THIRD AMENDMENT TO
EQUITY LINKED INCENTIVE PLAN
STOCK APPRECIATION RIGHTS PLAN
WHEREAS, ACE Limited (the "Company") maintains the Equity
Linked Incentive Plan - Stock Appreciation Rights Plan (the
"Plan"); and
WHEREAS, the Company desires to amend the Plan;
NOW, THEREFORE, IT IS RESOLVED that, by virtue and in
exercise of the power reserved to the Company, and the
Compensation Committee of the Board of Directors of the Company
(the "Committee"), under Paragraph XVIII of the Plan, the Plan is
hereby amended in the following particulars:
1. By adding the following to the end of Paragraph X as a part
thereof:
"Notwithstanding the foregoing provisions of this Paragraph
X, the Committee may permit Options, including Replacement
Options, awarded 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
section 422 of the Internal Revenue Code of 1986, as
amended."
2. By adding the following new Paragraph XIII-A after
Paragraph XIII:
"XIII-A. AWARD OF REPLACEMENT OPTIONS
The Committee may, in its discretion, modify any Right
outstanding as of March 31, 1997 to provide that in lieu of
continuing to hold the Right, a participant may elect to
exercise the Right and be awarded replacement options
covering the same number of shares of Company stock as are
covered by the Right being exercised, with a per-share
exercise price equal to the value of the Company's stock on
March 31, 1997 (the "Replacement Options"), subject to the
following:
(i) If a Replacement Option elects to have the Rights
replaced with Replacement Options, the Rights will
become fully vested and automatically exercised as of
March 31, 1997.
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(ii) A Replacement Option will become exercisable on the
same date or dates that the Rights would have become or
did become exercisable, in accordance with the vesting
schedule applicable to the Rights being exercised, as
in effect immediately prior to March 31, 1997.
(iii) A Replacement Option will expire on the second
anniversary of the Expiration Date applicable to
the related Rights being exercised, as in effect
immediately prior to March 31, 1997.
(iv) While a Replacement Option is outstanding, the
participant will be entitled to dividend awards equal
to the number of shares of Company stock subject to the
Replacement Option multiplied by the amount of any
dividend per ordinary share declared in the sole
discretion of the Board of Directors of the Company,
without regard to whether the Replacement Option is
fully vested; such dividend awards to be paid in cash
to the participant on the same date that ordinary share
dividends are paid. However, the Committee, in its
discretion, may permit a participant to elect receipt
of additional options in lieu of receipt of dividend
equivalents.
(v) A participant electing to exercise a Right and be
awarded a Replacement Option may, at the time such
election is made (the "Election Date"), also elect to
receive settlement of the Right in cash or shares of
Company stock.
(vi) A participant who is subject to United States taxation
and who elects to receive settlement of his Rights in
cash shall receive such settlement on the Expiration
Date of the Rights which would have applied but for his
election to exercise the Rights and be awarded
Replacement Options; provided however, that on the
Election Date, the participant may instead elect to
receive such settlement (a) as of the date of his
termination of employment or termination of service as
a director (regardless of whether such date is earlier
or later than the Expiration Date), or (b) as of a date
after the Expiration Date.
(vii) A participant who is not subject to United States
taxation and who elects to receive settlement of his
Rights in cash shall receive such settlement on (or as
soon as practicable after) March 31, 1997; provided
however, that on the Election Date, the participant may
instead elect to receive such settlement as of a date
after March 31, 1997.
(viii) If settlement in cash is payable as of a date other
than March 31, 1997, the amount of cash settlement
determined as of March 31, 1997 will have investment
returns elected by the participant, subject to the
choices similar to those available under the Company's
retirement plans.
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(ix) A participant electing to receive settlement of his
Rights in shares of Company stock shall have the cash
amount converted to shares (or share units, as
applicable) based on a per-share price of the stock as
of March 31, 1997 which is discounted 15% from market
value. The participant will be required to hold the
shares until the Expiration Date of the Rights being
replaced, during which period the participant will be
fully vested in the shares, though not permitted to
sell the shares.
(x) A participant electing settlement of his Rights in
shares of Company stock may defer receipt of such
shares, subject to the same rules applicable to
deferred receipt of cash settlement. Any dividends
payable with respect to stock the receipt of which has
been deferred by the participant will be deemed to be
reinvested in additional shares of Company stock during
the period of deferral, based on 100% of market value
of the shares at the time the dividends are paid."
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