13. Share-Based Compensation Plans

The following table summarizes share-based compensation expense recognized in the Consolidated Statements of Income in Compensation and benefits (in millions):

Years ended December 31	2012		2011		2010


Restricted share units ("RSUs")	$	154	$	142	$	138
Performance share awards ("PSAs")		46		78		62
Share options		5		9		17
Employee share purchase plans		7		6		4

Total share-based compensation expense		212		235		221
Tax benefit		62		77		75

Share-based compensation expense, net of tax	$	150	$	158	$	146

Restricted Share Units

RSUs generally vest between three and five years, but may vest up to ten years from the date of grant. The fair value of RSUs is based upon the market value of the Aon ordinary shares at the date of grant. With certain limited exceptions, any break in continuous employment will cause the forfeiture of all unvested awards. Compensation expense associated with RSUs is recognized over the service period. Dividend equivalents are paid on certain RSUs, based on the initial grant amount.

A summary of the status of Aon's RSUs is as follows (shares in thousands):

	2012					2011					2010

Years ended December 31	Shares			Fair Value (1)		Shares			Fair Value (1)		Shares			Fair Value (1)

Non-vested at beginning of year		9,916		$	42		10,674		$	38		12,850		$	36
Granted		5,113			46		3,506			51		3,817			40
Vested		(3,958	)		42		(3,773	)		39		(5,278	)		35
Forfeited		(639	)		44		(491	)		39		(715	)		35

Non-vested at end of year		10,432			44		9,916			42		10,674			38

(1): Represents per share weighted average fair value of award at date of grant.

The fair value of RSUs that vested during 2012, 2011 and 2010 was $180 million, $146 million and $174 million, respectively.

Performance Share Awards

The vesting of PSAs is contingent upon meeting various individual, divisional or company-wide performance conditions, including revenue generation or growth in revenue, pretax income or earnings per share over a one to five-year period. The performance conditions are not considered in the determination of the grant date fair value for these awards. The fair value of PSAs is based upon the market price of the Aon ordinary share at the date of grant. Compensation expense is recognized over the performance period, and in certain cases an additional vesting period, based on management's estimate of the number of units expected to vest. Compensation expense is adjusted to reflect the actual number of shares issued at the end of the programs. The actual issuance of shares may range from 0-200% of the target number of PSAs granted, based on the plan. Dividend equivalents are not paid on PSAs.

Information regarding PSAs granted during the years ended December 31, 2012, 2011 and 2010 follows (shares in thousands, dollars in millions, except fair value):

	2012		2011		2010


Target PSAs granted		1,369		1,715		1,390
Fair Value (1)	$	47	$	50	$	39
Number of shares that would be issued based on current performance levels		1,722		1,120		1,079
Unamortized expense, based on current performance levels	$	63	$	19	$	—

(1): Represents per share weighted average fair value of award at date of grant.

During 2012, the Company issued approximately 1.4 million shares in connection with the 2009 Leadership Performance Plan ("LPP") cycle and 0.9 million shares related to other performance plans. During 2011, the Company issued approximately 1.2 million shares in connection with the 2008 LPP cycle and 0.3 million shares related to a 2006 performance plan. During 2010, the Company issued approximately 1.6 million shares in connection with the 2007 LPP cycle and 0.1 million shares related to other performance plans.

Share Options

Options to purchase ordinary shares are granted to certain employees at fair value on the date of grant. Commencing in 2010, the Company ceased granting new share options with the exception of historical contractual commitments. Generally, employees are required to complete two continuous years of service before the options begin to vest in increments until the completion of a four-year period of continuous employment, although a number of options were granted that require five continuous years of service before the options are fully vested. Options issued under the LPP program vest ratable over three years with a six-year term. The maximum contractual term on share options is generally ten years from the date of grant.

The Company uses a lattice-binomial option-pricing model to value share options. Lattice-based option valuation models use a range of assumptions over the expected term of the options. Expected volatilities are based on the average of the historical volatility of the Company's share price and the implied volatility of traded options and the Company's shares. The valuation model stratifies employees between those receiving LPP options, Special Stock Plan ("SSP") options, and all other option grants. The Company believes that this stratification better represents prospective share option exercise patterns. The expected dividend yield assumption is based on the Company's historical and expected future dividend rate. The risk-free rate for periods within the contractual life of the option is based on the U.S. Treasury yield curve in effect at the time of grant. The expected life of employee share options represents the weighted-average period stock options are expected to remain outstanding and is a derived output of the lattice-binomial model.

The weighted average assumptions, the weighted average expected life and estimated fair value of employee share options are summarized as follows:

Years ended December 31	2012	2011			2010


	All Other Options	All Other Options			All Other Options

Weighted average volatility	NA		26.1	%		28.5	%
Expected dividend yield	NA		1.3	%		1.6	%
Risk-free rate	NA		2.2	%		3.0	%

Weighted average expected life, in years	NA		5.5			6.1
Weighted average estimated fair value per share	NA	$	10.92		$	10.37

In connection with its incentive compensation plans, the Company granted the following number of share options at the noted exercise price: 2012 — none, 2011 — 80,000 shares at $53 per share, and 2010 — 143,000 shares at $38 per share. In 2010, the Company acquired Hewitt Associates and immediately vested all outstanding options issued under Hewitt's Global Stock and Incentive Compensation Plan.

Each outstanding vested Hewitt stock option was converted into a fully vested and exercisable option to purchase Aon common stock with the same terms and conditions as the Hewitt stock option. On the acquisition date, 4.5 million options to purchase Aon common stock were issued to former holders of Hewitt stock options and 0.6 million of these options remain outstanding and exercisable at December 31, 2012.

A summary of the status of the Company's share options and related information is as follows (shares in thousands):

Years ended December 31	2012					2011					2010


	Shares			Weighted- Average Exercise Price Per Share		Shares			Weighted- Average Exercise Price Per Share		Shares			Weighted- Average Exercise Price Per Share

Beginning outstanding		9,116		$	32		13,919		$	32		15,937		$	33
Options issued in connection with the Hewitt acquisition		—			—		—			—		4,545			22
Granted		—			—		80			53		143			38
Exercised		(3,413	)		31		(4,546	)		32		(6,197	)		27
Forfeited and expired		(92	)		37		(337	)		36		(509	)		35

Outstanding at end of year		5,611			32		9,116			32		13,919			32

Exercisable at end of year		5,117			31		7,833			30		11,293			30

Shares available for grant		17,024					24,508					22,777

A summary of options outstanding and exercisable as of December 31, 2012 is as follows (shares in thousands):

	Options Outstanding						Options Exercisable

Range of Exercise Prices	Shares Outstanding		Weighted- Average Remaining Contractual Life (years)		Weighted- Average Exercise Price Per Share		Shares Exercisable		Weighted- Average Remaining Contractual Life (years)		Weighted- Average Exercise Price Per Share

$14.71 – 22.86		1,747		2.07	$	21.72		1,747		2.07	$	21.72
22.87 – 25.51		331		2.43		25.40		331		2.43		25.40
25.52 – 32.53		675		1.74		27.30		675		1.74		27.30
32.54 – 36.88		631		2.99		35.89		482		2.57		35.73
36.89 – 43.44		1,393		2.81		39.50		1,238		2.37		39.58
43.45 – 52.93		834		3.79		46.54		644		3.32		45.64

		5,611						5,117

The aggregate intrinsic value represents the total pretax intrinsic value, based on options with an exercise price less than the Company's closing share price of $55.61 as of December 31, 2012, which would have been received by the option holders had those option holders exercised their options as of that date. At December 31, 2012, the aggregate intrinsic value of options outstanding was $131 million, of which $124 million was exercisable.

Other information related to the Company's share options is as follows (in millions):

	2012		2011		2010


Aggregate intrinsic value of stock options exercised	$	67	$	80	$	87
Cash received from the exercise of stock options		105		153		162
Tax benefit realized from the exercise of stock options		11		14		4

Unamortized deferred compensation expense, which includes both options and awards, amounted to $302 million as of December 31, 2012, with a remaining weighted-average amortization period of approximately 2.1 years.

Employee Share Purchase Plan

United States

The Company has an employee share purchase plan that provides for the purchase of a maximum of 7.5 million shares of the Company's ordinary shares by eligible U.S. employees. Prior to 2011, shares of the Company's common stock were purchased at 3-month intervals at 85% of the lower of the fair market value of the common stock on the first or the last day of each 3-month period. Beginning in 2011, the Company's ordinary shares were purchased at 6-month intervals at 85% of the lower of the fair market value of the ordinary shares on the first or last day of each 6-month period. In 2012, 2011, and 2010, 621,000 shares, 468,000 shares and 357,000 shares, respectively, were issued to employees under the plan. Compensation expense recognized was $6 million in 2012, $5 million in 2011, and $3 million in 2010.

United Kingdom

The Company also has an employee share purchase plan for eligible U.K. employees that provides for the purchase of shares after a 3-year period and that is similar to the U.S. plan previously described. Three-year periods began in 2008 and 2006, allowing for the purchase of a maximum of 200,000 and 525,000 shares, respectively. In 2012, 2011 and 2010, 25,000 shares, 63,000 shares, and 5,000 shares, respectively, were issued under the plan. In 2012, 2011 and 2010, $1 million, $1 million, and $1 million, respectively, of compensation expense was recognized.