10-K405 1 FORM 10-K405 ================================================================================ SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (Mark One) [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED] For the fiscal year ended December 31, 1994 OR [_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED] Commission File Number: 1-7933 Aon Corporation (Exact Name of Registrant as Specified in its Charter) ____________________ DELAWARE (State or Other Jurisdiction of 36-3051915 Incorporation or Organization) (I.R.S. Employer 123 NORTH WACKER DRIVE, Identification No.) CHICAGO, ILLINOIS 60606 (Address of Principal Executive Offices) (Zip Code) (312) 701-3000 (Telephone Number) -------------------- Securities registered pursuant to Section 12(b) of the Act:
Name of Each Exchange Title of Each Class on Which Registered ------------------- ---------------------- Common Stock, $1 par value New York Stock Exchange* 8% Cumulative Perpetual Preferred Stock New York Stock Exchange 6 1/4% Cumulative Convertible Exchangeable New York Stock Exchange Preferred Stock 6.875% Notes Due 1999 New York Stock Exchange 7.40% Notes Due 2002 New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: NONE *The Common Stock of the Registrant is also listed for trading on the Chicago Stock Exchange and The International Stock Exchange London. -------------------- Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES [X] NO [_] Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant's knowledge, in definitive proxy or information statements, incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X] Aggregate market value of the voting stock held by non-affiliates of the Registrant as of February 28, 1995 was $3,008,185,977. Number of shares of $1.00 par value Common Stock outstanding as of February 28, 1995: 108,305,662. Documents From Which Information Is Incorporated By Reference: Annual Report to Stockholders of the Registrant for the Year 1994 (Parts I, II and IV) Notice of Annual Meeting of Holders of Common Stock and Series C Preferred Stock and Proxy Statement for Annual Meeting of Stockholders on April 20, 1995 of the Registrant (Part III) ================================================================================ PART I ITEM 1. BUSINESS. The Registrant is an insurance holding company. Incorporated in 1979, it is the parent corporation of long established and more recently formed companies. Rollins Hudig Hall Holdings b.v., the Registrant's principal European commercial insurance brokerage subsidiary, traces its origin back to 1688. The Life Insurance Company of Virginia, another of Registrant's principal subsidiaries, was incorporated in 1871. It, along with subsidiaries Combined Insurance Company of America and Union Fidelity Life Insurance Company/1/ engage in the marketing of life and accident and health insurance products. Virginia Surety Company, Inc., Dearborn Insurance Company and London General Insurance Company, Ltd., also subsidiaries, offer specialty property and casualty insurance products. Aon Risk Services, Inc., Aon Specialty Group, Inc., Rollins Hudig Hall Holdings b.v., Godwins International, Inc., Nicholson Leslie Group, Limited and Rollins Hudig Hall Co., subsidiaries of Registrant's wholly-owned subsidiary, Rollins Hudig Hall Group, Inc., provide reinsurance intermediary services, benefits consulting and commercial insurance brokerage services. The Registrant hereby incorporates by reference pages 15 through 19 and 21 through 25 of the Annual Report to Stockholders of the Registrant for the year 1994 ("Annual Report"). Competition and Industry Position (1) INSURANCE BROKERAGE AND CONSULTING SERVICES Rollins Hudig Hall Co. ("RHH"), Rollins Hudig Hall Holdings b.v. ("Hudig"), Aon Risk Services, Inc. ("ARS"), Aon Specialty Group, Inc. ("ASG"), Godwins International, Inc. ("Godwins") and Nicholson Leslie Group, Limited ("NL"). Rollins Hudig Hall Group, Inc., ("RHH Group"), is a holding company for the Registrant's commercial brokerage and consulting operation. RHH Group is the third largest brokerage and consulting services firm in the world. In early 1993, the Registrant completed the acquisition of the remaining outstanding interest in its London-based wholesale broker, Nicholson Leslie Group, Limited (formerly Nicholson Chamberlain Colls Limited.) The RHH Group companies have offices around the world and employ more than 13,000 professionals and support personnel who serve the diverse needs of the Registrant's growing multinational client base. RHH is ranked second among commercial insurance brokerage firms in the United States in terms of gross revenues (Business Insurance, July 18, 1994). Its subsidiaries operate in a highly competitive industry and compete with a large number of insurance brokerage and agency firms as well as individual brokers and agents and direct writers of insurance coverage. RHH subsidiaries offer comprehensive services to clients which range from small businesses to major corporations, including placement of all lines of insurance, actuarial ------------ /1/The Registrant's Union Fidelity Life Insurance Company subsidiary and its The Credit Life Insurance Company subsidiary merged in 1993 and all lines of business conducted by the separate companies prior to the merger are now conducted by Union Fidelity Life Insurance Company. 2 services, proprietary risk management information systems, captive management, and risk management and loss control consulting. It has also developed certain specialist niche areas such as marine, aviation, directors and officers liability, financial institutions, construction, energy, public entities, leisure, entertainment and fine art. Hudig traces its commercial broking roots to 1688 and is one of the premier brokers in Continental Europe with some 70 European offices and approximately 2,100 employees. Hudig has subsidiaries in more than thirty countries and, together with an unaffiliated English broker, is part of a joint venture that owns a network of insurance broking offices in Southeast Asia. RHH and Hudig operate through subsidiaries with owned offices in North America and Europe, as well as in the Far East, the Middle East, Central and Latin America, and Australia. RHH is actively pursuing expansion in Latin America and the far East. During 1994, Hudig subsidiaries opened offices in Russia, Finland, Turkey, Portugal and Slovakia, and expanded its rapidly growing European art brokerage business, operating under the name ArtScope, with acquisitions of specialized art brokers in France and Germany. Together with its Huntington T. Block operation in Washington, D.C. RHH is now one of the leading art brokerage specialists in the world. RHH also acquired an Australian broker specializing in group programs, making RHH one of the largest such brokers in that part of the world. ARS offers creative, flexible and economical solutions to clients requiring alternative risk services. ARS subsidiaries, Aon Re Inc., formerly Aon Reinsurance Agency, Inc. ("Aon Re") and Aon Risk Consultants, Inc., specialize in providing reinsurance brokerage and consulting services. Aon Re ranked second in 1993 among United States reinsurance intermediaries in terms of gross revenues as published in Business Insurance (October 31, 1994). Aon Re Worldwide, formed in 1993 to bring together all the reinsurance operations of ARS, has become one of the top reinsurance intermediaries in the world. The captive management and alternative market services in Europe were combined under the name Aon Risk Services (Europe). In 1994, new offices were opened in Luxembourg and The Netherlands. Agricultural Risk Management in London, specializing in the evaluation of agricultural risk, was acquired in early 1995. Through Aon Risk Consultants, ARS offers actuarial expertise, catastrophe modeling and alternative risk financing products to the global marketplace. SLE Worldwide is a leading managing general underwriter in the sports, leisure and entertainment industries, both domestically and abroad. ASG addresses the highly specialized product development, consulting and administrative needs of associations, affinity groups and financial services companies nationwide. ASG operating subsidiaries market and broker both the primary and reinsurance risks of these programs. Go Pro, Inc. acts as an underwriting manager for property and liability programs for government entities, public officials, school boards and law enforcement agencies. Aon Direct Group is ASG's direct marketer of specialty insurance products for associations and affinity groups. Media/Professional Insurance (M/PI), a division of Aon Direct Group, is one of the largest providers of libel and other insurance to the broadcast and print media in the United States. Its Bankers Insurance Service Corp. subsidiary is an underwriting manager that serves the mortgage banking industry. Its Scarborough & Co. subsidiary provides similar underwriting services to community banks, mortgage and savings institutions. ASG formed the Aon Alliance in 1993 to bring together expertise from throughout the Registrant's operating subsidiaries to deliver value-added service to the health-care industry, especially hospitals. The Aon Alliance provides professional liability insurance, software systems, reinsurance, benefits, risk management, claims investigation, workers' compensation, retail brokerage services and underwriting management. As part of its overall health- care strategy, ASG, in 1994, acquired OUM & Associates, an underwriting manager and program administrator with a specialization in medical malpractice coverages. 3 Employee training has long been an area of expertise for Aon companies, and the 1994 acquisition of Pecos River Learning Centers, Inc. extends that expertise into a broad range of industries, including some of the largest multinational corporations. Further, it builds upon a tradition of nationally recognized customer-satisfaction consulting and training programs developed for the automobile industry by Ryan Insurance Group, Inc. subsidiaries. The Registrant serves the employee benefits needs of clients around the world through subsidiaries of Godwins and through the European benefits operations of Hudig. Godwins and its affiliated subsidiaries do business as Godwins Booke and Dickenson ("GBD"), and serve the United States and Latin America. GBD was formed after the July 1, 1993 merger with Booke & Company Inc., an actuarial and employee benefits consulting firm. In the United States, the benefits environment continues to change as companies look for ways to manage their benefits costs while increasing the choices offered to their employees. GBD, with its expertise in all areas of benefits and compensation, and its access to the Registrant's other subsidiaries, is well-positioned to serve this market. Existing business continued to be influenced by a sluggish benefits consulting environment in the United States. Benefits issues in foreign countries are becoming more complicated, and Hudig and Godwins anticipates increased demand for their services in these markets. The late-1994 acquisition of HRStrategies Inc. marks an important expansion for GBD. HRStrategies specializes in human resources strategy development, employee selection, and identification and development of employee skill and skills assessment systems. As employers contend with a steadily shrinking skilled labor pool, the ability to identify, motivate and compensate the skilled worker becomes increasingly important. NL is a London based Lloyd's broker that was formed as a result of Nicholson Chamberlain & Coll's 1993 acquisitions of the assets of Leslie & Godwins and the remaining outstanding shares of Nicholson Chamberlain & Colls. It places wholesale and reinsurance business in the London and international markets, serving the needs of a wide range of clients around the world. A significant majority of NL's revenue is derived from sources unaffiliated with Aon. During 1994, Aon acquired Lloyd's broker Jenner Fenton Slade Group Limited (JFS), a premier energy insurance and reinsurance brokerage firm. The acquisition of JFS expands the expertise of Aon in this important and growing area. The energy brokerage operations of NL will be integrated into JFS. (2) LIFE INSURANCE The Life Insurance Company of Virginia ("LOV"), Combined Insurance Company of America ("Combined Insurance"), Combined Life Insurance Company of New York ("CLICNY"), Globe Life Insurance Company ("Globe") and Union Fidelity Life Insurance Company ("Union Fidelity"). The Registrant's life insurance subsidiaries are part of a highly competitive industry. LOV is the Registrant's principal life company. LOV and its broker-dealer subsidiary conducts operations through a combination of branch offices, independent broker arrangements, national and regional stock brokerage houses and financial institutions. Collectively, LOV operates through 150 career and independent agencies with approximately 386 field representatives and has contracts with approximately 17,000 independent brokers. LOV also operates through 159 national and regional stock brokerage houses and 7 financial institutions and has contracts with some 17,000 stockbrokers and representatives in financial institutions. LOV's franchise distribution system, the Forth Financial Network, operates through 28 franchises supporting approximately 400 agents 4 marketing capital accumulation and traditional life products underwritten by LOV and unrelated insurers. Business written by LOV includes a complete portfolio of regular ordinary life insurance, individual and group annuities, group life and group disability, variable life, variable annuities and universal life coverages. In 1993 (the most recent year for which comparative tables are available), LOV ranked 50th in terms of total life premiums and annuity premiums written. In terms of total ordinary life insurance in force, LOV ranked 71st. Combined Insurance and its wholly-owned subsidiary, CLICNY (which operates exclusively in the state of New York) market primarily whole life products through direct sales career agents in the United States. Unit-linked products are sold in the United Kingdom by Combined Life Assurance Company Limited, an indirect, wholly owned subsidiary of the Registrant. Life insurance business is conducted in 49 states, Canada, the United Kingdom, Ireland, Germany, Australia and New Zealand, by the Registrant's life insurance subsidiaries. Combined Insurance ranked among the top 100 life insurance companies in the United States in terms of total life premiums in 1993. Union Fidelity focuses on third-party and affinity clients in marketing life products, while the Group Division of Combined Insurance concentrates on the small-employer group market offering products underwritten by Combined Insurance. (3) ACCIDENT AND HEALTH INSURANCE Combined Insurance, CLICNY, Union Fidelity, Ryan Insurance Group, Inc. ("Ryan"), Globe, and LOV. Through its various operating subsidiaries, the Registrant's accident and health operations serve individuals, businesses, affinity groups and associations in North America, Europe and the Pacific. The accident and health distribution network encompasses the agents of Combined Insurance, the direct- response marketing capabilities of Union Fidelity, the agents and brokers of the Group Division of Combined Insurance, and the automobile dealers and financial institutions that market the products of Ryan. Combined Insurance, the Registrant's principal accident and health insurer, has a direct sales force of more than 9,000 career agents calling on individuals to sell a broad spectrum of accident and health products. It is one of the few companies with agents that call on customers every six months to renew and to sell additional coverage. Combined Insurance offers a wide range of accident only and sickness only insurance products including short term disability, cancer aid, Medicare supplement and disability income coverage. Combined Insurance's products are primarily fixed indemnity disability based, thereby not subject to exposure to escalating medical costs. Combined Insurance offers a simplified accident and sickness long-term disability policy. In 1993, Combined Insurance was ranked among the top 10 companies in the United States in terms of individual non-cancelable and guaranteed renewable accident and health insurance premiums written and ranked 24th among all United States companies in terms of total accident and health insurance premiums written. Operating in the United States in the highly competitive direct response marketing segment of the industry, Union Fidelity and the Group Division of Combined Insurance serve different markets with different products. Through emphasis on service to sponsored and affiliated groups, Union Fidelity continues to capture a stable share of the direct response market. 5 The Group Division of Combined Insurance operates in the small-group market, with life, long-and short-term disability, and dental insurance products sold through managing general agents, brokers and LOV's career agent system and agents of endorsed companies. The group life and disability products are underwritten by Combined Insurance and administered through the Trevose, Pennsylvania facility. These products are generally targeted at businesses with fewer than 500 lives. In particular, the Group Division of Combined Insurance offers a portfolio of products designed for small companies desiring a flexible benefits package for employees. Ryan (with policies underwritten by Globe and Union Fidelity) is the largest independent marketer of credit life and disability products sold through automobile dealers. Union Fidelity sells short and long-term credit related insurance products to qualified borrowers from financial institutions and mortgage companies through a captive sales force and select brokers and general agents. In terms of direct premiums written with respect to credit life insurance, Globe ranked third among all companies in 1993. In January 1995, Globe merged with Combined Insurance. Ryan subsidiaries operate in a highly competitive industry, competing against numerous insurers and insurance agents engaged in selling credit life and disability insurance, including some which also provide finance and consulting services to automobile dealers. Ryan also is in direct competition with lending institutions which operate on a national basis, some of which have working arrangements with insurance companies writing credit insurance. Substantially all of the credit insurance sold by Ryan subsidiaries is generated through dealers or financial institutions who have no legal obligation or commitment to continue as agents for Ryan and are free to terminate such relationships and act as agents for, and place insurance with, Ryan's competitors. (4) SPECIALTY PROPERTY AND CASUALTY INSURANCE Ryan, Virginia Surety Company, Inc. ("VSC"), London General Insurance Company, Ltd. ("London General"), and Dearborn Insurance Company ("Dearborn"). The Registrant's specialty property and casualty insurance business, conducted by subsidiaries VSC, Dearborn & London General, has traditionally been composed primarily of extended warranty insurance products, professional liability insurance coverages, workers' compensation and specialty financial institution coverages. During 1994, VSC continued its withdrawal from the direct risk-taking and underwriting of certain lines of property and casualty business except extended warranty and the reinsurance of various liability programs. VSC and London General continue to be the largest independent providers of automobile extended warranties worldwide. Ryan's automobile warranty products are sold in the United Kingdom, Ireland, France, the Netherlands, Belgium and Spain. During 1994, Aon Warranty Group was created to handle certain extended warranty products on automobiles, electronic goods, personal computers and appliances. In addition, the company acquired Independent Dealer Services Inc. (IDS) of St. Louis, a major extended warranty marketing and administration company for electronic goods, personal computers and appliances. LICENSING AND REGULATION Insurance companies must comply with laws and regulations of the jurisdictions in which they do business. These laws and regulations are designed to ensure financial solvency of insurance companies and to require fair and adequate service and treatment for policyholders. They are enforced by the states in the United States, by industry self-regulating agencies in the United Kingdom, and by various regulatory agencies in other countries through the granting and revoking of licenses to do business, licensing of agents, monitoring of trade practices, policy form approval, minimum loss ratio requirements, limits on premium and commission rates, and minimum reserve and capital requirements. Compliance is monitored by the state insurance departments through periodic regulatory reporting procedures and periodic 6 examinations. The quarterly and annual financial reports to the regulators in the United States utilize accounting principles which are different from the generally accepted accounting principles used in stockholders' reports. The statutory accounting principles, in keeping with the intent to assure the protection of policyholders, are based, in general, on a liquidation concept while generally accepted accounting principles are based on a going concern concept. The state insurance regulators are members of the National Association of Insurance Commissioners ("NAIC"). This Association seeks to promote uniformity of and to enhance the state regulation of insurance. Both the NAIC and the individual states have significantly increased their focus on the solvency of insurance companies. This focus is reflected in additional regulatory oversight by the states and emphasis on the enactment or adoption of a series of NAIC model laws and regulations designed to promote solvency. The increase in any solvency related oversight by the states will not have any significant impact on the insurance business of the Registrant. In addition, the NAIC has developed a formula for analyzing insurers called risk based capital ("RBC"). RBC is intended to establish "minimum" capital threshold levels that vary with the size and mix of business of a company. It is designed to identify companies with the capital levels that may require regulatory attention. RBC does not have any significant impact on the insurance business of the Registrant. Insurance companies are generally not subject to any federal regulation of their insurance business because of the existence of a federal law commonly known as the McCarran-Ferguson Act. McCarran-Ferguson provides the insurance industry with immunity from certain aspects of the federal anti-trust law and exempts the business of insurance from federal regulation. In the past several years there have been a number of recommendations that McCarran-Ferguson be repealed entirely or modified to remove the industry's anti-trust exemption and subject it to federal regulation. If McCarran-Ferguson were to be repealed or modified, state regulation of the insurance business would continue. The result could be an additional layer of federal regulation. The Registrant expects that any repeal of anti-trust exemptions available to insurers under the McCarran- Ferguson Act would not have a significant impact on its operations. The state insurance holding company laws require prior notice to and approval of the domestic state insurance department of intracorporate transfers of assets within the holding company structure, including the payment of dividends by insurance company subsidiaries. In addition, sales of credit insurance by Ryan's agents and premium finance loans by Cananwill, Inc., an indirect wholly-owned subsidiary of the Registrant, are subject to one or more of truth-in-lending and credit regulations, insurance premium finance acts, retail installment sales acts and other similar consumer legislation. Failure to comply with such laws or regulations can result in the temporary suspension or permanent loss of the right to engage in business in a particular jurisdiction as well as other penalties. Regulatory authorities in the states in which the operating subsidiaries of RHH Group conduct business may require individual or company licensing to act as brokers, agents, third party administrators, managing general agents, reinsurance intermediaries or adjusters. Under the laws of most states, regulatory authorities have relatively broad discretion with respect to granting, renewing and revoking brokers' and agents' licenses to transact business in the state. The manner of operating in particular states may vary according to the licensing requirements of the particular state, which may require, among other things, that a firm operate in the state through a local corporation. In a few states, licenses are issued only to individual residents or locally-owned business entities. In such cases, RHH Group subsidiaries have arrangements with residents or business entities licensed to act in the state. If their sales activities so require, employees of some of the Registrants are registered with one of the Registrant's three broker-dealer subsidiaries. These broker-dealers and employees registered therewith are subject to the Securities Exchange Act of 1934, to rules and regulations promulgated thereunder by the SEC and to state securities laws and regulations. There continues to be activity in the area of health care reform at the state levels in the United States. Numerous states have had legislation introduced to reform the health care system and such legislation has passed in several states. While it is impossible to forecast the precise nature of future state health care changes, the Registrant does not expect a major impact on its operations because of the 7 supplemental nature of most of the policies issued by its insurance subsidiaries and because the coverages are primarily purchased to provide financial protection through loss of time or disability benefits. If health care reform does not provide for a significant role for insurance companies currently writing primary medical coverage, the Registrant expects that some of those companies would increase their participation in other segments of the accident and health insurance business, perhaps heightening the competition with Combined Insurance. Combined Insurance and its subsidiaries currently operate successfully in several foreign countries which have national health plans in effect. MORTGAGE LOAN AND REAL ESTATE INVESTMENTS Mortgage loans and real estate investments held by the Registrants' subsidiaries at December 31, 1994 were $567.5 million and $35.6 million, respectively. Commercial mortgage loans represent over 98% of total mortgage loans at December 31, 1994. Mortgage loans and real estate in the South Atlantic region totalled $307.6 million and $26.8 million, respectively, at December 31, 1994. The five states carrying the highest concentrations of these mortgage loans and real estate investments are listed below by each category.
(millions) MORTGAGE LOANS 1994 1993 REAL ESTATE 1994 1993 ----------------- ------ ------ -------------- ----- ----- Virginia $126.1 $131.8 Virginia $14.5 $12.2 Maryland 60.2 53.1 Florida 3.9 4.5 Florida 56.0 46.1 South Carolina 3.4 4.4 New Jersey 53.2 66.5 Georgia 2.9 3.0 California 36.3 41.5 New Jersey 2.9 0.1
CAPITAL ACCUMULATION INVESTMENT TYPE CONTRACTS The capital accumulation products sold by the Registrant's insurance subsidiaries in 1994 and 1993 had the earned revenue composition presented in the following table:
(millions) 1994 1993 --------------------------- --------------------------- PRODUCT TYPE EARNED REVENUE % OF TOTAL EARNED REVENUE % OF TOTAL ------------------------- -------------- ----------- -------------- ----------- Interest sensitive life $208.3 37.8% $207.7 38.0% Unit-linked life 14.7 2.7% 14.6 2.7% Annuities 213.9 38.8% 219.5 40.2% Guaranteed investment contracts 114.4 20.7% 104.4 19.1% ------ ----- ------ ----- Total: $551.3 100.0% $546.2 100.0% ====== ===== ====== =====
Among these product types, those that are investment type contracts (as defined by Statement of Financial Accounting Standards No. 97) are annuities (approximately 87% are single premium deferred annuities) and guaranteed investment contracts. Significant terms and conditions of these contracts are described below. 8 SINGLE PREMIUM DEFERRED ANNUITIES (SPDAS): The Registrant's insurance subsidiaries had approximately $2 billion of SPDA reserves in force at December 31, 1994. SPDAs are single premium accumulation vehicles with one, three or five year interest rate guarantees, after which declared one year guaranteed renewal rates are set based on prevailing economic conditions. There is a minimum guaranteed interest rate of 4% on most policies. Policies contain decreasing surrender charges for either a five or seven year period, and contain several guaranteed income options at maturity. Approximately 13% of the in force SPDA policyholder funds have a bailout option where, if the declared renewal interest rate is less than the initial rate, the policyowner may surrender the policy without a surrender charge. The policyowner has a 30 to 60-day time period in which to exercise this option. GUARANTEED INVESTMENT CONTRACTS (GICS): The Registrant's insurance subsidiaries had approximately $1.6 billion in GIC contracts outstanding at December 31, 1994. Of these, 65% are fixed rate contracts originally written with a maturity from two to six years. The average maturity of the fixed rate GIC pool was 2.4 years at December 31, 1994. Most of these contracts either cannot be liquidated prior to maturity, or if they can be liquidated by the contractholder, they are subject to a market value adjustment calculated to provide a significant penalty to the contractholder. The remaining 35% of the GICs are variable rate contracts which have rates that float monthly based on an index relating to money market yields. These contracts have no fixed maturities but may be liquidated in seven days to one year, depending on the contract, at the contractholder's request. The Registrant's insurance subsidiaries may, at their option, change the index, but if they do so, the contractholder would have a right to liquidate the contract. Most of the GICs are benefit sensitive to varying degrees. As of December 31, 1994, most GIC contracts were for the benefit of qualified retirement plans. The terms of these investment type contracts are typical of similar products sold by competitors. CLIENTELE No significant part of the Registrant's or its subsidiaries' business is dependent upon a single client or on a few clients, the loss of any one of which would have a material adverse effect on the Registrant. EMPLOYEES The Registrant's subsidiaries, at the end of 1994, had more than 18,000 salaried and hourly employees and approximately 9,000 sales representatives who are generally compensated wholly or primarily by commission. ITEM 2. PROPERTIES. The Registrants' subsidiaries own and occupy office buildings in seven states, Puerto Rico and certain foreign countries, and lease office space elsewhere in the United States and in various foreign cities. Loss of the use of any owned or leased property, while potentially disruptive, would have no material impact on the Registrant. ITEM 3. LEGAL PROCEEDINGS. The Registrant hereby incorporates by reference note 11 of the Notes to Consolidated Financial Statements on page 48 of the Annual Report. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. None. 9 EXECUTIVE OFFICERS OF THE REGISTRANT Executive officers of the Registrant are regularly elected by its Board of Directors at the annual meeting of the Board which is held following each annual meeting of the stockholders of the Registrant. The executive officers of the Registrant were elected to their current positions on April 15, 1994 to serve until the meeting of the Board following the annual meeting of stockholders on April 20, 1995. Ages shown are as of March 15, 1995. For information concerning certain executive officers of the Registrant, see item 10, below. As of March 15, 1995, the following are also executive officers of the Registrant as defined in Rule 16a-1(f): 10
HAS CONTINUOUSLY SERVED AS AN OFFICER OF REGISTRANT OR NAME, AGE, AND ONE OR CURRENT OFFICE MORE OF ITS OR PRINCIPAL SUBSIDIARIES BUSINESS EXPERIENCE POSITION SINCE PAST 5 YEARS --------------------------- ---------------- --------------------------------------------------- Harvey N. Medvin, 58 1972 Mr. Medvin became Vice President and Chief Executive Vice President, Financial Officer of the Registrant in Chief Financial Officer 1982 and was elected to his current position in and Treasurer 1987. He also serves as a Director or Officer of certain of the Registrant's subsidiaries. Daniel T. Cox, 49 1986 Mr. Cox was elected to his current position in 1991 Executive Vice President and has served as Chairman and Chief Executive Officer of LOV since 1988 and of Union Fidelity since 1989. Mr. Cox has headed the Registrant's benefits consulting operation since 1987. He also serves as Director or Officer of certain of the Registrant's subsidiaries. Michael A. Conway, 48 1990 Mr. Conway was Vice President of Combined Senior Vice President and Insurance from 1980 to 1984. Following other Senior Investment Officer employment, Mr. Conway rejoined the Registrant in 1990 as Senior Vice President of Combined Insurance and was elected to his current position in 1991. He also serves as Director or Officer of certain of the Registrant's subsidiaries.
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED SECURITY HOLDER MATTERS. The Registrant's $1.00 par value common shares ("Common Shares") are traded on the New York, Chicago and London stock exchanges. The Registrant hereby incorporates by reference the "Dividends paid per share" and "Price range" data on page 51 of the Annual Report. The Registrant had approximately 14,000 holders of record of its Common Shares as of February 28, 1995. The Registrant hereby incorporates by reference note 7 of the Notes to Consolidated Financial Statements on pages 43 and 44 of the Annual Report. ITEM 6. SELECTED FINANCIAL DATA. The Registrant hereby incorporates by reference the "Selected Financial Data" table on page 50 of the Annual Report. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. The Registrant hereby incorporates by reference "Management's Analysis of Operating Results and Financial Condition" on pages 27 through 32 of the Annual Report. 11 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. The Registrant hereby incorporates by reference the following statements, notes and data from the Annual Report.
Page(s) ------- Consolidated Financial Statements................. 33-37 Notes to Consolidated Financial Statements........ 38-48 Report of Ernst & Young LLP, Independent Auditors. 49 Quarterly Financial Data.......................... 51
ITEM 9. CHANGES IN AND DISAGREEMENT WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. Not Applicable. 12 PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT. The Registrant hereby incorporates by reference the information on pages 3 and 6 of the Notice of Annual Meeting of Holders of Common Stock and Series C Preferred Stock and Proxy Statement For Annual Meeting of the Stockholders on April 20, 1995, of the Registrant ("Proxy Statement") concerning the following Directors of the Registrant, each of whom also serves as an executive officer of the Registrant as defined in Rule 16a-1(f): Patrick G. Ryan and Raymond I. Skilling. Information concerning additional executive officers of the Registrant is contained in Part I hereof, pursuant to General Instruction G(3) and Instruction 3 to Item 401(b) of Regulation S-K. ITEM 11. EXECUTIVE COMPENSATION. The Registrant hereby incorporates by reference the information under the headings "Executive Compensation," "Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-End Option Values," "Option Grants in 1994 Fiscal Year" and "Pension Plan Table" on pages 11 through 13 of the Proxy Statement. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT. The Registrant hereby incorporates by reference the share ownership data contained on pages 2, 7 and 8 of the Proxy Statement. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. The Registrant hereby incorporates by reference the information under the heading "Transactions with Management" on page 17 of the Proxy Statement. 13 PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K. (A)(1) AND (2). The Registrant has incorporated by reference from the Annual Report (see Item 8) the following consolidated financial statements of the Registrant and subsidiaries:
ANNUAL REPORT PAGE(S) ------- Consolidated Statements of Income--Years Ended December 31, 1994, 1993 and 1992 33 Consolidated Statements of Financial Position--As of December 31, 1994 and 1993 34-35 Consolidated Statements of Stockholders' Equity--Years Ended December 31, 1994, 1993 and 1992 36 Consolidated Statements of Cash Flows--Years Ended December 31, 1994, 1993 and 1992 37 Notes to Consolidated Financial Statements 38-48 Report of Ernst & Young LLP, Independent Auditors 49
Financial statement schedules of the Registrant and consolidated subsidiaries not included in the Annual Report but filed herewith: Consolidated Financial Statement Schedules-- Schedule -------- Summary of Investments-Other than Investments in Related Parties I Parent Company Condensed Financial Statements II Supplementary Insurance Information III Reinsurance IV Valuation and Qualifying Accounts V Schedule VI is omitted as it is immaterial (A)(3). EXHIBITS (a) Second Restated Certificate of Incorporation of the Registrant-- incorporated by reference to Exhibit 3(a) to the Registrant's Annual Report to the Securities and Exchange Commission on Form 10-K for the year ending December 31, 1991 (the "1991 Form 10-K"). (b) Certificate of Amendment of the Registrant's Second Restated Certificate of Incorporation--incorporated by reference to Exhibit 3 to the Registrant's Quarterly Report on Form 10-Q for the quarter ending March 31, 1994 (the "First Quarter 1994 Form 10-Q"). (c) Bylaws of the Registrant--incorporated by reference to Exhibit (d) to the Registrant's Annual Report to the Securities and Exchange Commission on Form 10-K for the year ending December 31, 1982 (the "1982 Form 10-K"). (d) Indenture dated September 15, 1992 between the Registrant and Continental Bank Corporation (now known as Bank of America Illinois), as Trustee--incorporated by reference to Exhibit 4(a) to the Registrant's Current Report on Form 8-K dated September 23, 1992. 14 (e) Resolutions establishing terms of 6.875% Notes Due 1999 and 7.40% Notes Due 2002--incorporated by reference to Exhibit 4(d) to the Registrant's Annual Report to the Securities and Exchange Commission on Form 10-K for the year ending December 31, 1992. (f) Resolutions establishing the terms of 6.70% Notes Due 2003 and 6.30% Notes Due 2004--incorporated by reference to Exhibits 4(c) and 4(d) of the Registrant's Annual Report to the Securities and Exchange Commission on Form 10-K for the year ended December 31, 1993. (g) Certificate of Designation for the Registrant's 8% Cumulative Perpetual Preferred Stock, $1.00 par value--incorporated by reference to Exhibit 4(a) to the Registrant's Quarterly Report on Form 10-Q for the quarter ended September 30, 1992 (the "Third Quarter 1992 Form 10-Q"). (h) Certificate of Designation for the Registrant's 6 1/4% Cumulative Convertible Exchangeable Preferred Stock, $1.00 par value--incorporated by reference to Exhibit 4(b) to the Third Quarter 1992 Form 10-Q. (i) Certificate of Designation for the Registrant's Series C Cumulative Preferred Stock--incorporated by reference to Exhibit 4.1 to the Registrant's Current Report on Form 8-K dated February 9, 1994. (j) Registration Rights Agreement dated November 2, 1992 by and between the Registrant and Frank B. Hall & Co. Inc.--incorporated by reference to exhibit 4(c) to the Third Quarter 1992 Form 10-Q. (k) Registration rights agreement by and among the Registrant and certain affiliates of Ryan Insurance Group, Inc. (including Patrick G. Ryan and Andrew J. McKenna)--incorporated by reference to Exhibit (f) to the 1982 Form 10-K. (l) Deferred Compensation Agreement by and among the Registrant and Registrant's directors who are not salaried employees of Registrant or Registrant's affiliates--incorporated by reference to Exhibit 10(i) to the Registrant's Annual Report to the Securities and Exchange Commission on Form 10-K for the year ending December 31, 1987 ("1987 Form 10-K"). (m) Amendment and Waiver Agreement dated as of November 4, 1991 among the Registrant and each of Patrick G. Ryan, Shirley Ryan, Ryan Enterprises Corporation and Harvey N. Medvin--incorporated by reference to Exhibit 10(j) to the 1991 Form 10-K. (n) Statement regarding Computation of Per Share Earnings. (o) Statement regarding Computation of Ratio of Earnings to Fixed Charges. (p) Statement regarding Computation of Ratio of Earnings to Combined Fixed Charges and Preferred Stock Dividends. (q) Aon Corporation 1994 Amended and Restated Outside Director Stock Award Plan--incorporated by reference to Exhibit 10(b) to the First Quarter 1994 Form 10-Q. (r) Annual Report to Stockholders of the Registrant for the year ended December 31, 1994 (for information, and not to be deemed filed, except for those portions specifically incorporated by reference herein). (s) List of subsidiaries of the Registrant. (t) Consent of Ernst & Young LLP to the incorporation by reference into Aon's Annual Report on Form 10-K of their report included in the 1994 Annual Report to Stockholders and into Aon's Registration Statement Nos. 2-79114, 2-82791, 33-27984, 33-42575, and 33-57562. 15 (u) Annual Report to the Securities and Exchange Commission on Form 11-K for the Aon Savings Plan for the year ended December 31, 1994--to be filed by amendment as provided in Rule 15d-21(b). (v) Executive Compensation Plans and Arrangements: (A) Aon Stock Option Plan--incorporated by reference to Exhibit 10(a) of the 1990 Form 10-K. (B) First Amendment to Aon Stock Option Plan--incorporated by reference to the Exhibit 10(a) to Registrant's Quarterly Report on Form 10-Q for the quarter ending June 30, 1994 (the "Second Quarter 1994 Form 10-Q"). (C) Second Amendment to Aon Stock Option Plan--incorporated by reference to Exhibit 10(c) to the Second Quarter 1994 Form 10-Q. (D) 1994 Restatement of Aon Savings Plan. (E) 1994 Restatement of Aon Employee Stock Ownership Plan. (F) Ryan Insurance Group, Inc. Stock Option Plan together with Stock Option Assumption Agreement providing for amendment of the plan-- incorporated by reference to Exhibit 4(b) to Registration Statement No. 2-79114 on Form S-8. (G) Aon Stock Award Plan, as amended--incorporated by reference to Exhibit 10(a) to the First Quarter 1994 Form 10-Q. (H) First Amendment to the Aon Stock Award Plan--incorporated by reference to Exhibit 10(b) to the Second Quarter 1994 Form 10-Q. (I) Second Amendment to Aon Stock Award Plan--incorporated by reference to Exhibit 10(d) to the Second Quarter 1994 Form 10-Q. (J) 1994 Restatement of Aon Pension Plan. (b) Reports on Form 8-K. The Registrant filed no Current Reports on Form 8-K during the last quarter of the Registrant's year ended December 31, 1994. 16 SIGNATURES PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934, THE REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, ON THE 17TH DAY OF MARCH, 1995. Aon Corporation By /s/PATRICK G. RYAN -------------------------------- Patrick G. Ryan, Chairman, President and Chief Executive Officer PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE REGISTRANT AND IN THE CAPACITIES AND ON THE DATES INDICATED. SIGNATURE TITLE DATE --------- ----- ---- /s/PATRICK G. RYAN Chairman, President, Chief March 17, 1995 ------------------------ Executive Officer and Director Patrick G. Ryan (Principal Executive Officer) /s/DANIEL T. CARROLL Director March 17, 1995 ------------------------ Daniel T. Carroll /s/FRANKLIN A. COLE Director March 17, 1995 ------------------------ Franklin A. Cole /s/PERRY J. LEWIS Director March 17, 1995 ------------------------ Perry J. Lewis /s/JOAN D. MANLEY Director March 17, 1995 ------------------------ Joan D. Manley /s/ANDREW J. MCKENNA Director March 17, 1995 ------------------------ Andrew J. McKenna 17 /s/NEWTON N. MINOW Director March 17, 1995 ------------------------ Newton N. Minow /s/PEER PEDERSEN Director March 17, 1995 ------------------------ Peer Pedersen /s/DONALD S. PERKINS Director March 17, 1995 ------------------------ Donald S. Perkins /s/JOHN W. ROGERS, JR. Director March 17, 1995 ------------------------ John W. Rogers, Jr. /s/GEORGE A. SCHAEFER Director March 17, 1995 ------------------------ George A. Schaefer /s/RAYMOND I. SKILLING Director March 17, 1995 ------------------------ Raymond I. Skilling /s/JOHN E. SWEARINGEN Director March 17, 1995 ------------------------ John E. Swearingen /s/FRED L. TURNER Director March 17, 1995 ------------------------ Fred L. Turner /s/ARNOLD R. WEBER Director March 17, 1995 ------------------------ Arnold R. Weber /s/HARVEY N. MEDVIN Executive Vice President, March 17, 1995 ----------------------- Chief Financial Officer and Harvey N. Medvin Treasurer (Principal Financial and Accounting Officer) 18 SCHEDULE I Aon Corporation and Subsidiaries CONSOLIDATED SUMMARY OF INVESTMENTS - OTHER THAN INVESTMENTS IN RELATED PARTIES AS OF DECEMBER 31, 1994
Amount shown in Statement (millions) Amortized Fair of Financial Cost Value Position --------- -------- ------------ Fixed Maturities - held to maturity: U.S. government and agencies................ $ 3.2 $ 3.3 $ 3.2 States and political subdivisions........... 2.4 2.5 2.4 Corporate securities........................ 833.7 784.4 833.7 Public utilities............................ 554.7 521.8 554.7 Mortgage-backed securities.................. 1,589.8 1,437.6 1,589.8 --------- -------- -------- TOTAL FIXED MATURITIES HELD TO MATURITY............................. 2,983.8 2,749.6 2,983.8 --------- -------- -------- Fixed Maturities - available for sale: U.S. government and agencies................ 188.9 187.2 187.2 States and political subdivisions........... 392.9 406.9 406.9 Debt securities of foreign governments not classified as loans.................... 607.9 609.9 609.9 Corporate securities........................ 1,298.7 1,265.0 1,265.0 Public utilities............................ 282.4 269.8 269.8 Mortgage-backed securities.................. 1,478.3 1,358.0 1,358.0 Other fixed maturities...................... 68.7 63.5 63.5 --------- -------- -------- TOTAL FIXED MATURITIES AVAILABLE FOR SALE................................ 4,317.8 4,160.3 4,160.3 --------- -------- -------- Equity securities - available for sale Common stocks: Public utilities............................ 91.7 81.4 81.4 Banks, trusts, and insurance companies...... 81.5 79.7 79.7 Industrial, miscellaneous, and all other.... 136.8 153.8 153.8 Nonredeemable preferred stocks.............. 679.7 624.4 624.4 --------- -------- -------- TOTAL EQUITY SECURITIES................... 989.7 $ 939.3 939.3 --------- -------- -------- Mortgage loans on real estate................. 597.2* 567.5* Real estate - net of depreciation............. 35.6 35.6 Policy loans.................................. 214.9 214.9 Other long-term investments................... 104.6* 97.9* Short-term investments........................ 783.2 783.2 --------- -------- TOTAL INVESTMENTS....................... $10,026.8 $9,782.5 ========= ========
*Differences between amortized cost and amounts shown in Statement of Financial Position result from certain valuation allowances. 19 SCHEDULE II Aon Corporation (Parent Company) CONDENSED STATEMENTS OF FINANCIAL POSITION
As of December 31 (millions) 1994 1993 -------- -------- ASSETS Investments in subsidiaries............................... $3,024.7 $2,788.8 Notes receivable--subsidiaries............................ 468.3 451.6 Other assets.............................................. 8.6 34.1 -------- -------- Total Assets............................................ $3,501.6 $3,274.5 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY LIABILITIES Short-term borrowings .................................... $ 243.9 $ 168.6 6.3% long-term debt securities ........................... 99.7 -- 7.4% long-term debt securities ........................... 99.8 99.8 6.875% long-term debt securities ......................... 99.8 99.7 6.7% long-term debt securities ........................... 149.6 149.6 7.5% long-term debt securities ........................... -- 124.9 Notes payable--other...................................... 22.0 22.5 Notes payable--subsidiaries .............................. 372.7 217.9 Debt guarantee of employee stock ownership plan .......................................... 65.5 72.5 Accrued expenses and other liabilities.................... 41.2 31.2 -------- -------- Total Liabilities ...................................... 1,194.2 986.7 -------- -------- Redeemable Preferred Stock................................ 50.0 -- STOCKHOLDERS' EQUITY Preferred stock .......................................... 11.1 13.8 Common stock ............................................. 110.6 70.0 Paid-in additional capital................................ 485.2 605.7 Net unrealized investment gains (losses) of subsidiaries.. (142.8) 50.3 Net foreign exchange losses of subsidiaries............... (19.7) (61.0) Retained earnings......................................... 1,998.1 1,784.9 Less treasury stock at cost............................... (72.9) (69.3) Less deferred compensation................................ (112.2) (106.6) -------- -------- Total Stockholders' Equity ............................. 2,257.4 2,287.8 -------- -------- Total Liabilities and Stockholders' Equity.............. $3,501.6 $3,274.5 ======== ========
See notes to condensed financial statements. 20 SCHEDULE II (Continued) Aon Corporation (Parent Company) CONDENSED STATEMENTS OF INCOME
Years ended December 31 ------------------------ 1994 1993 1992 ------ ------ ------ (millions) REVENUE Dividends from subsidiaries.......................... $166.2 $248.7 $202.4 Other investment income.............................. 34.8 10.8 9.4 Realized investment losses........................... -- (2.1) -- ------ ------ ------ Total Revenue...................................... 201.0 257.4 211.8 EXPENSES Operating and administrative(1)...................... 2.3 4.7 (6.5) Interest--subsidiaries............................... 12.2 5.2 5.9 Interest--other...................................... 45.1 41.3 35.4 ------ ------ ------ Total Expenses..................................... 59.6 51.2 34.8 ------ ----- ------ INCOME BEFORE EQUITY IN UNDISTRIBUTED INCOME OF SUBSIDIARIES AND CUMULATIVE EFFECT OF CHANGES IN ACCOUNTING PRINCIPLES..................... 141.4 206.2 177.0 Equity in undistributed income of subsidiaries......... 218.6 117.6 29.2 ------ ------ ------ INCOME BEFORE CUMULATIVE EFFECT OF CHANGES IN ACCOUNTING PRINCIPLES..................... 360.0 323.8 206.2 Cumulative effect of changes in accounting principles. -- -- (79.6) ------ ------ ------ NET INCOME......................................... $360.0 $323.8 $126.6 ====== ====== ======
================================================================================ (1) Operating and administrative expenses include employee benefit plan credits of $3.4 million and a tax credit of $9.3 million in 1992. See notes to condensed financial statements. 21 SCHEDULE II (Continued) Aon Corporation (Parent Company) CONDENSED STATEMENTS OF CASH FLOWS
Years ended December 31 --------------------------- 1994 1993 1992 ------- ------- ------- (millions) Cash Flows From Operating Activities................ $ 164.1 $ 186.3 $ 178.7 Cash Flows From Investing Activities: Sale or maturity of investments................... - - 0.2 Purchase of investments........................... - - (0.1) Investments in subsidiaries....................... (31.3) (178.9) (105.3) Notes receivable from subsidiaries................ (15.5) 34.8 (152.3) ------- ------- ------- Cash Used by Investing Activities............. (46.8) (144.1) (257.5) ------- ------- ------- Cash Flows From Financing Activities: Treasury stock transactions - net................. (15.4) 11.4 6.9 Issuance of short-term borrowings - net........... 75.3 53.5 51.8 Issuance of notes payable to subsidiaries.......... 74.8 4.9 13.2 Issuance of long-term debt securities............. 99.7 149.6 199.5 Repayment of long-term debt securities............ (125.0) (100.0) (75.0) Retirement of preferred stock..................... (58.3) (7.3) - Cash dividends to stockholders.................... (162.3) (151.0) (119.5) ------- ------- ------- Cash Provided (Used) by Financing Activities.. (111.2) (38.9) 76.9 ------- ------- ------- Increase (Decrease) in Cash and Cash Equivalents.... 6.1 3.3 (1.9) Cash and Cash Equivalents at Beginning of Year...... 3.3 - 1.9 ------- ------- ------- Cash and Cash Equivalents at End of Year............ $ 9.4 $ 3.3 $ - ======= ======= =======
See notes to condensed financial statements. 22 SCHEDULE II (Continued) Aon Corporation (Parent Company) NOTES TO CONDENSED FINANCIAL STATEMENTS (1) See notes to consolidated financial statements incorporated by reference from the Annual Report. (2) Payments made as assessments by state guaranty funds to cover losses to policyholders of insurance companies under regulatory supervision for the years ended December 31, 1994, 1993 and 1992 were $6.9 million, $5.8 million and $3.6 million, respectively. In addition, Aon's reserve for the recognition of probable assessments for known industry insolvencies was $9.9 million and $12.7 million at December 31, 1994 and 1993, respectively. (3) Generally, the net assets of Aon's insurance subsidiaries available for transfer to the parent company are limited to the amounts that the insurance subsidiaries' statutory net assets exceed minimum statutory capital requirements; however, payment of the amounts as dividends in excess of $286 million may be subject to approval by regulatory authorities. (4) During 1993, Aon Corporation (Parent Company) reclassified $269 million of investments in subsidiaries to notes receivable--subsidiaries related to the finalization of the purchase price allocation for the 1992 acquisition of certain assets and assumption of certain liabilities of Frank B. Hall, Inc. 23 SCHEDULE II (Continued) Aon Corporation (Parent Company) NOTES TO CONDENSED FINANCIAL STATMENTS (5) Below is a reconciliation of the combined statutory stockholders' equity of Aon's insurance subsidiaries to the consolidated stockholders' equity on a basis in accordance with generally accepted accounting principles (GAAP):
As of December 31, 1994 As of December 31, 1993 ------------------------------------------- --------------------------- Life/A&H P&C Combined Life/A&H P&C Combined -------- ------ -------- -------- ------ --------- Statutory Stockholders' Equity $714.1 $284.0 $998.1 $561.3 $251.0 $812.3 Insurance business related adjustments: Deferred policy acquisition costs 1,120.3 61.3 1,181.6 963.9 41.5 1,005.4 Cost of insurance purchased 109.1 - 109.1 94.7 - 94.7 Excess of cost over net assets purchased 148.4 - 148.4 153.5 - 153.5 Policy liabilities and reinsurance asset 131.3 - 131.3 112.1 - 112.1 Deferred income taxes (209.1) 42.5 (166.6) (227.6) 36.9 (190.7) Investment valuation reserves 171.1 - 171.1 203.9 - 203.9 Unrealized capital (losses) (FAS 115) (158.0) - (158.0) - - - ------------------------------------------- --------------------------- Subtotal $2,027.2 $387.8 2,415.0 $1,861.8 $329.4 2,191.2 ========================= ================= Investment in other operations and other 609.7 597.6 -------- --------- Investments in subsidiaries 3,024.7 2,788.8 Elimination of parent company contributions (767.3) (501.0) -------- --------- Consolidated Stockholders' Equity $2,257.4 $2,287.8 ======== =========
Year Ended December 31, 1994 Year Ended December 31, 1993 ---------------------------------- ---------------------------- Life/A&H P&C Combined Life/A&H P&C Combined -------- ----- -------- -------- ------ -------- Statutory Net Income * $271.9 $34.1 $306.0 $255.0 $62.1 $317.1 Insurance business related adjustments: Deferred policy acquisition costs 337.7 76.8 414.5 269.6 56.3 325.9 Amortization of deferred policy acquisition costs (227.7) (48.5) (276.2) (204.1) (53.6) (257.7) Amortization of cost of insurance purchased (13.9) - (13.9) (15.5) - (15.5) Amortization of excess of cost over net assets purchased (4.8) - (4.8) (5.0) - (5.0) Policy liabilities and reinsurance assets 19.2 - 19.2 10.5 - 10.5 Deferred income taxes (64.7) (6.9) (71.6) 26.3 2.7 29.0 Change in valuation reserves 26.6 - 26.6 (39.2) - (39.2) Realized gain on transfer of subsidiary (89.4) - (89.4) (3.4) - (3.4) Cumulative effect of postretirement benefits - - - - - - ---------------------------------- ---------------------------- Subtotal $255.0 $55.5 $310.3 $294.2 $67.5 $361.7 ===================== ================= Investment in other operations and other 49.7 (37.9) ------ ------ Consolidated Net Income - GAAP Basis $360.0 $323.8 ====== ======
Year Ended December 31, 1992 ---------------------------------- Life/A&H P&C Combined -------- ----- -------- Statutory Net Income * $187.0 $42.1 $229.1 Insurance business related adjustments: Deferred policy acquisition costs 256.5 63.3 319.8 Amortization of deferred policy acquisition costs (195.0) (57.3) (252.3) Amortization of cost of insurance purchased (20.5) - (20.5) Amortization of excess of cost over net assets purchased (5.1) - (5.1) Policy liabilities and reinsurance assets 47.8 - 47.8 Deferred income taxes (55.2) 2.0 (53.2) Change in valuation reserves (16.6) - (16.6) Realized gain on transfer of subsidiary - - - Cumulative effect of postretirement benefits (30.0) - (30.0) ---------------------------------- Subtotal $168.9 $50.1 $219.0 ===================== Investment in other operations and other (92.4) ------- Consolidated Net Income - GAAP Basis $126.6 =======
* net of intercompany dividends 24 SCHEDULE III Aon Corporation and Subsidiaries SUPPLEMENTARY INSURANCE INFORMATION
Future policy benefits, Unearned Benefits, Amortization Deferred losses, premiums Premium claims, of deferred policy claims and other & policy Net Commissions, losses and policy Other acquisition and loss policyholder fees investment fees settlement acquisition operating Premiums costs (1) expenses (4) funds (4) revenue income (2) & other expenses (5) costs (1) expenses written (3) (millions) ----------- ------------ ------------ -------- ---------- ----------- ------------ ----------- --------- ----------- Year ended December 31, 1994 Insurance brokerage and consulting services...... $ -- $ -- $ -- $ -- $ 46.6 $1,375.5 $ -- $ -- $1,263.3 $ -- Life insurance. 583.7 1,206.1 5,785.6 454.5 477.8 14.6 608.2 98.2 127.3 325.2 A&H insurance.. 645.6 732.0 625.3 1,229.3 51.6 15.7 539.9 143.4 435.6 1,307.1 Specialty property and casualty.. 61.3 440.6 520.8 249.9 45.4 20.3 156.8 48.5 56.8 335.1 Corporate and other......... -- -- -- -- 138.1 37.6 -- -- 141.3 -- -------- -------- -------- -------- ------ -------- -------- ------ -------- -------- Total........ $1,290.6 $2,378.7 $6,931.7 $1,933.7 $759.5 $1,463.7 $1,304.9 $290.1 $2,024.3 $1,967.4 ======== ======== ======== ======== ====== ======== ======== ====== ======== ======== Year ended December 31, 1993 Insurance brokerage and consulting services...... $ -- $ -- $ -- $ -- $ 37.5 $1,177.5 $ -- $ -- $1,086.9 $ -- Life insurance. 508.6 1,221.5 5,448.4 432.1 490.9 12.1 609.1 90.7 128.9 279.0 A&H insurance.. 550.0 661.8 531.2 1,130.1 54.2 16.4 483.0 128.8 422.1 1,151.4 Specialty property and casualty.. 41.5 443.0 470.4 260.8 47.0 18.4 175.2 53.9 53.6 284.0 Corporate and other......... -- -- -- -- 115.6 52.2 -- -- 133.5 -- -------- -------- -------- -------- ------ -------- -------- ------ -------- -------- Total........ $1,100.1 $2,326.3 $6,450.0 $1,823.0 $745.2 $1,276.6 $1,267.3 $273.4 $1,825.0 $1,714.4 ======== ======== ======== ======== ====== ======== ======== ====== ======== ======== Year ended December 31, 1992 Insurance brokerage and consulting services...... $ -- $ -- $ -- $ -- $ 27.5 $ 699.2 $ -- $ -- $ 728.4 $ -- Life insurance. 454.9 1,184.7 4,863.9 426.4 489.6 11.5 616.1 89.7 140.8 306.0 A&H insurance.. 563.8 627.1 506.8 1,121.8 60.2 16.2 494.6 125.7 420.3 1,117.5 Specialty property and casualty.. 39.1 239.3 337.4 278.1 52.3 17.9 194.9 57.7 58.4 377.8 Corporate and other......... -- -- -- -- 107.4 28.4 -- -- 119.4 -- -------- -------- -------- -------- ------ -------- -------- ------ -------- -------- Total........ $1,057.8 $2,051.1 $5,708.1 $1,826.3 $737.0 $773.2 $1,305.6 $273.1 $1,467.3 $1,801.3 ======== ======== ======== ======== ====== ======== ======== ====== ======== ========
---------------- (1) Includes cost of insurance purchased. (2) The above results reflect allocations of investment income and certain expense elements considered reasonable under the circumstances. (3) Net of reinsurance ceded. (4) Net of reinsurance ceded in 1992. (5) Interest expense incurred on investment-type policies for the years ended December 31, 1994, 1993 and 1992 amounted to $248.2 million, $248.5 million, and $256.3 million, respectively. 25 SCHEDULE IV Aon Corporation and Subsidiaries REINSURANCE
Year Ended December 31, 1994 ----------------------------------------------------------- Percentage Ceded to Assumed of amount Gross other from other Net assumed to (millions) amount companies companies amount net --------- --------- ---------- --------- ---------- Life insurance in force (1).............. $74,047.9 $25,109.7 $1,173.9 $50,112.1 2.3% ========= ========= ======== ========= ==== Premiums and policy fees Life Insurance......................... $ 606.3 $ 161.1 $ 9.3 $ 454.5 2.0% A&H Insurance.......................... 1,218.9 114.4 124.8 1,229.3 10.2 Specialty Property & Casualty (2)...... 309.9 139.1 79.1 249.9 31.7 --------- --------- -------- --------- ---- Total premiums and policy fees........... $ 2,135.1 $ 414.6 $ 213.2 $ 1,933.7 11.0% ========= ========= ======== ========= ====
Year Ended December 31, 1993 ----------------------------------------------------------- Percentage Ceded to Assumed of amount Gross other from other Net assumed to (millions) amount companies companies amount net --------- --------- ---------- --------- ---------- Life insurance in force (1).............. $70,936.8 $24,800.0 $1,223.9 $47,360.7 2.6% ========= ========= ======== ========= ==== Premiums and policy fees Life Insurance......................... $ 582.9 $ 159.4 $ 8.6 $ 432.1 2.0% A&H Insurance.......................... 1,182.1 117.9 65.9 1,130.1 5.8 Specialty Property & Casualty (2)...... 281.6 130.7 109.9 260.8 42.1 --------- --------- -------- --------- ---- Total premiums and policy fees........... $ 2,046.6 $ 408.0 $ 184.4 $ 1,823.0 10.1% ========= ========= ======== ========= ====
Year Ended December 31, 1992 ----------------------------------------------------------- Percentage Ceded to Assumed of amount Gross other from other Net assumed to (millions) amount companies companies amount net --------- --------- ---------- --------- ---------- Life insurance in force (1).............. $70,375.8 $23,231.3 $1,475.6 $48,620.1 3.0% ========= ========= ======== ========= ==== Premiums and policy fees Life Insurance ........................ $ 559.7 $ 156.5 23.2 $ 426.4 5.4% A&H Insurance.......................... 1,177.7 151.7 95.8 1,121.8 8.5 Specialty Property & Casualty (2)...... 274.7 105.9 $ 109.3 278.1 39.3 --------- --------- -------- --------- ---- Total premiums and policy fees........... $ 2,012.1 $ 414.1 $ 228.3 $ 1,826.3 12.5% ========= ========= ======== ========= ====
(1) Includes credit life insurance. (2) Includes mechanical repair insurance sold through automobile dealers, appliance warranty insurance and property liability insurance. 26 SCHEDULE V Aon CORPORATION VALUATION AND QUALIFYING ACCOUNTS Years Ended December 31, 1994, 1993 and 1992
(millions) Additions ------------------------- Balance at Charged to Charged to Balance beginning cost and other Deductions at end Description of year expenses accounts (1) of year ----------------------------------------------- ---------- ---------- ---------- ---------- ---------- Year ended December 31, 1994 ---------------------------- Reserve for losses (2) (deducted from mortgage loans on real estate) $42.0 $ - $(12.3) $ - $29.7 Reserve for losses (deducted from long-term bonds) 11.7 - - (11.7) - Reserve for losses (2) (deducted from other long-term investments) 9.3 - (2.6) - 6.7 Allowance for doubtful accounts (3) (deducted from insurance brokerage and consulting services receivables) 41.2 7.0 1.3 (4.3) 45.2 Allowance for doubtful accounts (3) (deducted from premiums and other) 3.1 1.4 - (1.3) 3.2 Year ended December 31, 1993 ---------------------------- Reserve for losses (2) (deducted from mortgage loans on real estate) $23.8 $ - $ 25.7 $ (7.5) $42.0 Reserve for losses (2) (deducted from long-term bonds) - - 11.7 - 11.7 Reserve for losses (2) (deducted from other long-term investments) - - 21.0 (11.7) 9.3 Allowance for doubtful accounts (3) (deducted from insurance brokerage and consulting services receivables) 34.6 2.3 6.4 (2.1) 41.2 Allowance for doubtful accounts (3) (deducted from premiums and other) 5.0 1.4 - (3.3) 3.1 Year ended December 31, 1992 ---------------------------- Reserve for losses (2) (deducted from mortgage loans on real estate) $7.2 $ - $ 29.6 $(13.0) $23.8 Allowance for doubtful accounts (deducted from insurance brokerage and consulting services receivables) 4.2 9.4 22.4 (1.4) 34.6 Allowance for doubtful accounts (3) (deducted from premiums and other) 6.9 2.5 0.5 (4.9) 5.0
(1) Accounts deemed to be uncollectible. (2) Amounts shown in additions charged to other accounts represent realized investment losses. (3) Amounts shown in additions charged to other accounts represent reserves related to acquired business. 27 Cross Reference Sheet, Pursuant to General Instruction G(4)
ITEM IN INCORPORATED BY FORM 10-K REFERENCE TO --------- ------------ Part I Item 1. Business Annual Report to Stockholders of the Registrant for the Year 1994 ("Annual Report") pages 15 through 19 and 21 through 25. Item 3. Legal Proceedings Annual Report page 48 (note 11 of Notes to Consolidated Financial Statements). Part II Item 5. Market for the Registrant's Annual Report pages 43 and 44 (note 7 Common Stock and Related of Notes to Consolidated Financial Security Holder Matters Statements) and page 51. Item 6. Selected Financial Data Annual Report page 50. Item 7. Management's Discussion and Annual Report pages 27 through 32. Analysis of Financial Condition and Results of Operations Item 8. Financial Statements Annual Report pages 33 through 49 and 51. and Supplementary Data Part III Item 10. Directors and Executive Notice of Annual Meeting of Holders Officers of the Registrant of Common Stock and Series C Preferred Stock and Proxy Statement For Annual Meeting of Stockholders on April 20, 1995 of the Registrant ("Proxy Statement") pages 3 and 6. Item 11. Executive Compensation Proxy Statement pages 11 through 13. Item 12. Security Ownership of Certain Proxy Statement pages 2, 7 and 8. Beneficial Owners and Management Item 13. Certain Relationships and Proxy Statement page 17. Related Transactions Part IV Item 14. Exhibits, Financial Statement Annual Report pages 33 through 49. Schedules, and Reports on Form 8-K
(3) Articles of incorporation and bylaws: 28 EXHIBIT INDEX Exhibit Number Page Number of Regulation Sequentially S-K, Item 601 Numbered Copy ------------- -------------- (a) Second Restated Certificate of Incorporation of the Registrant-- incorporated by reference to Exhibit 3(a) to the 1991 Form 10-K. (b) Certificate of Amendment of the Registrant's Second Restated Certificate of Incorporation - incorporated by reference to Exhibit 3 to the Registrant's Quarterly Report on Form 10-Q for the quarter ending March 31, 1994 (the "First Quarter 1994 Form 10-Q). (c) Bylaws of the Registrant--incorporated by reference to Exhibit (d) to the 1982 Form 10-K. (d) Certificate of Designation for the Registrant's 8% Cumulative Perpetual Preferred Stock, $1.00 par value -- incorporated by reference to Exhibit 4(a) to the Registrants Quarterly Report on Form 10-Q for the quarter ended September 30, 1992 (the "Third Quarter 1992 Form 10-Q"). (e) Certificate of Designation for the Registrant's 6 1/4% Cumulative Convertible Exchangeable Preferred Stock, $1.00 par value -- incorporated by reference to Exhibit 4(b) to the Third Quarter 1992 Form 10-Q. (f) Certificate of Designation for the Registrant's Series C Cumulative Preferred Stock - incorporated by reference to Exhibit 4.1 to the Registrant's Current Report on Form 8-K dated February 9, 1994. (4) Instruments defining the rights of security holders, including indentures: (a) Indenture dated September 15, 1992 between the Registrant and Continental Bank Corporation (now known as Bank of America Illinois), as Trustee--incorporated by reference to Exhibit 4(a) of the Registrant's Current Report on Form 8-K dated September 23, 1992. (b) Resolutions establishing terms of 6.875% Notes Due 1999 and 7.40% Notes Due 2002 - incorporated by reference to Exhibit 4(d) to the Registrant's Annual Report to the Securities and Exchange Commission on Form 10-K for the year ending December 31, 1992. (c) Resolutions establishing the terms of 6.70% Notes Due 2003 incorporated by reference to Exhibit 4(c) to the Registrant's Annual Report to the Securities and Exchange Commission on Form 10-K for the year ending December 31, 1993 (the "1993 Form 10-K"). (d) Resolutions establishing the terms of 6.30% Notes Due 2004 incorporated by reference to Exhibit 4(d) to the 1993 Form 10-K. 29 EXHIBIT INDEX Exhibit Number Page Number of Regulation Sequentially S-K, Item 601 Numbered Copy ------------- -------------- (10) Material Contracts: (a) Aon Stock Option Plan-incorporated by reference to Exhibit 10(a) to the 1990 Form 10-K. (b) First Amendment to Aon Stock Option Plan - incorporated by reference to the Exhibit 10(a) to Registrant's Quarterly Report on Form 10-Q for the quarter ending June 30, 1994 (the "Second Quarter 1994 Form 10-Q"). (c) Second Amendment to Aon Stock Option Plan - incorporated by reference to Exhibit 10(c) to the Second Quarter 1994 Form 10-Q. (d) Ryan Insurance Group, Inc. Stock Option Plan together with Stock Option Assumption Agreement providing for amendment of the plan--incorporated by reference to Exhibit 4(b) to the Registration Statement No. 2-79114 on Form S-8. (e) Registration Rights Agreement by and among the Registrant and certain affiliates of Ryan Insurance Group, Inc. (including Patrick G. Ryan and Andrew J. McKenna)--incorporated by reference to Exhibit (f) to the 1982 Form 10-K. (f) 1994 Restatement of Aon Savings Plan. 32 (g) 1994 Restatement of Aon Employee Stock Ownership Plan. 124 (h) 1994 Restatement of Aon Pension Plan. 192 (i) Deferred Compensation Agreement by and among Registrant and Registrant's directors who are not salaried employees of Registrant or Registrant's affiliates--incorporated by reference to Exhibit 10(i) to the 1987 Form 10-K. (j) Aon Stock Award Plan, as amended - incorporated by reference to Exhibit 10(a) to the First Quarter 1994 Form 10-Q. (k) Amendment and Waiver Agreement Dated as of November 4, 1991 among the Registrant and each of Patrick G. Ryan, Shirley Ryan, Ryan Enterprises Corporation and Harvey N. Medvin -- incorporated by reference to Exhibit 10(j) to the 1991 Form 10-K. (l) Registration Rights Agreement dated November 2, 1992 by and between the Registrant and Frank B. Hall & Co. Inc. -- incorporated by reference to exhibit 4(c) to the Third Quarter 1992 Form 10-Q. 30 EXHIBIT INDEX Exhibit Number Page Number of Regulation Sequentially S-K, Item 601 Numbered Copy ------------- -------------- (m) Aon Corporation 1994 Amended and Restated Outside Director Stock Award Plan - incorporated by reference to Exhibit 10(b) to the First Quarter 1994 Form 10-Q. (11) Statement regarding Computation of Per Share Earnings. 283 (12) Statements regarding Computation of Ratios. (a) Statement regarding Computation of Ratio of Earnings to Fixed Charges. 284 (b) Statement regarding Computation of Ratio of Earnings to Combined Fixed Charges and Preferred Stock Dividends. 285 (13) Annual Report of Stockholders of the Registrant for the year ended December 31, 1994 (for information, and not to be deemed filed, except for those portions specifically incorporated by reference herein). (21) List of subsidiaries of the Registrant. 286 (23) Consent of Ernst & Young LLP to the incorporation by reference into Aon's Annual Report on Form 10-K of their report included in the 1994 Annual Report to Stockholders and into Aon's Registration Statement Nos. 2-79114, 2-82791, 33-27984, 33-42575 and 33-57562. 297 (99) Annual Report to the Securities and Exchange Commission on Form 11-K for the Aon Savings Plan for the year ended December 31, 1994 -- to be filed by amendment as provided in Rule 15d-21(b). 31 EX-10.F 2 94 RESTATEMENT OF SAVING Exhibit 10(F) page 1 of 92 1994 RESTATEMENT OF Aon SAVINGS PLAN 32 Exhibit 10(F) page 2 of 92 1994 Restatement of Aon Savings Plan ------------------- (Previously known as Combined International Corporation Staff Employees' Saving Plan) TABLE OF CONTENTS SECTION 1 - DEFINITION OF TERMS............................................ 3 1.01 THE TERM "AFFILIATE"......................................... 3 1.02 THE TERM "ANNIVERSARY DATE".................................. 3 1.03 THE TERM "BASIC PAY DEFERRAL AMOUNT"......................... 3 1.04 THE TERM "BENEFICIARIES"..................................... 3 1.05 THE TERM "BOARD"............................................. 3 1.06 THE TERM "COMMITTEE"......................................... 3 1.07 THE TERM "COMPANY"........................................... 3 1.08 THE TERM "COMPENSATION"...................................... 3 1.09 THE "EFFECTIVE DATE"......................................... 4 1.10 THE TERM "EMPLOYEE".......................................... 4 1.11 THE TERM "ERISA"............................................. 5 1.12 THE TERM "HIGHLY COMPENSATED EMPLOYEE"....................... 5 1.13 THE TERM "HOURS OF SERVICE".................................. 6 1.14 THE TERM "INSTITUTIONAL TRUSTEE"............................. 7 1.15 THE TERM "IRC"............................................... 7 1.16 THE TERM "INVESTMENT FUNDS".................................. 7 1.17 THE TERM "LEASED EMPLOYEE"................................... 7 1.18 THE TERM "NORMAL RETIREMENT DATE"............................ 8 1.19 THE TERM "1-YEAR BREAK IN SERVICE"........................... 8 1.20 THE TERM "PARTICIPANT"....................................... 8 1.21 THE TERM "PLAN".............................................. 8 1.22 THE TERM "PLAN YEAR"......................................... 8 1.23 THE TERM "SERVICE"........................................... 8 1.24 THE TERM "SUBSIDIARY"........................................ 9 1.25 THE TERM "SUPPLEMENTAL PAY DEFERRAL AMOUNT".................. 9 1.26 THE TERM "TRUST"............................................. 9 1.27 THE TERM "TRUSTEE" OR "TRUSTEES"............................. 9 1.28 THE TERM "TRUST FUND"........................................ 9 1.29 THE TERM "UNITED STATES"..................................... 9 SECTION 2 - EMPLOYEES ENTITLED TO PARTICIPATE.............................. 10 2.01 CONDITIONS OF ELIGIBILITY.................................... 10 2.02 TERMINATION OF EMPLOYMENT.................................... 10 2.03 LEAVE OF ABSENCE............................................. 11 2.04 TRANSFER TO AN AFFILIATE..................................... 11 33 Exhibit 10(F) page 3 of 92 TABLE OF CONTENTS (continued) 2.05 TRANSFER TO A FOREIGN COUNTRY................................ 11 2.06 EMPLOYMENT IN BARGAINING UNIT................................ 11 SECTION 3 - CONTRIBUTIONS.................................................. 12 3.02 DATE OF CONTRIBUTION......................................... 13 3.03 BASIC PAY DEFERRAL AMOUNT.................................... 13 3.04 SUPPLEMENTAL PAY DEFERRAL AMOUNT............................. 13 3.05 VOLUNTARY CONTRIBUTIONS BY PARTICIPANTS...................... 13 3.06 RESTRICTIONS AND LIMITATIONS ON PAY DEFERRAL AMOUNTS......... 15 3.07 ADJUSTMENTS IN PAY DEFERRAL AMOUNTS.......................... 15 3.10 ROLLOVERS.................................................... 22 SECTION 4 - ALLOCATION OF TRUST FUNDS...................................... 23 4.01 COMPANY CONTRIBUTION ACCOUNT................................. 23 4.02 BASIC PAY DEFERRAL ACCOUNT................................... 23 4.03 SUPPLEMENTAL PAY DEFERRAL ACCOUNT............................ 24 4.04 VOLUNTARY CONTRIBUTION ACCOUNT............................... 24 4.05 RECORDS AND ACCOUNTING....................................... 24 4.06 DETERMINATION OF COMPENSATION................................ 25 4.07 DESIGNATION OF BENEFICIARY................................... 25 4.08 MERGERS AND TRANSFERS OF ASSETS AND LIABILITIES.............. 26 SECTION 5 - INVESTMENTS.................................................... 33 5.01 INVESTMENT FUNDS............................................. 33 5.02 INVESTMENT ELECTIONS......................................... 33 5.03 PASS-THROUGH VOTING, LIFE OF VIRGINIA SERIES FUND, INC....... 33 5.04 LACK OF VALID ELECTION....................................... 34 5.05 FUNDS FOR INVESTMENT......................................... 35 5.06 INVESTMENT OF THE SEPARATE FUNDS............................. 36 5.07 INVESTMENTS NOT ALLOCATED TO SEPARATE ACCOUNTS............... 37 SECTION 6 - PROVISIONS RELATING TO TRUSTEE................................. 38 6.01 APPOINTMENT OF TRUSTEES AND INSTITUTIONAL TRUSTEE............ 38 6.02 FEES AND EXPENSES OF TRUSTEE................................. 38 6.03 PAYMENT OF COSTS, FEES AND EXPENSES.......................... 38 6.04 UNCERTAIN DISTRIBUTION....................................... 38 6.05 LIABILITY.................................................... 38 6.06 LEGAL ACTION................................................. 39 6.07 MANNER OF ACTING............................................. 39 6.08 DUTIES OF INSTITUTIONAL TRUSTEE.............................. 39 34 Exhibit 10(F) page 4 of 92 TABLE OF CONTENTS (continued) 6.09 LIMITATION ON LIABILITY...................................... 39 6.10 INDEMNITY.................................................... 39 6.11 DISBURSEMENTS................................................ 40 6.12 REPORTS...................................................... 40 6.13 ADDITIONAL POWERS OF TRUSTEE................................. 40 6.14 INVESTMENT MANAGER........................................... 42 SECTION 7 - ADMINISTRATION OF THE PLAN..................................... 43 7.01 COMMITTEE.................................................... 43 7.02 DUTIES OF COMMITTEE.......................................... 43 7.03 CHAIRMAN AND SECRETARY....................................... 43 7.04 MEETINGS AND QUORUM.......................................... 43 7.05 ALLOCATION OF DUTIES......................................... 43 7.06 AON.......................................................... 44 7.07 RULES AND INTERPRETATION..................................... 44 7.08 LIMITATIONS ON LIABILITY..................................... 44 7.09 INDEMNITY.................................................... 44 7.10 IDENTITY..................................................... 45 SECTION 8 - DISPOSITION OF THE SEPARATE TRUST ACCOUNTS..................... 46 8.01 PARTICIPANT STILL EMPLOYED BY COMPANY AFTER RETIREMENT DATE.. 46 8.02 DISPOSITION AT OR AFTER RETIREMENT DATE OR IN CASE OF PHYSICAL OR MENTAL DISABILITY................................ 46 8.03 DISPOSITION UPON THE DEATH OF A PARTICIPANT.................. 46 8.04 DISPOSITION UPON TERMINATION OF EMPLOYMENT BEFORE REACHING RETIREMENT DATE..................................... 46 8.05 TERMINATION OF THE TRUST AND DISPOSITION UPON SUCH TERMINATION........................................ 47 8.06 PAYMENT TO MINORS, ETC....................................... 48 8.07 HARDSHIP WITHDRAWALS......................................... 48 8.08 NET EARNINGS AND VALUATION ADJUSTMENT........................ 50 8.09 METHOD OF VALUING ASSETS..................................... 50 8.10 GENERAL PROVISIONS REGARDING PAYMENT OF BENEFITS............. 50 35 Exhibit 10(F) page 5 of 92 TABLE OF CONTENTS (continued) SECTION 9 - PARTICIPANT'S NONFORFEITABLE INTEREST.................... 55 9.01 GENERAL RULE............................................ 55 9.02 SPECIAL RULES........................................... 55 9.03 RESTORATION OF FORFEITURES.............................. 56 9.04 APPLICATION OF OLD VESTING SCHEDULE..................... 57 SECTION 10 - SPENDTHRIFT TRUST........................................ 58 10.01 GENERAL................................................. 58 10.02 QUALIFIED DOMESTIC RELATIONS ORDER...................... 58 SECTION 11 - COMPANY TO HAVE NO INTEREST IN TRUST..................... 61 SECTION 12 - AMENDMENT AND SUSPENSION OF CONTRIBUTIONS................ 62 12.01 AMENDMENT OF THE AGREEMENT.............................. 62 12.02 SUSPENSION.............................................. 62 SECTION 13 - ADOPTION OF PLAN BY AFFILIATE............................ 63 13.01 ADOPTION OF PLAN........................................ 63 13.02 INTENTION OF PARTIES.................................... 63 13.03 TERMINATION OF STATUS OF SUBSIDIARY..................... 63 SECTION 14 - ERISA PROVISIONS......................................... 64 14.01 SERVICE FOR PREDECESSOR................................. 64 14.02 CONTROLLED GROUP........................................ 64 14.03 MERGER.................................................. 64 14.04 CLAIMS PROCEDURE........................................ 64 14.05 INVESTMENT IN DEPOSITS WITH CORPORATE FIDUCIARY......... 65 14.06 MAXIMUM ANNUAL ADDITION................................. 65 SECTION 15 - MISCELLANEOUS............................................ 70 15.01 VALIDITY OF CONTRACTS................................... 70 15.02 RELIANCE ON INFORMATION FURNISHED BY THE COMPANIES...... 70 15.03 INABILITY TO PERFORM.................................... 70 15.04 EXECUTION OF DOCUMENTS.................................. 70 15.05 NOTICE OF REQUIRED ACTION............................... 70 15.06 RELIANCE UPON COMMUNICATION............................. 71 15.07 DISCHARGE UPON PAYMENT.................................. 71 15.08 INSURER NOT PARTY TO AGREEMENT.......................... 71 36 Exhibit 10(F) page 6 of 92 TABLE OF CONTENTS (continued) 15.09 DISPOSITION OF SHARE OF MISSING PERSONS.................... 71 15.10 GENDER AND CASE............................................ 71 15.11 SECTION TITLE NOT PART OF AGREEMENT........................ 71 15.12 CONSTRUCTION............................................... 71 15.13 AGREEMENT BINDING ON ALL PARTIES........................... 72 SECTION 16 - PROVISIONS APPLICABLE IF PLAN BECOMES TOP-HEAVY............. 73 16.01 APPLICABILITY.............................................. 73 16.02 ADDITIONAL DEFINITIONS..................................... 73 16.03 SPECIAL RULES.............................................. 75 16.04 PARTICIPANT'S TOP-HEAVY ACCOUNT............................ 75 16.05 VESTING WITH RESPECT TO PARTICIPANTS' TOP-HEAVY ACCOUNTS... 76 16.06 MINIMUM CONTRIBUTION FOR NON-KEY EMPLOYEE.................. 76 16.07 MAXIMUM ANNUAL ADDITION.................................... 76 16.08 SIMPLIFIED EMPLOYEE PENSIONS............................... 77 16.09 CONTRIBUTIONS OR BENEFITS NOT TAKEN INTO ACCOUNT........... 77 SCHEDULE A - SPECIAL PROVISIONS RELATING TO SERVICE............................ 79 SCHEDULE B - SPECIAL PROVISIONS RELATED TO FORMER PARTICIPANTS OF THE SAVINGS AND INVESTMENT PLAN FOR THE EMPLOYEES OF FRANK B. HALL & CO. INC........................................ 82 SCHEDULE C - SPECIAL PROVISIONS RELATED TO FORMER PARTICIPANTS OF THE K&K INSURANCE GROUP, INC. 401(K) SALARY REDUCTION PLAN...................................... 84 SCHEDULE D - SPECIAL PROVISIONS RELATED TO FORMER PARTICIPANTS OF THE SALARY DEFERRAL THRIFT PLAN FOR THE EMPLOYEES OF BOOKE & COMPANY.................. 85 37 Exhibit 10(f) Page 7 of 92 1994 RESTATEMENT OF AON SAVINGS PLAN ---------------- (Previously known as Combined International Corporation Staff Employees' Savings Plan) WHEREAS, Rollins Burdick Hunter Co. entered into an agreement establishing a profit- sharing plan and a trust pursuant to the plan for the benefit of its employees and the employees of its subsidiaries which adopted the plan, which agreement was known as the Rollins Burdick Hunter Co. Savings and Investment Plan; WHEREAS, effective July 1, 1984, Combined International Corporation, the parent corporation of Rollins Burdick Hunter Co., adopted this profit-sharing Plan and Trust agreement for the Staff Employees of Combined and of its various other subsidiaries, amended and restated the Plan and Trust agreement, changed the name of the Plan and Trust agreement to the Combined International Corporation Staff Employees' Savings Plan, and made Combined the sponsor of the Plan and Trust agreement; WHEREAS, pursuant to said 1984 Restatement, assets and liabilities under various plans within the Combined group for participants therein were transferred to this Plan pursuant to IRC Sections 401(a)(12) and 414(l) and Section 208 of ERISA, and pursuant to the provisions of such plans; and assets and liabilities under various plans within the Aon group were likewise transferred to the Plan pursuant the 1989 Restatement and subsequent amendments in similar fashion; WHEREAS, the Plan previously had been set forth in an instrument dated July 1, 1984, and was amended five times after that last restatement thereof, on July 20, 1984; December 13, 1984; again on December 13, 1984; November 15, 1985; and on November 38 Exhibit 10(f) Page 8 of 92 20, 1987; and whereas the Plan was restated by a 1987 Restatement thereof on November 20, 1987 which itself was amended one time on April 15, 1988; WHEREAS, the Plan was again restated effective January 1, 1989 ("Second Amendment to and 1989 Restatement of Aon Savings Plan") in order to comply with the Tax Reform Act of 1986 and other later changes in the law and to change the name of the Plan and Trust agreement to the Aon Savings Plan; WHEREAS, AON CORPORATION (sometimes referred to herein as "Aon") now wishes to amend and again restate the Plan and Trust agreement for the purpose of complying with the Omnibus Budget Reconciliation Act of 1993 and other changes in the law and to make certain other desirable changes therein, including changes necessary for the Plan to constitute an ERISA 404(c) plan wherein the fiduciaries may be relieved of liability for any losses which are the direct and necessary result of investment instructions given by participants and beneficiaries; NOW, THEREFORE, pursuant to a resolution adopted by the Board of Directors the Plan shall be and hereby is further amended and restated effective as of January 1, 1994, except as otherwise indicated herein, as follows: 39 Exhibit 10(f) Page 9 of 92 SECTION 1 - DEFINITION OF TERMS Unless the context shall otherwise clearly indicate, the following terms shall be construed as hereinafter defined: 1.01 THE TERM "AFFILIATE" shall refer to a substantially owned subsidiary or sub-subsidiary of Aon that has not adopted the Plan herein set forth. 1.02 THE TERM "ANNIVERSARY DATE" shall refer to the last day of each Plan Year during which this Agreement shall be in force and effect. 1.03 THE TERM "BASIC PAY DEFERRAL AMOUNT" shall refer to the amount by which a Participant has elected to have his Compensation adjusted under Section 3.03. 1.04 THE TERM "BENEFICIARIES" shall refer to persons designated by the Participant to receive his share of any property of the Trust in case of the Participant's death. 1.05 THE TERM "BOARD" shall refer to the Board of Directors of Aon or any committee of the Board of Directors delegated authority to act for the whole Board in respect of matters relating to the Plan. 1.06 THE TERM "COMMITTEE" shall refer to the Committee appointed by the Board pursuant to Section 7.01. The Committee is designated as the administrator, plan administrator, and named fiduciary with respect to the administration of the Plan (but not with respect to the control, management and investment of the assets of the trust) for the purposes of ERISA. 1.07 THE TERM "COMPANY" as used herein shall refer to Aon Corporation (hereinafter referred to as "Aon" when referring only to Aon Corporation) when applying the provisions of this Trust as its profit sharing plan for its Employees. It shall refer to each "Subsidiary" when applying the provisions of this Trust as the profit-sharing plan for the Employees of such Subsidiary. The term "Companies" as used herein shall refer collectively to Aon and all Subsidiaries and shall be applied as though all of such Companies constituted a single employer. 1.08 THE TERM "COMPENSATION" shall mean the following types of earnings paid to an Employee for his service on behalf of the Company subsequent to the date he becomes a Participant, determined before excluding any reduction described in Sections 3.03 and 3.04 or for cafeteria plans under Section 125 of the IRC, but excluding any such amounts paid to him in respect to employment during which he is not permanently employed within the United States or its possessions as set forth in Section 2.01(b): (a) salary and fixed-based compensation including compensation for overtime; 40 Exhibit 10(f) Page 10 of 92 (b) bonuses paid pursuant to periodic individual performance appraisals and formal contractual bonus programs, but excluding other bonus and miscellaneous income; and (c) net commission, renewal and override compensation (but excluding deferred commission payments). In addition to other applicable limitations set forth in the Plan, and notwithstanding any other provision of the Plan to the contrary, for Plan Years beginning on or after January 1, 1994, the annual Compensation of each Employee taken into account under the Plan shall not exceed the OBRA '93 annual compensation limit. The OBRA '93 annual compensation limit is $150,000, as adjusted by the commissioner of the Internal Revenue Service for increases in the cost of living in accordance with Section 401(a)(17)(B) of the IRC. The cost-of-living adjustment in effect for a calendar year applies to any period, not exceeding 12 months, over which compensation is determined (determination period) beginning in such calendar year. If a determination period consists of fewer than 12 months, the OBRA '93 annual compensation limit will be multiplied by a fraction, the numerator of which is the number of months in the determination period, and the denominator of which is 12. For plan years beginning on or after January 1, 1994, any reference in this Plan to the limitation under section 401(a)(17) of the IRC shall mean the OBRA '93 annual compensation limit set forth in this provision. If Compensation for any prior determination period is taken into account in determining an employee's benefits accruing in the current Plan Year, the Compensation for that prior determination period is subject to the OBRA '93 annual compensation limit in effect for that prior determination period. For this purpose, for determination periods beginning before the first day of the first plan year beginning on or after January 1, 1994, the OBRA '93 annual compensation limit is $150,000. In determining Compensation the rules of Section 1.12(d) shall apply except the term "family" shall be limited to the Employee's spouse and to any lineal descendants of the Employee who have not attained age 19 before the close of the year. 1.09 THE "EFFECTIVE DATE" of this Plan as restated shall be January 1, 1994 . 1.10 THE TERM "EMPLOYEE" shall refer to all employees of the Companies, except those who are included in a unit of employees covered by a collective bargaining agreement between employee representatives and one or more employers, if retirement benefits were the subject of good faith bargaining between such employee representatives and such employer or employers. 41 Exhibit 10(f) Page 11 of 92 1.11 THE TERM "ERISA" refers to the Employee Retirement Income Security Act of 1974, as from time to time amended. 1.12 THE TERM "HIGHLY COMPENSATED EMPLOYEE" shall include an employee who received compensation in excess of $75,000, received compensation in excess of $50,000 and was in the top-paid group, or was an officer and received compensation greater than $45,000 (all amounts as adjusted for increases in the cost of living per Section 14.6), either (i) in the current year while a member of the 100 employees paid the greatest compensation or (ii) in the preceding year. The term "compensation" means compensation under Section 14.06, and shall include reductions described in Sections 3.03 and 3.04 or for cafeteria plans under Section 125 of the IRC. The following rules shall apply. (a) Five-percent owner. Such term shall also include an employee who was a five-percent owner (as defined at Section 16.02(b)) at any time during either the preceding year or the current year. (b) Top-paid group. The "top-paid group" is the group consisting of the top 20 percent of employees ranked on the basis of compensation paid during the year. For purposes of determining the number of employees in the top-paid group (but not for purposes of identifying the particular employees therein), or the number of officers taken into account under Subsection (c), below, there shall be excluded those employees who have not completed six months of service; employees who normally work either less than 17 1/2 hours per week or not more than six months during any year; employees who have not attained age 21; and except to the extent provided in regulations, employees included in a unit of employees covered by a collective bargaining agreement. (c) Officers. The highest paid officer shall always be treated as a Highly Compensated Employee; otherwise the number of officers so treated shall not exceed the lesser of (i) 50 employees or (ii) the greater of three employees or 10 percent of the employees. (d) Family members. Any individual who is a member of the family (i.e., the spouse, and lineal ascendants or descendants and their spouses) of a Highly Compensated Employee who is either a five-percent owner or one of the ten most highly compensated employees shall not be considered a separate employee and his compensation (and any applicable contribution or benefit on behalf of such individual) shall be treated as if it were paid to (or on behalf of) such Highly Compensated Employee. This rule shall apply in determining the compensation of (or any contributions or benefits on behalf of) any employee for purposes of any Section of the IRC with respect to which a Highly Compensated Employee is defined by reference to IRC Section 414(q) (the provisions of which are set forth in this Section), except as provided in regulations and except in determining the portion of the 42 Exhibit 10(f) Page 12 of 92 compensation of a Participant which is under the integration level for purposes of IRC Section 401(l). (e) Former employees. A former employee shall be treated as a Highly Compensated Employee if he was a Highly Compensated Employee either (i) when he separated from service or (ii) at any time after attaining age 55. (f) Nonresident Aliens. For purposes of this Section, employees who are nonresident aliens and who receive no earned income (within the meaning of Section 911(d)(2) of the IRC ) from the Company which constitutes income from sources within the United States shall not be treated as employees. (g) Simplified Method for Determining Highly Compensated Employees. If an election by the Company under this subsection applies to any year, in determining whether an employee is a Highly Compensated Employee for such year, the first sentence of this Section shall be applied by substituting "$50,000" for "$75,000," and the $50,000 test for the top-paid group shall not apply. Such election shall not apply to any year unless at all times during such year, the Company maintained significant business activities (and employed employees) in at least 2 significantly separate geographic areas, and the Company satisfies such other conditions as the Secretary of the Treasury may prescribe. (h) Coordination with Other Provisions. Section 14.02 shall be applied before the application of this Section 1.12. 1.13 THE TERM "HOURS OF SERVICE" shall refer to the hours for which an Employee is directly or indirectly paid or entitled to payment, for the performance of duties or for a period of time during which no duties are performed (irrespective of whether the employment relationship has terminated) during the applicable computation period and such hours shall include any hours for which back pay, irrespective of mitigation of damages, has either been awarded or agreed to; provided, however, no more than 501 Hours of Service shall be credited on account of any single continuous period during which an Employee performs no duties (whether or not such period occurs in a single computation period). An Employee who enters military service and again becomes actively employed upon separation from such service shall be credited with Hours of Service in respect to his period of military service only to the extent and for the purposes required by federal law governing veterans' reemployment rights. Hours shall not be credited for payments made or due under a plan maintained solely for the purpose of complying with applicable workmen's compensation, unemployment compensation, or disability insurance laws, or for a payment which solely reimburses an Employee for medical or medically related expenses incurred by the Employee. In those instances where payroll or other Company records do not reflect the actual number of hours worked by an Employee, such Employee shall be credited with 45 Hours of Service for each calendar week that he would be required to be 43 Exhibit 10(f) Page 13 of 92 credited with at least one Hour of Service under the preceding portion of this Section. This Section shall be applied, in respect to payments for reasons other than the performance of duties and in respect to crediting of Hours of Service to a particular computation period, in accordance with the rules set forth in Labor Department Regulations Section 2530.200b-2(b) and (c), which are incorporated herein by reference. 1.14 THE TERM "INSTITUTIONAL TRUSTEE" shall refer to the bank, or other corporate trustee, duly appointed pursuant to Sections 5.05 and 6.01 of this agreement and any amendment hereto. The Institutional Trustee is designated as the named fiduciary with respect to the control, management and investment of the assets of the Aon Stock Fund. 1.15 THE TERM "IRC" shall refer to the Internal Revenue Code of 1986 as from time to time amended. 1.16 THE TERM "INVESTMENT FUNDS" shall refer to the funds available for investment and established as described in Section 5.01 1.17 THE TERM "LEASED EMPLOYEE" shall refer to an individual, other than an employee of the Employer or an affiliated employer (the "recipient employer"), who, pursuant to an agreement between the recipient employer and any other person (the "leasing organization") has performed services for the recipient employer (or the recipient employer and related persons determined in accordance with Section 414(n) of the IRC) on a substantially full-time basis for a period of at least one year, and such services are of a type historically performed by employment in the business field of the recipient employer. Contributions or benefits provided a Leased Employee by the leasing organization which are attributable to services performed for the recipient employer shall be treated as provided by the recipient employer. A leased employee shall not be considered an employee of the recipient employer if: (a) such individual is covered by a money purchase pension plan providing: (i) a nonintegrated employer contribution rate of at least ten percent of compensation, but including amounts contributed pursuant to a salary reduction agreement which are excludible from the employee's gross income under Section 125, 402(e)(3), 402(h), or 403(b) of the IRC, (ii) immediate participation, and (iii) full and immediate vesting; and (b) Leased Employees do not constitute more than 20% of the recipient employer's non-highly compensated work force, as defined in Section 414(n)(5)(C)(ii) of the IRC. 44 Exhibit 10(f) Page 14 of 92 1.18 THE TERM "NORMAL RETIREMENT DATE" shall refer to a Participant's sixty- fifth (65th) birthday. 1.19 THE TERM "L-YEAR BREAK IN SERVICE" shall refer to a 12-month consecutive period, commencing with the termination of a Participant's employment as an Employee of the Companies or an Affiliate, during which he has not completed any Hours of Service as an Employee of the Companies or an Affiliate. For purposes of this Section only, Service shall include up to one year of Maternity or Paternity Leave; provided that the Trustees may require the Participant to furnish such timely information as may reasonably be required so as to establish that the absence from work is for Maternity or Paternity Leave and to establish the number of days for which there was such an absence. "Maternity or Paternity Leave" shall mean an absence from work by reason of the pregnancy of the Participant, by reason of the birth of a child of the Participant, by reason of placement of a child with the Participant in connection with its adoption by him or her, or for purposes of caring for such child for a period beginning immediately following such birth or placement. 1.20 THE TERM "PARTICIPANT" shall refer to an Employee eligible under the terms hereof to participate herein whose employment by the Companies has not terminated. Where the context so requires, an individual for whose benefit an account is being maintained under this Plan shall also be deemed to be a Participant. 1.21 THE TERM "PLAN" shall refer to the Aon Savings Plan set forth in this instrument, as the same may be amended from time to time. 1.22 THE TERM "PLAN YEAR" shall refer to the annual accounting period used by the Trust ending on the last day of December of each year. 1.23 THE TERM "SERVICE" shall refer to the total period of time that an individual has served as an Employee of the Companies (beginning on the date an Employee first performs an Hour of Service and ending on the date on which an Employee quits, retires, is discharged or dies), with the following exceptions and modifications: (a) In respect to an individual who is an Employee on January 1, 1975, or becomes an Employee after January 1, 1975, any period of time immediately preceding the date he became an Employee that he was associated with the Companies as an independent field sales representative shall be counted for the purpose of determining his eligibility to participate hereunder pursuant to Section 2.01. (b) For the purpose of determining the eligibility of an individual to participate hereunder pursuant to Section 2.01, and his vested interest pursuant to Section 9.02, service as an employee of an Affiliate, or service as an employee in a bargaining unit for which the individual will not be deemed to be an 45 Exhibit 10(f) Page 15 of 92 Employee under Section 1.10, shall be deemed to be Service as an Employee of the Companies. (c) If an Employee's employment with the Companies is terminated but he is reemployed before he has incurred five 1-Year Breaks in Service, the period commencing with the date his employment terminated and ending with his reemployment date shall be counted as uninterrupted Service and employment as an Employee of the Companies for the purpose of determining his eligibility to participate hereunder pursuant to Section 2.01; provided, that not more than 12 months of such period shall count as uninterrupted Service for the purpose of determining his vested interest pursuant to Section 9.02. (d) For purposes of eligibility under Section 2.01, a year of Service shall refer to a 12-consecutive month period beginning with his employment commencement date (or reemployment commencement date) and each anniversary of such date during which an Employee has 1,000 Hours of Service. 1.24 THE TERM "SUBSIDIARY" shall refer to such substantially owned subsidiary or sub-subsidiary of Aon that has adopted the Plan herein set forth with the approval of Aon. 1.25 THE TERM "SUPPLEMENTAL PAY DEFERRAL AMOUNT" shall refer to the additional amount by which the Participant has elected to have his Compensation further adjusted under Section 3.04; provided, that Participants may elect a Supplemental Pay Deferral Amount only to the extent permitted by the Board. 1.26 THE TERM "TRUST" shall refer to any trust established under this Agreement, as such trusts may be amended. 1.27 THE TERM "TRUSTEE" OR "TRUSTEES" shall refer to the individual Trustees herein originally named and the successors duly appointed or elected pursuant to the provisions of this Agreement and any amendment hereto. The Trustees are designated as the named fiduciary with respect to the control, management and investment of the assets of the Trust, except for assets of the Aon Stock Fund, for the purposes of ERISA. 1.28 THE TERM "TRUST FUND" shall refer to all the assets held under this Plan regardless of the fund in which such assets are held. 1.29 THE TERM "UNITED STATES" for the purposes of this Plan shall include possessions of the United States. 46 Exhibit 10(f) Page 16 of 92 SECTION 2 - EMPLOYEES ENTITLED TO PARTICIPATE 2.01 CONDITIONS OF ELIGIBILITY. Every Employee shall become a Participant as of the first day of the first pay period succeeding the Employee's compliance with the following three requirements: (a) He must have completed one year of Service and attained the age of 21. In determining whether or not an Employee has completed the required year of Service, there shall be disregarded, except as provided in the next sentence, Service prior to any break in Service equal to or more than the greater of five 1-Year Breaks in Service or his prior completed years of Service. Once an Employee has completed his required year of Service, subsequent breaks in Service shall not affect the fact that this requirement has been completed; (b) He must be employed within the United States or its possessions on a permanent basis as determined under Section 2.05; and (c) He must sign and deliver to the Committee an Agreement of Participation, Designation of Beneficiary and Compensation Adjustment Election in such form as may from time to time be prescribed by the Committee. The Committee shall notify all Employees who are eligible to participate in this Trust and shall provide them with an Agreement of Participation, Designation of Beneficiary and Compensation Adjustment Election. Any Employee who does not elect to become a Participant as of the first date on which he would otherwise be eligible, may become a Participant as of the first day of any succeeding pay period if he is still eligible and upon compliance with the provisions of this Section 2.01. Leased Employees shall not be eligible to participate in the Plan. 2.02 TERMINATION OF EMPLOYMENT. Any Participant whose employment with the Companies is terminated for any reason whatsoever, shall cease to be eligible to participate hereunder, except to the extent he or his beneficiary shall have the right to receive payments from his individual accounts as provided in Section 8 hereof. Except as provided in Section 8.04, any Participant whose employment with the Companies is terminated shall, in the event of his later reemployment, become a Participant on the first day of the first pay period following his signing and delivery of the documents referred to in Section 2.01(c). If a reemployed Employee, by such action, again becomes a Participant in the Plan Year his employment terminated, and he remains a Participant through the last day of that Plan Year, he shall be entitled to share in the Companies' contribution, and in the forfeitures, for that Plan Year in accordance with Section 4.01(a). Any person who has ceased to be a Participant hereunder by virtue of termination of his employment and for whom the Trustee continues to hold a portion of his Participant's Basic Contribution Account, Participant's Supplemental Contribution Account, Participant's Voluntary Contribution Account or Company Contribution 47 Exhibit 10(f) Page 17 of 92 Account shall continue to share in net earnings and valuation adjustments (as provided in Section 8.08 hereof) as though he were a Participant. 2.03 LEAVE OF ABSENCE. Any Participant obtaining a leave of absence from the Company because of illness, disability (except permanent disability, provision for which is made in Section 8.02 hereof) or national emergency requiring governmental, military, or naval service subsequent to the execution of this agreement or for any other reason, shall continue to participate in this Trust and shall not be deemed to have his employment terminated. The Companies agree to adopt a uniform policy with reference to the granting of leaves of absence. Such policy shall be applied without individual selection or discrimination in all cases involving the same, or substantially the same, facts. The Companies shall provide the Committee with all information with reference to leaves of absence. The determination made by or caused to be made by the Companies shall be conclusive and binding upon all persons having any interest in the Trust. 2.04 TRANSFER TO AN AFFILIATE. If a Participant is transferred to the employment of an Affiliate, he shall be deemed to be on leave of absence during such time as he is an Employee of the Affiliate. 2.05 TRANSFER TO A FOREIGN COUNTRY. The determination of when an Employee is employed within the United States on a permanent basis, when a transfer from the United States is or becomes permanent, and when a transfer to or from the United States is temporary, shall be made by the Company and such determination shall be conclusive and binding on all persons having any interest in the Trust. If he is transferred from the United States on a temporary basis, he shall be deemed to continue as being employed within the United States on a permanent basis until such time as his transfer becomes permanent. 2.06 EMPLOYMENT IN BARGAINING UNIT. An individual in a bargaining unit who is not deemed to be an Employee by reason of Section 1.10 shall not be eligible to participate hereunder and shall not be entitled to make contributions hereunder. Notwithstanding the foregoing, his Service in such bargaining unit shall be counted for the purpose of determining his eligibility to participate pursuant to Section 2.01, and if a Participant becomes ineligible to participate hereunder by reason of employment in such bargaining unit, his Service in such bargaining unit shall be counted for the purpose of determining his nonforfeitable interest under Section 9. 48 Exhibit 10(F) Page 18 of 92 SECTION 3 - CONTRIBUTIONS 3.01 CONTRIBUTIONS BY COMPANIES. (a) Aggregate Contribution. For the Plan Year ending December 31, 1989, and for each Plan Year thereafter, the Companies, in total, shall pay to the Trustee the amount set forth below. Except for contributions under Items (i) and (ii), below, the payment shall be limited to the total current pretax earnings or profits of the Companies and Affiliates for that year (as shown on the Consolidated Statements of Income for Aon and its subsidiaries reported in the Annual Report to Shareholders of Aon as certified by a firm of Independent Public Accountants). The preceding two sentences shall be subject to what is stated in Section 3.01(c). The aggregate contribution of the Companies for Staff Employees shall be an amount equal to the sum of (i), (ii), and (iii) below. (i) An amount equal to the Basic Pay Deferral Amounts applicable to Participants employed by the Company during such Plan Year. (ii) An amount equal to the Supplemental Pay Deferral Amounts applicable to Participants employed by the Company during such Plan Year. (iii)An additional amount equal to one hundred percent (100%) of the Basic Pay Deferral Amounts applicable to Participants who on the last day of such Plan Year are employed by the Company and have not completely discontinued their Basic Pay Deferral Amounts; provided, that such contribution shall be made only on Basic Pay Deferral Amounts of up to three percent (3%) of a Participant's Compensation and shall not be made on additional Basic Pay Deferral Amounts. (b) Allocation and Possible Reduction of Aggregate Contribution. Each of the Companies' share of the aggregate contribution described in Section 3.01(a) shall be equal to the amount of such contribution as will be allocated to the individual accounts of Participants who are employed by it pursuant to Section 4.01(a). If, during any Plan Year, any Participant is employed by more than one Company that has adopted this Plan, the amount allocable to such Participant's account may be allocated among such Companies in the proportion of Basic Pay Deferral Amounts paid by each during the Plan Year in respect to which the contribution is made. (c) Maximum Contribution of Each Company. Except for contributions of Pay Deferral Amounts under Sections 3.01(a)(i) and (ii), each Company shall contribute no more than an amount equal to the lesser of its current or 49 Exhibit 10(F) Page 19 of 92 accumulated earnings or profits or the maximum amount deductible under the IRC for the year for which the contribution is made. If, because of the aforesaid limitation, any Company is unable to make all or any part of the contribution that would otherwise be due from it, the amounts that would otherwise be allocated to the Participants (or the affected group of Participants) employed by such Company, pursuant to Section 4.01(a) hereof, shall be proportionately reduced; provided that an additional contribution may be made by any Company to the extent permitted by IRC Section 404(a)(3)(B). 3.02 DATE OF CONTRIBUTION. For the purposes of this Agreement, the date of any Company contributions under Section 3.01(a)(i) or (ii) shall be as of the last day of each month and they shall be remitted to the Trustees not less frequently than quarterly. The date of any Company contribution under Section 3.01(a)(iii) will be deemed to be the last day of the Plan Year for which the contribution is made, even though received by the Trustee at a later or earlier date. 3.03 BASIC PAY DEFERRAL AMOUNT. Except as provided in Section 8.04: (a) Nonhighly Compensated Participants. Each Participant who was not a Highly Compensated Employee as of the immediately preceding Anniversary Date may elect to have his Compensation reduced by any whole percentage of his Compensation (as defined in Section 1.08) from two percent (2%) through ten percent (10%). (b) Highly Compensated Participants. Each Participant who was a Highly Compensated Employee as of the immediately preceding Anniversary Date may elect to have his Compensation reduced by any whole percentage of his Compensation (as defined in Section 1.08) from two percent (2%) through six percent (6%). The amount of such reduction in a Participant's Compensation is sometimes referred to herein as the "Basic Pay Deferral Amount." 3.04 SUPPLEMENTAL PAY DEFERRAL AMOUNT. Each Participant who has elected a ten percent (10%) reduction under Section 3.03(a) or a six percent (6%) reduction under Section 3.03(b) may elect to have his Compensation further reduced as provided in Section 1.25. The amount of such reduction is sometimes herein referred to as the Supplemental Pay Deferral Amount. 3.05 VOLUNTARY CONTRIBUTIONS BY PARTICIPANTS. Except as provided in Section 8.04, each Participant may, at his election, contribute to the Trustee for each Plan Year, up to nine percent (9%) of his Compensation as defined at Section 1.08 for the Plan Year. The contribution which a Participant has elected to make shall be deducted by the Company from each payment of Compensation made to such Participant at the time the same is paid, and remitted directly by the Company 50 Exhibit 10(F) Page 20 of 92 to the Trustee on behalf of such Participant within three months after the deduction is made. Contributions under this Section shall be subject to the following restrictions and limitations: (a) Change in Rate. A Participant may elect to change the rate of his voluntary contributions by filing a written application with the Committee, and such change shall be effective as soon as administratively convenient thereafter. (b) Discontinuance. A Participant may elect to discontinue making voluntary contributions, but in such event he may not elect to again make voluntary contributions in the same Plan Year. (c) Full Percentage. Voluntary Contributions must be expressed as a full percentage point of Compensation (i.e., 1%, 2%, 3%, 4%, 5%, 6%, 7%, 8%, or 9%). (d) Withdrawals. A Participant may withdraw his own voluntary contributions, or any part thereof, but only two such withdrawals shall be permitted under this Section in any Plan Year. A withdrawal under this Section shall not be considered an Application for Benefits under Section 8.04, and the Company shall continue to make the contributions required by Section 3.01. Any withdrawal shall be for at least $1,000 or if less, the lesser of (1) the Participant's actual unwithdrawn Voluntary Contributions, (2) the balance in his Voluntary Contribution Account. (e) Discretion. Voluntary contributions on or after January 1, 1987, shall be allowable only at the discretion of the Board. Such contributions may be allowed under the rules or limitations of Sections 401(k) and (m) of the IRC, and may be made allowable for only those Participants who are not Highly Compensated Employees. Accordingly, the rules set forth above in this Section shall be for guidance only and the rules and intent of Subsections (e) through (h) shall be controlling. (f) First Withdrawals. The first withdrawals shall be made from the subaccount for contributions made prior to January 1, 1987, and earnings thereon. Such withdrawals shall be limited to the amount of such contributions. Upon all of such contributions having been withdrawn and upon the Participant becoming 100% vested in his Company Contribution Account, the earnings may at the discretion of the Committee be transferred to the Participant's Company Contribution Account. (g) Post-86 Amounts. Withdrawals shall next be made from contributions made on or after January 1, 1987, if any, and there shall be a separate sub-account for these amounts. Allocation of any withdrawal between contributions and earnings shall be made pursuant to IRC Section 72(d) and (e) as amended from time to time, and regulations and rulings thereunder. 51 Exhibit 10(F) Page 21 of 92 (h) Rollovers. Any separate sub-account for amounts previously rolled over under Section 3.10 shall be transferred to a separate sub- account in the Participant's Company Contribution Account and shall be treated as one hundred percent (100%) vested. 3.06 RESTRICTIONS AND LIMITATIONS ON PAY DEFERRAL AMOUNTS. Pay Deferral Amounts and Voluntary Contributions under Sections 3.03, 3.04 and 3.05 shall be subject to the following restrictions and limitations: (a) A Participant may elect to change the rate of his Basic or Supplemental Pay Deferral Amounts under Sections 3.03 and 3.04. Such election shall become effective as soon as administratively convenient after receipt thereof by the Committee. (b) Pay Deferral Amounts must be expressed as a full percentage point of Compensation. (c) A Supplemental Pay Deferral Amount may not be in effect in respect to any period of time in respect to which a Basic Deferral Amount of six percent (6%) or more of Compensation in the case of a Highly Compensated Employee and ten percent (10%) or more in the case of a Participant who is not a Highly Compensated Employee is not in effect. (d) No Compensation reduction election under Section 3.03 or 3.04 shall apply to a terminated or retired Participant in respect to any Compensation paid to him (whether in the form of severance pay or otherwise) subsequent to the Valuation Date used to determine the balances of his separate accounts for the purpose of making the final distribution to him. 3.07 ADJUSTMENTS IN PAY DEFERRAL AMOUNTS. It is intended that the cash or deferred arrangement under Section 3.01(a)(i) and (ii) shall comply with the excess deferral limitations ($7,000 for 1987 and adjusted for cost of living) and the excess contribution limitations set forth in Sections 402(g) and 401(k) of the IRC and the regulations and rulings construing Sections 402(g) and 401(k) of the IRC. Accordingly, the following limitations are placed upon the Basic Pay Deferral Amount and Supplemental Pay Deferral Amount a Participant may elect under Section 3.03 and 3.04. (a) Reductions During Plan Year. If it appears prior to the end of a Plan Year that the required limitations will not be complied with, the administrator may reduce the future Basic Pay Deferral Amount or the future Supplemental Pay Deferral Amount of any Participant (and therefore the amount of Compensation reduction) in accordance with the following rules. (i) Reductions shall be made first so as to avoid excess deferrals under Section 402(g) of the IRC. This reduction shall apply for the calendar 52 Exhibit 10(F) Page 22 of 92 year beginning January 1, 1987, and calendar years thereafter in respect to all Participants except as provided in (c), below. (ii) Reductions shall be made next so as to avoid excess contributions under Section 401(k) of the IRC. This reduction shall apply for the Plan Year beginning January 1, 1987, and all Plan Years thereafter but only in respect to those Participants who are Highly Compensated Employees. (iii) Reductions under Paragraph (ii) shall first be made in all Supplemental Pay Deferral Amounts before any reductions are made in any Basic Pay Deferral Amount. (iv) Reductions under Paragraph (ii) shall be made in such manner that no Highly Compensated Employee's Supplemental Pay Deferral Amount (or, if necessary, Basic Pay Deferral Amount) expressed as a percentage of Compensation will exceed that of any other Highly Compensated Employee whose Supplemental or Basic Pay Deferral Amount is reduced. (b) Reductions after End of Plan Year. If it appears after the end of a Plan Year that the required limitations have not been complied with, the administrator shall make reductions in the Basic Pay Deferral Amount or the Supplemental Pay Deferral Amount of any Participant in accordance with the following rules. (i) Reductions shall first be made at least to the extent necessary to comply with the applicable excess deferral limitations ($7,000 for 1987 and adjusted for cost of living increases) and then to the extent necessary to comply with the excess contribution limitations. Any distribution made so as to comply with the excess deferral limitations shall continue to be treated, with respect to each Highly Compensated Employee, as a Company contribution in figuring whether the actual deferral percentage test at Section 3.09(b) has been met. (ii) Reductions so as to avoid excess contributions under Section 401(k) of the IRC shall be made only in respect to those Participants who are Highly Compensated Employees. (iii) Reductions under Paragraph (ii) shall first be made in all Supplemental Pay Deferral Amounts before any reductions are made to any Basic Pay Deferral Amount. (iv) Reductions under Paragraph (ii) shall be made in such manner that no Highly Compensated Employee's Supplemental Pay Deferral Amount (or, if necessary, Basic Pay Deferral Amount) expressed as a 53 Exhibit 10(F) Page 23 of 92 percentage of Compensation will exceed that of any other Highly Compensated Employee whose Supplemental or Basic Pay Deferral Amount is reduced. (v) The amount of any reduction in a Participant's Basic Pay Deferral Amount or Supplemental Pay Deferral Amount shall be distributed to the Participant, except that to the extent permitted in rules and regulations under the IRC, the Participant may be allowed or required by the administrator to have excess contributions (other than QMACs and QNCs, defined in Section 3.09 (d) below, and after adjustment for withholding taxes) recharacterized as employee contributions and transferred to the Participant's Voluntary Contribution Account. Such recharacterization shall be made and the Participant shall be properly notified thereof on or before two and one-half months after the close of the Plan Year. (vi) The amount by which any Participant's Supplemental Pay Deferral Amount is reduced shall be charged against his Supplemental Pay Deferral Account. (vii) The amount by which any Participant's Basic Pay Deferral Amount is reduced shall be charged against his Basic Pay Deferral Account. (c) No Responsibility for Excess Deferrals. The amount of elective deferrals under all plans of the Company shall not exceed the amount of the limitation in effect under Section 402(g) of the IRC, as amended from time to time. Primary responsibility for avoiding excess deferrals under Section 402(g) of the IRC shall be upon the Participant and not upon the Company or the Committee. The Participant must notify the Committee in writing if (i) elective deferrals are being made on his behalf under IRC Section 402(g)(3) by any employer which is not within the Aon Group, or (ii) his taxable year is a year other than the calendar year. 3.08 ADJUSTMENTS IN COMPANY MATCHING CONTRIBUTIONS AND IN PARTICIPANT CONTRIBUTIONS. It is intended that Company matching contributions under Section 3.01(a)(iii) and Participant contributions under Section 3.05 shall comply with the excess aggregate contribution limitations set forth in Section 401(m) of the IRC and the rules and regulations construing Section 401(m) of the IRC. Accordingly, the following limitations are placed upon Company matching contributions and Participant contributions under Sections 3.01(a)(iii) and 3.05. (a) Reductions During Plan Year. If it appears prior to the end of a Plan Year that the contribution percentage limitation will not be complied with, the administrator may reduce the future matching Company contributions or the future Participant contributions of any Participant in accordance with the following rules. 54 Exhibit 10(f) Page 24 of 92 (i) Reductions shall be made only in respect to those Participants who are Highly Compensated Employees. (ii) Reductions shall first be made in all Participant contributions before any reductions are made in any matching Company contributions, including return of Participant contributions made earlier in the Plan Year. (iii) Reductions shall be made in such manner that no Highly Compensated Employee's percentage limitation will exceed that of any other Highly Compensated Employee whose matching Company contribution or Participant contribution is reduced. (b) Reductions after End of Plan Year. If it appears after the end of a Plan Year that the required contribution percentage limitation has not been complied with, or will not be complied with if any matching contribution otherwise required under Section 3.01(a)(iii) is made, the administrator shall make reductions in the matching Company contribution or Participant contribution of any Participant in accordance with the following rules. (i) Reductions shall be made only in respect to those Participants who are Highly Compensated Employees. (ii) Reductions shall first be made at least to the extent necessary to comply with the applicable contribution percentage limitation. (iii) Reductions shall first be made in all Participant contributions before any reductions are made to any matching Company contribution. (iv) Reductions shall be made in such manner that no Highly Compensated Employee's percentage limitation will exceed that of any other Highly Compensated Employee whose matching Company contribution or Participant contribution is reduced. (v) The amount by which any Participant's matching Company contribution is reduced shall be charged against his Company Contribution Account. The nonforfeitable vested portion, if any, shall be distributed to the Participant. The forfeitable portion shall be reallocated, or, to the extent not prohibited under the rules and regulations of the IRC, may at the discretion of the Committee not be contributed by the Company. (vi) The amount by which any Participant's own contribution is reduced shall be charged against his Voluntary Contribution Account. 55 Exhibit 10(f) Page 25 of 92 (vii) Forfeitures of excess aggregate contributions may not be allocated to Participants whose contributions are reduced under Paragraph (v) or (vi), above. 3.09 SPECIAL RULES. For purposes of Sections 3.07 and 3.08 the following special rules shall apply. (a) The term "Compensation" shall mean compensation as defined under Section 414(s) of the IRC; provided, the applicable period for purposes of Section 414(s) shall be the Plan Year. Such compensation shall be measured only during the portion of the Plan Year during which the Employee is eligible to Participate in the Plan and determined before excluding any reduction described in Sections 3.03 or 3.04, or for cafeteria plans under Section 125 of the IRC. Any elective contribution must relate to compensation that either (i) would have been received by the Employee during the Plan Year but for the Employee's election to defer, or (ii) is attributable to services performed in the Plan Year and which would otherwise have been received by the Employee within two and one-half (2 1/2) months after the close of the Plan Year. To the extent permissible under rules and regulations construing Section 414(s), the term shall have the same meaning as under Section 1.08. (b) The actual deferral percentage of Pay Deferral Amounts, as adjusted under Section 3.07, of Highly Compensated Employees shall not be more than the larger of (i) 125% of such percentage for other Participants or, (ii) as the Alternative Limitation, twice such percentage but not more than two percentage points more, all calculations to be made to the nearest one-hundredth of 1% of the Employee's Compensation. A similar limitation shall apply to the average contribution percentage of Company matching contributions and Participant contributions, as adjusted under Section 3.08, of Highly Compensated Employees. (c) Any income allocable or attributable to any amounts distributed or reallocated under Sections 3.07 or 3.08 shall also be distributed or reallocated, pursuant to rules and regulations promulgated under Sections 401(k), 401(m) and 402(g) of the IRC. The amount of such distributed income shall generally be total income for the Plan Year under Section 8.08 for the Participant's account, times the excess amount divided by the Participant's total account balance in that account; provided, that in the event of a loss the distribution or reallocation shall not be less than the amount of such excess except as allowed under rules and regulations of the IRC. Income for any period of time after the end of the Plan Year and before the distribution date may be calculated as determined by the Committee, as determined by the Committee, under either the fractional method (described in the prior sentence for actual income during the Plan Year), under the safe harbor using 10% per calendar month of the prior year's income, or under any other method allowed under rules and regulations of the IRC. 56 Exhibit 10(f) page 26 of 92 (i) The following rules shall be applied to prevent the multiple use of the Alternative Limitation (as defined Section 1.402(m)-2 of the regulations promulgated under the IRC) with respect to any plan year. If multiple use of the alternative limitation occurs, and the sum of the ADP and ACP of affected Highly Compensated Employees subject to either or both tests exceeds the aggregate limit, then the ACP of those Highly Compensated Employees will be reduced (beginning with the Highly Compensated Employee whose ACP is the highest) so that the limit is not exceeded. The amount by which each Highly Compensated Employee's contribution percentage amount is reduced shall be treated as an excess aggregate contribution. The ADP and ACP of the Highly Compensated Employees are determined after any correction required to meet the ADP and ACP tests. Multiple use of the alternative limitation does not occur if both the ADP and ACP of the eligible Highly Compensated Employees do not exceed 1.25 multiplied by the ADP and ACP of the group of non-highly compensated employees. (d) The Company may elect, subject to the IRC rules and regulations: (i) To the extent necessary in meeting the actual deferral percentage test under Subsection (b), above, as applied to Pay Deferral Amounts under Section 3.07, to elect to include matching Company contributions and nonelective Company contributions which meet the Plan distribution and 100% vesting rules for Pay Deferral Amounts as provided in IRC regulations and thus constitute qualified matching contributions ("QMACs") and qualified nonelective contributions ("QNCs"). Such matching and nonelective contributions must meet the general nondiscrimination requirements of the IRC under Section 401(a)(4) as regards Highly Compensated Employees both after including and after excluding any QMAC or QNC portion thereof, and any QMAC or QNC portion may not be taken into account in determining whether any other contributions or benefits provided under the Plan generally discriminate as regards Highly Compensated Employees. Any QMACs so taken into account may be taken into account again under Paragraph (ii), below, as appropriate. (ii) To the extent necessary in meeting the average contribution percentage test under Subsection (b), above as applied to Company matching contributions and to Participant contributions under Section 3.08, to include Pay Deferral Amounts, plus QNCs which meet the Plan distribution and 100% vesting rules for Pay Deferral Amounts, subject to the rules under Paragraph (i), above, as applicable under IRC rules and regulations. (iii) As permitted under Paragraphs (i) and (ii), above, to make an additional QNC on behalf of each Participant who is not a Highly 57 Exhibit 10(f) page 27 of 92 Compensated Employee. Such contribution may be, but need not be, a uniform percentage of Compensation for each such Participant and shall be allocated to his appropriate account or sub-account within the time period required by any applicable law or regulations. A Participant may not elect to receive any portion of such additional contribution as current Compensation. In lieu of making all or a portion of the additional QNC described in this Paragraph (iii), the Company may elect to have matching contributions under Section 3.01(a)(iii) on behalf of Participants who are not Highly Compensated Employees, be QMACs. Any such QNC or QMAC shall be allocated each such Participant's appropriate account or sub-account, and shall be separately accounted for. (e) Three correction rules shall apply as set forth below: (i) The Committee may designate whether excess contributions under Section 3.07 or excess aggregate contributions under Section 3.08 are attributable to Pay Deferral Amounts, QNCs, QMACs, Participant contributions, qualified nonelective contributions, or Company matching contributions. Any such ordering must be used consistently and shall be subject to the ordering rule of Paragraph (2). (ii) The general rule for the order in which amounts are to be distributed is: (A) excess deferrals under Section 402(g) of the IRC. (B) excess contributions under Section 401(k) of the IRC. (C) excess aggregate contributions under Section 401(m) of the IRC. (iii) QNCs, QMACs, the recharacterization method, the corrective distribution method, or a combination of these methods may be used to avoid or correct excess contributions or excess aggregate contributions. (f) Any distribution or forfeiture under Section 3.07 or 3.08, including income thereon under Section 3.09(c), shall, insofar as administratively convenient, be made or reallocated before the close of the first two and one-half (2-1/2) months of the following Plan Year, and shall in all events be distributed or forfeited no later than the last day of such Plan Year. QMACs and QNCs properly taken into account may permit avoidance of excess contributions or excess aggregate contributions even if such contributions are made after the close of such two and one-half (2-1/2) month period. 58 Exhibit 10(f) page 28 of 92 3.10 ROLLOVERS. Any amount that is an eligible rollover distribution within the meaning of Section 402(c)(4) of the Code may be contributed to this Plan by the Employee on or before the 60th day following the receipt by the Employee of such distribution from an employee's trust, annuity plan, individual retirement account, or individual retirement annuity described above. Alternatively, an eligible rollover distribution may be transferred at the direction of the Employee directly to the Trustee from any plan, account or annuity described above. 59 Exhibit 10(f) Page 29 of 92 SECTION 4 - ALLOCATION OF TRUST FUNDS 4.01 COMPANY CONTRIBUTION ACCOUNT AND ALLOCATION OF FORFEITURE. The Committee shall maintain a separate account in the name of each Participant, to be known as the "Company Contribution Account", and the Committee shall post to such account of each Participant on whose behalf a Company contribution under Section 3.01(a)(iii) is made the following: (a) His share of additional Company contributions for the Plan Year, described in Section 3.01(a)(iii), plus his share of forfeitures from accounts of terminated Participants, which shall be allocated to the account of each Participant in the ratio that his Basic Pay Deferral Amount of up to three percent (3%) of his Compensation bears to such Basic Pay Deferral Amounts of all Participants employed on the last day of the Plan Year. For the purpose of applying the above formula, allocations shall be made as if there were no reduction in the contribution of any Company under Section 3.01(c). However, where for a Plan Year the contribution of any Company is reduced under Section 3.01(c), the Company Contribution Accounts of the Participants in the Service of such company involved as of December 31 of that year shall share in the reduction of the contribution of such Company on the basis of the above formula applied to them only. (b) Any additions or deductions arising out of net earnings and valuation adjustments resulting from the operation of Section 8.08 of this Agreement. (c) Any forfeitures chargeable to his account, interim net earnings and valuation adjustments resulting from the operation of Section 8.08 of this Trust Agreement and any withdrawals or other payments chargeable to his account. 4.02 BASIC PAY DEFERRAL ACCOUNT. The Committee shall also maintain a separate account in the name of each Participant, to be known as the "Basic Pay Deferral Account", and the Committee shall post to such account of each Participant the following: (a) His share of Company contributions described in Section 3.01(a)(i), which shall be equal to his Basic Pay Deferral Amount. (b) Any additions or deductions arising out of net earnings and valuation adjustments resulting from the operation of Section 8.08 of this Agreement. (c) Any interim net earnings and valuation adjustments resulting from the operation of Section 8.08 of this Trust Agreement and any withdrawals or other payments chargeable to his account. 60 Exhibit 10(f) Page 30 of 92 4.03 SUPPLEMENTAL PAY DEFERRAL ACCOUNT. The Committee shall also maintain a separate account in the name of each Participant, to be known as the "Supplemental Pay Deferral Account", and the Committee shall post to such account of each Participant the following: (a) His share of Company contributions described in Section 3.01(a)(ii), which shall be equal to his Supplemental Pay Deferral Amount. (b) Any additions or deductions arising out of net earnings and valuation adjustments resulting from the operation of Section 8.08 of this Agreement. (c) Any interim net earnings and valuation adjustments resulting from the operation of Section 8.08 of this Trust Agreement and any withdrawals or other payments chargeable to his account. 4.04 VOLUNTARY CONTRIBUTION ACCOUNT. The Committee shall also maintain an account in the name of each Participant to be known as the "Voluntary Contribution Account", which shall be divided into two sub-accounts for contributions and earnings thereon made (i) before and (ii) on or after January 1, 1987. The Committee shall post to such account for each Participant the following: (a) All voluntary contributions made by such Participant pursuant to Section 3.05; (b) Any additions or deductions arising out of the net earnings and valuation adjustment resulting from the operation of Section 8.08 of this Agreement; (c) Any interim net earnings and valuation adjustments resulting from the operation of Section 8.08 of this Trust Agreement and withdrawals or other payments chargeable to such account. (d) The amount from each Participant's former mandatory contribution account pursuant to Section 4.08. For the purpose of applying the above formula, allocations shall be made as if there were no reduction in the contribution of any Company under Section 3.01(c). However, where for a Plan Year the contribution of any Company is reduced under Section 3.01(c), the Company Contribution Accounts of the Participants in the Service of such Company involved as of December 31 of that year shall share in the reduction of the contribution of such Company on the basis of the above formula applied to them only. 4.05 RECORDS AND ACCOUNTING. Books of account, forms, and accounting methods used in the administration of the Plan shall be subject in all respects to the supervision of the Committee, and if at any time the Committee shall determine that the accounting methods are not fair and equitable to all Participants, the Committee shall have the right to make whatever adjustments are necessary in the accounting 61 Exhibit 10(f) Page 31 of 92 methods to carry out this Agreement. In the event an erroneous amount is posted to a Participant's account for any year, the Committee may, at the time such error is discovered, correct such error by making such adjustments in allocating contributions, forfeitures, and earning and valuation adjustments as they may deem fair and equitable, without the necessity of making retroactive adjustments in the accounts of Participants. The Committee shall furnish each Participant a record of his account. 4.06 DETERMINATION OF COMPENSATION. The Companies shall furnish to the Committee information as to the Compensation and contributions of a Participant for each Plan Year, and, for the purposes of this Agreement, the Committee shall accept such information furnished by the Companies as correct, and the amount of the Compensation and contributions as so certified to the Committee by the Companies shall be binding and conclusive on all persons whomsoever, unless a Participant files a written objection with the Committee as to the Compensation or contributions so certified within thirty (30) days from the date he has been notified thereof. 4.07 DESIGNATION OF BENEFICIARY. (a) Each Participant shall have the right to designate the Beneficiary or Beneficiaries who are entitled to receive any amount or benefit in case of the Participant's death and shall have the right at any time prior to final distribution of his accounts to change the Beneficiary or Beneficiaries theretofore designated by him by filing a new designation; provided, that such Beneficiary shall be deemed to be the surviving spouse of such Participant unless a spousal consent under Subsection (b) has been signed by the surviving spouse. Each such new designation shall completely revoke all designations previously filed by the same Participant. All designations shall be in writing and filed with the Committee and may be included in the Agreement of Participation and Designation of Beneficiary, or in such other form or forms as the Committee shall require. The Trustee, at the direction of the Committee, shall make settlement hereunder at the time of the Participant's death with such Beneficiary or Beneficiaries as shall be designated by said Participant during his lifetime. (b) Any designation of a Beneficiary other than his spouse by the Participant shall not take effect unless the spouse consents to such designation. Such consent must acknowledge the effect of the designation, shall be a consent to a specific Beneficiary and to a specific form of benefit, and be witnessed by a Plan representative or a notary public. Any consent shall be effective only as to such spouse. Such designation of a Beneficiary shall take effect without the spousal consent only if it is established to the satisfaction of a Plan representative that the consent may not be obtained because there is no spouse, because the spouse cannot be located, or because of such other circumstances as the Secretary of the Treasury may by regulations prescribe. 62 Exhibit 10(f) Page 32 of 92 4.08 MERGERS AND TRANSFERS OF ASSETS AND LIABILITIES. Effective as of the dates set forth below, the following mergers and transfers of assets and liabilities have taken place, pursuant to this section and to amendments to the plans set forth below. (a) Effective July 1, 1984, assets and liabilities for staff employees under the Combined Profit Sharing Plan were transferred to the Combined International Corporation Staff Employees' Profit Sharing Plan ("Combined Staff PST"), and to this Plan. Assets and liabilities from the mandatory and voluntary contribution accounts of staff employees therein were transferred to their respective participant's voluntary contribution accounts in this Plan, and assets and liabilities from their Company contribution accounts therein were transferred to their respective Company Contribution Accounts in the Combined PST. Assets and liabilities from the accounts of accident and health insurance agents and of life insurance agents in the Combined Profit Sharing Plan remained in such plan, which was renamed the Combined International Corporation Field Sales Agents' Profit Sharing Plan. (b) Effective July 1, 1984, the Ryan Insurance Group, Inc. Profit Sharing Plan was similarly merged into the Combined Staff PST, and into this Plan, with assets and liabilities from the participants, voluntary contribution accounts therein being transferred to their respective participant's voluntary contribution accounts in this plan and the company contribution accounts therein being transferred to their respective company contribution accounts in the Combined Staff PST. (c) Effective July 1, 1984, the Union Fidelity Life Insurance Corporation Profit-Sharing Trust Agreement was similarly merged into the Combined Staff PST with assets and liabilities from the company contribution accounts therein being transferred to the participant's respective company contribution accounts in the Combined Staff PST. (d) Effective July 1, 1984, Participants under the above plans became Participants in the Combined Staff PST and were given up to five years of benefit credit under the Combined International Corporation Pension Plan, but were not allowed to elect Basic Pay Deferral Amounts until they satisfied the eligibility requirements of section 2.01. (e) Effective January 1, 1989, assets and liabilities for employees under the Miller, Mason & Dickenson, Inc. Employee Stock Ownership Plan were transferred to this Plan. Assets and liabilities from the voluntary contribution accounts of employees therein were transferred to their respective Participant's Voluntary Contribution Accounts in this Plan, and assets and liabilities from their employer contribution accounts therein were transferred to their respective Company Contribution Accounts in this Plan. 63 Exhibit 10(f) Page 33 of 92 (f) Effective January 1, 1989, assets and liabilities for staff employees under the Aon Profit Sharing Plan (formerly the Combined Staff PST) were transferred to this Plan. Such assets and liabilities from their company contribution accounts therein were transferred to their respective Company Contribution Accounts in this Plan. (g) Effective January 1, 1989, Combined Insurance Field Sales Agents' Profit Sharing Plan (formerly the Combined Profit Sharing Plan) was similarly merged into this Plan with assets and liabilities from the participants' voluntary contribution accounts therein being transferred to their respective Participant's Voluntary Contribution Accounts in this Plan, the company contribution accounts therein being transferred to their respective Company Contribution Accounts in this Plan, and their pay deferral accounts therein being transferred to the Basic and Supplemental Pay Deferral Accounts in this Plan. (h) Participants under the above plans immediately became Participants in this Plan and were allowed to elect Basic Pay Deferral Amounts whether or not they satisfied the eligibility requirements of Section 2.01. (i) Hall Plan. Effective January 1, 1993, the assets and liabilities of the Savings and Investment Plan for the Employees of Frank B. Hall & Co. Inc. ("Hall Plan") were transferred to this Plan. The following special provisions apply, effective as of January 1, 1993, to any Employee who was employed by Frank B. Hall & Co. Inc., or any of its subsidiaries, on November 1, 1992, and who was employed by the Company on and after November 2, 1992 ("Former Hall Employee"): (i) Participation. Notwithstanding the provisions of Section 2 of this Plan ("Employees Entitled to Participate"), a Former Hall Employee who was a participant in the Hall Plan on December 31, 1992, became a Participant in this Plan on January 1, 1993, following compliance with the requirements of Section 2.01(c) of this Plan. A Former Hall Employee who was not a Participant in the Hall Plan on December 31, 1992, shall become a Participant in this Plan in accordance with Section 2.01 of this Plan on the earlier of: (A) attainment of age 45; or (B) satisfaction of all the requirements of Section 2.01 of this Plan. (ii) Service. For purposes of satisfying Section 2.01, a Former Hall Employee who was not a participant in the Hall Plan on December 31, 1992, shall receive credit for periods of Service with both Hall and the Company and: 64 Exhibit 10(f) Page 34 of 92 (A) shall be credited with the number of full years of Service computed under the elapsed-time provisions of the Hall Plan as of December 31, 1992; and (B) shall be credited with 45 Hours of Service for any calendar week for which the Employee would be required to be credited with at least one Hour of Service under Section 1.13; provided, however, that this paragraph (B) shall apply only to any fractional part of the 12-month period which begins on the Employee's date of hire. (iii) Vesting. For purposes of satisfying Section 9.01 of this Plan (relating to vesting), service for Hall shall be considered Service for the Company. In the case of a Participant who has five consecutive One-Year Breaks-in-Service, Service, after such Break-in-Service, shall not be taken into account for the purpose of determining his nonforfeitable interest in his Accounts before such Break-in-Service. In addition, with respect to a Participant who was a participant in the Hall Plan on December 31, 1992, any period of time credited for vesting under the Hall Plan as of December 31, 1992, shall be taken into account under this Plan. (iv) Account Balance. The value of the account of each Participant who was a participant in the Hall Plan on December 31, 1992, shall be determined as of December 31, 1992, and that balance shall be transferred to the trust of this Plan on January 1, 1993, and shall constitute (in addition to any existing Account balance in the Plan), the balance in the Account of such Participant as of January 1, 1993. (v) Other Provisions. The provisions of this Plan which shall be applicable to the Hall Plan prior to January 1, 1993, and their retroactive effective dates, are as specified on Schedule B, which is attached and made a part of this Plan. (vi) Benefit Options. Benefit options under the Hall Plan which shall continue to apply to accrued benefits are set forth in Schedule B. To the extent such accrued benefits are accounted for separately, any amount withdrawn under the terms of the Plan shall be charged first to the account maintained for such accrued benefits. (j) K&K Plan. Effective August 1, 1993, the assets and liabilities of the K&K Insurance Group Inc. 401(k) Salary Reduction Plan ("K&K Plan") were transferred to this Plan. The following special provisions apply, effective as of August 1, 1993, to any Employee ("Former K&K Employee") who was employed by K&K Insurance Group, Inc., K&K Specialties, Inc. National Sports Underwriters, Inc., or American Insurance Brokers, Inc. (collectively, "K&K") on July 31, 1993: 65 Exhibit 10(f) Page 35 of 92 (i) Participation. Notwithstanding the provisions of Section 2 of this Plan ("Employees Entitled to Participate"), a Former K&K Employee who was a participant in the K&K Plan on July 31, 1993, became a Participant in this Plan on August 1, 1993, following compliance with the requirements of Section 2.01(c) of this Plan. A Former K&K Employee described above who was not a Participant in the K&K Plan on July 31, 1993, shall become a Participant in this Plan in accordance with Section 2.01 of this Plan upon satisfaction of the requirements of Section 2.01 of this Plan. (ii) Service. For purposes of satisfying Section 2.01, a Former K&K Employee who was not a participant in the K&K Plan on July 31, 1993, shall receive credit for Hours of Service performed for K&K as if they were hours of service performed for the Company. (iii) Vesting at Age 62. Any Employee who was a participant in the K&K Plan with three years of service under the K&K Plan as of July 31, 1993, shall be fully vested in his account balance upon attainment of age 62. (iv) Vesting. For purposes of satisfying Section 9.01 of this Plan (relating to vesting), service for K&K shall be considered Service for the Company. In the case of a Participant who has five consecutive One-Year Breaks-in-Service, Service, after such Break-in-Service, shall not be taken into account for the purpose of determining his nonforfeitable interest in his Accounts before such Break-in-Service. In addition, with respect to a Participant who was a participant in the K&K Plan on July 31, 1993, the following shall apply: notwithstanding the provisions of Section 9.01 of this Plan, a Participant who was a participant in the K&K Plan on July 31, 1993, shall be credited with: (A) years of Service equal to his number of years of service for vesting purposes under the K&K Plan as of December 31, 1992; (B) in respect of calendar year 1993, the greater of the Participant's service under the elapsed time method beginning January 1, 1993, or his period of service for vesting purposes as of July 31, 1993, under terms of the K&K Plan; and (C) the Participant's Service under the elapsed-time method on and after January 1, 1994. (v) Valuation. The balance in the account of each Participant who was a participant in the K&K Plan on July 31, 1993, shall constitute the balance in the account of such Participant as of August 1, 1993. 66 Exhibit 10(f) Page 36 of 92 (vi) Separate Accounting. Gains, losses, withdrawals, contributions, forfeitures and other credits or charges attributable to benefits accrued by Participants under the terms of the K&K Plan as of July 31, 1993, shall be accounted for separately. Benefit options under the K&K Plan which shall continue to apply to such accrued benefits are set forth in Schedule C. Any amount withdrawn under the terms of the Plan shall be charged first to the account maintained for such accrued benefits. (k) Booke Plan. Effective July 1, 1993, the assets and liabilities of the Salary Deferral Thrift Plan for the Employees of Booke and Company ("Booke Plan") shall be transferred to this Plan. The following special provisions apply, effective as of July 1, 1993, to any Employee ("Former Booke Employee") who was employed by Booke and Company ("Booke") on June 30, 1993: (i) Participation. Notwithstanding the provisions of Section 2 of this Plan ("Employees Entitled to Participate"), a Former Booke Employee who was a participant in the Booke Plan on June 30, 1993, became a Participant in this Plan on July 1, 1993, following compliance with the requirements of Section 2.01(c) of this Plan. An Employee described above who was not a participant in the Booke Plan on June 30, 1993, shall become a Participant in this Plan following compliance with the requirements of Section 2.01(a), (b) and (c). (ii) Service. For purposes of satisfying Section 2.01 (relating to service requirements for eligibility), hours of service performed for Booke shall be considered hours of service performed for the Company. (iii) Vesting. Notwithstanding the provisions of Section 9.01 of the Plan (relating to vesting), the nonforfeitable interest in the Company Contribution Account of an individual: (A) who was a participant in the Booke Plan on June 30, 1993; (B) who was an employee of Booke on June 30, 1993, and who, effective July 1, 1993, met the requirements of subsections (a), (b) and (c) of Section 2.01; or (C) who terminated employment with Booke but is employed by the Company before incurring five consecutive One-Year Breaks- in-Service shall not be less than the percentage set forth below that corresponds to years of Service: Percent Vested 67 Exhibit 10(f) Page 37 of 92 Years of Completed Service in Company Contributions -------------------------- ------------------------ less than 3 years 50% 3 years 60% 4 years 80% 5 years 100% The vested percentage of any individual who was an employee of Booke on June 30, 1993, and who is not described under (A), (B) or (C) shall be determined under Section 9.01. The vested percentage of any individual who is eligible to elect and has elected early retirement under the Booke Plan shall be 100 percent. (iv) Years of Service. For purposes of satisfying Section 9.01 and Section 4.08(k)(iii) as set forth above, service for Booke shall be considered Service for the Company. In the case of a Participant who has five consecutive One-Year Breaks-in-Service, Service, after such Break-in-Service, shall not be taken into account for the purpose of determining his nonforfeitable interest in his Accounts before such Break-in-Service. In addition, notwithstanding the provisions of Section 9.01 of this Plan, individuals described in 4.08(k)(3)(iii), (B) and (C) shall be credited with: (A) an elapsed-time period for vesting purposes equal to the number of years of service for vesting purposes under the Booke Plan as of December 31, 1992; (B) in respect of calendar year 1993, the greater of the Participant's years of service under the elapsed-time method beginning January 1, 1993, or his period of service for vesting purposes under the Booke Plan as of June 30, 1993; and (C) the Participant's Service under the elapsed-time method on and after January 1, 1994. (v) Valuation. The value of the account of each Participant who was a participant in the Booke Plan on June 30, 1993, shall be determined as of June 30, 1993; the balance shall be transferred to the trust of this Plan on July 1, 1993; and that balance shall constitute the balance in the Account of such Participant as of July 1, 1993. (vi) Separate Accounting. Gains, losses, withdrawals, contributions, forfeitures and other credits or charges attributable to benefits accrued by Participant under the terms of the Booke Plan as of June 30, 1993, shall be accounted for separately. Benefit options 68 Exhibit 10(f) Page 38 of 92 under the Booke Plan which shall continue to apply to such accrued benefits are set forth in Schedule D. 69 Exhibit 10(f) Page 39 of 92 SECTION 5 - INVESTMENTS 5.01 INVESTMENT FUNDS. Except as otherwise hereinafter provided, deposits to the Plan and earnings thereon shall be invested as directed by each Participant or Beneficiary of a deceased Participant in one or more of the Investment Funds which have been selected by the Trustees. Investment Funds, except to the extent required under the terms of this Plan, may be added or terminated from time to time at the option of the Trustees. 5.02 INVESTMENT ELECTIONS. Each Participant shall, upon becoming a Participant, and from time to time thereafter, instruct the Trustees as to his investment selections and shall receive written confirmation of same. (a) The Participant may select one or more Investment Funds in which to invest deposits and earnings thereon, and may invest these amounts in such multiples as have been established by the Trustees. The investment selection of the Participant shall apply uniformly to all the Participant's accounts. (b) Contributions made by or on behalf of a Participant shall continue to be invested in the manner selected by the Participant until a new designation has been received and confirmed in writing by the Trustees, and such change shall be effective pursuant to rules and regulations promulgated by the Company. (c) The Trustees shall be obligated to comply with instructions given to the Trustees pursuant to this Section 5.02 (except as otherwise provided under Department of Labor Regulations (S) 2550.404(c)- 1(b)(2)(ii)(B) and (d)(2)(ii)). (d) The Committee shall be obligated to ensure that each Participant (or Beneficiary) is provided or can obtain sufficient information concerning investment selections under the Plan as is described under Department of Labor Regulations (S) 2550.404(c)-1(b)(2)(i)(B). 5.03 PASS-THROUGH VOTING, LIFE OF VIRGINIA SERIES FUND, INC. The following rules shall apply to shares of Life of Virginia Series Fund, Inc. (the "Fund"): (a) Each Participant (or Beneficiary) shall have the right to direct the Trustee as to the manner in which Fund shares allocated to his accounts are to be voted on each matter requiring a shareholder vote. Shares shall be voted on a portfolio or aggregate basis, as determined by the Fund. (b) Before each vote, the Trustees shall cause to be furnished to each Participant (or Beneficiary) a copy of the proxy solicitation material, together with a form 70 Exhibit 10(f) Page 40 of 92 requesting confidential direction as to how the shares allocated to his accounts are to be voted by the Trustees. (c) Upon timely receipt of directions, the Trustees shall vote the shares (including fractional shares) of stock allocated to such Participant's (or Beneficiary's) accounts as directed by the Participant (or Beneficiary). Each Participant (or Beneficiary) who timely directs voting of Fund stock on an aggregate (or portfolio) basis shall also direct the vote of a portion of the shares of Fund (or shares of the portfolio, if applicable) for which signed voting directions are not timely received. Each such Participant (or Beneficiary) shall be entitled to direct the voting of that number of the undirected shares resulting from multiplying the total number of undirected shares (on an aggregate or portfolio basis, as shall be determined by the Fund) by a fraction, the numerator of which is the total number of shares allocated to that Participant's accounts and the denominator of which is the total number of shares of all participants who timely direct the voting of Fund shares. (d) Each Participant (or Beneficiary) may direct the Trustees as to how to respond to an exchange offer with respect to Fund shares allocated to his accounts. The Trustees shall use their best efforts to timely distribute or cause to be distributed to each Participant (or Beneficiary) such information as will be distributed to stockholders of the Fund in connection with any exchange offer. Upon timely receipt of written instructions as to the tendering or exchanging of Fund stock, the Trustees shall act as instructed with respect to shares of Fund stock allocated to such Participant's (or Beneficiary's) accounts. If the Trustees do not receive timely written instructions from a Participant (or Beneficiary) as to the manner in which to respond to such exchange offer, the Trustees shall not exchange any Fund shares with respect to which such Participant (or Beneficiary) has the right of direction. (e) The Participants' individual instructions are to be given to the Trustees or the Trustees' designee, and such person shall not divulge the Participant's directions to any person. Instructions so received shall be held in strict confidence and shall not be divulged or released to any person except as may be required to vote at the shareholders' meeting, or as required by federal or state laws not preempted by ERISA. The Trustees shall be responsible for monitoring compliance with confidentiality procedures. (f) Each Participant (or Beneficiary) shall be considered a "named fiduciary" under section 402(a)(2) of ERISA with respect to all voting directions. 5.04 LACK OF VALID ELECTION. If a valid election under Section 5.02 is not made but the Participant or Beneficiary of a deceased Participant has made a valid prior election, then all amounts shall remain in their present fund. If a Participant, or 71 Exhibit 10(f) Page 41 of 92 Beneficiary of a deceased Participant, has not made a valid election and no prior valid election is in effect, then all amounts in respect to which a valid election has never been made shall be invested in a money market fund, or as otherwise directed by the Trustees. 5.05 FUNDS FOR INVESTMENT. The Trustees shall determine, from time to time, the Investment Funds available to Participants, except that there shall be established under this Plan an Investment Fund holding exclusively shares of the common stock of Aon Corporation, except as provided under subsection (a) of this Section 5.05, to be called the Aon Stock Fund. The trustee of the Aon Stock Fund shall be the Institutional Trustee. (a) A portion of the Aon Stock Fund may also be invested in short-term United States Government obligations, other short-term obligations guaranteed by the United States Government, commercial paper, or money market funds for qualified employee benefit trusts while awaiting investment in Employer stock, or to provide sufficient liquidity to satisfy Participants' request for withdrawals and distributions. (b) The following provisions shall apply with respect to voting shares of Aon common stock: (i) Each Participant (or Beneficiary) shall have the right to direct the Institutional Trustee as to the manner in which shares of Aon common stock allocated to his accounts are to be voted on each matter brought before an annual or special stockholders' meeting of Aon. (ii) Before each such meeting of stockholders, the Institutional Trustee, or Aon, upon written notice to the Institutional Trustee, shall cause to be furnished to each Participant (or Beneficiary) a copy of the proxy solicitation material, together with a form requesting confidential direction as to how the shares of Aon common stock allocated to such Participant's accounts are to be voted by the Institutional Trustee. (iii) Upon timely receipt of such directions, the Institutional Trustee shall vote the shares (including fractional shares) of Aon common stock allocated to such Participant's accounts on each matter as directed by the Participant. Each Participant (or Beneficiary) who timely directs voting of Aon common stock shall also direct the vote of a portion of the shares of Aon common stock for which signed voting directions are not timely received. Each such Participant (or Beneficiary) shall be entitled to direct the voting of that number of the undirected shares resulting from multiplying the total number of undirected shares by a fraction, the numerator of which is the total number of 72 Exhibit 10(f) Page 42 of 92 shares allocated to that Participant's accounts and the denominator of which is the total number of shares of all Participants who timely direct the voting of Aon common stock. (iv) The Participants' individual instructions are to be given to the Institutional Trustee, or to any other person who is not the Company, a subsidiary, or an employee, officer, or director thereof and such person shall not divulge the Participant's directions to any person. Instructions so received shall be held in strict confidence and shall not be divulged or released to any person except as may be required to vote at the shareholders' meeting, or as required by federal or state laws not preempted by ERISA. (v) Each Participant (or Beneficiary) may direct the Institutional Trustee as to how to respond to a tender or exchange offer with respect to shares of Aon common stock allocated to his accounts. The Institutional Trustee or Aon, upon written notice to the Institutional Trustee, shall use its best efforts to timely distribute or cause to be distributed to each Participant (or Beneficiary) such information as will be distributed to stockholders of the Company in connection with any such tender or exchange offer. Upon timely receipt of written instructions as to the tendering or exchanging of Aon common stock, the Institutional Trustee shall act as instructed with respect to shares of Aon common stock allocated to such Participant's (or Beneficiary's) accounts. If the Institutional Trustee does not receive timely written instructions from a Participant (or Beneficiary) as to the manner in which to respond to such a tender or exchange offer, the Institutional Trustee shall not tender or exchange any shares of Aon common stock with respect to which such Participant )or Beneficiary) has the right of direction. The participants' individual instructions shall be given to the Institutional Trustee or to any other person who is not the Company, a subsidiary, or an employee, officer or director thereof and such person shall not divulge any Participant's directions to any person, except as required by federal or state law not preempted by ERISA. (vi) Each Participant (or Beneficiary) shall be considered a "named fiduciary" under section 402(a)(2) of ERISA with respect to all voting directions. (c) The Institutional Trustee shall be responsible for monitoring and safeguarding the confidentiality of information relating to the purchase, sale, and holding and exercise of voting and similar rights of Participants. 5.06 INVESTMENT OF THE SEPARATE FUNDS. Except with respect to the Aon Stock Fund, the Trustees shall have full power and authority to receive, collect, receipt for, 73 Exhibit 10(f) Page 43 of 92 hold, manage, and care for all amounts held, paid and contributed to each of the separate funds described in Section 5.02, and the proceeds thereof and the income and profits therefrom, as a single fund, and to invest and reinvest the same as provided in Section 5.02, provided that all investments shall comply with the requirements of Section 404 of ERISA. Also except with respect to the Aon Stock Fund the Trustees are further authorized and empowered to sell, exchange, convert, or transfer any property of the Trust; to sell covered stock options; to retain uninvested for such time as the Trustee deems for the best interest of the Trust any cash held in any separate fund; to exercise or dispose of all rights accruing to the holders of any securities; to join in, by deposit, pledge, or otherwise, any plan of reorganization or other means of protecting and dealing with securities; and to compromise, adjust, and settle, all claims of or against said Trust at such amounts and upon such terms as the Trustee deems advisable. Powers of the Institutional Trustee are as set forth in the agreement between the Company and the Institutional Trustee. 5.07 INVESTMENTS NOT ALLOCATED TO SEPARATE ACCOUNTS. All right, title, and interest in and to the assets and investments held in each separate fund shall be vested in, and reside exclusively in, the Trustee or the Institutional Trustee, as applicable, and no Participant shall have any right, title, or interest in or to the assets or investments of any fund except to have the same held, invested, and applied in accordance with the provisions of this agreement. The maintenance of separate accounts for each Participant, as heretofore provided, shall not require the allocation of or segregation of assets to each such account, but the creation of such accounts is primarily for accounting purposes and designed to reflect the dollar interest of each such account in the separate funds. 74 Exhibit 10(f) Page 44 of 92 SECTION 6 - PROVISIONS RELATING TO TRUSTEE 6.01 APPOINTMENT OF TRUSTEES AND INSTITUTIONAL TRUSTEE. There shall at all times be one or more individual Trustees and an Institutional Trustee acting hereunder. Such individual Trustees and the Institutional Trustee shall be appointed by the Board. The Board shall have the right at any time, and from time to time, to remove any individual Trustee or the Institutional Trustee. Each individual Trustee and the Institutional Trustee shall serve until 60 days after the earlier of (a) the day notice of resignation is given to the Board (or its representative); or (b) the day notice of removal by the Board (or its representative) is given to the Trustee or Institutional Trustee. By mutual agreement, the 60-day notice may be waived. In the event of the death, resignation, or removal of an individual Trustee or the Institutional Trustee acting hereunder, the Board shall appoint a successor to fill the vacancy, and such successor, upon accepting appointment by an instrument in writing delivered to the Board (or its representative) shall, without further action, become vested with all the estate, rights, powers, discretions and duties of the predecessor. 6.02 FEES AND EXPENSES OF TRUSTEE. The Trustee shall be paid such reasonable compensation as shall from time to time be agreed upon by Aon and the Trustee except that no person so serving shall be entitled to receive compensation where he receives fulltime pay from the Companies. The Trustee, in addition, shall be reimbursed for any reasonable expenses, including reasonable counsel fees and investment manager fees, incurred by it in the administration of the Trust. 6.03 PAYMENT OF COSTS, FEES AND EXPENSES. Expenses arising from the administration, management and operation of the Plan and the funds described in Section 5.02, including compensation payable to the Trustee or Institutional Trustee, shall be payable from the fund to which such expenses relate or to which such expenses or a portion thereof are fairly allocable. In construing the foregoing, the following shall be understood: (1) expenses incurred in connection with transactions involving the purchase or sale of investments shall be added to the cost of such investment or deducted from the sale price thereof as the case may be; and (2) nothing contained herein shall preclude the Companies, by agreement or otherwise, from paying expenses not attributable to them hereunder. 6.04 UNCERTAIN DISTRIBUTION. In the event any question or dispute shall arise as to the proper person or persons to whom any payment shall be made, the Trustee may withhold such payment until a determination of such question or dispute shall have been made, or the Trustee shall have been adequately indemnified against loss to its satisfaction. 6.05 LIABILITY. No Trustee shall ever be liable for any act or default by any predecessor Trustee, nor shall any successor Trustee or Trustees acting hereunder be under any duty to examine into or take any action with reference to the accounts of any 75 Exhibit 10(f) Page 45 of 92 prior Trustee heretofore acting hereunder. All contributions and other monies received by the Trustee shall be held for the exclusive benefit of the Participants and their Beneficiaries and for the payment of such administrative expenses as may be provided for hereunder. The Trustee shall be accountable for all such contributions and other monies, but shall have no duty to determine that the amounts of the contributions comply with the provisions of the Plan. 6.06 LEGAL ACTION. The Trustee shall at no time be obliged to institute any legal action or to become a party to any legal action unless it shall have been indemnified to its satisfaction for any fees, costs, and expenses to be incurred in connection therewith. 6.07 MANNER OF ACTING. The duties of the Institutional Trustee shall be as set forth in Section 6.08. In all other matters, all decisions by the Trustees pertaining to the management of the Trust and their duties and powers, shall be made by the decision of the majority of the Trustees, and the action of the majority of the Trustees shall be binding upon all of the Trustees and have the same effect as an action, or decision, of all the Trustees. 6.08 DUTIES OF INSTITUTIONAL TRUSTEE. The Institutional Trustee of the Aon Stock Fund shall be responsible for performing one or more of the duties and powers prescribed to the Institutional Trustee under this agreement solely with respect to the Aon Stock Fund, and under any other agreement between the Company and the Institutional Trustee. Such other agreement shall be in writing and shall be signed by and on behalf of the Company and the Institutional Trustee. In the event of a conflict between this agreement and such other agreement, the term of such other agreement shall control. The Trustees shall be responsible for performing the duties and powers prescribed to the Trustees under this Section 6, with respect to all other assets of the Trust. 6.09 LIMITATION ON LIABILITY. To the extent permitted by law, each person serving as a Trustee without compensation shall be relieved and released from all personal liability by reason of any act or failure to act on his part, except to the extent such act or failure to act was a result of fraud or gross negligence. 6.10 INDEMNITY. Each person serving as a Trustee without compensation (and their respective assigns, heirs, executors and administrators) shall be entitled to be indemnified by Aon against all costs and expenses reasonably incurred by or imposed upon him in connection with or resulting from any action, suit or proceeding or threat thereof, to which he may be made a party by reason of his serving as a Trustee, except in relation to matters as to which a recovery shall be had against him by reason of his having been finally adjudged in such action, suit or proceeding to have committed a fraudulent act or omission. The foregoing right to indemnity shall include reimbursement of the costs and expenses paid in 76 Exhibit 10(f) Page 46 of 92 settling any such action, suit or proceeding or threat thereof when it appears to Aon that the Trustee did not commit a fraudulent act or omission. 6.11 DISBURSEMENTS. The Trustee shall make such disbursements or payments from the Investment Funds as described in Section 5.02 as may be directed by the Committee. Any such directions shall be in writing and signed by a member of the Committee or the Secretary of the Committee. The Trustee shall have no duty or obligation to inquire into the propriety of any payment directed by the Committee but may conclusively presume that the payment is authorized by the terms of the Plan; however, this Section shall in no event be construed as granting the Committee any authority to manage, control, or invest the assets of the Trust but is intended solely to facilitate the administration of the Plan by the Committee. 6.12 REPORTS. The Trustee shall maintain accurate and detailed records and accounts of all investments, receipts, disbursements and other transactions hereunder, and all accounts, books and records relating thereto shall be open at all reasonable times to inspection and audit by any person or persons designated by Aon or the Committee. Within sixty (60) days following the close of each Plan Year (or following the close of such other periods as may be agreed upon by the Trustee and Aon) the Trustee shall file with Aon a written account setting forth a description of all securities and other property purchased and sold, all receipts, disbursements and other transactions affected by it during such period, and listing the securities and other property held by it at the end of such period, at their cost and fair market values. Aon may approve such accounting by written notice of approval delivered to the Trustee or by failure to express objection to such accounting in writing delivered to the Trustees within eight (8) months from the date upon which the accounting was delivered to Aon. Upon receipt of a written approval of the accounting, or upon the passage of said period of time within which objections may be filed, without written objections having been delivered to the Trustee, such accounting shall be deemed to be approved, and the Trustee shall be released and discharged as to all items, matters and things set forth in such accounting as if such accounting had been settled and allowed by a decree of a court of competent jurisdiction in any action or proceeding in which the Trustee, Aon, and all persons having or claiming to have any interest in the Trust Fund or under the Plan, were parties. The Trustee, nevertheless, shall have the right to have its accounts settled by judicial proceedings if it so elects, in which event only the Trustee and Aon shall be necessary parties. Nothing contained in this paragraph shall relieve the Trustee from any responsibility or duty under ERISA and any subsequent amendment thereto. 6.13 ADDITIONAL POWERS OF TRUSTEE. The Trustee shall have exclusive authority and discretion to manage and control all of the assets of the Plan except for the assets of the Aon Stock Fund. Pursuant thereto, and in addition to the other powers granted by this Agreement, the Trustee shall be authorized and empowered, except with respect to the Aon Stock Fund: 77 Exhibit 10(f) Page 47 of 92 (a) To sell, exchange, convey, transfer, or otherwise dispose of any property held by it, by private contract or at public auction, and no person dealing with the Trustee shall be bound to see to the application of the purchase money or to inquire into the validity, expediency, or propriety of any such sale or other disposition; (b) To make, execute, acknowledge, and deliver any and all documents of transfer and conveyance and any and all other instruments that may be necessary or appropriate to carry out the powers herein granted; (c) To register any investment held for an Investment Fund in its own name or in the name of a nominee and to hold any investment in bearer form, but the books and records of the Trustee shall at all times show that all such investments are part of the Trust Fund; (d) To manage, administer, operate, lease for any number of years, develop, improve, repair, alter, demolish, mortgage, pledge, grant options with respect to, or otherwise deal with any real property or interest therein at any time held by it; (e) To employ suitable agents and persons to render it services and advice in connection with its responsibilities and to pay their reasonable expenses and compensation; (f) To settle, compromise, or submit to arbitration, any claims, debts, or damages, due or owing to or from the Trust, to commence or defend suits or legal proceedings and to represent the Trust in all suits or legal proceedings; (g) To enter into any covenants or agreements binding the Trust with regard to any securities or other property held by it as Trustee; and (h) To borrow or raise monies for the purposes of the Trust and for any such so borrowed to issue its promissory note as Trustee and to secure the repayment thereof by pledging all or any part of the assets of the Trust, but nothing herein contained shall obligate the Trustee to render itself liable individually for the amount of any such borrowing; and no person loaning money to the Trustee shall be bound to see to the application of the money loaned or to inquire into the validity, expediency, or propriety of any such borrowing. 6.14 INVESTMENT MANAGER. The Trustees or the Company may delegate the investment powers granted to the Trustee by this Plan to an investment manager provided such investment manager meets all the requirements set forth in Section 3(38) of ERISA. In the event of the delegation of their investment powers as above provided, the Trustees shall have no duty or obligation to supervise or control in any way the investments made and shall in no way be liable or responsible on account 78 Exhibit 10(f) Page 48 of 92 of any investments made or retained by the investment manager, whether or not such investments are authorized by this Plan, or for any acts or omissions of the investment manager. Such delegation may apply to any part or all of the Investment Funds. 79 Exhibit 10(f) Page 49 of 92 SECTION 7 - ADMINISTRATION OF THE PLAN 7.01 COMMITTEE. The Board shall appoint a Committee consisting of not less than three (3) nor more than seven (7) members. Any person appointed a member of the Committee shall signify his acceptance by filing written acceptance with the Board. The members of the Committee shall serve without compensation for their services. The term of the members of the Committee shall commence with the date of their appointment and continue at the convenience of the Board. Any member of the Committee may resign by delivering his written resignation to the Board, and such resignation shall become effective at delivery or at any later date specified therein. 7.02 DUTIES OF COMMITTEE. The Committee shall have those duties prescribed to it elsewhere in this Agreement, and shall be responsible for the general administration of the Plan except where duties in connection with such general administration have been prescribed to others under this Agreement. The Committee shall not incur expenses on behalf of the Plan or Trust except with the consent of Aon. 7.03 CHAIRMAN AND SECRETARY. The members of the Committee shall elect a chairman from their number, and a secretary who may be but need not be one of the members of the Committee. 7.04 MEETINGS AND QUORUM. The Committee shall hold meetings upon such notice, at such place or places, and at such time or times as it may from time to time determine. A majority of the members of the Committee at the time in office shall constitute a quorum for the transaction of business. All resolutions or other actions taken by the Committee at any meeting shall be by the vote of a majority of the members of the Committee present at the meeting. Actions may be taken by the Committee without a meeting where such actions are consented to in writing by the entire Committee. 7.05 ALLOCATION OF DUTIES. The Committee, by its action, may allocate its fiduciary responsibilities among its members, and may designate persons other than its members to carry out its fiduciary responsibilities. The Committee, individual members of the Committee allocated specific fiduciary responsibilities, and persons other than members of the Committee designated to carry out specific fiduciary responsibilities, may employ one or more persons to render advice with respect to their responsibilities. If the Committee has allocated a specific fiduciary responsibility among its members, or has designated persons other than its members to carry out a specific fiduciary responsibility, it shall do the following things: (1) it shall make as a condition of such allocation or designation the fact that the Committee may terminate the allocation or designation at will; and (2) it shall report such allocation or designation to the Executive Committee of Aon 80 Exhibit 10(f) Page 50 of 92 who by its action, or by action of the Board, may order that such allocation or designation be terminated in which case it shall be done as soon as practicable. 7.06 Aon. Aon shall have the responsibility for hiring personnel in connection with the administration of the Plan (who shall be employees of Aon), and persons to perform services in connection with the administration of the Plan on an ad hoc basis, as may be required to carry out the provisions of the Plan. In accordance with the exercise of such responsibility, Aon may employ a manager for the Plan, clerical help, accountants, investment consultants, management consultants, public relations consultants, attorneys (who may be counsel for Aon) and other individuals as may be necessary. 7.07 RULES AND INTERPRETATION. The Committee may, from time to time, establish rules and procedures for administration of the Plan not inconsistent with the Plan's provisions, and administer the Plan in accordance with such provisions and such rules and procedures. The Committee shall have the exclusive right and discretionary authority to construe the terms and provisions of the Plan, including without limitation, the power to construe or interpret disputed, ambiguous or uncertain terms, and such other powers as may be necessary to carry out the provisions of the Plan. The Committee shall also have the discretionary authority to determine all questions relating to the eligibility of Employees to participate in the benefits of the Plan and the amount of such benefits, and resolve all questions pertaining to the administration, interpretation and application of the Plan provisions. Actions taken in good faith by the Company, the Committee or an Employer shall be conclusive and binding on all interested parties as to all questions of interpretation and application under this Plan and as to all other matters arising out of the administration thereof, and shall be given the maximum possible deference allowed by the law. 7.08 LIMITATIONS ON LIABILITY. To the extent permitted by law, each member of the Committee, and each employee of the Company who is involved in the administration of the Plan, shall be relieved and released from all personal liability by reasons of any act or failure to act on his part with respect to the administration of the Plan, except to the extent such act or failure to act was a result of fraud or gross negligence. 7.09 INDEMNITY. Each person named in Section 7.08 (and his respective assigns, heirs, executors and administrators) shall be entitled to be indemnified by Aon against all costs and expenses reasonably incurred by or imposed upon him in connection with or resulting from any action, suit or proceeding or threat thereof, to which he may be made a party by reason of his being involved in the administration of the Plan, except in relation to matters as to which a recovery shall be had against him by reason of his having been finally adjudged in such action, suit or proceeding to have committed a fraudulent act or omission. The foregoing right to indemnity shall include reimbursement of the costs and expenses paid in 81 Exhibit 10(f) Page 51 of 92 settling any such action, suit or proceeding or threat thereof when it appears to Aon that the person did not commit a fraudulent act or omission. 7.10 IDENTITY. The Committee shall have authority to determine the identity of the distributees, and in so doing, to act upon such information as, on reasonable inquiry, it may deem reliable with respect to heirship, relationship, survivorship, or any other fact relative to the distributees; the Committee may rely upon any affidavit, certificate, letter, or other paper or document reasonably believed by it to be genuine, and upon any evidence reasonably believed by it to be sufficient; and shall be protected and saved harmless in all payments required to be made hereunder, if made in good faith and without actual notice or knowledge of the changed condition or status of any person receiving payments upon a condition. 82 Exhibit 10(f) Page 52 of 92 SECTION 8 - DISPOSITION OF THE SEPARATE TRUST ACCOUNTS 8.01 PARTICIPANT STILL EMPLOYED BY COMPANY AFTER RETIREMENT DATE. A Participant shall have a 100% vested interest in his Company Contribution Account when he attains his Normal Retirement Date. If he continues in active employment, no distribution shall be made to such Participant (except pursuant to Section 8.07) until he retires or is retired from active employment and the Committee is so advised, and he shall continue to participate in this Trust. 8.02 DISPOSITION AT OR AFTER RETIREMENT DATE OR IN CASE OF PHYSICAL OR MENTAL DISABILITY. In the event that at or after his Normal Retirement Date a Participant shall resign or be released from employment from the Companies, or in the event that the employment of any Participant shall, at any time, either before or after Normal Retirement Date, be terminated because of permanent physical or mental disability, then the Committee shall direct the Trustee to distribute the Participant's entire individual accounts to such Participant, without regard to the provisions for vesting as set forth in Section 9, in one or more of the ways described in Section 8.10. Permanent physical or mental disability means a physical or mental disability or illness which, in the opinion of a physician approved by the Committee, renders the Participant permanently incapable of performing the duties he was performing for the Companies when such disability began. 8.03 DISPOSITION UPON THE DEATH OF A PARTICIPANT. The Committee, upon the death of a Participant, whether before or after retirement, shall direct the Trustee to distribute the Participant's individual accounts, without regard to the provisions for vesting as set forth in Section 9, to such Participant's Beneficiary in one or more of the ways described in Section 8.10. If the Participant has not named a Beneficiary, or if no Beneficiary is living at the death of the Participant, such accounts shall be paid over in one sum to the executor or administrator of the estate of such deceased Participant; provided, that if in such situations the Participant's spouse survives him then such surviving spouse shall be the Beneficiary. In the event the Beneficiary dies subsequent to the death of the Participant but prior to the distribution of the entire accounts to the Beneficiary, the balance of the accounts shall forthwith be paid over and delivered to the executor or administrator of the estate of the deceased Beneficiary. 8.04 DISPOSITION UPON TERMINATION OF EMPLOYMENT BEFORE REACHING RETIREMENT DATE. If a Participant shall withdraw from the employ of the Companies prior to attaining his Normal Retirement Date, whether because of resignation or discharge, or any reason other than permanent disability, provision for which is made in Section 8.02, the Committee shall direct the Trustee to pay to such Participant his vested interest in his individual accounts, as provided in Section 9, in one or more of the ways described in Section 8.10. If prior to incurring a 1-Year Break in Service such terminated Participant shall file with the Committee 83 Exhibit 10(f) Page 53 of 92 an application for the payment of benefits which has been approved by the Committee and distributions pursuant thereto have commenced, and if prior to incurring such 1-Year Break in Service he shall be reemployed by one of the companies, he shall not share in the Companies' contribution or forfeitures for the Plan Year in which the withdrawal occurred (this assumes he reentered employment in the same year as the withdrawal occurred) and he shall not be entitled to make contributions, or to have contributions made on his behalf, under Section 3.03, 3.04 or 3.05 in respect to his Compensation for the 12 month period following the month in which his application is filed or following the month of termination of his employment, whichever shall occur later and, accordingly, shall not share in Companies' contributions and forfeitures on the basis of the contribution which would otherwise have been made on his behalf under Section 3.03 during this period. 8.05 TERMINATION OF THE TRUST AND DISPOSITION UPON SUCH TERMINATION. Unless otherwise terminated as hereinafter provided in Paragraphs (a), (b), (c), or (d), of this Section 8.05, this Trust and Plan shall continue in perpetuity or for such time as may be necessary to accomplish the purpose for which it is created. This Trust and Plan shall terminate in respect to a Company upon the happening of any of the following events, but shall continue as a liquidation trust until final distribution of all assets. (a) Election by Aon. Aon, by appropriate resolutions by its Board, may elect to terminate this Trust and Plan as to any Company or all Companies. (b) Bankruptcy. In the event a Company at any time shall be adjudicated bankrupt or insolvent. (c) Dissolution. In the event a Company at any time shall be legally dissolved. (d) Merger or Consolidation. In the event of the merger or consolidation of a Company in and with another corporation or an association and such other corporation or association shall not agree to continue this Trust, with proper agreement with the Trustee and Committee; provided, however, in the event of dissolution, merger or consolidation of a Company, provision may be made by the successor or successors, whether it be an individual, firm, or corporation, for continuing this Trust and Plan, and such successor or successors shall be substituted for its predecessor hereunder, in which event the Trust and Plan shall continue in full force and effect in respect to such successor. If this Trust and Plan shall be terminated upon the happening of any of the events specified in Paragraphs (a), (b), (c), or (d) of this Section 8.05, and in accordance with Section 401(k)(10(A)(i) of the IRC, the Committee shall direct the Trustee to distribute the value of the affected Participants' entire accounts to such Participants in the manner provided in Section 8.10. Upon the completion of all payments to everyone entitled thereto, this Trust and Plan shall finally cease 84 Exhibit 10(f) Page 54 of 92 and terminate in respect to the Company and Participants affected thereby. Upon the termination of the Trust and Plan in respect to any Company, any unallocated contributions, forfeitures, or earnings and valuation adjustments shall be allocated to the accounts of the affected Participants in a fair and equitable manner as determined by the Committee. In the event of any action by or in respect to any Company resulting in the termination of the Trust and Plan pursuant to this Section 8.05, this Trust and Plan shall only terminate in respect to such Company but not in respect to any other Companies which have adopted the Plan, it being understood that the Trust and Plan shall continue in full force and effect as to any such other Companies. 8.06 PAYMENT TO MINORS, ETC. In case any payment hereunder becomes payable to a minor, person under legal disability, or person who by reason of physical or mental disability, although not adjudicated incompetent, is in the opinion of the Committee unable to administer properly such payment, then the same may be paid out by the Trustee for the benefit of such person in any of the following ways as the Committee, in its sole and uncontrolled discretion, shall determine: (a) directly to such person; or (b) to the legally appointed guardian or conservator of such person; or (c) to some near relative of such person for the support, maintenance, and education of such person; (d) by the Trustee using such amounts directly for the benefit of such person. The payment and acceptance of any money or property in settlement of a participation under this Section 8.06 shall constitute a complete acquittance and discharge of all liability of the Trustee with respect to such participation. 8.07 HARDSHIP WITHDRAWALS. Hardship withdrawals may be made from the accounts of a Participant under the circumstances and subject to the limitations set forth in this Section. (a) A Condition of Hardship. For the purposes of this Section, a hardship shall mean financial needs of a Participant which are immediate and heavy and which cannot be satisfied by the Participant from other reasonably available resources. For example, an immediate and heavy financial need shall be deemed to exist if funds are needed for one of the following reasons: Expenses incurred or necessary for medical care (as defined in Section 213(d) of the IRC) of the participant, the participant's spouse, children, or dependents (as defined in Section 152 of the IRC); costs directly related to the purchase (excluding mortgage payments) of a principal residence for the participant; payment of tuition and related educational fees for the next 12 months of post-secondary eduction for the participant, the participant's 85 Exhibit 10(f) Page 55 of 92 spouse, children, or dependents; the need to prevent the eviction of the participant from or a foreclosure on the mortgage of, the participant's principal residence; or the need to meet funeral expenses of a family member. (b) Request for Payment. In case of a condition of hardship, a Participant may request in writing to the Committee payment from his Participant's Pay Deferral Accounts (other than contributions to his Basic Pay Deferral Account for the current Plan Year) and Voluntary Contribution Account, plus an amount equal to 50% of the vested portion of the balance in his Company Contribution Account, of such amount as is necessary to meet the immediate and heavy financial need created by the hardship and not reasonably available from other resources. Such request shall be in writing and shall set forth all the applicable facts. (c) Objective Standards. Subject to the approval of the Committee, there shall be paid to such Participant such portion, or all, of his request for payment hereunder as the Committee determines is necessary to alleviate such hardship. Consent to the withdrawal shall be given by the Committee if the Committee finds an immediate and heavy financial need and that the distribution is necessary in light of the standards set forth in the regulations and rulings of the Secretary of the Treasury or his delegate. (d) Order of Payment. Payments to a Participant under this section shall be charged to his accounts in the following order: Participant's Voluntary Contribution Account (in the order described under Section 3.05), Participant's Supplemental Pay Deferral Account, Participant's Basic Pay Deferral Account (other than contributions to that account for the current Plan Year), Company Contribution Account. (e) Limitation on Withdrawals. (i) In no event shall the total of the amounts paid to a Participant under this Section exceed the balance in his Participant's Accounts (less his contributions to his Basic Pay Deferral Account during the current Plan Year) plus fifty percent (50%) of the vested portion of his "Adjusted Company Contribution Account" less the prior withdrawals referred to in the following sentence. For the purpose of the preceding sentence, a Participant's "Adjusted Company Contribution Account" shall be deemed to be the balance in his Company Contribution Account plus all prior withdrawals from such account plus all prior withdrawals from such accounts under the merged plans (as described in Section 4.08). (ii) For Plan Years beginning on or after January 1, 1989, a distribution for financial hardship shall not be made of either earnings subsequent 86 Exhibit 10(f) Page 56 of 92 to December 31, 1988, on Pay Deferral Amounts or, to the extent required under regulations of the IRC, any matching or nonelective Company contributions treated as Pay Deferral Amounts under Section 3.09(e). (f) Withdrawals After Termination of Employment. A withdrawal under this Section shall not be treated as a withdrawal under Section 8.04. 8.08 NET EARNINGS AND VALUATION ADJUSTMENT. Net earnings and valuation adjustments shall be made to the accounts of each Participant as set forth herein or under such separate agreement between the Company and the Institutional Trustee. As of the last day of each calendar month, the Committee shall ascertain the net Gain or net Loss of each of the funds described in Section 5. Gain shall include profits actually realized and received and income earned plus any net increase in the fair market value of all of the assets of the fund since the date of their last valuation. Losses shall include expenses and losses actually incurred and paid plus any net decrease in the fair market value of all of the assets of the fund since the date of their last valuation. The net Gain or net Loss of each Fund for the period shall then be allocated to or charged against the account or accounts of each Participant representing his interest in the fund in the proportion which the balance in his account or accounts (reduced by any amounts paid to him during the year) shall bear to the total of the balances in the accounts of all Participants representing an interest in the fund (reduced by any amounts paid to all of them during the year). The allocation provided for in the preceding sentence shall be made before the allocation of the contributions of the Company, the Subsidiaries and the Participants for the period and before the allocations of any forfeitures for the period. 8.09 METHOD OF VALUING ASSETS. Valuation adjustments under Section 8.08 shall be based on the fair market value of the assets held by the Trustees and the Trustees shall adopt accepted valuation and accounting methods in determining fair market value. 8.10 GENERAL PROVISIONS REGARDING PAYMENT OF BENEFITS. If the person entitled to receive benefits pursuant to this Section 8 is a terminated or retired Participant or Beneficiary of a deceased Participant, the following shall apply: (a) He shall receive benefits in a lump sum or in equal periodic installments which at his discretion may be increased or accelerated or otherwise adjusted. Payment shall be made in a lump sum if the initial amount thereof is $5,000 or less; provided, that no distribution shall be made without the consent of the Participant if the amount thereof exceeds $3,500. If a distribution is one to which Sections 401(a)(11) and 417 of the IRC do not apply, such distribution may commence less than 30 days after the notice required under section 1.411(a)-11(c) of the Income Tax Regulations is given, provided that: 87 Exhibit 10(f) Page 57 of 92 (i) the Committee clearly informs the Participant that the Participant has a right to a period of at least 30 days after receiving the notice to consider the decision of whether or not to elect a distribution (and, if applicable, a particular distribution option), and (ii) the Participant, after receiving the notice, affirmatively elects a distribution. (b) If he is a terminated or retired Participant, payment of benefits to him shall commence not later than the 60th day after the later of the close of the Plan Year in which his employment terminated or he attains his Normal Retirement Date; or if he is a Beneficiary of a deceased Participant, payment of benefits to him shall commence not later than the 60th day after the Plan Year in which the Participant of whom he is Beneficiary dies. Notwithstanding the preceding sentence, if he is a terminated or retired Participant, he shall have the right to have his benefits commence at a date later than described herein, but not beyond April 1st of the calendar year following the calendar year in which he attains age 70 1/2. (c) The Participant shall decide the method or methods to be used for paying him benefits, and, subject to what is stated in (b) above, when payment of benefits to him shall commence. He shall be given the opportunity to inform the Committee what his preferences are regarding the method or methods to be used for paying him benefits, and when payment of benefits to him shall commence. (d) If he is to receive payment of benefits in the form of periodic installments, such payments shall be made not less frequently than annually and shall be over a period of up to ten years but not to exceed the Participant's life expectancy or, if applicable, the combined life expectancy of the Participant and his Designated Beneficiary. (e) If he is a terminated Participant as described in Section 8.04, payment of benefits to him shall not commence until he has a 1-Year Break in Service except that the Committee shall commence payment to him sooner, as soon as administratively convenient, if he so requests. (f) Where distribution of the Participant's interest has begun under Section 8.10(b) and the Participant dies before his entire interest has been distributed to him, the remaining portion of such interest will be distributed at least as rapidly as under the method of distribution being used under Section 8.10(b) as of the date of his death. (g) If a Participant dies before the distribution of his interest has begun under Section 8.10(b) the entire interest of the Participant will be distributed within five years after his death except as described below: 88 Exhibit 10(f) Page 58 of 92 (i) If any portion of the Participant's interest is payable to (or for the benefit of) a Designated Beneficiary such portion will be distributed over the life of such Designated Beneficiary (or over a period not extending beyond the life expectancy of such Beneficiary), and such distributions begin not later than one year after the date of the Participant's death (or such later date as the Secretary of the Treasury may prescribe), then for purposes of this Subsection such portion shall be treated as distributed on the date when such distributions began. (ii) If such Designated Beneficiary is the surviving spouse of the Participant, distributions need not begin until the date on which the Participant would have attained age 70 1/2. If the surviving spouse dies before distributions to her begin, Section 8.10(g) shall be applied as if the surviving spouse were the Participant. Any amount paid to a child shall be treated as if it had been paid to the surviving spouse if such amount will become payable to the surviving spouse upon such child reaching majority (or other designated event permitted under IRC regulations). (h) The term "Designated Beneficiary" means any individual designated as a Beneficiary by the Participant. (i) Notwithstanding the provisions of Subsection (b) hereof, distribution to a Participant who has terminated his service, or who is a 5% owner (as defined in Section 16.02(b)) at any time during the 5-Plan-Year period ending in the calendar year in which he attains age 70-1/2 shall commence not later than the 1st day of April of the calendar year following the calendar year in which he attains age 70-1/2. If a Participant who has not terminated his service subsequently becomes a 5% owner after the calendar year in which he attains age 70-1/2, then distribution shall commence by April 1st of the calendar year following the Plan Year during which he became a 5% owner. Effective January 1, 1989, distribution to a Participant shall commence by April 1st of the calendar year following the calendar year in which he attains age 70 1/2, without regard to whether he has terminated his service; provided, that this rule shall not apply to a Participant age 70-1/2 or over on January 1, 1988 unless he has been a 5% owner at any time during the Plan Year ending during the calendar year when he attained age 66-1/2 or any subsequent Plan Year, nor shall it apply to any benefits with respect to which a designation is in effect as described in Section 8.10(j). (j) The foregoing provisions of this Section 8.10, other than the right of a Participant to elect his own optional forms of benefit as may be applicable, shall not apply to distributions under a plan of distribution designated by a Participant in writing prior to January 1, 1984, which was permissible under the provisions of this Plan as in effect prior to the 1984 Restatement of the Plan. 89 Exhibit 10(f) Page 59 of 92 (k) If the Beneficiary of the Participant is not his spouse the form of distribution must be one whereunder the present value of the retirement benefit payments projected to be made to the Participant, while living, is more than 50 percent of the present value of the total payments projected to be made to the Participant and the Participant's Beneficiary; provided, that this requirement shall be interpreted so as to comply with the incidental benefit rule of the IRC and the rules and regulations thereunder. (l) In lieu of making payments directly from a terminated, deceased, or retired Participant's separate accounts, the Committee may, in their sole discretion, invest all or a portion of such Participant's separate accounts in one or more annuity contracts and assign such contract or contracts to such Participant or his Beneficiary or cause payments to be made pursuant to the terms of such contract or contracts to such Participant or his Beneficiary in such manner as the Committee deem advisable. Before assigning any contract to a terminated or retired Participant or Beneficiary, the Committee shall cause such contract to be made non-assignable by the assignee. Any contract shall be issued on a unisex basis and all the terms and conditions under any such contract, including benefits, premiums, options, loan values and cash surrender values, shall be the same for both male and female. (m) Distribution to a Participant (or his Beneficiary) whose vested interest in his Accounts has a fair market value of $3,500 or less based on the Plan's last valuation shall be made as soon as administratively convenient. (n) Except as provided in regulations, the provisions of IRC Section 401(a)(9) are hereby incorporated by reference to the extent not set forth in this Section. 8.11 ELIGIBLE ROLLOVER DISTRIBUTIONS. Effective with respect to distributions made on or after January 1, 1993, a distributee may elect, at the time and in the manner prescribed by the plan administrator, to have any portion of an Eligible Rollover Distribution paid directly to an Eligible Retirement Plan specified by the distributee in a Direct Rollover. For purposes of this Section 8.11: (a) An "Eligible Rollover Distribution" is any distribution of all or any portion of the balance to the credit of the distributee, except that an Eligible Rollover Distribution does not include: any distribution that is one of a series of substantially equal periodic payments (not less frequently than annually) made for the life (or life expectancy) of the distributee and the distributee's designated beneficiary, or for a specified period of ten years or more; any distribution to the extent such distribution is required under Section 401(a)(9) of the IRC; and the portion of any distribution that is not includable in gross income (determined without regard to the exclusion for net unrealized appreciation with respect to employer securities). 90 Exhibit 10(f) Page 60 of 92 (b) An "Eligible Retirement Plan" is an individual retirement account described in Section 408(a) of the IRC, an individual retirement annuity described in Section 408(b) of the IRC, an annuity plan described in Section 403(a) of the IRC, or a qualified trust described in Section 401(a) of the IRC, that accepts the distributee's Eligible Rollover Distribution. In the case of an Eligible Rollover Distribution to the surviving spouse, an Eligible Retirement Plan is an individual retirement account or individual retirement annuity. (c) A "Distributee" is an employee or former employee, the employee's or former employee's surviving spouse and the employee's or former employee's spouse or former spouse who is the alternate payee under a qualified domestic relations order, as defined in Section 414(p) of the IRC. (d) A "Direct Rollover" is a payment by the Plan to the Eligible Retirement Plan specified by the Distributee. 91 Exhibit 10(F) page 61 of 92 SECTION 9--PARTICIPANT'S NONFORFEITABLE INTEREST 9.01 GENERAL RULE. A Participant's nonforfeitable (vested) interest prior to his Normal Retirement Date shall be an amount equal to the balance of his Participant's Voluntary Contribution Account, plus the balance of his Participant's Basic and Supplemental Pay Deferral Accounts, plus the percentage of the balance of his Company Contribution Account applicable to his number of Years of Participation as follows: Completed Years of Participation Nonforfeitable Interest -------------------------------- ----------------------- Less than 1 year None 1 Year 20% 2 Years 40% 3 Years 60% 4 Years 80% 5 Years 100% For the purpose of computing the balance of the Company Contribution Account of a Participant with less than a 100% vested interest, any amounts previously paid out pursuant to Section 8.07 shall be credited back to such Account and then charged against such Participant. Upon the termination, or a partial termination, of this Plan, except as provided in Section 11, or upon complete discontinuance of contributions thereto by any Company, each affected Participant's interest in his separate accounts shall become one hundred percent (100%) nonforfeitable. 9.02 SPECIAL RULES. In applying the provisions of Section 9.01, Years of Participation shall refer to the total years of Service of an Employee with the following exceptions and modifications: (a) Subject to the provisions of (c) of this Section, an Employee's Service shall be deemed to commence on the January first following the date his actual employment commenced, except that if a prior Participant is reemployed and again becomes a Participant in the year of his reemployment pursuant to Section 2.02 his Service shall be deemed to have commenced on January first of the year of his reemployment. (b) If an Employee's employment is terminated during any calendar year, he shall receive no credit for any Service during such calendar year (unless the rule set forth in Section 1.23(c) applies). (c) In the case of an Employee who has five 1-Year Breaks in Service, Service, after such Break in Service, shall not be taken into account for the purpose of determining his nonforfeitable interest in his Company Contribution Account before such Break in Service. As provided at Sections 2.02 and 4.01, 92 Exhibit 10(F) page 62 of 92 any nonforfeitable vested interest of a Participant in the balance of his Company Contribution Account at the time of such Breaks in Service shall be separately accounted for thereafter as one hundred percent (100%) nonforfeitable. (d) In the case of a Participant who becomes an independent field sales representative for the Companies (and thereby ceases to be an Employee) any period of time that he is acting in such capacity and during which his accounts are not distributed to him (except for hardship distribution under Section 8.07) shall be deemed to be Service. (e) Any period of time taken into account under the Combined Profit Sharing Plan, the Ryan Insurance Group, Inc. Profit Sharing Plan, or the Union Fidelity Life Insurance Company Profit-Sharing Plan as of the date of merger of the first two of those plans into this Plan shall be taken into account under this Plan, and a similar rule shall apply as to the Aon Profit Sharing Plan, the Combined Insurance Field Sales Agents' Plan and the Miller, Mason & Dickenson, Inc. Employee Stock Ownership Plan being merged into this Plan as of January 1, 1989. (f) If the Plan becomes a Top-Heavy Plan and subsequently ceases to be such, the vesting schedule in Section 16.05 shall continue to apply in determining the vested interest of any Participant who had at least five years of Service as of December 31 in the last Plan Year of topheaviness. For other Participants, said schedule shall apply only to their Top-Heavy Account as of such December 31. (g) A Participant's account shall be one hundred percent (100%) vested and nonforfeitable when he attains age 55 and completes five Years of Participation and such date shall be regarded as his early retirement date. 9.03 RESTORATION OF FORFEITURES. Forfeitures from a terminated Participant's Company Contribution Account shall be charged to his account upon termination of his employment; provided, that no forfeiture shall be incurred by a Participant reemployed before the next following Anniversary Date if he does not receive a distribution under Section 8.04 by reason of such reemployment and if no administrative inconvenience as to such forfeitable amount would thereby be suffered by the Committee. If any terminated Participant who has suffered a forfeiture becomes reemployed before he has incurred five consecutive 1-Year Breaks in Service, upon his earning a year of Service after his rehire his Company Contribution Account shall be reconstituted by crediting thereto an amount equal to the amount forfeited, which amount shall be deducted from forfeitures during the Plan Year in which his Company Contribution Account is reconstituted. To the extent forfeitures for such year are not adequate for such purpose, such amount as may be necessary to reconstitute his Company Contribution Account shall be deducted pro rata from the assets of those funds earning a net Gain 93 Exhibit 10(F) page 63 of 92 pursuant to the earnings and valuation adjustment under Section 8.08, and if there are no net Gains then such amount shall be deducted from Company contributions for the year. As an alternative to either of the sources set forth in the preceding sentence, at the discretion of the Company such amount may be contributed by the Company as a special contribution and credited to such account. In the event the employment of a rehired Participant whose account has been reconstituted is again terminated before he has acquired a one hundred percent (100%) vested interest, any prior distribution made to him on account of his prior termination of employment shall be taken into consideration in computing his vested interest at the time of his later termination of employment. 9.04 APPLICATION OF OLD VESTING SCHEDULE. Each Employee who has three or more years of Service on December 31, 1988, and who earns one Hour of Service after such date, shall have his vested interest determined under the provisions of this Plan as in effect on December 31, 1988, or under the terms of any merged plan under Section 4.08 of which he was a Participant, if such determination will result in increasing the percentage of his vested interest. 94 Exhibit 10(f) Page 64 of 92 SECTION 10 - SPENDTHRIFT TRUST 10.01 GENERAL. No Participant or Beneficiary shall have any right or power to transfer, assign, anticipate, mortgage, pledge or otherwise encumber his interest in the Trust established by this Agreement, or his rights to receive payments or benefits from the Trust and neither such interest nor rights nor any assets of the Trust shall be subject to seizure or sequestration for the payment of any debts, judgments, alimony or separate maintenance owed by any Participant or Beneficiary nor to transferability by operation of law in the event of bankruptcy, insolvency or otherwise; provided, that this limitation shall not apply to a Qualified Domestic Relations Order ("QDRO") under IRC Section 401(a)(13) as amended from time to time. 10.02 QUALIFIED DOMESTIC RELATIONS ORDER. For purposes of this Section, a QDRO shall mean a domestic relations order which relates to alimony, child support or marital property rights and which has been determined by the Company to meet the requirements of IRC Section 414(p) as amended from time to time. The following rules shall apply to the rights and obligations of the spouse of a Participant (the "Non-Participant Spouse") under a QDRO and under a domestic relations order not yet determined to be a QDRO. (a) These rules shall apply prior to determination by the Company that the domestic relations order is a QDRO, and shall apply thereafter as applicable: (i) As soon as administratively feasible after receipt of a domestic relations order, those funds which could go to the Non- Participant Spouse, if she (or he) is later determined by the Company to be entitled to these, will be put into a separate account. These funds will be invested in the money market fund, except as otherwise may be directed by the Trustees, until the Non-Participant Spouse decides how to invest the funds and the Company is afforded reasonable time to honor the investment decision. The Non-Participant Spouse may be allowed to begin making investment decisions even though the order is eventually determined not to be a QDRO. (ii) The Non-Participant Spouse will share in any intervening gains (or losses) enjoyed (or suffered) by the Participant in his accounts between the time the Company is notified of the domestic relations order and the time a transfer of funds to the separate account of the Non-Participant Spouse can be accomplished. (iii) An account or account balances may be segregated for the Non- Participant Spouse even though the Participant is not yet eligible to have funds distributed to him. The funds of the Non-Participant 95 Exhibit 10(f) Page 65 of 92 Spouse may be accounted for separately without the necessity for an escrow. (iv) Once the Non-Participant Spouse does reach an investment decision, she (or he) will be entitled to invest her (or his) account balance among the same Investment Funds as are available to the Participant for investment. (v) The Non-Participant Spouse may elect a Beneficiary for her (or his) account balances under the QDRO. If a property settlement agreement is involved or some other court decree which is not a final divorce so that the individuals remain married, the Participant shall be treated as the death Beneficiary of the Non-Participant Spouse, just as the Non-Participant Spouse will be for the Participant, unless the QDRO provides otherwise. If the QDRO provides that the Non-Participant Spouse is to be no longer regarded as the Participant's spouse, then the preceding sentence shall not apply. (vi) Upon written notification from either the Participant or Non- Participant Spouse that a QDRO is forthcoming, no distribution of benefits or hardship withdrawals will be made to the Participant until a final determination has been made as to the qualified status of any domestic relations order received within the 90-day period following the date the Company sends the Aon QDRO Procedures to the parties. If no domestic relations order is received by the Company within that 90 day period, a distribution or hardship withdrawal may be made to the Participant. (b) These rules shall apply once the domestic relations order has been determined to be a QDRO: (i) The Non-Participant Spouse may withdraw all of her (or his) account balances at any time, without regard to whether the Participant has attained his (or her) earliest retirement age under the Plan. Any benefits distributed under this rule may be taken out only in a single sum and may not be taken out periodically. (ii) The Non-Participant Spouse may also be allowed to take a partial withdrawal of her (or his) account balances, but only in the event of a hardship in situations where the Participant could get a hardship distribution prior to separation from service. The test for a hardship will be whether the Non-Participant Spouse is suffering a hardship and not the Participant. The same rules applicable for a partial withdrawal for hardship will be imposed on the Non-Participant Spouse as upon the Participant. Any such partial distribution will be made pro rata from all of the accounts or sub-accounts of the Non- 96 Exhibit 10(f) Page 66 of 92 Participant Spouse, including a pro rata portion of any nontaxable return of funds in the Participant's voluntary contribution account, if any. (iii) If the amount to be distributed to the Non-Participant Spouse is less than $3,500, such amount will be paid out only in a lump sum and may be distributed without the consent of the Non- Participant Spouse or of the Participant. (iv) A distribution otherwise permissible may be made to the spouse without regard to whether the limitations on a distribution under IRC Section 401(a) or 401(k) are met. (c) It is the intent of Subsections (a) and (b) that the rules set forth therein shall be subject to, and shall be interpreted in light of, the requirements for a QDRO under the IRC and under regulations and rulings of the Secretary of the Treasury or his delegate. (d) Subsections (a) and (b) shall also apply to a child or other dependent of the Participant as appropriate. (e) This Section shall be incorporated into procedures in compliance with IRC Section 414(p) and adopted by the Committee by resolution. 97 Exhibit 10(f) Page 67 of 92 SECTION 11 - COMPANY TO HAVE NO INTEREST IN TRUST The Company shall in no event, either directly or indirectly, receive any refund of contributions made to the Trust, nor directly or indirectly participate in the distribution, or receive the benefits of the assets or funds comprising the trust estate. Upon transfer to the Trustee, all responsibilities of the Company for each contribution shall cease, and the Company shall have no responsibilities for the acts of the Trustee or Committee. Notwithstanding the first sentence of this Section, a refund may be made to a Company, subject to the limitations imposed by Rev. Rul. 77-200, if a contribution is made by a mistake of fact or a deduction for federal income taxes is disallowed for any portion of a contribution and the mistaken contribution or the nondeductible portion of the contribution is returned one year after payment of the mistaken contribution or within one year after the disallowance of the deduction. 98 Exhibit 10(f) Page 68 of 92 SECTION 12 - AMENDMENT AND SUSPENSION OF CONTRIBUTIONS 12.01 AMENDMENT OF THE AGREEMENT. Aon reserves the right, by action of the Board, to amend this Agreement at any time, and from time to time, including the right to change the provisions for each Company's contributions. No amendment shall vest in the Companies any right, title or interest in and to the Trust Fund, or any part thereof, or cause them to be used or diverted to, purposes other than for the exclusive benefit of Participants and beneficiaries. The amendment of this Agreement shall not require the approval or ratification of the stockholders of Aon, or any Subsidiary, nor of the Trustee, Committee, Participants or Beneficiaries, or any of them; however, no amendment shall change the rights, duties, or responsibilities of the Trustee without its written consent. Except as may be necessary to qualify this Trust, or to continue the qualification of the Trust under Section 401 of the IRC, or any successor to such section, no amendment shall adversely affect vested rights of any Participant hereunder. 12.02 SUSPENSION. Aon reserves the right, by action of the Board, to suspend Aon's or any Subsidiary's contributions under Section 3.01(a)(iii) for any Plan Year, but not exceeding two successive Plan Years, without terminating the Plan and Trust or discontinuing contributions permanently, by providing written notice of such action of the Board to the Committee and Trustee not later than sixty (60) days prior to the end of such Plan Year, in which event the Company or Companies affected shall not be obliged to make any contribution to the Company Fund for the period of such suspension. The Committee upon receiving notice of such suspension shall immediately notify the affected Participants. 99 Exhibit 10(f) Page 69 of 92 SECTION 13 - ADOPTION OF PLAN BY AFFILIATE 13.01 ADOPTION OF PLAN. Any Affiliate, by proper resolutions adopted by its Board, or by an adoption agreement executed by a principal executive officer, may become a party to this Agreement by adopting this Trust as a profit sharing plan for its Employees. A certified copy of such resolutions shall be delivered to the Committee and Trustee. 13.02 INTENTION OF PARTIES. Except as provided herein, it is the intention of the parties hereto that the Employees of Aon and the Employees of any Subsidiary that adopts this Trust shall receive the same benefits as they would receive if Aon and such Subsidiaries were one corporate entity and this Plan were the plan of such entity, and the provisions of this Agreement shall be interpreted in accordance with this intent. 13.03 TERMINATION OF STATUS OF SUBSIDIARY. In the event any Subsidiary adopting this Plan at any time does not meet the requirements herein set forth for a Subsidiary, such company shall nevertheless be considered as continuing its status as a Subsidiary unless Aon files with the Trustee and Committee a resolution adopted by its Board electing to discontinue such Company's participation hereunder. Such resolution shall be considered as an election to terminate such Company's participation in this Trust under the provisions of Section 8.05(a). 100 Exhibit 10(f) page 70 of 92 SECTION 14 - ERISA PROVISIONS 14.01 SERVICE FOR PREDECESSOR. To the extent required by regulations that may be prescribed by the Secretary of the Treasury or his delegate, service for a predecessor shall be treated as Service for the Companies. 14.02 CONTROLLED GROUP. To the extent required by IRC Section 414(b), (c), (m), (n) and (o) all employees of the entities described therein shall be treated as employed by a single employer. 14.03 MERGER. This Plan shall not be merged or consolidated with any other plan (or the assets held under this Plan shall not be transferred to any other plan), unless each Participant under the plan, if the plan then terminated, would receive a benefit equal to or greater than the benefit he would have been entitled to receive before the merger, consolidation, or transfer (if the plan had then terminated). 14.04 CLAIMS PROCEDURE. Pursuant to Section 503 of ERISA the following claims procedure is established. (a) A timely written application for benefits shall be filed with the Committee on a form prescribed by it. (b) If a claim is denied, in whole or in part, written notice of such denial shall be furnished to the applicant setting forth, in a manner calculated to be understood by him, the following: (i) The specific reason or reasons for the denial; (ii) A specific reference to pertinent Plan provisions on which the denial is based; (iii) A description of any additional material or information necessary for the claimant to perfect the claim and an explanation of why such material or information is necessary; (iv) An explanation of the Plan's claim review procedure. (c) An applicant whose claim has been denied in whole or in part (or his duly authorized representative) may appeal such denial to the Committee by making a written request for a review and may review pertinent documents and submit issues and comments in writing. A written request for review must be filed within sixty (60) days of the date an applicant has been notified of the denial or partial denial of his claim. 101 Exhibit 10(f) Page 71 of 92 (d) The decision on review shall be made promptly, shall be in writing, and shall include specific reasons for the decision, written in a manner calculated to be understood by the applicant, and specific references to the pertinent Plan provisions on which the decision is based. 14.05 INVESTMENT IN DEPOSITS WITH CORPORATE FIDUCIARY. In the event a corporate fiduciary is appointed, such fiduciary may invest all or a part of the Plan's assets in deposits, which bear a reasonable rate of interest, in an account maintained in its own banking department, to the extent such investment is permitted by Section 408(b) ERISA, and to the extent otherwise permitted under Section 5.05. 14.06 MAXIMUM ANNUAL ADDITION. (a) In no event shall the annual addition (as hereinafter defined) to a Participant's separate accounts with respect to any Plan Year exceed the lesser of (i) $30,000 (or, if greater, one-fourth of the defined benefit plan dollar limitation under Section 415(b) of the IRC), or (ii) Twenty-five percent (25%) of the Participant's total compensation. (b) The term "annual addition" means the sum for any Plan Year of (i) his share of Company contributions, plus (ii) the amount of his contributions under Section 3.05 made on or after January 1, 1987, plus (iii) his share of forfeitures, plus (iv) for purposes of Section 14.06(a)(i) only, amounts allocated to a separate account for the Participant to provide medical benefits after retirement, whether under a pension or annuity plan or a welfare benefit fund, pursuant to Sections 401(h), 415(c)(2), 415(l) and 419A(d)(2) of the IRC. (c) In the event a Participant herein also participates in any stock bonus plan maintained by the Company or a member of a controlled group (as defined in Section 14.02) the maximum annual addition computed pursuant to subsection (a) hereof may be reduced (except as IRC Section 415(c)(6) may apply) by the amount of employer contributions and forfeitures allocated to the Participant in such other plan; provided, that if the Participant also participates in another profit sharing plan, then the maximum annual addition hereunder may be reduced prior to the maximum annual addition under such plan; employee contributions made by the Participant to such other plans 102 Exhibit 10(f) Page 72 of 92 shall be included in computing his annual addition pursuant to subsection (b)(ii) hereof; and compensation received from a member of a controlled group shall be included in total compensation. (d) In the event a Participant herein is a Participant at any time in a defined benefit plan maintained by the Company or a member of a controlled group, the sum of the defined benefit plan fraction and the defined contribution plan fraction for any Plan Year shall not exceed 1.0 but such limitation may be applied to first reduce benefits under the defined benefit before being applied to reduce benefits under this Plan. For this purpose the defined benefit plan fraction for any Plan Year is: Projected annual benefit of the Participant under the plan (determined as of the close of the year) -------------------------------------------------- Lesser of: (a) 1.25 multiplied by the dollar limitation in effect for such year ($90,000 for Plan Year beginning in 1983) or (b) 1.4 multiplied by the percentage limitation with respect to such individual under the plan for such year (100% of his average total compensation for his high 3 Years). The defined contribution plan fraction for any Plan Year is: Sum of the annual additions to the Participant's account as of the close of the year -------------------------------------------------- Sum of the lesser of the following amounts determined for such year and for each prior year of service with the employer: (a) 1.25 multiplied by the dollar limitation in effect for each such year ($30,000 for Plan Year beginning in 1983) or (b) 1.4 multiplied by the percentage limitation with respect to such individual under the Plan for each such year (25% of his total compensation). (e) At the election of the plan administrator, in determining the defined contribution plan fraction under Subsection (d), above, with respect to any Plan Year ending after December 31, 1982, the denominator of the fraction with respect to each Participant for all years ending before January 1, 1983, shall be an amount equal to the product of such denominator under the law in effect for the year ending in 1982 multiplied by the transition fraction. The transition fraction means a fraction whose numerator is 35% of the compensation of the Participant for the year ending in 1981 (limited to 103 Exhibit 10(f) Page 73 of 92 $51,875) and whose denominator is 25% of such compensation (but not more than $41,500). (f) Provided the Plan satisfied the requirements of IRC Section 415 for the last year beginning before January 1, 1983, and pursuant to regulations prescribed by the Secretary of the Treasury or his delegate, the numerator of the defined contribution plan fraction at Subsection (d) may be reduced so that the sum of the defined contribution plan fraction and the defined benefit plan fraction does not exceed 1.0 for such year. (g) In the case of an individual who is a participant before January 1, 1983, in a defined benefit plan which is in existence on July 1, 1982, and with respect to which the requirements of Section 415 of the IRC have been met for all years, if such individual's current accrued benefit under such plan exceeds the limitation of subsection (b) of Section 415, then (in the case of such plan) for purposes of such IRC Section 415(b), and also for purposes of IRC Section 415(e) as provided under Subsections (d) through (f) hereof, the limitation of such IRC Section 415(b) with respect to such individual shall be equal to such current accrued benefit. The term "current accrued benefit" means the individuals accrued benefit (at the close of the last year beginning before January 1, 1983) when expressed as an annual benefit (within the meaning of Section 415(b)(2) of the IRC as in effect before the amendments made by the Tax Equity and Fiscal Responsibility Act of 1982). For purposes of determining the amount of any individuals current accrued benefit, (I) no change in the terms and conditions of the plan after July 1, 1982, and (II) no cost-of-living adjustment occurring after July 1, 1982, shall be taken into account. (h) In the event the amount of the annual addition for a Participant exceeds the limitation of this Section 14.06, the Trustees shall forthwith reduce the amount of the annual addition to the limitations of Section 14.06 by first refunding any contributions of the Participant for such Plan Year to the extent includable in the computation of the annual addition; second, if necessary, by reducing his share of the Company's contribution for such Plan Year, the amount of such reduction to be applied as a reduction of the Company's contribution for such Plan Year. Any remaining excess contributions, plus forfeitures, shall be reallocated among the other Participants. If after such adjustments there still remains an excess, such amounts from such Participants so affected shall be held unallocated in a suspense account and all amounts in the suspense account shall be allocated and reallocated to Participant's accounts (subject to the limitations of Section 415 of the IRC) before any contributions by the Company or by the Participants may be made for the limitation year during which such suspense accounts are in existence. 104 Exhibit 10(f) Page 74 of 92 (i) In determining under which plan the contributions or other annual additions, or benefits, of a Participant should be reduced under this Section, the intent is that the order of reduction set forth herein in for purposes of guidance only and not obligatory, and that such order of reduction as to one Participant may be different from another Participant, so as to afford maximum flexibility to the Plan in avoiding a violation of the provisions of Section 415 of the IRC. (j) If the Plan satisfied the applicable requirements of Section 415 of the IRC as in effect for all years beginning before January 1, 1987, an amount shall be subtracted from the numerator of the defined contribution plan fraction (not exceeding such numerator) as prescribed by the Secretary of the Treasury so that the sum of the defined benefit plan fraction and defined contribution plan fraction computed under Section 415(e)(1) of the IRC does not exceed 1.0 for such year. (k) (i) Compensation shall include the following items: (A) The Participant's wages, salaries, fees for professional service and other amounts received for personal services actually rendered in the course of employment with an employer maintaining the plan (including but not limited to, commissions paid salesmen, compensation for services on the basis of a percentage of profits, commissions on insurance premiums, tips and bonuses). (B) For purposes of the prior sentence, earned income from sources outside the United States. (C) Amounts described in IRC Sections 104(a)(3), 105(a) and 105(h), but only to the extent that these amounts are includable in the gross income of the Employee. (D) Amounts described in IRC Section 105(d), whether or not these amounts are excludable from the gross income of the Employee under that section. (E) Amounts paid or reimbursed by the Employer for moving expenses incurred by an Employee, but only to the extent that these amounts are not deductible by the Employee under IRC Section 217. (F) The value of a non-qualified stock option granted to an Employee by the employer, but only to the extent that the value of the option is includable in the gross income of the Employee for the taxable year in which granted. 105 Exhibit 10(f) Page 75 of 92 (G) The amount includable in the gross income of an Employee upon making the election described in IRC Section 83(b). (ii) Compensation shall not include the following items: (A) Contributions made by the Employer to a plan of deferred compensation to the extent that, before the application of the IRC Section 415 limitations to that plan, the contributions are not includable in the gross income of the employee for the taxable year in which contributed. In addition, Employer contributions made on behalf of an Employee to a simplified employee pension described in IRC Section 408(k) are not considered as compensation for the taxable year in which contributed to the extent such contributions are deductible by the Employee under IRC Section 219(b)(7). Additionally, any distributions from a plan of deferred compensation are not considered as compensation for IRC Section 415 purposes, regardless of whether such amounts are includable in the gross income of the Employee when distributed. However, any amounts received by an Employee pursuant to an unfunded non-qualified plan may be considered as compensation for IRC Section 415 purposes in the year such amounts are includable in the gross income of the Employee. (B) Amounts realized from the exercise of a nonqualified stock option, or when restricted stock (or property) held by an Employee either becomes freely transferable or is no longer subject to a substantial risk of forfeiture (see IRC Section 83 and the regulations thereunder). (C) Amounts realized from the sale, exchange or other disposition of stock acquired under a qualified stock option. (D) Other amounts which receive special tax benefits, such as premiums for group term life insurance (but only to the extent that the premiums are not includable in the gross income of the Employee), or contributions made by an Employer (whether or not under a salary reduction agreement) towards the purchase of an annuity contract described in Section 403(b) (whether or not the contributions are excludable from the gross income of the Employee). 106 Exhibit 10(f) Page 76 of 92 (iii) Except as provided in regulations, the provisions of IRC Section 415 are hereby incorporated by reference to the extent not set forth in this Section. 107 Exhibit 10(F) Page 77 of 92 SECTION 15 - MISCELLANEOUS 15.01 VALIDITY OF CONTRACTS. Neither the Companies, the Committee nor the Trustee shall be responsible under any circumstances for the validity of any annuity contracts issued pursuant to the provisions of this Agreement, nor for the failure on the part of any insurer to make any payment or to provide for benefits under any such contract issued by it, nor for the action of any person or persons which may render such contracts null and void or unenforceable, either in whole or in part. 15.02 RELIANCE ON INFORMATION FURNISHED BY THE COMPANIES. Any information furnished by the Companies to the Committee or Trustee, such as Compensation or contributions of Participants, the proper amount of the Companies' contribution, the status of individuals as Employees of the Companies, or otherwise, and any other information which may be furnished by the Companies to the Committee or Trustee, shall be accepted by the Committee and Trustee as being true and correct, and the Committee or Trustee shall incur no liability in relying on such information. In no event shall the Trustee or Committee have any right to request or demand an audit, investigation, or disclosure of the Companies' books or records. 15.03 INABILITY TO PERFORM. Neither the Companies, the Committee nor the Trustee shall be responsible for any inability to perform, or delay in performing, any act occasioned by any restriction or provision of any annuity contract, or imposed by any insurer, or by any other person, or by law, and in the event any such inability or delay shall be so occasioned, then that act which can be performed shall be performed by the Companies, the Committee, or the Trustee which, in the sole discretion of the Committee, most completely carries out the intention and purpose of this Trust. All parties to this Trust or in any way interested therein shall be bound by any act so performed under such conditions. 15.04 EXECUTION OF DOCUMENTS. All parties to this Trust or claiming any interest hereunder expressly agree to perform any and all acts, and to execute any and all documents and papers which at any time may be necessary or desirable for carrying out any of the provisions of this Trust. 15.05 NOTICE OF REQUIRED ACTION. In any case in which the Companies, the Trustee, the Committee or the insurer shall be directed to take any action upon the occurrence of any event, they, or any one or more of them, shall be under no obligation or liability to take such action unless and until notice, proper and satisfactory to them, shall first have been received of the occurrence of such event. For the purposes of this Section 15.05, a certificate in writing signed by any officer of Aon and delivered to the Trustee, the Committee or the insurer, or a certificate in writing from the Trustee to the insurer as to the occurrence or happening of any event, shall constitute conclusive evidence of such occurrence 108 Exhibit 10(F) Page 78 of 92 or happening, and the Trustee, the Committee and the insurer, respectively, shall be fully protected and discharged from all liability whatsoever in accepting and relying on such certificate. No insurer shall be required to go back of any action of the Trustee, and no insurer shall be responsible to see that any action of the Trustee is authorized by the terms of this Agreement. 15.06 RELIANCE UPON COMMUNICATION. Neither the Companies, the Committee, nor the Trustee shall incur any liability in acting upon any notice, request, signed letter, telegram, or other paper or documents reasonably believed by them or any one of them to be genuine and to be signed or sent by the proper person. 15.07 DISCHARGE UPON PAYMENT. The payment and acceptance of any money or property in a settlement of any participation under this Trust shall constitute a complete acquittance and discharge of full liability of the Trustee with respect to such participation. An insurer shall be fully discharged from any and all liability for any amount paid to the Trustee, the Participant, or any Beneficiary, or to any other person or persons in accordance with the written directions of the Trustee, and the Trustee and the insurer, respectively, shall be under no obligation or duty to see to the distribution or further application of any monies so paid. Any change made or action taken by the insurer upon the written directions of the Trustee shall fully discharge the insurer from all liability with respect thereto. 15.08 INSURER NOT PARTY TO AGREEMENT. No insurer shall be deemed a party to this Agreement for any purpose. 15.09 DISPOSITION OF SHARE OF MISSING PERSONS. In the event the Committee is unable to make payment of any benefit payable under this Plan because of inability to find the person to whom payment is due and such inability continues for a period of two years, the benefit shall be forfeited; provided, however, if a claim is subsequently made for such benefit by the person entitled thereto, such benefit shall be reinstated. This Section 15.09 shall have no application to any payments that an insurer is required to make by the terms of its contract to anyone other than the Trustee. 15.10 GENDER AND CASE. Where used in this Agreement, words in the masculine shall be read and construed as in the feminine, and words in the singular shall be read and construed as though used in the plural in all cases where such constructions would so apply. 15.11 SECTION TITLE NOT PART OF AGREEMENT. The section and subsection designations and titles are included solely for convenience and shall, in no event, be construed to affect or modify any of the provisions of this Agreement or be construed as a part thereof. 15.12 CONSTRUCTION. It is intended that this Plan and the Trust Agreement which is a part thereof shall comply with the provisions of ERISA, constitute a qualified 109 Exhibit 10(F) Page 79 of 92 profit-sharing plan and trust with a cash or deferred arrangement under the provisions of Section 401(a) of the IRC and be operated in a manner so as not to discriminate in favor of Highly Compensated Employees. Accordingly, the provisions of this Plan and the Trust Agreement shall be construed and applied in a manner consistent with such intent. However, to the extent not superseded by ERISA, this plan and the Trust Agreement which is a part thereof, shall be construed and enforced in accordance with the laws of the State of Illinois. 15.13 AGREEMENT BINDING ON ALL PARTIES. This Agreement shall be binding upon the heirs, executors, administrators, successors, and assigns of any and all parties hereto, present and future. 110 Exhibit 10(F) Page 80 of 92 SECTION 16 - PROVISIONS APPLICABLE IF PLAN BECOMES TOP-HEAVY 16.01 APPLICABILITY. The provisions of this Section 16 shall be applicable during any Plan Year only if the Plan was a Top-Heavy Plan or was part of a Top-Heavy Group on the Determination Date, and in such case shall override and supersede all other provisions in this Plan to the contrary; provided, that these provisions shall not apply to a Plan which is not itself a Top-Heavy Plan and which was included in an Aggregation Group under the second sentence of Section 16.02(f); provided further, that, to the extent permitted by law, Section 16.06 shall not apply to any Employee who has received the minimum benefit for the Plan Year as required under the Top-Heavy rules from any defined benefit plan of the Company. 16.02 ADDITIONAL DEFINITIONS: (a) Key Employee. The term "Key Employee" shall refer to any Employee who, at any time during the Plan Year or any of the four preceding Plan years, is (i) an officer of the Company, excluding any Employee whose Compensation is less than 150 percent (150%) of the maximum dollar limitation in Section 14.06(a)(i), (ii) one of the ten Employees owning (or considered as owning within the meaning of Section 318 of the IRC but substituting 5% for 50% in IRC Section 318(a)(2)(C)] the largest interests in the Company; excluding any Employee whose Compensation is less than the maximum dollar limitation in Section 14.06(a)(i), (iii) a Five Percent Owner of the Company, or (iv) a One Percent Owner of the Company having an annual compensation from the Company of more than $150,000. The term shall also include beneficiaries of a Key Employee. For purposes of clause (i), no more than 50 Employees (or, if less, the greater of 3 or 10% of the Employees) shall be treated as officers, and the officers taken into account shall be the officers with the highest compensation. For purposes of clause (ii), if two Employees have the same interest in the Company, the Employee having greater annual Compensation from the Company shall be treated as having a larger interest. For this purposes of clauses (ii), (iii) and (iv), the aggregation rules of subsections (b), (c) and (m) of Section 414 of the IRC (pertaining to employees of a controlled group of corporations, of partnerships and proprietorships under common control, and of an affiliated service group) shall not apply. 111 Exhibit 10(F) Page 81 of 92 (b) Five Percent Owners. The term "Five Percent Owner" shall mean any person who owns [or is considered as owning within the meaning of Section 318 of the IRC but substituting 5% for 50% in Section 318(a)(2)(C)] more than five percent of the outstanding stock of the Company or stock possessing more than five percent of the total combined voting power of all stock of the Company. (c) One Percent Owners. The term "One Percent Owner" means any person who owns [or is considered as owning within the meaning of Section 318 of the IRC but substituting 5% for 50% in Section 318(a)(2)(C)] more than one percent of the outstanding stock of the Company or stock possessing more than one percent of the total combined voting power of all stock of the Company. (d) Non-Key Employee. The Term "Non-Key Employee" shall refer to any Participant who is not a Key Employee. (e) Top-Heavy Plan. A Plan is a "Top-Heavy" Plan if, as of the Determination Date, the aggregate of the accounts of Key Employees under the Plan exceed 60% of the aggregate of the accounts of all Employees under the Plan; or if it is required to be included in an Aggregation Group and such Aggregation Group is a Top-Heavy Group; provided, that the Plan shall not be a Top-Heavy Plan if the Plan is part of an Aggregation Group which is not a Top-Heavy Group. (f) Aggregation Group. The term "Aggregation Group" means (i) each plan of the Company in which a Key Employee is a Participant and (ii) each other plan of the Company which enables any plan described in (i) to meet the discrimination requirements of Section 401(a)(4) of the IRC or the minimum participation standards of Section 410 of the IRC. In addition, at the option of the Company, it may include any other plan of the Company if the Group would continue to meet the requirements of Sections 401(a)(4) and 410 of the IRC with such other plan being taken into account. (g) Top-Heavy Group. An Aggregation Group is a "Top-Heavy Group" if, as of the Determination Date, (i) the present value of the cumulative accrued benefits for Key Employees under all defined benefit plans included in such group, plus (ii) the aggregate of the accounts for Key Employees under all defined contribution plans included in such Group, exceeds (3) sixty percent (60%) of a similar sum determined for all Employees. (h) Employee. The term "Employee" shall include the Beneficiaries of such Employee. 112 Exhibit 10(F) Page 82 of 92 (i) Determination Date. The term "Determination Date" shall mean, with respect to any Plan Year, the last day of the preceding Plan Year. All required valuations shall be made as of the Determination Date. (j) Compensation. The term "Compensation" shall mean total compensation but shall not include annual compensation in excess of $200,000 (as adjusted for cost-of-living increases by the Secretary or his delegate at the same time and in the same manner as the dollar amount under Section 14.06). Effective January 1, 1989, this Section 17.02(j) shall no longer apply. 16.03 SPECIAL RULES. In determining whether the Plan is a Top-Heavy Plan or part of a Top-Heavy Group, the following rules shall apply. (a) Except to the extent provided in regulations issued by the Secretary of the Treasury, any rollover contribution (or similar transfer) initiated by an Employee from a plan not maintained by the Company and made after December 31, 1983, to a plan shall not be taken into account with respect to the transferee plan. (b) if any individual is a Non-Key Employee with respect to the Plan for any Plan Year, but such individual was a Key Employee with respect to the Plan for any prior Plan Year, any accrued benefit for such Employee (and the account of such Employee) shall not be taken into account for purposes of Sections 16.02(e) and (g). (c) To the extent provided in regulations issued by the Secretary of the Treasury, the Top-Heavy rules of this Section shall be applied on the basis of any year specified in such regulations in lieu of Plan Years. (d) In determining present values and account balances under Sections 16.02(e) and (g), all distributions made with respect to any Employee during the 5-year period ending on the Determination Date shall be added back and included therein. The preceding sentence shall also apply to distributions under a terminated plan which if it had not been terminated would have been required to be included in an Aggregation Group. (e) In determining the account of any Participant under 16.02(e) or (g), amounts attributable to deductible employee contributions shall not be considered. (f) If any individual has not performed services for any employer maintaining this Plan at any time during the 5 year period ending on the Determination Date, any accrued benefit for such individual and his accounts shall not be taken into account. 113 Exhibit 10(F) Page 83 of 92 16.04 PARTICIPANT'S TOP-HEAVY ACCOUNT. An additional separate account shall be established for each Participant to be known as the Participant's Top- Heavy Account to which shall be posted his share of Company's contributions, forfeitures and net earnings and valuation adjustments for each Plan Year to which Section 16 is applicable. His share of the Company's contributions, forfeitures and net earnings and valuation adjustments that have been posted to his Company Contribution Account pursuant to Section 4.02 for all prior Plan Years shall be transferred to his Top-Heavy Account. 16.05 VESTING WITH RESPECT TO PARTICIPANTS' TOP-HEAVY ACCOUNTS. In lieu of the vesting schedule set forth in Section 9.01(a), a Participant, provided he earns at least one Hour of Service after the Plan has become Top-Heavy, shall vest in his Top Heavy Account according to the following schedule: Completed Years of Service Non-Forfeitable % Less than 3 -0- 3 100% provided, that a Participant's nonforfeitable (vested) interest in his Top-Heavy Account, as regards funds transferred from his Company Contribution Account for prior years as set forth in Section 16.04, shall not be reduced from his nonforfeitable interest therein under Section 9.01. 16.06 MINIMUM CONTRIBUTION FOR NON-KEY EMPLOYEE. The Company's contribution and forfeitures allocated to the Top-Heavy Account for each Plan Year for each Non-Key Employee shall not be less than three percent (3%) of his compensation as defined at IRC Section 416(c)(2)(A), except that said percentage shall not be more than the highest percentage at which Company contributions plus forfeitures are made for any Key Employee. The percentage for each Key Employee shall be determined by dividing the amount of his share of the Company's contribution plus forfeitures by the amount of so much of his Compensation as does not exceed $200,000. For this purpose, all defined contribution plans required to be included in an Aggregation Group shall be treated as one plan. The foregoing exception to the three percent (3%) provision shall not apply if the Plan is required to be included in an Aggregation Group wherein the Plan enables a defined benefit plan required to be included in such Group to meet the requirements of Sections 401(a)(4) and 410 of the IRC pertaining to discrimination and minimum participation. The minimum contribution rules of this Section 16.06 may be satisfied by taking into account Company contributions attributable to a salary reduction or similar arrangement. The allocation provisions contained in Section 4 of this Plan shall be modified as may be necessary to comply with the provisions of this Section 16.06 and the Company may, but shall not be required to, increase Company contributions so no Participant will incur a reduction of benefits by reason of the operation of this Section 16.06. 114 Exhibit 10(F) Page 84 of 92 16.07 MAXIMUM ANNUAL ADDITION. The limitations of Section 14.06 shall be applied by substituting 1.0 for 1.25 where it appears in Section 14.06(d) in the denominators of the defined benefit plan fraction and the defined contribution plan fraction. The preceding sentence shall not apply if (a) The minimum contribution requirements of Section 16.06 would be met if 4% were substituted for 3%, and (b) The Plan would not be a Top-Heavy Plan or part of a Top-Heavy Group if 90% were substituted for 60% in Sections 16.02(e) and (g). The application of the first sentence of this Section 16-07 shall be suspended with respect to any Participant so long as there are no (i) Company contributions, forfeitures or voluntary nondeductible contributions allocated to such Participant or (ii) accruals for such Participant under the defined benefit plan. If the first sentence of this Section 16.07 is applicable, Section 14.06(e) shall be applied by substituting $41,500 for $51,875. 16.08 SIMPLIFIED EMPLOYEE PENSIONS. For purposes of Section 16, a Simplified Employee Pension shall be treated as a defined contribution plan. At the Company's election, the aggregate Company contributions to a Simplified Employee Pension may be taken into account in lieu of the aggregate of the accounts of the Employees for the purpose of determining whether the Plan is a Top-Heavy Plan or is part of a Top-Heavy Group pursuant to Section 16.02(e) and (g). 16.09 CONTRIBUTIONS OR BENEFITS NOT TAKEN INTO ACCOUNT. The Plan must meet the requirements of Section 16.05 and Section 16.06 without taking into account (i) contributions or benefits under Chapter 2 of the IRC (relating to tax on self-employment income); (ii) Chapter 21 of the IRC (relating to Federal Insurance Contributions Act; (iii) Title II of the Social Security Act; or (iv) any other federal or state law. 115 Exhibit 10(f) Page 85 of 92 SCHEDULE A SPECIAL PROVISIONS RELATING TO SERVICE This Schedule A contains special rules regarding the granting of past service credit for eligibility (Section 2), vesting (Section 9) and allocation of employer contributions (Section 4) with respect to certain Employees of the Company acquired through corporate acquisition.
EMPLOYEE CATEGORY PLAN PROVISIONS CREDITED SERVICE ----------------- --------------- ---------------- (1) Employed by Frank B. Years of service for From employment Hall & Co. Inc., or any eligibility commencement date with of its subsidiaries or Hall, with entry at plan affiliates ("Hall") on merger. November 1, 1992, and employed by the Years of service for From employment Company on or after vesting commencement date above. November 2, 1992. Allocation of Compensation determined Company for periods of Plan contributions participation only. --------------------------- (2) Employed by K&K Years of service for From employment Insurance Group, Inc., eligibility commencement date with K&K Specialties, Inc., K&K, with entry at plan National Sports merger. Underwriters Inc., or American Insurance Years of service for From employment Brokers, Inc. ("K&K") vesting commencement date above. on July 31, 1993. Allocation of Compensation determined Company for periods of Plan contributions participation only.
116 Exhibit 10(f) Page 86 of 92 (3) Employed by Booke Years of service for From employment and Company or an eligibility commencement date with affiliate ("Booke") on Booke, with entry at plan June 30, 1993, and merger. employed by the Company on July 1, Years of service for From employment 1993. vesting commencement date above. Allocation of Compensation determined Company for periods of Plan contributions participation only. -------------------------- (4) Employed by Albert G. Years of service for From employment Ruben & Co., Inc., eligibility commencement date with Albert G. Ruben & Co. Ruben, with entry (New York), Inc., or September 1, 1993. Bachrach Insurance Services, Inc. Years of service for From employment ("Ruben"), on vesting commencement date above August 31, 1993, and and in accordance with employed by the Section 9.02. Company on September 1, 1993. Allocation of Compensation determined Company for periods of Plan contributions participation only. -------------------------- (5) Employed by Insurance Years of service for From employment Broker Service, Inc. on eligibility commencement date with May 4, 1993, and Insurance Broker Service, employed by the Inc., with entry August 1, Company on May 5, 1993. 1993. Years of service for From employment vesting commencement date above and in accordance with Section 9.02. Allocation of Compensation determined Company for periods of Plan contributions participation only.
117 Exhibit 10(f) Page 87 of 92 (6) Employed by National Years of service for From employment commencement Benefit Corporation on eligibility date with National Benefit May 19, 1993, and employed Corporation, with entry by the Company on May 20, date May 20, 1993. 1993. Years of service for From employment commencement vesting date above and in accordance with Section 9.02. Allocation of Company Compensation determined contributions for periods of Plan participation only. ------------------------------- (7) Employed by Bryson Years of service for From employment Associates, Inc. on eligibility commencement date with May 16, 1993, and Bryson Associates, Inc., with employed by the entry June 5, 1993. Company on May 17, 1993. Years of service for From employment vesting commencement date above and in accordance with Section 9.02. Allocation of Compensation determined Company for periods of Plan contributions participation only.
118 Exhibit 10(f) Page 88 of 92 SCHEDULE B SPECIAL PROVISIONS RELATED TO FORMER PARTICIPANTS OF THE SAVINGS AND INVESTMENT PLAN FOR THE EMPLOYEES OF FRANK B. HALL & CO. INC. A. Additional Provisions Effective January 1, 1993. As set forth in paragraph (6) of Section 4.08(i) of this Plan, the following provisions of the Savings and Investment Plan for the Employees of Frank B. Hall & Co. Inc. ("Hall Plan") shall survive the merger of the Hall Plan into this Plan and continue to apply, effective January 1, 1993, in addition to the rules of this Plan, to benefits accrued by Hall Plan participants under the terms of the Hall Plan and under the terms of this Plan. Specifically, the following provisions of the Hall Plan -- in regard to benefit entitlement, payment scheduling, timing of payments, commencement of benefits and election rights -- shall be retained with respect to all accrued benefits of former participants in the Hall Plan and earnings and losses thereon: (a) Section 8.2 (regarding distributions upon the participant's death, including provision of qualified pre-retirement survivor's annuity). (b) Section 8.3 (regarding options for annuity distribution upon termination of employment on or after age 55). (c) Section 8.4 (regarding lump-sum distributions and distributions of qualified joint and survivor annuities). Distributions requested in Hall stock shall be made in stock of Reliance Group Holdings, Inc. ("RGH Stock") and shall not exceed the amount of the Participant's account invested in RGH Stock. (d) Sections 9.1.3, 9.1.4, and 9.1.5 (regarding in-service withdrawals without a showing of hardship). Section 9.1.5 shall survive only with respect to rollover contributions. (e) Section 9.6.5 (regarding reduction of account balance in the event of loan default). In addition, such other provisions of the Hall Plan shall survive as may be required under Section 411(d)(6) of the Code. The provisions listed above are attached to this Schedule B as exhibits. B. Provisions of the Aon Savings Plan Applicable to the Hall Plan and Effective Retroactively. The following provisions of this Plan are hereby incorporated into the Hall Plan effective as of the dates indicated: 119 Exhibit 10(f) Page 89 of 92 (a) Section 1.12 (regarding the term "Highly Compensated Employee"). Effective January 1, 1989. (b) Section 3.09 (regarding the average deferral percentage test ("ADP Test") and the average contributions percentage test ("ACP Test")). The terms "Basic Contributions" and "Supplemental Before-Tax Contributions" shall be substituted for the term "Pay Deferral Amounts" and the terms "Employer Contributions" and "Supplemental After-Tax Contributions shall be substituted for the term "Company Matching Contributions." The ADP Test shall be effective for plan years beginning January 1, 1986; the ACP Test shall be effective for plan years beginning January 1, 1989. In addition, Section 3.07(B)(5) (regarding distributions of excess contributions) shall apply to Basic Contributions and Supplemental Before-Tax Contributions, and Section 3.08(B)(5) (regarding distributions of excess aggregate contributions) shall apply to Employer Contributions and Supplemental After-Tax Contributions. (c) Section 8.07(a) (regarding needs that are deemed immediate and heavy financial needs). Funeral expenses are not necessarily a deemed immediate and heavy financial need. (d) Section 8.10(i) (regarding required beginning date for plan distributions). Effective January 1, 1989. (e) Section 8.10(k) (regarding minimum distribution incidental benefit requirements). Effective January 1, 1989. (f) Section 9.01 (regarding computation of a Participant's nonforfeitable interest). Effective January 1, 1989, the table in Section 9.01 of this Plan shall be substituted for the table in Section 7.3.3(a) of the Hall Plan. (g) Section 14.06(b) (regarding the definition of annual additions). Effective January 1, 1987. 120 Exhibit 10(f) Page 90 of 92 SCHEDULE C SPECIAL PROVISIONS RELATED TO FORMER PARTICIPANTS OF THE K&K INSURANCE GROUP, INC. 401(K) SALARY REDUCTION PLAN Additional Provisions Effective August 1, 1993. As set forth in paragraph (6) of Section 4.08(j) of this Plan, the following provisions of the K&K Insurance Group, Inc., 401(k) Salary Reduction Plan ("K&K Plan") shall survive the merger of the K&K Plan into this Plan and continue to apply, effective August 1, 1993, in addition to the rules of this Plan, to benefits accrued under the K&K Plan as of July 31, 1993. Specifically, the following provisions of the K&K Plan -- in regard to benefit entitlement, payment scheduling, timing of payments, commencement of benefits and election rights -- shall survive and be retained with respect to benefits accrued under the K&K Plan as of July 31, 1993, and earnings and losses thereon: (a) Sections 3.04 and 4.13 (regarding distribution of voluntary contributions and distributions of elective deferrals and qualified nonelective contributions upon attainment of age 59 1/2 and before separation from service). (b) Section 8.08 (regarding availability of optional forms of benefits). (c) Section 9.02 (regarding availability of qualified joint and survivor annuity). (d) Section 9.03 (regarding availability of qualified pre-retirement survivor annuity). (e) Section 11.07 (regarding restoration of account balance upon repayment). (f) Section 11.08 (regarding disposition of account balance upon termination of the Plan). In addition, such other provisions of the K&K Plan shall survive as may be required under Section 411(d)(6) of the Code. The provisions listed above are attached to this Schedule C as exhibits. 121 Exhibit 10(f) Page 91 of 92 SCHEDULE D SPECIAL PROVISIONS RELATED TO FORMER PARTICIPANTS OF THE SALARY DEFERRAL THRIFT PLAN FOR THE EMPLOYEES OF BOOKE & COMPANY Additional Provisions Effective July 1, 1993. As set forth in paragraph (6) of Section 4.08(k) of this Plan, the following provisions of the Salary Deferral Thrift Plan for the Employees of Booke & Company ("Booke Plan") shall survive the merger of the Booke Plan into this Plan and apply, effective July 1, 1993, in addition to the rules of this Plan, to benefits accrued under the Booke Plan as of June 30, 1993. Specifically, the following provisions of the Booke Plan -- in regard to benefit entitlement, payment scheduling, timing of payments, commencement of benefits and election rights -- shall survive and be retained with respect to benefits accrued under the Booke Plan as of June 30, 1993, and earnings and losses thereon: (a) Section 5.4 (regarding optional methods of settlement). (b) Section 8.1 (regarding withdrawal of employee voluntary contributions and rollover contributions). (c) Section 8.2 (regarding withdrawal of employer contributions). (d) Section 8.3 (regarding withdrawal of employee deferrals upon attainment of age 59 1/2). (e) Section 8.5(b)(10) (regarding reduction of account balance in the event of loan default). In addition, such other provisions of the Booke Plan shall survive as may be required under Section 411(d)(6) of the Code. The provisions listed above are attached to this Schedule D as exhibits. 122 Exhibit 10(f) Page 92 of 92 IN WITNESS WHEREOF, Aon Corporation and the Trustees have signed this amendment and restatement of the Aon Savings Plan, effective as of January 1, 1994. Aon Corporation By: /Daniel T. Cox/ 12/16/94 ------------------------ -------- Daniel T. Cox Date Executive Vice President /Mark B. Burka/ 12/19/94 ------------------------ -------- Mark B. Burka Date Trustee /Michael A. Conway/ 12/19/94 ------------------------ -------- Michael A. Conway Date Trustee /Lawrence R. Miller/ 12/19/94 ------------------------ -------- Lawrence R. Miller Date Trustee /J. Garnett Nelson/ 12/22/94 ------------------------ -------- J. Garnett Nelson Date Trustee 123 EX-10.G 3 94 EMPLOYEE STOCK PLAN Exhibit 10(g) Page 1 of 68 --------------------------- | | | 1994 RESTATEMENT OF | | Aon EMPLOYEE STOCK | | OWNERSHIP PLAN | | | --------------------------- 124 Exhibit 10(g) Page 2 of 68 1994 Restatement of Aon Employee Stock Ownership Plan (Previously known as Combined International Corporation Stock Ownership Plan) TABLE OF CONTENTS SECTION 1 - DEFINITION OF TERMS..................................... 3 1.01 Acquisition Loan........................................... 3 1.02 Affiliate.................................................. 3 1.03 Anniversary Date........................................... 3 1.04 Beneficiaries.............................................. 3 1.05 Board...................................................... 3 1.06 Committee.................................................. 3 1.07 Company.................................................... 3 1.08 Compensation............................................... 3 1.09 Effective Date............................................. 4 1.10 Employee................................................... 4 1.11 Employer Securities........................................ 5 1.12 ESOP Fund.................................................. 5 1.13 ERISA...................................................... 5 1.14 Financed Shares............................................ 5 1.15 General Fund............................................... 5 1.16 Highly Compensated Employee................................ 5 1.17 The term "Leased Employee"................................. 7 1.18 Hours of Service........................................... 7 1.19 IRC........................................................ 8 1.20 Normal Retirement Date..................................... 8 1.21 1-Year Break in Service.................................... 8 1.22 Participant................................................ 8 1.23 Plan....................................................... 8 1.24 Plan Year.................................................. 8 1.25 Service.................................................... 8 1.26 Stock Fund................................................. 9 1.27 Subsidiary................................................. 9 1.28 Trustee.................................................... 9 1.29 United States.............................................. 10 1.30 Valuation Date............................................. 10 1.31 Value...................................................... 10 SECTION 2 - EMPLOYEES ENTITLED TO PARTICIPATE....................... 11 2.01 Conditions of Eligibility.................................. 11 2.02 Termination of Employment.................................. 11 2.03 Leave of Absence........................................... 12 2.04 Transfer to an Affiliate................................... 12 2.05 Transfer to a Foreign Country.............................. 12 2.06 Employment in Bargaining Unit.............................. 12 2.07 Ineligible Persons......................................... 12 SECTION 3 - CONTRIBUTIONS........................................... 14 125 Exhibit 10(g) Page 3 of 68 TABLE OF CONTENTS (continued) 3.01 Contributions by Companies................................. 14 3.02 Date of Contribution....................................... 15 3.03 Form of Contribution....................................... 15 3.04 Combined Life Insurance Company of New York................ 15 SECTION 4 - ALLOCATION OF TRUST FUNDS............................... 16 4.01 ESOP Account............................................... 16 4.02 Stock Sub-Account.......................................... 16 4.03 General Sub-Account........................................ 17 4.04 Records and Accounting..................................... 17 4.05 Designation of Beneficiary................................. 17 4.06 Allocations of Dividends on Employer Securities............ 18 4.07 Allocation of Financed Shares.............................. 20 4.08 Allocation of Purchased Employer Securities Other Than Financed Shares....................................... 20 4.09 Determination of Compensation.............................. 20 SECTION 5 - INVESTMENTS............................................. 21 5.01 Primary Purpose............................................ 21 5.02 Investment of the Stock Fund............................... 21 5.03 Investment of the General Fund............................. 21 5.04 Investments Not Allocated to Separate Accounts............. 21 5.05 Purchase or Sale of Contributed Employer Securities........ 22 5.06 Acquisition Loans.......................................... 22 5.07 Diversification of Investments by Qualified Participants............................................... 23 SECTION 6 - PROVISIONS RELATING TO TRUSTEE.......................... 25 6.01 Appointment of Trustee and Successors...................... 25 6.02 Fees and Expenses of Trustee............................... 25 6.03 Payment of Costs, Fees, and Expenses....................... 25 6.04 Uncertain Distribution..................................... 25 6.05 Liability.................................................. 25 6.06 Legal Action............................................... 26 6.07 Manner of Action........................................... 26 6.08 Allocation of Duties....................................... 26 6.09 Limitation on Liability.................................... 26 6.10 Indemnity.................................................. 26 6.11 Disbursements.............................................. 26 6.12 Reports.................................................... 27 6.13 Additional Powers of Trustee............................... 27 6.14 Investment Manager......................................... 28 126 Exhibit 10(g) Page 4 of 68 TABLE OF CONTENTS (continued) SECTION 7 - ADMINISTRATION OF THE PLAN.............................. 29 7.01 Committee.................................................. 29 7.02 Duties of Committee........................................ 29 7.03 Chairman and Secretary..................................... 29 7.04 Meetings and Quorum........................................ 29 7.05 Allocation of Duties....................................... 29 7.06 Aon........................................................ 30 7.07 Rules and Interpretation................................... 30 7.08 Limitations on Liability................................... 30 7.09 Indemnity.................................................. 30 7.10 Identity................................................... 31 7.11 Voting of Employer Securities.............................. 31 7.12 Rights on Tender or Exchange Offer......................... 32 SECTION 8 - DISPOSITION OF THE SEPARATE TRUST ACCOUNTS.............. 33 8.01 Participant Still Employed by Company After Retirement Date............................................ 33 8.02 Disposition at or After Retirement Date or in Case of Physical or Mental Disability................... 33 8.03 Disposition Upon the Death of a Participant................ 33 8.04 Disposition Upon Termination of Employment Before Reaching Retirement Date............................ 33 8.05 Termination of the Trust and Disposition Upon Such Termination........................................... 34 8.06 Payment to Minors, etc..................................... 35 8.07 Net Earnings and Valuation Adjustment...................... 35 8.08 Method of Valuing Assets................................... 36 8.09 General Provisions Governing Distributions................. 36 8.10 Eligible Rollover Distributions............................ 38 SECTION 9 - PARTICIPANT'S NONFORFEITABLE INTEREST................... 39 9.01 General Rule............................................... 39 9.02 Special Rules.............................................. 39 9.03 Restoration of Forfeitures................................. 40 SECTION 10 - SPENDTHRIFT TRUST...................................... 41 10.01 General.................................................... 41 10.02 Qualified Domestic Relations Order......................... 41 SECTION 11 - COMPANY TO HAVE NO INTEREST IN TRUST................... 43 SECTION 12 - AMENDMENT AND SUSPENSION OF CONTRIBUTIONS.............. 44 12.01 Amendment of the Agreement................................. 44 12.02 Suspension................................................. 44 127 Exhibit 10(g) Page 5 of 68 TABLE OF CONTENTS (continued) SECTION 13 - ADOPTION OF PLAN BY AFFILIATE.......................... 45 13.01 Adoption of Plan........................................... 45 13.02 Intention of Parties....................................... 45 13.03 Termination of Status of Subsidiary........................ 45 SECTION 14 - ERISA PROVISIONS....................................... 46 14.01 Service for Predecessor.................................... 46 14.02 Controlled Group........................................... 46 14.03 Merger..................................................... 46 14.04 Claims Procedure........................................... 46 14.05 Investment in Deposits with Corporate Fiduciary............ 47 14.06 Maximum Annual Addition.................................... 47 SECTION 15 - MISCELLANEOUS.......................................... 53 15.01 Reliance on Information Furnished by the Companies......... 53 15.02 Inability to Perform....................................... 53 15.03 Execution of Documents..................................... 53 15.04 Notice of Required Action.................................. 53 15.05 Reliance Upon Communication................................ 53 15.06 Discharge Upon Payment..................................... 54 15.07 Disposition of Share of Missing Persons.................... 54 15.08 Gender and Case............................................ 54 15.09 Section Title Not Part of Agreement........................ 54 15.10 Construction............................................... 54 15.11 Agreement Binding on All Parties........................... 54 SECTION 16 - PROVISIONS APPLICABLE IF PLAN BECOMES TOP-HEAVY........ 55 16.02 Additional Definitions:.................................... 55 16.03 Special Rules.............................................. 57 16.04 Participant's Top-Heavy Account............................ 57 16.05 Vesting with Respect to Participants' Top-Heavy Accounts... 58 16.06 Minimum Contribution for Non-Key Employees................. 58 16.07 Maximum Annual Addition.................................... 58 16.08 Simplified Employee Pensions............................... 59 16.09 Contributions or Benefits Not Taken Into Account........... 59 SCHEDULE A - SPECIAL PROVISIONS RELATING TO SERVICE................. 60 128 Exhibit 10(g) Page 6 of 68 1994 RESTATEMENT OF Aon EMPLOYEE STOCK OWNERSHIP PLAN WHEREAS, effective January 1, 1983, Combined International Corporation, a corporation organized and existing under the laws of the State of Delaware, adopted the Combined International Corporation Stock Ownership Plan in order to provide its employees with the opportunity to acquire common stock ownership in Combined International Corporation under a stock bonus plan which constituted a tax credit stock ownership plan designed to invest primarily in Employer Securities and otherwise meeting the requirements of Sections 44G and 409A of the Internal Revenue Code of 1954; and WHEREAS, the Company previously amended said Plan three times on December 13, 1984; again on December 13, 1984; and on November 15, 1985; WHEREAS, the Company has changed its name from Combined International Corporation to Aon Corporation (sometimes referred to herein as "Aon"); WHEREAS, the Company previously amended and restated the Plan ("Fourth Amendment to and 1989 Restatement of Aon Employee Stock Ownership Plan") for the purpose of complying with the Tax Reform Act of 1986, to change the Plan to a qualified employees' stock bonus plan qualified under Section 401(a) of the IRC and an employee stock ownership plan under Section 4975(e) of the IRC and Section 407(d) of ERISA for the exclusive benefit of such employees, and to change the name of this Plan and Trust Agreement to the Aon Employee Stock Ownership Plan, pursuant to the Company's change of name to Aon Corporation from Combined International Corporation and subsequently amended such 1989 Restatement twice effective January 1, 1989, and twice January 1, 1993; WHEREAS, Aon now wishes to amend and again restate the Plan for the purpose of complying with the Omnibus Budget Reconciliation Act of 1993 and to make certain other desirable changes therein; 129 Exhibit 10(g) Page 7 of 68 NOW, THEREFORE, pursuant to a resolution adopted by the Board of Aon Corporation said Plan shall be and hereby is further amended and restated effective as of January 1, 1994, except as otherwise indicated herein, as follows: 130 Exhibit 10(g) Page 8 of 68 SECTION 1 - DEFINITION OF TERMS Unless the context shall otherwise clearly indicate, the following terms shall be construed as hereinafter defined: 1.01 ACQUISITION LOAN shall refer to a loan (or other extension of credit) used by the Plan to finance the acquisition of Employer Securities, which loan may constitute an extension of credit to the Plan from a party in interest (as defined in ERISA), or may be guaranteed by a party in interest. See Section 5.06. 1.02 AFFILIATE shall refer to a Subsidiary of Aon that has not adopted the Plan herein set forth. 1.03 ANNIVERSARY DATE shall refer to the last day of each Plan Year during which this Agreement shall be in force and effect. 1.04 BENEFICIARIES shall refer to persons designated by the Participant to receive his share of any property of the Trust in case of the Participant's death. 1.05 BOARD shall refer to the Board of Directors of Aon or any committee of the Board of Directors delegated authority to act for the whole Board in respect of matters relating to the Plan. 1.06 COMMITTEE shall refer to the Committee appointed by the Board pursuant to Section 7.01. The Committee is designated as the administrator, plan administrator, and named fiduciary with respect to the administration of the Plan (but not with respect to the control, management and investment of the assets of the trust) for the purposes of ERISA. 1.07 COMPANY as used herein shall refer to Aon Corporation (hereinafter referred to as "Aon") when applying the provisions of this Plan as its stock bonus plan for its Employees. It shall refer to each "Subsidiary" when applying the provisions of this Trust as the stock bonus plan for the Employees of such Subsidiary. The term "Companies" as used herein shall refer collectively to Aon and all Subsidiaries and shall be applied as though all of such Companies constituted a single employer. 1.08 COMPENSATION shall refer to the following types of earnings paid to an Employee for his service on behalf of the Company subsequent to the date he becomes a Participant, determined before excluding any reduction described in Sections 3.03 and 3.04 or for cafeteria plans under Section 125 of the IRC, but excluding any such amounts paid to him in respect to employment during which he is not permanently employed within the United States or its possessions as set forth in Section 2.01(b): 131 Exhibit 10(g) Page 9 of 68 (a) salary and fixed-based compensation including compensation for overtime; (b) bonuses paid pursuant to periodic individual performance appraisals and formal contractual bonus programs, but excluding other bonus and miscellaneous income; and (c) net commission, renewal and override compensation (but excluding deferred commission payments). In addition to other applicable limitations set forth in the Plan, and notwithstanding any other provision of the Plan to the contrary, for Plan Years beginning on or after January 1, 1994, the annual Compensation of each Employee taken into account under the Plan shall not exceed the OBRA '93 annual compensation limit. The OBRA '93 annual compensation limit is $150,000, as adjusted by the commissioner of the Internal Revenue Service for increases in the cost of living in accordance with Section 401(a)(17)(B) of the IRC. The cost-of-living adjustment in effect for a calendar year applies to any period, not exceeding 12 months, over which compensation is determined (determination period) beginning in such calendar year. If a determination period consists of fewer than 12 months, the OBRA '93 annual compensation limit will be multiplied by a fraction, the numerator of which is the number of months in the determination period, and the denominator of which is 12. For plan years beginning on or after January 1, 1994, any reference in this Plan to the limitation under section 401(a)(17) of the IRC shall mean the OBRA '93 annual compensation limit set forth in this provision. If Compensation for any prior determination period is taken into account in determining an employee's benefits accruing in the current Plan Year, the Compensation for that prior determination period is subject to the OBRA '93 annual compensation limit in effect for that prior determination period. For this purpose, for determination periods beginning before the first day of the first plan year beginning on or after January 1, 1994, the OBRA '93 annual compensation limit is $150,000. 1.09 EFFECTIVE DATE of this Plan as restated shall be January 1, 1994. 1.10 EMPLOYEE shall refer to all employees of the Companies, except those who are (a) included in a unit of employees covered by a collective bargaining agreement between employee representatives and one or more employers, if retirement benefits were the subject of good faith bargaining between such employee representatives and such employer or employers; or 132 Exhibit 10(g) Page 10 of 68 (b) Combination, ordinary and regional representatives and managers as those terms were defined under the Retirement Plan for Employers of the Life Insurance Company of Virginia and Designated Subsidiaries and Designated Affiliates. 1.11 EMPLOYER SECURITIES shall refer to common stock issued by Aon Corporation which is readily tradeable on the New York Stock Exchange. 1.12 ESOP FUND shall refer to all the assets held under this Plan in both the Stock Fund and the General Fund. 1.13 ERISA refers to the Employee Retirement Income Security Act of 1974, as from time to time amended. 1.14 FINANCED SHARES shall mean shares of Employer Securities acquired by the Trust with the proceeds of an Acquisition Loan. 1.15 GENERAL FUND shall refer to the separate fund maintained under this Plan consisting of assets other than those Employer Securities which are part of the Stock Fund, including cash dividends, stock rights and stock warrants received with regard to all Employer Securities in the ESOP Fund. Where the content so indicates, the term shall also refer to the assets held in the General Fund. 1.16 HIGHLY COMPENSATED EMPLOYEE shall include an employee who received compensation in excess of $75,000, received compensation in excess of $50,000 and was in the top paid group, or was an officer and received compensation greater than $45,000 (all amounts as adjusted for increases in the cost of living per Section 14.06), either (i) in the current year while a member of the 100 employees paid the greatest compensation or (ii) in the preceding year. The term "compensation" means compensation under Section 14.06, and shall include reductions for pay deferral amounts under Section 401(k) of the IRC or for cafeteria plans under Section 125 of the IRC. The following rules shall apply. (a) FIVE-PERCENT OWNER. Such term shall also include an employee who was a five-percent owner (as defined at Section 16.02(b)) at any time during either the preceding year or the current year. (b) TOP-PAID GROUP. The "top-paid group" is the group consisting of the top 20 percent of employees ranked on the basis of compensation paid during the year. For purposes of determining the number of employees in the top-paid group (but not for purposes of identifying the particular employees therein), or the number of officers taken into account under Subsection (c), below, there shall be excluded those employees who have not completed six months of service; employees who normally work either less than 17 1/2 hours per week or not more than six months during any year; employees who have not attained age 21; and except to the extent provided in 133 Exhibit 10(g) Page 11 of 68 regulations, employees included in a unit of employees covered by a collective bargaining agreement. (c) OFFICERS. The highest paid officer shall always be treated as a Highly Compensated Employee; otherwise the number of officers so treated shall not exceed the lesser of (i) 50 employees or (ii) the greater of three employees or 10 percent of the employees. (d) FAMILY MEMBERS. Any individual who is a member of the family (i.e., the spouse, and lineal ascendants or descendants and their spouses) of a Highly Compensated Employee who is either a five-percent owner or one of the ten most highly compensated employees shall not be considered a separate employee and his (or her) compensation (and any applicable contribution or benefit on behalf of such individual) shall be treated as if it were paid to (or on behalf of) such Highly Compensated Employee. This rule shall apply in determining the compensation of (or any contributions or benefits on behalf of) any employee for purposes of any Section of the IRC with respect to which a Highly Compensated Employee is defined by reference to IRC Section 414(q) (the provisions of which are set forth in this Section), except as provided in regulations and except in determining the portion of the compensation of a Participant which is under the integration level for purposes of IRC Section 401 (1). (e) FORMER EMPLOYEES. A former employee shall be treated as a Highly Compensated Employee if he was a Highly Compensated Employee either (i) when he separated from service or (ii) at any time after attaining age 55. (f) NONRESIDENT ALIENS. For purposes of this Section, employees who are nonresident aliens and who receive no earned income (within the meaning of Section 911(d)(2) of the IRC) from the Company which constitutes income from sources within the United States shall not be treated as employees. (g) SIMPLIFIED METHOD FOR DETERMINING HIGHLY COMPENSATED EMPLOYEES. If an election by the Company under this Subsection applies to any year, in determining whether an employee is a Highly Compensated Employee for such year the first sentence of this Section shall be applied by substituting "$50,000" for "$75,000" and the $50,000 test for the top-paid group shall not apply. Such election shall not apply to any year unless at all times during such year, the Company maintained significant business activities (and employed employees) in at least 2 significantly separate geographic areas, and the Company satisfies such other conditions as the Secretary of the Treasury may prescribe. (h) COORDINATION WITH OTHER PROVISIONS. Section 14.02 shall be applied before the application of this Section 1.16. 134 Exhibit 10(g) Page 12 of 68 1.17 THE TERM "LEASED EMPLOYEE" shall refer to an individual, other than an employee of the Employer or an affiliated employer (the "recipient employer"), who, pursuant to an agreement between the recipient employer and any other person (the "leasing organization") has performed services for the recipient employer (or the recipient employer and related persons determined in accordance with Section 414(n) of the IRC) on a substantially full-time basis for a period of at least one year, and such services are of a type historically performed by employment in the business field of the recipient employer. Contributions or benefits provided a Leased Employee by the leasing organization which are attributable to services performed for the recipient employer shall be treated as provided by the recipient employer. A leased employee shall not be considered an employee of the recipient employer if: (a) such individual is covered by a money purchase pension plan providing: (i) a nonintegrated employer contribution rate of at least ten percent of compensation, but including amounts contributed pursuant to a salary reduction agreement which are excludible from the employee's gross income under Section 125, 402(e)(3), 402(h), or 403(b) of the IRC, (ii) immediate participation, and (iii) full and immediate vesting; and (b) Leased Employees do not constitute more than 20% of the recipient employer's non-highly compensated work force, as defined in Section 414(n)(5)(C)(ii) of the IRC. 1.18 HOURS OF SERVICE shall refer to the hours for which an Employee is directly or indirectly paid or entitled to payment, for the performance of duties or for a period of time during which no duties are performed (irrespective of whether the employment relationship has terminated) during the applicable computation period and such hours shall include any hours for which back pay, irrespective of mitigation of damages, has either been awarded or agreed to; provided, however, no more than 501 Hours of Service shall be credited on account of any single continuous period during which an Employee performs no duties (whether or not such period occurs in a single computation period). An Employee who enters military service and again becomes actively employed upon separation from such service shall be credited with Hours of Service in respect to his period of military service only to the extent and for the purposes required by federal law governing veterans' reemployment rights. Hours shall not be credited for payments made or due under a plan maintained solely for the purpose of complying with applicable workmen's compensation, unemployment compensation, or disability insurance laws, or for a payment which solely reimburses an Employee for medical or medically related expenses incurred by the Employee. In those instances where payroll or other Company records do not reflect the actual 135 Exhibit 10(g) Page 13 of 68 number of hours worked by an Employee, such Employee shall be credited with 45 Hours of Service for each calendar week that he would be required to be credited with at least one Hour of Service under the preceding portion of this Section. This Section shall be applied, in respect to payments for reasons other than the performance of duties and in respect to crediting of Hours of Service to a particular computation period, in accordance with the rules set forth in Labor Department Regulations Section 2530.200b-2(b) and (c), which are incorporated herein by reference. 1.19 IRC shall refer to the Internal Revenue Code of 1986 as from time to time amended. 1.20 NORMAL RETIREMENT DATE shall refer to a Participant's sixty-fifth (65th) birthday. 1.21 1-YEAR BREAK IN SERVICE shall refer to a 12-month consecutive period, commencing with the termination of a Participant's employment as an Employee of the Companies or an Affiliate, during which he has not completed any Hours of Service as an Employee of the Companies or an Affiliate. For purposes of this Section only, Service shall include up to one year of Maternity or Paternity Leave; provided, however, that the Trustees may require the Participant to furnish such timely information as may reasonably be required so as to establish that the absence from work is for Maternity or Paternity Leave and to establish the number of days for which there was such an absence. "Maternity or Paternity Leave" shall mean an absence from work by reason of the pregnancy of the Participant, by reason of the birth of a child of the Participant, by reason of placement of a child with the Participant in connection with its adoption by him or her, or for purposed of caring for such child for a period beginning immediately following such birth or placement. 1.22 PARTICIPANT shall refer to an Employee eligible under the terms hereof to participate herein whose employment by the Companies has not terminated. Where the context so requires, an individual for whose benefit an account is being maintained under this Plan shall also be deemed to be a Participant. 1.23 PLAN shall refer to the Aon Employee Stock Ownership Plan set forth in this instrument, as the same may be amended from time to time. 1.24 PLAN YEAR shall refer to the annual accounting period used by the Trust ending on the last day of December of each year. 1.25 SERVICE shall refer to the total period of time that an individual has served as an Employee of the Companies (beginning on the date an Employee first performs an Hour of Service and ending on the date on which an Employee quits, retires, is discharged or dies), with the following exceptions and modifications: 136 Exhibit 10(g) Page 14 of 68 (a) In respect to an individual who is an Employee on January 1, 1983, or who becomes an Employee after January 1, 1983, or who becomes an Employee after January 1, 1983, any period of time immediately preceding the date he became an Employee that he was associated with the Companies as an independent accident and health insurance or life insurance representative shall be counted for the purpose of determining his eligibility to participate hereunder pursuant to Section 2.01. (b) For the purpose of determining the eligibility of an individual to participate hereunder pursuant to Section 2.01, and his vested interest pursuant to Section 9.02, service as an employee of an Affiliate, or service as an employee in a bargaining unit for which the individual will not be deemed to be an Employee under Section 1.10, shall be deemed to be Service as an Employee of the Companies. (c) If an Employee's employment with the Companies is terminated but he is reemployed before he has incurred five 1-Year Breaks in Service, the period commencing with the date his employment terminated and ending with his reemployment date shall be counted as uninterrupted service and employment as an Employee of the Companies for the purpose of determining his eligibility to participate hereunder pursuant to Section 2.01; provided, however, that not more than 12 months of such period shall count as uninterrupted Service for the purpose of determining his vested interest pursuant to Section 9.02. (d) For purposes of eligibility under Section 2.01, a year of Service shall refer to a 12-consecutive month period beginning with his employment commencement date (or reemployment commencement date) and each anniversary of such date during which an Employee has 1,000 Hours of Service. 1.26 STOCK FUND shall refer to the separate fund maintained under this Plan consisting of Employer Securities. Where the content so indicates, the term shall also refer to the Employer Securities held in the Stock Fund. 1.27 SUBSIDIARY shall refer to such substantially owned subsidiary or subsidiary of Aon that has adopted the Plan herein set forth with the approval of Aon. 1.28 TRUSTEE shall refer to the Trustee herein originally named and its successor duly appointed or elected pursuant to the provisions of this Agreement and any amendment hereto. The Trustee is designated as the named fiduciary with respect to the control, management and investment of the assets of the Trust for the purposes of ERISA. If there is more than one individual or one or more individuals and a bank acting as Trustees hereunder, the term "Trustee" shall refer to each Trustee or to the Trustees collectively, as the context may require. 137 Exhibit 10(g) Page 15 of 68 1.29 UNITED STATES for the purposes of this Plan shall include possessions of the United States. 1.30 VALUATION DATE shall refer to the last business day of each calendar month. 1.31 VALUE shall refer to the value of Employer Securities. The value of Employer Securities on any particular date shall be the mean of the opening and closing prices of Employer Securities on the New York Stock Exchange on such date and if such date was not a business day of the New York Stock Exchange then on the last day prior to such day which was a business day of the Exchange. 138 Exhibit 10(g) Page 16 of 68 SECTION 2 - EMPLOYEES ENTITLED TO PARTICIPATE 2.01 CONDITIONS OF ELIGIBILITY. Every Employee shall become a Participant as of the first day of the first pay period succeeding the Employee's compliance with the following three requirements: (a) He must have completed one year of Service and attained the age of 21. In determining whether or not an Employee has completed the required year or years of Service, there shall be disregarded, except as provided in the next sentence, Service prior to any break in Service equal to or more than the greater of five 1-year Breaks in Service or his prior completed years of Service. Once an Employee has completed one year of Service, subsequent breaks in Service shall not affect the fact that this requirement has been completed; (b) He must be employed within the United States or its possessions on a permanent basis as determined under Section 2.05; and (c) He must sign and deliver to the Committee a Designation of Beneficiary in such form as may from time to time be prescribed by the Committee. The Committee shall notify all Employees who are eligible to participate in this Trust and shall provide them with a Designation of Beneficiary. Any Employee who does not become a Participant as of the first date on which he would otherwise be eligible, because of employment in a foreign country under Section 2.05, shall become a Participant as of the first day of any succeeding pay period upon compliance with the provisions of this Section 2.01. 2.02 TERMINATION OF EMPLOYMENT. Any Participant whose employment with the Companies is terminated for any reason whatsoever, shall cease to be eligible to participate hereunder, except to the extent he or his beneficiary shall have the right to receive payments from his individual accounts as provided in Section 8 hereof. Except as provided in Section 8.04, any Participant whose employment with the Companies is terminated shall, in the event of his later reemployment, become a Participant on the first day of the next day period. If a reemployed Employee, by such action, again becomes a Participant in the Plan Year his employment terminated, and he remains a Participant through the last day of that Plan Year, he shall be entitled to share in the Companies' contribution, and the forfeitures, for that Plan Year in accordance with Section 4.02(a). Any person who has ceased to be a Participant hereunder by virtue of termination of his employment and for whom the Trustee continues to hold a portion of his account shall continue to share in net earnings and valuation adjustments (as provided in Section 8.07 hereof) as though he were a Participant. 139 Exhibit 10(g) Page 17 of 68 2.03 LEAVE OF ABSENCE. Any Participant obtaining a leave of absence from the Company because of illness, disability (except permanent disability, provision for which is made in Section 8.02 hereof) or national emergency requiring governmental, military, or naval service subsequent to the execution of this agreement or for any other reason, shall continue to participate in this Trust and shall not be deemed to have his employment terminated. The Companies agree to adopt a uniform policy with reference to the granting of leaves of absence. Such policy shall be applied without individual selection or discrimination in all cases involving the same, or substantially the same, facts. The Companies shall provide the Committee with all information with reference to leaves of absence. The determination made by or caused to be made by the Companies shall be conclusive and binding upon all persons having any interest in the Trust. 2.04 TRANSFER TO AN AFFILIATE. If a Participant is transferred to the employment of an Affiliate, he shall be deemed to be on leave of absence during such time as he is an Employee of the Affiliate. 2.05 TRANSFER TO A FOREIGN COUNTRY. The determination of when an Employee is employed within the United States on a permanent basis, when a transfer from the United States is or becomes permanent, and when a transfer to or from the United States is temporary, shall be made by the Company and such determination shall be conclusive and binding on all persons having any interest in the Trust. If he is transferred from the United States on a temporary basis, he shall be deemed to continue as being employed within the United States on a permanent basis until such time as his transfer becomes permanent. 2.06 EMPLOYMENT IN BARGAINING UNIT. An individual in a bargaining unit who is not deemed to be an Employee by reason of Section 1.10 shall not be eligible to participate hereunder and shall not be entitled to make contributions hereunder. Notwithstanding the foregoing, his Service in such bargaining unit shall be counted for the purpose of determining his eligibility to participate pursuant to Section 2.01, and if a Participant becomes ineligible to participate hereunder by reason of employment in such bargaining unit, his Service in such bargaining unit shall be counted for the purpose of determining his nonforfeitable interest under Section 9. 2.07 INELIGIBLE PERSONS. Notwithstanding the foregoing provisions of this Section 2, no portion of the assets of the Plan attributable to (or allocable in lieu of) Employer Securities acquired by the Plan in a sale to which IRC Section 1042 or IRC Section 2057 applies may accrue (or be allocated directly or indirectly under any Plan of the Companies) for the benefit of the following persons during the 10-year non-allocation period at IRC Section 409(n)(3)(C): (a) Any shareholder of the Company of any decedent of the executor who has made the election permitted under Section 1042 or a qualified sale under Section 2057 of the IRC, 140 Exhibit 10(g) Page 18 of 68 (b) Any person who is related (within the meaning of Section 267(b) of the IRC) to such shareholder or the decedent, other than lineal descendants whose aggregate amount allocated during the non- allocation period does not exceed more than five percent of the Company securities held by the Plan which are attributable to a sale within Section 1042 of the IRC by a person related to such descendants, pursuant to Section 409(h)(3)(A) of the IRC, or (c) Any person who owns (after application of Section 318 of the IRC without regard to the employee trust exception under Section 318(a)(2)(B)(i)) more than 25% of any class (or the value of any class) of outstanding Company stock (within the meaning of Section 409(1) of the IRC) within the one-year period ending on the date of sale. 141 Exhibit 10(g) Page 19 of 68 SECTION 3 - CONTRIBUTIONS 3.01 CONTRIBUTIONS BY COMPANIES. (a) AGGREGATE CONTRIBUTION. For the Plan Year ending December 31, 1989, and for each Plan Year thereafter, the Companies, in total, shall pay to the Trustee the amount set forth below. The aggregate contribution of the Companies for Employees shall be an amount equal to the sum of (i), and (ii) below, for Participants with 1,000 Hours of Service (including annualized service) employed by the Company on the last day of the Plan Year. (i) Such amount as may be determined at the discretion of the Board. The portion of the contribution made on behalf of each group of employees need not be pro rata but may be based upon such factor as the Board shall deem relevant, including geographical location, job description or earnings, as the Board in its sole discretion shall decide; provided, that any such group shall be selected in a manner that does not discriminate in favor of Highly Compensated Employees. (ii) In addition to the amounts contributed under (i) above, any additional amount as may be needed (after taking into account dividends under Section 4.06(d)) to provide the Trustees with sufficient funds to pay any maturing obligations under Acquisition Loans. (iii) If contributions under (i) are not pro rata, then allocations, contributions, and other calculations (other than forfeitures) under the Plan may be adjusted to take this factor into account. (b) ALLOCATION AND POSSIBLE REDUCTION OF AGGREGATE CONTRIBUTION. Each of the Companies' share of the aggregate contribution describes in Section 3.01(a) shall be equal to the amount of such contribution as will be allocated to the individual accounts of Participants who are employed by it pursuant to Section 4.02 (a). If, during any Plan Year, any Participant is employed by more than one Company that has adopted this Plan, the amount allocable to such Participant's account may be allocated among such Companies in the proportion of Compensation paid by each during the Plan Year in respect to which the contribution is made. The Trustee shall be under no duty or obligation to inquire into the correctness of the amount of the contribution nor shall the Trustee be obligated to institute any legal action to compel the Company to make any contribution. 3.02 DATE OF CONTRIBUTION. For the purposes of this Agreement, the date of any contribution will be deemed to be the last day of the Plan Year for which the contribution is made, even though received by the Trustee at a later or earlier date. 142 Exhibit 10(g) Page 20 of 68 3.03 FORM OF CONTRIBUTION. The contribution of a Company shall be made in the form of Employer Securities having a Value equal to the amount set forth at Section 3.01, or in the form of cash including a check. Any contribution made in the form of cash may be used to acquire Employer Securities or to make payments on Acquisition Loans. 3.04 COMBINED LIFE INSURANCE COMPANY OF NEW YORK. The contribution of Combined Life Insurance Company of New York shall take into account the contribution of such Subsidiary under the Aon Savings Plan, as amended from time to time, as may be required under relevant Federal and State laws. 143 Exhibit 10(g) Page 21 of 68 SECTION 4 - ALLOCATION OF TRUST FUNDS 4.01 ESOP ACCOUNT. The Committee shall maintain a separate account in the name of each Participant to be known as the Participant's "ESOP Account." A Participant's ESOP Account shall consist of the sum of two sub- accounts, his "Stock Sub-Account" under Section 4.02 and his "General Sub-Account" under Section 4.03. 4.02 STOCK SUB-ACCOUNT. The Committee shall maintain a separate sub-account in the name of each Participant, to be known as his "Stock Sub-Account." The Committee shall post to such sub-account for each Participant the following: (a) For each Participant who has earned 1,000 Hours of Service (including annualized service) for the Plan Year and who is employed by the Company on the last day of such Plan Year, his share of Employer Securities contributed, acquired or released under Sections 3.01 and 3.03 and forfeitures from the Stock Sub-Accounts. The Stock Sub- Account of each Participant whose Compensation is taken into account under Section 3.01 in figuring the amount of the contribution by the Company shall receive a portion of such Employer Securities in proportion to the ratio of the Compensation of the Participant for the Plan Year to the aggregate Compensation of all Participants. For these purposes, Compensation shall mean Compensation earned during periods of Plan participation. Such share shall include fractional shares, calculated based upon using four(4) decimal places. (b) As of each Valuation Date any additions or deductions arising out of net earnings and valuation adjustments resulting from the operation of Section 8.07 of this Trust Agreement. (c) As of each Valuation Date, any additions arising out of transfers of Employer Securities from the General Fund resulting from the operation of Section 5.05 of this Trust Agreement. (d) Any withdrawals or other payments chargeable to such sub-account. (e) As of each Valuation Date, each Participant's share of Employer Securities released pursuant to payment of Acquisition Loans from dividends under Section 4.06 and from Company contributions and earnings thereon in the General Fund; provided, however, that Employer Securities released per application of dividends shall be allocated as provided under Section 4.06 and shares released per application of prior Company contributions and earnings thereon shall be accounted for as provided in the formula at Section 5.05. 144 Exhibit 10(g) Page 22 of 68 4.03 GENERAL SUB-ACCOUNT. The Committee shall also maintain a separate sub- account in the name of each Participant, to be known as his "General Sub- Account," and the Committee shall post to such sub-account of each Participant the following: (a) For each Participant who has earned 1,000 Hours of Service (including annualized service) for the Plan Year and who is employed by the Company on the last day of such Plan Year, his share of any cash contribution not used to acquire Employer Securities under Section 3.03 prior to allocation hereunder. Such contribution and forfeitures from the General Sub-Accounts shall be allocated among the Participants in the same manner as Employer Securities under Section 4.02(a). (b) As of each Valuation Date, any additions or deductions arising out of net earnings and valuation adjustments resulting from the operation of Section 8.07 of this Trust Agreement. (c) As of each Valuation Date, any deductions arising out of transfers of Employer Securities to the Stock Fund resulting from the operation of Section 5.05 of this Trust Agreement. (d) Any withdrawals or other payments chargeable to such sub-account. 4.04 RECORDS AND ACCOUNTING. Books of account, forms, and accounting methods used in the administration of the ESOP Fund shall be subject in all respects to the supervision of the Committee, and if at any time the Committee shall determine that the accounting methods are not fair and equitable to all Participants, the Committee shall have the right to make whatever adjustments are necessary in the accounting methods to carry out this Agreement. Employer Securities shall be accounted for separately from other contributions to the Trust. In the event an erroneous amount is posted to a Participant's account for any year, the Committee may, at the time such error is discovered, correct such error by making such adjustments in allocating contributions, forfeitures and earning and valuation adjustments as they may deem fair and equitable, without the necessity of making retroactive adjustments in the accounts of Participants. The Committee shall furnish each Participant a record of his account which shall include the number of Employer Securities, including fractional shares, allocated to his Stock Sub-Account. 4.05 DESIGNATION OF BENEFICIARY. (a) Each Participant shall have the right to designate the Beneficiary or Beneficiaries who are entitled to receive any amount or benefit in case of the Participant's death and shall have the right at any time prior to final distribution of his accounts to change the Beneficiary of Beneficiaries theretofore designated by him by filing a new designation; provided, however, that such Beneficiary shall be deemed to be the surviving spouse of such 145 Exhibit 10(g) Page 23 of 68 Participant unless a spousal consent under Subsection 4.05(b) has been signed by the surviving spouse. Each such new designation shall completely revoke all designations previously filed by the same Participant. All designations shall be in writing and filed with the Committee and may be included in the Designation of Beneficiary, or in such other form or forms as the Committee shall require. The Trustee, at the discretion of the Committee, shall make settlement hereunder at the time of the Participant's death with such Beneficiary of Beneficiaries as shall be designated by said Participant. (b) Any designation of a Beneficiary other than his spouse by the Participant shall not take effect unless the spouse consents to such designation. Such consent must acknowledge the effect of such designation, shall be a consent to a specific Beneficiary and to a specific form of benefit, and be witnessed by a Plan representative or a notary public. Any consent shall be effective only as to such spouse. Such designation of a Beneficiary shall take effect without the spousal consent only if it is established to the satisfaction of a Plan representative that the consent may not be obtained because there is no spouse, because the spouse cannot be located, or because of such other circumstances as the Secretary of the Treasury may by regulations prescribe. 4.06 ALLOCATIONS OF DIVIDENDS ON EMPLOYER SECURITIES. (a) CASH DIVIDENDS. Except as provided in Subsection (d), dividends received from the Company in cash shall be deposited in the General Fund and credited to the General Sub-Accounts of the Participants to the extent applicable to the share allocated to their respective Stock Sub-Accounts, and, to the extent applicable to shares held in the General Fund or the Financed Shares held in the suspense account in the Stock Fund, such dividends shall be credited as income of the General Fund. (b) STOCK DIVIDENDS. Stock dividends attributable to Employer Securities held in the General Fund or in the suspense account in the Stock Fund shall be deposited in the General Fund and credited as income of the General Fund. Stock dividends attributable to Employer Securities held in the Stock Fund and allocated to the Participants' Stock Sub- Accounts shall be deposited in the Stock Fund and allocated to the Participants' Stock Sub-Accounts in proportion to the shares held in each Sub-Account. (c) DISTRIBUTION TO PARTICIPANTS. Any cash dividends received by the Plan on shares of Employer Securities allocated to Participants' Stock Sub-Accounts may be paid currently (or within ninety (90) days after the close of the Plan Year in which paid) in cash to such Participants (who are still employees) or their Beneficiaries on a nondiscriminatory basis, as determined by the Trustees. Such distribution of cash dividends to Participants may be limited to shares of Employer Securities which are then vested (under Section 9) or 146 Exhibit 10(g) Page 24 to 68 may be applicable to all shares allocated to their respective Stock Sub-Accounts, as determined by the Committee. (d) LOAN PAYMENTS. Dividends may be used to make payments on Acquisition Loans, at the discretion of the Company, to the extent that a deduction is allowable therefor under Section 404(k) of the IRC as amended from time to time. Financed Shares in the suspense account which are released pursuant to dividends on Employer Securities being used to make payments on Acquisition Loans shall be allocated as follows: (i) For dividends on allocated Employer Securities in the Stock Fund, an amount of released shares equal in fair market value to the amount of such dividends shall be allocated to the respective Stock Sub-Accounts of those Participants upon whose allocated shares the dividends were paid. (ii) For dividends on unallocated Employer Securities in the suspense account, the released shares shall be allocated to the Stock Sub-Accounts of Participants pursuant to their relative Compensation in the same manner as under Section 4.02(a). (iii) For dividends on Employer Securities in the General Fund, the released shares shall be allocated in the same manner as under Paragraph (i). (iv) Released shares under Paragraph (i), to the extent they exceed the amount of such dividends in fair market value, shall be allocated as under Paragraph (ii); provided, however, that if such shares are less in fair market value than the amount of the dividends on allocated Employer Securities used to make payments on Acquisition Loans, the balance of the released shares allocable to the Stock Fund under Paragraph (i) shall be allocated first from shares released under Paragraph (ii) and then if necessary under Paragraph (iii). Any remaining shares needed in order to comply with Paragraph (i) shall be acquired with assets in the General Fund. (v) Shares released due to payments on Acquisition Loans financed by dividends under Paragraphs (ii) and (iii) declared during the first six months of the Plan Year shall be allocated to the Stock Sub-Accounts of Participants employed by the Company on the last day of the prior Plan Year. Shares released due to payments on Acquisition Loans financed by other dividends under Paragraphs (i), (ii) and (iii) declared during the Plan Year shall be allocated to the Stock Sub-Accounts of Participants employed by the Company on the last day of the current Plan Year. 147 Exhibit 10(g) Page 25 of 68 4.07 ALLOCATION OF FINANCED SHARES. Financed Shares shall initially be credited to a suspense account in the Stock Fund and shall be allocated to the Stock Sub-Accounts of Participants only as released upon payment of Acquisition Loans. The number of Financed Shares to be released for each Plan Year shall be based upon a ratio approved in regulations and rulings issued by the Secretary of the Treasury or his delegate. The shares so released shall be allocated to the Participants' Stock Sub- Accounts as provided at Sections 4.02(a), 4.06(d) and 5.05. 4.08 ALLOCATION OF PURCHASED EMPLOYER SECURITIES OTHER THAN FINANCED SHARES. The Trustees may purchase Employer Securities using funds of the General Fund in which case such shall be considered an investment of the General Fund. The Trustees from time to time may, at their discretion, allocate some or all of the shares of Employer Securities held in the General Fund to the Participants. In the event of any such allocation, the shares so allocated shall be transferred from the General Fund to the Stock Fund and allocated to the Participants' Stock Sub-Accounts in proportion to their respective General Sub-Account balances at the time. 4.09 DETERMINATION OF COMPENSATION. The Company shall furnish to the Trustees information as to the Compensation of a Participant for each Plan Year, and, for the purposes of this agreement, the Trustees shall accept such information furnished by the Company as correct, and the amount of the Compensation as so certified to the Trustees by the Company shall be binding and conclusive on all persons whomsoever, unless a Participant files a written objection with the Trustees to the Compensation so certified within thirty (30) days from the date he has been notified thereof. 148 Exhibit 10(g) Page 26 of 68 SECTION 5 - INVESTMENTS 5.01 PRIMARY PURPOSE. This Plan is designed to invest primarily in Employer Securities under Sections 4975(e) of the IRC and Section 407(d) of ERISA. Investment by the Trustees of the Stock Fund and of the General Fund shall be made pursuant to such primary purpose set forth in the preceding sentence; provided, that all investments shall comply with Section 404 of ERISA. 5.02 INVESTMENT OF THE STOCK FUND. The assets of the Stock Fund shall be invested solely in Employer Securities, including stock dividends and stock splits on such Employer Securities. Employer Securities in the Stock Fund shall not be sold except to provide funds for Participants receiving a cash distribution under Section 8.09(b) and (c). The Trustee shall have full power and authority to receive, collect, receipt for, manage, and care for all Employer Securities in the Stock Fund as a single fund. Any other assets transferred to the Plan, including items received with regard to Employer Securities such as cash dividends and stock rights, shall be held in the General Fund. 5.03 INVESTMENT OF THE GENERAL FUND. The Trustee shall have full power and authority to receive, collect, receipt for, hold, manage, and care for all amounts held, paid and contributed to the General Fund, and the proceeds thereof and the income and profits therefrom, as a single fund, and to invest and reinvest the same or any part thereof in bonds, notes, conditional sales contracts, debentures, stocks, obligations of the United States and any other security or interest in income-producing property as the Trustee may deem advisable. Employer Securities acquired by the General Fund shall not be allocated among the accounts of the Participants but shall be accounted for like any other asset of the General Fund. The Trustee is further authorized and empowered to sell, exchange, convert, or transfer any property of the Trust; to sell covered stock options; to retain uninvested for such time as the Trustee deems for the best interest of the Trust any cash held in the Trust not otherwise required to be invested in Employer Securities, to exercise or dispose of all rights accruing to the holders of any securities; to join in, by deposit, pledge, or otherwise, any plan of reorganization or other means of protecting and dealing with securities; and to compromise, adjust, and settle, all claims of or against said Trust at such amounts and upon such terms as they deem advisable. 5.04 INVESTMENTS NOT ALLOCATED TO SEPARATE ACCOUNTS. Except as provided in Section 7.11, all right, title and interest in and to the assets and investments of the Trust shall be vested in, and reside exclusively in, the Trustee, and no Participant shall have any right, title, or interest in or to the assets or investments of the Trust except to have the same held, invested, and applied in accordance with the provisions of this agreement. The maintenance of a separate account for each Participant, as heretofore provided, shall not require the allocation of or 149 Exhibit 10(g) Page 27 of 68 segregation of assets to each such account, but the creation of such accounts is primarily for accounting purposes. 5.05 PURCHASE OR SALE OF CONTRIBUTED EMPLOYER SECURITIES. The Trustee may acquire or sell Employer Securities with funds in the General Fund. Such transactions may be entered into so as to acquire Employer Securities to be distributed to a retired or terminated Participant who decides to take stock or because of needed liquidity, or for any other reason in the discretion of the Trustee. Also at the discretion of the Trustee, at appropriate intervals all or a portion of the Employer Securities in the General Fund may be transferred to the Stock Fund and shall thereafter be accounted for as part of the Stock Fund. Upon any transfer of Employer Securities from the General Fund to the Stock Fund, the General Fund shall be charged with the Value of such Employer Securities as of the relevant Valuation Date, and each Participant's General Sub-Account shall bear a portion of such charge based upon his balance in his General Sub- Account compared to the total balance in the General Fund; each Participant's Stock Sub-Account shall then be credited with the same amount as was charged against his General Sub-Account, and such credit shall determine the number of shares (or fractional shares) to be allocated to his Stock Sub-Account. The Trustee may sell Employer Securities in the Stock Fund only as provided in the following sentence. If a cash distribution is made to a retired or terminated Participant or to a Beneficiary pursuant to Section 8.09(b) and (c), the Employer Securities allocated to his Stock Sub-Account may be sold by the Trustees or may be instead transferred to the General Fund to be accounted for thereafter like any other asset of the General Fund. If such individual demands Employer Securities and a stock distribution is made to him pursuant to Section 8.09(d), then any Employer Securities distributed in addition to the number of shares in the Participant's Stock Sub-Account shall be taken from Employer Securities held in the General Fund. 5.06 ACQUISITION LOANS. The Trustee may incur Acquisition Loans from time to time to finance the acquisition of Employer Securities (Financed Shares) for the Plan or to repay a prior Acquisition Loan. An installment obligation incurred in connection with the purchase of Employer Securities shall constitute an Acquisition Loan. An Acquisition Loan shall be for a specific term, shall bear a reasonable rate of interest and shall not be payable on demand except in the event of default. The terms of the loan, whether or not between independent parties, must, at the same time the loan is made, be at least as favorable to the Plan as the terms of a comparable loan resulting from arm's-length negotiations between independent parties. An Acquisition Loan may be secured by a collateral pledge of the Financed Shares so acquired. No other Plan assets may be pledged as collateral for an Acquisition Loan, and no lender shall have recourse against Plan assets other than any Financed Shares remaining subject to pledge. In the event of a default, the value of the Plan assets transferred in satisfaction of the loan must not exceed the amount of default. Any pledge of Financed Shares must provide for the release of shares so pledged as payments on the Acquisition Loan are made by the Trustee and such Financed Shares are 150 Exhibit 10(g) Page 28 of 68 allocated to Participants' Accounts (as provided in Section 4.07). Repayments of principal and interest on any Acquisition Loan shall be made by the Trustees only from Company contributions paid in cash to enable the Trustees to repay such Loan, from dividends under Section 4.06(d) and from earnings attributable to such Company's contributions and dividends, and from the proceeds of Acquisition Loans. 5.07 DIVERSIFICATION OF INVESTMENTS BY QUALIFIED PARTICIPANTS. (a) Each Qualified Participant may elect within ninety (90) days after the close of each Plan Year in his Qualified Election Period to direct the Trustees as to the investment of twenty-five percent (25%) of his Stock Sub-Account in the Plan, to the extent that such portion exceeds the amount to which a prior election under this Section applies. This election shall apply, at the option of the Participant, to all funds subject to both the current election and to a prior election, and only one election per year shall be allowed. (b) The following rules shall apply to this Section: (i) A "Qualified Participant" means any Employee (or former Employee) who has completed at least ten years of participation in the Plan and has attained age 55. (ii) A Participant's "Qualified Election Period" means the six- Plan Year period beginning with the later of (A) the first Plan Year in which the individual became a Qualified Participant or (B) the first Plan Year beginning after December 31, 1986. (iii) In the case of the election year in which the Participant can make his last election, "fifty percent (50%)" shall be substituted for the aforesaid "twenty-five percent (25%)." (iv) The requirements of this Section shall be satisfied if the Participant has the right to demand that the portion of his Accounts covered by the election (or by a prior election) be transferred to a plan qualified under the IRC, to be invested in one or more of three sub-funds, said sub-funds to be differentiated by the investments therein ranging from assets less subject to fluctuations in value and with more stable earnings yield to assets more subject to fluctuations in value and with less stable earnings. (v) Within ninety (90) days after the aforesaid ninety (90)-day election period, the Trustees shall invest the portion of his Company Stock Account covered by the election as directed by the Participant pursuant to his election. 151 Exhibit 10(g) Page 29 of 68 (vi) This section shall apply only to Employer Securities acquired after December 31, 1986, and whose value on the Valuation Date immediately preceding the first day on which a Qualified Participant is eligible to make a diversification election is more than $500. 152 Exhibit 10(g) Page 30 of 68 SECTION 6 - PROVISIONS RELATING TO TRUSTEE 6.01 APPOINTMENT OF TRUSTEE AND SUCCESSORS. There shall at all times be one or more Trustees acting hereunder. Such Trustee or Trustees shall be appointed by the Board and the Board has duly appointed the Trustee executing this agreement. The Board shall have the right at any time, and from time to time, to remove any Trustee or successor Trustee. Each Trustee or successor Trustee shall serve until such time as he shall resign or be removed by the Board and until his successor is appointed. In the event of the death, resignation, or removal of any Trustee acting hereunder, the Board shall appoint a successor to fill such vacancy and such successor Trustee, upon accepting such appointment by an instrument in writing delivered to Aon, shall, without further action on his part, become vested with all the estate, rights, powers, discretions, and duties of his predecessor Trustee with like effect as if originally named as Trustee hereunder. Any Trustee acting hereunder shall have the right at any time, by sixty (60) days written notice to Aon, to resign as a Trustee hereunder. By written acceptance of a resignation, Aon may waive the 60 day notice. 6.02 FEES AND EXPENSES OF TRUSTEE. The Trustee shall be paid such reasonable compensation as shall from time to time be agreed upon by Aon and the Trustee except that no person so serving shall be entitled to receive compensation where he received full-time pay from the Companies. The Trustee, in addition, shall be reimbursed for any reasonable expenses, including reasonable counsel fees and investment manager fees, incurred by it in the administration of the Trust. 6.03 PAYMENT OF COSTS, FEES, AND EXPENSES. Expenses arising form the operation of the ESOP Fund, including compensation payable to the Trustee, shall be payable from the ESOP Fund. In construing the foregoing, the following shall be understood: (a) expenses incurred in connection with transactions involving the purchase or sale of investments shall be added to the cost of such investment or deducted from the sale price thereof as the case may be; and (b) nothing contained herein shall preclude the Companies, by agreement or otherwise, from paying expenses not attributable to them hereunder. 6.04 UNCERTAIN DISTRIBUTION. In the event any question or dispute shall arise as to the proper person or persons to whom any payment shall made, the Trustee may withhold such payment until a determination of such question or dispute shall have been made, or the Trustee shall have been adequately indemnified against loss to its satisfaction. 6.05 LIABILITY. No Trustee shall ever be liable for any act or default by any predecessor Trustee, nor shall any successor Trustee or Trustees acting hereunder be under any duty to examine into or take any action with reference to the accounts or any prior Trustee heretofore acting hereunder. All contributions and other monies received by the Trustee shall be held for the exclusive benefit of the 153 Exhibit 10(g) Page 31 of 68 Participants and their Beneficiaries and for the payment of such administrative expenses as may be provided for hereunder. The Trustee shall be accountable for all such contributions and other monies, but shall have no duty to determine that the amounts of the contributions comply with the provisions of the Plan. 6.06 LEGAL ACTION. The Trustee shall at no time be obliged to institute any legal action or to become a party to any legal action unless it shall have been indemnified to its satisfaction for any fees, costs, and expenses to be incurred in connection therewith. 6.07 MANNER OF ACTION. Except as provided for in Section 6.08, if there is more than one Trustee, all decisions by the Trustees pertaining to the management of the Trust and their duties and powers, shall be made by the decision of the majority of the Trustees, and the action of the majority of the Trustees shall be binding upon all of the Trustees and have the same effect as an action, or decision, of all the Trustees. 6.08 ALLOCATION OF DUTIES. If there is more than one Trustee of the Trust, one of which may or may not be a bank, they may agree among themselves by unanimous consent that one or more (but less than all) of the Trustees shall be responsible for performing one or more of the duties and powers prescribed to the Trustee under this Agreement. Such Agreement shall be in writing and shall be signed by all of the Trustees, and shall be transmitted to the Executive Committee of Aon, who by its action, or by action of the Board, may order at any time that such Agreement be terminated. Such Agreement may also be terminated by any one of the Trustees giving written notice to the other Trustees that he desires the Agreement to be terminated. 6.09 LIMITATION ON LIABILITY. To the extent permitted by law, each person serving as a Trustee without compensation shall be relieved and released from all personal liability by reason of any act or failure to act on his part, except to the extent such act or failure to act was a result of fraud or gross negligence. 6.10 INDEMNITY. Each person serving as a Trustee without compensation (and their respective assigns, heirs, executors and administrators) shall be entitled to be indemnified by Aon against all costs and expenses reasonably incurred by or imposed upon him in connection with or resulting from any action, suit or proceeding or threat thereof, to which he may be made a party by reason of his serving as a Trustee, except in relation to matters as to which a recovery shall be had against him by reason of his having been finally adjudged in such action, suit or proceeding to have committed a fraudulent act or omission. The foregoing right to indemnity shall include reimbursement of the costs and expenses paid in settling any such action, suit or proceeding or threat thereof when if appears to Aon that the Trustee did not commit a fraudulent act or omission. 154 Exhibit 10(g) Page 32 of 68 6.11 DISBURSEMENTS. The Trustee shall make such disbursements or payments from the ESOP Fund as may be directed by the Committee. Any such directions shall be in writing and signed by a member of the Committee or the Secretary of the Committee. The Trustee shall have no duty or obligation to inquire into the propriety of any payment directed by the Committee but may conclusively presume that the payment is authorized by the terms of the Plan; however, this Section shall in no event be construed as granting the Committee any authority to manage, control, or invest the assets of the Trust but is intended solely to facilitate the administration of the Plan by the Committee. 6.12 REPORTS. The Trustee shall maintain accurate and detailed records and accounts of all investments, receipts, disbursements and other transactions hereunder, and all accounts, books and records relating thereto shall be open at all reasonable times to inspection and audit by any person or persons designated by Aon or the Committee. Within sixty (60) days following the close of each Plan Year (or following the close of such other periods as may be agreed upon by the Trustee and Aon) the Trustee shall file with Aon a written account setting forth a description of all Employer Securities and other property purchased and sold, all receipts, disbursements and other transactions affected by it during such period, and listing the Employer Securities and other property held by it at the end of such period, at their cost and fair market values. Aon may approve such accounting by written notice of approval delivered to the Trustee or by failure to express objection to such accounting in writing delivered to the Trustees within eight (8) months from the date upon which the accounting was delivered to Aon. Upon receipt of a written approval of the accounting, or upon the passage of said period of time within which objections may be filed, without written objections having been delivered to the Trustee, such accounting shall be deemed to be approved, and the Trustee shall be released and discharged as to all items, matters and things set forth in such accounting as if such accounting had been settled and allowed by a decree of a court of competent jurisdiction in any action or proceeding in which the Trustee, Aon, and all persons having or claiming to have any interest in the Trust Fund or under the Plan, were parties. The Trustee, nevertheless, shall have the right to have its accounts settled by judicial proceedings if it so elects, in which event only the Trustee and Aon shall be necessary parties. Nothing contained in this paragraph shall relieve the Trustee from any responsibility or duty under ERISA and any subsequent amendment thereto. 6.13 ADDITIONAL POWERS OF TRUSTEE. The Trustee shall have exclusive authority and discretion to manage and control the Trust Fund which shall constitute all of the assets of the Plan. Pursuant thereto, and in addition to the other powers granted by this Agreement, the Trustee shall be authorized and empowered: (a) To sell, exchange, transfer, or otherwise dispose of any property held by it, by private contract or at public auction, and no person dealing with the Trustee shall be bound to see the application of the purchase money or to 155 Exhibit 10(g) Page 33 of 68 inquire into the validity, expediency, or propriety of any such sale or other disposition; (b) To make, execute, acknowledge, and deliver any and all documents of transfer and any and all other instruments that may be necessary or appropriate to carry out the powers herein granted; (c) To register any investment held for either Fund in its own name or in the name of a nominee and to hold any investment in bearer form, but the books and records of the Trustee shall at all times show that all such investments are part of the Trust Fund; (d) To manage, administer, operate, lease for any number of years, develop, improve, repair, alter, demolish, mortgage, pledge, grant options with respect to, or other wise deal with any real property or interest therein at any time held by it; (e) To employ suitable agents and persons to render it services and advice in connection with its responsibilities and to pay their reasonable expenses and compensation; (f) To settle, compromise, or submit to arbitration, any claims, debts, or damages, due or owing to or from the Trust, to commence or defend suits or legal proceedings and to represent the Trust in all suits or legal proceedings; (g) To enter into any covenants or agreements binding the Trust with regard to any securities or other property held by it as Trustee; and (h) To borrow or raise monies for the purposes of the Trust and for any such so borrowed to issue its promissory note as Trustee and to secure the repayment thereof by pledging all or any part of the assets of the Trust, but nothing herein contained shall obligate the Trustee to render itself liable individually for the amount of any such borrowing; and no person loaning money to the Trustee shall be bound to see to the application of the money loaned or to inquire into the validity , expediency, or propriety of any such borrowing. 6.14 INVESTMENT MANAGER. The Trustees are hereby expressly authorized, in their discretion, to delegate the investment powers granted to them by this agreement to an investment manager provided such investment manager meets all the requirements set forth in Section 3(38) of ERISA. In the event of the delegation of their investment powers as above provided, the Trustees shall have no duty or obligation to supervise or control in any way the investments made and shall in no way be liable or responsible on account of any investments made or retained by the investment manager, whether or not such investments are authorized by this agreement, or for any acts or omissions of the investment manager. 156 Exhibit 10(g) Page 34 of 68 SECTION 7 - ADMINISTRATION OF THE PLAN 7.01 COMMITTEE. The Board shall appoint a Committee consisting of not less than three (3) nor more than seven (7) members. Any person appointed a member of the Committee shall signify his acceptance by filing written acceptance with the Board. The members of the Committee shall serve without compensation for their services. The term of the members of the Committee shall commence with the date of their appointment and continue at the convenience of the Board. Any member of the Committee may resign by delivering his written resignation to the Company, and such resignation shall become effective at delivery or at any later date specified therein. 7.02 DUTIES OF COMMITTEE. The Committee shall have those duties prescribed to it elsewhere in this Agreement, and shall be responsible for the general administration of the Plan except where duties in connection with such general administration have been prescribed to others under this Agreement. The Committee shall not incur expenses on behalf of the Plan or Trust except with the consent of Aon. 7.03 CHAIRMAN AND SECRETARY. The members of the Committee shall elect a chairman from their number, and a secretary who may be but need not be one of the members of the Committee. 7.04 MEETINGS AND QUORUM. The Committee shall hold meetings upon such notice, at such place or places, and at such time or times as it may from time to time determine. A majority of the members of the Committee at the time in office shall constitute a quorum for the transaction of business. All resolutions or other actions taken by the Committee at any meeting shall be by the vote of a majority of the members of the Committee present at the meeting. Actions may be taken by the Committee without a meeting where such actions are consented to in writing by the entire Committee. 7.05 ALLOCATION OF DUTIES. The Committee, by its action, may allocate its fiduciary responsibilities among its members, and may designate persons other than its members to carry out its fiduciary responsibilities. The Committee, individual members of the Committee allocated specific fiduciary responsibilities, and persons other than members of the Committee designated to carry out specific fiduciary responsibilities, may employ one or more persons to render advice with respect to their responsibilities. If the Committee has allocated a specific fiduciary responsibility among its members, or has designated persons other than its members to carry out a specific fiduciary responsibility, it shall do the following things: (a) it shall make as a condition of such allocation or designation the fact that the Committee may terminate the allocation or designation at will; and (b) it shall report such allocation or designation to the Executive Committee of Aon 157 Exhibit 10(g) Page 35 of 68 who by its action, or by action of the Board, may order that such allocation or designation be terminated in which case it shall be done as soon as practicable. 7.06 AON. Aon shall have the responsibility for hiring personnel in connection with the administration of the Plan (who shall be employees of Aon), and persons to perform services in connection with the administration of the Plan on an ad hoc basis, as may be required to carry out the provisions of the Plan. In accordance with the exercise of such responsibility, Aon may employ a manager for the Plan, clerical help, accountants, investment consultants, management consultants, public relations consultants, attorneys (who may be counsel for Aon) and other individuals as may be necessary. 7.07 RULES AND INTERPRETATION. The Committee may, from time to time, establish rules and procedures for administration of the Plan not inconsistent with the Plan's provisions, and administer the Plan in accordance with such provisions and such rules and procedures. The Committee shall have the exclusive right and discretionary authority to construe the terms and provisions of the Plan, including without limitation, the power to construe or interpret disputed, ambiguous or uncertain terms, and such other powers as may be necessary to carry out the provisions of the Plan. The Committee shall also have the discretionary authority to determine all questions relating to the eligibility of Employees to participate in the benefits of the Plan and the amount of such benefits, and resolve all questions pertaining to the administration, interpretation and application of the Plan provisions. Actions taken in good faith by the Company, the Committee or an Employer shall be conclusive and binding on all interested parties as to all questions of interpretation and application under this Plan and as to all other matters arising out of the administration thereof, and shall be given the maximum possible deference allowed by the law. 7.08 LIMITATIONS ON LIABILITY. To the extent permitted by law, each member of the Committee, and each employee of the Company who is involved in the administration of the Plan, shall be relieved and released from all personal liability by reasons of any act or failure to act on his part with respect to the administration of the Plan, except to the extent such act or failure to act was a result of fraud or gross negligence. 7.09 INDEMNITY. Each person named in Section 7.08 (and his respective assigns, heirs, executors and administrators) shall be entitled to be indemnified by Aon against all costs and expenses reasonable incurred by or imposed upon him in connection with or resulting from any action, suit or proceeding or threat thereof, to which he is made a party by reason of his being involved in the administration of the Plan, except in relation to matters as to which a recovery shall be had against him by reason of his having been finally adjudged in such action, suit or proceeding to have committed a fraudulent act or omission. The foregoing right to indemnity shall include reimbursement of the costs and expenses paid in settling any such 158 Exhibit 10(g) Page 36 of 68 action, suit or proceeding or threat thereof when it appears to Aon that the person did not commit a fraudulent act or omission. 7.10 IDENTITY. The Committee shall have authority to determine the identity of the distributees, and in so doing, to act upon such information as, on reasonable inquiry, it may deem reliable with respect to heirship, relationship, survivorship, or any other fact relative to the distributees; the Committee may rely upon any affidavit, certificate, letter, or other paper or document reasonably believed by it to be genuine, and upon any evidence reasonably believed by it to be sufficient; and shall be protected and saved harmless in all payments required to be made hereunder, if made in good faith and without actual notice or knowledge of the changed condition or status of any person receiving payments upon a condition. 7.11 VOTING OF EMPLOYER SECURITIES. Each Participant (or, in the event of the Participant's death, the Participant's Beneficiary) shall have the right to direct the Trustee as to the manner in which shares of Employer Securities allocated to his Stock Sub-Account are to be voted on each matter brought before an annual or special stockholders' meeting of the Company, and each Participant (or Beneficiary) shall be considered a "named fiduciary" under Section 402(a)(2) or ERISA with respect to this direction to the Trustee. Before each such meeting of stockholders, the Company shall cause to be furnished to each Participant (or Beneficiary) a copy of the proxy solicitation material, together with a form requesting confidential direction as to how the shares of Employer Securities allocated to such Participant's Stock Sub-Account are to be voted on each matter. Upon timely receipt of such directions, the Trustee shall vote the shares (including fractional shares) of Employer Securities allocated to such Participant's Stock Sub-Account on each matter as directed by the Participant. Each Participant (or Beneficiary) who timely directs voting of Employer Securities shall also direct the vote of a portion of the shares of Employer Securities for which signed voting directions are not timely received and any unallocated shares of Employer Securities held in a suspense account ("Undirected Shares") in the General Fund and in the Stock Fund. Each Participant (or Beneficiary shall be considered a "named fiduciary" under Section 402(a)(2) of ERISA with respect to this direction of the Trustee. Each such Participant shall be entitled to direct the voting of that number of the Undirected Shares resulting from multiplying the total number of Undirected Shares by a fraction, the numerator of which is the total number of shares allocated to that Participant's Stock Sub-Account and the denominator of which is the total number of shares of all Participants who timely direct the voting of Employer Securities. The Participants' individual instructions are to be given to a recordkeeper, auditor, or other person who is not the Company, a Subsidiary, or an Employee, officer, or director thereof and such person shall not divulge any Participant's directions to any person. Instructions received by the Trustee shall be made in the aggregate basis, shall be held by the Trustee in strict confidence and shall not be divulged or released to any person except as may be required to vote at the shareholders' meeting, or as required by applicable law. 159 Exhibit 10(g) Page 37 of 68 7.12 RIGHTS ON TENDER OR EXCHANGE OFFER. Each Participant (or in the event of the Participant's death, his Beneficiary) may direct the Trustee as to how to respond to a tender or exchange offer with respect to shares of Employer Securities in his Stock Sub-Account, and each Participant (or Beneficiary) shall be considered a "named fiduciary" under Section 402(a)(2) of ERISA with respect to this direction to the Trustee. The Company shall use its best efforts to timely distribute or cause to be distributed to each Participant (or Beneficiary) such information as will be distributed to stockholders of the Company in connection with any such tender or exchange offer. Upon timely receipt of such written instructions, the Trustee shall respond as instructed with respect to shares of Employer Securities allocated to such Participant's Stock Sub-Account. If the Trustee does not receive timely written instructions from a Participant as to the manner in which to respond to such a tender or exchange offer, the Trustee shall not tender or exchange any shares of Employer Securities with respect to which such Participant has the right of direction. Each Participant (or Beneficiary) shall also be entitled to direct the tender or exchange of a portion of the unallocated shares of Employer Securities held in a suspense account in the General Fund and the Stock Fund and each Participant (or Beneficiary) shall be considered a "named fiduciary" under Section 402(a)(2) of ERISA with respect to this direction to the Trustee. Each such Participant shall be entitled to direct the voting of that number of unallocated shares by a fraction, the numerator of which is the total number of shares allocated to that Participant's Stock Sub-Account and the denominator of which is the total number of shares of Employer Securities which are allocated to the Stock Sub-Accounts of all Participants for which instructions on the tender or exchange offer are received. The Participants' individual instructions shall be given to a recordkeeper, auditor or other person who is not the Company, a Subsidiary, or an Employee, officer or director thereof and such person shall not divulge any Participant's directions to any person, except as required by applicable law. Instructions received by the Trustee shall be made in the aggregate basis, shall be held by the Trustee in strict confidence and shall not be divulged or released to any person except as may be required to vote or tender. 160 Exhibit 10(g) Page 38 of 68 SECTION 8 - DISPOSITION OF THE SEPARATE TRUST ACCOUNTS 8.01 PARTICIPANT STILL EMPLOYED BY COMPANY AFTER RETIREMENT DATE. A Participant shall have a 100% vested interest in his Accounts when he attains his Normal Retirement Date. If he continues in active employment, no distribution shall be made to such Participant until he retires or is retired from active employment and the Committee is so advised, and he shall continue to participate in this Trust. 8.02 DISPOSITION AT OR AFTER RETIREMENT DATE OR IN CASE OF PHYSICAL OR MENTAL DISABILITY. In the event that at or after his Normal Retirement Date a Participant shall resign or be released from employment from the Companies, or in the event that the employment of any Participant shall, at any time, either before or after Normal Retirement Date, be terminated because of permanent physical or mental disability, then the Committee shall direct the Trustee to distribute the Participant's entire individual accounts to such Participant, without regard to the provisions for vesting as set forth in Section 9, in one or more of the ways described in Section 8.09. Permanent physical or mental disability means a physical or mental disability of illness which , in the opinion of a physician approved by the Committee, renders the Participant permanently incapable of performing the duties he was performing for the Companies when such disability began. 8.03 DISPOSITION UPON THE DEATH OF A PARTICIPANT. The Committee, upon the death of a Participant, whether before or after retirement, shall direct the Trustee to distribute the Participant's individual accounts, without regard to the provisions for vesting as set forth in Section 9, to such Participant's Beneficiary in one or more of the ways described in Section 8.09. If the Participant has not named a Beneficiary, or if no Beneficiary is living at the death of the Participant, such accounts shall be paid over in one sum to the executor or administrator of the estate of such deceased Participant; provided, however, that if in such situations the Participant's spouse survives him then such surviving spouse shall be the Beneficiary. In the event the Beneficiary dies subsequent to the death of the Participant but prior to the distribution of the entire accounts to the Beneficiary, the balance of the accounts shall forthwith be paid over and delivered to the executor or administrator of the estate of the deceased Beneficiary. 8.04 DISPOSITION UPON TERMINATION OF EMPLOYMENT BEFORE REACHING RETIREMENT DATE. If a Participant shall withdraw from the employ of the Companies prior to attaining his Normal Retirement Date, whether because of resignation or discharge, or any reason other then permanent disability, provision for which is made in Section 8.02, the Committee shall direct the Trustee to pay such Participant his vested interest in his individual accounts, as provided in Section 9, in one or more of the ways described in Section 8.09. If prior to incurring a 1-Year Break in Service such terminated Participant shall file with the Committee an application for the payment of benefits which has been approved by the 161 Exhibit 10(g) Page 39 of 68 Committee and distributions pursuant thereto have commenced, and if prior to incurring such 1-Year Break in Service he shall be reemployed by one of the Companies, he shall not share in the Companies' contribution or forfeitures for the Plan Year in which the withdrawal occurred (this assumes he reentered employment in the same year as the withdrawal occurred) and shall not be entitled to have contributions made on his behalf under Section 3, in respect to his Compensation for the 12 month period following the month in which his application is filed or following the month of termination of his employment, whichever shall occur later and, accordingly, shall not share in Companies' contributions and forfeitures on the basis of the contribution which would otherwise have been made on his behalf under Section 3 during this period. 8.05 TERMINATION OF THE TRUST AND DISPOSITION UPON SUCH TERMINATION. Unless otherwise terminated as hereinafter provided in Paragraphs (a), (b), (c) or (d) of this Section 8.05, this Trust and Plan shall continue in perpetuity or for such time as may be necessary to accomplish the purpose for which it is created. This Trust and Plan shall terminate in respect to a Company upon the happening of any of the following events, but shall continue as a liquidation trust until final distribution of all assets. (a) ELECTION BY AON. Aon, by appropriate resolutions, by its Board, may elect to terminate this Trust and Plan as to any Company or all Companies. (b) BANKRUPTCY. In the event a Company at any time shall be adjudicated bankrupt or insolvent. (c) DISSOLUTION. In the event a Company at any time shall be legally dissolved. (d) MERGER OR CONSOLIDATION. In the event of the merger or consolidation of a Company in and with another corporation or an association and such other corporation or association shall not agree to continue this Trust, with proper agreement with the Trustee and Committee; provided, however, in the event of dissolution, merger, or consolidation of a Company, provision may be made by the successor or successors, whether it be an individual, firm, or corporation, for continuing this Trust and Plan, and such successor or successors shall be substituted for its predecessor hereunder, in which event the Trust and Plan shall continue in full force and effect in respect to such successor. If this Trust and Plan shall be terminated upon the happening of any of the events specified in Paragraphs (a), (b), (c), or (d) of this Section 8.05, the Committee shall direct the Trustee to distribute the value of the affected Participants' entire accounts to such Participants in the manner provided in Section 8.09. Upon the completing of all payments to everyone entitled thereto, this Trust and Plan shall finally cease and terminate in respect to the Company and Participants affected thereby. Upon the termination of the Trust and Plan 162 Exhibit 10(g) Page 40 of 68 in respect to any Company, any unallocated contributions, forfeitures, or earnings and valuation adjustments shall be allocated to the accounts of the affected Participants in a fair and equitable manner as determined by the Committee. In the event of any action by or in respect to any Company resulting in the termination of the Trust and Plan pursuant to this Section 8.05, this Trust and Plan shall only terminate in respect to such Company but not in respect to any other Companies which have adopted the Plan, it being understood that the Trust and Plan shall continue in full force and effect as to any such other Companies. 8.06 PAYMENT TO MINORS, ETC. In case any payment hereunder becomes payable to a minor, person under legal disability, or person who by reason of physical or mental disability, although not adjudicated incompetent, is in the opinion of the Committee unable to administer properly such payment, then the same may be paid out by the Trustee for the benefit of such person in any of the following ways as the Committee, in its sole and uncontrolled discretion, shall determine: (a) directly to such person; or (b) to the legally appointed guardian or conservator of such person; or (c) to some near relative of such person for the support, maintenance, and education of such person; or (d) by the Trustee using such amounts directly for the benefit of such person. The payment and acceptance of any money or property in settlement of a participation under this Section 8.06 shall constitute a complete acquittance and discharge of all liability of the Trustee with respect to such participation. 8.07 NET EARNINGS AND VALUATION ADJUSTMENT. As of each Valuation Date, there shall be allocated the net earnings and valuations changes of the ESOP Fund for the period ending on such date among the accounts maintained on such date on the basis of, and in proportion to, their account balances on such date. A separate adjustment shall be made for the Stock Fund and for the General Fund as set forth below. (a) There shall be valued the Employer Securities in the Stock Fund. The resulting Value, which shall be the amount of the Stock Fund and which shall not be revised until the next Valuation Date except as described in the last sentence of this Subsection, shall then be compared with the total amount of all Participants' Stock Sub-Accounts in the Stock Fund as of such Valuation Date for the purpose of determining the interests of the Participants in the assets of the Stock Fund and the value thereof. If the Value of the Employer Securities shall be more or less than the total amount of all Participants' Stock Sub-Account balances, then the Trustees shall prorate any such difference and shall add or deduct from each Stock Sub-Account such amount 163 Exhibit 10(g) Page 41 of 68 as shall be determined upon the basis of the ratio that the balance of each Participant's Stock Sub-Account bears to the total of all Participants' Stock Sub-Account balances. The Value of the Employer Securities contributed by the Company as of the last day of each Plan Year shall be their Value for purposes of Section 1.31, which shall be allocated among those Participants described in Section 4.02(a) on a per compensation basis, but for the purpose of valuation adjustments shall not be regarded as a part of the Stock Fund or the Stock Sub- Account of any Participant until such Employer Securities are remitted to the Trustees. (b) There shall then be valued or appraised, the assets in the General Fund. The resulting value shall be the amount in the General Fund and shall not be revised until the next Valuation Date. The amount of such valuation shall be allocated among the General Sub-Accounts of each Participant's pro rata based upon the balance in each Participant's Stock Sub-Account compared to the balance of all Participants' Stock Sub-Accounts in the same ratio as the adjustment made under the penultimate sentence of Subsection (a), after giving effect to such adjustment but prior to giving effect to the adjustment under the final sentence of subsection (a). 8.08 METHOD OF VALUING ASSETS. Valuation adjustments under Section 8.07 shall be based on the fair market value of the assets held by the Trustees and the Trustees shall adopt accepted valuation and accounting methods in determining fair market value. The Value of Employer Securities shall be determined pursuant to Section 1.31. 8.09 GENERAL PROVISIONS GOVERNING DISTRIBUTIONS. Distributions to a terminated or retired Participant or Beneficiary of a deceased Participant shall be governed by the following: (a) Except upon termination of this Trust as provided in Section 8.05, and as provided in Subsection (h) distribution shall not be made to a Participant until he has retired or has terminated his employment. (b) Upon direction of a Participant except as provided in Subsections (h) and (i), distribution shall be made in a lump sum as soon as administratively feasible following the administrative period described in Subsection (f). (c) Except as provided in Subsection (d), below, distribution shall be made in the form of cash. (d) A Participant or Beneficiary shall have the right to demand that his benefits be distributed in the form of Employer Securities, and shall be advised in writing of his right to demand such form of distribution. Any fractional shares shall be distributed in cash. 164 Exhibit 10(g) Page 42 of 68 (e) Despite the fact that a Participant has retired or has terminated employment, no Employer Security allocated to his Stock Sub-Account prior to January 1, 1989 shall be distributed from that account before the end of the eighty-fourth (84th) month beginning after the month in which the security is allocated to the account, unless such retirement or termination of employment constitutes a "separation form service" as that phrase is construed under the IRC. (f) No distribution in the form of cash under Sub-section (c), above, shall be made to a Participant or Beneficiary of a deceased Participant, until 30 days have elapsed from the last to occur of the date he is advised of his right under Subsection (d) to demand that his benefits be distributed in the form of Employer Securities or the date of termination of employment. Any demand made by a Participant or Beneficiary of a deceased Participant shall be irrevocable. If he fails to make such demand during such 30-day period, he shall be deemed not to have made any such demand, and payment shall be made in accordance with the preceding provisions of this Section in the same manner at though no demand had been made. All elections and requests shall be made in writing. (g) As provided in Section 2.02, no distribution shall be made to a terminated Participant who has been re-employed and is again a Participant at the time the distribution would otherwise become payable. (h) Notwithstanding the provisions of Subsection (b) hereof, distribution to a Participant who has terminated his service, or who is a 5% owner [as defined in Section 16.02(b)] at any time during the 5-Plan-Year period ending in the calendar year in which he attains age 70-1/2 shall commence not later than the 1st day of April of the calendar year following the calendar year in which he attains age 70-1/2. If a Participant who has not terminated his service subsequently becomes a 5% owner after the calendar year in which he attains age 70-1/2, then distribution shall commence by April 1st of the calendar year following the Plan Year during which he became a 5% owner. Effective January 1, 1989, distribution to a Participant shall commence by April 1st of the calendar year following the calendar year in which he attains age 70-1/2, without regard to whether he has terminated his service; provided, that this rule shall not apply to a Participant age 70-1/2 or over on January 1, 1988 unless he has been a 5% owner at any time during the Plan Year ending during the calendar year when he attained age 66-1/2 or any subsequent Plan Year. (j) Distribution to a Participant (or his Beneficiary) whose vested interest in his Accounts has a fair market value of $3,500 or less based on the Plan's last valuation shall be made as soon as administratively convenient. 165 Exhibit 10(g) Page 43 of 68 (k) Except as provided in regulations, the provisions of IRC Section 401(a)(9) are hereby incorporated by reference to the extent not set forth in this Section. 8.10 ELIGIBLE ROLLOVER DISTRIBUTIONS. Effective with respect to distributions made on or after January 1, 1993, a distributee may elect, at the time and in the manner prescribed by the plan administrator, to have any portion of an Eligible Rollover Distribution paid directly to an Eligible Retirement Plan specified by the distributee in a Direct Rollover. For purposes of this Section 8.10: (a) An "Eligible Rollover Distribution" is any distribution of all or any portion of the balance to the credit of the distributee, except that an Eligible Rollover Distribution does not include: any distribution that is one of a series of substantially equal periodic payments (not less frequently than annually) made for the life (or life expectancy) of the distributee and the distributee's designated beneficiary, or for a specified period of ten years or more; any distribution to the extent such distribution is required under Section 401(a)(9) of the Code; and the portion of any distribution that is not includable in gross income (determined without regard to the exclusion for net unrealized appreciation with respect to employer securities). (b) An "Eligible Retirement Plan" is an individual retirement account described in Section 408(a) of the Code, an individual retirement annuity described in Section 408(b) of the Code, an annuity plan described in Section 403(a) of the Code, or a qualified trust described in Section 401(a) of the Code, that accepts the distributee's Eligible Rollover Distribution. In the case of an Eligible Rollover Distribution to the surviving spouse, an Eligible Retirement Plan is an individual retirement account or individual retirement annuity. (c) A "Distributee" is an employee or former employee, the employee's or former employee's surviving spouse and the employee's or former employee's spouse or former spouse who is the alternate payee under a qualified domestic relations order, as defined in Section 414(p) of the Code. (d) A "Direct Rollover" is a payment by the Plan to the Eligible Retirement Plan specified by the Distributee. 166 Exhibit 10(g) Page 44 of 68 SECTION 9 - PARTICIPANT'S NONFORFEITABLE INTEREST 9.01 GENERAL RULE. A Participant's nonforfeitable (vested) interest prior to his Normal Retirement Date and as of December 31, 1988, shall be one hundred percent (100%), and for contributions on or after such date shall be an amount equal to the balance of his Accounts applicable to his number of Years of Participation as follows: Completed Years of Participation Nonforfeitable Interest -------------------------------- ----------------------- Less than 1 year None 1 Year 20% 2 Years 40% 3 Years 60% 4 Years 80% 5 Years 100% Upon the termination, or a partial termination, of this Plan, except as provided in Section 11, or upon complete discontinuance of contributions thereto by any Company, each affected Participant's interest in his separate accounts shall become one hundred percent (100%) nonforfeitable. 9.02 SPECIAL RULES. In applying the provisions of Section 9.01, Years of Participation shall refer to the total years of Service of an Employee with the following exceptions and modifications: (a) Subject to the provisions of (c) of this Section, an Employee's Service shall be deemed to commence on the January first following the date his actual employment commenced, except that if a prior Participant is reemployed and again becomes a Participant in the year of his reemployment pursuant to Section 2.02 his Service shall be deemed to have commenced on January first of the year of his reemployment. (b) If an Employee's employment is terminated during any calendar year, he shall receive no credit for any Service during such calendar year (unless the rule set forth in Section 1.25(c) applies). (c) In the case of an Employee who has five 1-Year Breaks in Service, Service after such Break in Service, shall not be taken into account for the purpose of determining his nonforfeitable interest in his Company Contribution Account before such Break in Service. As provided at Section 2.02, any nonforfeitable vested interest of an Participant in the balance of his Company Contribution Account at the time of such Breaks in Service shall be separately accounted for thereafter as one hundred percent (100%) nonforfeitable. 167 Exhibit 10(g) Page 45 of 68 (d) In the case of a Participant who becomes an independent field sales representative for the Companies (and thereby ceases to be an Employee) any period of time that he is acting in such capacity and during which his accounts are not distributed to him shall be deemed to be Service. (e) Any period of time taken into account under the mergers set forth at Section 9.02(e) of the Aon Savings Plan shall be taken into account under this Plan. (f) If the Plan becomes a Top-Heavy Plan and subsequently ceases to be such, the vesting schedule in Section 16.05 shall continue to apply in determining the vested interest of any Participant who had at least three years of Service as of December 31st in the last Plan Year of top-heaviness. For other Participants, said schedule shall apply only to their Top-Heavy Account as of such December 31st. (g) A Participant's account shall be 100% vested and nonforfeitable when he earns five Years of Participation and attains age 55 and such date shall be regarded as his early retirement date. 9.03 RESTORATION OF FORFEITURES. Forfeitures from a terminated Participant's Accounts shall be charged to his Accounts upon termination of his employment; provided, however, that no forfeiture shall be incurred by a Participant reemployed on or before the following Anniversary Date if he does not receive a distribution under Section 8.04 by reason of such reemployment and if no administrative inconvenience as to such forfeitable amount would thereby be suffered by the Committee. If any terminated Participant who has suffered a forfeiture becomes reemployed before he has incurred five consecutive 1-Year Breaks in Service, upon his earning a year of Service after his rehire his Accounts shall be reconstituted by crediting thereto an amount equal to the amount forfeited, which amount shall be deducted from forfeitures during the Plan Year in which his Accounts are reconstituted. To the extent forfeitures for such year are not adequate for such purpose, such amount as may be necessary to reconstitute his Accounts shall be deducted pro rata from the assets of those funds earning a net Gain pursuant to the earnings and valuation adjustment under Section 8.07(a), and if there are no net Gains then such amount shall be deducted from Company contributions for the year. As an alternative to either of the sources set forth in the preceding sentence, at the discretion of the Company such amount may be contributed by the Company as a special contribution and credited to such account. In the event the employment of a rehired Participant whose account has been reconstituted is again terminated before he has acquired a 100% vested interest, any prior distribution made to him on account of his prior termination of employment shall be taken into consideration in computing his vested interest at the time of his later termination of employment. Financed Shares allocated to a Participant's Stock Sub-Account shall be forfeited only after his interest in all other Plan assets has been exhausted. 168 Exhibit 10(g) Page 46 of 68 SECTION 10 - SPENDTHRIFT TRUST 10.01 GENERAL. No Participant or Beneficiary shall have any right or power to transfer, assign, anticipate, mortgage, pledge or otherwise encumber his interest in the Trust established by this Agreement, or his rights to receive payments or benefits from the Trust and neither such interest nor rights nor any assets of the Trust shall be subject to seizure or sequestration for the payment of any debts, judgments, alimony or separate maintenance owed by any Participant or Beneficiary nor to transferability by operation of law in the event of bankruptcy, insolvency or otherwise; provided, that this limitation shall not apply to a Qualified Domestic Relations Order ("QDRO") under IRC Section 401(a)(13) as amended from time to time. 10.02 QUALIFIED DOMESTIC RELATIONS ORDER. For purposes of this Section, a QDRO shall mean a domestic relations order which relates to alimony, child support or marital property rights and which has been determined by the Company to meet the requirements of IRC Section 414(p) as amended from time to time. The following rules shall apply to the rights and obligations of the spouse of a Participant under a QDRO and under a domestic relations order not yet determined to be a QDRO. (a) These rules shall apply prior to determination by the Plan administrator that the domestic relations order is a QDRO, and shall apply thereafter as applicable. (i) As soon as administratively feasible after receipt of a domestic relations order, those funds which will go to the spouse if she (or he) should be determined to be entitled thereto will be put into a separate account. (ii) The spouse will share in any intervening gains (or losses) enjoyed (or suffered) by the Participant in his accounts between the time of the domestic relations order and when the Company is notified of the existence thereof and has been afforded a reasonable time to transfer the funds which would go to the spouse into a separate account. (iii) An account or account balances may be segregated for the spouse even though the Participant is not yet eligible to have funds distributed to him (or her). The spouse's funds may be accounted for separately without the necessity for an escrow. (iv) The spouse may elect a Beneficiary for her (or his) account balances under the QDRO. If a property settlement agreement is involved or some other court decree which is not a final divorce so that the individuals remain married, the Participant shall be treated as her 169 Exhibit 10(g) Page 47 of 68 death Beneficiary, just as the spouse will be for the Participant, unless the QDRO provides otherwise. If the QDRO provides that the spouse is to be no longer regarded as the Participant's spouse, then the preceding sentence shall not apply. (v) Upon written notification from either the Participant or spouse that a QDRO is forthcoming no distribution of benefits will be made to the Participant until the later of: (A) Ninety days after the date the Company has sent the Aon QDRO Procedures to the parties and no domestic relations order has been received, or (B) the period that the Company is reviewing a domestic relations order to determine if it is a QDRO. (b) These rules shall apply once the domestic relations order has been determined to be QDRO. (i) The spouse may take all of her (or his) account balances at any time, without regard to whether the Participant has attained his (or her) earliest retirement age under the Plan. Any benefits distributed under this rule may be taken out only in a single sum and may not be taken out periodically or pro rata. (ii) The spouse may not take a partial withdrawal of her (or his) account balances. (iii) If the amount to be distributed to the spouse is less than $3,500, such amount will be paid out only in a lump sum and may be distributed without the consent of the spouse or of the Participant. (iv) A distribution otherwise permissible may be made to the spouse without regard to whether the limitations on a distribution under IRC Section 401(a) are met. (c) It is the intent of this Subsection that the rules set forth herein shall be subject to, and shall be interpreted in light of, the requirements for a QDRO under the IRC and under the regulations and rulings of the Secretary of the Treasury and his delegate. This Subsection shall also apply to a child or other dependent of the Participant as appropriate. 170 Exhibit 10(g) Page 48 of 68 SECTION 11 - COMPANY TO HAVE NO INTEREST IN TRUST The Company shall in no event, either directly or indirectly, receive any fund or contributions made by it to the Trust, nor directly or indirectly participate in the distribution, or receive the benefits of the assets or funds comprising the Trust prior to the satisfaction of all liabilities with respect to Employees, beneficiaries, and spouses under this Plan; provided, however, that (subject to the limitations of Revenue Ruling 91-4): (a) If a contribution is made by a mistake of fact, the mistaken portion of the contribution shall returned within one year after payment of the mistaken contribution upon Company's written request; and (b) Each contribution by the Company is conditioned upon the deductibility of the contribution under the applicable section of the IRC. Accordingly, to the extent of disallowance of the decuction for the part or all of the contribution, the contribution shall be returned within one year after disallownance upon the Employer's written request. Upon transfer to the Trustees, all responsibilities of the Company for each contribution shall cease, and Company shall have no responsibilities for the acts of the Trustees. 171 Exhibit 10(g) Page 49 of 68 SECTION 12 - AMENDMENT AND SUSPENSION OF CONTRIBUTIONS 12.01 AMENDMENT OF THE AGREEMENT. Aon reserves the right, by action of the Board, to amend this Agreement at any time, and from time to time, including the right to change the provisions for each Company's contributions; provided that the contribution of Combined Life Insurance Company of New York for its Life Insurance Agents shall not be changed or modified without its consent. No amendment shall vest in the Companies any right, title or interest in and to the Trust Fund, or any part thereof, or cause them to be used or diverted to, purposes other than for the exclusive benefit of Participants and beneficiaries. The amendment of this Agreement shall not require the approval or ratification of the stockholders of Combined, or any Subsidiary, nor of the Trustee, Committee, Participants or Beneficiaries, or any of them; however, no amendment shall change the rights, duties, or responsibilities of the Trustee without its written consent. Except as may be necessary to qualify this Trust, or to continue the qualification of the Trust under Section 4975(e) of the Internal Revenue Code, or any successor to such section, no amendment shall adversely affect vested rights of any Participant hereunder. 12.02 SUSPENSION. Except for contributions required under Section 3.01(a)(2), Aon reserves the right, by action of the Board, to suspend Aon's or any Subsidiary's contributions for any Plan Year, but not exceeding two successive Plan Years, without terminating the Plan and Trust or discontinuing contributions permanently, by providing written notice of such action of the Board to the Committee and Trustee not later than sixty (60) days prior to the end of such Plan Year, in which event the Company or Companies affected shall not be obliged to make any contribution to the Company Fund for the period of such suspension. The Committee upon receiving notice of such suspension shall immediately notify the affected Participants. 172 Exhibit 10(g) Page 50 of 68 SECTION 13 - ADOPTION OF PLAN BY AFFILIATE 13.01 ADOPTION OF PLAN. Any Affiliate, by proper resolutions adopted by its Board, or by an adoption agreement executed by a principal executive officer, may become a party to this Agreement by adopting this Trust as a stock bonus plan for its Employees. A certified copy of such resolutions shall be delivered to the Committee and Trustee. 13.02 INTENTION OF PARTIES. Accept as provided herein, it is the intention of the parties hereto that the Employees of Aon and the Employees of any Subsidiary that adopts this Trust shall receive the same benefits as they would receive if Aon and such Subsidiaries were one corporate entity and this Plan were the plan of such entity, and the provisions of this Agreement shall be interpreted in accordance with this intent. 13.03 TERMINATION OF STATUS OF SUBSIDIARY. In the event any Subsidiary adopting this Plan at any time does not meet the requirements herein set forth for a Subsidiary, such company shall nevertheless be considered as continuing its status as a Subsidiary unless Aon files with the Trustee and Committee a resolution adopted by its Board electing to discontinue such Company's participation hereunder. Such resolution shall be considered as an election to terminate such company's participation in this Trust under the provisions of Section 8.05(a). 173 Exhibit 10(g) Page 51 of 68 SECTION 14 - ERISA PROVISIONS 14.01 SERVICE FOR PREDECESSOR. To the extent required by regulations that may be prescribed by the Secretary of the Treasury or his delegate, service for a predecessor shall be treated as Service for the Companies. 14.02 CONTROLLED GROUP. To the extent required by Section 414(b), (c), (m), (n) and (o) of the Internal Revenue Code, all employees of the entities described therein shall be treated as employed by a single employer. 14.03 MERGER. This Plan shall not be merged or consolidated with any other plan (or the assets held under this Plan shall not be transferred to any other plan), unless each Participant under the plan, if the plan then terminated, would receive a benefit equal to or greater than the benefit he would have been entitled to receive before the merger, consolidation, or transfer (if the plan had then terminated). 14.04 CLAIMS PROCEDURE. Pursuant to Section 503 of ERISA the following claims procedure is established. (a) A timely written application for benefits shall be filed with the Committee on a form prescribed by it. (b) If a claim is denied, in whole or in part, written notice of such denial shall be furnished to the applicant setting forth, in a manner calculated to be understood by him, the following: (i) The specific reason or reasons for the denial; (ii) A specific reference to pertinent Plan provisions on which the denial is based; (iii) A description of any additional material or information necessary for the claimant to perfect the claim and an explanation of why such material or information is necessary; (iv) An explanation of the Plan's claim review procedure. (c) An applicant whose claim has been denied in whole or in part (or his duly authorized representatives) may appeal such denial to the Committee by making a written request for a review and may review pertinent documents and submit issues and comments in writing. A written request for review must be filled within 60 days of the date an applicant has been notified of the denial or partial denial of his claim. 174 Exhibit 10(g) Page 52 of 68 (d) The decision on review shall be made promptly, shall be in writing, and shall include specific reasons for the decision, written in a manner calculated to be understood by the applicant, and specific references to the pertinent Plan provisions on which the decision is based. 14.05 INVESTMENT IN DEPOSITS WITH CORPORATE FIDUCIARY. In the event a corporate fiduciary is appointed pursuant to Section 6.01, such fiduciary may invest all or part of the Plan's assets in deposits, which bear a reasonable rate of interest, in an account maintained in its own banking department, to the extent such investment is permitted by Section 408(b) of ERISA. 14.06 MAXIMUM ANNUAL ADDITION. (a) In no event shall the annual addition (as hereinafter defined) to a Participant's separate accounts with respect to any Plan Year exceed the lesser of (i) $30,000 (or, if greater, one-fourth of the defined benefit plan dollar limitation under Section 415(b) of the IRC); provided, however, that such dollar amount may be increased by the lesser of (A) 100% of the dollar amount otherwise applicable for that Plan Year, or (B) the amount of Employer Securities allocated as Company contributions to the Participant for that Plan Year, but only if not more than one-third (1/3) of the Company contributions for the Plan Year are allocated to Highly Compensated Employees, or (ii) Twenty-five percent (25%) of the Participant's total compensation. (b) The term "annual addition" means the sum for any Plan Year of (i) his share of Company contributions, plus (ii) the amount of his Employee contributions made on or after January 1, 1987, plus (iii) his share of forfeitures, plus (iv) for purposes of Section 14.06(a)(i) only, amounts allocated to a separate account for the Participant to provide medical benefits after retirement, whether under a pension or annuity plan or a welfare benefit fund, pursuant to Sections 401(h), 415(c), 415(l) and 419(d)(2) of the IRC. In determining annual additions, forfeitures of Company Stock shall be based upon the Value of Company Stock as of the Anniversary Date. Any Company contributions which are applied (not later than the due date, 175 Exhibit 10(g) Page 53 of 68 including extensions, for filing the Company's Federal income tax return for that Plan Year) to pay interest on an Acquisition Loan, and any Financed Shares which are allocated as forfeitures, shall not be included as annual additions provided, however, that the provisions of this sentence shall be applicable only in Plan Years for which not more than one-third (1/3) of the Company contributions applied to pay principal and interest on an Acquisition Loan are allocated to the Highly Compensated Employees. The Trustees may reallocate such Company contributions in order to satisfy this special limitation. (c) In the event a Participant herein also participates in any other stock bonus plan maintained by the Company or a member of a controlled group (as defined in Section 14.02) the maximum annual addition computed pursuant to subsection (a) hereof may be reduced (except as IRC Section 415(c)(6) may apply) by the amount of employer contributions and forfeitures allocated to the Participant in such plan; provided, however, that if the Participant also participates in another profit sharing plan, then the maximum annual addition hereunder may be reduced subsequent to the maximum annual addition under such plan; employee contributions made by the Participant to such other plans shall be included in computing his annual addition pursuant to subsection (b)(ii) hereof; and compensation received from a member of a controlled group shall be included in total compensation. (d) In the event a Participant herein is a Participant at any time in a defined benefit plan maintained by the Company or a member of a controlled group, the sum of the defined benefit plan fraction and the defined contribution plan fraction for any Plan Year shall not exceed 1.0 but such limitation may be applied to first reduce benefits under the defined benefit plan before being applied to reduce benefits under this plan. For this purpose the defined benefit plan fraction for any Plan Year is: Project annual benefit of the Participant under the plan (determined as of the close of the year) ----- Lesser of: (a) 1.25 multiplied by the dollar limitation in effect for such year ($90,000 for Plan Year beginning in 1983) or (b) 1.4 multiplied by the percentage limitation with respect to such individual under the plan for such year (100% of his average total compensation for his high 3 Years). The defined contribution plan fraction for any Plan Year is: 176 Exhibit 10(g) Page 54 of 68 Sum of the annual additions to the Participant's account as of the close of the year ------------------------------------------------ Sum of the lesser of the following amounts determined for such year and for each prior year of service with the employer: (a) 1.25 multiplied by the dollar limitation in effect for such year ($30,000 for Plan Year beginning in 1983) or (b) 1.4 multiplied by the percentage limitation with respect to such individual under the Plan for each such year (25% of his total compensation). (e) At the election of the plan administrator, in determining the defined contribution plan fraction under Subsection (d), above, with respect to any Plan Year ending after December 31, 1982, the denominator of the fraction with respect to each Participant for all years ending before January 1, 1983, shall be an amount equal to the product of such denominator under the law in effect for the year ending in 1982 multiplied by the transition fraction. The transition fraction means a fraction whose numerator is 35% of the compensation of the Participant for the year ending in 1981 (limited to $51,875) and whose denominator is 25% of such compensation (but not more than $41,500). (f) Provided the Plan satisfied the requirements of IRC Section 415 for the last year beginning before January 1, 1983, and pursuant to regulations prescribed by the Secretary of the Treasury or his delegate, the numerator of the defined contribution plan fraction at Subsection (d) may be reduced so that the sum of the defined contribution plan fraction and the defined benefit plan fraction does not exceed 1.0 for such year. (g) In the case of an individual who is a participant before January 1, 1983, in a defined benefit plan which is in existence on July 1, 1982, and with respect to which the requirements of Section 415 of the IRC have been met for all years, if such individual's current accrued benefit under such plan exceeds the limitation of subsection (b) of Section 415, then (in the case of such plan) for purposes of such IRC Section 415(b), and also for purposed of IRC Section 415(e) as provided under Subsection (d) through (f) hereof, the limitation of such IRC Section 415(b) with respect to such individual shall be equal to such current accrued benefit. The term "current accrued benefit" means the individual's accrued benefit (at the close of the last year beginning before January 1, 1983) when expressed as an annual benefit (within the meaning of Section 415(b)(2) of the IRC as in effect before the amendments made by the Tax Equity and Fiscal Responsibility Act of 1982). For purposes of determining the amount of any individual's current accrued benefit, (i) no change in the terms and conditions of the plan after July 1, 1982, and (ii) no cost-of-living adjustment occurring after July 1, 1982, shall be taken into account. 177 Exhibit 10(g) Page 55 of 68 (h) In the event the amount of the annual addition for a Participant exceeds the limitation of this Section 14.06, the Trustees shall forthwith reduce the amount of the annual addition to the limitation of Section 14.06 by first refunding any contributions of the Participant for such Plan Year to the extent includable in the computation of the annual addition; second, if necessary, by reducing his share of the Company's contribution for such Plan Year, the amount of such reduction to be applied as a reduction of the Company's contribution for such Plan Year. Any remaining excess contributions plus forfeitures, shall be reallocated among the other Participants. If after such adjustments there still remains an excess, such amounts from such Participants so affected shall be held unallocated in a suspense account and all amounts in the suspense account shall be allocated and reallocated to Participant's accounts (subject to the limitations of Section 415 of the IRC) before any contributions by the Company or by the Participants may be made for the limitation year during which such suspense accounts are in existence. (i) In determining under which plan the contributions or other annual additions, or benefits, of a Participant should be reduced under this Section, the intent is that the order of reduction set forth herein be for purposes of guidance only and not obligatory, and that such order of reduction as to one Participant may be different from another Participant, so as to afford maximum flexibility to the Plan in avoiding a violation of the provisions of Section 415 of the IRC. (j) If the Plan satisfied the applicable requirements of Section 415 of the IRC as in effect for all years beginning before January 1, 1987, an amount shall be subtracted from the numerator of the defined contribution plan fraction (not exceeding such numerator) as prescribed by the Secretary of the Treasury so that the sum of the defined benefit plan fraction and defined contribution plan fraction computed under Section 415(e)(1) of the IRC does not exceed 1.0 for such year. (k) Compensation shall include the following items: (i) The Participant's wages, salaries, fees for professional service and other amounts received for personal services actually rendered in the course of employment with an employer maintaining the plan (including but not limited to, commissions paid salesmen, compensation for services on the basis of a percentage of profits, commissions on insurance premiums, tips and bonuses). (ii) For purposes of the prior sentence, earned income from sources outside the United States. 178 Exhibit 10(g) Page 56 of 68 (iii) Amounts described in IRC Sections 104(a)(3), 105(a) and 105(h), but only to the extent that these amounts are includable in the gross income of the Employee. (iv) Amounts described in IRC Section 105(d), whether or not these amounts are excludable from the gross income of the Employee under that Section. (v) Amounts paid or reimbursed by the Employer for moving expenses incurred by an Employee, but only to the extent that these amounts are not deductible by the Employee under IRC Section 217. (vi) The value of a non-qualified stock option granted to an Employee by the employer, but only to the extent that the value of the option is includable in the gross income of the Employee for the taxable year in which granted. (vii) The amount includable in the gross income of an Employee upon making the election described in IRC Section 83(b). Compensation shall not include the following items: (viii) Contributions made by the Employer to a plan of deferred compensation to the extent that, before the application of the IRC Section 415 limitations to that plan, the contributions are not includable in the gross income of the employee for the taxable year in which contributed. In addition, Employer contributions made on behalf of an Employee to a simplified employee pension described in IRC Section 408(k) are not considered as compensation for the taxable year in which contributed to the extent such contributions are deductible by the Employee under IRC Section 219(b)(7). Additionally, any distributions from a plan of deferred compensation are not considered as compensation for IRC Section 415 purposes, regardless of whether such amounts are includable in the gross income of the Employee when distributed. However, any amounts received by an Employee pursuant to an unfunded non-qualified plan may be considered as compensation for IRC Section 415 purposes in the year such amounts are includable in the gross income of the Employee. (ix) Amounts realized from the exercise of a non-qualified stock option, or when restricted stock (or property) held by an Employee either becomes freely transferable or is no longer subject to a substantial risk of forfeiture (see IRC Section 83 and the regulations thereunder.) (x) Amounts realized from the sale, exchange or other disposition of stock acquired under a qualified stock option. 179 Exhibit 10(g) Page 57 of 68 (xi) Other amounts which receive special tax benefits, such as premiums for group term life insurance (but only to the extent that the premiums are not includable in the gross income of the Employee), or contributions made by an Employer (whether or not under a salary reduction agreement) towards the purchase of an annuity contract described in Section 403(b) (whether or not the contributions are excludable from the gross income of the Employee). (l) Except as provided in regulations, the provisions of IRC Section 415 are hereby incorporated by reference to the extent not set forth in this Section. 180 Exhibit 10(g) Page 58 of 68 SECTION 15--MISCELLANEOUS 15.01 RELIANCE ON INFORMATION FURNISHED BY THE COMPANIES. Any information furnished by the Companies to the Committee or Trustee, such as Compensation of Participants, the proper amount of the Companies' contribution, the status of individuals as Employees of the Companies, or otherwise, and any other information which may be furnished by the companies to the Committee or Trustee, shall be accepted by the Committee and Trustee as being true and correct, and the Committee or Trustee shall incur no liability in relying on such information. In no event shall the Trustee or Committee have any right to request or demand an audit, investigation, or disclosure of the Companies' books or records. 15.02 INABILITY TO PERFORM. Neither the Companies, the Committee nor the Trustee shall be responsible for any inability to perform, or delay in performing, any act occasioned by any restriction or provision of any annuity contract or Acquisition Loan, or imposed by any insurer, or by any other person, or by law, and in the event any such inability or delay shall be so occasioned, then than act which can be performed shall be performed by the Companies, the Committee, or the Trustee which, in the sole discretion of the Committee, most completely carries out the intention and purpose of this Trust. All parties to this Trust or in any way interested therein shall be bound by any act so performed under such conditions. 15.03 EXECUTION OF DOCUMENTS. All parties to this Trust or claiming any interest hereunder expressly agree to perform any and all acts, and to execute any and all documents and papers which at any time may be necessary or desirable for carrying out any of the provisions of this Trust. 15.04 NOTICE OF REQUIRED ACTION. In any case in which the Companies, the Trustee, or the Committee shall be directed to take any action upon the occurrence of any event, they, or any one or more of them, shall be under no obligation or liability to take such action unless and until notice, proper and satisfactory to them, shall first have been received of the occurrence of such event. For the purposes of this Section 15.04, a certificate in writing signed by any officer of Aon and delivered to the Trustee or the Committee as to the occurrence or happening of any event, shall constitute conclusive evidence of such occurrence or happening, and the Trustee and the Committee respectively, shall be fully protected and discharged from all liability whatsoever in accepting and relying on such certificate. 15.05 RELIANCE UPON COMMUNICATION. Neither the Companies, the Committee, nor the Trustee shall incur any liability in acting upon any notice, request, signed letter, telegram, or other paper or documents reasonably believed by them or any one of them to be genuine and to be signed or sent by the proper person. 181 Exhibit 10(g) Page 59 of 68 15.06 DISCHARGE UPON PAYMENT. The payment and acceptance of any money or property in a settlement of any participation under this Trust shall constitute a complete acquittance and discharge of full liability of the Trustee with respect to such participation. 15.07 DISPOSITION OF SHARE OF MISSING PERSONS. In the event the Committee is unable to make payment of any benefit payable under this Plan because of inability to find the person to whom payment is due and such inability continues for a period of two years, the benefit shall be forfeited; provided, however, if a claim is subsequently made for such benefit by the person entitled thereto, such benefit shall be reinstated. 15.08 GENDER AND CASE. Where used in this Agreement, words in the masculine shall be read and construed as in the feminine, and words in the singular shall be read and construed as though used in the plural in all cases where such constructions would so apply. 15.09 SECTION TITLE NOT PART OF AGREEMENT. The section and subsection designations and titles are included solely for convenience and shall, in no event, be construed to affect or modify any of the provisions of this Agreement or be construed as a part thereof. 15.10 CONSTRUCTION. It is intended that this Plan and the Trust Agreement which is a part thereof shall comply with the provisions of ERISA, constitute a qualified plan and trust under the provisions of sections 401(a) and 4975(e) of the IRC and be operated in a manner so as not to discriminate in favor of Highly Compensated Employees. Accordingly, the provisions of this Plan and Trust Agreement shall be construed and applied in a manner consistent with such intent. However, to the extent not superseded by ERISA, this plan and the Trust Agreement which is a part thereof, shall be construed and enforced in accordance with the laws of the State of Illinois. 15.11 AGREEMENT BINDING ON ALL PARTIES. This Agreement shall be binding upon the heirs, executors, administrators, successors, and assigns of any and all parties hereto, present and future. 182 Exhibit 10(g) Page 60 of 68 SECTION 16--PROVISIONS APPLICABLE IF PLAN BECOMES TOP-HEAVY 16.01 APPLICABILITY. The provisions of this Section 16 shall be applicable during any Plan Year only if the Plan was a Top-Heavy Plan or was part of a Top-Heavy Group on the Determination Date, and in such case shall override and supersede all other provisions in this Plan to the contrary; provided, that these provisions shall not apply to a Plan which is not itself a Top-Heavy Plan and which was included in an Aggregation Group under the second sentence of Section 16.02(f); provided further, that, to the extent permitted by law, Section 16.06 shall not apply to any Employee who has received the minimum benefit for the Plan Year as required under the Top-Heavy rules from any defined benefit plan of the Company. 16.02 ADDITIONAL DEFINITIONS: (a) KEY EMPLOYEE. The term "Key Employee" shall refer to any Employee who, at any time during the Plan Year or any of the four preceding Plan years, is (i) an Officer of the Company, excluding any Employee whose Compensation is less than 150 percent (150%) of the maximum dollar limitation in Section 14.06(a)(i), (ii) one of the ten Employees owning [or considered as owning within the meaning of Section 318 of the IRC but substituting 5% for 50% in Section 318(a)(2)(C) the largest interests in the Company; excluding any Employee whose Compensation is less than the maximum dollar limitation in Section 14.06(a)(i), (iii) a Five Percent Owner of the Company, or (iv) a One Percent Owner of the Company having an annual compensation from the Company of more than $150,000. The term shall also include beneficiaries of a Key Employee. For purposes of clause (i), no more than 50 Employees (or, if less, the greater of 3 or 10% of the Employees) shall be treated as officers, and the officers taken into account shall be the officers with the highest compensation. For purposes of clause (ii), if two Employees have the same interest in the Company, the Employee having greater annual Compensation from the Company shall be treated as having a larger interest. For this purposes of clauses (ii), (iii) and (iv), the aggregation rules of subsections (b), (c) and (m) of Section 414 of the IRC (pertaining to employees of a controlled group of corporations, of partnerships and proprietorships under common control, and of an affiliated service group) shall not apply. 183 Exhibit 10(g) Page 61 of 68 (b) FIVE PERCENT OWNER. The term "Five Percent Owner" shall mean any person who owns [or is considered as owning within the meaning of Section 318 of the IRC but substituting 5% for 50% in Section 318(a)(2)(C)] more than five percent of the outstanding stock of the Company or stock possessing more than five percent of the total combined voting power of all stock of the Company. (c) ONE PERCENT OWNER. The term "One Percent Owner" means any person who owns [or is considered as owning within the meaning of Section 318 of the IRC but substituting 5% for 50% in Section 318(a)(2)(C)] more than one percent of the outstanding stock of the Company or stock possessing more than one percent of the total combined voting power of all stock of the Company. (d) NON-KEY EMPLOYEE. The term "Non-Key Employee" shall refer to any Participant who is not a Key Employee. (e) TOP-HEAVY PLAN. A Plan is a "Top-Heavy" Plan if, as of the Determination Date, the aggregate of the accounts of Key Employees under the Plan exceed 60% of the aggregate of the accounts of all Employees under the Plan; or if it is required to be included in an Aggregation Group and such Aggregation Group is a Top-Heavy Group; provided, that the Plan shall not be a Top-Heavy Plan if the Plan is part of an Aggregation Group which is not a Top-Heavy Group. (f) AGGREGATION GROUP. The term "Aggregation Group" means (i) each plan of the Company in which a Key Employee is a Participant and (ii) each other plan of the Company which enables any plan described in (i) to meet the discrimination requirements of Section 401(a)(4) of the IRC or the minimum participation standards of Section 410 of the IRC. In addition, at the option of the Company, it may include any other plan of the Company if the Group would continue to meet the requirements of Sections 401(a)(4) and 410 of the IRC with such other plan being taken into account. (g) TOP-HEAVY GROUP. An Aggregation Group is a "Top-Heavy Group" if, as of the Determination Date, (i) the present value of the cumulative accrued benefits for Key Employees under all defined benefit plans included in such group, plus (ii) the aggregate of the accounts for Key Employees under all defined contribution plans included in such Group, exceeds (iii) 60% of a similar sum determined for all Employees. (h) EMPLOYEE. The term "Employee" shall include the Beneficiaries of such Employee. 184 Exhibit 10(g) Page 62 of 68 (i) DETERMINATION DATE. The term "Determination Date" shall mean, with respect to any Plan Year, the last day of the preceding Plan Year. All required valuations shall be made as of the Determination Date. (j) COMPENSATION. The term "Compensation" shall mean total compensation but shall not include annual compensation in excess of $200,000 (as adjusted for cost-of-living increases by the Secretary of his delegate at the same time and in the same manner as the dollar amount under Section 14.06). Effective January 1, 1989, this Section 16.02(j) shall no longer apply. 16.03 SPECIAL RULES. In determining whether the Plan is a Top-Heavy Plan or part of a Top-Heavy Group, the following rules shall apply. (a) Except to the extent provided in regulations issued by the Secretary of the Treasury, any rollover contribution (or similar transfer) initiated by an Employee from a plan not maintained by the Company and made after December 31, 1983, to a plan shall not be taken into account with respect to the transferee plan. (b) If any individual is a Non-Key Employee with respect to the Plan for any Plan Year, but such individual was a Key Employee with respect to the Plan for any prior Plan Year, any accrued benefit for such Employee (and the account of such Employee) shall not be taken into account for purposes of Sections 16.02(e) and (g). (c) To the extent provided in regulations issued by the Secretary of the Treasury, the Top-Heavy rules of this Section shall be applied on the basis of any year specified in such regulations in lieu of Plan Years. (d) In determining present values and account balances under Section 16.02(e) and (g), all distributions made with respect to any Employee during the 5-year period ending on the Determination Date shall be added back and included therein. The preceding sentence shall also apply to distributions under a terminated plan which if it had not been terminated would have been required to be included in an Aggregation Group. (e) In determining the account of any Participant under 16.02(e) or (g), amounts attributable to deductible employee contributions shall not be considered. (f) If any individual has not performed services for any employer maintaining this Plan at any time during the 5 year period ending on the Determination Date, any accrued benefit for such individual and his accounts shall not be taken into account. 16.04 PARTICIPANT'S TOP-HEAVY ACCOUNT. An additional separate account shall be established for each Participant to be known as the Participant's Top- Heavy 185 Exhibit 10(g) Page 63 of 68 Account to which shall be posted his share of Company's contributions, forfeitures and net earnings and valuation adjustments for each Plan Year to which Section 16 is applicable. His share of the Company's contributions, forfeitures and net earnings and valuation adjustments that have been posted to his Company Contribution Account pursuant to Section 4.02 for all prior Plan Years shall be transferred to his Top- Heavy Account. 16.05 VESTING WITH RESPECT TO PARTICIPANTS' TOP-HEAVY ACCOUNTS. In lieu of the vesting schedule set forth in Section 9.01(a), a Participant, provided he earns at least one Hour of Service after the Plan has become Top-Heavy, shall vest in his Top-Heavy Account according to the following schedule: Completed Years of Service Non-Forfeitable % -------------------------- ----------------- Less than 3 -0- 3 100%
provided, that a Participant's nonforfeitable (vested) interest in his Top-Heavy Account, as regards funds transferred from his Company Contribution Account for prior years as set forth in Section 16.04, shall not be reduced from his nonforfeitable interest therein under Section 9.01. 16.06 MINIMUM CONTRIBUTION FOR NON-KEY EMPLOYEES. The Company's contribution and forfeitures allocated to the Top-Heavy Account for each Plan Year for each Non-Key Employee shall not be less than 3% of his compensation as defined at IRC Section 416(c)(2)(A), except that said percentage shall not be more than the highest percentage at which Company contributions plus forfeitures are made for any Key Employee. The percentage for each Key Employee shall be determined by dividing the amount of his shares of the Company's contribution plus forfeitures by the amount of so much of his Compensation as does not exceed $200,000. For this purpose, all defined contribution plans required to be included in an Aggregation Group shall be treated as one plan. The foregoing exception to the 3% provision shall not apply if the Plan is required to be included in an Aggregation Group wherein the Plan enables a defined benefit plan required to be included in such Group to meet the requirements of Sections 401(a)(4) and 410 of the IRC pertaining to discrimination and minimum participation. The minimum contribution rules of this Section 16.06 may be satisfied by taking into account Company contributions attributable to a salary reduction or similar arrangement. The allocation provisions contained in Section 4 of this plan shall be modified as may be necessary to comply with the provisions of this Section 16.06 and the Company may, but shall not be required to, increase Company contributions so no Participant will incur a reduction of benefits by reason of the operation of this Section 16.06. 16.07 MAXIMUM ANNUAL ADDITION. The limitations of Section 14.06 shall be applied by substituting 1.0 for 1.25 where it appears in Section 14.06(d) in the denominators 186 Exhibit 10(g) Page 64 of 68 of the defined benefit plan fraction and the defined contribution plan fraction. The preceding sentence shall not apply if (a) The maximum contribution requirements of Section 16.06 would be met if 4% were substituted for 3%, and (b) The Plan would not be a Top-Heavy Plan or part of a Top-Heavy Group if 90% were substituted for 60% in Sections 16.02(e) and (g). The application of the first sentence of this Section 16.07 shall be suspended with respect to any Participant so long as there are no (i) Company contributions, forfeitures or voluntary nondeductible contributions allocated to such Participant or (ii) accruals for such Participant under the defined benefit plan. If the first sentence of this Section 16.07 is applicable, Section 14.06(e) shall be applied by substituting $41,500 for $51,875. 16.08 SIMPLIFIED EMPLOYEE PENSIONS. For purposes of Section 16, a Simplified Employee Pension shall be treated as a defined contribution plan. At the Company's election, the aggregate Company contributions to a Simplified Employee Pension may be taken into account in lieu of the aggregate of the accounts of the Employees for the purpose of determining whether the Plan is a Top-Heavy Plan or is part of a Top-Heavy Group pursuant to Section 16.02(e) and (g). 16.09 CONTRIBUTIONS OR BENEFITS NOT TAKEN INTO ACCOUNT. The Plan must meet the requirements of Section 16.05 and Section 16.06 without taking into account (i) contributions or benefits under Chapter 2 of the IRC (relating to tax on self-employment income); (ii) Chapter 21 of the IRC (relating to Federal Insurance Contributions Act); (iii) Title II of the Social Security Act; or (iv) any other Federal or State law. 187 Exhibit 10(g) Page 65 of 68 AON EMPLOYEE STOCK OWNERSHIP PLAN SCHEDULE A SPECIAL PROVISIONS RELATING TO SERVICE This Schedule A contains special rules regarding the granting of past service credit for eligibility (Section 2.1), vesting (Section 9.1) and allocation of employer contributions (Section 4.2) with respect to certain Employees of the Company acquired through corporate acquisition.
EMPLOYEE CATEGORY PLAN PROVISIONS CREDITED SERVICE -------------------------------------- ---------------- -------------------- (1) Employed by Frank B. Hall & Years of service From employment Co. Inc., or any of its for commencement date subsidiaries or affiliates ("Hall") eligibility with Hall, with entry on November 1, 1992, and January 1, 1993. employed by the Company on or after November 2, 1992. Years of service From employment for commencement date vesting above and in accordance with Section 9.02. Allocation of Hours of service for the Company Company beginning contributions January 1, 1993 (and Compensation for periods of Plan participation). (2) Employed by K&K Insurance Years of service From employment Group, Inc., K&K Specialties, for commencement date Inc., National Sports eligibility with K&K, with entry Underwriters Inc., or American June 11, 1993. Insurance Brokers, Inc. ("K&K") on June 10, 1993. Years of service From employment for commencement date vesting above and in accordance with Section 9.02. Allocation of Hours of service for the Company Company (and contributions Compensation for periods of Plan participation).
188 Exhibit 10(g) Page 66 of 68
EMPLOYEE CATEGORY PLAN PROVISIONS CREDITED SERVICE ---------------- --------------- ---------------- (3) Employed by Booke and Years of service From employment Company or an affiliate for commencement date ("Booke") on June 30, 1993, and eligibility with Booke, with entry employed by the Company on July 1, 1993. July 1, 1993. Years of service From employment for commencement date vesting above and in accordance with Section 9.02. Allocation of Hours of service for the Company Company (and contributions Compensation for periods of Plan Participation). (4) Employed by Albert G. Ruben Years of service From employment & Co., Inc., Albert G. Ruben & for commencement date Co. (New York), Inc., or eligibility with Ruben, with entry Bachrach Insurance Services, September 1, 1993. Inc. ("Ruben"), on August 31, 1993, and employed by the Years of service From employment Company on September 1, 1993. for commencement date vesting above and in accordance with Section 9.02. Allocation of Hours of service for the Company Company (and contributions Compensation for periods of Plan participation). (5) Employed by Insurance Brokers Years of service From employment Service, Inc. on May 4, 1993, for commencement date and employed by the Company eligibility with Insurance Brokers on May 5, 1993. Service, Inc., with entry August 1, 1993. Years of service From employment for commencement date vesting above and in accordance with Section 9.02.
189 Exhibit 10(g) Page 67 of 68
EMPLOYEE CATEGORY PLAN PROVISIONS CREDITED SERVICE ---------------- --------------- ---------------- Allocation of Hours of service for the Company Company (and contributions Compensation for periods of Plan participation). (6) Employed by National Benefit Years of service From employment Corporation on May 19, 1993, for commencement date and employed by the Company eligibility with National Benefit on May 20, 1993. Corporation, with entry May 20, 1993. Years of service From employment for commencement date vesting above and in accordance with Section 9.02. Allocation of Hours of service for the Company Company (and contributions Compensation for periods of Plan participation). (7) Employed by Bryson Associates, Years of service From employment Inc. on May 16, 1993, and for commencement date employed by the Company on eligibility with Bryson Associates, May 17, 1993. Inc., with entry June 1, 1993. Years of service From employment for commencement date vesting above and in accordance with Section 9.02. Allocation of Hours of service for the Company Company (and contributions Compensation for periods of Plan participation).
190 Exhibit 10(g) Page 68 of 68 IN WITNESS WHEREOF, Aon Corporation and the Trustees have signed this amendment and restatement of the Aon Employee Stock Ownership Plan, effective as of January 1, 1994. Aon Corporation By: /Daniel T. Cox/ 12/20/94 ------------------------ -------- Daniel T. Cox Date Executive Vice President /Harvey N. Medvin/ 12/20/94 ------------------------ -------- Harvey N. Medvin Date Trustee /Andrew J. McKenna/ 12/20/94 ----------------------- -------- Andrew J. McKenna Date Trustee /Peer Pedersen/ 12/20/94 ----------------------- -------- Peer Pedersen Date Trustee 191 EX-10.H 4 94 RESTATEMENT PENSION Exhibit 10(H) page 1 of 91 1994 RESTATEMENT OF AON PENSION PLAN 192 Exhibit 10(H) Page 2 of 91 1994 Restatement of Aon Pension Plan ------------------- TABLE OF CONTENTS
SECTION 1 - NAME AND PURPOSE 3 1.01 NAME........................................................... 3 SECTION 2 - DEFINITIONS 4 2.01 "ACCRUED RETIREMENT INCOME".................................... 4 2.02 "ANNUAL EARNINGS".............................................. 4 2.03 "ANNUITY STARTING DATE"........................................ 6 2.04 "AUTHORIZED LEAVE OF ABSENCE".................................. 6 2.05 "BOARD"........................................................ 6 2.06 "COMMITTEE".................................................... 6 2.07 "COMPANY"...................................................... 7 2.08 "EFFECTIVE DATE"............................................... 7 2.09 "EMPLOYEE"..................................................... 7 2.10 "EMPLOYER"..................................................... 7 2.11 "EMPLOYMENT"................................................... 7 2.12 "ERISA"........................................................ 7 2.13 "FIELD SALES AGENT"............................................ 7 2.14 "FINAL AVERAGE EARNINGS"....................................... 7 2.15 "HIGHLY COMPENSATED EMPLOYEE".................................. 8 2.16 "HOURS OF SERVICE"............................................. 10 2.17 "IRC".......................................................... 10 2.18 "LEASED EMPLOYEE".............................................. 10 2.19 "MAXIMUM OFFSET ALLOWANCE"..................................... 11 2.20 "NORMAL RETIREMENT BENEFIT".................................... 11 2.21 "NORMAL RETIREMENT DATE"....................................... 12 2.22 "PARTICIPANT".................................................. 12 2.23 "PLAN"......................................................... 12 2.24 "PLAN YEAR".................................................... 12 2.25 "RETIRED PARTICIPANT".......................................... 12 2.26 "RETIREMENT FUND".............................................. 12 2.27 "TERMINATED PARTICIPANT"....................................... 12 2.28 "TERMINATION DATE"............................................. 12 2.29 "TRUST AGREEMENT" OR "TRUST"................................... 12 2.30 "TRUSTEE(S)"................................................... 12 2.31 "YEARS OF SERVICE"............................................. 13 SECTION 3 - ELIGIBILITY 16 3.01 INITIAL COVERAGE............................................... 16
193 Exhibit 10(H) page 3 of 91 TABLE OF CONTENTS (continued)
3.02 COVERAGE AFTER DECEMBER 31, 1988............................... 16 3.03 TERMINATION OF EMPLOYMENT...................................... 16 3.04 LEAVE OF ABSENCE............................................... 17 3.05 EMPLOYMENT IN BARGAINING UNIT.................................. 17 3.06 EMPLOYMENT OUTSIDE UNITED STATES............................... 18 SECTION 4 - DETERMINATION OF RETIREMENT BENEFITS.......................... 20 5.01 ELIGIBILITY FOR FULL VESTING................................... 22 5.02 AMOUNT OF MONTHLY BENEFIT...................................... 22 5.03 SPECIAL RULES.................................................. 22 5.04 EARLY COMMENCEMENT ELECTION.................................... 23 5.05 CHANGE IN TOP-HEAVY STATUS..................................... 24 SECTION 6 - DEATH BENEFITS................................................. 25 6.01 AMOUNT OF DEATH BENEFIT........................................ 25 SECTION 7 - FORM OF PAYMENTS............................................... 26 7.01 NORMAL FORM OF PAYMENT......................................... 26 7.02 120 PAYMENT CERTAIN OPTION..................................... 26 7.03 PAYMENT IN QUALIFIED JOINT AND SURVIVOR FORM................... 26 7.04 ALTERNATE JOINT AND SURVIVOR FORM.............................. 27 7.05 SOCIAL SECURITY ADJUSTMENT OPTION.............................. 27 7.06 ELECTION NOT TO RECEIVE QUALIFIED JOINT AND SURVIVOR ANNUITY... 27 7.07 REVOCATION OF ELECTION NOT TO RECEIVE QUALIFIED JOINT AND SURVIVOR ANNUITY..................................... 27 7.08 SURVIVING SPOUSE BENEFIT....................................... 28 7.09 LUMP SUM CASH OUT.............................................. 28 7.10 USE OF ANNUITY POLICY.......................................... 28 7.11 RETURN TO WORK................................................. 29 7.12 WHEN PARTICIPANT DEEMED RETIRED................................ 30 7.13 GENERAL PROVISIONS GOVERNING DISTRIBUTIONS..................... 31 7.14 SPOUSAL CONSENT................................................ 33 7.15 NOTICE......................................................... 34 7.16 JOINT AND SURVIVOR ANNUITIES AND SURVIVING SPOUSE BENEFITS TO FORMER PARTICIPANTS................................ 34
194 Exhibit 10(H) page 4 of 91 SECTION 8--PLAN FUNDING 36 8.01 CONTRIBUTIONS.......................................... 36 8.02 FORFEITURES............................................ 36 SECTION 9--RIGHTS TO AMEND OR DISCONTINUE CONTRIBUTIONS 37 9.01 CONTINUANCE OF CONTRIBUTIONS NOT ASSUMED............... 37 9.02 RIGHT TO AMEND......................................... 37 SECTION 10--DURATION AND DISTRIBUTION ON TERMINATION 39 10.01 TERMINATION BY EMPLOYER................................ 39 10.02 DISTRIBUTION ON COMPLETE TERMINATION................... 39 10.03 TERMINATION BY PENSION BENEFIT GUARANTY CORPORATION.... 39 10.04 VESTING UPON TERMINATION............................... 40 SECTION 11--BENEFITS IN THE EVENT OF EARLY TERMINATION OF PLAN 41 11.01 PARTICIPANTS........................................... 41 11.02 MAXIMUM BENEFIT........................................ 41 11.03 LIMITATION ON BENEFITS................................. 42 11.04 TERMINATION OF EMPLOYMENT.............................. 42 11.05 DEATH BENEFITS......................................... 42 11.06 RETIREMENT BENEFITS.................................... 42 11.07 LUMP SUM DISTRIBUTION.................................. 43 11.08 INTENT................................................. 43 SECTION 12--ADMINISTRATIVE COMMITTEE 44 12.01 FORMATION AND MEMBERS.................................. 44 12.02 CHAIRMAN AND SECRETARY................................. 44 12.03 ACTIONS OF THE COMMITTEE............................... 44 12.04 EXECUTION OF INSTRUMENTS............................... 44 12.05 REPORTS TO THE BOARD................................... 45 12.06 ADMINISTRATION OF THE PLAN............................. 45 12.07 LIABILITY OF MEMBERS................................... 45 12.08 ALLOCATION OF DUTIES................................... 45 12.09 INVESTMENTS............................................ 46 SECTION 13--ERISA PROVISIONS 47 13.01 SERVICE FOR PREDECESSOR................................ 47 13.02 CONTROLLED GROUP....................................... 47
195 Exhibit 10(H) page 5 of 91
TABLE OF CONTENTS (continued) 13.03 MERGER.................................................... 48 13.04 CLAIMS PROCEDURE.......................................... 48 13.05 MAXIMUM ANNUAL BENEFIT.................................... 49 SECTION 14--MISCELLANEOUS PROVISIONS 58 14.01 SPENDTHRIFT CLAUSE........................................ 58 14.02 FACILITY OF PAYMENT....................................... 58 14.03 EVIDENCE OF SURVIVAL...................................... 58 14.04 DISCRETIONARY ACTS TO BE UNIFORM.......................... 58 14.05 ELECTIONS TO BE MADE ON PRESCRIBED FORMS.................. 59 14.06 RELIANCE ON INFORMATION FURNISHED BY EMPLOYER............. 59 14.07 INABILITY TO PERFORM...................................... 59 14.08 MISSTATEMENT OF AGE....................................... 59 14.09 RIGHTS OF INDIVIDUALS..................................... 59 14.10 ACTUARIAL COMPUTATIONS.................................... 60 14.11 NOTICE OF REQUIRED ACTION................................. 61 14.12 RELIANCE UPON COMMUNICATION............................... 62 14.13 NO REVERSION TO EMPLOYERS................................. 62 14.14 INSURER NOT PARTY TO AGREEMENT............................ 62 14.15 CONSTRUCTION.............................................. 63 14.16 SECTION TITLES NOT PART OF AGREEMENT...................... 63 14.17 GENDER AND CASE........................................... 63 14.18 ELIGIBLE ROLLOVER DISTRIBUTIONS........................... 63 SECTION 15--ADOPTION OF PLAN BY SUBSIDIARY 65 15.01 ADOPTION OF PLAN.......................................... 65 15.02 INTENTION OF PARTIES...................................... 65 15.03 TERMINATION BY ONE EMPLOYER............................... 65 SECTION 16--RIGHTS OF FORMER EMPLOYEES 66 16.01 RIGHTS OF FORMER EMPLOYEES................................ 66 SECTION 17--PROVISIONS APPLICABLE IF PLAN BECOMES TOP-HEAVY 67 17.01 APPLICABILITY............................................. 67 17.02 ADDITIONAL DEFINITIONS.................................... 67 17.03 SPECIAL RULES............................................. 70 17.04 VESTING WITH RESPECT TO PARTICIPANT'S TOP-HEAVY BENEFIT... 71 17.05 MINIMUM BENEFIT FOR NON-KEY EMPLOYEE...................... 72 17.06 MAXIMUM ANNUAL BENEFIT.................................... 72 17.07 SIMPLIFIED EMPLOYEE PENSIONS.............................. 72 17.08 CONTRIBUTIONS OR BENEFITS NOT TAKEN INTO ACCOUNT.......... 73 17.09 EMPLOYMENT IN BARGAINING UNIT............................. 73
196 Exhibit 10(H) page 6 of 91
TABLE OF CONTENTS (continued) 17.10 COMMENCEMENT OF BENEFITS.................................. 73 17.11 FORFEITURES............................................... 73 SECTION 18--MERGERS AND TRANSITIONAL RULES 74 18.01 GENERAL................................................... 74 18.02 MERGERS AND TRANSFERS OF ASSETS AND LIABILITIES........... 74 18.04 MILLER, MASON & DICKENSON, INC. PENSION PLAN.............. 75 18.05 ROLLINS BURDICK HUNTER CO. EMPLOYEES PENSION PLAN......... 76 18.06 BOOKE AND COMPANY PENSION PLAN............................ 76 SECTION 19--VOLUNTARY RETIREMENT PROGRAM 78 19.01 VOLUNTARY RETIREMENT PROGRAM.............................. 78 19.02 DEFINITIONS............................................... 78 19.04 COMMENCEMENT OF BENEFITS.................................. 80 SECTION 20--AD HOC RETIREE BENEFIT ADJUSTMENT 81 20.01 RETIREMENT BENEFIT ADJUSTMENT............................. 81 SCHEDULE A--SPECIAL PROVISIONS RELATING TO SERVICE 82
197 Exhibit 10(H) page 7 of 91 1994 RESTATEMENT OF AON PENSION PLAN WHEREAS, Combined Insurance Company of America previously entered into an Agreement establishing an Employees Pension Plan for the benefit of its Staff Employees and the Staff Employees of its Subsidiaries which adopted the Plan, which Agreement is known as the Combined Pension Plan and was effective as of January 1, 1973; WHEREAS, Combined Insurance Company of America made one amendment to said Agreement dated February 24, 1975 and restated said Agreement on December 10, 1976 effective as of January 1, 1976, amended said Restatement once on April 6, 1978 and again restated said Agreement effective as of January 1, 1978, and made five amendments to said 1978 Restatement, on December 14, 1979; June 26, 1980; November 8, 1982; January 11, 1983; and June 27, 1983; WHEREAS, Combined International Corporation, the parent corporation of Combined Insurance Company of America, adopted this Pension Plan and Trust Agreement for the Staff Employees of Combined International Corporation and of its various other subsidiaries, amended and restated said Plan and Trust Agreement, changed the name of this Plan and Trust Agreement to the Combined International Corporation Pension Plan, and made Combined International the sponsor of said Plan and Trust Agreement, in an Instrument dated July 1, 1984, which has been amended six times since such last 1984 Restatement thereof, on November 16, 1984; again on November 16, 1984; again on November 16, 1984; November 15, 1985; March 20, 1987; and November 20, 1987; 198 Exhibit 10(H) Page 8 of 91 WHEREAS, pursuant to the Sixth Amendment the name of the Plan was changed to the AON PENSION PLAN; WHEREAS, the Plan was amended by a 1987 Restatement thereof on November 20, 1987; WHEREAS, Plan was amended by a 1989 Restatement thereof on July 22, 1988, which 1989 Restatement was further amended on November 20, 1992, July 16, 1993, and October 18, 1993; WHEREAS, Aon Corporation ("Aon") now wishes to amend and again restate said Plan for the purpose of complying with the Omnibus Budget Reconciliation Act of 1993 and other changes in the law and to make certain other desirable changes therein; WHEREAS, Aon Corporation has reserved the right to amend said Plan and Trust Agreement pursuant to the terms of Section 9.02 thereof; NOW, THEREFORE, pursuant to a resolution adopted by the Board of Aon Corporation the Plan shall be and hereby is further amended and restated effective as of January 1, 1994, unless otherwise stated herein, as follows: 199 Exhibit 10(H) Page 9 of 91 SECTION 1 - NAME AND PURPOSE 1.01 NAME. This Plan shall be known as the Aon Pension Plan. 1.02 PURPOSE. It is the purpose of this Plan to provide a retirement income to supplement benefits payable under the Federal Social Security Program for such eligible Employees who shall qualify as Participants. 200 Exhibit 10(H) Page 10 of 91 SECTION 2 - DEFINITIONS Unless the context shall otherwise clearly indicate, the following terms shall be construed as hereafter defined: 2.01 "ACCRUED RETIREMENT INCOME" shall mean the monthly amount determined at any time in accordance with Section 4.01 of the Plan, but based on Years of Service and Final Average Earnings as of the Participant's determination date on or after his Normal Retirement Date or Termination Date, whichever is applicable; provided, however, that the Accrued Retirement Income of a Participant as of December 31, 1988, who would have earned more than 30 Years of Service at his Normal Retirement Date if he had continued in employment and earned 40 Hours of Service a week until his Normal Retirement Date shall not be less than the Normal Retirement Benefit he would have been eligible to receive on his Normal Retirement Date (based on the above assumptions but determined on the basis of Final Average Earnings and his Primary Social Security Benefit (as defined prior to the 1989 Restatement of the Plan) on December 31, 1988) multiplied by a fraction the numerator of which shall be his Years of Service on December 31, 1988, and the denominator of which shall be the Years of Service he would have had if he had continued in employment until his Normal Retirement Date. In applying the above proviso, Years of Service that are normally not counted for benefit accrual purposes (as provided in Sections 3.05, 3.06 and 3.07) shall be counted except for the purpose of determining the numerator of the fraction referred to in the preceding sentence, and the Participant shall be deemed to have earned Years of Service after December 31, 1988, even if he was employed in a capacity and location where he was not earning Years of Service, for benefit accrual purposes immediately before December 31, 1988. 2.02 "ANNUAL EARNINGS" (a) Annual Earnings with respect to calendar years prior to 1993 shall mean the regular salary of an Employee excluding any bonuses or extra remuneration, but determined before excluding any reduction described in Sections 3.03 and 3.04 of the Aon Savings Plan, or before excluding any reduction for cafeteria plans under Section 125 of the IRC, paid to him by the Employer during any calendar year for his services to the Employer in the capacity of a staff 201 Exhibit 10(H) Page 11 of 91 Employee. Such Annual Earnings shall also include, for representatives of the Life Insurance Company of Virginia only, financing/subsidy payments, first year commissions, renewal commissions, first year overrides, renewal overrides, personal service fees, managerial service fees, and validation bonuses. (b) Annual Earnings with respect to calendar years after 1992 shall mean the following types of earnings paid to an Employee for his service on behalf of the Employer determined before excluding any reduction described in Sections 3.03 and 3.04 of the Aon Savings Plan, or before excluding any reduction for cafeteria plans under Section 125 of the IRC: (i) salary and fixed base compensation including compensation for overtime; (ii) bonuses paid pursuant to periodic individual performance appraisals and formal contractual bonus programs, but excluding other bonus and miscellaneous income; (iii)net commission, renewal and override compensation (but excluding deferred commission payments). Annual Earnings shall not include remuneration reported to the Internal Revenue Service on Form 1099 or amounts deferred under a nonqualified deferred compensation Plan. In addition to other applicable limitations set forth in the Plan, and notwithstanding any other provision of the Plan to the contrary, for Plan Years beginning on or after January 1, 1994, the Annual Earnings of each Employee taken into account under the Plan shall not exceed the OBRA '93 annual compensation limit. The OBRA '93 annual compensation limit is $150,000, as adjusted by the Commissioner of the Internal Revenue Service for increases in the cost of living in accordance with section 401(a)(17)(B) of the IRC. The cost-of-living adjustment in effect for a calendar year applies to any period, not exceeding 12 months, over which compensation is determined (determination period) beginning in such calendar year. If a determination period consists of fewer than 12 months, the OBRA '93 annual 202 Exhibit 10(H) Page 12 of 91 compensation limit will be multiplied by a fraction, the numerator of which is the number of months in the determination period, and the denominator of which is 12. For Plan Years beginning on or after January 1, 1994, any reference in this Plan to the limitation under section 401(a)(17) of the Code shall mean the OBRA '93 annual compensation limit set forth in this provision. If compensation for any prior determination period is taken into account in determining an employee's benefit accruing in the current plan year, the compensation for that prior determination period is subject to the OBRA '93 annual compensation limit in effect for that prior determination period. For this purpose, for determination periods beginning before the first day of the first Plan Year beginning on or after January 1, 1994, the OBRA '93 annual compensation limit is $150,000. In determining compensation, the family member rule for Highly Compensated Employees shall apply, but be limited to the Employee's spouse and lineal descendants under 19 years of age. 2.03 "ANNUITY STARTING DATE" shall mean the first day of the first period for which the Participant or Beneficiary receives an annuity. 2.04 "AUTHORIZED LEAVE OF ABSENCE" means any absence authorized by the Employer because of illness, military service, or for any other reason. Authorized Leaves of Absence shall be granted on a uniform and non- discriminatory basis. 2.05 "BOARD" shall mean the present and any succeeding Board of Directors of the Company or any committee of the Board of Directors delegated authority to act for the whole Board in respect of matters relating to the Plan. 2.06 "COMMITTEE" shall mean the administrative committee designated by the Board in accordance with Section 12. The Committee is designated as the administrator, plan administrator, and named fiduciary with respect to the administration of the Plan (but not with respect to the control, management and investment of the assets of the Trust) for the purposes of ERISA. 2.07 "COMPANY" shall mean Aon Corporation and any successor. 203 Exhibit 10(H) page 13 of 91 2.08 "EFFECTIVE DATE" shall mean January 1, 1973, but shall refer to January 1, 1994 when applied to the 1994 restatement of this Plan. 2.09 "EMPLOYEE" shall mean any person employed by the Employers who is not a Field Sales Agent. 2.10 "EMPLOYER" shall mean the Company and such of its subsidiaries as have adopted or shall adopt this Plan for the benefit of its Employees. The term "Employers" as used herein shall refer collectively to all of the Employers that have adopted this Plan at any particular time and shall be applied as though all of such Employers constituted a single employer. 2.11 "EMPLOYMENT" shall mean service of an Employee with the Employers. 2.12 "ERISA" refers to the Employee Retirement Income Security Act of 1974, as from time to time amended. 2.13 "FIELD SALES AGENT" shall refer to an employee who represents Combined Insurance Company of America (or any Subsidiary thereof) as an insurance agent in the Superior Policy Division of such company and who is under an employment contract with the Company denominating him as a representative, sales manager, territory manager, district manager, state manager, or other comparable title. 2.14 "FINAL AVERAGE EARNINGS" shall mean the average of a Participant's Annual Earnings paid to him by the Employers for service during the highest five consecutive calendar years of the last ten calendar years of Employment immediately preceding his retirement date or his Termination Date; provided, however, that if he was not an Employee during any five consecutive calendar years during such period, his Final Average Earnings shall be the average of his Annual Earnings during the five calendar years (or lesser period if he was not an Employee for such five calendar years) immediately preceding the calendar year he was last an Employee. "Final Average Earnings A" shall be an amount determined in the same manner as Final Average Earnings, except that Annual Earnings during a Participant's highest five consecutive calendar years, whether before 1993 or after 1992, shall 204 Exhibit 10(H) page 14 of 91 be computed solely on the basis of Section 2.02(a) without reference to Section 2.02(b). 2.15 "HIGHLY COMPENSATED EMPLOYEE" shall include an Employee who received compensation in excess of $75,000, received compensation in excess of $50,000 and was in the top-paid group, or was an officer and received compensation greater than $45,000 (all amounts as adjusted for increases in the cost of living per Section 14.6), either (i) in the current year while a member of the 100 employees paid the greatest compensation or (ii) in the preceding year. The term "compensation" means compensation under Section 13.05, and shall include reductions described in Sections 3.03 and 3.04 of the Aon Savings Plan or for cafeteria plans under Section 125 of the IRC. The following rules shall apply: (a) Five-percent owner. Such term shall also include an employee who was a five-percent owner (as defined at Section 16.2(b)) at any time during either the preceding year or the current year. (b) Top-paid group. The "top-paid group" is the group consisting of the top 20 percent of employees ranked on the basis of compensation paid during the year. For purposes of determining the number of employees in the top paid group (but not for purposes of identifying the particular employees therein), or the number of officers taken into account under Subsection (c), below, there shall be excluded those employees who have not completed six months of service; employees who normally work either less than 17 1/2 hours per week or not more than six months during any year; employees who have not attained age 21; and except to the extent provided in regulations, employees included in a unit of employees covered by a collective bargaining agreement. (c) Officers. The highest paid officer shall always be treated as a Highly Compensated Employee; otherwise the number of officers so treated shall not exceed the lesser of (i) 50 employees or (ii) the greater of three employees or 10 percent of the employees. (d) Family members. Any individual who is a member of the family (i.e., the spouse, and lineal ascendants or descendants and their spouses) of a Highly Compensated Employee who is either a five-percent owner or one of the ten most highly compensated employees shall not be considered a separate 205 Exhibit 10(H) page 15 of 91 employee and his (or her) compensation (and any applicable contribution or benefit on behalf of such individual) shall be treated as if it were paid to (or on behalf of) such Highly Compensated Employee. This rule shall apply in determining the compensation of (or any contributions or benefits on behalf of) any employee for purposes of any Section of the IRC with respect to which a Highly Compensated Employee is defined by reference to IRC Section 414(q) (the provisions of which are set forth in this Section), except as provided in regulations and except in determining the portion of the compensation of a Participant which is under the integration level for purposes of IRC Section 401(l). (e) Former employees. A former employee shall be treated as Highly Compensated Employee if he was a Highly Compensated Employee either (i) when he separated from service or (ii) at any time after attaining age 55. (f) Nonresident Aliens. For purposes of this Section, employees who are nonresident aliens and who receive no earned income (within the meaning of Section 911(d)(2) of the IRC) from the Company which constitutes income from sources within the United States shall not be treated as employees. (g) Simplified Method for Determining Highly Compensated Employees. If an election by the Company under this Subsection applies to any year, in determining whether an employee is a Highly Compensated Employee for such year the first sentence of this Section shall be applied by substituting "$50,000" for "$75,000," and the $50,000 test for the top-paid group shall not apply. Such election shall not apply to any year unless at all times during such year, the Company maintained significant business activities (and employed employees) in at least 2 significantly separate geographic areas, and the Company satisfies such other conditions as the Secretary of the Treasury may prescribe. (h) Coordination with Other Provisions. Section 13.02 shall be applied before the application of this Section 2.15. 2.16 "HOURS OF SERVICE" in respect to an Employee shall refer to the hours for which the Employee is directly or indirectly paid, or entitled to payment, for the performance of duties or for a period of time during which no duties are 206 Exhibit 10(H) page 16 of 91 performed during the applicable computation period and such hours shall include any hours for which back pay, irrespective of mitigation of damages, has either been awarded or agreed to; provided, however, no more than 501 Hours of Service shall be credited to an Employee on account of any single continuous period (irrespective of whether such period occurs in a single computation period, and irrespective of whether the employment relationship has terminated) during which the Employee performs no duties. Hours shall not be credited for payments made or due under a Plan maintained solely for the purpose of complying with applicable workman's compensation, unemployment compensation or disability insurance laws, or for a payment which solely reimburses an Employee for medical or medically related expenses incurred by such Employee. In those instances where payroll or other Company records do not reflect the actual number of hours worked by an Employee, such Employee shall be credited with 45 Hours of Service for each calendar week that he would be required to be credited with at least one Hour of Service under the preceding portion of this Section. This Section shall be applied, in respect to payments for reasons other than the performance of duties and in respect to crediting of Hours of Service to a Particular computation period, in accordance with the rules set forth in Labor Department Regulations Section 2530.200(b)-2(b) and (c), which are incorporated herein by reference. 2.17 "IRC" shall refer to the Internal Revenue Code of 1986, as from time to time amended. 2.18 "LEASED EMPLOYEE" shall refer to an individual, other than an employee of the Employer or an affiliated employer (the "recipient employer"), who, pursuant to an agreement between the recipient employer and any other person (the "leasing organization") has performed services for the recipient employer (or the recipient employer and related persons determined in accordance with Section 414(n) of the IRC) on a substantially full-time basis for a period of at least one year, and such services are of a type historically performed by employment in the business field of the recipient employer. Contributions or benefits provided a leased employee by the leasing organization which are attributable to services performed for the recipient employer shall be treated as provided by the recipient employer. A leased employee shall not be considered an employee of the recipient employer if: 207 Exhibit 10(H) page 17 of 91 (a) such individual is covered by a money purchase pension plan providing: (i) a nonintegrated employer contribution rate of at least ten percent of compensation, but including amounts contributed pursuant to a salary reduction agreement which are excludible from the employee's gross income under Section 125, 402(e)(3), 402(h), or 403(b) of the Code, (ii) immediate participation, and (iii) full and immediate vesting; and (b) leased employees do not constitute more than 20% of the recipient employer's non-highly compensated work force, as defined in Section 414(n)(5)(C)(ii) of the Code. 2.19 "MAXIMUM OFFSET ALLOWANCE" shall mean the maximum offset allowance for a Participant under Section 401(1) of the IRC pursuant to regulations and rulings of the Secretary of the Treasury or his delegate. The Maximum Offset Allowance shall be calculated based upon one-half of one percent (.5%) of the Participant's Final Average Compensation multiplied by his Years of Service, up to but not in excess of 35 Years of Service, figuring "Final Average Compensation" so as not to exceed "Covered Compensation" based upon the definitions and rules under Section 1.401(l)-1(c)(7) of Treasury Regulations; provided, however, that Covered Compensation shall be the average of the Taxable Wage Bases (as defined pursuant to Section 3121(a)(1) of the IRC) for the 35 calendar years ending with the last day of the year in which a Participant attains Social Security Retirement Age (as defined at Section 13.05(n)), and assuming for any particular Plan Year that the Taxable Wage Base on January 1st will remain the same for all future years. 2.20 "NORMAL RETIREMENT BENEFIT" shall mean the monthly income for life of a Retired Participant pursuant to Section 4.01. 2.21 "NORMAL RETIREMENT DATE" shall mean a Participant's sixty-fifth (65th) birthday. 208 Exhibit 10(H) page 18 of 91 2.22 "PARTICIPANT" shall mean any Employee who is or becomes eligible to participate in the Plan pursuant to Section 3, but shall also mean a Retired or Terminated Participant, where the context so requires. 2.23 "PLAN" shall mean the Aon Pension Plan as from time to time amended or restated. 2.24 "PLAN YEAR" shall mean the annual accounting period of the Plan which shall be a 12-month period ending on December 31st of each year. 2.25 "RETIRED PARTICIPANT" shall mean a person who was a Participant but who has become entitled to retirement benefits under Section 4 of this Plan. 2.26 "RETIREMENT FUND" shall mean all assets held by the Trustee for the purpose of providing the benefits described in this Plan. 2.27 "TERMINATED PARTICIPANT" shall mean a person who was a Participant but whose employment terminated and who is not eligible for Normal Retirement Benefits under Section 4 of this Plan, although he may be eligible or become eligible for payment of a vested retirement benefit under Section 5. 2.28 "TERMINATION DATE" shall mean the date on which a Participant ceases to be an Employee for reasons other than death or retirement on or after his Normal Retirement Date. 2.29 "TRUST AGREEMENT" OR "TRUST" shall refer to the "Combined Group of Companies Employees' Retirement Trust," as from time to time amended, as set forth in an agreement between the Company and The Northern Trust Company dated December 28, 1973. 2.30 "TRUSTEE(S)" shall mean the person, persons, corporation, association, or a combination of them, or their successors, who shall accept the appointment of the Board to execute the duties of Trustee under the Trust Agreement. The Trustee is designated as the named fiduciary with respect to the control, management and investment of the assets of the Trust for the purposes of ERISA. 209 Exhibit 10(H) page 19 of 91 2.31 "YEARS OF SERVICE" shall, except as hereinafter provided, refer to a 12- month period during which an Employee has not less than 1,000 Hours of Service in the employment of the Employers. For purposes of eligibility under Section 3, computation of any 12-month period shall be made with references to the date on which the Employee's employment commenced and each anniversary of such date. For all other purposes, it shall coincide with the Plan Year. Notwithstanding the foregoing, the following special rules shall be applied for the purpose of determining an Employee's or a Participant's Years of Service: (a) In the case of an Employee who was a Participant in the Combined Pension Plan on December 31, 1975, service prior to January 1, 1976, that was not a part of a period of Continuous Service as of December 31, 1975, (as defined by the Combined Pension Plan prior to January 1, 1976) shall not be counted, but service that was Continuous Service as of December 31, 1975, shall be counted and a fractional year of such service in excess of 6 months shall be counted as a full Year of Service. (b) In the case of an Employee whose employment was terminated before he acquired any vested interest who again becomes a Participant by reason of reemployment after a 1-Year Break in Service, Years of Service prior to such break in service shall not be taken into account if the number of consecutive 1-Year Breaks in Service equals or exceeds the greater of (a) the aggregate number of such Years of Service before the break in service; or (b) five. Such aggregate number of Years of Service before such break shall not include any Years of Service not taken into account by reason of any prior break in service. (c) In the event of employment in a bargaining unit described in Section 3.02(d), the rules set forth in Section 3.05 shall apply. (d) In the event of employment outside the United States or its possessions, the rules set forth in Section 3.06 shall apply. (e) In the event of employment as a Field Sales Agent the rules set forth in Section 3.07 shall apply. 210 Exhibit 10(H) page 20 of 91 (f) Solely for the purpose of determining a Participant's vested or non- forfeitable interest in his Accrued Retirement Income, and subject to the limitations of subsection (f) of this section, an Employee shall be deemed to have earned a Year of Service for each calendar year prior to the date he became an Employee during all of which he rendered services to the Employers as an insurance agent in the Superior Policy Division in a capacity other than that of an Employee (i.e. an independent contractor) and was compensated with respect to such service on a commission basis. (g) In the case of an Employee ineligible for participation prior to January 1, 1988, because his employment began on or after age 60, such Employee's service prior to January 1, 1988, shall be taken into account. 2.32 "1-YEAR BREAK IN SERVICE" shall refer to a 12-month consecutive period during which an Employee has not completed more than 500 Hours of Service. For purposes of eligibility under Section 3, computation of such 12-month period shall be made with reference to the Employee's employment commencement date (or, where appropriate, reemployment commencement date) and each anniversary of such date. For all other purposes, it shall coincide with the Plan Year. For purposes of this Section only, Hours of Service shall include up to 501 Hours of Maternity or Paternity Leave, to be treated as Hours of Service only in the Plan Year in which such absence from work begins if the Employee would be prevented from incurring a Break in Service in such Plan Year solely because periods of absence are treated as Hours of Service as provided under this clause, and in any other case in the immediately following Plan Year; provided, however, that such hours shall be figured based upon the Hours of Service which otherwise would normally have been credited to the Participant but for such absence and eight Hours of Service per day shall be credited in any case where such normal crediting of Hours of Service cannot be calculated; provided further, that the Trustees may require the Participant to furnish such timely information as may reasonably be required so as to establish that the absence from work is for Maternity or Paternity Leave and to establish the number of days for which there was such an absence. "Maternity or Paternity Leave" shall mean an absence from work by reason of pregnancy of the Participant, by reason of the birth of a child of the Participant, by reason of placement of a child with the Participant in connection with its adoption by him or her, or for purposes of caring for such child for a period beginning immediately following such birth or placement. 211 Exhibit 10(H) page 21 of 91 SECTION 3 - ELIGIBILITY 3.01 INITIAL COVERAGE. Each Employee who was a Participant hereunder on December 31, 1988, shall continue his status as a Participant hereunder. 3.02 COVERAGE AFTER DECEMBER 31, 1988. Each present or future Employee who is not eligible to participate pursuant to the Provisions of Section 3.01 hereof shall be eligible for participation hereunder as of the first day and the first Plan Year beginning after December 31, 1988, that he shall have met the following requirements: (a) He must complete one Year of Service prior to the first day of July of such Plan Year; and (b) He must attain his 21st birthday prior to the first day of July of such Plan Year; and (c) He must be employed within the United States or its possessions on a permanent basis as determined under Section 3.06; and (d) He must not be (unless otherwise expressly provided by the bargaining agreement) included in a unit of employees covered by a collective bargaining agreement between employee representatives and one or more employers where retirement benefits were the subject of good faith bargaining between such employee representatives and such employer or employers. 3.03 TERMINATION OF EMPLOYMENT. Any Participant whose employment with the Employers is terminated for any reason whatsoever, shall cease to be eligible to participate hereunder. Any Participant whose employment with the Employers is terminated shall, in the event of his later reemployment as an Employee, again become a Participant on the first day of his reemployment, provided he meets the requirements of Section 3.02(c) and (d), unless his prior service is not taken into account under the rule set forth in Section 2.31(b). 3.04 LEAVE OF ABSENCE. An Employee who receives an Authorized Leave of Absence shall continue to be regarded as an Employee during such leave of absence; 212 Exhibit 10(H) page 22 of 91 however, he shall not earn Hours of Service during a period of unpaid Authorized Leave of Absence except to the extent that may be required by federal law governing veterans' reemployment rights or under Section 2.32 relating to Maternity or Paternity Leave. The Employers shall provide the Committee with all information with reference to leaves of absence. The determination made by or caused to be made by the Employers shall be conclusive and binding upon all persons having any interest in the Trust. 3.05 EMPLOYMENT IN BARGAINING UNIT. In the event an Employee is transferred to a bargaining unit described in Section 3.02(d) the following rules shall apply: (a) He shall not accrue any retirement benefits hereunder while employed in such bargaining unit. (b) Compensation paid to him for service in such bargaining unit shall be disregarded in determining his Final Average Earnings. (c) His Years of Service in such bargaining unit shall be counted for the purpose of determining his vested or non-forfeitable interest in his Accrued Retirement Income in the event his employment terminates prior to his Normal Retirement Date. (d) His service in such bargaining unit shall in no event be considered for the purpose of determining his Normal Retirement Benefit under Section 4.01 or his Accrued Retirement Income, it being the express intent hereof that his service in such bargaining unit shall be counted for the purpose of determining his non-forfeitable percentage but not for the purpose of increasing the amount of benefits to which such percentage shall apply. (e) An Employee who becomes employed in a bargaining unit because of the recognition of a representative for such unit shall be deemed to be transferred to such unit. 3.06 EMPLOYMENT OUTSIDE UNITED STATES. In the event an Employee is or was transferred to or from the United States the following rules shall apply: 213 Exhibit 10(H) page 23 of 91 (a) Except as provided under (e) of this Section, he shall not accrue any retirement benefits hereunder while employed outside the United States. (b) Except as provided under (e) of this Section, compensation paid to him for service outside the United States shall be disregarded in determining his Final Average Earnings. (c) His Years of Service outside the United States shall be counted for the purpose of determining his vested or non-forfeitable interest in his Accrued Retirement Income in the event his employment terminated prior to his Normal Retirement Date. (d) Except as provided under (e) of this Section, his service outside the United States shall in no event be considered for the purpose of determining his Normal Retirement Benefit under Section 4.01 or his Accrued Retirement Income, it being the express intent hereof that his service outside the United States shall be counted for the purpose of determining his eligibility to participate hereunder and his non-forfeitable percentage but not for the purpose of increasing the amount of benefits to which such percentage shall apply. (e) If he is transferred from the United States on a temporary basis, he shall be deemed to continue as being employed within the United States on a permanent basis until such time as his transfer becomes permanent. (f) The determination of when an Employee is employed within the United States on a permanent basis, when a transfer from the United States is or become permanent, and when a transfer to or from the United States is temporary, shall be made by the Employer and such determination shall be conclusive and binding on all persons having any interest in the Trust. (g) As used in this Section the term "United States" includes possessions of the United States. 3.07 EMPLOYMENT AS FIELD SALES AGENT. In the event an Employee was employed or becomes employed as a Field Sales Agent the following rules shall apply: 214 Exhibit 10(H) page 24 of 91 (a) He shall not accrue any retirement benefit hereunder while employed as a Field Sales Agent. (b) Compensation paid to him for services a Field Sales Agent shall be disregarded in determining his Final Average Earnings. (c) His Years of Service as a Field Sales Agent shall be counted for the purpose of determining his vested or non-forfeitable interest in his Accrued Retirement Income in the event his employment terminates prior to his Normal Retirement Date. (d) His service as a Field Sales Agent shall in no event be considered for the purpose of determining his Normal Retirement Benefit under Section 4.01 or his Accrued Retirement Income, it being the express intent hereof that his service as a Field Sales Agent shall be counted for the purpose of determining his eligibility to participate hereunder and his non-forfeitable percentage but not for the purpose of increasing the amount of benefits to which such percentage shall apply. 3.08 TRANSFER TO MEMBER THAT IS NOT AN EMPLOYER. If an Employee is or was transferred to a member of the Aon group that is not an Employer hereunder, he shall continue to be treated as being employed by member of the Aon group that has adopted this Plan in the same manner as though such transfer had not been made and for the purpose of determining his Normal Retirement Benefit the member of the Aon group to which he transferred shall be deemed to be an Employer and have adopted this Plan. This Section shall not apply to an Employee whose employment with a member of the Aon group is terminated and who subsequently is reemployed by a non-adopting member of the Aon group. 215 Exhibit 10(H) page 25 of 91 SECTION 4 - DETERMINATION OF RETIREMENT BENEFITS 4.01 NORMAL RETIREMENT BENEFIT. Each Participant who is employed in the service of the Employer on his Normal Retirement Date and who retires on or after his Normal Retirement Date shall be entitled to receive a monthly Normal Retirement Benefit, beginning on the fifteenth (15th) day of the month next following his actual retirement and continuing for his life, equal to one-twelfth (1/12th) of the following: (a) one percent (1%) of the Participant's Final Average Earnings A multiplied by his Years of Service, plus one percent (1%) of the the excess, if any, of Final Average Earnings over Final Average Earnings A multiplied by his Years of Service accrued after January 1, 1993; plus (b) three-quarters of one percent (.75%) of the Participant's Final Average Earnings A multiplied by his Years of Service accrued after January 1, 1989, up to but not in excess of 25 Years of Service, plus three-quarters of one percent (.75%) of the excess, if any, of Final Average Earnings over Final Average Earnings A multiplied by his Years of Service accrued after January 1, 1993, up to but not in excess of 25 Years of Service less the number of Years of Service credited between January 1, 1989, and January 1, 1993; minus (c) the Participant's Maximum Offset Allowance. 4.02 Notwithstanding any other provision in the Plan, each section 401(a)(17) employee's accrued benefit under this Plan will be the sum of: (a) the Employee's accrued benefit as of the last day of the last plan year beginning before January 1, 1994, frozen in accordance with section 1.401(a)(4)-13 of the regulations, and (b) the Employee's accrued benefit determined under the benefit formula applicable for the Plan Year beginning on or after January 1, 1994, as applied to the Employee's Years of Service credited to the Employee for Plan Years beginning on or after January 1, 1994, for purposes of benefit accruals. 216 Exhibit 10(H) page 26 of 91 A section 401(a)(17) employee means an employee whose current accrued benefit as of a date on or after the first day of the first Plan Year beginning on or after January 1, 1994, is based on Compensation for a year beginning prior to the first day of the first Plan Year beginning on or after January 1, 1994, that exceeded $150,000. 217 Exhibit 10(H) page 27 of 91 SECTION 5 - VESTED INTEREST 5.01 ELIGIBILITY FOR FULL VESTING. A Terminated Participant who has completed the required number of Years of Service and whose employment is terminated (for any reason other than death) prior to his Normal Retirement Date, shall be entitled to receive a monthly vested retirement benefit commencing with the fifteenth (15th) day of the month next following his Normal Retirement Date, if he is then living. 5.02 AMOUNT OF MONTHLY BENEFIT. The amount of monthly vested retirement benefit which shall be paid to a Terminated Participant with one or more Hours of Service on or after January 1, 1989, and eligible therefor pursuant to Section 5.01 shall be a percentage of his Accrued Retirement Income equal to the percentage determined under the following table: Full Years of Service Non-forfeitable Percentage --------------------- -------------------------- Less than 5 0% 5 or more 100% 5.03 SPECIAL RULES. In determining a Participant's vested benefit under this Section, the following rules shall apply: (a) The Accrued Retirement Income and the vested retirement benefit of a Participant shall not be less than his benefit as of December 31, 1988. (b) Except as provided in Section 7.11, in the event a Terminated Participant again becomes a Participant his Accrued Retirement Income shall be determined as of the date his employment last terminated but shall in no event be less than his Accrued Retirement Income at the time of any prior termination of employment. (c) For a Participant formerly in the LOV Pension Plan (as discussed at Section 18.03 and not under the career average formula therein), such benefit as described at Section III B.I. thereof but counting credited Service only through December 31, 1988 shall be (a) 1.5% times final average compensation times years of credited service up to 25 years, less (but not 218 Exhibit 10(H) page 28 of 91 below zero) (b) 2% times his primary social security benefit at age 65 times years of credited service up to 25 years, plus (c) .5% times final average compensation times total years of credited service. (d) For a Participant previously in the MMD Pension Plan (as discussed at Section 18.04), such benefit as described at Section 4.1 thereof but counting credited service only through December 31, 1988, shall be (a) 1.6% times average monthly compensation times years of credited service up to 25 years plus .5% times average monthly compensation times total years of credited service in excess of 25 years; less (b) 2.5% times his primary social security benefit at age 65 times years of credited service up to 25 years; (c) prior to Normal Retirement Date the accrued benefit of a participant shall be calculated by assuming credited service to Normal Retirement Date and then multiplying the excess of (a) over (b) by a fraction the numerator of which is the Participant's actual years of credited service on December 31, 1988 and the denominator of which is the number of years of credited service he would have accrued if his employment had continued uninterrupted to his Normal Retirement Date; (d) provided, however, that a Participant's accrued benefit shall be offset by the amount set forth in Appendix A to the Pension Plan, i.e., the actuarial equivalent of his June 30, 1982, account balance in the MMD Money Purchase Pension Plan, but said offset shall not exceed the Participant's accrued benefit figured as set forth at (c) but reduced by substituting "May 1, 1982" for "December 31, 1988". 5.04 EARLY COMMENCEMENT ELECTION. A Terminated Participant whose employment is terminated prior to his Normal Retirement Date may elect to have his deferred vested retirement benefit commence on the fifteenth (15th) day of any month after his 55th birthday, in which case he will be entitled to a vested retirement benefit computed under Section 5.02 but reduced as follows, if at all, for each year payable prior to the fifteenth (15th) day of the month next following his Normal Retirement Date to reflect the early commencement of such benefits: (a) For a vested retirement benefit commencing on or after the fifteenth (15th) day of the month next following his Normal Retirement Date, there shall be no reduction in the Terminated Participant's vested retirement benefit. 219 Exhibit 10(H) page 29 of 91 (b) For a vested retirement benefit commencing on or after the fifteenth (15th) day of the month next following his sixtieth (60th) birthday but prior to the date sixty (60) months thereafter, there shall be a reduction in the Terminated Participant's vested retirement benefit of four percent (4%) for each year or portion thereof payable prior to the fifteenth (15th) day of the month next following his Normal Retirement Date. (c) For a vested retirement benefit commencing on or after the fifteenth (15th) day of the month next following his fifty-fifth (55th) birthday but prior to the date sixty (60) months thereafter, there shall be an additional reduction in the Terminated Participant's vested retirement benefit of six percent (6%) for each year or portion thereof payable prior to the fifteenth (15th) day of the month next following his sixtieth birthday. (d) Any early vested retirement benefit for a Participant as figured above shall not be less than the sum of the following two amounts: (i) his vested retirement benefit as of December 31, 1988, reduced under the prior reduction formula in effect on such date, plus (ii) his vested retirement benefit calculated under Section 5.01 for service after December 31, 1988 (but taking all service into account in figuring the 35-year cap under Sections 2.19 and 4.01(c)) reduced under the current formula set forth above. For Employees of Combined Life Insurance Company of New York the reduced vested retirement benefit payable under this Section shall in no event exceed the benefit payable under the rules and regulations of the New York State Insurance Department. 5.05 CHANGE IN TOP-HEAVY STATUS. If the Plan becomes subject to Section 17 and subsequently ceases to be such, the vesting schedule in Section 17.04 shall continue to apply in determining the amount of monthly vested retirement benefit of any Participant who had at least three Years of Service as of December 31st in the last Plan Year of top-heaviness. For other Participants, said schedule shall apply only to their accrued benefit as of such December 31st. 220 Exhibit 10(H) page 30 of 91 SECTION 6 - DEATH BENEFITS 6.01 AMOUNT OF DEATH BENEFIT. Except as provided in Section 7, no death benefits or survivor benefits shall be paid upon the death of a Participant or former participant. 221 Exhibit 10(H) page 31 of 91 SECTION 7 - FORM OF PAYMENTS 7.01 NORMAL FORM OF PAYMENT. Except as provided in Section 7.03, the normal form of payment of any monthly retirement benefit shall be a straight life annuity commencing on the date indicated in Section 4 or 5 (as may be applicable). 7.02 120 PAYMENT CERTAIN OPTION. Anything herein contained to the contrary notwithstanding, in every instance in which monthly retirement benefits are payable to a Retired or Terminated Participant under Section 4 or 5 he may elect to receive such retirement benefits as a life annuity with 120 payments certain. In any such instance, the monthly retirement benefit shall be reduced to the actuarial equivalent of the straight life annuity provided by the normal form. An election under this Section must be filed with the Committee not more than 90 days before retirement benefits are to commence. If the Retired or Terminated Participant dies prior to the day he is entitled to receive his first monthly payment, the election under this Section shall be of no effect and no payments shall be made to his Beneficiary. All distributions under this Section shall be subject to Section 7.13. 7.03 PAYMENT IN QUALIFIED JOINT AND SURVIVOR FORM. Notwithstanding the provisions of Sections 7.01 and 7.02, if a Participant is legally married under the laws of any jurisdiction on the date retirement benefits described in Section 4 or 5 are to commence, then, in lieu of the form and amount of retirement benefit provided by Section 7.01 or 7.02, the retirement benefit of such Participant shall be paid in the form of a Qualified Joint and Survivor Annuity (as defined below) with the spouse of such Participant unless the Participant and his spouse have elected, as provided in Section 7.06, to have his retirement benefits paid to him pursuant to Sections 7.01, 7.02, 7.04 or 7.05. For the purposes of this Plan, the term "Qualified Joint and Survivor Annuity" means an annuity for the life of the Participant with a survivor annuity for the life of his spouse which is equal to one-half of the amount of the annuity payable during the joint lives of the Participant and his spouse and which is actuarially equivalent ot the annuity for the life of the Participant which he would otherwise be entitled to receive under the normal form. 222 Exhibit 10(H) page 32 of 91 7.04 ALTERNATE JOINT AND SURVIVOR FORM. In addition to the 50% Qualified Joint and Survivor Annuity form under Section 7.03 for the Participant and his spouse, a Participant may elect a joint and survivor form with a survivor annuity of 50% (for a contingent annuitant other than the spouse), 75% or 100% of the annuity payable during the joint lives of the Participant and his designated contingent annuitant. If the specified fraction is 75% or 100%, evidence of the Participant's good health must be submitted to the Committee if the annuity starting date is prior to the Participant's Normal Retirement Date. Spousal consent under Section 7.14 shall not be required unless the contingent annuitant is a person other than the spouse. 7.05 SOCIAL SECURITY ADJUSTMENT OPTION. In order that a Participant who retires under the Plan, prior to the earliest date upon which his primary insurance benefits may commence under the Social Security Act, may receive a more level income where the monthly lifetime annuity payable under Section 7.01 is taken together with the Participant's estimated primary insurance benefit under the Social Security Act commencing at age 62, such Participant may elect to convert a portion of his lifetime annuity to an actuarial equivalent temporary annuity. The temporary annuity shall provide for monthly payments, commencing at the Participant's retirement date, provided that he is then living, and terminating with the monthly payment next preceding the earlier of (i) the date of the Participant's death or (ii) age 62. Such election may be made by filing a proper written authorization with the Committee before the date upon which the annuity payments are to commence to the Participant. 7.06 ELECTION NOT TO RECEIVE QUALIFIED JOINT AND SURVIVOR ANNUITY. A Participant, Retired Participant or Terminated Participant may elect to have his retirement benefits paid to him pursuant to Sections 7.01, 7.02, 7.04 or 7.05 instead of the Qualified Joint and Survivor Annuity form under Section 7.03. Any such election shall be made in writing and filed with the Committee on such form as the Committee may determine, subject to spousal consent under Section 7.14, and shall not be effective unless filed with the Trustees within 90 days of the date retirement benefits commence. 7.07 REVOCATION OF ELECTION NOT TO RECEIVE QUALIFIED JOINT AND SURVIVOR ANNUITY. A Participant, Retired Participant or Terminated Participant, or his spouse, who has 223 Exhibit 10(H) page 33 of 91 elected not to receive his retirement benefits in the Qualified Joint and Survivor Annuity form, as provided in Section 7.06, may revoke such election at any time before retirement benefits commence. 7.08 SURVIVING SPOUSE BENEFIT. In the event of the death of a Participant, including a Retired Participant or a Terminated Participant, prior to his annuity starting date and after he has either attained his Normal Retirement Date under Section 4 or has earned a vested retirement benefit under Section 5, the surviving spouse of such deceased Participant shall be entitled to receive a survivor annuity. This survivor annuity shall be in the amount that would have been payable under Section 7.03 if the decedent had retired with a Qualified Joint and Survivor Annuity thereunder on the day before his death; provided, however, that if the Participant dies prior to age 55 the survivor annuity shall not be payable until the date he would have attained age 55, calculated as if the Participant had separated from service on the date of death, survived to age 55, and retired with a Qualified Joint and Survivor Annuity on the day before his death. Commencement of the surviving spouse benefit shall be delayed beyond the date when it would otherwise commence if the spouse so elects in writing, but not beyond the date on which the Participant would have attained age 70-1/2 and only if Section 7.07 does not apply. 7.09 LUMP SUM CASH OUT. In the event the actuarial equivalent of any monthly benefit pursuant to any of the provisions of this Plan expressed as a single sum is $3,500 or less, the Committee shall direct the Trustee, upon termination of the Participant's employment, to pay to the person entitled to such monthly benefit, in a single sum, the amount of such actuarial equivalent. If the payee is a Participant, any benefit that may hereafter become payable to him because of subsequent service as an Employee shall be reduced by the present value of the accrued benefit which was paid to him pursuant to this Section or shall be determined by disregarding the Years of Service with respect to which he has received payment, the method to be used to be the one which results in the lesser benefit. 7.10 USE OF ANNUITY POLICY. At such time as a retirement benefit becomes payable under this Plan, the Committee may, in its sole discretion, provide for the payment of such benefit by directing the Trustee to obtain an annuity policy from an insurance company that will provide the retirement benefit that is payable and 224 Exhibit 10(H) page 34 of 91 payment pursuant to the terms of any said policy shall be deemed to be payment pursuant to the terms of this Plan. The Trustee may retain ownership of any such policy or assign it to the Participant (or his surviving spouse, if applicable) and upon such assignment all further obligation to make payments pursuant to the terms of this Plan shall terminate. Any annuity policy obtained after July 31, 1983, shall be issued on a unisex basis and all the terms and conditions under any such contract, including benefits, premiums, options, loan values and cash surrender values, shall be the same for both male and female. Before any annuity policy is assigned by the Trustee it shall cause such policy to be made nontransferable by any person other than the Trustee. 7.11 RETURN TO WORK. (a) Except as provided below, the retirement benefits of an Employee receiving retirement benefits pursuant to Section 4 or 5 and rehired by a corporation which is a member of the same controlled group of corporations under Section 13.02 as the Employer as of the time benefits commenced, shall be suspended or shall continue to be suspended only for the calendar month in which the fifteenth (15th) day of the month next following his fifty-fifth (55th) birthday falls and calendar months thereafter, in which he completes 40 or more Hours of Service. (b) An Employee may request, and the Committee within a reasonable amount of time will render, a determination of whether specific contemplated employment would result in suspension of benefits. Requests for status determination shall be considered in accordance with the procedure under Section 13.04 for affording a review of the status determination. (c) No payment shall be withheld pursuant to this Section unless the Committee notifies the Employee, by personal delivery or first class mail, during the first calendar month in which the Plan withholds payments, that his benefits are suspended. Such notification shall contain a description of the specific reasons why benefit payments are being suspended, a general description of this Section relating to the suspension of payments, a copy of this Section and Section 7.13, and a statement to the effect that applicable Department of Labor regulations may be found in Section 2530.203-3 of Title 29 of the Code of Federal Regulations. In addition, the suspension notification shall inform 225 Exhibit 10(H) page 35 of 91 the Employee of the procedure under Section 13.04 for affording a review of the suspension of benefits. (d) An Employee rehired prior to his Normal Retirement Date may earn additional Years of Service subsequent to his return to work and until he retires on or after his Normal Retirement Date. Such period shall be taken into account in figuring his Normal Retirement Benefit or his vested retirement benefit, as may be applicable. (e) Benefits suspended under this Section shall resume (or shall begin, in the case of a working Employee who continues in employment after the fifteenth (15th) day of the month next following his fifty-fifth (55th) birthday and who has completed 40 or more Hours of Service per month thereafter as set forth in Subsection (b), above) no later than the first day of the third calendar month after the calendar month in which the Employee ceases to be subject to suspension of his benefits hereunder. The initial payment shall include the payment scheduled to occur in the calendar month when payments resume (or begin) and shall include any amounts withheld during the period between cessation of employment (or the beginning of a calendar month with less than 40 Hours of Service as provided at Section 7.12, as the case may be) and the resumption of payments. The full amount of such initial payment may be offset against the amount of any prior retirement benefits erroneously paid to the Employee after he had become subject to this Section, and subsequent benefit payments may be offset in the amount of 25% of the amount otherwise due, until the amount of such overpayment has been completely recovered. 7.12 WHEN PARTICIPANT DEEMED RETIRED. If a Participant continues to be employed after the fifteenth (15th) day of the month next following his fifty-fifth (55th) birthday but in any calendar month completes less than 40 Hours of Service, he shall, for the purposes of this Plan, be deemed to have retired on the first day of the month in which such event took place; provided, however, that the rules of Section 7.11 shall continue to apply in respect to any subsequent month in which he completes 40 or more Hours of Service. 226 Exhibit 10(H) page 36 of 91 7.13 GENERAL PROVISIONS GOVERNING DISTRIBUTIONS. Distributions to a terminated or retired Participant or Beneficiary of a deceased Participant pursuant to Section 4 or Section 5 shall be governed by the following: (a) Distributions (including distributions under any contract) made in periodic installments (which may be increased or accelerated) to a Retired Participant shall commence not later than April 1st of the calendar year following the calendar year in which he attains age 70-1/2. (b) Distributions made in periodic installments shall be made either: (i) over the life of the Participant or over the joint lives of the Participant and his Designated Beneficiary; or (ii) over a period certain not extending beyond the life expectancy of the Participant or the life expectancy of the Participant and his Designated Beneficiary. (c) Where distribution of the Participant's interest has begun under Section 7.13(b) and the Participant dies before his entire interest has been distributed to him, the remaining portion of such interest will be distributed at least as rapidly as under the method of distributions being used under Section 7.13(b) as of the date of his death. (d) If a Participant dies before the distribution of his interest has begun under Section 7.13(b), the entire interest of the Participant will be distributed within five years after his death except as described below: (i) If any portion of the Participant's interest is payable to (or for the benefit of) a Designated Beneficiary, such portion is to be distributed over the life of such Designated Beneficiary (or over a period not extending beyond the life expectancy of such Beneficiary), and such distributions begin not later than one year after the date of the Participant's death (or such later date as IRC regulations may prescribe), then for purposes of this Subsection such portion shall be treated as distributed on the date when such distributions began. 227 Exhibit 10(H) page 37 of 91 (ii) If such Designated Beneficiary is the surviving spouse of the Participant, distributions need not begin until the date on which the Participant would have attained age 70-1/2. If the surviving spouse dies before distributions to such surviving spouse begin, Section 7.13(d) shall be applied as if the surviving spouse were the Participant. Any amount paid to a child shall be treated as if it had been paid to the surviving spouse if such amount will become payable to the surviving spouse upon such child reaching majority (or other designated event permitted under IRC regulations). (e) The term "Designated Beneficiary" means any individual designated as a Beneficiary by the Participant. (f) Notwithstanding the provisions of Subsection (a) hereof, distribution to a Participant who has terminated his service, or who is a 5% owner [as defined in Section 17.02(b)] at any time during the 5-Plan-Year period ending in the calendar year in which he attains age 70-1/2, shall commence not later than the 1st day of April of the calendar year following the calendar year in which he attains age 70-1/2. If a Participant who has not terminated his service subsequently becomes a 5% owner after the calendar year in which he attains age 70-1/2, then distribution shall commence by April 1st of the calendar year following the Plan Year during which he became a 5% owner. Effective January 1, 1989, distribution to a Participant shall commence by April 1st of the calendar year following the calendar year in which he attains age 70-1/2, without regard to whether he has terminated his service; provided, that this rule shall not apply to a Participant age 70-1/2 or over on January 1, 1988 unless he has been a 5% owner at any time during the Plan Year ending during the calendar year when he attained age 66-1/2 or any subsequent Plan Year, nor shall it apply to any benefits with respect to which a designation is in effect as described in Section 7.13(h). (g) If any contract or annuity policy on the life of a terminated, deceased or retired Participant is distributed, such contract or annuity policy shall be endorsed to provide for payments thereunder in accordance with the preceding provisions of this Section. 228 Exhibit 10(H) page 38 of 91 (h) The foregoing provisions of this Section 7.13 shall not apply to distributions under a plan of distribution designated by a Participant in writing prior to January 1, 1984, which was permissible under the provisions of this Plan as in effect prior to the Amendment adding the provisions of the Tax Equity and Fiscal Responsibility Act of 1982. (i) Distribution to a Participant (or his Beneficiary) whose vested accrued benefit has a present value of $3,500 or less shall be made as soon as administratively convenient. (j) If the Beneficiary of the Participant is not his spouse the form of distribution must be one whereunder the present value of the retirement benefit payments projected to be made to the Participant, while living, is more than 50 percent of the present value of the total payments projected to be made to the Participant and the Participant's Beneficiary; provided, however, that this requirement shall be interpreted so as to comply with the incidental benefit rule of the IRC and the rules and regulations thereunder. (k) Except as provided in regulations, the provisions of IRC Section Section 401(a)(9) are hereby incorporated by reference to the extent not set forth in this Section. 7.14 SPOUSAL CONSENT. Any election by the Participant under Section 7.06 shall not take effect unless the spouse consents in writing to such election. Such consent must be given within the 90 day election period under Section 7.06, must acknowledge the effect of the election or designation, shall be to a specific Beneficiary and to a specific form of benefit, and be witnessed by a Plan representative or a notary public. Any consent shall be effective only as to such spouse. Such election shall take effect without the spousal consent only if it is established to the satisfaction of a Plan representative that the consent may not be obtained because there is no spouse, because the spouse cannot be located, or because of such other circumstances as the Secretary of the Treasury may by regulations prescribe. 7.15 NOTICE. The Trustees shall deliver a written explanation to each Participant or terminated Participant who will become entitled to receive vested retirement benefits on or about the date nine (9) months before he attains age 55 of the terms and conditions of the Qualified Joint and Survivor Annuity form and the 229 Exhibit 10(H) page 39 of 91 surviving spouse benefit, including the rights of the spouse under Section 7.14, and the effect of electing or not electing such a form of payment. The explanation shall include a general description of the eligibility conditions and other material features of the optional forms of benefit, including the relative values of such optional forms with the interest rate used in calculating such values. Notwithstanding the provisions of Sections 7.06 and 7.07, the period for such election or revocation thereof shall not expire until at least ninety (90) days after such notice has been given. Any Participant who has not had an election under Section 7.06 made available may elect (or his personal representative may elect in the event of his death) to receive the balance of his benefits in a form other than that of a Qualified Joint and Survivor Annuity or surviving spouse benefit at any time until ninety (90) days after notice of the availability of such election is given to such Participant (or to his personal representative). 7.16 JOINT AND SURVIVOR ANNUITIES AND SURVIVING SPOUSE BENEFITS TO FORMER PARTICIPANTS. Effective August 23, 1984, a Participant (including a Terminated Participant) who had at least one Hour of Service on or after September 2, 1974, to whom Section 205 of ERISA and IRC Section 401(a)(11) (as in effect on August 22, 1984) would not apply but for this Section, to whom the amendments made by Section 103 and 203 of the Retirement Equity Act of 1984 dealing with Qualified Joint and Survivor Annuities and Surviving spouse Benefits do not apply, whose annuity starting date has not occurred as of August 23, 1984, and who is still alive as of August 23, 1984, may elect to have the Provisions of Section 7 as in effect prior to August 23, 1984 apply. A Participant (including a Terminated Participant) who had at least one Hour of Service in any Plan Year beginning on or after January 1, 1976, to whom the amendments made by Section 103 and 203 of the Retirement Equity Act of 1984 dealing with Qualified Joint and Survivor Annuities and Surviving Spouse Benefits would not (but for this Section) apply who at the time of his separation from service had at least ten Years of Service under the Plan and had a non-forfeitable right at least a portion of his accrued benefit derived from Employer contributions, whose annuity starting date has not occurred as of August 23, 1984, and who is still alive as of August 23, 1984, may elect to have the qualified pre-retirement survivor annuity requirements of the amendments made by such Sections 103 and 203 apply. Any election under this Section may be made during the period beginning August 23, 1984, and ending on the earlier of the Participant's Annuity Starting Date or the 230 Exhibit 10(H) page 40 of 91 date of his death. Notice of the provisions of this Section shall be given at such time or times and in such manner as the Secretary of the Treasury may prescribe. 231 Exhibit 10(H) page 41 of 91 SECTION 8 - PLAN FUNDING 8.01 CONTRIBUTIONS. The Employers will make contributions from time to time to the Trustee under the Trust Agreement in amounts that are sufficient (as determined in accordance with the Plan funding method and policy adopted by the Employer) to provide the benefits provided hereunder and as are consistent with the provisions of Part 3 of Title I of ERISA. Participants shall not make contributions under the Plan. 8.02 FORFEITURES. All forfeitures arising under the Plan will be applied to reduce the Employer's contributions thereunder and shall not be used to increase the benefits any person would otherwise receive under the Plan. 232 Exhibit 10(H) page 42 of 91 SECTION 9 - RIGHTS TO AMEND OR DISCONTINUE CONTRIBUTIONS 9.01 CONTINUANCE OF CONTRIBUTIONS NOT ASSUMED. It is the expectation of the Employers that they will continue this Plan and the payment of its contributions hereunder indefinitely; but continuance of the Plan is not assumed as a contractual obligation and the right is reserved to each Employer at any time to discontinue its contributions hereunder. 9.02 RIGHT TO AMEND. Except as herein limited, the Company, by action of the Board, shall have the right to amend this Plan at any time to any extent it may deem advisable. Such amendment shall be stated in an instrument in writing approved by the Board. Upon delivery of such instrument to the Committee, this Agreement shall be deemed to have been amended in the manner set forth, provided, however, except as may be required to maintain this Plan as a qualified Plan under the IRC: (a) No amendment shall increase the duties or liabilities of the Trustees without their consent; (b) No amendment shall have the effect of vesting in the Employers any interest in or control over the Retirement Fund; (c) No amendment shall have the effect of depriving the surviving spouse or Beneficiary of a then deceased Participant of the right to receive the benefits to which such spouse or Beneficiary is entitled; (d) No amendment shall have the effect of depriving any then Retired Participant or active Participant who has then reached his Normal Retirement Date of the retirement income which he is entitled to receive; (e) No amendment shall have the effect of depriving any Terminated Participant of the benefits which he is entitled to receive; (f) No amendment shall have the effect of depriving any Participant of any benefit he would have been entitled to receive if he had terminated his employment immediately prior to such amendment; 233 Exhibit 10(H) page 43 of 91 (g) No amendment shall have the effect of decreasing the accrued benefit of Participant other than an amendment described in IRC Section 412(c)(8), or Section 4281 of ERISA. For purposes of the preceding sentence a plan amendment which has the effect of (i) eliminating or reducing a subsidy or an early retirement benefit (as defined in regulations), or (ii) eliminating an optional form of benefit with respect to benefits attributable to service before the amendment, shall be treated as reducing accrued benefits. In the case of a retirement-type subsidy, the preceding sentence shall apply only with respect to a Participant who satisfies (either before or after the amendment) the pre-amendment conditions for the subsidy. This Paragraph shall not apply, to the extent provided by regulations, to a plan amendment described in clause (ii) (other than a plan amendment having an effect described in clause (i)). 234 Exhibit 10(H) page 44 of 91 SECTION 10 - DURATION AND DISTRIBUTION ON TERMINATION 10.01 TERMINATION BY EMPLOYER. Unless otherwise terminated, as provided in paragraphs (a), (b), and (c), of this Section or Section 10.03, this Plan shall continue in perpetuity, or for such time as may be necessary to accomplish the purpose or which it is created. This Plan shall terminate upon the happening of any of the following events: (a) The Company, by appropriate resolution of its Board, elects to terminate this Plan; (b) An Employer shall elect to terminate its participation in the Plan or shall be judicially declared bankrupt or insolvent, or in the event of dissolution, merger, or consolidation of the Employer without provision for continuing this Plan; provided, however, in the event of dissolution, merger, or consolidation of the Employer, provision may be made by its successor for continuing this Plan and the substitution of such successor or successors for the Employer hereunder, in which event this Plan shall continue in full force and effect and further provided that termination shall be limited as described under Section 15.03. (c) There is a complete termination of this Plan within the meaning of Section 411(d)(3) of the IRC. 10.02 DISTRIBUTION ON COMPLETE TERMINATION. In the event this Plan shall terminate for any of the reasons set forth in Section 10.01(a) or (c), the Trustees shall, after payment of all expenses of liquidation, distribute the Retirement Fund in the manner and order set forth in Section 4044 of ERISA. This Trust shall continue as a liquidation trust until final distribution of all assets. 10.03 TERMINATION BY PENSION BENEFIT GUARANTY CORPORATION. In the event this Plan is terminated by reason of proceedings instituted by the Pension Benefit Guaranty Corporation under Section 4042 of ERISA, the Retirement Fund shall be distributed pursuant to the provisions of Section 402 of ERISA. 235 Exhibit 10(H) page 45 of 91 10.04 VESTING UPON TERMINATION. Except as provided in Section 11, upon the termination or partial termination of this Plan the rights of all affected Participants to benefits accrued to the date of termination or partial termination, to the extent funded as of such date, shall be non- forfeitable. 236 Exhibit 10(H) page 46 of 91 SECTION 11 - BENEFITS IN THE EVENT OF EARLY TERMINATION OF PLAN 11.01 PARTICIPANTS. Notwithstanding any provision in this Agreement to the contrary, the benefits provided by the Company's contributions for Participants whose anticipated annual retirement benefit provided by such contributions will exceed $1,500, but applicable only to the twenty-five highest paid Employees as of December 31, 1988 (including any such highest-paid Employees who are not Participants at that time but may later become Participants) shall be subject to the conditions hereinafter set forth. 11.02 MAXIMUM BENEFIT. Such benefits shall be paid in full which have been provided by the Company's contributions not exceeding the largest of the following amounts: (a) The Company contributions (or funds attributable thereto) which would have been applied to provide the benefits for the Employee of this Plan, as it existed prior to January 1, 1989, and as if the Plan had been continued without change. (b) $20,000 (c) An amount equal to 20% of the first $50,000 of the Participant's annual Compensation multiplied by the number of years between December 31, 1988, and (A) the date that the Plan terminates, or (B) if benefits become payable to a Participant described in Section 11.01 within ten years after December 31, 1988, the date the benefits of such Participant first become payable (if before the date of termination of this Plan), or (C) if benefits become payable to a Participant described in Section 11.01 after December 31, 1988, and if the full current costs of the Plan for the ten years starting December 31, 1988, have not been met, or if the full current costs have not been met on the dates referred to in (A) or (B) above, the date of the failure to meet the full current cost. (d) whichever of the following amounts shall apply: (i) for a Participant who owns, directly or indirectly, more than ten percent (10%) in value of either the voting stock of the Company or all the stock of the Company (applying the constructive ownership rules 237 Exhibit 10(H) page 47 of 91 of Section 1563(e) of the IRC without regard to Section 1563(e)(3)), a dollar amount which equals the present value of the benefit guaranteed for such Participant under Section 4022 of ERISA, as amended, or if the Plan has not terminated, the present value of the benefit that would be guaranteed if the Plan terminated on the date the benefit commences determined in accordance with regulations of the Pension Benefit Guaranty Corporation; or (ii) for a Participant not within Paragraph (i), above, a dollar amount which equals the present value of the maximum benefit described in Section 4022(b)(3)(B) of ERISA, as amended (determined on the date the Plan terminates or on the date benefits commence, whichever is earlier) without regard to any other limitations in Section 4022 of ERISA. 11.03 LIMITATION ON BENEFITS. If (1) this Plan is terminated within ten years after December 31, 1988, or (2) the benefits of any of the Participants described in Section 11.01 become payable within ten years from December 31, 1988, the benefits which any of the Participants described in Section 11.01 may receive from the Company's contributions shall not exceed the benefits set forth in Section 11.02. 11.04 TERMINATION OF EMPLOYMENT. If a Participant described in Section 11.01 leaves the employ of the Company or withdraws from participation in this Plan, the benefits which he may receive from the Company's contributions shall not at any time, within the first ten years after December 31, 1988, exceed the benefits set forth in Section 11.02. If, at the end of the ten-year period starting December 31, 1988, the full current costs for such ten years have not been met, the benefits such Participant may receive from the Company's contributions shall not exceed the benefits set forth in Section 11.02 until the first time that the full current costs of this Plan have been met. 11.05 DEATH BENEFITS. These conditions shall not restrict the full payment of any insurance, death or survivor's benefits on behalf of a Participant who dies while this Plan is in full effect and its full current costs have been met. 11.06 RETIREMENT BENEFITS. These conditions shall not restrict the current payment of full retirement benefits not exceeding those provided by the normal form called 238 Exhibit 10(h) Page 48 of 91 for by this Plan for any Retired Participant while this Plan is in full effect and its full current costs have been met. 11.07 LUMP SUM DISTRIBUTION. The conditions of this Section shall not restrict a lump sum distribution to a Terminated or Retired Participant of the benefits he may be entitled to receive, if this Plan is in full effect and its full current costs have been met at the time of the distribution and he enters into an agreement with the Trustees to the effect that in the event (a) the Plan terminates before December 31, 1998, or (b) a default occurs in the payment of the full current costs of the Plan for any Plan Year ending before December 31, 1998 he (or, in the case of his death, his estate) will repay to the Trustees a sum equal to the actuarial equivalent of the amounts by which his monthly retirement benefits under the Plan (under the normal form) would have decreased during his then remaining lifetime pursuant to the provisions of this Section 11. Such obligation to repay must be adequately secured, and if secured by property of the distributes, the distributes must agree that if the market value of the property falls below a certain percentage of the amount that would then be repayable if the Plan were then terminated he will deposit additional property necessary to sufficiently increase the value of the property held by the depositary. The agreement need not be secured if the fair market value of Plan assets is not less than the actuarial equivalent of all accrued benefits (whether or nor forfeitable) expressed as a single sum; provided, that the agreement shall provide for security to be provided in the future in the event that the fair market value of Plan assets subsequently, during the period covered by this Section, falls below the actuarial equivalent of all accrued benefits. 11.08 INTENT. This Section 11 is included in this agreement to conform to the requirements of Treasury Regulation Paragraph 1.401-4(c) and shall be applied in a manner consistent with such Regulation or any substitute therefor but shall cease to be effective at such time as the provisions of the Treasury Regulation Paragraph 1.401(c) or any substitute therefor are no longer effective or applicable. 239 Exhibit 10(H) page 49 of 91 SECTION 12 - ADMINISTRATIVE COMMITTEE 12.01 FORMATION AND MEMBERS. This Plan shall be administered by an administrative committee constituted of not less than three (3) and not more than seven (7) members. The Board shall have the right at any time and from time to time to appoint the members of the Committee and to remove any member of the Committee and appoint a successor member. Each member of the Committee shall serve until such time as he shall resign, die, or be removed by the Board and until his successor is appointed. In the event of the death, resignation or removal of any member acting hereunder, the Board may appoint a successor to fill such vacancy and such successor member, upon accepting such appointment by an instrument in writing delivered to the Company, shall without further action, become vested with all the rights, powers, discretion and duties of a member of the Committee with like effect as if originally named as a member hereunder. Each member of the Committee shall have the right at any time, by ten (10) days written notice to the other members then acting hereunder, and to the Company, to resign as a member hereunder. 12.02 CHAIRMAN AND SECRETARY. The Committee shall appoint a Chairman from among the members of the Committee and the Chairman shall preside at all meetings of the Committee, and shall have the right to vote on any matter to be determined by the Committee. The Committee shall also appoint a Secretary to the Committee, who need not be a member of the Committee, who shall keep an accurate record of all determinations of the Committee and perform such other duties as may from time to time be assigned to him by the Committee or the Chairman of the Committee. 12.03 ACTIONS OF THE COMMITTEE. All actions of the Committee shall be by majority vote of the entire Committee. No formal meetings need be called or held by such Committee if a majority of the then members of the Committee shall authorize and approve, by an instrument in writing, any action or decision agreed upon by such majority. 12.04 EXECUTION OF INSTRUMENTS. The Committee may designate any one or more of its members, or its Secretary, to sign any document, instrument or paper on behalf of the entire Committee. 240 Exhibit 10(H) page 50 of 91 12.05 REPORTS TO THE BOARD. The Committee shall furnish such reports and other information as may be required from time to time by the Board. 12.06 ADMINISTRATION OF THE PLAN. The Committee may, from time to time, establish rules and procedures for administration of the Plan not inconsistent with the Plan's provisions, and administer the Plan in accordance with such provisions and such rules and procedures. The Committee shall have the exclusive right and discretionary authority to construe the terms and provisions of the Plan, including without limitation, the power to construe or interpret disputed, ambiguous or uncertain terms, and such other powers as may be necessary to carry out the provisions of the Plan. The Committee shall also have the discretionary authority to determine all questions relating to the eligibility of Employees to participate in the benefits of the Plan and the amount of such benefits, and resolve all questions pertaining to the administration, interpretation and application of the Plan provisions. Actions taken in good faith by the Company, the Committee or an Employer shall be conclusive and binding on all interested parties as to all questions of interpretation and application under this Plan and as to all other matters arising out of the administration thereof, and shall be given the maximum possible deference allowed by the law. The Committee shall issue such directions to the Trustee as may from time to time be necessary to authorize the Trustee to make the payments provided for by this Plan. 12.07 LIABILITY OF MEMBERS. To the extent permitted by law, no member of the Committee shall ever be liable for any act or default of any predecessor member nor for any loss sustained through any error of judgment, but shall only be liable for his own willful default. No successor member acting hereunder shall be under any duty to examine into or take any action with reference to the prior action of any prior Committee acting hereunder. The Company shall indemnify and save harmless each member of the Committee and the Secretary to the Committee from the effects and consequences of his actions and conduct in his official capacity, except to the extent that such effects and consequences flow from his own willful conduct. 12.08 ALLOCATION OF DUTIES. The Committee, by its action, may allocate its fiduciary responsibilities among its members, and may designate persons other than its members to carry out its fiduciary responsibilities. The Committee, individual members of the Committee allocated specific fiduciary responsibilities, and 241 Exhibit 10(H) page 51 of 91 persons other than members of the Committee designated to carry out specific fiduciary responsibilities may employ one or more persons to render advice with respect to their responsibilities. If the Committee has allocated a specific fiduciary responsibility among its members, or has designated persons other than its members to carry out a specific fiduciary responsibility, it shall do the following things: (1) it shall make as a condition of such allocation or designation the fact that the Committee may terminate the allocation or designation at will; and (2) it shall report such allocation or designation to the Board who by its action, may order that such allocation or designation be terminated in which case it shall be done as soon as practicable. 12.09 INVESTMENTS. The Committee shall have no duty or obligation to supervise or control in any way the investments made by the Trustee under the Trust Agreement, but all fiduciary responsibility for investing and safeguarding the assets of the Plan shall reside solely with such Trustee. 242 Exhibit 10(H) page 52 of 91 SECTION 13 - ERISA PROVISIONS 13.01 SERVICE FOR PREDECESSOR. To the extent required by regulations that may be prescribed by the Secretary of the Treasury or his delegate, service for a predecessor shall be treated as service for the Employers. 13.02 CONTROLLED GROUP. To the extent required by Section 414(b), (c), (m), (n) and (o) of the Internal Revenue Code, all employees of the entities described therein shall be treated as employed by a single employer. If an Employee or former Employee becomes employed or was employed by any such entity that the Employer is a member of and such other member has not adopted this Plan, the following rules shall apply: (a) Upon becoming an Employee of the Employer, his prior service in the employment of another member of the controlled group shall be considered as though it was service for the Employer for the purpose of determining when he will become eligible for participation under Section 3 and for the purpose of determining his eligibility for a vested retirement benefit. (b) If he was previously an Employee of the Employers and a Participant under this Plan but did not have five Years of Service at the time such employment terminated, his subsequent service in the employment of another member of the controlled group shall be considered as though it was service for the Employers for the purpose of determining his eligibility for a vested retirement benefit under Section 5.02. (c) His service for such other member of the controlled group shall in no event be considered for the purpose of determining his Normal Retirement Benefit under Section 4.01 or his Accrued Retirement Income under Section 5.02, it being the express intent hereof that his service for another member of the controlled group that has not adopted this Plan shall be counted for the purpose of determining his non-forfeitable percentage but not for the purpose of increasing the amount of benefits to which such percentage shall apply. (d) He shall not be eligible to receive any benefits while employed by any other member of the controlled group, except as provided at Section 7.12. 243 Exhibit 10(H) page 53 of 91 (e) Remuneration paid to such person for services rendered to another member of a controlled group shall not be considered in determining his Final Average Earnings. 13.03 MERGER. This Plan shall not be merged or consolidated with any other Plan or the assets held under this Plan shall not be transferred to any other Plan, unless each Participant in the Plan would (if the Plan then terminated) receive a benefit immediately after the merger, consolidation or transfer which is equal to or greater than the benefit he would have been entitled to receive immediately before the merger, consolidation or transfer (if this Plan had then terminated) . 13.04 CLAIMS PROCEDURE. Pursuant to Section 503 of ERISA the following claims procedure is established: (a) A timely written application for benefits shall be filed with the Committee on a form prescribed by it. (b) if a Claim is denied, in whole or in part, written notice of such denial shall be furnished to the applicant setting forth, in a manner calculated to be understood by him, the following: (i) The specific reason or reasons for the denial; (ii) A specific reference to pertinent Plan provisions on which the denial is based; (iii) A description of any additional material or information necessary for the claimant to perfect the claim and an explanation of why such material or information is necessary; and (iv) An explanation of the claim review procedure. (c) An applicant whose claim has been denied in whole or in part (or his duly authorized representative) may appeal such denial to the Committee by making a written request for a review and may review pertinent documents and submit issues and comments in writing. A written request for review 244 Exhibit 10(H) page 54 of 91 must be filed within 120 days of the date an applicant has been notified of the denial or partial denial of this claim. (d) The decision on review shall be made promptly and within 60 days of receipt of the request for review, shall be in writing, and shall include specific reasons for the decision, written in a manner calculated to be understood by the applicant, and specific references to the pertinent Plan provisions on which the decision is based. 13.05 MAXIMUM ANNUAL BENEFIT. The annual benefits payable to a Participant under this Plan and any other qualified defined benefit plan adopted by the Employer shall in no event exceed the lesser of $90,000 (the "dollar" limitation) or 100% of the Participant's average compensation for his high three consecutive calendar years of participation (the "percentage" limitation). The following rules shall be effective in applying the provisions of this Section: (a) Both the $90,000 dollar limitation and the 100% percentage limitation referred to in the first sentence of this Section shall be adjusted for increases in the cost of living in accordance with regulations prescribed by the Secretary of the Treasury or his delegate; provided, however, that the 100% percent limitation shall be adjusted only in the case of adjusting any benefits under this Section, and no cost of living adjustments under this Subsection shall be taken into account before the year for which such adjustment takes effect. (b) If the annual benefit is payable in a form other than as a straight life annuity, an adjustment shall be made to the maximum permissible annual benefit, in accordance with regulations prescribed by the Secretary of the Treasury or his delegates so that it is equivalent to the maximum annual benefit payable as a straight life annuity. In determining the maximum annual benefit payable any ancillary benefit which is not directly related to retirement income benefits shall not be taken into account, and that portion of any joint and survivor annuity which constitutes a qualified joint and survivor annuity under Section 7.03 shall not be taken into account. (c) If the retirement income benefit begins before the Social Security Retirement Age, the determination as to whether the $90,000 dollar limitation referred to in the first sentence of this Section has been satisfied shall be made in 245 Exhibit 10(H) page 55 of 91 accordance with regulations prescribed by the Secretary of the Treasury or his delegate, by reducing the limitation so that such limitation (as so reduced) equals an annual benefit (beginning when such retirement income benefit begins) which is equivalent to a $90,000 annual benefit beginning at the Social Security Retirement Age. The reduction shall be made in such manner (as prescribed by the secretary of the Treasury or his delegate) as is consistent with the reduction for old-age insurance benefits commencing before the Social Security Retirement Age under the Social Security Act. (d) If the retirement income benefit begins after the Social Security Retirement Age, the determination as to whether the dollar limitation referred to in the first sentence of this Section has been satisfied shall be made in accordance with regulations prescribed by the Secretary of the Treasury or his delegate, by increasing the limitation so that such limitation (as so increased) equals an annual benefit (beginning when such retirement income benefit begins) which is equivalent to a $90,000 annual benefit beginning at the Social Security Retirement Age. (e) For the purpose of adjusting any benefit under Subsection (b) or (c), above, the interest rate assumption shall not be less than the greater of 5% or the rate specified in the Plan. For purposes of adjusting any benefit under Subsection (d), above, the interest rate assumption shall not be greater than the lesser of 5% or the rate specified in the Plan. (f) Notwithstanding the preceding provisions, the benefits payable with respect to a Participant shall be deemed not to exceed his limitation if they do not exceed $10,000 for the Plan Year, or for any prior Plan Year, and the Employer has not at any time maintained a defined contribution Plan in which the Participant participated. (i) if a Participant has less than 10 years of participation in the Plan, the $90,000 dollar limitation referred to in the first sentence of this Section shall be the limitation determined under such sentence (without regard to this Subsection (g)), multiplied by a fraction -- (A) the numerator of which is the number of years (or part thereof) of participation, and 246 Exhibit 10(H) page 56 of 91 (B) the denominator of which is 10. (ii) If a Participant has less than 10 years of service with the Employer, the 100% percentage limitation under the first sentence of this Section and the $10,000 limitation under Subsection (f) shall be adjusted by multiplying such amounts by a fraction -- (A) the numerator of which is the number of years (or part thereof) of service, and (B) the denominator of which is 10. (iii) In no event shall Paragraphs (i) or (ii), above, reduce either the dollar limitation or the percentage limitation under the first sentence of this Section, or the $10,000 limitation under Subsection (f), to an amount less than 1/10 of such limitation (determined without regard to this Subsection (g)). (iv) To the extent provided in regulations this Subsection (g) shall be applied separately with respect to each change in the benefit structure of the Plan. (g) In the event a Participant herein is a participant at any time in a defined contribution plan maintained by the Employer or a member of a controlled group, the sum of the defined benefit plan fraction and the defined contribution plan fraction for any year shall not exceed 1.0 but such limitation may be applied to first reduce benefits under this Plan before being applied to reduce annual additions under the defined contribution plan. For this purpose the defined benefit plan fraction for any year is: Projected annual benefit of the Participant under the Plan (determined as of the close of the year) ----------------------------------------------------------------- Lesser of: (a) 1.25 multiplied by the dollar limitation in effect for such year ($90,000 for 1987) or (b) 1.4 multiplied by the percentage limitation with respect to such individual under 247 Exhibit 10(H) page 57 of 91 the Plan for such year (100% of his average total compensation for his high 3 years). The defined contribution plan fraction for any year is: Sum of the annual additions to the participant's account as of the close of the year. -------------------------------------------------------------- The sum of the lesser of the following amounts determined for such year and for each prior year of service with the employer: (a) 1.25 multiplied by the dollar limitation in effect for such year ($30,000 for 1987) or (b) 1.4 multiplied by the percentage limitation with respect to such individual under the plan for such year (25% of his total compensation). Contributions by a Participant to any qualified cost-of-living arrangement (as defined under IRC Section 415(k)(2), as amended from time to time) under the Plan shall be treated as an annual addition for purposes of this Subsection (h). 248 Exhibit 10(H) page 58 of 91 (h) At the election of the plan administrator, in applying the defined contribution plan fraction under Subsection (h), above, with respect to any year ending after December 31, 1982, the denominator of the fraction with respect to each participant for all years ending before January 1, 1983, shall be an amount equal to the product of such denominator under the law in effect for the year ending in 1982 multiplied by the transition fraction. The transition fraction means a fraction whose numerator is 35% of the compensation of the participant for the year ending in 1981 (limited to $51,875) and whose denominator is 25% of such compensation (but more than $41,500). (i) Provided the Plan satisfied the requirements of IRC Section 415 for the last year beginning before January 1, 1983, and pursuant to regulations prescribed by the Secretary of the Treasury or his delegate, the numerator of the defined contribution plan fraction at Subsection (h) may be reduced so that the sum of the defined contribution plan fraction and the defined benefit plan fraction does not exceed 1.0 for such year. (j) In the case of an individual who is a participant before January 1, 1983, in a defined benefit plan which is in existence on July 1, 1982, and with respect to which the requirements of Section 415 of the IRC have been met for all years, if such individual's current accrued benefit under such plan exceeds the limitation of Subsection (b) of Section 415 as provided under the first sentence of this Section and under Subsections (a) through (g) hereof, then (in the case of such plan) for purposes of such IRC Section 415(b), and also for purposes of IRC Section 415(e) as provided under Subsections (h) through (j), hereof, the limitation of such IRC Section 415(b) with respect to such individual shall be equal to such current accrued benefit. The term "current accrued benefit" means the individual's accrued benefit (at the close of the last year beginning before January 1, 1983) under this Plan, which was in existence on July 1, 1982, when expressed as an annual benefit (within the meaning of Section 415(b)(2) of the IRC as in effect before the amendments made by the Tax Equity and Fiscal Responsibility Act of 1982). For purposes of determining the amount of any individual's current accrued benefit, no change in the terms and conditions of the Plan after July 1, 1982, and no cost-of-living adjustment occurring after July 1, 1982, shall be taken into account. 249 Exhibit 10(H) page 59 of 91 (k) In the case of an individual who was an active Participant in this Plan before October 3, 1973, his annual benefit need not be less than 100% of his annual rate of compensation on the earlier of October 2, 1973, or the date on which he separated from the service of the Employer; provided, that such annual benefit shall not exceed the benefit which would have been payable under the terms of the plan on October 3, 1973, if his compensation taken into account for any period after such date had not exceeded his annual rate of compensation on such date; and provided further, in the case of a Participant who separated from service prior to October 2, 1973, his annual benefit shall in no event be greater than his vested retired benefit as of the date he separated from service. (l) In addition to other limitations set forth in the Plan and notwithstanding any other provisions of the Plan , the accrued benefit, including the right to any option benefit provided in the Plan (and all other defined benefit plans required to be aggregated with this Plan under the provisions of IRC Section 415) shall not increase to any amount in excess of the amount permitted under IRC Section 415 as amended by the Tax Equity and Fiscal Responsibility Act of 1982. (m) In determining under which Plan the contributions or other annual additions, or benefits, of a Participant should be reduced under this Section, the intent is that the order of reduction set forth herein is for purposes of guidance only and not obligatory, and that such order of reduction as to one Participant may be different from another Participant, so as to afford maximum flexibility to the Plan in avoiding a violation of the provisions of Section 415 of the IRC. (n) For purposes of this Subsection, the term "Social Security Retirement Age" means the age used as the retirement age for the Participant under Section 216(l) of the Social Security Act, except that such section shall be applied without regard to the age increase factor, and as if the early retirement age under Section 216(l)(2) of such Act were 62. (o) In the case of an individual who is a Participant as of January 1, 1987, the dollar limitation of the Participant shall be equal to his Current Accrued Benefit if such Current Accrued Benefit exceeds the benefit limitations of this 250 Exhibit 10(H) page 60 of 91 Section and of IRC Section 415(b) of the IRC. The "Current Accrued Benefit" shall be the Participant's accrued benefit under the Plan when expressed as an annual benefit under IRC Section 415(b)(2), determined as if he had separated from service as of December 31, 1986, but disregarding any changes in the terms and conditions of the Plan, or any cost-of-living adjustment, occurring after May 5, 1986. (p) Compensation shall include the following items: (i) The Participant's wages, salaries, fees for professional service and other amounts received for personal services actually rendered in the course of employment with an employer maintaining the plan (including but not limited to, commissions paid salesmen, compensation for services on the basis of a percentage of profits, commissions on insurance premiums, tips and bonuses). (ii) For purposes of the prior sentence, earned income from sources outside the United States. (iii) Amounts described in IRC Sections 104(a)(3), 105(a) and 105(h), but only to the extent that these amounts are includable in the gross income of the Employee. (iv) Amounts described in IRC Section 105 (d) , whether or not these amounts are excludable from the gross income of the Employee under that section. (v) Amounts paid or reimbursed by the Employer for moving expenses incurred by an Employee, but only to the extent that these amounts are not deductible by the Employee under IRC Section 217. (vi) The value of a non-qualified stock option granted to an Employee by the employer, but only to the extent that the value of the option is includable in the gross income of the Employee for the taxable year in which granted. 251 Exhibit 10(H) page 61 of 91 (vii) The amount includable in the gross income of an Employee upon making the election described in IRC Section 83(b). (q) Compensation shall not include the following items: (i) Contributions made by the Employer to a plan of deferred compensation to the extent that, before the application of the IRC Section 415 limitations to that plan, the contributions are not includable in the gross income of the employee for the taxable year in which contributed. In addition, Employer contributions made on behalf of an Employee to a simplified employee pension described in IRC Section 408(k) are not considered as compensation for the taxable year in which contributed to the extent such contributions are deductible by the Employee under IRC Section 219(b)(7). Additionally, any distributions from a plan of deferred compensation are not considered as compensation for IRC Section 415 purposes, regardless of whether such amounts are includable in the gross income of the Employee when distributed. However, any amounts received by an Employee pursuant to an unfunded non-qualified plan may be considered as compensation for IRC Section 415 purposes in the year such amounts are includable in the gross income of the Employee. (ii) Amounts realized from the exercise of a non-qualified stock option, or when restricted stock (or property) held by an Employee either becomes freely transferable or is not longer subject to a substantial risk of forfeiture (see IRC Section 83 and the regulations thereunder). (iii) Amounts realized from the sale, exchange or other disposition of stock acquired under a qualified stock option. (iv) Other amounts which receive special tax benefits, such as premiums for group term life insurance (but only to the extent that the premiums are not includable in the gross income of the Employee), or contributions made by an Employer (whether or not under a salary reduction agreement) towards the purchase of an annuity contract described in Section 403(b) (whether or not the contributions are excludable from the gross income of the Employee). 252 Exhibit 10(H) page 62 of 91 (r) Except as provided in regulations, the provisions of IRC Section 415 are hereby incorporated by reference to the extent not set forth in this Section. 253 Exhibit 10(H) page 63 of 91 SECTION 14 - MISCELLANEOUS PROVISIONS 14.01 SPENDTHRIFT CLAUSE. Except as provided in Section 14.02, benefits or payments from this Plan shall be paid to the individual entitled to receive them personally and upon his personal receipt or endorsement. No Participant, spouse or Beneficiary shall have the right or power to transfer, assign, anticipate, mortgage, pledge or otherwise encumber this interest in the Trust established by this Agreement, or his rights to receive payments or benefits from the Trust and neither such interests nor rights nor any assets of the Trust shall be subject to seizure or sequestration for the payment of any debts, judgments, alimony or separate maintenance owed by the Participant or Beneficiary nor to transferability by operation of law in the event of bankruptcy, insolvency or otherwise, provided, however, that this limitation shall not apply to a qualified domestic relations order under IRC Section 414(p). 14.02 FACILITY OF PAYMENT. If any person to whom payments are to be made under the Plan is in the judgment of the Committee or an insurance company that has issued an annuity policy pursuant to Section 7.10 under a legal disability, or by reason of mental or physical disability is in the opinion of the Committee or such insurance company unable to administer properly such payments, even though such person has not been legally adjudicated incompetent, then such payment or payments may be made to any person, persons, or institution as, in the option of the Committee or the insurance company, is then maintaining or has custody of such person until claim is made by a duly appointed guardian or other legal representative of such person. Such payment shall constitute a full discharge of liability of the Plan to the extent thereof. 14.03 EVIDENCE OF SURVIVAL. The Committee or an insurance company shall have the right to require satisfactory evidence that a person entitled to receive benefits hereunder is living on each and every date when a benefit is due such person. In the absence of such evidence, when required, any payments otherwise due shall not be made until such evidence shall have been received. 14.04 DISCRETIONARY ACTS TO BE UNIFORM. Any discretionary acts to be taken under the Plan by the Committee, or any person or persons to whom authority has been delegated, shall be uniform in their nature and applicable to all persons similarly 254 Exhibit 10(H) page 64 of 91 situated, and no discretionary acts shall be taken that will be discriminatory under the applicable provisions of the IRC pertaining to qualified plans. 14.05 ELECTIONS TO BE MADE ON PRESCRIBED FORMS. All elections, claims, designations, and revocations made by Participants or other persons under the Plan shall be made in writing on forms prescribed by and furnished by the Committee and shall not be effective until filed with the Committee. 14.06 RELIANCE ON INFORMATION FURNISHED BY EMPLOYER. Any information furnished by the Employer to the Committee, such as compensation of Employees, length of service, Hours of Service, or otherwise, shall be accepted by the Committee as being true and correct, and the Committee shall incur no liability in relying on such information. 14.07 INABILITY TO PERFORM. Neither the Employers nor the Committee shall be responsible for any inability to perform, or delay in performing, any act occasioned by any restriction or provisions imposed by the Trustee, or by any other person, or by law, and in the event any such inability or delay shall be so occasioned, then that act which can be performed shall be performed by the Employers or the Committee which, in the sole discretion of the Committee, most completely carries out the intention and purpose of this Plan. All parties of this Plan or in any way interested therein shall be bound by any acts so performed under such conditions. 14.08 MISSTATEMENT OF AGE. In the event an Employee misrepresents his age or his spouse's age to his Employer or the Committee, he shall be entitled to the lesser of the following benefits: (a) The benefit that would be payable on the basis of actual age; or (b) The benefit that would be payable on the basis of the misrepresented age. 14.09 RIGHTS OF INDIVIDUALS. No Employee, nor any person claiming by, through, or under such Employee, shall have any right, title, or interest in or to the Retirement Fund except such right to a benefit as expressly provided herein. No Employee shall be entitled to receive any part of the contributions of the Employers or any other cash consideration upon his withdrawal from the services 255 Exhibit 10(H) page 65 of 91 of the Employers, or the termination of his services by the Employers, unless otherwise provided herein, or upon the discontinuance of the Plan except to the extent provided herein. All rights and claims are limited as set forth hereunder and no Participant or other person shall have any recourse toward satisfaction or payment of any benefit provided by this Plan from other than the Retirement Fund or the Pension Benefit Guaranty Corporation. Nothing contained herein gives, nor is intended to give, any Employee the right to be retained in the service of the Employers, nor to interfere with the right of the Employers to discharge or terminate the employment of an Employee at any time and this Plan shall in no event be construed as a contract of employment between any Employer and the Employee. 14.10 ACTUARIAL COMPUTATIONS. The Committee, Trustees and the Employer shall be entitled to conclusively rely upon any actuarial computations or evaluations made by an insurance company or an actuary or a firm of actuaries. Except in case of a mathematical error, each Employee, or person claiming through any Employee, shall be conclusively bound by any actuarial computation or evaluation made by an insurance company or an actuary or a firm of actuaries, provided, however, the determination of an actuarial equivalent of another form of payment or the present value of future payments that may become payable shall be made on the basis of the following factors until such time as the applicable law or rulings of the Internal Revenue Service no longer requires fixed standards for actuarial assumptions used in determining actuarial equivalents to be set forth in the Plan: Table ----- Unisex Pension Table - 1984 (UP-1984) with a two year age setback, except that the age setback shall be one year for a contingent annuitant under a joint and survivor annuity option. Interest -------- Interest factor of seven and one-half percent (7.5%), except that single sum distributions shall be based upon an interest factor which shall be adjusted as of the first day of each calendar month to be the monthly annuity rate (immediate or deferred) of the Pension Benefit Guaranty Corporation for that calendar month. 256 Exhibit 10(H) page 66 of 91 The following rules shall apply to the interest factor: (i) In figuring whether the single sum actuarial equivalent under Section 7.09 exceeds $3,500, the interest rate used shall not exceed the Pension Benefit Guaranty Corporation ("PBGC") interest rate or rates for purposes of determining the present value of a lump sum distribution on plan termination, as in effect on the first day of that calendar month. (ii) In figuring whether such single sum actuarial equivalent exceeds $25,000, the interest rate shall not exceed 120% of the PBGC interest rate but such increase in the allowable PBGC rate may in no event cause the single sum actuarial equivalent to be less than $25,000. (iii) This Section shall apply to distributions in Plan Years beginning after December 31, 1986. The Section shall also apply to distributions in Plan Years beginning after December 31, 1984, which were not made in accordance with regulations issued under the Retirement Equity Act of 1984, other than distributions under an annuity contract distributed to or owned by a Participant prior to September 17, 1985, unless additional contributions were made by the Employer under such contracts. 14.11 NOTICE OF REQUIRED ACTION. In any case in which an Employer, the Committee, or the Trustee shall be directed to take any action upon the occurrence of any event, they, or any one or more of them, shall be under no obligation or liability to take such action unless and until notice, proper and satisfactory to them shall first have been received or the occurrence of such event. For the purposes of this Section 14.11, a certificate in writing signed by an officer of the Company and delivered to the Committee or the Trustee, or a certificate in writing from the Committee to the Trustee as to the occurrence or happening of any event, shall constitute conclusive evidence of such occurrence or happening, and the Committee and the Trustee, respectively, shall be fully protected and discharged from all liability whatsoever in accepting and relying on such certificate. No Trustee shall be required to go a back of any action of the Committee, and no Trustee shall be responsible to see that any action of the Committee is authorized by the terms of this agreement. 257 Exhibit 10(H) page 67 of 91 14.12 RELIANCE UPON COMMUNICATION. Neither the Employers, the Committee, nor any agent of the Trustees shall incur any liability in acting upon any notice, request, signed letter, telegram, or other paper or documents reasonably believed by any one of them to be genuine and to be signed or sent by the proper person. 14.13 NO REVERSION TO EMPLOYERS. The Employers shall in no event, either directly or indirectly, receive any fund or contributions made by it to the Trust, nor directly or indirectly participate in the distribution, or receive the benefits of the assets or funds comprising the Retirement Fund prior to the satisfaction of all liabilities with respect to Employees, beneficiaries, and spouses under this Plan; provided, however, if there are any assets remaining after all such liabilities have been satisfied they shall be returned to the Employers; provided, further: that (subject to the limitations of Revenue Ruling 91-4): (a) If a contribution is made by a mistake of fact, the mistaken portion of the contribution shall be returned within one year after payment of the mistaken contribution upon the Employer's written request; and (b) Each contribution by the Employer is conditioned upon the deductibility of the contribution under the applicable section of the IRC. Accordingly, to the extent of disallowance of the deduction for the part or all of the contribution, the contribution shall be returned within one year after disallowance upon the Employer's written request. Upon transfer to the Trustees, all responsibilities of the Employers for each contribution shall cease, and the Employer shall have no responsibilities for the acts of the Trustees. 14.14 INSURER NOT PARTY TO AGREEMENT. No insurance company (other than the Employers) shall be deemed a party to this Plan for any purpose. 14.15 CONSTRUCTION. It is intended that this Plan and the Trust Agreement which is a part thereof shall comply with the provisions of ERISA and constitute a qualified plan and trust under the Provisions of Section 401(a) of the IRC, and be operated in a manner so as not to discriminate in favor of Highly Compensated Employees as defined at Section 414(q) of the IRC. Accordingly, the provisions of this Plan and the Trust Agreement shall be construed and applied in a manner consistent 258 Exhibit 10(H) page 68 of 91 with such intent. However, to the extent not superseded by ERISA, this Plan and the Trust Agreement which is a part thereof, shall be construed and enforced in accordance with the laws of the State of Illinois. 14.16 SECTION TITLES NOT PART OF AGREEMENT. The section designations and titles are included solely for convenience and shall, in no event, be construed to affect or modify any of the provisions of this Agreement or be construed as a part thereof. 14.17 GENDER AND CASE. Where used in this Agreement, words in the masculine shall be read and construed as in the feminine, and words in the singular shall be read and construed as though used in the plural, in all cases where such constructions would so apply. Unless the context requires otherwise, such words as "herein" "hereto" "hereinafter" "hereinbefore" or "hereunder" refer to this instrument as a whole and not merely to the subdivisions in which such words appear. 14.18 ELIGIBLE ROLLOVER DISTRIBUTIONS. Effective with respect to distributions made on or after January 1, 1993, a distributee may elect, at the time and in the manner prescribed by the plan administrator, to have any portion of an Eligible Rollover Distribution paid directly to an Eligible Retirement Plan specified by the distributee in a Direct Rollover. For purposes of this Section 14.18: (a) An "Eligible Rollover Distribution" is any distribution of all or any portion of the balance to the credit of the distributee, except that an Eligible Rollover Distribution does not include: any distribution that is one of a series of substantially equal periodic payments (not less frequently than annually) made for the life (or life expectancy) of the distributee and the distributee's designated beneficiary, or for a specified period of ten years or more; any distribution to the extent such distribution is required under Section 401(a)(9) of the Code; and the portion of any distribution that is not includable in gross income (determined without regard to the exclusion for net unrealized appreciation with respect to employer securities). (b) An "Eligible Retirement Plan" is an individual retirement account described in Section 408(a) of the Code, an individual retirement annuity described in Section 408(b) of the Code, an annuity plan described in Section 403(a) of the Code, or a qualified trust described in Section 401(a) of the Code, that accepts the distributee's Eligible Rollover Distribution. In the case of an 259 Exhibit 10(H) page 69 of 91 Eligible Rollover Distribution to the surviving spouse, an Eligible Retirement Plan is an individual retirement account or individual retirement annuity. (c) A "Distributee" is an employee or former employee, the employee's or former employee's surviving spouse and the employee's or former employee's spouse or former spouse who is the alternate payee under a qualified domestic relations order, as defined in Section 414(p) of the Code. (d) A "Direct Rollover" is a payment by the Plan to the Eligible Retirement Plan specified by the Distributee. 260 Exhibit 10(H) page 70 of 91 SECTION 15 - ADOPTION OF PLAN BY SUBSIDIARY 15.01 ADOPTION OF PLAN. This Plan has been adopted by Combined Insurance Company of America, Combined American Insurance Company, Combined Insurance Company of Wisconsin, and Combined Life Insurance Company of New York. Any other Subsidiary of the Company, by proper resolutions adopted by its Board, or by an adoption agreement executed by a principal executive officer, may become a party to this instrument by adopting this Plan as its pension plan for its Staff Employees. A certified copy of such resolutions shall be delivered to the Trustees. 15.02 INTENTION OF PARTIES. The provisions of this Plan shall be construed as the pension plan of each of the Employers that may adopt this Plan as its pension plan and each such Employer shall contribute the cost attributable to its Employees, as may be determined by the Company. Except as otherwise may be provided herein, or as may be provided in the resolutions of an adopting Subsidiary, it is the intention of the parties hereto that the Employees of the Company and the Employees of any Subsidiary that adopts this Plan or has adopted this Plan shall receive the same benefits as they would receive if all the Employers were one corporate entity and this Plan were the plan of such entity, and the provisions of this Plan shall be interpreted in accordance with this intent. 15.03 TERMINATION BY ONE EMPLOYER. In the event any Employer discontinues the Plan in accordance with the provisions of Section 10, this Plan shall only be discontinued in respect to such Employer and its Employees but not in respect to the other Employers that have adopted the Plan; it being understood that the Plan shall continue in full force and effect as to any such other Employers and their Employees. 261 Exhibit 10(H) page 71 of 91 SECTION 16 - RIGHTS OF FORMER EMPLOYEES 16.01 RIGHTS OF FORMER EMPLOYEES. The rights of Employees whose employment terminated prior to January 1, 1989, shall be determined by the terms of the Plan as they existed prior to January 1, 1989; provided, however, that if any such individual again becomes an Employee his rights shall be determined by the terms of the Plan at the time he again becomes an Employee and such amendments thereto as may thereafter be adopted. 262 Exhibit 10(H) page 72 of 91 SECTION 17 - PROVISIONS APPLICABLE IF PLAN BECOMES TOP-HEAVY 17.01 APPLICABILITY. The provisions of this Section 17 shall be applicable during any Plan Year commencing subsequent to December 31, 1983, but only if the Plan was a Top-Heavy Plan or was part of a Top-Heavy Group on the Determination Date, and in such case shall override and supersede all other provisions in this Plan to the contrary; provided, that these provisions shall not apply to a Plan which is not itself a Top-Heavy Plan and which was included in an Aggregation Group under the second sentence of Section 17.02(f); provided further, that, these the extent permitted by law, Section 17.05 shall not apply to any Employee who has received the minimum contribution and/or benefit for the Plan Year as required under The Top-Heavy rules from either any defined contribution plan of the Employer, or from such defined contribution plan plus this Plan. 17.02 ADDITIONAL DEFINITIONS. (a) Key Employee. The term "Key Employee" shall refer to any Participant who at any time during the Plan Year or any of the four preceding Plan years, is (i) an officer of the Employer, but not taking into account any such Employee whose Compensation is less than one hundred fifty percent (150%) of the maximum dollar limitation in IRC Section 415(c)(1)(A) as in effect for the calendar year in which the Determination Date falls, (ii) one of the ten Employees owning [or considering as owning within the meaning of Section 318 of the IRC but substituting 5% for 50% in Section 318(a)(2)(C)] the largest interests in the Employer, but not taking into account any such Employee whose Compensation is less than the maximum dollar limitation in IRC Section 415(c)(1)(A) as in effect for the calendar year in which the Determination Date falls, (iii) a Five Percent Owner of the Employer, or 263 Exhibit 10(H) page 73 of 91 (iv) a One Percent Owner of the Employer having an annual compensation from the Employer of more than $150,000. The term shall also include beneficiaries of a Key Employee. For purposes of clause (i), no more than 50 Employees (or, if lesser, the greater of 3 or 10% of the Employees) shall be treated as officers, and the officers taken into account shall be the officers with the highest compensation. For purposes of Paragraph (ii), if two Employees have the same interest in the Employer, the Employee having greater annual Compensation from the Employer shall be treated as having a larger interest. For purposes of Paragraphs (ii), (iii), and (iv), the aggregation rules of Subsections (b), (c), and (m) of Section 414 of the IRC (pertaining to employees of a controlled group of corporation, of partnerships and proprietorships under common control, and of an affiliated service group) shall not apply. (b) Five Percent Owner. The term "Five Percent owner" shall mean any person who owns (or is considered as owning within the meaning of Section 318 of the IRC but substituting 5% or 50% in Section 318(a)(2)(C)] more than five percent of the outstanding stock of the Employer or stock possessing more than five percent of the total combined voting power of all stock of the Employer. (c) One Percent Owner. The term "One Percent Owner" means any person who owns or is considered as owning within the meaning of Section 318 of the IRC but substituting 5% for 50% in Section 318(a)(2)(C)] more than one percent of the outstanding stock of the Employer or stock possessing more than one percent of the total combined voting power of all stock of the Employer. (d) Non-Key Employee. The term "Non-Key Employee" shall refer to any Participant who is not a Key Employee. (e) Top-Heavy Plan. A Plan is a "Top-Heavy Plan" if, as of the Determination Date, the present value of the cumulative accrued benefits under the Plan for Key Employees exceeds 60% of the present value of the cumulative accrued benefits for all Employees under the Plan, or under the Aggregation Group if the Plan is required to be included in an Aggregation Group and such 264 Exhibit 10(H) page 74 of 91 group is a Top-Heavy Group; provided, that the Plan shall not be a Top-Heavy Plan if the Plan is part of an Aggregation Group which is not a Top-Heavy Group. (f) Aggregation Group. The term "Aggregation Group" means (i) each plan of the Employer in which a Key Employee is a Participant and (ii) each other plan of the Company which enables any plan described in (i) to meet the discrimination requirements of Section 401(a)(4) of the IRC or the minimum participation standards of Section 410 of the IRC. In addition, at the option of the Company, it may include any other plan of the Company if the Group would continue to meet the requirements of Sections 401(a)(4) and 410 of the IRC with such other plan being taken into account. (g) Top-Heavy Group. An Aggregation Group is a "Top-Heavy Group" if, as of the Determination Date, (i) the present value of the cumulative accrued benefits for Key Employees under all defined benefit plans included in such group, plus (ii) the aggregate of the accounts for Key Employees under all defined contribution plans included in such Group, exceeds (ii) 60% of a similar sum determined for all Employees. (h) Employee. The term "Employee" shall include the Beneficiaries of such Employee. (i) Determination Date. The term "Determination Date" shall mean, with respect to any Plan Year, the last day of the preceding Plan Year. (j) Compensation. The term "Compensation" shall mean total compensation but shall not include annual compensation in excess of $200,000 (as adjusted for cost-of-living increases by the Secretary or his delegate at the same time and in the same manner as the dollar amount contained in Section 13.06). Effective January 1, 1989, this Section 17.02(j) shall no longer apply. (k) Annual Retirement Benefit. The term "Annual Retirement Benefit" means a benefit payable annually in the form of a single life annuity (with no ancillary benefits beginning at Normal Retirement Date. Such benefit shall be actuarially adjusted if payment commences before or after Normal Retirement Date. 265 Exhibit 10(H) page 75 of 91 (l) Applicable Percentage. The term "Applicable Percentage" means 2 percent multiplied by the number of Years of Top-Heavy Service with the Employer, disregarding any such years in excess of ten. (m) Year of Top-Heavy Service. The term "Year of Top-Heavy Service" shall refer to a Year of Service under Section 2.31, except that no Years of Service shall be taken into account which may be disregarded under paragraphs (4), (5) and (6) of IRC Section 411(a), other than under IRC Section 411(a)(4)(B) for failure of the Participant to make mandatory contributions. In addition, a Year of Top-Heavy Service with the Employer shall not be taken into account if (i) the plan was not a Top-Heavy Plan for the Plan Year ending during such Year of Service, or (ii) such Year of Top-Heavy Service was completed in a Plan Year beginning before January 1, 1984. (n) Top-Heavy Benefit. The term "Top-Heavy Benefit" shall mean a Participant's pension benefit earned under Section 17.05. (o) Testing Period. The term "Testing Period" shall mean the period of consecutive Plan Years (not exceeding 5) during which the Participant had the greatest aggregate Compensation from the Employer. Such years shall be properly adjusted for years not included as a Year of Top- Heavy Service. Furthermore, a year shall not be taken into account if (i) such year ends in a Plan Year beginning before January 1, 1984, or (ii) such year begins after the close of the last year in which the Plan was a Top-Heavy Plan. 17.03 SPECIAL RULES. In determining whether the Plan is a Top-Heavy Plan or part of a Top-Heavy Group, the following rules shall apply. (a) Except to the extent provided in regulations issued by the Secretary of the Treasury, any rollover contribution (or similar transfer) initiated by an 266 Exhibit 10(H) page 76 of 91 Employee and made after December 31, 1983, to a plan shall not be taken into account with respect to the transferee plan. (b) If any individual is a Non-Key Employee with respect to the Plan for any Plan Year, but such individual was a Key Employee with respect to the Plan for any prior Plan Year, any accrued benefit for such Employee (and the account of such Employee) shall not be taken into account for purposes of Sections 17.02(e), (f) and (g). (c) To the extent provided in regulations issued by the Secretary of Treasury, the Top-Heavy rules of this Section shall be applied on the basis of any year specified in such regulations in lieu of Plan Years. (d) In determining present values and account balances under Section 17.02(e), (f), and (g), all distributions made with respect to any Employee during the 5-year period ending on the Determination Date shall be added back and included therein. The preceding sentence shall also apply to distributions under a terminated plan which if it had not been terminated would have been required to be included in an Aggregation Group. (e) In determining the present value of accrued benefits under Section 17.02(e) or (g), amounts attributable to deductible employee contributions shall not be considered to be part of the accrued benefits. (f) Effective January 1, 1985, if any Employee has not performed services for any Employer maintaining the Plan at any time during the 5-Year period ending on the Determination Date, any accrued benefit for such Employee (and the account of such individual) shall not be taken into account. 17.04 VESTING WITH RESPECT TO PARTICIPANT'S TOP-HEAVY BENEFIT. In lieu of the vesting schedule set forth in Section 5.02, a Participant, provided he earns at least one Hour of Service after the Plan becomes Top-Heavy, shall vest in his Top-Heavy Benefit according to the following schedule: Completed Years of Service Non-Forfeitable % 2 20% 3 40% 267 Exhibit 10(H) page 77 of 91 4 60% 5 80% 6 100% 17.05 MINIMUM BENEFIT FOR NON-KEY EMPLOYEE. The Normal Retirement Benefit derived from Employer contributions for each Participant in a Top-Heavy Plan, when expressed as an Annual Retirement Benefit, shall not be less than the Applicable Percentage of his average Compensation in the Testing Period. The Participant's accrued benefit under Section 2.01 shall not be less than the amount of such Top-Heavy Benefit. Any accrued benefits derived from Employer contributions, whether or not attributable to years for which the Plan is a Top-Heavy Plan, may be used to satisfy such minimum benefit. 17.06 MAXIMUM ANNUAL BENEFIT. The limitations of Section 13.05 shall be applied by substituting 1.0 for 1.25 where it appears in Section 13.05(g) in the denominators of the defined benefit plan fraction and the defined contribution plan fraction. However, if the plan would not be a Top- Heavy Plan or part of a Top-Heavy Group if 90% were substituted for 60% in Sections 17.02(e) and (g), then "3 percent" shall be substituted for "2 percent" as the minimum benefit for any defined contribution plan in the Top-Heavy Group and the preceding sentence shall not apply. The application of the first sentence of this Section 17.06 shall be suspended with respect to any Participant so long as there are no (i) Employer contributions, forfeitures or voluntary nondeductible contributions allocated to such Participant or (ii) accruals for such Participant under any defined benefit plan. If the first sentence of this Section 17.06 is applicable, Section 13.05(h) shall be applied by substituting $41,500 for $51,875. 17.07 SIMPLIFIED EMPLOYEE PENSIONS. For purposes of Section 17, a Simplified Employee Pension shall be treated as a defined contribution plan. At the Employer's election, the aggregate Employer contributions to a Simplified Employee Pension may be taken into account in lieu of the aggregate of the accounts of the Employees for the purpose of determining whether the Plan is part of a Top-Heavy Group pursuant to Section 17.02(g). 17.08 CONTRIBUTIONS OR BENEFITS NOT TAKEN INTO ACCOUNT. The Plan must meet the requirements of Sections 17.05 and 17.06 without taking into account (i) contributions or benefits under Chapter 2 of the IRC (relating to tax on self- 268 Exhibit 10(H) page 78 of 91 employment income); (ii) Chapter 21 of the IRC (relating to Federal insurance Contributions Act; (iii) Title 11 of the Social Security Act; or (iv) any other Federal or State law. 17.09 EMPLOYMENT IN BARGAINING UNIT. The provisions of Sections 17.02(j), 17.04 and 17.05 shall not apply with respect to any Employee employed in a bargaining unit described in Section 3.02(d). 17.10 COMMENCEMENT OF BENEFITS. Notwithstanding Section 7.11(a), distributions to a Key Employee shall commence not later than the end of his taxable year in which he attains age 70-1/2 whether or not he has retired. 17.11 FORFEITURES. No portion of a Participant's Top-Heavy Benefit maybe forfeited under Section 7.11 or because of his withdrawal of any amount attributable to the benefit derived from mandatory contributions made by such Participant. 269 Exhibit 10(H) page 79 of 91 SECTION 18 - MERGERS AND TRANSITIONAL RULES 18.01 GENERAL. As part of the 1989 Restatement of The Plan, both the Retirement Plan for Employees of the Life Insurance Company of Virginia and Designated Subsidiaries and Designated Affiliates ("LOV Pension Plan") and the Miller, Mason & Dickenson, Inc. Pension Plan ("MMD Pension Plan") were merged into this Plan as set forth below. It is the intention of this Section to set forth the transitional rules applicable to former participants in those plans, and also to set forth transitional rules for former participants in the Rollins Burdick Hunter Co. Employees Pension Plan which was merged into this Plan effective January 1, 1986; and for former participants in the Pension Plan for the Employees of Booke and Company ("Booke Plan") which was merged into this Plan effective August 1, 1993. 18.02 MERGERS AND TRANSFERS OF ASSETS AND LIABILITIES. Effective as of January 1, 1989, or as soon as administratively convenient thereafter, the following mergers and transfers of assets and liabilities took place. (a) Participants under the LOV Pension Plan became Participants in this Plan as of January 1, 1989. The Trustee shall deposit and hold as part of the Retirement Fund the transferred assets, as certified to by the Trustee under the LOV Pension Plan as provided for by the Amendment to such plan pursuant to which the assets of such plan are turned over and delivered to the Trustee of this Plan. (b) Participants under the MMD Pension Plan shall became Participants in this Plan as of January 1, 1989. The Trustee shall deposit and hold as part of the Retirement Fund the transferred assets, as certified to by the Trustee under the MMD Pension Plan as provided for by the Amendment to such plan pursuant to which the assets of such plan are turned over and delivered to the Trustee of this Plan. 18.03 THE RETIREMENT PLAN FOR EMPLOYEES OF THE LIFE INSURANCE COMPANY OF VIRGINIA AND DESIGNATED SUBSIDIARIES. In figuring the normal retirement benefit under Section 4.01, the 25 years of Service maximum under Section 4.01(b) shall take into account years of credited service for a former Participant in the LOV 270 Exhibit 10(H) page 80 of 91 Pension Plan prior to such date and such years of credited service shall reduce the remaining years available as of January 1, 1989. The post- retirement cost of living adjustment ("COLA") under the LOV Pension Plan at former Section IX is eliminated but the accrued benefit of a Participant as of December 31, 1988, shall be calculated so as to take into account an actuarial increase to reflect the COLA as of such date but only for Participants who attain age 55 with 10 or more years of credited service. A Participant's pre-retirement death benefit under the 66-2/3% joint and survivor annuity form as of December 31, 1988, shall be the minimum amount of such benefit. As required under Reg. Section 1.410(a)-7(f) upon transfer from an elapsed time plan to a plan using the general method, as of January 1, 1989, former participants shall get credit for the same number of Years under this Plan as were credited under the LOV Pension Plan; provided, however, that future benefits shall be reduced to take into account any part year credited under the LOV Pension Plan; provided further, however, that the actual Hours of Service for the full Plan Year beginning January 1, 1989, shall be used since the computation period which includes the date of transfer is a full year and not a fractional year. Since the accrual rate of benefits is reduced, the amendment to the early termination rule at Section 11 shall not apply. The career average formula for Ordinary Field Representatives (as defined in the LOV Pension Plan) is preserved through December 31, 1988, and the normal retirement benefit under Section 4.01 shall apply for service on or after January 1, 1989; provided, however, that service of an Ordinary Field Representative prior to January 1, 1989 shall be taken into account in figuring years available under Section 4.01(b) and Final Average Earnings. The formula for such field representatives shall be 1% of pay up to $17,000 plus 1.5% of pay in excess of $17,000. Accrued benefits as of December 31, 1988 shall be calculated as set forth at Section 5.03(c). 18.04 MILLER, MASON & DICKENSON, INC. PENSION PLAN. With respect to the maximum credit under Section 4.01(b) of 25 Years of Service on or after January 1, 1989, prior years of credited service under the MMD Pension Plan shall be taken into account and reduce the 25 years maximum in the same manner as provided under Section 18.03 for the LOV Pension Plan. The offset to the retirement benefit for account balances in the former Miller, Mason & Dickenson, Inc. Money Purchase Pension Plan is preserved. Any Participant with four years of vesting service as of December 31, 1988 shall be given 40% vesting as of January 1, 1989. Accrued 271 Exhibit 10(H) page 81 of 91 benefits as of December 31, 1988 shall be calculated as set forth at Section 5.03(d). 18.05 ROLLINS BURDICK HUNTER CO. EMPLOYEES PENSION PLAN. The formula for compensation at former Section 19.01(g) shall include overtime. The special pre-retirement death benefit for a Participant with 20 Years of Service or after age 55 with 10 Years of service under former Section 19.15, for payment of 50% of the accrued benefit immediately as the death benefit is preserved, but only for the amount accrued as of December 31, 1988. The retirement benefit formula at former Section 19.07 shall continue to apply except that the new offset at Section 4.01(c) shall apply. Service previously not taken into account as of December 31, 1988 pursuant to former Sections 18(b)(ii) and 19.13 shall continue not to be taken into account. The offsets at former Sections 18(b)(vi) and 19.10 shall continue to apply. 18.06 BOOKE AND COMPANY PENSION PLAN. Effective August 1, 1993, the assets and liabilities of the Pension Plan for the Employees of Booke and Company ("Booke Plan") shall be transferred to this Plan. The following special provisions apply, effective as of August 1, 1993, to an Employee who was employed by Booke and Company on July 31, 1993 ("Former Booke Employee"): (a) Participation. Notwithstanding the provisions of Section 3 ("Eligibility") of this Plan, both active and inactive participants in the Booke Plan shall become Participants in this Plan as of August 1, 1993. A Former Booke Employee who was not an active participant in the Booke Plan on July 31, 1993, shall become a Participant in this Plan following satisfaction of the requirements of Section 3.02. (b) Hours of Service. For purposes of satisfying Section 3.02 (relating to service requirements for eligibility), and Section 5.02 (relating to service requirements for vesting) hours of service performed for Booke shall be considered hours of service performed for an Employer. (c) Normal Retirement Benefit. The Normal Retirement Benefit for a Former Booke Employee under Section 4.01 of this Plan shall be the sum of (i) and (ii): 272 Exhibit 10(H) page 82 of 91 (i) For Years of Participation (as defined in the Booke Plan) before January 1, 1993: the normal retirement benefit as computed under Section 5.1 of the Booke Plan but adjusted to reflect Annual Earnings on and after January 1, 1993, as defined under the Aon Pension Plan. (ii) For Years of Service after December 31, 1992: the Normal Retirement Benefit as computed under Section 4.01 of this Plan. The 25 Years of Service maximum under Section 4.01(b) shall take into account years of credited service under the Booke Plan, and such years of credited service shall reduce the remaining years available effective December 31, 1992. (d) Early Commencement Election. A Participant who terminates employment prior to his Normal Retirement Date shall be entitled to a vested retirement benefit computed under Sections 5.02 and 5.04 provided, however, that Accrued Retirement Income shall be computed in accordance with subsection (c) of this Section 18.06, using the reduction factors and excess factors specified in Section 5.2 of the Booke Plan with respect to Years of Service before January 1, 1993, and that the reductions of Sections 5.04(b) and (c) shall apply only to Accrued Retirement Income for Years of Service after December 31, 1992. (e) Special Rules. In no event shall the Normal Retirement Benefit nor the Accrued Retirement Income of a Former Booke Employee under the terms of this Plan be less than his minimum accrued benefit under the terms of the Booke Plan as of July 31, 1993. (f) Benefit Options. Benefit options under the Booke Plan which shall continue to apply to benefits accrued under the Booke Plan through July 31, 1993, shall include, under Section 7.8 of the Booke Plan, the ability of the spouse of a deceased Participant to elect a benefit commencement date prior to the date the Participant would have attained age 55. 273 Exhibit 10(H) page 83 of 91 SECTION 19 - VOLUNTARY RETIREMENT PROGRAM 19.01 VOLUNTARY RETIREMENT PROGRAM. The terms of this Section 19 are effective to provide supplemental retirement benefits (subject to Section 13.05) for certain Participants who terminate employment with an Employer under the terms of the Voluntary Retirement Program. 19.02 DEFINITIONS. In addition to those of Section 2, the following definitions shall apply for purposes of this Section 19: (a) "Additional Temporary Supplement" shall mean an amount equal to $150, to be paid monthly until the first to occur of: (i) attainment of age 65; (ii) death of the Participant; or (iii) completion of 24 payments. (b) "Lifetime Pension Supplement" shall mean an amount equal to 0.5 percent of the Participant's Final Average Earnings multiplied by Years of Service up to but not in excess of 20 Years of Service. The Lifetime Pension Supplement shall be paid at the same time and in the same optional form as benefits paid to the Participant under Section 4 or 5 and shall terminate coincident with the termination of such benefits. (c) "Temporary Pension Supplement" shall mean an amount equal to 0.5 percent of a Participant's Final Average Earnings multiplied by Years of Service up to but not in excess of 20 Years of Service. The Temporary Pension Supplement shall be paid monthly until the first to occur of: (i) attainment of age 65; (ii) death of the Participant; or 274 Exhibit 10(H) page 84 of 91 (iii) completion of 120 payments. (d) "Voluntary Retirement Participant" shall mean a Participant who: (i) is at least 54 years of age on or before December 31, 1992; (ii) terminates employment with an Employer between December 18, 1992, and February 15, 1993, inclusive; and (iii) meets the requirements of (A) or (B): (A) has Annual Earnings in 1992 of less than $62,345 and whose combined total Years of Employment and age as of January 1, 1993, is at least 66; or (B) has Annual Earnings in 1992 of $62,345 or more and whose combined total Years of Employment and age as of January 1, 1993, is at least 72. Commissioned agents of Combined Life Insurance Company of America and commissioned representatives of Life Insurance Company of Virginia are not eligible for the Voluntary Retirement Program. (e) "Years of Employment" shall mean total number of years of Employment with an Employer, beginning on the date an Employee first performs an Hour of Service and ending on the date the Voluntary Retirement Participant retires under the terms of this Section 19, excluding intervening periods, if any, commencing with such Employee's discharge or termination and ending with such Employee's rehire by an Employer. Years of Employment shall include years of employment by a Voluntary Retirement Participant for an employer the stock or assets of which was acquired by an Employer at the time of such employee's employment by the acquired entity. (f) "Years of Service" shall have the same meaning as stated in Section 2.28. However, for the sole purpose of determining amounts under Section 19.02(a), (b) and (c), Years of Service shall include credited service as that term is used in the Frank B. Hall & Co. Inc. Retirement Account Plan for 275 Exhibit 10(H) page 85 of 91 those formerly employed by Frank B. Hall companies and who were active participants in the Frank B. Hall & Co. Inc. Retirement Account Plan as of December 31, 1992. 19.03 COVERAGE. A Voluntary Retirement Participant shall be entitled to receive a Temporary Pension Supplement, an Additional Temporary Pension Supplement and a Lifetime Pension Supplement upon satisfaction of (a) and (b) on or before February 15, 1993: (a) receipt by an Employer of properly executed election form; and (b) receipt by an Employer of properly executed waiver and release. 19.04 COMMENCEMENT OF BENEFITS. Payment of the Temporary Pension Supplement and the Additional Temporary Pension Supplement shall commence as soon as practicable upon satisfaction of the requirements of Section 19.03 by the Voluntary Retirement Participant. Payment of the Lifetime Pension Supplement shall commence coincident with commencement of benefits paid to the Voluntary Retirement Participant in accordance with any election made by such Participant under Section 4 or 5. The amount of the Lifetime Pension Supplement, if payment is deferred, shall be the actuarial equivalent of the Lifetime Pension Supplement as if payment had commenced upon the later of attainment of age 55 or termination of employment. 276 Exhibit 10(H) page 86 of 91 SECTION 20 - AD HOC RETIREE BENEFIT ADJUSTMENT 20.01 RETIREMENT BENEFIT ADJUSTMENT. Participants or beneficiaries for whom benefit payments commenced before January 1, 1994, shall receive an adjustment for payments, effective as of January 1, 1994. Such adjustment shall be an addition to the monthly payment equal to: 3 percent times the Normal Retirement Benefit times the number of full years of retirement; provided, however, that: (a) "1 1/2 percent" shall be substituted for "3 percent" with respect to the Normal Retirement Benefit of: (i) former Participants or beneficiaries in the LOV Pension Plan who are eligible for the actuarial increase set forth in Section 18.03 of this Plan; and (ii) former Participants and beneficiaries under the LOV Pension Plan currently eligible for ongoing COLA adjustments; (b) the Normal Retirement Benefit shall be computed in accordance with the adjustments set forth in Section 5.04 for Participants and beneficiaries for whom the rules regarding early commencement of benefits are applicable; and (c) the maximum increase in any monthly payment shall not exceed $60.00 per month. For purposes of this Section 20.01, a "full year of retirement" shall be the 12-month period beginning on the date of a Participant's benefit commencement as defined in Section 4.01 or 5.04, and each complete 12- month period thereafter. 277 Exhibit 10(H) page 87 of 91 SCHEDULE A SPECIAL PROVISIONS RELATING TO SERVICE This Schedule A contains special rules regarding the granting of past service credit for eligibility (Section 3), vesting (Section 5) and benefits (Sections 4 and 5) with respect to certain Employees of the Company acquired through corporate acquisition.
EMPLOYEE CATEGORY PLAN PROVISIONS CREDITED SERVICE ---------------------------- ---------------------------- ------------------------------ (1) Employed by Frank B. Years of service for From employment Hall & Co. Inc., or any eligibility commencement date with of its subsidiaries or Hall, with entry affiliates ("Hall") on December 31, 1992. November 1, 1992, and employed by the Company on or after November 2, 1992. Years of service for vesting From employment commencement date above and in accordance with Section 2.28, effective December 31, 1992. Benefit accrual Years of service for the Company beginning January 1, 1993, and Final Average Earnings based on compensation received from the Company and Hall. (2) Employed by K&K Years of service for From employment Insurance Group, Inc., eligibility commencement date with K&K Specialties, Inc., K&K, with entry June 11, National Sports 1993. Underwriters Inc., or American Insurance Brokers, Inc. ("K&K") on June 10, 1993.
278
Exhibit 10(h) Page 88 of 91 EMPLOYEE CATEGORY PLAN PROVISIONS CREDITED SERVICE ----------------- --------------- ---------------- Years of service for vesting From employment commencement date above and in accordance with Section 2.28. Benefit accrual Years of service for the Company beginning June 11, 1993, and Final Average Earnings based on compensation received from Company and K&K. (3) Employed by Booke Years of service for From employment and Company or an eligibility commencement date with affiliate ("Booke") on Booke, with entry August 1, June 30, 1993, and 1993. employed by the Company on July 1, 1993. Years of service for vesting From employment commencement date above and in accordance with Section 2.28. Benefit accrual See Section 18.06. (4) Employed by Albert G. Years of service for From employment Ruben & Co., Inc., eligibility commencement date with Albert G. Ruben & Co. Ruben, with entry (New York), Inc., or September 1, 1993. Bachrach Insurance Services, Inc. ("Ruben"), on August 31, 1993, and employed by the Company on September 1, 1993. Years of service for vesting From employment commencement date above and in accordance with Section 2.28. 279
Exhibit 10(h) Page 89 of 91
EMPLOYEE CATEGORY PLAN PROVISIONS CREDITED SERVICE ----------------- --------------- ---------------- Benefit accrual Years of service for the Company beginning September 1, 1993, and Final Average Earnings based on compensation received from Company and Ruben. (5) Employed by Insurance Years of service for From employment Brokers Service, Inc. eligibility commencement date with on May 4, 1993, and Insurance Brokers Service, employed by the Inc., with entry May 5, 1993. Company on May 5, 1993. Years of service for vesting From employment commencement date above and in accordance with Section 2.28. Benefit accrual Years of service for the Company beginning May 5, 1993, and Final Average Earnings based on compensation received from Company and Insurance Brokers Service. (6) Employed by National Years of service for From employment Benefit Corporation eligibility commencement date with on May 19, 1993, and National Benefit employed by the Corporation, with entry date Company on May 20, May 20, 1993. 1993.
280 Exhibit 10(h) Page 90 of 91
EMPLOYEE CATEGORY PLAN PROVISIONS CREDITED SERVICE ----------------- --------------- ---------------- Years of service for vesting From employment commencement date above and in accordance with Section 2.28. Benefit accrual Years of service for the Company beginning May 20, 1993, and Final Average Earnings based on compensation received from Company and National Benefit Corporation. (7) Employed by Bryson Years of service for From employment Associates, Inc. on eligibility commencement date with May 16, 1993, and Bryson Associates, Inc., with employed by the entry date June 1. Company on May 17, 1993. Years of service for vesting From employment commencement date above and in accordance with Section 2.28. Benefit accrual Years of service for the Company beginning May 17, 1993, and Final Average Earnings based on compensation received from Company and Bryson Associates.
281 Exhibit 10(h) page 91 of 91 IN WITNESS WHEREOF, Aon Corporation and the Trustees have signed this amendment and restatement of the Aon Pension Plan, effective as of January 1, 1994. Aon Corporation By: /Daniel T. Cox/ 12/16/94 --------------------------- -------- Daniel T. Cox Date Executive Vice President /Mark B. Burka/ 12/19/94 --------------------------- -------- Mark B. Burka Date Trustee /Michael A. Conway/ 12/19/94 --------------------------- -------- Michael A. Conway Date Trustee /Lawrence R. Miller/ 12/19/94 --------------------------- -------- Lawrence R. Miller Date Trustee /J. Garnett Nelson/ 12/22/94 --------------------------- -------- J. Garnett Nelson Date Trustee 282 EX-11 5 CONSENT INCOME/SHARE EXHIBIT 11 Aon Corporation and Subsidiaries CONSOLIDATED NET INCOME PER SHARE COMPUTATION
(millions except per share data) Years Ended December 31 ----------------------- 1994 1993 1992 ------ ------ ------ EARNINGS PER SHARE Net income........................................................ $360.0 $323.8 $126.6 Preferred stock dividends......................................... 26.8 24.5 4.2 ------ ------ ------ Net income less preferred stock dividends.................... $333.2 $299.3 $122.4 ====== ====== ====== Average common shares issued...................................... 107.1 105.0 102.5 Net effect of treasury stock activity............................. (4.4) (3.7) (4.3) Weighted average effect of Series A and B preferred stock......... 2.8 4.1 5.7 Net effect of dilutive stock compensation plans based on the treasury stock method................................ 0.7 1.0 1.0 ------ ------ ------ Average common and common equivalent shares outstanding.......................................... 106.2 106.4 104.9 ====== ====== ====== Net income per share................................................... $ 3.14 $ 2.81 $ 1.17 ====== ====== ======
(1) Primary and fully diluted net income per share are materially the same. 283 EX-12.A 6 COMP RATIO OF EARNINGS Exhibit 12(a) Aon Corporation and Consolidated Subsidiaries Combined With Unconsolidated Subsidiaries Computation of Ratio of Earnings to Fixed Charges
Years Ended December 31, ------------------------------------------------ (millions except ratios) 1994 1993 1992(1) 1991 1990 ------ ------ ------- ------ ------ Income from continuing operations before provision for income taxes $537.6 $479.1 $290.5 $331.5 $325.2 Add back fixed charges: Interest on indebtedness 46.4 42.3 41.9 40.7 44.4 Interest on ESOP 5.9 6.5 6.9 7.2 7.4 Portion of rents representative of interest factor 28.7 26.1 19.2 15.4 13.2 ------ ------ ------ ------ ------ Income as adjusted $618.6 $554.0 $358.5 $394.8 $390.2 ====== ====== ====== ====== ====== Fixed charges: Interest on indebtedness: Aon Corporation and consolidated subsidiaries $ 46.4 $ 42.3 $ 41.9 $ 40.7 $ 43.9 Unconsolidated subsidiaries - - - - 0.5 ------ ------ ------ ------ ------ Interest 46.4 42.3 41.9 40.7 44.4 Interest on ESOP 5.9 6.5 6.9 7.2 7.4 Portion of rents representative of interest factor 28.7 26.1 19.2 15.4 13.2 ------ ------ ------ ------ ------ Total fixed charges $ 81.0 $ 74.9 $ 68.0 $ 63.3 $ 65.0 ====== ====== ====== ====== ====== Ratio of earnings to fixed charges 7.6 7.4 5.3 6.2 6.0 ====== ====== ====== ====== ======
(1) Income from continuing operations before provision for income taxes excludes the cumulative effect of changes in accounting principles. 284 EX-12.B 7 COMP RATIO FIXED CHARGES Exhibit 12(b) Aon Corporation and Consolidated Subsidiaries Combined With Unconsolidated Subsidiaries Computation of Ratio of Earnings to Combined Fixed Charges and Preferred Stock Dividends
Years Ended December 31, ---------------------------------------------- (millions except ratios) 1994 1993 1992(1) 1991 1990 ------ ------ ------- ------ ------ Income from continuing operations before provision for income taxes $537.6 $479.1 $290.5 $331.5 $325.2 Add back fixed charges: Interest on indebtedness 46.4 42.3 41.9 40.7 44.4 Interest on ESOP 5.9 6.5 6.9 7.2 7.4 Portion of rents representative of interest factor 28.7 26.1 19.2 15.4 13.2 ------ ------ ------ ------ ------ Income as adjusted $618.6 $554.0 $358.5 $394.8 $390.2 ====== ====== ====== ====== ====== Fixed charges and preferred stock dividends: Interest on indebtedness: Aon Corporation and consolidated subsidiaries $ 46.4 $ 42.3 $ 41.9 $ 40.7 $ 43.9 Unconsolidated subsidiaries - - - - 0.5 Preferred stock dividends 48.4 47.5 20.3 3.5 2.0 ------ ------ ------ ------ ------ Interest and dividends 94.8 89.8 62.2 44.2 46.4 Interest on ESOP 5.9 6.5 6.9 7.2 7.4 Portion of rents representative of interest factor 28.7 26.1 19.2 15.4 13.2 ------ ------ ------ ------ ------ Total fixed charges and preferred stock dividends $129.4 $122.4 $ 88.3 $ 66.8 $ 67.0 ====== ====== ====== ====== ====== Ratio of earnings to combined fixed charges and preferred stock 4.8 4.5 4.1 5.9 5.8 ====== ====== ====== ====== ======
(1) Income from continuing operations before provision for income taxes excludes the cumulative effect of changes in accounting principles. 285 EX-13 8 ANNUAL REPORT Aon Corporation | Commercial Operations Businesses Aon's global commercial brokerage and consulting businesses are represented by the units of Rollins Hudig Hall Group (RHH Group). RHH Group offers a full range of insurance brokerage, risk management and consulting services, including reinsurance, wholesale brokerage, alternative risk services, specialty products, employee benefits and training services. RHH Group units have 13,000 employees in more than 300 offices around the world. =============================================================================== Rollins Hudig Hall Rollins Hudig Hall (RHH) is the worldwide retail brokerage and risk management arm of Aon. RHH is a full- service insurance brokerage and consulting firm, working with commercial clients to develop and deliver creative and innovative ways to protect assets. Services provided by RHH include placement of all lines of insurance, actuarial services and alternative risk services, development and administration of new products or programs, and employee benefits, risk management and loss-control consulting worldwide. Aon Specialty Group The companies of Aon Specialty Group (ASG) develop and deliver highly specialized products and services for professional groups, service businesses, governmental units and commercial organizations, including health care providers, financial institutions, automotive clients and the media. ASG is a market leader in virtually every area it serves. ASG markets specialty insurance products and services for affinity groups. These products cover more than 2 million insureds in the United States. In addition, Aon's training and consulting capabilities were greatly expanded through the 1994 acquisition of Pecos River Learning Centers Inc. Pecos River is a creative and innovative corporate change organization, serving many major corporate clients. The acquisition complements, and allows us to expand on, Aon's successful programs serving the automobile industry, including Intercept and Ryan/CSi. Aon Risk Services Aon Risk Services (ARS) serves the insurance industry and the alternative risk marketplace worldwide with reinsurance brokerage, captive management and consulting services, underwriting management and third-party administration services, and wholesale brokerage. Aon Re Worldwide, formed in 1993, is one of the largest reinsurance brokerage companies in the world. Through its reinsurance expertise and its other services, including captive management, ARS is a leader in serving the fast- growing alternative market with creative ideas and superior solutions. Nicholson Leslie Nicholson Leslie Group (NLG) is one of the largest Group Lloyd's brokers. Nicholson Leslie places wholesale and reinsurance business in the London and international markets on behalf of Aon companies as well as other companies. During 1994, Aon acquired Lloyd's broker Jenner Fenton Slade Group Limited (JFS), a premier energy insurance and reinsurance brokerage firm. The acquisition of JFS expands the expertise of Aon in this important and growing area. The energy brokerage operations of Nicholson Leslie will be integrated into JFS. Godwins Godwins International (Godwins) meets the employee International benefits and compensation consulting needs of employers. In the United States, Godwins Booke and Dickenson offers outstanding benefits expertise through more than 1,000 employees in 25 offices nationwide. Godwins Ltd. serves employers in the United Kingdom, with more than 600 employees in 27 offices. The human resources capabilities of the Aon companies were enhanced significantly during 1994 by the acquisition of HRStrategies Inc., a human resources consulting firm. 15 Aon Corporation | Commercial Operations | Operations Highlights Rollins Hudig Hall Group (RHH Group), which includes Aon's commercial insurance brokerage and consulting companies, is one of the largest insurance brokerage and consulting operations in the world. ================================================================================ Rollins Hudig Hall As the the retail brokerage and risk management arm of Aon, Rollins Hudig Hall (RHH) is the largest contributor to the revenues of the commercial operations. Despite severe pressure on pricing throughout the brokerage industry, particularly in the U.S. market, RHH recorded worldwide revenues of $701.4 million in 1994, up 5.8 percent from $663 million in 1993. Domestic revenues were 70 percent of total worldwide revenues, with international accounting for the balance. 1994 Revenue Through acquisition and as a percent of total internal growth, RHH has Commercial Operations assembled some of the best talent in the industry in an extensive variety of niches, and created an organization that can bring this talent to the service of clients throughout the world. Areas that saw important --------------------- expansion in 1994 include construction, transportation, energy, financial services, entertainment and health care. In addition, in 1994, RHH enhanced its position as a specialist in satellite risks, forming Space Risk International in conjunction with Nicholson Leslie. Further, the 1994 acquisition of Houston energy broker Energy Insurance International (EII), combined with our existing expertise, positions RHH as a leader serving the vital and growing energy industry. RHH emphasizes interdependence, bringing its vast resources together to find the best solutions for each client, going beyond the traditional role of the broker. The professionals of RHH work in partnership with clients, developing and delivering innovative solutions for each insurance need. As part of this commitment to provide the highest levels of service, RHH in 1994 established the Knowledge Network, a global communication system that enables RHH professionals to share market intelligence, identify specific expertise, and facilitate improved communication with each other and with clients. RHH also has actively responded to clients seeking to outsource portions of their risk management activities. RHH's operations in Europe and elsewhere overseas are working with RHH in the United States, using specialty practice groups to pursue business in specific industries, to share information and to develop innovative products and services. RHH commercial insurance brokerage operates through its offices in the United States and Europe, as well as in the Far East, Latin America and the Middle East. RHH is actively pursuing expansion in Latin America and the Far East. During 1994, RHH opened offices in Russia, Finland, Turkey, Portugal and Slovakia, and expanded its rapidly growing European art brokerage business, operating under the name ArtScope, with acquisitions of specialized art brokers in France and Germany. Together with its Huntington T. Block operation in Washington, RHH is now one of the leading art brokerage specialists in the world. 16 RHH also acquired an Australian broker specializing in group programs, making RHH one of the largest such brokers in that part of the world. Building on the success of Aon's affinity group program business in the United States and in Europe, RHH is expanding a worldwide group program business. RHH continues to build its pool of talented professionals, to add to its distribution capabilities and to expand its expertise. The breadth of its resources, as well as the ability to bring these vast resources to bear in a very direct way in the service of each client, differentiates RHH in the global brokerage arena. ================================================================================ Aon Specialty Group The companies of Aon Specialty Group (ASG) develop highly specialized insurance products and administrative service programs for third-party and affinity groups. ASG companies include Media/Professional Insurance, one of the largest providers of libel insurance in the country; Bankers Insurance Service Corp., an underwriting manager for the mortgage banking industry; Scarborough & Co., an underwriting manager for community banks, mortgage and savings institutions; and GoPro 1994 Revenues Inc., an underwriting manager as a percent of total for property and liability Commercial Operations programs for governmental entities, public officials, school boards and law enforcement entities. ASG units are direct marketers -------------------- of specialty insurance products for association and affinity groups, including accountants, attorneys, chiropractors, dentists, insurance agents, nurses, pharmacists, physical therapists and podiatrists. ASG formed the Aon Alliance in 1993 to meet the unique needs of health care delivery systems. The Aon Alliance provides brokerage, risk management, loss prevention, software, actuarial and reinsurance services for health care entities. These health care entities are forming new relationships that present opportunities for the Aon Alliance. Employee training has long been an area of expertise for Aon companies, and the 1994 acquisition of Pecos River Learning Centers Inc. extends that expertise into a broad range of industries, including some of the largest multinational corporations. Further, it builds upon a tradition of nationally recognized customer-satisfaction consulting and training programs developed for the automobile industry by The Ryan Group. ASG revenues, including specialty programs and training and consulting, were $155.9 million in 1994, up significantly from 1993. 17 ================================================================================ Aon Risk Services A key to Aon's growth in 1994 was the growing significance of the expertise provided by Aon Risk Services (ARS) to insurance organizations. The alternative insurance market, both conventional and non- conventional, continues to experience explosive growth, as large multinational companies look for more control over the cost and configuration of their risk-protection strategies. Working with other RHH Group operations, ARS has emerged as one of the premier players in this increasingly important arena. 1994 Revenue ARS experienced an outstanding as a percent of total year in 1994, with growth in Commercial Operations virtually every line of business. Revenues increased 33.5 percent in 1994, to $258.5 million from $193.6 million in 1993. --------------------- Aon Re Worldwide, formed in 1993 to bring together all the reinsurance operations of ARS, has become one of the top reinsurance intermediaries in the world. Included in ARS revenues are reinsurance brokerage revenues that increased 40.3 percent in 1994, to $103.4 million from $73.7 million a year earlier. The increase in revenues was fueled largely by the formation of strategic alliances with other insurers. The captive management and alternative market services in Europe were combined under the name Aon Risk Services (Europe). In 1994, we opened new offices in Luxembourg and The Netherlands. Agricultural Risk Management in London, specializing in the evaluation of agricultural risk, was acquired in early 1995. Through Aon Risk Consultants, ARS offers actuarial expertise, catastrophe modeling and alternative risk financing products to the global marketplace. SLE Worldwide, a managing general underwriter in the sports, leisure and entertainment industries, recorded significant revenue increases. In the United States, ARS established Aon Risk Technologies, which conducts research and development in risk-evaluation systems, and opened a Los Angeles office for Aon Broker Services. Wexford Underwriting Managers, which specializes in the alternative market for workers compensation, experienced significant growth in 1994. At year-end, Sherwood Insurance Services, a wholesale brokerage unit of ARS, announced a cooperative venture with CNA Insurance Companies to enter the commercial property insurance market. This venture is targeting major companies, here and abroad. The growth of ARS over the last several years should continue in concert with the growth of the alternative market. Leaving the traditional insurance market can offer large companies significant advantages, but it also requires great sophistication, creativity and an understanding of the market. ARS, with its experience and resources, is a valuable and important resource for RHH offices in meeting the needs of major companies seeking to navigate the alternative market. 18 ================================================================================ Nicholson Leslie Nicholson Leslie Group (NLG) is a Group prominent Lloyd's of London broker placing wholesale and reinsurance business in the London and international markets. Brokerage revenues at NLG rose in 1994, to $112.1 million from $87.4 million in 1993. Expenses were reduced considerably because of the integration of the operations of Nicholson Chamberlain Colls and Leslie & Godwin, which created NLG. In 1994, NLG formed Nicholson Leslie Accident & Health, which places managed health care business in the London market. 1994 Revenue NLG will merge its energy as a percent of total business into Jenner Fenton Slade Commercial Operations Group Limited (JFS), a Lloyd's insurance and reinsurance brokerage firm specializing in --------------------- the placement of coverages for companies in the international energy and petrochemical industries. Aon acquired JFS in late 1994. NLG works with Aon Re Worldwide to place Aon Re Worldwide's North American business in the London market. NLG continues to derive a significant majority of its revenues from sources unaffiliated with Aon. =============================================================================== Godwins Employers around the world turn International to the companies of Godwins International for help in meeting their employee benefits, compensation and human resources needs. In the United States, Godwins Booke and Dickenson (GBD) experienced growth in most employee benefits and compensation areas. However, the "wait-and-see" posture prompted by the debate over health care reform contributed to weaker than normal revenues. The consolidation during 1994 of merged companies also caused some loss of revenues, but improved 1994 Revenue profitability. as a percent of total Commercial Operations The late-1994 acquisition of HRStrategies Inc. marks an important expansion for GBD. -------------------- HRStrategies specializes in human resources strategy development, employee selection, and identification and development of employee skills and skills assessment systems. As employers contend with a steadily shrinking skilled labor pool, the ability to identify, motivate and compensate the skilled worker becomes increasingly important. Both in the United States and internationally, employers continue to look for efficiencies in their employee benefits operations. Given its expertise in benefits administration, Godwins International currently is providing support for companies that want to streamline this work. The market outlook appears to be improving for the retirement and capital accumulation consulting areas. With GBD's daily valuation service fully operational, it is well-positioned to assist its clients. With these companies as cornerstones, Godwins Ltd. in the United Kingdom and Australia and GBD in the United States, Godwins International offers services around the world to diverse employers, from the start-up company to the multinational organization. Godwins International reported worldwide revenues of $164.8 million in 1994, compared to $168.5 million in 1993. Of those revenues, $111.2 million, or 67.5 percent, were from domestic business. International business grew to $53.6 million in 1994, an increase of 3.3 percent over $51.9 million in 1993. 19 Aon Corporation | Consumer Operations | Businesses Aon businesses serve consumers in North America, Europe and the Pacific with a variety of insurance products and services, including traditional and specialty life insurance, capital accumulation products, accident and health coverages, extended warranty, credit insurance and related products. ================================================================================ Combined Insurance Combined Insurance Company of America (CICA), which Company of traces its origins to 1919 and is one of the founding America companies of Aon, underwrites and sells supplemental life and disability-based accident and health products in North America, Europe and the Pacific. CICA's products are distributed through a well trained and highly motivated career sales force of more than 9,000 agents in the United States, Canada, Puerto Rico, the United Kingdom, Ireland, The Netherlands, Germany, Australia and New Zealand. More than 4.5 million policyholders are covered by the products of CICA. The Ryan Group The Ryan Group markets automobile extended warranties, credit insurance and training services to the automotive industry. The company also has expanded its leading position in the automotive industry by developing value-added profit programs, including prospect development and customer-satisfaction training systems. The extended warranty and credit insurance activities are underwritten by Aon companies. Union Fidelity Union Fidelity Life Insurance Company (UFLIC) is a Life Insurance direct-response marketer of supplementary accident and Company/ health and life insurance products, mostly through third- Combined Group party and association groups. During the past few years, UFLIC has achieved significant success by building long- term relationships with sponsoring organizations, including auto clubs, major oil companies and veterans groups. In addition, UFLIC manages the marketing and underwriting of Combined Group. Combined Group distributes products through managing general agents, brokers, LOV agents and the agents of endorsed companies. The Life Insurance The Life Insurance Company of Virginia (LOV) provides Company of capital accumulation products as well as traditional life Virginia insurance to help individuals meet their savings and retirement goals. LOV, founded more than 120 years ago, distributes its products through approximately 400 career agents in 31 offices, mostly in the Southern and Eastern United States. LOV products also are marketed by the Forth Financial Network, a network of about 35 franchisees who have the right to represent LOV in a specific area. Finally, LOV distributes its products through about 115 managing general agents, banks in six states, life brokers and stockbrokers nationwide. Virginia Surety Virginia Surety Company in North America and London London General General Insurance Company in Europe are the specialty Insurance property and casualty insurance companies of Aon. The primary business of these companies is the underwriting of extended warranty products, especially for automobiles, electronics and appliances. 21 Aon Corporation | Consumer Operations | Operations Highlights Aon companies provide a wide range of insurance products to consumers throughout the world. ================================================================================ Combined Combined Insurance Company of Insurance America (CICA) has built a long Company tradition of providing consumers of America with life and disability-based accident and health insurance products. The success of CICA is fueled 1994 Revenue by its three captive sales forces as a percent of total numbering a total of more than Consumer Operations 9,000 agents. These direct sales forces offer accident, health and -------------------- life coverages directly to consumers. CICA had a record year in 1994, with worldwide revenues increasing to $976.3 million, a 4 percent increase over $938.9 million in 1993. U.S. business represented $703.5 million, or 72.1 percent of this total, an increase of $19 million over 1993. International business was $272.8 million, or 27.9 percent of the total; this was an increase of 7.2 percent over $254.4 million in 1993. Total life insurance revenue rose to $130.4 million from $129.8 million in 1993. The domestic life business recorded its most successful year in the last 10 years with $111.8 million in revenues. Accident and health (A&H) business also grew in 1994, with revenues of $845.9 million, up 4.5 percent from $809.1 million in 1993. Domestic business accounted for $591.7 million, or 69.9 percent, of this total. Domestically, new sales of A&H products increased in the fourth quarter, with health sales showing a double-digit rate of growth for the year. Overseas, CICA's operation in The Netherlands, which began in 1993, continued to develop. In addition, CICA was one of only a few U.S. insurers authorized to be licensed in Mexico during 1994. CICA will begin test- marketing in Mexico in 1995. ================================================================================ The Ryan Group The Ryan Group is a leader in offering insurance products and services to the automotive industry. The companies of The Ryan Group distribute automotive extended warranty products and credit- related life and disability insurance products underwritten by Aon companies. Ryan is the largest independent marketer of auto credit insurance in North America and produces more auto extended warranties than any other independent company worldwide. Ryan has expanded its experience and expertise to develop a number of 1994 Revenue training and other service as a percent of total programs. Consumer Operations --------------------- 22 Ryan Group Europe produces credit insurance and extended warranty products in Europe. These products are marketed through automobile dealerships in the United Kingdom, Ireland, The Netherlands, France, Belgium and Spain. Worldwide auto credit revenues were $178.8 million in 1994, up 12.2 percent from $159.4 million in 1993. Domestic credit revenues were $124.8 million in 1994, up 5 percent from $118.9 million in 1993. International credit revenues were $54 million, up 33.3 percent from $40.5 million in 1993. Credit premiums written become part of earned revenue over the approximate five-year life of underlying policies. In 1994, credit premiums written before reinsurance were $388.8 million, a 25.3 percent increase from $310.2 million in 1993. ================================================================================ Union Fidelity Life A variety of consumer insurance Insurance Company/ needs are met by two Aon Combined Group subsidiaries: Union Fidelity Life Insurance Company (UFLIC), a direct-response marketer and underwriter of supplemental A&H and life insurance coverages and provider of credit insurance coverages; and Combined Group, the group arm of Combined Insurance Company of America. UFLIC's direct-response business, which is marketed primarily through third-party and affinity groups, posted strong results in 1994. For the first time in its history, the company issued more than 1 million new policies. 1994 Revenue as a percent of total This growth was fueled by some Consumer Operations significant new business, including the acquisition of a --------------------- major Medicare Supplement portfolio, and new relationships with major sponsoring organizations. These relationships were developed with the help of other Aon companies, exemplifying the spirit of interdependence among Aon units. A major area of growth for Combined Group was voluntary insurance coverages, particularly dental and disability plans. Employers offer these coverages to employees at group rates; employees who choose to participate pay their cost through payroll deduction. This product line is expected to expand, as the cost of traditional employer-provided benefits rises, especially for smaller employers. Life insurance revenues for UFLIC and Combined Group direct-response business totaled $57.7 million in 1994, up 8.7 percent from $53.1 million in 1993. Revenues from accident and health business were $314.1 million in 1994, up 23 percent from $255.3 million a year earlier. In addition, revenues attributable to financial institution mortgage and credit insurance underwritten by UFLIC reflected the elimination of low-margin business. UFLIC sees opportunities for expanding relationships with bank clients for additional insurance products that could be distributed to their customers. 23 ================================================================================ The Life Insurance The Life Insurance Company of Company of Virginia (LOV) underwrites and Virginia distributes a broad range of capital accumulation, life and annuity products through a variety of distribution systems. The product portfolio includes variable life and annuities, universal and interest-sensitive whole life coverages, individual and group term coverages and individual and group annuities. During 1994, LOV added a survivorship universal life coverage, which pays on the death of the second of a joint life insured. Additionally, its term life and universal life products 1994 Revenue were revised to meet the rapidly as a percent of total changing needs of the Consumer Operations marketplace. Last year, interest rate --------------------- spreads narrowed on capital accumulation products. In 1994, LOV earned a 136 basis-point interest rate spread compared to 170 basis points in 1993. The interest rate spread narrowed primarily due to reinvestment at lower yields of proceeds from bonds called and mortgage-backed securities prepaid, as well as sharply higher short-term interest rates negatively affecting crediting rates on indexed GICs. Total life revenues were $634.4 million in 1994 compared to $625.7 million in 1993; capital accumulation products accounted for $529.9 million, up 1 percent from 1993. Traditional life revenues increased to $104.5 million in 1994. Life revenues reflect the fees earned on variable product sales. Variable product sales continued to be strong. Variable annuity sales rose 97 percent. Variable life deposits increased 82 percent, and variable universal life annualized premium sales were up 37 percent. ================================================================================ Virginia Surety/ Aon's specialty property and London General casualty insurers are Virginia Insurance Surety Company (VSC), operating in North America, and London General Insurance Company, operating in Europe. VSC continues the run-off of the underwriting of certain lines of specialty property and casualty insurance. However, the growth in extended warranty business has largely compensated for the loss in revenues. Total worldwide revenues were $315.6 million in 1994, compared with $326.2 million in 1993, reflecting this run-off. Extended warranty worldwide revenues were 1994 Revenue up 22.8 percent in 1994, to as a percent of total $234.9 million from $191.3 Consumer Operations million in 1993. Written premium rose substantially in 1994. During 1994, Aon Warranty Group --------------------- was created to handle certain extended warranty products on automobiles, electronic goods, personal computers and appliances. In addition, the company acquired Independent Dealer Services Inc. (IDS) of St. Louis, a major extended warranty marketing and administration company for electronic goods, personal computers and appliances. Virginia Surety and London General Insurance continue to be the largest independent underwriter of extended warranties on automobiles worldwide and are moving rapidly toward achieving that goal in the electronics, personal computer and appliance extended warranty segments. 24 Aon Corporation | Investment Operations | ================================================================================ Aon Corporation invests in broad asset categories related to its diversified operations. Investments are managed with the objective of maximizing earnings while matching assets and liability durations and in consideration of regulatory requirements. Investment characteristics mirror liability characteristics of the respective operating units. Aon's insurance brokerage and consulting businesses invest fiduciary funds in short-term obligations. Investments underlying interest-sensitive capital accumulation insurance products are primarily intermediate-term obligations, while indemnity and other types of non-interest sensitive insurance liabilities are supported by longer-term 1994 Invested Assets instruments. Our longer-term as a percent of total assets also include private Investments equity investments that are expected to generate returns in excess of those available in the --------------------- public capital markets. Aon maintains well-capitalized operating companies. The financial strength of these companies permits an overall diversified investment portfolio for stability in volatile financial markets. Moreover, the quality of invested assets remains solid, as 97 percent of our rated bonds were investment-grade at year-end. Last year, interest rates moved sharply higher in most countries where Aon operates. In the United States, bond prices suffered their steepest loss in nearly 70 years. This sharp increase in interest rates reduced the market to book value of Aon's fixed maturity portfolio to 94.6 percent at year-end 1994 compared to 105.1 percent at year-end 1993. Investment income earned in 1994 totaled $759.5 million, modestly higher than the $745.2 million earned a year ago. Lower yields on securities underlying capital accumulation products were partially offset by higher yields on insurance brokerage and consulting short-term investments. The yield on average invested assets was 7.56 percent in 1994 compared to 7.55 percent a year earlier. Net investment income from insurance brokerage and consulting activities totaled $46.6 million in 1994 compared to $37.5 million a year earlier. The 24.3 percent increase was due primarily to sharply higher short-term yields in the United States and the United Kingdom. Through Aon Advisors, Aon manages funds and provides consulting services on behalf of clients in addition to our operating units. This includes acting as investment advisor to mutual funds which are among the investment options available to purchasers of LOV annuities. At year-end, nearly $1 billion of outside funds were managed by Aon Advisors. This developing business line fits in a seamless fashion with other Aon insurance consulting activities. Financing Operations ================================================================================ The specialized finance subsidiaries of Aon offer financing services to commercial clients of RHH and other independent organizations for their liability and casualty premiums through Cananwill Inc., and offer auto financing for individuals in partnership with select retail auto dealerships through Aon Auto Capital Corporation. Both these organizations enjoyed good growth in 1994. Total revenues rose to $20.2 million, a 16.8 percent increase over 1993. 25 Aon Corporation | Management's Analysis of Operating | Results and Financial Condition Revenue and Income Before Income Tax Consolidated Results for 1994 Compared to 1993 Total revenues amounted to $4.2 billion, an increase of 8.1%. This increase was primarily due to the growth in brokerage commissions and fees resulting from business combination activity and internal growth. Brokerage commissions and fees increased 16.7% to $1.4 billion. Premiums and policy fees of $1.9 billion increased 6.1% in 1994 reflecting improvement in the life and accident and health major lines of business. Life premium and policy fees of $454.4 million increased 5.2%, primarily reflecting policy fees on domestic capital accumulation products. Accident and health premiums earned of $1.2 billion, an increase of 8.8%, were influenced by the continued growth in Combined Insurance Company of America's (CICA) direct sales business in addition to the direct response acquisition of a medicare supplement block of business and growth in the third party line of business. Specialty property and casualty premiums earned decreased 4.2% or $10.9 million as anticipated, reflecting the phase-out of certain specialty liability programs. A higher volume of new business in the extended warranty line partially offset this decrease. Net investment income of $759.5 million increased 1.9% for the year. Pretax investment portfolio yield of 7.56% was flat for the year when compared to 1993. Investment income was stable as reduced returns on securities underlying capital accumulation products were partially offset by higher yields on insurance brokerage and consulting short-term investments and investment in new assets at higher yields. Net realized investment gains of $5.8 million decreased significantly, largely reflecting the reduction in bond calls by issuers in 1994. Revenues excluding realized investment gains increased 8.7% or $332.9 million when compared to 1993. Benefits to policyholders increased 3%. Accident and health benefits increased primarily due to the acquired direct response block of business mentioned above. Additionally, the reduction in benefits on specialty liability products primarily reflected the discontinuation of certain specialty programs. Commissions and general expenses (excluding interest expense) increased 11.3% for the year. Amortization of intangibles, which include deferred policy acquisition costs, increased $19.3 million or 5.5%. Total benefits and expenses increased 7.5% or $253.6 million over 1993. Pretax income increased $58.5 million or 12.2% due largely to growth in the brokerage businesses and to the continued favorable phase-out of certain specialty property and casualty underwriting programs. Fourth quarter revenue increased 10.5% to $1.1 billion reflecting business combination activity and internal growth. Benefits and expenses of $952 million increased 10.4% for the quarter. Pretax income increased $13.5 million or 11.7%. Revenue and Income Before Income Tax Consolidated Results for 1993 Compared to 1992 Total revenues amounted to $3.8 billion, an increase of 15.2%. Premiums and policy fees were $1.8 billion, slightly below 1992. As anticipated, special property and casualty premiums earned decreased reflecting reduced underwriting of certain specialty liability programs. Net investment income of $745.2 million increased 1.1% for the year. Brokerage commissions and fees increased 68.2% to $1.2 billion. This increase was primarily due to the growth in brokerage commissions and fees resulting from the late 1992 acquisition of the businesses of Frank B. Hall & Co., Inc. During 1992, Aon adopted Statement of Financial Accounting Standards (Statement) No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions," and Statement No. 109, "Accounting for Income Taxes." The 1992 results reflect a $79.6 million charge for the cumulative effect of these changes in accounting principles. In addition, in 1992, Aon had pretax special charges amounting to $86.5 million relating primarily to the consolidation of global brokerage operations. For purposes of the following expense ratio comparisons, these items have been excluded. Benefits to policyholders decreased 2.9% when compared to 1992. This reduction primarily reflects the discontinuation of certain specialty property and casualty programs. Total benefits and expenses increased 13.7% over 1992. Commissions and general expenses (excluding interest expense) increased 24.2% for the year primarily reflecting brokerage acquisition activity. Pretax income excluding the 1992 special charges increased by 27.1% or $102.1 million. Major Lines of Business Highlights of operating performance were discussed earlier in this Annual Report. Please refer to pages 14 through 25 for descriptions of Aon's businesses and comments on each operation's revenue comparisons. Insurance Brokerage and Consulting Services Total revenue, which includes investment income, was $1,422.1 million in 1994, up 17%. The increase is due primarily to the contribution of acquisition activity and internal growth. Domestic revenue of $1,033 million was up 20.8% while international revenue increased 8.1%. Consulting related fees previously included in Retail brokerage in 1993 have been reclassified to Consulting to conform to the 1994 presentation. Pretax income was $158.8 million in 1994, up 24% from $128.1 million in 1993. Domestic income was up 41.9% from 1993 while international income declined 6.5%, primarily due to start-up activity. Retail brokerage benefited from integration efficiencies and growth from acquisition activity; however, results continued to be influenced by a highly competitive property and casualty pricing environment and investment in new industry areas. 27 Reinsurance and wholesale income improved due to the inclusion of the Jenner Fenton Slade Group Limited (JFS) business combination, international expansion of alternative market services and internal growth. In the Consulting line, growth of specialized employee development programs marketed primarily through the 1994 merger with Pecos River Learning Centers Inc. partially offset a decline in income due to investments in new automobile training operations. Life Insurance Revenue was $946.9 million in 1994 up 1.3% from $935.1 million in 1993. Domestic revenue of $886.9 million was up 0.8% while international revenue rose 8.1%. Capital accumulation products were negatively influenced by rising interest rates and higher adjusted crediting rates causing investment spreads to narrow. Sales of variable products increased when compared to prior year. In addition, traditional life business in Europe and the Pacific is continuing to run off as planned. Pretax income was $113.2 million in 1994, up 6.4% from $106.4 million last year. Domestic income was up 10.7%. International income declined $3.6 million or 38.3%, largely due to higher operating costs. Improved market conditions, increased productivity, and better underwriting controls contributed to a positive impact on auto credit business income during the year. On the majority of life and variable annuity policies, lapse rates did not increase in 1994 from prior years. While lapse rates on fixed annuity policies that reached the end of their surrender period did increase in 1994, these policies remain profitable. Variations in mortality experience between years do not suggest any fundamental changes and do not signal a trend. Accident and Health Insurance Revenue was $1,296.6 million in 1994, up 8% from $1,200.7 million in 1993. Domestic revenue of $1,009.3 million was up 7.7% while international revenue rose 9.2%. Domestically, the impact of the acquisition of the medicare supplement block of business on direct response revenues and, to a lesser extent, new business growth on direct sales products, were chiefly responsible for this improvement. Financial credit disability revenue declined due to the discontinuation of lower margin business. Auto credit insurance revenues improved due to growth in new business. Pretax income was $177.7 million in 1994, up 6.5% from $166.8 million in 1993. Domestic and international income were up 5.8% and 8.2%, respectively. Levels of persistency have been stable for this line of business. Both domestic and international direct sales income improved with continued good expense control and strong health product sales. Expense savings and growth in third party endorsed business primarily contributed to improved income in direct response. Good expense controls and improved underwriting ratios led to an improvement in auto credit income. Specialty Property and Casualty Insurance Revenue was $315.6 million in 1994, down 3.2% from $326.2 million in 1993. Domestic revenue was down 6.6% while international revenue was up 15.8%. Domestically, the continued phase-out of certain specialty property and casualty underwriting programs offset good warranty revenue growth. Internationally, revenue improvements reflect growth in the extended warranty mechanical repair and brown and white lines. Pretax income was $53.5 million in 1994, up 23% from $43.5 million in 1993. Domestic income was up 21%. International income was up sharply due to improved claims experience and a higher volume of new business in the extended warranty line. Specialty liability programs continued to be phased-out with favorable income results. Corporate and Other Revenue consists primarily of investment income on capital, premium finance revenue, and realized investment gains before tax. Expenses include interest and financing expenses, corporate administrative expenses, and goodwill amortization associated with acquisitions. Revenue increased 4.7% over 1993 to $175.7 million. Realized investment gains were $20.8 million lower in 1994 than 1993. The 1993 realized investment gains reflected a high number of corporate bond calls by issuers. Excluding these gains from both years, the revenue increase of 20.3% reflects growth in financing fees and new investments in higher yielding securities. Allocation of investment income to the operating segments is determined by each segment's investable assets as well as the related yield on these investments. The remaining investment income is reported in this segment. Pretax income of $34.4 million in 1994 increased modestly over 1993. Excluding realized investment gains from both years, pretax income increased $20.9 million or over 200%. The increase primarily reflects improved investment yields and investment mix, as well as, a reduction in the level of internal funds employed for acquisition financing. The premium financing business experienced continued growth. In addition, financing costs and goodwill amortization related to acquisitions grew more slowly when compared to the growth in investment income. Geographic Segments The international segment is primarily composed of insurance brokerage and consulting services, accident, health and life products of CICA, and The Ryan Group credit insurance and extended warranty products. Overall, international results were influenced by favorable foreign exchange rates in 1994. International revenues increased 9.2% to $833.3 million primarily reflecting the improvement in brokerage revenues relating to internal growth and acquisitions. International pretax income increased slightly when compared to 1993 to $118.2 million. 28 Aon Corporation | Major Lines of Business
(millions) --------------------------------------------------------------------------------------------------------------- Insurance Specialty Brokerage Accident Property and Consulting and and Corporate Year ended December 31, 1994 Services Life Health Casualty and Other --------------------------------------------------------------------------------------------------------------- Revenue $1,422.1 $ 946.9 $1,296.6 $ 315.6 $ 175.7 Benefits to policyholders -- 608.2 539.9 156.8 -- Amortization of intangibles 47.6 98.2 143.4 48.5 30.7 Other operating expenses 1,215.7 127.3 435.6 56.8 110.6 ------------------------------------------------------------------ Total benefits and expenses 1,263.3 833.7 1,118.9 262.1 141.3 ------------------------------------------------------------------ Income before income tax $ 158.8 $ 113.2 $ 177.7 $ 53.5 $ 34.4 ------------------------------------------------------------------ Identifiable assets $2,967.4 $8,417.0 $1,344.1 $ 999.6 $4,193.8 ===============================================================================================================
Insurance Specialty Brokerage Accident Property and Consulting and and Corporate Year ended December 31, 1993 Services Life Health Casualty and Other --------------------------------------------------------------------------------------------------------------- Revenue $1,215.0 $ 935.1 $1,200.7 $ 326.2 $ 167.8 Benefits to policyholders -- 609.1 483.0 175.2 -- Amortization of intangibles 47.5 90.7 128.8 53.9 28.2 Other operating expenses 1,039.4 128.9 422.1 53.6 105.3 ------------------------------------------------------------------ Total benefits and expenses 1,086.9 828.7 1,033.9 282.7 133.5 ------------------------------------------------------------------ Income before income tax $ 128.1 $ 106.4 $ 166.8 $ 43.5 $ 34.3 ------------------------------------------------------------------ Identifiable assets $2,705.6 $7,613.4 $1,220.3 $ 910.1 $3,829.7 ===============================================================================================================
Insurance Specialty Brokerage Accident Property and Consulting and and Corporate Year ended December 31, 1992 Services Life Health Casualty and Other --------------------------------------------------------------------------------------------------------------- Revenue $ 726.7 $ 927.5 $1,198.2 $ 348.3 $ 135.8 Benefits to policyholders -- 616.1 494.6 194.9 -- Amortization of intangibles 30.9 89.7 126.0 57.7 19.5 Other operating expenses 629.1 128.6 418.1 58.4 95.9 ------------------------------------------------------------------ Total benefits and expenses 660.0 834.4 1,038.7 311.0 115.4 ------------------------------------------------------------------ Income before income tax excluding special charges* 66.7 93.1 159.5 37.3 20.4 Special charges (68.4) (12.2) (1.9) -- (4.0) ------------------------------------------------------------------ Income (loss) before income tax* $ (1.7) $ 80.9 $ 157.6 $ 37.3 $ 16.4 ------------------------------------------------------------------ Identifiable assets $2,366.3 $6,489.3 $1,164.0 $ 565.2 $3,705.0 ===============================================================================================================
*Before cumulative effect of changes in accounting principles. 29 Domestic revenues increased 7.8% primarily reflecting brokerage acquisition activity. Pretax income increased 16.1% primarily on the strength of acquisition activity, improved benefit experience in life insurance and specialty property and casualty business lines, and overall expense controls. Income Tax and Net Income On March 18, 1994, the Board of Directors authorized a three-for-two stock split, payable in the form of a stock dividend, of Aon's $1.00 par value common stock. All references to share data in the accompanying management's discussion and analysis and financial statements reflect the three-for-two stock split. Net income for 1994 was $360 million or $3.14 per share compared to $323.8 million or $2.81 per share in 1993. Dividends on the 8%, 6.25% and Series C preferred stock of $26.8 million in 1994 and dividends on the 8% and 6.25% preferred stock of $24.5 million in 1993 have been deducted from net income to compute earnings per share. Net income for fourth quarter 1994 amounted to $86 million or $0.74 per share compared to $77.9 million or $0.67 per share for 1993. Operating income amounted to $356.3 million or $3.10 per share, up from $312.2 million or $2.70 per share in 1993. Operating income excludes after-tax realized investment gains in 1994 and 1993. Aon's effective operating income tax rate was 33% in 1994 and 31% in 1993, while realized gains were taxed at a 36% rate for both years. The 1993 annual tax provision also incorporated a federal tax rate increase of one percentage point effective January 1, 1993 which caused a retroactive charge to deferred income tax of $5.4 million. Liquidity Aon's operating subsidiaries anticipate that there will be adequate liquidity to meet their needs in the foreseeable future. Aon Corp.'s liquidity needs are primarily for servicing its debt and for the payment of dividends on stock issues. Dividends from Aon Corp.'s subsidiaries are the primary source for meeting these requirements. There are certain regulatory restrictions relating to dividend capacity of insurance subsidiaries that are discussed in note 7. Insurance subsidiaries' statutory equity at year end 1994 again exceeded the risk-based capital target set by the National Association of Insurance Commissioners by a satisfactory level. At December 31, 1994, Aon Corp. had short-term lines of credit available in excess of $100 million. The businesses of Aon continue to provide substantial positive cash flow. Brokerage cash flow has been used primarily for servicing acquisition-related debt. Due to the contractual nature of its insurance policyholder liabilities which are intermediate to long-term in nature, Aon has invested primarily in investment-grade fixed maturities. Capital accumulation products are interest-sensitive and require close duration matching. Non interest-sensitive insurance products do not require as close monitoring of duration matching. Because there is a reasonable duration match between these investments and their related liabilities, changes in prevailing interest rates can, to a large extent, be matched by congruent changes in credited interest rates resulting in minimal impact on Aon's earnings. However, mismatches do occur. Aon will accept a mismatch in duration in each individual segment but attempts to allow no more than a one year mismatch when all interest-sensitive segments are aggregated. As of December 31, 1994, assets and interest-sensitive liabilities were closely matched with the aggregate estimated duration variance of less than one year. Through the use of derivative financial instruments (derivatives) (see note 10), Aon improved its overall asset and liability duration match and managed its interest rate risks. Given Aon's bond portfolio's average life of 7.6 years, access to lines of credit, and an uninterrupted trend in Aon's positive cash flow, Aon expects sufficient cash flow to meet both short-term and long-term cash needs. Cash provided by operating activities in 1994 increased $91 million from 1993 to $695.8 million. This increase primarily reflects internal growth as well as acquisitions related to brokerage operations. Investment activities used $361.5 million, down $312.3 million from prior year primarily due to the use of cash at the brokerage operations as well as a reduced level of funds made available from capital accumulation products. Cash of approximately $100 million was provided from the issuance of long-term debt. Proceeds from the debt issuance were used to retire $125 million of long-term debt securities at par. Cash was used to pay dividends of $135.7 million on common stock and Series B conversion preferred stock (PERCS), $18 million on 8% preferred stock, $6.7 million on 6.25% preferred stock and $1.9 million on Series C preferred stock. As of January 1, 1994, Aon adopted Statement of Financial Accounting Standards (Statement) No. 115 "Accounting for Certain Investments in Debt and Equity Securities." In accordance with Statement No. 115, Aon has segregated its fixed maturity portfolio into two components: fixed maturities to be held to maturity and fixed maturities available for sale. Fixed maturities that are categorized as held to maturity are valued at amortized cost, while those available for sale are carried at fair value with unrealized gains and losses excluded from income and recorded directly as a separate component of stockholders' equity. The after-tax stockholders' equity impact of reporting fixed maturities available for sale at fair value was a net unrealized loss of $111 million at December 31, 1994. To minimize the volatility of the changes in this component of stockholders' equity, Aon enters into derivatives to hedge its available for sale asset positions. In administering its hedging programs, Aon performs analyses that have demonstrated that Aon achieves a high degree of correlation. 30 Aon Corporation | Geographic Segments |
(millions) ------------------------------------------------------------------------------- Year ended December 31, 1994 Domestic International Total ------------------------------------------------------------------------------- Revenue Insurance brokerage and consulting services $ 1,033.0 $ 389.1 $ 1,422.1 Life 886.9 60.0 946.9 Accident and health 1,009.3 287.3 1,296.6 Specialty property and casualty 259.2 56.4 315.6 Corporate and other 135.2 40.5 175.7 ---------------------------------------- Total revenue 3,323.6 833.3 4,156.9 ---------------------------------------- Income before income tax $ 419.4 $ 118.2 $ 537.6 ---------------------------------------- Identifiable assets $15,083.6 $2,838.3 $17,921.9 ===============================================================================
------------------------------------------------------------------------------- Year ended December 31, 1993 Domestic International Total ------------------------------------------------------------------------------- Revenue Insurance brokerage and consulting services $ 855.0 $ 360.0 $ 1,215.0 Life 879.6 55.5 935.1 Accident and health 937.5 263.2 1,200.7 Specialty property and casualty 277.5 48.7 326.2 Corporate and other 132.3 35.5 167.8 ---------------------------------------- Total revenue 3,081.9 762.9 3,844.8 ---------------------------------------- Income before income tax $ 361.2 $ 117.9 $ 479.1 ---------------------------------------- Identifiable assets $13,689.3 $2,589.8 $16,279.1 ===============================================================================
------------------------------------------------------------------------------- Year ended December 31, 1992 Domestic International Total ------------------------------------------------------------------------------- Revenue Insurance brokerage and consulting services $ 494.8 $ 231.9 $ 726.7 Life 867.2 60.3 927.5 Accident and health 925.5 272.7 1,198.2 Specialty property and casualty 295.8 52.5 348.3 Corporate and other 84.4 51.4 135.8 ---------------------------------------- Total revenue 2,667.7 668.8 3,336.5 ---------------------------------------- Income before income tax* $ 180.6 $ 109.9 $ 290.5 ---------------------------------------- Identifiable assets $11,755.7 $2,534.1 $14,289.8 ===============================================================================
*Before cumulative effect of changes in accounting principles. 31 With a carrying value of $7.1 billion, Aon's total fixed maturity portfolio is invested primarily in investment grade holdings (97%) and has a market value which is 94.6% of amortized cost. At December 31, 1994 and 1993, Aon's fixed maturity portfolio includes mortgage-backed securities with an amortized cost of $3.1 billion and $2.7 billion, respectively. The amortized cost and fair value of Aon's mortgage-backed securities are also presented in note 3. The following table summarizes Aon's mortgage-backed securities held at December 31, 1994 and 1993, respectively.
------------------------------------------------------------------------------ Par Amortized Fair (millions) As of December 31, 1994 Value Cost Value ------------------------------------------------------------------------------ Mortgage-backed securities: Collateralized mortgage obligations (CMOs): Principally targeted amortization classes $ 322.8 $ 315.3 $ 290.6 Principally sequential pay class 2,429.3 2,401.1 2,159.9 ------------------------------------------------------------------------------ Total collateralized mortgage obligations 2,752.1 2,716.4 2,450.5 Mortgage-backed pass-through securities 348.7 351.7 345.2 ------------------------------------------------------------------------------ Total mortgage-backed securities $3,100.8 $3,068.1 $2,795.7 ==============================================================================
------------------------------------------------------------------------------ Par Amortized Fair (millions) As of December 31, 1993 Value Cost Value ------------------------------------------------------------------------------ Mortgage-backed securities: Collateralized mortgage obligations: Principally targeted amortization classes $ 443.5 $ 443.4 $ 448.0 Principally sequential pay class 1,903.7 1,914.4 1,914.6 ------------------------------------------------------------------------------ Total collateralized mortgage obligations 2,347.2 2,357.8 2,362.6 Mortgage-backed pass-through securities 338.0 339.9 354.0 ------------------------------------------------------------------------------ Total mortgage-backed securities $2,685.2 $2,697.7 $2,716.6 ==============================================================================
Aon does not have any CMO residuals, interest only, inverse floating or principal only type securities. CMOs have been acquired as alternatives to mortgage-backed pass-through securities. Aon's insurance subsidiaries have generally acquired shorter tranche CMOs classified in the form of sequential payment, targeted amortization classes (TACs) or support TACs. Market values for CMOs are established each quarter based primarily on information received from broker-dealer market makers. Certain mortgage-backed securities are subject to duration extension risk during periods of rising interest rates and to prepayment risk during periods of declining interest rates. To limit its credit risk, Aon's CMO investments are concentrated in tranches that have received an investment grade rating. Aon maintained separate investment reserves related to mortgage loan losses on real estate and illiquid holdings which include real estate ventures, limited partnerships and private placement common stocks totalling $36.4 million in 1994, down $14.9 million from the year end 1993 level of $51.3 million. These reserves are a product of Aon's continued review of the characteristics and risks of its investment portfolio and current environmental and economic conditions. Assets and liabilities held under special contracts increased $554 million from 1993 primarily due to increased funds in variable life and annuity programs. The net investment income generated from these assets is not included in the consolidated statements of income. Capital Resources In 1994, notes payable decreased $25.8 million, reflecting the $125 million repayment of public debt, the issuance of $100 million public debt, as well as repayments on privately placed obligations. In addition, short-term borrowings increased $75.3 million to satisfy Aon's short-term cash needs. This increase was used primarily to finance the repurchase of common stock and the repurchase of PERCS prior to mandatory conversion into common stock. The credit agreements providing lines of credit for commercial paper contain no restrictive covenants. Aon Corp. continues to maintain an internal lending program with its various subsidiaries where the parent company is able to borrow or lend funds. As of December 31, 1994, Aon Corp. held notes payable to its subsidiaries of approximately $373 million. These notes have interest rates in terms that were competitive at the time of issuance. In 1994, stockholders' equity per common share decreased to $18.30, down from $18.95 in 1993. The principal factors influencing this reduction were a $193.1 million increase in net unrealized investment losses, the exchange of 1,500,000 shares of common stock for Series C preferred stock and business combinations. Excluding net income and dividends, another significant impact on equity was a $41.3 million reduction in net unrealized foreign exchange losses. 32 Aon Corporation | Consolidated Statements of Income |
(millions except common stock and per share data) Years ended December 31 1994 1993 1992 ---------------------------------------------------------------------------------------------------------------------------- Revenue Premiums and policy fees $1,933.7 $1,823.0 $1,826.3 Net investment income (note 3) 759.5 745.2 737.0 Realized investment gains 5.8 26.6 4.2 Brokerage commissions and fees 1,369.6 1,173.2 697.4 Other income 88.3 76.8 71.6 ---------------------------------------- Total revenue earned 4,156.9 3,844.8 3,336.5 ============================================================================================================================ Benefits and Expenses Benefits to policyholders 1,304.9 1,267.3 1,305.6 Commissions and general expenses 1,899.6 1,707.0 1,374.7 Interest expense 46.4 42.3 41.9 Amortization of deferred policy acquisition costs 276.2 257.7 252.3 Amortization of intangible assets 92.2 91.4 71.5 ---------------------------------------- Total benefits and expenses 3,619.3 3,365.7 3,046.0 ============================================================================================================================ Income Before Income Tax and Cumulative Effect of Changes in Accounting Principles 537.6 479.1 290.5 Provision for income tax (note 5) 177.6 155.3 84.3 ---------------------------------------- Income Before Cumulative Effect of Changes in Accounting Principles 360.0 323.8 206.2 Cumulative effect of changes in accounting principles -- -- (79.6) ---------------------------------------- Net Income $ 360.0 $ 323.8 $ 126.6 ============================================================================================================================ Income attributable to common stockholders $ 327.6 $ 291.0 $ 112.2 ============================================================================================================================ Per Share Income before cumulative effect of changes in accounting principles $ 3.14 $ 2.81 $ 1.93 Cumulative effect of changes in accounting principles -- -- (0.76) ---------------------------------------- Net income $ 3.14 $ 2.81 $ 1.17 ---------------------------------------- Cash dividends paid on common stock $ 1.26 $ 1.18 $ 1.11 ============================================================================================================================ Average common and common equivalent shares outstanding 106,177,000 106,369,000 104,885,000 ============================================================================================================================
See accompanying notes to consolidated financial statements. 33 Aon Corporation | Consolidated Statements of Financial Position |
(millions) As of December 31 1994 1993 ----------------------------------------------------------------------------------------------------------------------------- Assets Investments Fixed maturities Held to maturity--at amortized cost (fair value: 1994--$2,750; 1993--$5,304) $ 2,983.8 $ 5,021.1 Available for sale--1994 at fair value; 1993 at amortized cost 4,160.3 2,032.3 (1994 amortized cost: $4,318; 1993 fair value: $2,112) Equity securities--at fair value (cost: 1994--$989; 1993--$852) 939.3 932.5 Mortgage loans on real estate (net of reserve for losses: 1994--$30; 1993--$42) 567.5 557.1 Real estate (net of accumulated depreciation: 1994--$8; 1993--$5) 35.6 34.2 Policy loans 214.9 207.3 Other long-term investments 97.9 63.0 Short-term investments 783.2 804.2 -------------------------- Total investments 9,782.5 9,651.7 ============================================================================================================================= Cash 508.8 163.8 Receivables Insurance brokerage and consulting services (net of allowance for doubtful accounts: 1994--$45; 1993--$41) 1,882.0 1,614.6 Premiums and other (net of allowance for doubtful accounts: 1994--$3; 1993--$3) 637.7 485.9 Accrued investment income 133.5 128.6 -------------------------- Total receivables 2,653.2 2,229.1 ============================================================================================================================= Deferred Policy Acquisition Costs 1,181.6 1,005.4 Cost of Insurance and Renewal Rights Purchased (net of accumulated amortization: 1994--$567; 1993--$504) 678.6 688.5 Excess of Cost Over Net Assets Purchased (net of accumulated amortization: 1994--$121; 1993--$91) 869.4 840.8 Property and Equipment at Cost (net of accumulated depreciation: 1994--$281; 1993--$253) 266.5 224.2 Assets Held Under Special Contracts 1,595.1 1,041.1 Other Assets 386.2 434.5 ============================================================================================================================= Total Assets $17,921.9 $16,279.1 ============================================================================================================================= See accompanying notes to consolidated financial statements.
34
(millions except share data) As of December 31 1994 1993 ------------------------------------------------------------------------------- Liabilities and Stockholders' Equity Policy Liabilities Future policy benefits $ 1,434.5 $ 1,405.6 Policy and contract claims 944.2 920.7 Unearned and advance premiums 1,428.4 1,234.8 Other policyholder funds 5,503.3 5,215.2 ----------------------- Total policy liabilities 9,310.4 8,776.3 =============================================================================== General Liabilities Short-term borrowings 243.9 168.6 Insurance premiums payable 2,408.7 1,948.1 Commissions and general expenses 526.6 500.4 Current income tax 200.9 189.4 Deferred income tax 129.3 169.7 Notes payable 495.5 521.3 Debt guarantee of employee stock ownership plan 65.5 72.5 Liabilities held under special contracts 1,595.1 1,041.1 Other liabilities 638.6 603.9 ----------------------- Total Liabilities 15,614.5 13,991.3 =============================================================================== Commitments and Contingent Liabilities Redeemable Preferred Stock 50.0 -- Stockholders' Equity Preferred stock--$1 par value Authorized--25,000,000 shares; issued Series B conversion preferred stock -- 2.7 8% cumulative perpetual preferred stock 9.0 9.0 6.25% cumulative convertible exchangeable preferred stock 2.1 2.1 Common stock--$1 par value Authorized--(shares: 1994--300,000,000; 1993--120,000,000); issued 110.6 70.0 Paid-in additional capital 485.2 605.7 Net unrealized investment gains (losses) (142.8) 50.3 Net foreign exchange losses (19.7) (61.0) Retained earnings 1,998.1 1,784.9 Less treasury stock at cost (shares: 1994--2,872,000; 1993--3,482,000) (72.9) (69.3) Less deferred compensation (112.2) (106.6) ----------------------- Total Stockholders' Equity 2,257.4 2,287.8 =============================================================================== Total Liabilities and Stockholders' Equity $17,921.9 $16,279.1 ===============================================================================
35 Aon Corporation | Consolidated Statements of Stockholders' Equity
(millions) Years ended December 31 1994 1993 1992 ----------------------------------------------------------------------------------------------------- PREFERRED STOCK Balance at January 1 $ 13.8 $ 15.2 $ 3.8 Issuance of preferred stock -- -- 11.4 Retirement of preferred stock (1.3) (0.4) -- Conversion of preferred stock to common stock (1.4) (1.0) -- ------------------------------------- 11.1 13.8 15.2 ===================================================================================================== COMMON STOCK Balance at January 1 70.0 68.3 67.2 Shares issued for business combinations 5.3 0.7 1.1 Effect of three-for-two stock split 35.3 -- -- Conversion of preferred stock to common stock -- 1.0 -- ------------------------------------- 110.6 70.0 68.3 ===================================================================================================== PAID-IN ADDITIONAL CAPITAL Balance at January 1 605.7 600.9 258.4 Issuance of stock awards and option shares 10.8 20.6 10.8 Adjustment for business combinations 1.9 1.4 (0.6) Issuance of preferred stock -- -- 332.3 Retirement and conversion of preferred stock (97.9) (17.2) -- Effect of three-for-two stock split (35.3) -- -- ------------------------------------- 485.2 605.7 600.9 ===================================================================================================== NET UNREALIZED INVESTMENT GAINS (LOSSES) Balance at January 1 50.3 32.9 21.9 Effect of a change in accounting principles at January 1 148.2 -- -- Net unrealized investment gains (losses) (341.3) 17.4 11.0 ------------------------------------- (142.8) 50.3 32.9 ===================================================================================================== NET FOREIGN EXCHANGE GAINS (LOSSES) Balance at January 1 (61.0) (39.1) 6.9 Net foreign exchange gains (losses) 41.3 (21.9) (46.0) ------------------------------------- (19.7) (61.0) (39.1) ===================================================================================================== RETAINED EARNINGS Balance at January 1 1,784.9 1,603.2 1,602.3 Net income 360.0 323.8 126.6 Dividends to stockholders (162.0) (151.0) (124.5) Loss on treasury stock reissued -- -- (3.1) Adjustment for business combinations 27.6 10.4 1.9 Retirement of preferred stock (12.4) (1.5) -- ------------------------------------- 1,998.1 1,784.9 1,603.2 ===================================================================================================== TREASURY STOCK Balance at January 1 (69.3) (79.7) (87.7) Cost of shares (26.6) (0.6) (8.1) Shares reissued at average cost 73.0 11.0 16.1 Conversion of common stock to redeemable preferred stock (50.0) -- -- ------------------------------------- (72.9) (69.3) (79.7) ===================================================================================================== DEFERRED COMPENSATION Balance at January 1 (106.6) (97.8) (97.8) Stock awards issued (18.3) (18.3) (10.5) Debt guarantee of employee stock ownership plan 7.0 5.8 4.7 Amortization of deferred compensation 5.7 3.7 5.8 ------------------------------------- (112.2) (106.6) (97.8) ----------------------------------------------------------------------------------------------------- STOCKHOLDERS' EQUITY AT DECEMBER 31 $2,257.4 $2,287.8 $2,103.9 =====================================================================================================
See accompanying notes to consolidated financial statements. 36 Aon Corporation | Consolidated Statements of Cash Flows |
(millions) Year ended December 31 1994 1993 1992 -------------------------------------------------------------------------------------------------- Cash Flows from Operating Activities: Net income $ 360.0 $ 323.8 $ 126.6 Adjustments to reconcile net income to cash provided by operating activities Policy liabilities 298.6 273.0 278.6 Deferred policy acquisition costs (414.5) (325.9) (319.8) Amortization of deferred policy acquisition costs 276.2 257.7 252.3 Amortization of intangible assets 92.2 91.4 71.5 Other amortization and depreciation 57.3 50.7 33.2 Other operating assets and liabilities 31.8 (39.3) 140.5 Realized investment gains (5.8) (26.6) (4.2) ----------------------------------------- Cash Provided by Operating Activities 695.8 604.8 578.7 ================================================================================================== Cash Flows from Investing Activities: Sale (purchase) of short term investments--net 143.4 (160.2) 266.7 Sale or maturity of investments Fixed maturities--Held to maturity Maturities 49.2 116.8 88.6 Calls and Prepayments 727.6 2,021.7 1,497.3 Sales -- 60.4 907.8 Fixed maturities--Available for sale Maturities 109.5 13.9 0.1 Calls and Prepayments 312.2 484.3 20.6 Sales 883.9 496.1 64.1 All other investments 979.2 925.4 752.6 Purchase of investments Fixed maturities--Held to maturity (734.8) (2,171.7) (2,751.6) Fixed maturities--Available for sale (1,591.2) (1,326.8) (318.5) All other investments (1,141.6) (990.3) (930.2) Acquisition of subsidiaries (22.0) (96.3) (290.0) Property and equipment and other (76.9) (47.1) (25.7) ----------------------------------------- Cash Used by Investing Activities (361.5) (673.8) (718.2) ================================================================================================== Cash Flows from Financing Activities: Treasury stock transactions--net (15.4) 11.4 6.9 Issuance of short-term borrowings--net 75.3 53.5 51.8 Issuance of long-term debt securities 99.7 149.6 199.5 Repayment of notes payable (128.0) (192.8) (141.7) Interest sensitive life, annuity and investment contract deposits 1,557.5 1,376.0 955.6 Interest sensitive life, annuity and investment contract withdrawals (1,362.4) (1,089.9) (761.4) Retirement of Series B conversion preferred stock (58.3) (7.3) -- Cash dividends to stockholders (162.3) (151.0) (119.5) ----------------------------------------- Cash Provided by Financing Activities 6.1 149.5 191.2 ================================================================================================== Effect of Exchange Rate Changes on Cash 4.6 (4.4) (2.1) Increase in Cash 345.0 76.1 49.6 Cash at Beginning of Year 163.8 87.7 38.1 ----------------------------------------- Cash at End of Year $ 508.8 $ 163.8 $ 87.7 ==================================================================================================
See accompanying notes to consolidated financial statements. 37 Aon Corporation | Notes to Consolidated Financial Statements 1. Summary of Significant Accounting Principles and Practices Principles of Consolidation The accompanying consolidated financial statements have been prepared in conformity with generally accepted accounting principles and include the accounts of Aon Corporation and its operating subsidiaries (Aon). All material intercompany accounts and transactions have been eliminated. Recognition of Premium Revenue and Related Expenses For universal life-type and investment products, generally there is no requirement for payment of premium other than to maintain account values at a level sufficient to pay mortality and expense charges. Consequently, premiums for universal life-type policies and investment products are not reported as revenue, but as deposits. Policy fee revenue for universal life-type policies and investment products consists of charges for the cost of insurance, policy administration, and surrenders assessed during the period. Expenses include interest credited to policy account balances and benefit claims incurred in excess of policy account balances. In general, for accident and health, property and casualty and credit products, premiums collected are reported as earned proportionately over the period covered by the policies. For all other life products, premiums are recognized as revenue when due. Benefits and related expenses associated with premium revenues are charged to expense proportionately over the lives of the policies through a provision for future policy benefit liabilities and through deferral and amortization of deferred policy acquisition costs. In general, for property and casualty and accident and health products, benefits and related expenses associated with premium revenues are charged to expense as incurred. Brokerage Commissions and Fees In general, commission income is recognized at the later of the billing or effective date of the related insurance policies. Contingent commissions, certain life insurance commissions and commissions on premiums billed directly by insurance companies are generally recognized as income when received. Commissions on premium adjustments, including policy cancellations, are recognized as they occur. Fees for claim administration services, benefit consulting, reinsurance services and other services are recognized when the services are rendered. Reinsurance Reinsurance premiums, commissions, and expense reimbursements on reinsured business are accounted for on a basis consistent with those used in accounting for the original policies issued and the terms of the reinsurance contracts. Premiums and benefits ceded to other companies have been reported as a reduction of premium revenue and benefits. Expense reimbursements received in connection with reinsurance ceded have been accounted for as a reduction of the related policy acquisition costs or, to the extent such reimbursements exceed the related acquisition costs, as other revenue. All reinsurance receivables and prepaid reinsurance premium amounts are reported as assets. Income Tax Deferred income tax has been provided for the effects of temporary differences between financial reporting and tax bases of assets and liabilities and has been measured using the enacted marginal tax rates and laws that are currently in effect. Earnings Per Share Earnings per share are computed based on the weighted average number of common and common equivalent shares outstanding during the respective period. Common shares outstanding include 3,386,000 shares held by the employee stock ownership plan. Common equivalent shares include Series A and Series B preferred stocks and dilutive stock awards and stock options. The 8% cumulative perpetual preferred stock (8% preferred stock), the 6.25% cumulative convertible exchangeable preferred stock (6.25% preferred stock) and the Series C cumulative preferred stock (Series C) are not considered common equivalent shares. Accordingly, the dividends on the 8%, 6.25% and Series C preferred stock of $27 million in 1994 and the dividends on the 8% and 6.25% preferred stock of $25 million and $4 million in 1993 and 1992, respectively, have been deducted from net income to compute earnings per share. There is no material difference between primary and fully diluted per share amounts. Income attributable to common stockholders is net of dividends on all preferred stock. A three-for-two stock split of Aon's $1.00 par value common stock was effected on May 16, 1994 with 35 million shares issued to stockholders of record as of May 3, 1994. All references in the accompanying financial statements and notes to the number of common shares and per share amounts have been retroactively restated to reflect the stock split. Investments Fixed maturities, where the intent is to hold to maturity, are carried generally at amortized cost. As a result of adopting Statement of Financial Accounting Standards (Statement) No. 115 "Accounting for Certain Investments in Debt and Equity Securities" on January 1, 1994, fixed maturities that are available for sale are carried at fair value at December 31, 1994. At December 31, 1993, fixed maturities available for sale were carried, on an aggregate basis, at the lower of amortized cost or fair value. The amortized cost of fixed maturities is adjusted for amortization of premiums and accretion of discounts to maturity that are included in net investment income. Included in fixed maturities are investments in collateralized mortgage obligations (CMOs). Premiums and discounts arising from the purchase of CMOs are treated as yield adjustments and included in net investment income. Equity securities are valued at fair value. Unrealized gains and temporary unrealized losses on fixed maturities available for sale and equity securities are excluded from income and are recorded directly to stockholders' equity, net of related deferred income taxes. Mortgage loans are carried at amortized cost, net of reserves. Real estate is carried generally at cost less accumulated depreciation. Policy loans are carried at unpaid principal balance. 38 Other long-term investments are carried generally at cost. Realized investment gains or losses are computed using specific costs of securities sold. Investments that have declines in fair value below cost, are judged to be other than temporary, are written down to estimated fair values and reported as realized investment losses. Additionally, reserves for mortgage loans and certain other long-term investments are established based on an evaluation of the respective investment portfolio, past credit loss experience, and current economic conditions. Writedowns and reserves are included in realized investment gains and losses in the statements of income. In general, Aon ceases to accrue investment income where interest or dividend payments are in arrears. Accounting policies relating to derivative financial instruments are discussed in note 10. Deferred Policy Acquisition Costs Costs of acquiring new and renewal business, principally the excess of new commissions over renewal commissions, mass marketing advertising, underwriting and sales expenses that vary with and are primarily related to the production of new business, are deferred. For non-universal life-type products, amortization of deferred acquisition costs and the cost of insurance purchased is related to and based on the expected premium revenues on the policies. In general, such amortization is adjusted to reflect current withdrawal experience. Expected premium revenues are estimated by using the same assumptions used in estimating future policy benefits. For property and casualty and short-duration health insurance, costs of acquiring and renewing business, which are deferred, are amortized as the related premium is earned. In general, deferred policy acquisition costs and cost of insurance purchased related to universal life-type policies and investment products are amortized in relation to the present value of expected gross profits on the policies. Such amortization is adjusted periodically to reflect differences in actual and assumed gross profits. To the extent that unrealized gains or losses on available for sale securities would result in an adjustment of deferred policy acquisition costs had those gains or losses actually been realized, the related deferred policy acquisition cost adjustments are recorded along with the unrealized gains or losses included in stockholders' equity with no effect on net income. Other Intangible Assets In general, the excess of cost over net assets purchased relating to business acquisitions is being amortized into income over periods not exceeding forty years using the straight-line method. The cost of insurance and renewal rights purchased of certain subsidiaries is being amortized over a range of 2 to 30 years. Property and Equipment Property and equipment are generally depreciated using the straight-line method over their estimated useful lives. Fair Value of Financial Instruments The following methods and assumptions were used to estimate fair values for financial instruments. The carrying amounts in the consolidated statements of financial position for cash and cash equivalents and short-term investments approximate their fair values. Fair values for fixed maturity securities and equity securities are based on quoted market prices or, if they are not actively traded, on estimated values obtained from independent pricing services. The fair values for mortgage loans and policy loans are estimated using discounted cash flow analyses, using interest rates currently being offered for similar loans to borrowers with similar credit ratings. Fair values of derivatives are based on quoted prices for exchange-traded instruments or the cost to terminate or offset with other contracts. In general, other long-term investments are comprised of real estate joint ventures and limited partnerships. It was not practicable to estimate the fair value of other long-term investments because of the lack of quoted market prices and the inability to estimate fair value without incurring excessive costs. In addition, the determination of the fair value of investment commitments was deemed impractical due to the inability to estimate future cash flows. Fair values for liabilities for investment-type contracts are estimated using discounted cash flow calculations based on interest rates currently being offered for similar contracts with maturities consistent with those remaining for the contracts being valued. The fair value of notes payable are based on quoted market prices for the publicly traded portion and on estimates using discounted cash flow analyses based on current borrowing rates for similar types of borrowing arrangements for the non-publicly traded portion. Assets and Liabilities Held Under Special Contracts Assets held under special contracts principally represent designated funds of group pension, variable life, annuity and unit-linked policyholders. These assets are offset by liabilities that represent such policyholders' equity in those assets. The net investment income generated from these assets is not included in the consolidated statements of income. Future Policy Benefits, Unearned Premiums and Policy and Contract Claims Future policy benefit liabilities on non-universal life-type and accident and health products have been provided on the net level premium method. The liabilities are calculated based on assumptions as to investment yield, mortality, morbidity, and withdrawal rates that were determined at the date of issue, and provide for possible adverse deviations. Interest assumptions are graded and range from 9% to 4.5%. Withdrawal assumptions are based principally on insurance subsidiaries' experience and vary by plan, year of issue, and duration. Policyholder liabilities on universal life-type and investment products are generally based on policy account values. Interest credit rates for these products range from 8.4% to 5.6%. Unearned premiums generally are calculated using the pro rata method based on gross premiums. However, in the 39 case of credit life, credit accident and health, and extended warranty products, the unearned premiums are calculated such that the premiums are earned over the period of risk in a reasonable relationship to anticipated claims. Policy and contract claim liabilities represent estimates for reported claims, as well as provisions for losses incurred, but not yet reported. These claim liabilities are based on historical experience and are estimates of the ultimate amount to be paid when the claims are settled. Changes in the estimated liability are reflected in income as the estimates are revised. Foreign Currency Translation Foreign revenues and expenses are translated at average exchange rates. Foreign assets and liabilities are translated at year end exchange rates. Unrealized foreign exchange losses on translation are generally reported in stockholders' equity, net of deferred income tax credit of $11 million, $33 million and $20 million at December 31, 1994, 1993 and 1992, respectively. Accounting Changes On January 1, 1994, Aon adopted Statement No. 115 which requires categorization of fixed maturities either as held to maturity, available for sale or trading and equity securities as available for sale or trading. Investments in fixed maturities and equity investments, that are categorized as available for sale, are carried at fair value, with unrealized gains and losses (net of applicable tax and adjustment to amortization of deferred policy acquisition costs) excluded from income and recorded directly as a separate component of stockholders' equity. Aon does not categorize any fixed maturities or equity securities as trading. The adoption of Statement No. 115 had no effect on Aon's accounting for equity securities. In accordance with Statement No. 115, prior period financial statements have not been restated to reflect the change in accounting principle. In addition, Aon adopted Statement No. 112, "Employers' Accounting for Postemployment Benefits" in 1994. Implementation of this Statement did not have a material effect on Aon's financial statements. Aon adopted Statement No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions" (note 8) and Statement No. 109, "Accounting for Income Taxes" (note 5) in 1992. The Financial Accounting Standards Board has issued Statements No. 114 and 118 which relate to accounting by creditors for impairment of a loan. The Statements require that impaired loans are to be valued at the present value of expected future cash flows, at the loan's observable market price, or at the fair value of the collateral if the loan is collateral dependent. Aon anticipates adopting these Statements in its 1995 financial statements as required. Implementation of these Statements is not expected to have a material effect on Aon's financial statements. 2. Business Combinations Pooling of Interests Method In the fourth quarter of 1994, Aon issued 3,540,000 shares of common stock for the mergers with the insurance brokerage organizations of Jenner Fenton Slade Limited (JFS) and Energy Insurance International, Inc. (EII). In connection with these poolings, 325,000 shares are being held in escrow pending the resolution of contingencies. In addition, in 1994, 1993 and 1992, Aon issued 2,006,000 shares, 1,044,000 shares and 1,673,000 shares of common stock, respectively, for the mergers with certain other insurance brokerage organizations. In connection with several of the 1994 mergers, 255,000 shares are being held in escrow pending the resolution of contingencies. Aon's prior period financial statements have not been restated because the effect of the above mergers was not material. Purchase Method In November 1992, Aon acquired certain assets and assumed certain liabilities of Frank B. Hall and Co., Inc. (Hall) for approximately $500 million. This acquisition was financed with the issuance of 9 million shares of 8% preferred stock, 2,374,000 shares of 6.25% preferred stock, and cash. Based on the resolution in 1993 of certain issues related to the purchase of the assets of Hall, Hall returned 238,000 shares of 6.25% preferred stock to Aon, which were retired. In accordance with the purchase agreement, securities with a value of $125 million are being held in escrow. The escrowed securities will be released on a pre-determined schedule between 1997 and 2007. The statements of income include the operations of Hall since the transaction date. In 1992, Aon recorded special charges for employee reductions, which primarily included an early retirement program and the consolidation of certain brokerage offices as a result of the acquisition of the assets of Hall. The above charges aggregated $87 million before income taxes. In addition, during 1994, 1993 and 1992, subsidiaries of Aon acquired certain insurance brokerage and consulting services operations that were financed primarily by internal funds and the reissuance of common stock from treasury. Pursuant to a 1994 purchase agreement with one of the brokerage operations, over the next six years, Aon is contingently liable to issue up to 249,000 additional shares of common stock based on a formula relating to future earnings of that operation. The aggregate cost of these acquisitions was $22 million, $176 million and $153 million in 1994, 1993 and 1992, respectively. The proforma results of these operations, as if the acquisitions had occurred as of the beginning of the year, have an immaterial effect on Aon's consolidated revenues and net income. 3. Investments The components of net investment income are as follows:
---------------------------------------------------------------------- (millions) Years ended December 31 1994 1993 1992 ---------------------------------------------------------------------- Fixed maturities $555 $568 $574 Equity securities 76 55 51 Mortgage loans on real estate 55 58 63 Short-term investments 60 47 41 Other 36 33 27 ---------------------------------------------------------------------- Gross investment income 782 761 756 Investment expenses 22 16 19 ---------------------------------------------------------------------- Net investment income $760 $745 $737 ======================================================================
40 Realized gains (losses) on investments are as follows:
--------------------------------------------------------------------- (millions) Years ended December 31 1994 1993 1992 --------------------------------------------------------------------- Fixed maturities: Held to maturity $ 4 $ 28 $ 18 Available for sale (15) -- -- Equity securities 32 46 24 Mortgage loans on real estate 14 (25) (28) Other (29) (22) (10) --------------------------------------------------------------------- Total before tax 6 27 4 Less applicable tax 2 10 1 --------------------------------------------------------------------- Total realized gains $ 4 $ 17 $ 3 =====================================================================
Gross gains of $68 million, and gross losses of $51 million, were realized on available for sale fixed maturities and equity securities sales during 1994. Gross gains of $11 million, and gross losses of $7 million, were realized on sales of held to maturity fixed maturities during 1994. Gross gains of $63 million and $48 million and gross losses of $35 million and $30 million were realized on fixed maturity sales during 1993 and 1992, respectively. The cumulative effect of the adoption of Statement No. 115 increased stockholders' equity by $148 million (net of adjustments to deferred policy acquisition costs of $14 million and deferred income taxes of $83 million) to reflect the net unrealized fixed maturities holding gains on securities previously carried at amortized cost; there was no effect on net income as a result of the adoption. During 1994, those holding gains decreased by $259 million (net of adjustments to deferred policy acquisition costs of $44 million and deferred income taxes of $100 million) to a net unrealized loss of $111 million. In connection with the adoption of Statement No. 115, Aon reclassified certain fixed maturity investments with an amortized cost of $1,984 million and fair value of $2,149 million from held to maturity to available for sale. Subsequent to January 1, 1994 there were no additional reclassifications between available for sale and held to maturity. The changes in net unrealized gains (losses) on fixed maturities and equity security investments are as follows:
--------------------------------------------------------------------- (millions) Years ended December 31 1994 1993 1992 --------------------------------------------------------------------- Fixed maturities: Held to maturity $(351) $ 81 $(109) Available for sale (403) 28 52 Equity securities (131) 31 16 --------------------------------------------------------------------- Total $(885) $140 $ (41) =====================================================================
The amortized cost and fair value of investments in fixed maturities and equity securities are as follows:
---------------------------------------------------------------------------------------- Gross Gross Amortized Unrealized Unrealized Fair (millions) As of December 31, 1994 Cost Gains Losses Value ---------------------------------------------------------------------------------------- Held to maturity: U.S. government and agencies $ 3 $-- $ -- $ 3 States and political subdivisions 3 -- -- 3 Corporate securities 1,388 15 (97) 1,306 Mortgage-backed securities 1,590 1 (153) 1,438 ---------------------------------------------------------------------------------------- Total held to maturity $2,984 $16 $(250) $2,750 ========================================================================================
---------------------------------------------------------------------------------------- Gross Gross Amortized Unrealized Unrealized Fair (millions) As of December 31, 1994 Cost Gains Losses Value ---------------------------------------------------------------------------------------- Available for sale: U.S. government and agencies $ 189 $ 2 $ (4) $ 187 States and political subdivisions 393 17 (3) 407 Foreign governments 608 13 (11) 610 Corporate securities 1,581 37 (83) 1,535 Mortgage-backed securities 1,478 3 (123) 1,358 Other fixed maturities 69 -- (6) 63 ---------------------------------------------------------------------------------------- Total fixed maturities 4,318 72 (230) 4,160 Total equity securities 989 50 (100) 939 ---------------------------------------------------------------------------------------- Total available for sale $5,307 $122 $(330) $5,099 ========================================================================================
---------------------------------------------------------------------------------------- Gross Gross Amortized Unrealized Unrealized Fair (millions) As of December 31, 1993 Cost Gains Losses Value ---------------------------------------------------------------------------------------- Held to maturity: U.S. government and agencies $ 142 $ 14 $ -- $ 156 States and political subdivisions 368 43 -- 411 Foreign governments 423 59 -- 482 Corporate securities 2,000 155 (6) 2,149 Mortgage-backed securities 2,088 33 (15) 2,106 ---------------------------------------------------------------------------------------- Total held to maturity $5,021 $304 $(21) $5,304 ========================================================================================
---------------------------------------------------------------------------------------- Gross Gross Amortized Unrealized Unrealized Fair (millions) As of December 31, 1993 Cost Gains Losses Value ---------------------------------------------------------------------------------------- Available for sale: U.S. government and agencies $ 140 $ 6 $ -- $ 146 States and political subdivisions 46 6 -- 52 Foreign governments 196 27 -- 223 Corporate securities 939 43 (4) 978 Mortgage-backed securities 610 7 (6) 611 Other fixed maturities 101 2 (1) 102 ---------------------------------------------------------------------------------------- Total fixed maturities 2,032 91 (11) 2,112 Total equity securities 852 94 (13) 933 ---------------------------------------------------------------------------------------- Total available for sale $2,884 $185 $(24) $3,045 ========================================================================================
Net unrealized investment losses at December 31, 1994 of $143 million are net of deferred income tax credit of $45 million and a $20 million after-tax deferred policy acquisition cost adjustment. Net unrealized investment gains at December 31, 1993 of $50 million are net of a deferred income tax charge of $31 million. The amortized cost and fair value of fixed maturities, by contractual maturity, are shown below. Expected maturities will differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.
---------------------------------------------------------------------------------------- Amortized Fair (millions) As of December 31, 1994 Cost Value ---------------------------------------------------------------------------------------- Held to maturity: Due in one year or less $ 14 $ 14 Due after one year through five years 133 133 Due after five years through ten years 727 666 Due after ten years 520 499 Mortgage-backed securities 1,590 1,438 ---------------------------------------------------------------------------------------- Total held to maturity $2,984 $2,750 ========================================================================================
41
----------------------------------------------------------------- Amortized Fair (millions) As of December 31, 1994 Cost Value ----------------------------------------------------------------- Available for sale: Due in one year or less $ 129 $ 130 Due after one year through five years 1,012 1,015 Due after five years through ten years 1,159 1,140 Due after ten years 540 517 Mortgage-backed securities 1,478 1,358 ----------------------------------------------------------------- Total available for sale $4,318 $4,160 =================================================================
Securities on deposit for regulatory authorities as required by law amounted to $296 million at December 31, 1994 and $253 million at December 31, 1993. As required by the by-laws of Lloyd's brokers, assets subject to floating charges for the benefit of insurance creditors amounted to $594 million and $403 million at December 31, 1994 and 1993, respectively. Aon maintains premium trust bank accounts for premiums collected from insureds but not yet remitted to insurance companies of $475 million and $398 million at December 31, 1994 and 1993, respectively. At December 31, 1994 and 1993, respectively, Aon had $118 million and $30 million of non-income producing investments. 4. Debt and Lease Commitments Short-term Borrowings The interest rates on these borrowings vary based on existing market conditions. The weighted average interest rates on these borrowings were 4.5% in 1994 and 3.4% in 1993 and 1992. Interest expense was $11 million, $7 million and $6 million in 1994, 1993 and 1992, respectively. Aon has credit agreements providing lines of credit for commercial paper. The unused portion of these lines of credit totaled $121 million at December 31, 1994. Notes Payable The following is a summary of notes payable:
--------------------------------------------------------------- (millions) As of December 31 1994 1993 --------------------------------------------------------------- 6.3% debt securities, due January 2004 $100 $ -- 6.7% debt securities, due June 2003 150 150 6.875% debt securities, due October 1999 100 100 7.4% debt securities, due October 2002 100 100 7.5% debt securities, due February 1994 -- 125 Notes payable, due in varying installments, with interest at 4% to 9% 46 46 --------------------------------------------------------------- Total carrying value $496 $521 ===============================================================
Interest is payable semiannually on all debt securities. In addition, the debt securities are not redeemable by Aon prior to maturity and contain no sinking fund provisions. Maturities of notes payable are $22 million in 1995, $9 million in 1996, 1997 and 1998 and $101 million in 1999. Interest expense was $35 million in 1994 and $36 million in 1993 and 1992. Total interest paid on debt for 1994, 1993 and 1992 was $44 million, $41 million and $40 million, respectively. Guaranteed Debt During 1989, Aon's employee stock ownership plan (ESOP) entered into loan agreements amounting to $90 million to purchase Aon common stock. The ESOP paid $13 million in 1994 and $12 million in 1993 and 1992, in loan principal and interest from contributions made by Aon to the ESOP as well as dividend proceeds of common stock held by the ESOP. The loans have an interest rate of 8.35% and serially mature through 1999. Interest expense incurred by the ESOP related to these loans amounted to $6 million in 1994 and $7 million in 1993 and 1992. The loans are unconditionally guaranteed by Aon and therefore the unpaid balance of the loans is reflected as debt in the accompanying statements of financial position. An equivalent amount, representing deferred compensation, is recorded as a deduction from stockholders' equity. Future contributions, as determined by Aon's Board of Directors, plus dividends earned on shares held by the ESOP will be used to service the loans. Lease Commitments Aon has noncancelable operating leases for certain office space, equipment and automobiles. Future minimum rental payments required under operating leases that have initial or remaining noncancelable lease terms in excess of one year at December 31, 1994 are as follows:
--------------------------------------------------------------- (millions) Minimum Lease Payments --------------------------------------------------------------- 1995 $ 95 1996 88 1997 79 1998 71 1999 65 Later years 224 --------------------------------------------------------------- Total minimum payments required $622 ===============================================================
Rental expenses for all operating leases for the years ended December 31, 1994, 1993 and 1992, amounted to $96 million, $104 million and $64 million, respectively. 5. Income Tax Aon and its principal domestic subsidiaries are included in a consolidated life- nonlife federal income tax return. Aon's foreign subsidiaries file various income tax returns in their foreign jurisdictions. A reconciliation of the income tax provisions based on the statutory corporate tax rate to the provisions reflected in the consolidated financial statements is as follows:
--------------------------------------------------------------------- Years ended December 31 1994 1993 1992 --------------------------------------------------------------------- Statutory tax rate 35.0% 35.0% 34.0% Tax-exempt investment income (3.2) (3.2) (4.2) Increase in deferred taxes due to enacted rate increase from 34% to 35% -- 1.1 -- State income taxes 2.3 1.9 1.8 Other--net (1.1) (2.4) (2.6) --------------------------------------------------------------------- Effective tax rate 33.0% 32.4% 29.0% =====================================================================
The provision for income tax is made up of the following components:
--------------------------------------------------------------------- (millions) Years ended December 31 1994 1993 1992 --------------------------------------------------------------------- Current: Federal $ 96 $ 95 $ 64 Foreign 64 38 48 State 19 15 8 --------------------------------------------------------------------- Total current 179 148 120 --------------------------------------------------------------------- Deferred (credit): Federal 3 34 1 Foreign (7) (28) (37) State 3 1 -- --------------------------------------------------------------------- Total deferred (1) 7 (36) --------------------------------------------------------------------- Provision for income tax $178 $155 $ 84 =====================================================================
42 Significant components of Aon's deferred tax liabilities and assets are as follows:
--------------------------------------------------------------- (millions) As of December 31 1994 1993 --------------------------------------------------------------- Deferred tax liabilities: Policy acquisition costs $291 $251 Other--net 148 104 --------------------------------------------------------------- Total deferred tax liabilities 439 355 --------------------------------------------------------------- Deferred tax assets: Insurance reserve amounts 196 139 Unrealized investment losses 45 -- Other--net 69 46 --------------------------------------------------------------- Total deferred tax assets 310 185 --------------------------------------------------------------- Net deferred tax liabilities $129 $170 ===============================================================
As of December 31, 1994, the deferred tax asset relating to unrealized investment losses is net of a $30 million valuation allowance that was provided directly in stockholders' equity in 1994. Prior to 1984, the life insurance companies were required to accumulate certain untaxed amounts in a memorandum "policyholders' surplus account." Under the Tax Reform Act of 1984, the "policyholders' surplus account" balances were "capped" at December 31, 1983 and the balances will be taxed only to the extent distributed to stockholders or when they exceed certain prescribed limits. As of December 31, 1994, the combined "policyholders' surplus account" of Aon's life insurance subsidiaries approximates $363 million. Aon's life insurance subsidiaries do not intend to make any taxable distributions or exceed the prescribed limits in the foreseeable future; therefore, no income tax provision has been made. However, if such taxes were assessed, the amount of tax payable would be $127 million. The amount of income taxes paid for 1994, 1993 and 1992 was $167 million, $130 million and $105 million, respectively. Effective January 1, 1992, Aon changed its method of accounting for income taxes from the deferred method to the liability method required by Statement No. 109, "Accounting for Income Taxes." The cumulative effect of adopting Statement No. 109 for periods prior to January 1, 1992 was to decrease 1992 net income by $40 million ($0.38 per share). 6. Reinsurance and Claim Reserves Aon's insurance subsidiaries are involved in both the cession and assumption of reinsurance with other companies. Aon's reinsurance consists primarily of short- duration contracts that are entered into with numerous automobile dealerships and financial institutions. Aon's insurance subsidiaries would remain liable to the extent that the reinsuring companies are unable to meet their obligations. Ceded premiums earned were $415 million, $408 million and $414 million for 1994, 1993 and 1992, respectively, while ceded premiums written were $408 million and $420 million for 1994 and 1993, respectively. Assumed premiums earned were $213 million, $184 million and $228 million for 1994, 1993 and 1992, respectively, while assumed premiums written were $218 million and $176 million for 1994 and 1993, respectively. Benefits to policyholders are net of $247 million and $211 million in reinsurance recoveries during 1994 and 1993, respectively. Activity in the liability for policy contract claims is summarized as follows:
------------------------------------------------------------------ (millions) Years ended December 31 1994 1993 1992 ------------------------------------------------------------------ Liabilities at beginning of year $ 686 $ 669 $ 624 Incurred losses 923 910 916 Deduct payment of claims: Current year claims (582) (523) (536) Prior years claims (346) (370) (335) ------------------------------------------------------------------ Liabilities at end of year (net of insurance recoverables: 1994--$263, 1993--$235) $ 681 $ 686 $ 669 ==================================================================
7. Redeemable Preferred Stock and Stockholders' Equity Redeemable Preferred Stock In 1994, Aon issued 1,000,000 shares of Series C preferred stock to a former officer in exchange for 1,500,000 shares of Aon common stock. Dividends are cumulative at an annual rate of $2.55 per share. Dividends incurred were $2 million in 1994. The shares of Series C preferred stock will be redeemable at the option of Aon (by resolution of its Board of Directors) or the holders, in whole or in part, at $50.00 per share no sooner than February 9, 1999. Common Stock Aon recorded dividends to common stockholders of $129 million, $118 million and $112 million in 1994, 1993 and 1992, respectively. In addition, Aon repurchased 844,000, 16,000 and 395,000 shares, in 1994, 1993 and 1992, respectively, of its common stock, primarily to provide shares for stock compensation plans and the conversion of the Series B conversion preferred stock. Series B Conversion Preferred Stock In 1991, Aon issued 2,800,000 shares of $3.04 cumulative Series B conversion preferred stock (Series B preferred stock). Aon repurchased 1,210,000 shares and 151,000 shares of its outstanding stock for $58 million and $7 million in 1994 and 1993, respectively. These shares were cancelled and retired. Aon recorded dividends of $6 million, $8 million and $9 million in 1994, 1993 and 1992, respectively. At December 1, 1994, 1,439,000 shares were outstanding and each share of stock was automatically converted, pursuant to the stock's terms, into one and one half shares of common stock issued from treasury. 8% Cumulative Perpetual Preferred Stock In 1992, Aon issued 9,000,000 shares of cumulative perpetual 8% preferred stock. Dividends are cumulative at the annual rate of $2.00 per share. Dividends incurred were $18 million in 1994 and 1993 and $3 million in 1992. At its option, Aon may redeem all or any part of the stock at any time on or after November 1, 1997 at a redemption price of $25.00 per share plus all accrued and unpaid dividends. The holders of the stock have limited voting rights. 6.25% Cumulative Convertible Exchangeable Preferred Stock In 1992, Aon issued 2,374,000 shares of 6.25% cumulative convertible exchangeable preferred stock. At December 31, 1994, 2,136,000 shares are outstanding. Dividends are cumulative at the annual rate of $3.125 per share. Dividends incurred were $7 million in 1994 and 1993 and 43 $1 million in 1992. The stock is convertible at any time at the option of the holder into 1.22 shares of common stock for each share. The stock is exchangeable at Aon's option, in whole but not in part, on any dividend payment date commencing November 1, 1996 for 6.25% convertible subordinated debentures due November 1, 2022 at the rate of $50.00 principal amount of the debentures for each share. At its option, Aon may redeem all or any part of the stock, unless previously converted or exchanged, on or after November 1, 1996 at prices ranging from $51.875 per share in 1996 declining to $50.00 per share in 2002 and thereafter, plus accrued and unpaid dividends. The holders of the stock have limited voting rights. Statutory Capital and Surplus Generally, the capital and surplus of Aon's insurance subsidiaries available for transfer to the parent company are limited to the amounts that the insurance subsidiaries' statutory capital and surplus exceed minimum statutory capital requirements; however, payments of the amounts as dividends may be subject to approval by regulatory authorities. See note 5 for possible tax effects of distributions made out of untaxed earnings. Net income of Aon's insurance subsidiaries, as determined using statutory accounting practices, amounted to $272 million, $255 million and $187 million for the life insurance companies and $34 million, $62 million and $42 million for the property and casualty companies for the years ended December 31, 1994, 1993 and 1992, respectively. Statutory stockholders' equity of Aon's direct life insurance subsidiaries amounted to $714 million and $561 million at December 31, 1994 and 1993, respectively. Statutory stockholders' equity of property and casualty insurance companies amounted to $284 million and $251 million at December 31, 1994 and 1993, respectively. 8. Employee Benefits Savings and Profit Sharing Plans Certain of Aon's subsidiaries maintain a contributory savings plan for the benefit of United States salaried and commissioned employees and a contributory profit sharing plan for the benefit of Canadian salaried employees and commissioned agents. The company contribution for the savings plan is based on a match of 100% of employee contributions up to a maximum of 3% of eligible compensation. Provisions made for these plans were $14 million in 1994 and 1993 and $11 million in 1992. During 1993, the Hall savings and investment plan, the Booke & Company salary deferral thrift plan and the K&K Insurance Agency, Inc. 401(k) profit sharing trust were merged into the Aon savings plan. Employee Stock Ownership Plan Certain of Aon's subsidiaries maintain a leveraged ESOP for the benefit of the United States salaried and certain commissioned employees. Shares are allocated to eligible employees over a period of ten years through 1998. Contributions to the ESOP and charged to income amounted to $10 million in 1994 and $9 million in 1993 and 1992. Domestic Pension Plan Certain of Aon's subsidiaries maintain a non-contributory defined benefit pension plan providing retirement benefits for salaried employees and certain commissioned employees in the United States based on years of service and salary. Aon's funding policy is to contribute amounts to the plan sufficient to meet the minimum funding requirements set forth in the Employee Retirement Income Security Act of 1974, plus such additional amounts as Aon determines to be appropriate from time to time. A summary of the components of net periodic pension cost for the defined benefit plans in 1994, 1993 and 1992 is as follows:
------------------------------------------------------------------------------ (millions) Years ended December 31 1994 1993 1992 ------------------------------------------------------------------------------ Defined benefit plan: Service cost-benefits earned $ 21 $ 19 $ 10 Interest cost on projected benefit obligation 17 16 13 Actual return on plan assets (3) (27) (22) Net amortization and deferral (18) 6 3 ------------------------------------------------------------------------------ Net periodic pension cost $ 17 $ 14 $ 4 ==============================================================================
The weighted average assumptions used in accounting for the defined benefit plan were:
------------------------------------------------------------------------------ Years ended December 31 1994 1993 1992 ------------------------------------------------------------------------------ Assumed discount rate 8.5% 7.0% 8.0% Rate of compensation increase 5.0% 5.0% 6.0% Expected long-term rate of return on plan assets 9.0% 9.0% 9.0% ==============================================================================
In December 1992, as part of an employee reduction program, Aon established a limited time early retirement incentive program that provided benefits through the defined benefit plan. The additional cost of termination benefits applicable for 1992 resulting from the program was $13 million. During 1993, the assets and liabilities of the Pension Plan for the Employees of Booke & Company were merged with the Aon Pension Plan as a result of the merger of Booke & Company with an Aon subsidiary. Also, the Aon Pension Plan was amended in 1993 to include certain additional amounts of compensation in determining plan benefits and in 1994 to reduce the maximum amount of compensation that can be considered under the plan as required by law. Further the Pension Plan was amended in 1994 to provide increases in benefits to current pensioners. Net periodic pension cost for 1994 decreased $2 million and increased $2 million in 1993 as a result of these amendments. The following table sets forth the funded status and amounts recognized in the consolidated statements of financial position for Aon's U.S. defined benefit pension plan.
------------------------------------------------------------------------------ (millions) As of December 31 1994 1993 ------------------------------------------------------------------------------ Actuarial present value of benefit obligations: Vested benefit obligation $183 $190 Accumulated benefit obligation 189 197 Projected benefit obligation 228 251 ------------------------------------------------------------------------------ Plan assets at fair value 228 239 ------------------------------------------------------------------------------ Plan assets in less than projected benefit obligations -- (12) Unrecognized net loss (gain) (14) 17 Unrecognized prior service cost 2 3 Unrecognized net transition asset (3) (5) ------------------------------------------------------------------------------ Prepaid pension cost included in other assets (liabilities) $(15) $ 3 ==============================================================================
44 Plan assets include marketable equity securities, deposit administration insurance contracts, and corporate and government debt securities. Included are securities issued by Aon totaling $18 million in 1994 and 1993. In addition, $143 million of plan assets are held under a special contract with a subsidiary of Aon in 1994. Foreign Pension Plans Certain of Aon's foreign subsidiaries maintain contributory and non-contributory defined benefit pension plans for employees outside of the United States that provide retirement benefits based on service and salary. Material plans are maintained in the United Kingdom and The Netherlands. The funding policy for these plans is to contribute the amounts required by the plan provisions or applicable regulations, although additional amounts may be contributed from time to time. A summary of the components of net periodic pension cost for the material defined benefit plans in 1994 and 1993, grouped by country, is as follows:
------------------------------------------------------------------------------ United (millions) Year Ended December 31, 1994 Kingdom Netherlands ------------------------------------------------------------------------------ Defined benefit plans Service cost-benefits earned $ 8 $ 2 Interest cost on projected benefit obligation 10 8 Actual return on plan assets 6 (9) Net amortization and deferral (20) 1 ------------------------------------------------------------------------------ Net periodic pension cost $ 4 $ 2 ==============================================================================
------------------------------------------------------------------------------ United (millions) Year Ended December 31, 1993 Kingdom Netherlands ------------------------------------------------------------------------------ Defined benefit plans Service cost-benefits earned $ 8 $2 Interest cost on projected benefit obligation 8 7 Actual return on plan assets (11) (10) ------------------------------------------------------------------------------ Net periodic pension cost $ 5 $ (1) ==============================================================================
The weighted average assumptions used in accounting for these defined benefit plans were:
------------------------------------------------------------------------------ United Year Ended December 31, 1994 Kingdom Netherlands ------------------------------------------------------------------------------ Assumed discount rate 9.0% 7.0% Rate of compensation increase 7.0% 4.0% Expected long-term rate of return on plan assets 10.0% 7.0% =============================================================================
------------------------------------------------------------------------------ United Year Ended December 31, 1993 Kingdom Netherlands ------------------------------------------------------------------------------ Assumed discount rate 7.3% 7.0% Rate of compensation increase 5.0% 4.0% Expected long-term rate of return on plan assets 10.0% 7.0% =============================================================================
The following table sets forth the funded status and the amounts recognized in the 1994 and 1993 consolidated statements of financial position for Aon's foreign defined benefit pension plans.
------------------------------------------------------------------------------ United (millions) Year Ended December 31, 1994 Kingdom Netherlands ------------------------------------------------------------------------------ Projected benefit obligations $172 $123 ------------------------------------------------------------------------------ Plan assets at fair value 179 146 ------------------------------------------------------------------------------ Plan assets in excess of projected benefit obligations 7 23 Unrecognized net loss 14 18 Unrecognized prior service cost 1 -- Unrecognized net transition obligation 1 -- Adjustment to recognize minimum liability (4) -- ------------------------------------------------------------------------------ Prepaid pension cost included in other assets $19 $41 ==============================================================================
------------------------------------------------------------------------------ United (millions) Year Ended December 31, 1993 Kingdom Netherlands ------------------------------------------------------------------------------ Projected benefit obligations $133 $117 ------------------------------------------------------------------------------ Plan assets at fair value 137 128 ------------------------------------------------------------------------------ Plan assets in excess of projected benefit obligations 4 11 Unrecognized net loss 8 25 Unrecognized net transition obligation 1 -- ------------------------------------------------------------------------------ Prepaid pension cost included in other assets $ 13 $ 36 ==============================================================================
In 1992, the only significant foreign pension plans were the European brokerage plans. Aon recorded a net periodic pension credit for 1992 of approximately $1 million. These plans used an assumed discount rate of 8%, a rate of compensation increase of 6%, and an expected long-term rate of return on plan assets of 8%. Postretirement Benefits Other Than Pensions Aon sponsors defined benefit postretirement health and welfare plans that cover both salaried and nonsalaried employees in the U.S., as well as certain other salaried employees in Canada. In the U.S., one plan provides medical benefits, prior to and subsequent to Medicare eligibility, and the other provides life insurance benefits. In Canada, the plans provide both extended health care benefits and life insurance benefits. The postretirement health care plans are contributory, with retiree contributions adjusted annually; the life insurance plans are noncontributory. All plans are funded on a pay-as-you go basis. In 1993, the accounting for the U.S. health care plan reflected changes in the future cost-sharing provisions of the plan. These changes limited the employer's liability for future plan cost increases in any year to 5% per annum. In prior years, Aon anticipated that the retiree's share of future cost would increase at the same rate as the employer's share. In 1992, Aon adopted Statement No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions." Aon recorded a cumulative effect change for adopting Statement No. 106 in the amount of $40 million ($0.38 per share), which is net of income taxes of $20 million, in the 1992 statement of income. The recorded amount represented the cumulative postretirement benefit obligation for periods prior to January 1, 1992. 45 The following table sets forth the plans' combined funded status:
-------------------------------------------------------------------------------- (millions) As of December 31, 1994 Medical Life -------------------------------------------------------------------------------- Accumulated postretirement benefit obligation: Retirees $16 $ 6 Fully eligible active plan participants 7 4 Other active plan participants 8 2 -------------------------------------------------------------------------------- 31 12 Unrecognized prior service 26 8 Unrecognized net gain 22 6 -------------------------------------------------------------------------------- Accrued postretirement benefit cost $79 $26 ================================================================================
-------------------------------------------------------------------------------- (millions) As of December 31, 1993 Medical Life -------------------------------------------------------------------------------- Accumulated postretirement benefit obligation: Retirees $21 $ 8 Fully eligible active plan participants 8 4 Other active plan participants 13 3 -------------------------------------------------------------------------------- 42 15 Unrecognized prior service 31 9 Unrecognized net gain 9 3 -------------------------------------------------------------------------------- Accrued postretirement benefit cost $82 $27 ================================================================================
Net periodic postretirement benefit cost includes the following components:
-------------------------------------------------------------------------------- (millions) As of December 31, 1994 1993 1992 -------------------------------------------------------------------------------- Service cost $ 1 $ 3 $ 3 Interest cost 4 5 6 Amortization of prior service (6) (5) -- -------------------------------------------------------------------------------- Net periodic postretirement benefit cost (credit) $(1) $ 3 $ 9 ================================================================================
For measurement purposes in 1994 and 1993, an 11.5% and 12.5%, respectively, annual rate of increase in the per capita cost of covered health care benefits (trend rate) adjusted for actual current year cost experience was assumed, decreasing gradually to 7% in year 2000 and remaining the same thereafter. However, with the employer funding increase cap limited to 5% per year, net employer trend rates are effectively limited to 5% per year in the future. For measurement purposes in 1992, a 14.5% trend rate was assumed, decreasing gradually to 7% in year 2000 and remaining the same thereafter. Increasing the assumed health care cost trend rates by one percentage point would result in a negligible change in the accumulated postretirement benefit obligation (APBO) as of December 31, 1994 because of the 5% cap on future employer funding increases for domestic medical plans. The weighted-average discount rate used in determining the APBO was 8.5%, 7.0% and 8.0% at December 31, 1994, 1993 and 1992, respectively. The weighted-average rate of compensation increase used in determining the APBO for the postretirement life insurance plan was 5.0%, 5.5% and 6.0% at December 31, 1994, 1993 and 1992, respectively. 9. Stock Compensation Plans Stock Award Plan In 1994, Aon's stockholders approved an amendment to the Aon Stock Award Plan that increases the aggregate number of shares of common stock that Aon can award from 1,350,000 to 3,350,000 shares. Generally, the award plan requires the employees to complete three continuous years of service before the award begins to vest in increments until the completion of a ten year period of continuous employment. All awarded shares are issued as they become vested. With certain limited exceptions, any break in continuous employment will cause forfeiture of all unvested awards. During 1994, 1993 and 1992, Aon awarded 801,000, 539,000 and 401,000 shares, respectively. At December 31, 1994, 1993 and 1992, 587,000, 372,000 and 265,000 shares awarded under the Stock Award Plan have vested and been issued. The compensation cost associated with each award is deferred and amortized over the period of continuous employment using the straight line method. Aon awarded shares aggregating a net deferred compensation cost of $18 million in 1994 and 1993 and $11 million in 1993, that was included as an increase in paid-in additional capital with an equal amount deducted from stockholders' equity (deferred compensation). Amortization of deferred compensation cost totaled $6 million, $4 million and $6 million in 1994, 1993 and 1992, respectively. Stock Option Plan Under a nonqualified stock option plan, options to purchase common stock were granted to certain officers and employees of Aon and its subsidiaries at 100% of market value on the date of grant. Common stock options outstanding consisted of the following:
-------------------------------------------------------------------------------- As of December 31 1994 1993 -------------------------------------------------------------------------------- No. of Price No. of Price (shares in thousands) Shares Range Shares Range -------------------------------------------------------------------------------- Options outstanding at beginning of year 2,699 $14-36 2,745 $14-29 Granted 1,134 31-36 503 34-36 Exercised (353) 14-26 (486) 14-25 Canceled (134) 14-36 (63) 14-36 -------------------------------------------------------------------------------- Options outstanding at end of year 3,346 $14-36 2,699 $14-36 -------------------------------------------------------------------------------- Options exercisable at end of year 648 $14-32 591 $14-32 -------------------------------------------------------------------------------- Shares available for grant at end of year 2,180 3,182 ================================================================================
10. Financial Instruments Derivative Financial Instruments Aon uses interest rate derivative contracts to manage the interest rate and asset and liability duration risks on certain life and annuity and premium finance businesses. Aon does not engage in trading of derivatives. In addition, Aon purchased interest rate caps to limit interest expense on short-term borrowings. Exchange-traded interest rate futures and options are used primarily as a hedge against the value of Aon's available for sale fixed maturity and equity investments. As of December 31, 1994, Aon was selling futures as well as writing call options and limiting its risk on these written options to a spread by purchasing call options. Exchange traded futures and options are valued and settled daily. The premium that Aon pays for purchased options and receives for written options represents the cost basis of the option until it expires or is closed. 46 Interest rate swap agreements are used primarily to manage asset and liability durations relating to capital accumulation life and annuity business. As of December 31, 1994, Aon was paying fixed rates and receiving variable rates on interest rate swap contracts with the effect of lengthening liability durations. The net effect of interest rate swap payments is settled periodically and reported in income. There is no settlement of underlying notional amounts. Aon also used interest rate options and swaps to hedge against interest rate movements until certain anticipated debt was issued. Aon performs frequent analysis to measure the degree of correlation associated with its derivative programs. Aon assesses the adequacy of the correlation analysis results in determining whether the derivatives qualify for hedge accounting. Realized gains and losses on derivatives that qualify as hedges are deferred and reported as an adjustment of the cost basis of the hedged item. Deferred gains and losses are amortized into income over the life of the hedged item. Outstanding derivatives that are hedges of items carried at fair value are reflected in the financial statements with the derivative fair value reported as unrealized gains and losses directly in stockholders' equity. Aon uses foreign currency futures, options, and forward contracts to hedge against the effects of foreign currency fluctuations on the translation of the financial statements of Aon's foreign operations. Generally, realized and unrealized gains and losses on those derivatives are recorded directly to stockholders' equity, as a separate component of net unrealized foreign exchange gains and losses. Certain of Aon's foreign brokerage subsidiaries receive revenues in currencies that differ from the currency in which their operating costs are denominated. To reduce the variability of cash flows from these operations, foreign forward exchange contracts having settlement dates that are primarily less than one year are used. Related gains or losses on these contracts are reflected as an adjustment to the expense component on the statement of income when the currencies are exchanged to settle expense commitments. Contracts entered into require no up-front premium and settle at the expiration of the related contract. The following are the notional amounts of Aon's outstanding derivatives grouped by the types of risks being managed:
-------------------------------------------------------------------------------- (millions) As of December 31 1994 1993 -------------------------------------------------------------------------------- Interest rate and asset/liability duration management Futures sold $ 916 $203 Call options 1,089 168 Interest rate swaps--pay fixed 750 -- Interest rate swaps--receive fixed 10 450 Interest rate management for anticipated transactions Futures sold -- 53 Interest rate caps 58 -- Interest rate floors -- 52 Interest rate swaps--pay fixed 41 74 Foreign currency management--forwards 37 79 ================================================================================
During 1994, Aon amortized $3 million of deferred gains relating to derivatives into income. Deferred losses related to anticipated transactions were immaterial at December 31, 1994. The interest rates on Aon's principal outstanding swaps at December 31 are presented below.
------------------------------------------------------------------------------- Pay Receive Receive Pay Fixed Variable Fixed Variable ------------------------------------------------------------------------------- 1994 7.7-8.3% 7.8% 7.9% 6.5% 1993 3.9-4.9% 3.3% 6.0-6.3% 3.4-3.5% ===============================================================================
As of December 31, 1994, the principal swaps have maturities ranging from October 1998 to October 2000 and variable rates based on the five-year treasury rate. As of December 31, 1993, Aon paid variable rates based on the three and six month LIBOR index. Other outstanding derivative contracts generally have lives that are 90 days or less. Aon is exposed to credit risk of derivative contracts in the event of nonperformance by the counterparties to the financial instruments. The credit risk is generally limited to the fair value of those contracts that are favorable to Aon. Aon has limited its credit risk by restricting investments in derivative contracts to a diverse group of highly rated major financial institutions and by using exchange-traded instruments. At December 31, 1994 and 1993, Aon placed securities in escrow amounting to $21 million and $8 million, respectively, relating to these derivative contracts. Other Financial Instruments Aon has certain investment commitments to provide capital and fixed-rate loans as well as certain forward contract purchase commitments. The investment commitments, which would be collateralized by related properties of the underlying investments, involve varying elements of credit and market risk. Investment commitments outstanding at December 31, 1994 and 1993 totalled $134 million and $481 million, respectively. Subsidiaries of Aon have entered into agreements with financial institutions, whereby the subsidiaries sold certain receivables, with limited recourse. Agreements provide for sales of receivables on a continuing basis through November 1995. As of December 31, 1994 and 1993, the maximum commitment contained in these agreements was $525 million and $400 million, respectively. Accounts receivable sold in 1994, 1993 and 1992, amounted to $1,095 million, $879 million and $671 million, respectively. Outstanding receivables of $512 million and $401 million, remained to be collected at December 31, 1994 and 1993, respectively. Aon's credit risk relates to amounts that may be due under recourse provisions that could exceed recorded estimates. At December 31, 1994 and 1993, this exposure was approximately $34 million and $41 million, respectively. 47 Fair Value of Financial Instruments Accounting standards require the disclosure of fair values for certain financial instruments. The fair value disclosures are not intended to encompass the majority of policy liabilities, various other non-financial instruments, or other intangible items related to Aon's business. Accordingly, care should be exercised in deriving conclusions about Aon's business or financial condition based on the fair value disclosures. The carrying value and fair value of certain of Aon's financial instruments are as follows:
--------------------------------------------------------------------------------- As of December 31 1994 1993 --------------------------------------------------------------------------------- Carrying Fair Carrying Fair (millions) Value Value Value Value --------------------------------------------------------------------------------- Assets: Fixed maturities and equity securities (note 3) $8,083 $7,849 $7,986 $8,349 Mortgage loans on real estate 568 577 557 640 Policy loans 215 212 207 204 Cash, short-term investments, and receivables 3,945 3,945 3,197 3,197 Derivatives -- -- -- 4 Liabilities: Investment type insurance contracts $3,830 $3,745 $3,721 $3,736 Short-term borrowings, premium payables and commissions and general expenses 3,179 3,179 2,617 2,617 Notes payable 496 453 521 537 Derivatives 8 12 3 1 =================================================================================
11. Litigation Aon and its subsidiaries are subject to numerous claims and lawsuits that arise in the ordinary course of business. In some of these cases, the remedies that may be sought or damages claimed are substantial, including cases which seek punitive or extraordinary damages. Accruals for these lawsuits have been provided to the extent that losses are deemed probable and are estimable. Although the ultimate outcome of these suits cannot be ascertained and liabilities in indeterminate amounts may be imposed on Aon or its subsidiaries, on the basis of present information, availability of insurance coverages, and advice received from counsel, it is the opinion of management that the disposition or ultimate determination of such claims and lawsuits will not have a material adverse effect on the consolidated financial position of Aon. 12. Segment Information The segment information located on pages 29 and 31 is incorporated herein by reference. 48 Aon Corporation | Reports by Independent Auditors | and Management Report of Ernst & Young LLP, Independent Auditors Board of Directors and Stockholders Aon Corporation We have audited the accompanying consolidated statements of financial position of Aon Corporation as of December 31, 1994 and 1993, and the related consolidated statements of income, stockholders' equity, and cash flows for each of the three years in the period ended December 31, 1994. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Aon Corporation at December 31, 1994 and 1993, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 1994, in conformity with generally accepted accounting principles. As discussed in notes 3, 5 and 8, the Company changed its method of accounting for certain investments in 1994 and income taxes and postretirement benefits other than pensions in 1992. /s/ Ernst & Young LLP Chicago, Illinois February 9, 1995 Report by Management The management of Aon Corporation is responsible for the financial statements and other financial information in the annual report and for their integrity and objectivity. The statements have been prepared in conformity with generally accepted accounting principles. These statements include informed estimates and judgments for those transactions not yet complete or for which the ultimate effects cannot be measured precisely. Financial information elsewhere in this report is consistent with that in the financial statements. The consolidated financial statements have been audited by our independent auditors. Their role is to render an independent professional opinion on Aon's financial statements. Management maintains a system of internal control designed to meet its responsibilities for reliable financial statements. The system is designed to provide reasonable assurance, at appropriate costs, that assets are safeguarded and that transactions are properly recorded and executed in accordance with management's authorization. Judgments are required to assess and balance the relative costs and expected benefits of those controls. It is management's opinion that its system of internal control, as of December 31, 1994, was effective in providing reasonable assurance that its financial statements were free of material misstatement. In addition, management supports and maintains a professional staff of internal auditors who coordinate audit coverage with the independent auditors and conduct an extensive program of financial and operational audits. The Board of Directors selects an Audit Committee from among its members. No member of the Audit Committee is an employee of Aon. The Audit Committee is responsible to the Board for reviewing the accounting and auditing procedures and financial practices of Aon and for recommending appointment of the independent auditors. The Audit Committee meets periodically with management, internal auditors and independent auditors to review the work of each and satisfy itself that they are properly discharging their responsibilities. Both the independent auditors and the internal auditors have free access to the Committee, without the presence of management, to discuss the adequacy of internal control and to review the quality of financial reporting. 49 Aon Corporation | Selected Financial Data |
(millions except common stock and per share data)* 1994 1993 1992 1991 1990 ----------------------------------------------------------------------------------------------------------------------------- Income Statement Data Premiums and policy fees $ 1,934 $ 1,823 $ 1,826 $ 1,734 $ 1,559 Net investment income 760 745 737 713 661 Realized investment gains 6 27 4 5 5 Brokerage commissions and fees 1,369 1,173 697 375 355 Other income 88 77 72 104 46 ------------------------------------------------------------------- Total revenue earned $ 4,157 $ 3,845 $ 3,336 $ 2,931 $ 2,626 ============================================================================================================================= Income before cumulative effect of changes in accounting principles $ 360 $ 324 $ 206 $ 242 $ 239 Per share 3.14 2.81 1.93 2.47 2.41 Net income 360 324 127 242 239 Per share 3.14 2.81 1.17 2.47 2.41 Operating income** 356 312 265 239 235 Per share 3.10 2.70 2.49 2.44 2.37 ============================================================================================================================= Balance Sheet Data Assets Investments $ 9,783 $ 9,652 $ 9,088 $ 8,360 $ 7,704 Other 8,139 6,627 5,202 3,273 2,728 ------------------------------------------------------------------- Total assets $17,922 $16,279 $14,290 $11,633 $10,432 ============================================================================================================================= Liabilities and Stockholders' Equity Policy liabilities $ 9,310 $ 8,776 $ 7,759 $ 7,342 $ 6,832 Notes payable 561 594 556 501 517 General liabilities 5,744 4,621 3,871 2,015 1,625 ------------------------------------------------------------------- Total liabilities 15,615 13,991 12,186 9,858 8,974 Redeemable preferred stock 50 -- -- -- -- Stockholders' equity 2,257 2,288 2,104 1,775 1,458 =================================================================== Total liabilities and stockholders' equity $17,922 $16,279 $14,290 $11,633 $10,432 ============================================================================================================================= Common Stock Data Dividends paid per share $ 1.26 $ 1.18 $ 1.11 $ 1.05 $ 0.99 Stockholders' equity per share 18.30 18.95 17.48 17.39 14.93 Price range 35 3/4-29 1/4 39-30 7/8 36-26 1/8 27 7/8-19 7/8 28 3/8-17 7/8 Market price at year-end 32.000 32.250 36.000 26.375 23.125 Common stockholders 14,163 14,615 14,746 15,168 15,774 Shares outstanding 107,696,000 101,554,000 99,985,000 97,908,000 97,664,000 =============================================================================================================================
*Per share and shares outstanding data have been restated to reflect the three- for-two stock split. **Operating income excludes after-tax realized investment gains, a retroactive tax charge in 1993 of $5.4 million, the 1992 cumulative effect of changes in accounting principles of $79.6 million and 1992 special charges of $61.4 million. -- 50 Aon Corporation | Quarterly Financial Data |
(millions except common stock and per share data)* 1Q 2Q 3Q 4Q 1994 --------------------------------------------------------------------------------------------------------------------------- INCOME STATEMENT DATA Premiums and policy fees $ 466.9 $ 482.9 $ 480.9 $ 503.0 $ 1,933.7 Net investment income 185.5 184.7 190.6 198.7 759.5 Realized investment gains 1.7 1.7 1.8 0.6 5.8 Brokerage commissions and fees 342.2 336.1 336.7 354.6 1,369.6 Other income 23.3 21.0 20.5 23.5 88.3 -------------------------------------------------------------------------------------- Total revenue earned $ 1,019.6 $ 1,026.4 $ 1,030.5 $ 1,080.4 $ 4,156.9 -------------------------------------------------------------------------------------- Net income $ 99.1 $ 88.2 $ 86.7 $ 86.0 $ 360.0 Per share 0.88 0.77 0.76 0.74 3.14 Operating income** 98.0 87.1 85.6 85.6 356.3 Per share 0.87 0.76 0.75 0.73 3.10 =========================================================================================================================== COMMON STOCK DATA Dividends paid per share $ 0.30 $ 0.32 $ 0.32 $ 0.32 $ 1.26 Stockholders' equity per share 18.88 18.73 18.75 18.30 18.30 Price range 35-30 32 3/8-32 35 3/4-32 3/8 34-29 1/4 35 3/4-29 1/4 Average dividend yield 3.7% 4.0% 3.8% 4.0% 3.9% Shares outstanding 101,095,000 101,803,000 102,131,000 107,696,000 107,696,000 Average monthly trading volume 1,553,000 1,110,000 1,461,000 1,938,000 1,515,000 =========================================================================================================================== (millions except common stock and per share data)* 1Q 2Q 3Q 4Q 1993 --------------------------------------------------------------------------------------------------------------------------- INCOME STATEMENT DATA Premiums and policy fees $ 442.9 $ 457.4 $ 454.6 $ 468.1 $ 1,823.0 Net investment income 190.1 186.7 184.2 184.2 745.2 Realized investment gains 2.0 1.4 14.6 8.6 26.6 Brokerage commissions and fees 296.7 298.0 281.6 296.9 1,173.2 Other income 18.6 19.5 19.2 19.5 76.8 -------------------------------------------------------------------------------------- Total revenue earned $ 950.3 $ 963.0 $ 954.2 $ 977.3 $ 3,844.8 -------------------------------------------------------------------------------------- Net income $ 89.0 $ 79.1 $ 77.8 $ 77.9 $ 323.8 Per share 0.79 0.69 0.67 0.67 2.81 Operating income** 87.6 78.2 73.1 73.3 312.2 Per share 0.77 0.68 0.62 0.63 2.70 =========================================================================================================================== COMMON STOCK DATA Dividends paid per share $ 0.28 $ 0.30 $ 0.30 $ 0.30 $ 1.18 Stockholders' equity per share 18.05 18.40 18.69 18.95 18.95 Price range 37 5/8-33 3/8 37 7/8-33 1/2 39-35 1/4 37 3/8-30 7/8 39-30 7/8 Average dividend yield 3.2% 3.4% 3.2% 3.5% 3.4% Shares outstanding 100,136,000 101,333,000 101,417,000 101,554,000 101,554,000 Average monthly trading volume 2,064,000 1,717,000 1,469,000 2,514,000 1,941,000 ===========================================================================================================================
**Per share and outstanding data have been restated to reflect the three-for-two stock split. **Operating income excludes after-tax realized investment gains of $3.7 million and $17 million in 1994 and 1993, respectively, and a retroactive tax charge in 1993 of $5.4 million. -- 51 GRAPHICS APPENDIX DESCRIPTION OF GRAPHS IN THE 1994 Aon CORPORATION ANNUAL REPORT PAGE 16 RHH retail and RHH consulting, pie chart representing 48.4% and 0.9%, respectively, of the total 1994 commercial operations revenue. PAGE 17 ASG retail and ASG consulting, pie chart representing 7.8% and 3.1%, respectively, of the total 1994 commercial operations revenue. PAGE 18 ARS reinsurance and wholesale, pie chart representing 18.2% of the total 1994 commercial operations revenue. PAGE 19 NL reinsurance and wholesale, pie chart representing 7.9% of the total 1994 commercial operations revenue. Godwins International consulting, pie chart representing 11.6% of the total 1994 commercial operations revenue. PAGE 22 CICA direct sales life and direct sales accident and health, pie chart representing 5.1% and 33.1%, respectively, of the total 1994 consumer operations revenue. Ryan Group auto credit life and auto credit accident and health, pie chart representing 2.7% and 4.3%, respectively, of the total 1994 consumer operations revenue. PAGE 23 Union Fidelity Life direct response life, direct response accident and health, and financial institution life and accident and health, pie chart representing 2.2%, 12.3% and 1.6%, respectively, of the total 1994 consumer operations revenue. PAGE 24 Life of Virginia capital accumulation life and traditional life, pie chart representing 20.7% and 4.1%, respectively, of the total 1994 consumer operations revenue. VSC/London General Insurance extended warranty and specialty liability, pie chart representing 9.2% and 3.2%, respectively, of the total 1994 consumer operations revenue. PAGE 25 Investments fixed maturities, equity securities, mortgage loans and real estate, short-term, and other, pie chart representing 73.0%, 9.6%, 6.2%, 8.0% and 3.2%, respectively of the total 1994 invested assets. EX-21 9 LIST OF SUBSIDIARIES Exhibit 21 1 of 11
========================================================================================= corp_full_name juris_name ========================================================================================= A. J. Norcott & Company (Holdings) Limited United Kingdom A. J. Norcott & Partners (Northern) Limited United Kingdom A. J. Norcott & Partners (Scotland) Limited United Kingdom A. J. Norcott & Partners Limited United Kingdom A. J. Norcott Benefit Consultants Limited United Kingdom A.H. Laseur B.V. Netherlands AMLT, Inc. Alabama AOPA Insurance Agency, Inc. Maryland AOPA Insurance Agency, Inc. Texas APS International Limited United Kingdom APS Life & Pensions Limited United Kingdom APS Overseas Investments Limited United Kingdom ARS Holdings, Inc. Illinois ARS Holdings, Inc. Louisiana Acedale Co. Ltd. Hong Kong Adams & Porter Financial Services, Inc. Texas Adams & Porter Services, Inc. Texas Advantage Plus Insurance Services, Inc. Illinois Adviser 151 Limited United Kingdom Airscope Insurance Services Limited United Kingdom American Associates, Inc. Texas American Attorneys' Protection Plan Co. Illinois American Combined Life Insurance Company Nebraska American Insurance Brokers, Ltd. Indiana American National General Agencies, Inc. Colorado Anchor Reinsurance Company, Ltd. Bermuda Anchor Underwriting Managers, Ltd. Bermuda Anscor Insurance Brokers Inc. Philippines Aon Advisors (U.K.) Limited United Kingdom Aon Advisors, Inc. Virginia Aon Asset Management Fund, Inc. Virginia Aon Auto Capital Corporation Delaware Aon Aviation, Inc. Illinois Aon Broker Services, Inc. Illinois Aon Capital Corporation Delaware Aon Capital Management, Inc. Delaware Aon Captive Management, Ltd. U.S. Virgin Islands Aon Direct Group, Inc. California Aon Direct Group, Inc. Pennsylvania Aon Entertainment, Ltd. California Aon Entertainment, Ltd. New York Aon Entertainment, Ltd. (Divertissement Aon, Ltee.) Canada Aon Financial Institutions Services, Inc. Illinois Aon H&R, Inc. New York Aon Holdings Limited United Kingdom Aon Insurance Management Services - Virgin Islands, Inc. U.S. Virgin Islands Aon Insurance Management Services, Inc. Delaware Aon Insurance Management of Texas, Inc. Texas Aon Insurance Services California Aon Nominees Limited United Kingdom Aon Overseas Holdings Limited United Kingdom Aon Re (Bermuda) Ltd. Bermuda Aon Re Inc. Illinois Aon Re Latinoamericana, S.A. Mexico Aon Re Panama, S.A. Panama Aon Re Services, Inc. Delaware =========================================================================================
286 Exhibit 21 2 of 11
========================================================================================= corp_full_name juris_name ========================================================================================= Aon Re Worldwide, Inc. Delaware Aon Reengineering & Consulting Services, Inc. Delaware Aon Risk Consultants (Bermuda ) Ltd. Bermuda Aon Risk Consultants (Europe) Limited United Kingdom Aon Risk Consultants, Inc. Illinois Aon Risk Resources, Inc. Delaware Aon Risk Services (Bermuda) Ltd. Bermuda Aon Risk Services (Europe) Luxembourg Aon Risk Services (Vermont) Inc. Vermont Aon Risk Services, Inc. Delaware Aon Risk Technologies, Inc. Delaware Aon Service Corporation Illinois Aon Singer, Inc. Delaware Aon Specialty Group of Tennessee, Inc. Tennessee Aon Specialty Group, Inc. Delaware Aon Technical Insurance Services, Inc. Illinois Artscope Insurance Services Limited United Kingdom Artscope International Insurance Services Agency GmbH Germany Artscope International Insurance Services Limited United Kingdom Ascom B.V. Netherlands Asia Area Underwriters Ltd. Hong Kong Assurantie Groep Langeveldt c.v. Netherlands Atlantic Underwriters Agency, Incorporated Kentucky Auto Conduit Corporation, The Delaware Automotive Development Centers, Inc. Illinois B.V. Assurantiekantoor Langeveldt-Schroder Netherlands BRIC, Inc. North Carolina Banker's Acceptance, L.P. Illinois Bankers Insurance Service Corp. Illinois BenefitsMedia, Inc. Tennessee Big Sky Finance, L.P. Illinois Blanco Finance, L.P. Illinois Blom & Van der Aa BV Netherlands Blom & Van der Aa Holding BV Netherlands Brennan Group, Inc., The Delaware Bruno Sforni S.p.A. Italy Bruns Ten Brink & Co. b.v. Netherlands Bruns Ten Brink Groep b.v. Netherlands Bruns Ten Brink Herverzekeringen b.v. Netherlands Bryson Associates Incorporated Pennsylvania C.I.C. Realty, Inc. Illinois C.V. 'T Huys Ter Merwe Netherlands CCC Agency, Inc. of Illinois Illinois CIC - Atlanta, Inc. Illinois CIC - Hilldale, Inc. Illinois CIC - Wells, Inc. Illinois CIC - Westmont, Inc. Illinois CICA - 123, Inc. Illinois CICA - Court, Inc. Illinois CICA Realty Corporation Illinois CICA Superannuation Nominees Pty. Ltd. Australia CJP, Inc. Delaware Cabinet Servet et Baud S.a.r.l. Annecy France California Auto Finance, L.P. Illinois California Group Services California Cananwill Corporation Delaware Cananwill, Inc. California
287 Exhibit 21 3 of 11
========================================================================================= corp_full_name juris_name ========================================================================================= Cananwill, Inc. Pennsylvania Catz & Lips B.V. Netherlands Central States Acceptance, L.P. Illinois Cinema Completions International, Inc. Delaware Citadel Insurance Company Texas Cole Booth Potter of New Jersey, Inc. New Jersey Cole Booth Potter, Inc. Pennsylvania Combined Administrative Services Corp. Illinois Combined Insurance Company of America Illinois Combined Insurance Company of Ireland Limited Ireland Combined Insurance Company of New Zealand Limited New Zealand Combined Life Assurance Company Limited United Kingdom Combined Life Assurance Company of Europe Limited Ireland Combined Life Insurance Company of Australia Limited Australia Combined Life Insurance Company of New York New York Consumer Program Administrators, Inc. Illinois Cooreman & Saverys IBC & Co. nv Belgium Cooreman & Saverys N.V. Belgium Coughlan General Insurances Limited Ireland Courtiers D'Assurances Rollins Hudig Hall du Quebec, Inc. Canada Crotty MacRedmond Insurance Limited Ireland Cush Finance Group, L.P. Illinois D. Hudig & Co. b.v. Netherlands D.W.F.S., L.P. Illinois DPR, Dansk Pensionsradgivning A/S Denmark Dealer Development Services, Ltd. United Kingdom Dearborn Insurance Company Illinois Dobson Park L. G. Limited Guernsey Dominion Mutual Insurance Brokers Ltd. Canada Don Flower Aviation Underwriters, Inc. Kansas Dreadnaught Insurance Company Limited Bermuda DuPage Acceptance, L.P. Illinois E. Lillie & Co. Limited United Kingdom ERCO Services, Inc. Ohio Elm Lane Limited United Kingdom Energy Insurance International, Inc. Texas Equiscope Insurance Services Limited United Kingdom Excess Underwriters Agency, Inc. New York Expatriate Consultancy Limited, The United Kingdom FFRL Re Corp. Virginia Fabels-Versteeg b.v. Netherlands Far East Agency Korea Film Insurance Underwriting Agencies Pty. Limited (AUS) Australia Finance Associates, Inc. Texas Forth Financial Resources (Hawaii), Ltd. Hawaii Forth Financial Resources Insurance Agency of Massachusetts, Inc. Massachusetts Forth Financial Resources of Alabama, Inc. Alabama Forth Financial Resources of Ohio, Inc. Ohio Forth Financial Resources of Oklahoma Agency, Inc. Oklahoma Forth Financial Resources of Texas, Inc. Texas Forth Financial Resources, Ltd. Virginia Forth Financial Securities Corp. Virginia =========================================================================================
288 Exhibit 21 4 of 11
========================================================================================= corp_full_name juris_name ========================================================================================= France Fenwick Limited United Kingdom Frank B. Hall & Co. Holdings (N.Z.) Limited New Zealand Frank B. Hall (Reinsurance) France S.A. France Frank B. Hall Iberica S.A. Spain Frank B. Hall Ireland Ltd. Ireland Frank B. Hall Management Services Pty. Ltd. Australia Frank B. Hall Re (Latin America) Inc. Panama G.E.F. Insurance Ltd. U.S. Virgin Islands GBV Gesellschaft Fur Betriebliche Beratung und verwaltung GmbH Germany General Environmental Management Corporation Illinois Go Pro Agency, Inc. of San Antonio Texas Go Pro Life Agency, Inc. of San Antonio Texas Go Pro Underwriting Managers of Virginia, Inc. Virginia Go Pro Underwriting Managers, Inc. Texas Godolphin Bloodstock Limited United Kingdom Godwins (Overseas) Limited United Kingdom Godwins (Trustees) Limited United Kingdom Godwins Australia Pty. Limited Australia Godwins Booke & Dickenson Insurance Services California Godwins Booke & Dickenson Insurance Services Massachusetts Godwins Employee Benefits Services (Texas), Inc. Texas Godwins General Agency, Inc. Texas Godwins Group Limited United Kingdom Godwins International, Inc. Delaware Godwins Investment Advisors, Inc. Florida Godwins Limited United Kingdom Godwins Nederland pensioen- en employee benefits adviseurs en Netherlands actuarissen c.v Godwins Nominees Pty. Limited Australia Godwins Securities, Inc. Washington Godwins of New York, Inc. New York Godwins, Inc. Pennsylvania Gotuaco del Rosario & Associates, Inc. Philippines Group Organization, Inc. District of Columbia H.Z. Financial, Limited Partnership Illinois HHL (Holdings) Ltd. Hong Kong HHL (Taiwan) Ltd. Taiwan HHL (Thailand) Ltd. Thailand HHL Employee Benefits Ltd. Thailand HHL Ltd. Hong Kong HHL Management Ltd. Hong Kong HHL Pte Ltd. Singapore HHL Re Ltd. Thailand HHL Reinsurance Brokers Inc. Philippines HHL Reinsurance Brokers Pte. Ltd. Singapore HHL Reinsurance Services Ltd. Hong Kong HLS Hudig-Langeveldt Stanner GmbH Germany Hanseatische Assekuranz Kontor GmbH Germany Hanseatische Assekuranz Vermittlungs AG Germany Havag Hudig-Langeveldt GmbH Germany Heinz Hahn GmbH Germany Heli Agency Korea Highplain Limited United Kingdom Hodgson McCreery & Company Limited United Kingdom Hudig-Langeveldt Berlin GmbH Germany Hudig-Langeveldt Borghuis B.V. Netherlands Hudig-Langeveldt Coens N.V. Belgium =========================================================================================
289 Exhibit 21 5 of 11
========================================================================================= corp_full_name juris_name ========================================================================================= Hudig-Langeveldt Janson Elffers B.V. Netherlands Hudig-Langeveldt Kyoritsu Ltd. Japan Hudig-Langeveldt Makelaardij in Assurantien bv Netherlands Hudig-Langeveldt Merwestad bv Netherlands Hudig-Langeveldt Nijmegen B.V. Netherlands Hudig-Langeveldt Pensioenbureau B.V. Netherlands Hudig-Langeveldt Reinsurance B.V. Netherlands Hudig-Langeveldt Reinsurance Brokers C.V. Netherlands Hudig-Langeveldt S.A. France Hudig-Langeveldt SECA S.A. France Hudig-Langeveldt Tilburg B.V. Netherlands Hudig-Langeveldt Van Bruggen & De Laat B.V. Netherlands Huntington T. Block Insurance Agency, Inc. District of Columbia Huntington T. Block Insurance Agency, Inc. Ohio IRISC London Limited United Kingdom IRISC Specialty, Inc. Delaware IRISC, Inc. New Jersey Independent Dealer Services, Inc. Missouri Independent Homeowner Services, Inc. Missouri Independent Inspections, Inc. Illinois Inmobiliaria Ramos Rosada, S.A. de C.V. Mexico Insurance Brokers Service, Inc. Illinois Intassco Versicherungsmakler GmbH Austria Integrated Insurance Industries, Inc. Delaware Intercept Corporation Illinois International Industrial Insurances Limited Ireland International Shipowners Mutual Insurance Association Limited Bermuda Interocean (Italia) S.p.A. Italy Interocean Reinsurance Company, S.A. Panama J.C.J. Van Dalen Beheer B.V. Netherlands J.H. Blades & Co. (Agency), Inc. Texas J.H. Blades & Co., Inc. Texas J.H. Blades, Inc. Oklahoma J.H. Lea & Company, Inc. Illinois James S. Kemper & Co. International, Limited Bermuda James S. Kemper Insurance Services, Inc. Texas K & K Insurance Brokers, Ltd. Ontario K & K Insurance Group, Inc. Indiana K & K Insurance Specialties, Inc. Indiana K & K Insurance of Wyoming, Inc. Wyoming K & K Specialties, Inc. Indiana Karl Alt & Co. GmbH Germany Keeling & Company California Key-Royal Automotive Company, Inc. Alabama Kininmonth Limited Ireland L & G LMX Limited United Kingdom L & G Seascope Insurance Holdings Limited United Kingdom Langeveldt Groep B.V. Netherlands Langeveldt de Vos b.v. Netherlands Laverack & Haines, Inc. New York Lescorp Limited United Kingdom Leslie & Godwin (C.I.) Limited Guernsey Leslie & Godwin (Reinsurance) Copenhagen A/S Denmark Leslie & Godwin (Scotland) Limited Scotland Leslie & Godwin (U.K.) Limited United Kingdom Leslie & Godwin (WFG) Limited United Kingdom Leslie & Godwin AXL Limited United Kingdom =========================================================================================
290 Exhibit 21 6 of 11
========================================================================================= corp_full_name juris_name ========================================================================================= Leslie & Godwin Aviation Holdings Limited United Kingdom Leslie & Godwin Aviation Limited United Kingdom Leslie & Godwin Aviation Reinsurance Services Limited United Kingdom Leslie & Godwin Cargo Limited United Kingdom Leslie & Godwin Financial Risks Limited United Kingdom Leslie & Godwin Financial Services (Holdings) Limited United Kingdom Leslie & Godwin Financial Services Limited United Kingdom Leslie & Godwin GmbH Germany Leslie & Godwin Group Limited United Kingdom Leslie & Godwin Insurance Brokers Ltd. Canada Leslie & Godwin Insurance Brokers, Inc. New York Leslie & Godwin International Limited United Kingdom Leslie & Godwin Investments Limited United Kingdom Leslie & Godwin Limited United Kingdom Leslie & Godwin Marine Holdings Limited United Kingdom Leslie & Godwin Non-Marine Limited United Kingdom Leslie & Godwin Overseas Reinsurance Holdings Limited United Kingdom Leslie & Godwin Personal Insurance Services Limited United Kingdom Leslie & Godwin Reinsurance Holdings Limited United Kingdom Leslie & Godwin Risk Management Limited United Kingdom Leslie & Godwin Technical Services Limited United Kingdom Life Insurance Company of Virginia, The Virginia Life of Virginia Series Fund, Inc. Virginia Lloyd Paulista Corretores de Seguros e Reaseguros S.A. Brazil London General Holdings Limited United Kingdom London General Insurance Company Limited United Kingdom Lowndes Lambert Insurance Limited Ireland Lynn & Schaller Insurance Brokers, Inc. California MTSA S.a.r.l., Annecy France MacDonagh & Boland (International) Limited Ireland MacDonagh & Boland Group Limited Ireland MacDonagh Boland Beech Hill Limited Ireland MacDonagh Boland Crotty MacRedmond Limited Ireland MacDonagh Boland Cullen Duggan Limited Ireland MacDonagh Boland Foley Woollam Limited Ireland Macey Clifton Walters Limited United Kingdom Macey Williams Insurance Services Limited Ireland Macey Williams Insurance Services Limited United Kingdom Macey Williams Limited Ireland Madison Intermediaries Pty. Limited Australia Madison Reinsurance Holdings, Inc. Illinois Mahamy Company plc (Rollins Hudig Hall Iran) Iran Maritime Underwriters, Ltd. Bermuda Martin Boyer Company, Inc. Illinois Mayflower National Life Insurance Company Indiana Mayflower National Life Insurance Company of Texas Texas Minahan Reinsurance Management Limited United Kingdom Motorists Service Corporation Delaware Motorplan Limited United Kingdom Muirfield Underwriters, Ltd. Delaware N.V. Assurantiehuis Holding (Curacao) Netherland Antilles NB Life Agents, Inc. New York NSU Benefit Corporation Indiana =========================================================================================
291 Exhibit 21 7 of 11
========================================================================================= corp_full_name juris_name ========================================================================================= Nask bv Netherlands National Benefits Corporation Pennsylvania National Care Provider Insurance, Inc. California National Product Care Company Illinois National Sports Underwriters, Inc. Indiana Nesdale Holdings Limited New Zealand Newco Properties, Inc. Virginia Nicholson Chamberlain Colls Australia Holdings Limited Australia Nicholson Chamberlain Colls Australia Limited Australia Nicholson Chamberlain Colls Group Limited United Kingdom Nicholson Chamberlain Colls Marine Limited United Kingdom Nicholson Leslie (North America) Limited United Kingdom Nicholson Leslie Accident & Health Limited United Kingdom Nicholson Leslie Agencies Limited United Kingdom Nicholson Leslie Aviation Limited United Kingdom Nicholson Leslie Aviation Reinsurance Brokers United Kingdom Nicholson Leslie Bank Assure Limited United Kingdom Nicholson Leslie Bankscope Insurance Services Limited United Kingdom Nicholson Leslie Bankscope Marine Insurance Consultants United Kingdom Nicholson Leslie Energy Resources Limited United Kingdom Nicholson Leslie Financial Institutions Limited United Kingdom Nicholson Leslie Group Limited United Kingdom Nicholson Leslie International (Reinsurance Brokers) Limited United Kingdom Nicholson Leslie International Limited United Kingdom Nicholson Leslie International Limited United Kingdom Nicholson Leslie Investments Limited United Kingdom Nicholson Leslie Italia S.P.A. Italy Nicholson Leslie Limited United Kingdom Nicholson Leslie Management Services United Kingdom Nicholson Leslie Marine Limited United Kingdom Nicholson Leslie Nominees Limited United Kingdom Nicholson Leslie Non-Marine Reinsurance Brokers Limited United Kingdom Nicholson Leslie North American Reinsurance Brokers, Limited United Kingdom Nicholson Leslie Property Limited United Kingdom Nicholson Leslie Seascope Limited United Kingdom Nicholson Leslie Special Risks Limited United Kingdom Nicholson Stewart-Brown Limited United Kingdom North Derbyshire Finance Company Limited, The United Kingdom Nova Reinsurance Brokers, Inc. Illinois OLD BENEFITS CORPORATION Illinois OUM & Associates of California, A Corporation California OUM & Associates of New York, A Corporation New York OUM & Associates of Ohio, A Corporation Ohio OUM & Associates, Inc., A Corporation Washington OUM Risk Consultants, Inc. Washington Oak Brook Holding, Inc. Delaware Oak Brook Life Insurance Company Arizona Oceanic Adjusters Limited New York Ogle & Waters, Inc. Florida Ohrinsoo Agency Korea Olarescu & B. I. Davis Asesores y Corredores de Seguros S.A. Peru =========================================================================================
292 Exhibit 21 8 of 11
========================================================================================= corp_full_name juris_name ========================================================================================= Old RHH North, Inc. California Oxford Managers, Inc. Illinois P.I. Consultants Ltd. Hong Kong PFS, L.P. Illinois PLCM Group, Inc. Florida PLCM Group, Inc. Illinois PLCM Group, Inc. Pennsylvania PT RNJ Ratna Nusa Jaya Indonesia Pandimar Consultants, Inc. New York Paribas Assurantien B.V. Netherlands Parker Risk Management (Barbados) Ltd. Barbados Parker Risk Management (Bermuda) Ltd. Bermuda Parker Risk Management (Cayman) Ltd. Cayman Islands Parker Risk Management (Guernsey) Ltd. Guernsey Parker Risk Management (S) Pte Ltd Singapore Parker Risk Management, Inc. Colorado Pat Ryan & Associates, B.V. Netherlands Pat Ryan & Associates, Inc. Illinois Pat Ryan & Associates, Inc. Texas Pecos River Learning Centers, Inc. Minnesota Pernas HHL Malaysia Piercey Auto Group Finance, L.P. Illinois Pikes Peak Holding Company, Inc. Delaware Preferred Risk Strategies, A Corporation Washington Premier Auto Finance, L.P. Illinois Product Care, Inc. Illinois Production Life Insurance Company Arizona Professional Sports Insurance Co. Ltd. Bermuda Property Owners Database Limited United Kingdom Provider Services, Ltd. Bermuda Pyramid Services, Inc. Connecticut RAMRO y Asociados, S.C. Mexico RBH Acquisition Co. Delaware RBH Equities, Inc. New York RBH General Agencies (Canada) Inc. Quebec RHH (Intermediaries) Ltd. Bermuda RHH Captive Management Ltd. Bermuda RHH Empreendimentos e Servicos Ltda. Brazil RHH Europe, Inc. Delaware RHH Financial Services Group of New York, Inc. New York RHH Financial Services Group, Inc. California RHH Financial Services Group, Inc. Illinois RHH Financial Services Group, Inc. Pennsylvania RHH Financial Services Group, Inc. Texas RHH General Agency, Inc. Texas RHH Hazard Limited United Kingdom RHH Life Agency of Texas, Inc. Texas RHH Special Risks, Inc. Illinois RHH Texas Acquisition Company, Inc. Texas RHH/Albert G. Ruben Insurance Services, Inc. California RIP Services Limited Guernsey Rae Liness & Duffus Limited Scotland Ramos, Rosado y Ascociados Agente de Seguros, S.A. de C.V. Mexico Regent Acceptance, L.P. New Jersey Resource Insurance Services, Inc. Indiana Retailer Acceptance, L.P. Illinois Rockford Holding, Inc. Delaware =========================================================================================
293 Exhibit 21 9 of 11
========================================================================================= corp_full_name juris_name ========================================================================================= Rockford Life Insurance Company Arizona Rolins Hudig Hall (Sweden) A.B Sweden Rollins Financial Brokers, Inc. Oklahoma Rollins Financial Services Co. Illinois Rollins Heath (Japan) Ltd. Japan Rollins Hudig Hall & Co. (N.S.W.) Pty. Ltd. Australia Rollins Hudig Hall (Bermuda) Limited Bermuda Rollins Hudig Hall (Finland) OY Finland Rollins Hudig Hall (Hong Kong) Ltd. Hong Kong Rollins Hudig Hall (Nederland) Limited United Kingdom Rollins Hudig Hall (Norway) A/S Norway Rollins Hudig Hall (Scandinavia) A/S Norway Rollins Hudig Hall (Scandinavia) Holding A/S Denmark Rollins Hudig Hall (Singapore) Pte Ltd Singapore Rollins Hudig Hall (Turks & Caicos) Limited Bermuda Rollins Hudig Hall Agency of Texas, Inc. Texas Rollins Hudig Hall Antillen N.V. Netherland Antilles Rollins Hudig Hall Aruba N.V. Netherland Antilles Rollins Hudig Hall Associates B.V. Netherlands Rollins Hudig Hall Ceska Republika spol.s r.o. Czech Republic Rollins Hudig Hall Co. Delaware Rollins Hudig Hall Consulting Italia srl Italy Rollins Hudig Hall Denmark A/S Denmark Rollins Hudig Hall Employee Benefits of Ohio, Inc. Ohio Rollins Hudig Hall Entertainment Brokers Ltd. United Kingdom Rollins Hudig Hall Espana Correduria de Seguros, SA Spain Rollins Hudig Hall Groep B.V. Netherlands Rollins Hudig Hall Group, Inc. Delaware Rollins Hudig Hall Healthcare Risk, Inc. Florida Rollins Hudig Hall Holdings (Deutschland) GmbH Germany Rollins Hudig Hall Holdings Limited Australia Rollins Hudig Hall Holdings Limited United Kingdom Rollins Hudig Hall Holdings bv Netherlands Rollins Hudig Hall Insurance Brokers, Inc. Ontario Rollins Hudig Hall Insurance Services, Inc. British Columbia Rollins Hudig Hall International b.v. Netherlands Rollins Hudig Hall Italia S.p.A. Italy Rollins Hudig Hall Limited United Kingdom Rollins Hudig Hall Magyarorszag Biztositasi Alkusz Hungary Rollins Hudig Hall Middle East United Arab Emirates Rollins Hudig Hall Nederland Makelaars in Assurantien bv Netherlands Rollins Hudig Hall Netherlands b.v. Netherlands Rollins Hudig Hall Polska Ltd. Poland Rollins Hudig Hall Pty. Ltd. Australia Rollins Hudig Hall Risk Management Services A/S Denmark Rollins Hudig Hall Services Limited United Kingdom Rollins Hudig Hall Slovensko spol.s r.o. Slovak Republic Rollins Hudig Hall Surety & Guarantee Limited United Kingdom Rollins Hudig Hall do Brazil Corretora de Seguros Ltda. Brazil Rollins Hudig Hall of Alabama, Inc. Alabama Rollins Hudig Hall of Alaska, Inc. Alaska Rollins Hudig Hall of Arizona, Inc. Arizona Rollins Hudig Hall of Arkansas, Inc. Arkansas Rollins Hudig Hall of Canada Inc. Canada Rollins Hudig Hall of Central California, Inc. Insurance Services California =========================================================================================
294 Exhibit 21 10 of 11
========================================================================================= corp_full_name juris_name ========================================================================================= Rollins Hudig Hall of Colorado, Inc. Colorado Rollins Hudig Hall of Connecticut, Inc. Connecticut Rollins Hudig Hall of Florida, Inc. Florida Rollins Hudig Hall of Georgia, Inc. Georgia Rollins Hudig Hall of Hawaii, Inc. Hawaii Rollins Hudig Hall of Idaho, Inc. Idaho Rollins Hudig Hall of Illinois, Inc. Illinois Rollins Hudig Hall of Indiana, Inc. Indiana Rollins Hudig Hall of Kansas, Inc. Kansas Rollins Hudig Hall of Latin America, Inc. Delaware Rollins Hudig Hall of Louisiana, Inc. Louisiana Rollins Hudig Hall of Massachusetts, Inc. Massachusetts Rollins Hudig Hall of Michigan, Inc. Michigan Rollins Hudig Hall of Minnesota, Inc. Minnesota Rollins Hudig Hall of Missouri, Inc. Missouri Rollins Hudig Hall of Montana, Inc. Montana Rollins Hudig Hall of Nebraska, Inc. Nebraska Rollins Hudig Hall of Nevada, Inc. Nevada Rollins Hudig Hall of New Jersey, Inc. New Jersey Rollins Hudig Hall of New York, Inc. New York Rollins Hudig Hall of Northern California, Inc. Insurance Services California Rollins Hudig Hall of Ohio, Inc. Ohio Rollins Hudig Hall of Oklahoma, Inc. Oklahoma Rollins Hudig Hall of Oregon, Inc. Oregon Rollins Hudig Hall of Pennsylvania, Inc. Pennsylvania Rollins Hudig Hall of Rhode Island, Inc. Rhode Island Rollins Hudig Hall of Southern California, Inc. California Rollins Hudig Hall of Tennessee, Inc. Tennessee Rollins Hudig Hall of Utah, Inc. Utah Rollins Hudig Hall of Virginia, Inc. Virginia Rollins Hudig Hall of Washington, D.C., Inc. District of Columbia Rollins Hudig Hall of Washington, Inc. Washington Rollins Hudig Hall of Wisconsin, Inc. Wisconsin Rollins Hudig Hall of Wyoming, Inc. Wyoming Rollins Hudig Hall of the Americas, Inc. Illinois Rollins Hudig Hall of the Carolinas, Inc. North Carolina Rollins Risk & Benefit Management Services, Inc. Nevada Rollins Technical Services Co. Illinois Rollins Technology Brokers, Inc. California Roundwise Limited United Kingdom Ryan Financial Services, Inc. Illinois Ryan Insurance Group France S.A.R.L. France Ryan Insurance Group, Inc. Delaware Ryan Services Corporation Illinois Ryan Warranty Services Canada, Inc. Canada Ryan Warranty Services of Florida, Inc. Florida Ryan Warranty Services, Inc. Delaware Ryan/CSI, Inc. Illinois SIS Services of New York, Inc. New York SLE International Underwriters, Inc. Delaware SLE Underwriters, Inc. Delaware SLE Worldwide Australia Pty Limited Australia SLE Worldwide, Inc. Delaware SLE Worldwide, Limited United Kingdom SRS Management Antilles N.V. Netherland Antilles Saat Van Marwijk Beheer B.V. Netherlands Saat Van Marwijk Noordwijk B.V. Netherlands =========================================================================================
295 Exhibit 21 11 of 11
========================================================================================= corp_full_name juris_name ========================================================================================= Safeguard Risk Services (Bermuda) Ltd. Bermuda Safeguard Risk Services Antilles N.V. Netherland Antilles Safeguard Risk Services b.v. Netherlands Sang Woon Agency Korea Scarborough & Company Illinois Scarborough & Company, Inc. Delaware Scarborough Agency of Ohio, Inc. Ohio Scarborough Insurance Agency of Massachusetts, Inc. Massachusetts Seascope Cargo Insurance Services Limited United Kingdom Seascope Insurance Holdings Limited United Kingdom Seascope Insurance Services Limited United Kingdom Seascope Marine Insurance Services Limited United Kingdom Seascope Marine Limited United Kingdom Seascope Reinsurance Services Limited United Kingdom Select Direct Limited Scotland Self-Insurers Service, Inc. Delaware Service Protection, Inc. Illinois Service Saver, Incorporated Florida ServicePlan, Inc. Illinois Sherwood Insurance Services California Shoreline Insurance Agency, Inc. Rhode Island Singer Group, Inc., The Texas Singer Plan, Inc. Delaware Skyline Agency, Ltd., The Illinois Square One, Inc. Texas Steetley Leslie & Godwin Limited Guernsey Sterling Life Insurance Company Arizona Stichting Employee Fund Hudig-Langeveldt Groep B.V. Netherlands Stichting Verum-HLG Netherlands Stichting Werknemerscertificaten HLG Netherlands Superannuation Fund (CICNZ) Limited New Zealand Suras B.V. Netherlands Surety & Guarantee Consultants Limited United Kingdom Tabma-Hall Insurance Services Pty. Limited Australia Texecur Versicherungs Vermittlungs GmbH Germany UNIRISC, Inc. Delaware UNIRISC, Inc. Texas Underwriters Marine Services Limited United Kingdom Underwriters Marine Services of Texas, Inc. Texas Underwriters Marine Services, Inc. Louisiana Union Fidelity Life Insurance Company Illinois United Heartland, Inc. Wisconsin Universal Acceptance, L.P. Illinois Verum-HLG B.V. Netherlands Virginia Surety Company, Inc. Illinois Wacus/Hudig-Langeveldt GmbH Germany Wacus/Hudig-Langeveldt, Kreditversicherungsmakler und Beratungs GmbH Germany Walker Persson & Partners Limited United Kingdom Wexford Underwriting Managers, Inc. Delaware Wilfredo Armstrong S.A. Argentina Worldwide Integrated Services Company Texas Yorkshire Investment Company, Inc. Arizona =========================================================================================
296 EX-23 10 CONSENT ERNST & YOUNG Exhibit 23 CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS We consent to the incorporation by reference in this Annual Report (Form 10-K) of Aon Corporation of our report dated February 9, 1995, included in the 1994 Annual Report to Stockholders of Aon Corporation. Our audits also included the financial statement schedules of Aon Corporation listed in Item 14(a). These schedules are the responsibility of the Company's management. Our responsibility is to express an opinion based on our audits. In our opinion, with respect to which the date is February 9, 1995, the financial statement schedules referred to above, when considered in relation to the basic financial statements taken as a whole, present fairly in all material respects the information set forth therein. As discussed in Notes 3, 5 and 8 to the consolidated financial statements in the 1994 Annual Report to Stockholders of Aon Corporation, the Company changed its method of accounting for certain investments in 1994 and income taxes and postretirement benefits other than pensions in 1992. We also consent to the incorporation by reference in the Registration Statements pertaining to the employer's stock option and savings plans (Form S-8 Nos. 2-79114, 2-82791, 33-27984, and 33-42575) and the right to offer preferred stock (Form S-3 No. 33-57562) of Aon Corporation of our report dated February 9, 1995, with respect to the consolidated financial statements incorporated herein by reference, and our report, included in the preceding paragraph with respect to the financial statement schedules included in this Annual Report (Form 10-K) of Aon Corporation. /s/ Ernst & Young LLP --------------------- ERNST & YOUNG LLP Chicago, Illinois March 28, 1995 297 EX-27 11 FINANCIAL DATA SCHEDULE
7 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION AND CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000,000 YEAR DEC-31-1994 JAN-01-1994 DEC-31-1994 4,160 2,984 2,750 939 568 36 9,783 509 296 1,182 17,922 1,435 1,428 944 5,503 805 50 11 111 2,135 17,922 1,934 760 6 1,457 1,305 276 2,038 538 178 360 0 0 0 360 3.14 0.00 686 923 0 582 346 681 0 Includes short-term borrowings and debt guarantee of ESOP. Preferred stock at par value. Common stock at par value. Includes brokerage commissions and fees and other income.