February 15, 1996
ACE LIMITED 1995
LONG-TERM INCENTIVE PLAN
TABLE OF CONTENTS
SECTION 1. . . . . . . . . . . . . . . . . . . . . . . . . . . 1
GENERAL . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1. Purpose . . . . . . . . . . . . . . . . . . . . . . 1
1.2. Participation . . . . . . . . . . . . . . . . . . . 1
1.3. Operation and Administration. . . . . . . . . . . . 1
SECTION 2. . . . . . . . . . . . . . . . . . . . . . . . . . . 1
OPTIONS . . . . . . . . . . . . . . . . . . . . . . . . . 1
2.1. Definitions . . . . . . . . . . . . . . . . . . . . 1
2.2. Eligibility . . . . . . . . . . . . . . . . . . . . 2
2.3. Price . . . . . . . . . . . . . . . . . . . . . . . 2
2.4. Exercise. . . . . . . . . . . . . . . . . . . . . . 2
2.5. Post-Exercise Limitations . . . . . . . . . . . . . 2
2.6. Expiration Date . . . . . . . . . . . . . . . . . . 2
2.7. Restoration Option. . . . . . . . . . . . . . . . . 3
2.8. Limited Stock Appreciation Rights . . . . . . . . . 3
SECTION 3. . . . . . . . . . . . . . . . . . . . . . . . . . . 3
STOCK APPRECIATION RIGHTS . . . . . . . . . . . . . . . . 3
3.1. Definition. . . . . . . . . . . . . . . . . . . . . 3
3.2. Eligibility . . . . . . . . . . . . . . . . . . . . 3
3.3. Exercise. . . . . . . . . . . . . . . . . . . . . . 4
3.4. Settlement of Award . . . . . . . . . . . . . . . . 4
3.5. Post-Exercise Limitations . . . . . . . . . . . . . 4
3.6. Expiration Date . . . . . . . . . . . . . . . . . . 4
SECTION 4. . . . . . . . . . . . . . . . . . . . . . . . . . . 5
RESTRICTED STOCK. . . . . . . . . . . . . . . . . . . . . 5
4.1. Definition. . . . . . . . . . . . . . . . . . . . . 5
4.2. Eligibility . . . . . . . . . . . . . . . . . . . . 5
4.3. Terms and Conditions of Awards. . . . . . . . . . . 5
SECTION 5. . . . . . . . . . . . . . . . . . . . . . . . . . . 5
STOCK PURCHASE PROGRAM. . . . . . . . . . . . . . . . . . 5
5.1. Purchase of Stock . . . . . . . . . . . . . . . . . 5
5.2. Matching Shares . . . . . . . . . . . . . . . . . . 6
5.3. Restrictions on Shares. . . . . . . . . . . . . . . 6
SECTION 6. . . . . . . . . . . . . . . . . . . . . . . . . . . 6
OPERATION AND ADMINISTRATION. . . . . . . . . . . . . . . 6
6.1. Effective Date. . . . . . . . . . . . . . . . . . . 6
6.2. Shares Subject to Plan. . . . . . . . . . . . . . . 6
6.3. Adjustments to Shares . . . . . . . . . . . . . . . 7
6.4. Limit on Distribution . . . . . . . . . . . . . . . 8
6.5. Liability for Cash Payments . . . . . . . . . . . . 9
6.6. Withholding . . . . . . . . . . . . . . . . . . . . 9
6.7. Distributions to Disabled Persons . . . . . . . . . 9
6.8. Transferability . . . . . . . . . . . . . . . . . . 9
6.9. Administration. . . . . . . . . . . . . . . . . . . 9
6.10. Notices. . . . . . . . . . . . . . . . . . . . . . 9
6.11. Form and Time of Elections . . . . . . . . . . . . 9
6.12. Agreement With Company . . . . . . . . . . . . . . 9
6.13. Limitation of Implied Rights . . . . . . . . . . . 10
6.14. Benefits Under Qualified Retirement Plans. . . . . 10
6.15. Evidence . . . . . . . . . . . . . . . . . . . . . 10
6.16. Action by Employers. . . . . . . . . . . . . . . . 10
6.17. Gender and Number. . . . . . . . . . . . . . . . . 10
SECTION 7. . . . . . . . . . . . . . . . . . . . . . . . . . . 10
CHANGE IN CONTROL . . . . . . . . . . . . . . . . . . . . 10
SECTION 8. . . . . . . . . . . . . . . . . . . . . . . . . . . 11
COMMITTEE . . . . . . . . . . . . . . . . . . . . . . . . 11
8.1. Selection of Committee. . . . . . . . . . . . . . . 11
8.2. Powers of Committee . . . . . . . . . . . . . . . . 11
8.3. Delegation by Committee . . . . . . . . . . . . . . 11
8.4. Information to be Furnished to Committee. . . . . . 11
8.5. Liability and Indemnification of Committee. . . . . 12
SECTION 9. . . . . . . . . . . . . . . . . . . . . . . . . . . 12
AMENDMENT AND TERMINATION . . . . . . . . . . . . . . . . 12
SECTION 10 . . . . . . . . . . . . . . . . . . . . . . . . . . 12
DEFINED TERMS . . . . . . . . . . . . . . . . . . . . . . 12
Award . . . . . . . . . . . . . . . . . . . . . . . . . 12
Board . . . . . . . . . . . . . . . . . . . . . . . . . 12
Change in Control . . . . . . . . . . . . . . . . . . . 12
Code. . . . . . . . . . . . . . . . . . . . . . . . . . 13
Date of Termination . . . . . . . . . . . . . . . . . . 13
Disability. . . . . . . . . . . . . . . . . . . . . . . 13
Dollars . . . . . . . . . . . . . . . . . . . . . . . . 13
Effective Date. . . . . . . . . . . . . . . . . . . . . 13
Employer. . . . . . . . . . . . . . . . . . . . . . . . 13
Fair Market Value . . . . . . . . . . . . . . . . . . . 13
Option. . . . . . . . . . . . . . . . . . . . . . . . . 13
Qualified Retirement Plan . . . . . . . . . . . . . . . 14
Related Companies . . . . . . . . . . . . . . . . . . . 14
Retirement. . . . . . . . . . . . . . . . . . . . . . . 14
SEC . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Stock . . . . . . . . . . . . . . . . . . . . . . . . . 14
ACE LIMITED 1995
LONG-TERM INCENTIVE PLAN
SECTION 1
GENERAL
1.1. Purpose. The ACE Limited 1995 Long-Term Incentive
Plan (the "Plan") has been established by ACE Limited (the
"Company") to:
(a) attract and retain employees of the Company and Related
Companies;
(b) motivate participating employees, by means of appropriate
incentives, to achieve long-range goals;
(c) provide incentive compensation opportunities that are
competitive with those of other major corporations; and
(d) further identify Participants' interests with those of the
Company's other shareholders through compensation that is
based on the Company's common stock;
and thereby promote the long-term financial interest of the
Company and the Related Companies, including the growth in value
of the Company's equity and enhancement of long-term shareholder
return.
1.2. Participation. Subject to the terms and conditions of
the Plan, the Committee shall determine and designate, from time
to time, from among the employees of the Employers those persons
who will be granted one or more Awards under the Plan, and
thereby become "Participants" in the Plan. In the discretion of
the Committee, and subject to the terms of the Plan, a
Participant may be granted any Award permitted under the
provisions of the Plan, and more than one Award may be granted to
a Participant. Except as otherwise agreed by the Committee and
the Participant, or except as otherwise provided in the Plan, an
Award under the Plan shall not affect any previous Award under
the Plan or an award under any other plan maintained by the
Company or the Related Companies.
1.3. Operation and Administration. The operation and
administration of the Plan, including the Awards made under the
Plan, shall be subject to the provisions of Section 6.
Capitalized terms in the Plan shall be defined as set forth in
Section 10 or elsewhere in the Plan.
SECTION 2
OPTIONS
2.1. Definitions. The grant of an Option under this
Section 2 entitles the Participant to purchase shares of Stock at
a price fixed at the time the Option is granted, or at a price
determined under a method established at the time the Option is
granted, subject to the terms of this Section 2. Options granted
under this Section 2 may be either Incentive Stock Options or
Non-Qualified Stock Options, as determined in the discretion of
the Committee. An "Incentive Stock Option" is an Option that is
intended to satisfy the requirements applicable to an "incentive
stock option" described in section 422(b) of the Code. A "Non-
Qualified Option" is an Option that is not intended to be an
"incentive stock option" as that term is described in section
422(b) of the Code.
2.2. Eligibility. The Committee shall designate the
Participants to whom Options are to be granted under this Section
2 and shall determine the number of shares of Stock to be subject
to each such Option. To the extent that the aggregate fair
market value of Stock with respect to which Incentive Stock
Options are exercisable for the first time by any individual
during any calendar year (under all plans of the Company and all
Related Companies) exceeds $100,000, such options shall be
treated as Non-Qualified Stock Options, to the extent required by
section 422 of the Code.
2.3. Price. The determination and payment of the purchase
price of a share of Stock under each Option granted under this
Section 2 shall be subject to the following:
(a) The purchase price shall be established by the Committee or
shall be determined by a method established by the Committee
at the time the Option is granted; provided, however, that
in no event shall such price be less than the greater of (i)
100% of the Fair Market Value of a share of Stock as of the
date on which the Option is granted; or (ii) the par value
of a share of Stock on such date.
(b) Subject to the following provisions of this subsection 2.3,
the full purchase price of each share of Stock purchased
upon the exercise of any Option shall be paid at the time of
such exercise and, as soon as practicable thereafter, a
certificate representing the shares so purchased shall be
delivered to the person entitled thereto.
(c) The purchase price shall be payable in cash or in shares of
Stock (valued at Fair Market Value as of the day of
exercise), or in any combination thereof, as determined by
the Committee.
(d) A Participant may elect to pay the purchase price upon the
exercise of an Option through a cashless exercise
arrangement as may be established by the Committee.
2.4. Exercise. Except as otherwise expressly provided in
the Plan, an Option granted under this Section 2 shall be
exercisable in accordance with the following terms of this
subsection 2.4:
(a) The terms and conditions relating to exercise of an Option
shall be established by the Committee, and may include,
without limitation, conditions relating to completion of a
specified period of service, achievement of performance
standards, or achievement of Stock ownership objectives by
the Participant.
(b) No Option may be exercised by a Participant: (i) prior to
the date on which the Participant completes one continuous
year of employment with the Company or any Related Company
after the date as of which the Option is granted (provided,
however, that the Committee may permit earlier exercise
following the termination of the Participant's Date of
Termination by reason of death or Disability); or (ii) after
the Expiration Date applicable to that Option.
(c) The exercise of an Option will result in the surrender of
the corresponding rights under a tandem Stock Appreciation
Right, if any.
2.5. Post-Exercise Limitations. The Committee, in its
discretion, may impose such restrictions on shares of Stock
acquired pursuant to the exercise of an Option (including stock
acquired pursuant to the exercise of a tandem Stock Appreciation
Right) as it determines to be desirable, including, without
limitation, restrictions relating to disposition of the shares
and forfeiture restrictions based on service, performance, Stock
ownership by the Participant, and such other factors as the
Committee determines to be appropriate.
2.6. Expiration Date. The "Expiration Date" with respect
to an Option means the date established as the Expiration Date by
the Committee at the time of the grant; provided, however, that
the Expiration Date with respect to any Option shall not be later
than the earliest to occur of:
(a) the ten-year anniversary of the date on which the Option is
granted;
(b) if the Participant's Date of Termination occurs by reason of
death or Disability, the one-year anniversary of such Date
of Termination; or
(c) if the Participant's Date of Termination occurs by reason of
Retirement, the date on which the Expiration Date would
expire if the Participant's Date of Termination occurred on
the ten-year anniversary of such date on which the Option is
granted or, if earlier, the date of the Participant's death;
or
(d) if the Participant's Date of Termination occurs for reasons
other than Retirement, death or Disability, the three-month
anniversary of such Date of Termination.
2.7. Restoration Option. In the event the Participant
exercises an Option and pays all or a portion of the purchase
price in Common Stock, in the manner permitted by subsection 2.3,
such Participant may, in the Committee's discretion, be issued a
new Option to purchase additional shares of Stock equal to the
number of shares of Stock surrendered to the Company in such
payment plus the number of shares surrendered to satisfy the
Participant's tax liability. Such new Option shall have an
exercise price equal to the Fair Market Value per share on the
date such new Option is granted, shall first be exercisable not
less than six months from the date of grant of the new Option and
shall have an Expiration Date that is the same as the Expiration
Date of the original Option so exercised by payment of the
purchase price in shares of Stock.
2.8. Limited Stock Appreciation Rights. The Committee may
award Limited Stock Appreciation Rights in tandem with an Option,
regardless of whether the Option is in tandem with a Stock
Appreciation Right. An award of Limited Stock Appreciation
Rights entitles the Participant to receive, in connection with a
Change in Control, a cash payment in cancellation of the tandem
Options (and any Stock Appreciation Rights in tandem with such
Options) which are outstanding on the date the Change in Control
occurs (regardless of whether such Options are then presently
exercisable). The payment amount shall be equal to the
difference between the exercise price per share of any Stock
covered by the tandem Option and the "Market Price" of a share of
Stock. For purposes of this subsection 2.8, the term "Market
Price" shall mean the greater of (a) the highest price per share
of Stock paid in connection with the Change in Control and (b)
the highest price per share of Stock as reported on the Composite
Transaction Reporting System on the New York Stock Exchange
(which includes other participating exchanges and over-the-
counter markets) during the 30-day period ending on the date of
the Change in Control.
SECTION 3
STOCK APPRECIATION RIGHTS
3.1. Definition. Subject to the terms of this Section 3, a
Stock Appreciation Right granted under the Plan entitles the
Participant to receive, in cash or Stock (as determined in
accordance with subsection 3.4), value equal to all or a portion
of the excess of: (a) the Fair Market Value of a specified number
of shares of Stock at the time of exercise; over (b) a specified
price which shall not be less than 100% of the Fair Market Value
of the Stock at the time the Stock Appreciation Right is granted,
or, if granted in tandem with an Option, the exercise price with
respect to shares under the tandem Option.
3.2. Eligibility. Subject to the provisions of the Plan,
the Committee shall designate the Participants to whom Stock
Appreciation Rights are to be granted under the Plan, shall
determine the exercise price or a method by which the price shall
be established with respect to each such Stock Appreciation
Right, and shall determine the number of shares of Stock on which
each Stock Appreciation Right is based. A Stock Appreciation
Right may be granted in connection with all or any portion of a
previously or contemporaneously granted Option or not in
connection with an Option. If a Stock Appreciation Right is
granted in connection with an Option, then, in the discretion of
the Committee, the Stock Appreciation Right may, but need not be
granted in tandem with the Option.
3.3. Exercise. The exercise of Stock Appreciation Rights
shall be subject to the following:
(a) The terms and conditions relating to exercise of a Stock
Appreciation Right shall be established by the Committee,
and may include, without limitation, conditions relating to
completion of a specified period of service, achievement of
performance standards, or achievement of Stock ownership
objectives by the Participant.
(b) If a Stock Appreciation Right is not in tandem with an
Option, then the Stock Appreciation Right shall be
exercisable in accordance with the terms established by the
Committee in connection with such rights; provided, however,
that except as otherwise expressly provided in the Plan, no
Stock Appreciation Right may be exercised by a Participant
(i) prior to the date on which he completes one continuous
year of employment with the Company or any Related Company
after the date as of which the Stock Appreciation Right is
granted; or (ii) after the Expiration Date applicable to
that Stock Appreciation Right.
(c) If a Stock Appreciation Right is in tandem with an Option,
then the Stock Appreciation Right shall be exercisable at
the time the tandem Option is exercisable. The exercise of
a Stock Appreciation Right will result in the surrender of
the corresponding rights under the tandem Option.
3.4. Settlement of Award. Upon the exercise of a Stock
Appreciation Right, the value to be distributed to the
Participant, in accordance with subsection 3.1, shall be
distributed in shares of Stock (valued at their Fair Market Value
at the time of exercise), in cash, or in a combination thereof,
in the discretion of the Committee.
3.5. Post-Exercise Limitations. The Committee, in its
discretion, may impose such restrictions on shares of Stock
acquired pursuant to the exercise of a Stock Appreciation Right
as it determines to be desirable, including, without limitation,
restrictions relating to disposition of the shares and forfeiture
restrictions based on service, performance, ownership of Stock by
the Participant, and such other factors as the Committee
determines to be appropriate.
3.6. Expiration Date. If a Stock Appreciation Right is in
tandem with an Option, then the "Expiration Date" for the Stock
Appreciation Right shall be the Expiration Date for the related
Option. If a Stock Appreciation Right is not in tandem with an
Option, then the "Expiration Date" for the Stock Appreciation
Right shall be the date established as the Expiration Date by the
Committee; provided, however, that subject to the following
provisions of this subsection 3.6, the Expiration Date with
respect to any Stock Appreciation Right shall not be later than
the earliest to occur of:
(a) the ten-year anniversary of the date on which the Stock
Appreciation Right is granted;
(b) if the Participant's Date of Termination occurs by reason of
death or Disability, the one-year anniversary of such Date
of Termination; or
(c) if the Participant's Date of Termination occurs by reason of
Retirement, the three-year anniversary of such Date of
Termination; or
(d) if the Participant's Date of Termination occurs for reasons
other than Retirement, death or Disability, the three-month
anniversary of such Date of Termination.
SECTION 4
RESTRICTED STOCK
4.1. Definition. Subject to the terms of this Section 4,
Restricted Stock Awards under the Plan are grants of Stock to
Participants, the vesting of which is subject to such conditions
as may be established by the Committee, with some or all of those
conditions relating to performance or events occurring after the
date of grant.
4.2. Eligibility. The Committee shall designate the
Participants to whom Restricted Stock is to be granted, and the
number of shares of Stock that are subject to each such Award.
The Award of shares under this Section 4 may, but need not be
made in conjunction with a cash-based incentive compensation
program maintained by the Company, and may, but need not, be in
lieu of cash otherwise awardable under such program.
4.3. Terms and Conditions of Awards. Shares of Restricted
Stock granted to Participants under the Plan shall be subject to
the following terms and conditions:
(a) Restricted Stock granted to Participants may not be sold,
assigned, transferred, pledged or otherwise encumbered,
except as hereinafter provided, for a period of not less
than one year after the time of the grant of such Stock (the
"Restricted Period"). Except for such restrictions, the
Participant as owner of such shares shall have all the
rights of a shareholder, including but not limited to the
right to vote such shares and, except as otherwise provided
by the Committee, the right to receive all dividends paid on
such shares.
(b) Except as otherwise determined by the Committee, a
Participant whose Date of Termination occurs prior to the
end of the Restricted Period for any reason shall forfeit
all shares of Restricted Stock remaining subject to any
outstanding Restricted Stock Award.
(c) The Committee may, in its discretion, condition the vesting
of shares of Restricted Stock on the achievement of
performance goals.
(d) Each certificate issued in respect of such Stock shall be
registered in the name of the Participant and deposited in a
bank designated by the Committee. Each such certificate
shall bear the following (or a similar) legend:
"The transferability of this certificate and the shares
of stock represented hereby are subject to the terms
and conditions (including forfeiture) contained in the
ACE Limited 1995 Long-Term Incentive Plan and an
agreement entered into between the registered owner and
ACE Limited. A copy of such plan and agreement is on
file in the office of the General Counsel of ACE
Limited, The ACE Building, 30 Woodbourne Avenue,
Hamilton HM 08, Bermuda."
(e) Subject to the limitations of the Plan and the Award of
Restricted Stock, at the end of the Restricted Period for
Restricted Stock, such Restricted Stock will be transferred
free of all restrictions to a Participant (or his or her
legal representative, beneficiary or heir).
SECTION 5
STOCK PURCHASE PROGRAM
5.1. Purchase of Stock. The Committee may, from time to
time, establish one or more programs under which Participants
will be permitted to purchase shares of Stock under the Plan on a
periodic basis, and shall designate the Participants eligible to
participate under such Stock purchase programs. The purchase
price for shares of Stock available under such programs, and
other terms and conditions of such programs, shall be established
by the Committee. The purchase price may not be less than the
Fair Market Value of the Stock at the time of purchase (or, in
the Committee's discretion, the value of the Stock based on the
average Fair Market Value for a number of days determined by the
Committee); provided, however, that with respect to shares of
Stock purchased under a program that do not result in an award of
matching shares (as provided in subsection 5.2), the purchase
price may not be less than 50% of the Fair Market Value of the
Stock at the time of purchase (or, in the Committee's discretion,
the value of the Stock based on the average Fair Market Value for
a number of days determined by the Committee).
5.2. Matching Shares. Except as otherwise provided in
subsection 5.1, any Stock purchase program established by the
Committee under this Section 5 may provide for the award of
matching shares of Stock, except that in no event shall the
matching rate exceed one share for each one share purchased by
the Participant.
5.3. Restrictions on Shares. The Committee may impose such
restrictions with respect to shares purchased under subsection
5.1, or matching shares awarded pursuant to subsection 5.2, as
the Committee determines to be appropriate. Such restrictions
may include, without limitation, restrictions of the type that
may be imposed with respect to Restricted Stock under Section 4.
SECTION 6
OPERATION AND ADMINISTRATION
6.1. Effective Date. Subject to the approval of the
shareholders of the Company at the Company's 1996 annual meeting
of its shareholders, the Plan shall be effective as of the date
on which it is adopted by the Board; provided, however, that to
the extent that Awards are made under the Plan prior to its
approval by shareholders, they shall be contingent on approval of
the Plan by the shareholders of the Company. The Plan shall be
unlimited in duration and, in the event of Plan termination,
shall remain in effect as long as any Awards under it are
outstanding; provided, however, that no new Awards shall be made
under the Plan after the tenth anniversary of the Effective Date.
6.2. Shares Subject to Plan. The shares of Stock with
respect to which Awards may be made under the Plan shall be
currently authorized but unissued shares, or shares purchased in
the open market by a direct or indirect wholly owned subsidiary
of the Company (as determined by the Chairman or any Executive
Vice President of the Company). The Company may contribute to
the subsidiary an amount sufficient to accomplish the purchase in
the open market of the shares of Stock to be so acquired (as
determined by the Chairman or any Executive Vice President of the
Company). The number of shares of Stock available for Awards
under the Plan during any fiscal year of the Company shall equal:
(a) 5% of the adjusted average of the outstanding Stock, as that
number is determined by the Company to calculate fully
diluted earnings per share for the preceding fiscal year;
REDUCED BY
(b) any shares of Stock granted pursuant to Awards under the
Plan, and any shares of Stock subject to any outstanding
award under the Plan;
provided, however, that no reduction shall be made in the number
of shares otherwise available under paragraph 6.2(a) for any
shares of Stock subject to an Award under the Plan to the extent
that such shares are not issued by reason of a lapse, forfeiture,
expiration or termination of the Award for any reason without
issuance of shares (whether or not cash or other consideration is
paid to a Participant in respect of such shares); and further
provided that no more than 2,300,000 shares of Common Stock shall
be cumulatively available for issuance under the Plan for the
Award of Incentive Stock Options.
6.3. Adjustments to Shares.
(a) If the Company shall effect any subdivision or consolidation
of shares of Stock or other capital readjustment, payment of
stock dividend, stock split, combination of shares or
recapitalization or other increase or reduction of the
number of shares of Stock outstanding without receiving
compensation therefor in money, services or property, then
the Committee shall adjust (i) the number of shares of Stock
available under the Plan; (ii) the number of shares
available under any limits; (iii) the number of shares of
Stock subject to outstanding Awards; and (iv) the per-share
price under any outstanding Award to the extent that the
Participant is required to pay a purchase price per share
with respect to the Award.
(b) If the Company is reorganized, merged or consolidated or is
party to a plan of exchange with another corporation,
pursuant to which reorganization, merger, consolidation or
plan of exchange the shareholders of the Company receive any
shares of stock or other securities or property, or the
Company shall distribute securities of another corporation
to its shareholders, there shall be substituted for the
shares subject to outstanding Awards an appropriate number
of shares of each class of stock or amount of other
securities or property which were distributed to the
shareholders of the Company in respect of such shares,
subject to the following:
(i) If the Committee determines that the substitution
described in accordance with the foregoing provisions of
this paragraph (b) would not be fully consistent with the
purposes of the Plan or the purposes of the outstanding
Awards under the Plan, the Committee may make such other
adjustments to the Awards to the extent that the Committee
determines such adjustments are consistent with the purposes
of the Plan and of the affected Awards.
(ii) All or any of the Awards may be cancelled by the
Committee on or immediately prior to the effective date of
the applicable transaction, but only if the Committee gives
reasonable advance notice of the cancellation to each
affected Participant, and only if either: (A) the
Participant is permitted to exercise the Award for a
reasonable period prior to the effective date of the
cancellation; or (B) the Participant receives payment or
other benefits that the Committee determines to be
reasonable compensation for the value of the cancelled
Awards.
(iii) Upon the occurrence of a reorganization of the
Company or any other event described in this paragraph (b),
any successor to the Company shall be substituted for the
Company to the extent that the Company and the successor
agree to such substitution.
(c) Upon (or, in the discretion of the Committee, immediately
prior to) the sale to (or exchange with) a third party
unrelated to the Company of all or substantially all of the
assets of the Company, all Awards shall be cancelled. If
Awards are cancelled under this paragraph (c), then, with
respect to any affected Participant, either:
(i) the Participant shall be provided with reasonable
advance notice of the cancellation, and the Participant
shall be permitted to exercise the Award for a reasonable
period prior to the effective date of the cancellation; or
(ii) the Participant shall receive payment or other
benefits that the Committee determines to be reasonable
compensation for the value of the cancelled Awards.
The foregoing provisions of this paragraph (c) shall also
apply to the sale of all or substantially all of the assets
of the Company to a related party, if the Committee
determines such application is appropriate.
(d) In determining what action, if any, is necessary or
appropriate under the foregoing provisions of this
subsection 6.3, the Committee shall act in a manner that it
determines to be consistent with the purposes of the Plan
and of the affected Awards and, where applicable or
otherwise appropriate, in a manner that it determines to be
necessary to preserve the benefits and potential benefits of
the affected Awards for the Participants and the Employers.
(e) The existence of this Plan and the Awards granted hereunder
shall not affect in any way the right or power of the
Company or its shareholders to make or authorize any or all
adjustments, recapitalizations, reorganizations or other
changes in the Company's capital structure or its business,
any merger or consolidation of the Company, any issue of
bonds, debentures, preferred or prior preference stocks
ahead of or affecting the Company's Stock or the rights
thereof, the dissolution or liquidation of the Company, any
sale or transfer of all or any part of its assets or
business, or any other corporate act or proceeding, whether
of a similar character or otherwise.
(f) Except as expressly provided by the terms of this Plan, the
issue by the Company of shares of stock of any class, or
securities convertible into shares of stock of any class,
for cash or property or for labor or services, either upon
direct sale, upon the exercise of rights or warrants to
subscribe therefor or upon conversion of shares or
obligations of the Company convertible into such shares or
other securities, shall not affect, and no adjustment by
reason thereof shall be made with respect to Awards then
outstanding hereunder.
(g) Awards under the Plan are subject to adjustment under this
subsection 6.3 only during the period in which they are
considered to be outstanding under the Plan. For purposes
of this subsection 6.3, an Award is considered "outstanding"
on any date if the Participant's ability to obtain all
benefits with respect to the Award is subject to limits
imposed by the Plan (including any limits imposed by the
Agreement reflecting the Award). The determination of
whether an Award is outstanding shall be made by the
Committee.
6.4. Limit on Distribution. Distribution of shares of
Stock or other amounts under the Plan shall be subject to the
following:
(a) Notwithstanding any other provision of the Plan, the Company
shall have no liability to issue any shares of Stock under
the Plan or make any other distribution of benefits under
the Plan unless such delivery or distribution would comply
with all applicable laws and the applicable requirements of
any securities exchange or similar entity.
(b) In the case of a Participant who is subject to Section 16(a)
and 16(b) of the Securities Exchange Act of 1934, the
Committee may, at any time, add such conditions and
limitations to any Award to such Participant, or any feature
of any such Award, as the Committee, in its sole discretion,
deems necessary or desirable to comply with Section 16(a) or
16(b) and the rules and regulations thereunder or to obtain
any exemption therefrom.
(c) To the extent that the Plan provides for issuance of
certificates to reflect the transfer of shares of Stock, the
transfer of such shares may, at the direction of the
Committee, be effected on a non-certificated basis, to the
extent not prohibited by the provisions of Rule 16b-3,
applicable local law, the applicable rules of any stock
exchange, or any other applicable rules.
6.5. Liability for Cash Payments. Subject to the
provisions of this Section 6, an Employer shall be liable for
payment of cash due under the Plan with respect to any
Participant to the extent that such benefits are attributable to
the services rendered for that Employer by the Participant. Any
disputes relating to liability of Employers for cash payments
shall be resolved by the Committee.
6.6. Withholding. All Awards and other payments under the
Plan are subject to withholding of all applicable taxes, which
withholding obligations may be satisfied, with the consent of the
Committee, through the surrender of shares of Stock which the
Participant already owns, or to which a Participant is otherwise
entitled under the Plan.
6.7. Distributions to Disabled Persons. Notwithstanding
any other provision of the Plan, if, in the Committee's opinion,
a Participant or other person entitled to benefits under the Plan
is under a legal disability or is in any way incapacitated so as
to be unable to manage his financial affairs, the Committee may
direct that payment be made to a relative or friend of such
person for his benefit until claim is made by a conservator or
other person legally charged with the care of his person or his
estate, and such payment or distribution shall be in lieu of any
such payment to such Participant or other person. Thereafter,
any benefits under the Plan to which such Participant or other
person is entitled shall be paid to such conservator or other
person legally charged with the care of his person or his estate.
6.8. Transferability. Awards under the Plan are not
transferable except as designated by the Participant by will or
by the laws of descent and distribution or pursuant to a
qualified domestic relations order as defined by the Code, Title
I of the Employee Retirement Income Security Act, or the rules
thereunder (a "QDRO"). To the extent that the Participant who
receives an Award under the Plan has the right to exercise such
Award, the Award may be exercised during the lifetime of the
Participant only by the Participant. Notwithstanding the
foregoing provisions of this subsection 6.8, the Committee may
permit Awards under the Plan to be transferred to or for the
benefit of the Participant's family (including, without
limitation, to a trust for the benefit of a Participant's
family), subject to such limits as the Committee may establish.
In no event shall an Incentive Stock Option be transferable to
the extent that such transferability would violate the
requirements applicable to such option under Code section 422.
6.9. Administration. The authority to control and manage
the operation and administration of the Plan shall be vested in a
committee (the "Committee") in accordance with Section 8.
6.10. Notices. Any notice or document required to be filed
with the Committee under the Plan will be properly filed if
delivered or mailed by registered mail, postage prepaid, to the
Committee, in care of the Company, at its principal executive
offices. The Committee may, by advance written notice to
affected persons, revise such notice procedure from time to time.
Any notice required under the Plan (other than a notice of
election) may be waived by the person entitled to notice.
6.11. Form and Time of Elections. Unless otherwise
specified herein, each election required or permitted to be made
by any Participant or other person entitled to benefits under the
Plan, and any permitted modification or revocation thereof, shall
be in writing filed with the Committee at such times, in such
form, and subject to such restrictions and limitations, not
inconsistent with the terms of the Plan, as the Committee shall
require.
6.12. Agreement With Company. At the time of an Award to a
Participant under the Plan, the Committee will require a
Participant to enter into an agreement with the Company in a form
specified by the Committee, agreeing to the terms and conditions
of the Plan and to such additional terms and conditions, not
inconsistent with the Plan, as the Committee may, in its sole
discretion, prescribe.
6.13. Limitation of Implied Rights.
(a) Neither a Participant nor any other person shall, by reason
of the Plan, acquire any right in or title to any assets,
funds or property of the Employers whatsoever, including,
without limitation, any specific funds, assets, or other
property which the Employers, in their sole discretion, may
set aside in anticipation of a liability under the Plan. A
Participant shall have only a contractual right to the
amounts, if any, payable under the Plan, unsecured by any
assets of the Employers. Nothing contained in the Plan
shall constitute a guarantee by any of the Employers that
the assets of the Employers shall be sufficient to pay any
benefits to any person.
(b) The Plan does not constitute a contract of employment, and
selection as a Participant will not give any employee the
right to be retained in the employ of an Employer or any
Related Company, nor any right or claim to any benefit under
the Plan, unless such right or claim has specifically
accrued under the terms of the Plan. Except as otherwise
provided in the Plan, no Award under the Plan shall confer
upon the holder thereof any right as a shareholder of the
Company prior to the date on which he fulfills all service
requirements and other conditions for receipt of such
rights.
6.14. Benefits Under Qualified Retirement Plans. Awards to
a Participant (including the grant and the receipt of benefits)
under the Plan shall be disregarded for purposes of determining
the Participant's benefits under any Qualified Retirement Plan.
6.15. Evidence. Evidence required of anyone under the Plan
may be by certificate, affidavit, document or other information
which the person acting on it considers pertinent and reliable,
and signed, made or presented by the proper party or parties.
6.16. Action by Employers. Any action required or
permitted to be taken by any Employer shall be by resolution of
its board of directors, or by action of one or more members of
the board (including a committee of the board) who are duly
authorized to act for the board, or (except to the extent
prohibited by the provisions of Rule 16b-3, applicable local law,
the applicable rules of any stock exchange, or any other
applicable rules) by a duly authorized officer of the Employer.
6.17. Gender and Number. Where the context admits, words
in any gender shall include any other gender, words in the
singular shall include the plural and the plural shall include
the singular.
SECTION 7
CHANGE IN CONTROL
Subject to the provisions of subsection 6.3 (relating to the
adjustment of shares), and except as otherwise provided in the
Plan or the Agreement reflecting the applicable Award, upon the
occurrence of a Change in Control:
(a) All outstanding Options (regardless of whether in tandem
with Stock Appreciation Rights) shall become fully
exercisable, except to the extent that the right to exercise
the Option is subject to any restrictions established in
connection with a Limited Stock Appreciation Right that is
in tandem with the Option.
(b) All outstanding Stock Appreciation Rights (regardless of
whether in tandem with Options) shall become fully
exercisable, except that if Stock Appreciation Rights are in
tandem with an Option, and the Option is in tandem with a
Limited Stock Appreciation Right, the right to exercise the
Stock Appreciation Right shall be subject to any
restrictions established in connection with the Limited
Stock Appreciation Right.
(c) All shares of Restricted Stock shall become fully vested.
(d) All vesting restrictions imposed under subsection 5.3
(relating to restrictions on shares purchased by the
Participants, and matching shares awarded to Participants)
shall cease to apply, and the Participant shall become fully
vested in those shares.
SECTION 8
COMMITTEE
8.1. Selection of Committee. The Committee shall be
selected by the Board, and shall consist of not less than two
members of the Board, or such greater number as may be required
for compliance with SEC Rule 16b-3.
8.2. Powers of Committee. The authority to manage and
control the operation and administration of the Plan shall be
vested in the Committee, subject to the following:
(a) Subject to the provisions of the Plan, the Committee will
have the authority and discretion to select employees to
receive Awards, to determine the time or times of receipt,
to determine the types of Awards and the number of shares
covered by the Awards, to establish the terms, conditions,
performance criteria, restrictions, and other provisions of
such Awards, and to cancel or suspend Awards. In making
such Award determinations, the Committee may take into
account the nature of services rendered by the respective
employee, his present and potential contribution to the
Company's success and such other factors as the Committee
deems relevant.
(b) The Committee will have the authority and discretion to
interpret the Plan, to establish, amend, and rescind any
rules and regulations relating to the Plan, to determine the
terms and provisions of any agreements made pursuant to the
Plan, and to make all other determinations that may be
necessary or advisable for the administration of the Plan.
(c) Any interpretation of the Plan by the Committee and any
decision made by it under the Plan is final and binding on
all persons.
(d) Except as otherwise expressly provided in the Plan, where
the Committee is authorized to make a determination with
respect to any Award, such determination shall be made at
the time the Award is made, except that the Committee may
reserve the authority to have such determination made by the
Committee in the future (but only if such reservation is
made at the time the Award is granted and is expressly
stated in the Agreement reflecting the Award).
8.3. Delegation by Committee. Except to the extent
prohibited by the provisions of Rule 16b-3, applicable local law,
the applicable rules of any stock exchange, or any other
applicable rules, the Committee may allocate all or any portion
of its responsibilities and powers to any one or more of its
members and may delegate all or any part of its responsibilities
and powers to any person or persons selected by it. Any such
allocation or delegation may be revoked by the Committee at any
time.
8.4. Information to be Furnished to Committee. The
Employers and Related Companies shall furnish the Committee with
such data and information as may be required for it to discharge
its duties. The records of the Employers and Related Companies
as to an employee's or Participant's employment, termination of
employment, leave of absence, reemployment and compensation shall
be conclusive on all persons unless determined to be incorrect.
Participants and other persons entitled to benefits under the
Plan must furnish the Committee such evidence, data or
information as the Committee considers desirable to carry out the
terms of the Plan.
8.5. Liability and Indemnification of Committee. No member
or authorized delegate of the Committee shall be liable to any
person for any action taken or omitted in connection with the
administration of the Plan unless attributable to his own fraud
or willful misconduct; nor shall the Employers be liable to any
person for any such action unless attributable to fraud or
willful misconduct on the part of a director or employee of the
Employers. The Committee, the individual members thereof, and
persons acting as the authorized delegates of the Committee under
the Plan, shall be indemnified by the Employers, to the fullest
extent permitted by law, against any and all liabilities, losses,
costs and expenses (including legal fees and expenses) of
whatsoever kind and nature which may be imposed on, incurred by
or asserted against the Committee or its members or authorized
delegates by reason of the performance of a Committee function if
the Committee or its members or authorized delegates did not act
dishonestly or in willful violation of the law or regulation
under which such liability, loss, cost or expense arises. This
indemnification shall not duplicate but may supplement any
coverage available under any applicable insurance.
SECTION 9
AMENDMENT AND TERMINATION
The Board may, at any time, amend or terminate the Plan,
provided that, subject to subsection 6.3 (relating to certain
adjustments to shares), no amendment or termination may adversely
affect the rights of any Participant or beneficiary under any
Award made under the Plan prior to the date such amendment is
adopted by the Board.
SECTION 10
DEFINED TERMS
For purposes of the Plan, the terms listed below shall be
defined as follows:
(a) Award. The term "Award" shall mean any award or benefit
granted to any Participant under the Plan, including,
without limitation, the grant of Options, Stock Appreciation
Rights, Restricted Stock, or Stock acquired through purchase
or through matching allocations under Section 5.
(b) Board. The term "Board" shall mean the Board of Directors
of the Company.
(c) Change in Control. The term "Change in Control" shall mean
the occurrence of any one of the following events:
(i) any "person," as such term is used in Sections 3(a)(9)
and 13(d) of the Securities Exchange Act of 1934, becomes a
"beneficial owner," as such term is used in Rule 13d-3
promulgated under that act, of 50% or more of the Voting
Stock (as defined below) of the Company;
(ii) the majority of the Board consists of individuals
other than Incumbent Directors, which term means the members
of the Board on the date of this Agreement; provided that
any person becoming a director subsequent to such date whose
election or nomination for election was supported by three-
quarters of the directors who then comprised the Incumbent
Directors shall be considered to be an Incumbent Director;
(iii) the Company adopts any plan of liquidation providing
for the distribution of all or substantially all of its
assets;
(iv) all or substantially all of the assets or business of
the Company is disposed of pursuant to a merger,
consolidation or other transaction (unless the shareholders
of the Company immediately prior to such merger,
consolidation or other transaction beneficially own,
directly or indirectly, in substantially the same proportion
as they owned the Voting Stock of the Company, all of the
Voting Stock or other ownership interests of the entity or
entities, if any, that succeed to the business of the
Company); or
(v) the Company combines with another company and is the
surviving corporation but, immediately after the
combination, the shareholders of the Company immediately
prior to the combination hold, directly or indirectly, 50%
or less of the Voting Stock of the combined company (there
being excluded from the number of shares held by such
shareholders, but not from the Voting Stock of the combined
company, any shares received by Affiliates (as defined
below) of such other company in exchange for stock of such
other company).
For the purpose of this definition of "Change in Control",
(I) an "Affiliate" of a person or other entity shall mean a
person or other entity that directly or indirectly controls,
is controlled by, or is under common control with the person
or other entity specified and (II) "Voting Stock" shall mean
capital stock of any class or classes having general voting
power under ordinary circumstances, in the absence of
contingencies, to elect the directors of a corporation.
(d) Code. The term "Code" means the Internal Revenue Code of
1986, as amended. A reference to any provision of the Code
shall include reference to any successor provision of the
Code.
(e) Date of Termination. A Participant's "Date of Termination"
shall be the date on which his employment with all Employers
and Related Companies terminates for any reason; provided
that a Date of Termination shall not be deemed to occur by
reason of a transfer of the Participant between the Company
and a Related Company (including an Employer) or between two
Related Companies (including Employers); and further
provided that a Participant's employment shall not be
considered terminated while the Participant is on a leave of
absence from an Employer or a Related Company approved by
the Participant's employer.
(f) Disability. A Participant shall be considered to have a
"Disability" during the period in which he is unable, by
reason of a medically determinable physical or mental
impairment, to engage in any substantial gainful activity,
which condition, in the opinion of a physician selected by
the Committee, is expected to have a duration of not less
than 120 days.
(g) Dollars. As used in the Plan, the term "dollars" or numbers
preceded by the symbol "$" shall mean amounts in United
States Dollars.
(h) Effective Date. The "Effective Date" shall be the date on
which the Plan is adopted by the Board.
(i) Employer. The Company and each Related Company which, with
the consent of the Company, adopts the Plan for the benefit
of its eligible employees are referred to collectively as
the "Employers" and individually as an "Employer".
(j) Fair Market Value. The "Fair Market Value" of a share of
Stock of the Company as of any date shall be the closing
market composite price for such Stock as reported for the
New York Stock Exchange - Composite Transactions on that
date or, if Stock is not traded on that date, on the next
preceding date on which Stock was traded.
(k) Option. The term "Option" shall mean any Incentive Stock
Option or Non-Qualified Stock Option granted under the Plan.
(l) Qualified Retirement Plan. The term "Qualified Retirement
Plan" means any plan of the Company or a Related Company
that is intended to be qualified under section 401(a) of the
Code.
(m) Related Companies. The term "Related Company" means any
company during any period in which it is a "subsidiary
corporation" (as that term is defined in Code section
424(f)) with respect to the Company.
(n) Retirement. "Retirement" of a Participant shall mean the
occurrence of a Participant's Date of Termination with the
consent of the Participant's employer after the Participant
is eligible for early retirement or normal retirement under
the ACE Limited Employee Retirement Plan (or any other
retirement plan maintained by the Company or the Related
Companies); provided, however, that the Committee may impose
such additional conditions or restrictions on Retirement as
it determines to be appropriate.
(o) SEC. "SEC" shall mean the Securities and Exchange
Commission.
(p) Stock. The term "Stock" shall mean shares of common stock
of the Company.