ACE LIMITED
1999 REPLACEMENT
LONG TERM INCENTIVE PLAN
ARTICLE 1
Statement of Purpose
The ACE Limited 1999 Replacement Long-Term Incentive Plan (the "Plan") has
been established by ACE Limited (the "Company") to award substitute
restricted stock awards in satisfaction of its obligations under Section
5.3(b) of the acquisition agreement dated as of January 11, 1999 by and
among the Company, CIGNA Corporation ("CIGNA") and CIGNA Holdings, Inc.
(the "Acquisition Agreement") and to provide selected individuals
substitute restricted stock awards in replacement of certain CIGNA
equity-based awards which terminate or expire in connection with the
closing of the transaction contemplated by the Acquisition Agreement (the
"Transaction").
ARTICLE 2
Definitions
For all purposes of this Plan, except as otherwise expressly provided or
defined herein or unless the context otherwise requires, the terms defined
in this Article shall have the following meanings:
2.1 "Board of Directors" or "Board" means the board of directors of
the Company or any duly authorized committee of that board.
2.2 "CEO" means the Chief Executive Officer of the Company.
2.3 "Change of Control" means the occurrence of any one of the following
events:
(a) any "person," as such term is used in Sections 3(a)(9)
and 13(d) of the United States 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;
(b) the majority of the Board consists of individuals other
than Incumbent Directors, which term means the members of
the Board on the Effective Date; 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;
(c) the Company adopts any plan of liquidation providing for the
distribution of all or substantially all of its assets;
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(d) 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
(e) 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).
2.4 "Code" means the Internal Revenue Code of 1986, as amended.
2.5 "Committee" means the Committee selected by the Board of Directors
or any successor committee with responsibility for compensation.
2.6 "Company" means ACE Limited, a Cayman Island company.
2.7 "Deferred Compensation Account" means a separate account
established pursuant to a Deferred Compensation Plan.
2.8 "Deferred Compensation Plan" means a deferred compensation plan or
other arrangement of the Company or a Subsidiary which has been
designated by the Committee as a "Deferred Compensation Plan" for
purposes of this Plan.
2.9 "Disability" means permanent and total disability as defined in Code
Section 22(e)(3).
2.10 "Eligible Employee" means any person who (i) is entitled to
substitute restricted stock awards pursuant to the Acquisition
Agreement or (ii) is holding CIGNA equity awards that terminate or
expire in connection with the closing of the Transaction and is
selected by the Committee to receive Substitute Restricted Stock
under the Plan.
2.11 "Exchange Act" means the Securities Exchange Act of 1934, as amended.
2.12 "Fair Market Value" means except as otherwise provided by the
Committee, the "Fair Market Value" of a share of Stock 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.
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2.13 "Ordinary Shares" means the ordinary shares, par value $0.041666667
per share, of the Company.
2.14 "Participant" means an Eligible Employee to whom any one or more
of the awards authorized by this Plan shall have been granted.
2.15 "Plan" means this ACE Limited 1999 Replacement Long-Term Incentive
Plan, as it may be amended from time to time.
2.16 "Restricted Period" means the period during which Ordinary Shares
awarded under Article 5 are subject to restrictions on sale,
transfer, assignment, pledge or other disposition.
2.17 "Retirement" means the occurrence of a Participant's Date of
Termination with the consent of the Participant's employer after
the Participant is eligible for retirement under the ACE Limited
qualified retirement plan the individual is participating in at
the time; provided, however, that the Committee may impose such
additional conditions or restrictions on Retirement as it
determines to be appropriate.
2.18 "SEC" means the Securities and Exchange Commission.
2.19 "Subsidiary" means any corporation of which more than 50% of the
total combined voting power of all classes of stock entitled to
vote, or other equity interest, is directly or indirectly owned by
the Company; or a partnership, joint venture or other
unincorporated entity of which more than a 50% interest in the
capital, equity or profits is directly or indirectly owned by the
Company.
2.20 "Substitute Restricted Stock" means Ordinary Shares granted to a
Participant under Article 5 while it remains subject to a
Restricted Period.
2.21 "Termination for Cause" means, unless otherwise defined in the
particular agreement evidencing the grant of a Substitute
Restricted Stock award, termination by the Company or a Subsidiary
due (i) the willful and continued failure by the Participant to
substantially perform his duties with the Company (other than any
such failure resulting from the Participant's being Disabled),
within a reasonable period of time after a written demand for
substantial performance is delivered to the Participant by the
CEO, which demand specifically identifies the manner in which the
CEO believes that the Participant has not substantially performed
his duties; (ii) the failure by the Participant to execute or
materially conform to the ACE Limited Code of Conduct, within a
reasonable period of time after a written demand for compliance
with the Code of Conduct is delivered to the Participant by the
CEO, which demand specifically identifies the manner in which the
CEO believes that the Participant has failed to execute or
materially conform to the ACE Limited Code of Conduct; (iii) the
willful engaging by the Participant in conduct which is
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demonstrably and materially injurious to the Company, monetarily
or otherwise; or (iv) the engaging by the Participant in egregious
misconduct involving serious moral turpitude to the extent that,
in the reasonable judgment of the CEO, the Participant's
credibility and reputation no longer conform to the standard of
the Company's employees. For purposes of this section, no act, or
failure to act, on the Participant's part shall be deemed
"willful" unless done, or omitted to be done, by the Participant
not in good faith and without reasonable belief that the
Participant's action or omission was in the best interest of the
Company.
2.22 "Termination of Employment" means the termination of the
Participant's active employment relationship with the Company and
the Subsidiaries, unless otherwise expressly provided by the
Committee.
2.23 "Termination Upon a Change of Control" means a termination of
employment upon or within two years after a Change of Control (i)
initiated by the Company or a Subsidiary or a successor other than
a Termination for Cause or (ii) initiated by an Employee after
determining in his reasonable judgment that there has been a
reduction in his authority, duties, responsibilities or title, any
reduction in his compensation, or any change caused by the Company
or a Subsidiary in his office location of more than 35 miles from
its location on the date of the Change of Control.
ARTICLE 3
Participation
3.1 Participation. Subject to the terms and conditions the Plan,
participation in the Plan shall be limited to Eligible Employees.
ARTICLE 4
Authorized Incentive Awards
4.1 Authorized Awards. Substitute Restricted Stock Awards may be granted
under the Plan.
4.2 General Powers of the Committee. Subject to the requirements of
applicable law the Committee is authorized and empowered to grant
Substitute Restricted Stock Awards in replacement of certain CIGNA equity
awards which terminate or expire in connection with the closing of the
Transaction.
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ARTICLE 5
Substitute Restricted Stock Grants
5.1 General. The consideration for a grant of Substitute Restricted Stock
may be solely in the form of the recipient's services rendered to the
Company and the Subsidiaries, or may be such other lawful form of
consideration as the Committee shall determine.
5.2 Restricted Period. Except as expressly provided below, Substitute
Restricted Stock shall not be sold, transferred, assigned, pledged or
otherwise disposed of by the Participant during the Restricted Period(s)
established by the Committee. The Committee may establish different
Restricted Periods and different restriction terms applicable to such
number of the shares of Substitute Restricted Stock evidenced by a single
grant as it deems appropriate.
5.3 Issuance; Voting Rights; Dividends. Substitute Restricted Stock granted
to a Participant shall be issued by the Company as of the date of the
grant. During the Restricted Period, the Participant shall be entitled to
vote the shares. The Committee may provide for the current payment of
dividends on shares of Substitute Restricted Stock to the holders of such
shares. Shares issued as a consequence of stock dividends, splits or
reclassifications shall be issued subject to the same limitations,
restrictions and provisions applicable to the Ordinary Shares with respect
to which they are issued.
5.4 Termination of Employment.
(a) In the event of Termination of Employment of a Participant during a
Restricted Period, except Termination Upon a Change of Control or
termination by reason of death or Disability, ownership of the
Substitute Restricted Stock at the date of Termination of Employment
and all rights therein shall be forfeited to the Company, unless
otherwise expressly provided by the Committee. In the event of
Termination of Employment by reason of Retirement of a Participant
during a Restricted Period, the Committee or its designee in the sole
discretion of either may provide, before the Participant's Retirement,
that the Restricted Period applicable to any outstanding Substitute
Restricted Stock at the date of Retirement shall lapse immediately
upon the Participant's Retirement.
(b) In the event of Termination Upon a Change of Control or
Termination of Employment by reason of death or Disability of a
Participant during a Restricted Period, the Restricted Period
applicable to any outstanding Substitute Restricted Stock at the
date of Termination of Employment shall lapse immediately.
5.5 Leave of Absence. The effect of approved leaves of absence on the
running of applicable Restricted Periods shall be determined by the
Committee, provided, however, that no Restricted Period shall lapse during
an approved leave of absence unless expressly provided by the Committee.
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ARTICLE 6
Shares Authorized under the Plan
6.1 Maximum Number Authorized. The number of Ordinary Shares authorized to
be issued pursuant to Substitute Restricted Stock awards under this Plan is
1,939,100.
6.2 ACE Limited 1999 Replacement International Stock Unit Program. The
Company maintains the ACE Limited 1999 Replacement International Stock Unit
Program which provides for distribution of Ordinary Shares. Subject to the
terms and conditions of such program, Ordinary Shares to be delivered under
that program shall be distributed under this Plan.
ARTICLE 7
Antidilution Provisions
Except as otherwise expressly provided herein, the following provisions
shall apply to all Substitute Restricted Stock awarded under this Plan:
7.1 Stock Dividends, Splits, Etc. In the event of a stock dividend, stock
split, or other subdivision or combination of the Ordinary Shares, the
number of Ordinary Shares authorized under this Plan will be adjusted
proportionately by the Committee. Similarly, in any such event there will
be a proportionate adjustment by the Committee in the number of shares of
Substitute Restricted Stock outstanding.
7.2 Merger, Exchange or Reorganization. In the event that the outstanding
Ordinary Shares are changed or converted into, exchanged or exchangeable
for, a different number or kind of shares or other securities of the
Company or of another corporation, by reason of a reorganization, merger,
consolidation, reclassification or combination, appropriate adjustment
shall be made by the Committee in the number of shares and kind of
Substitute Restricted Stock awarded under this Plan, to the end that the
proportionate interests of Participants shall be maintained as before the
occurrence of such event, provided, however, that in the event of any
contemplated transaction which may constitute a Change of Control of the
Company, the Committee, with the approval of a majority of the members of
the Board of Directors who are not then Participants, may modify any and
all outstanding Substitute Restricted Stock, so as to accelerate, as a
consequence of or in connection with such transaction, the lapsing of the
Restricted Periods for shares of Substitute Restricted Stock.
ARTICLE 8
Administration of Plan
8.1 General Administration. The Plan is to be administered by the
Committee, subject to such requirements for review and approval by the
Board of Directors as the Board of Directors may establish.
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8.2 Administrative Rules. The Committee shall have full power and authority
to adopt, amend and rescind administrative guidelines, rules and
regulations pertaining to this Plan and to interpret the Plan and rule on
any questions respecting any of its provisions, terms and conditions.
8.3 Decisions Binding. All decisions of the Committee concerning this Plan,
participation and awards shall be binding on the Company and its
Subsidiaries and their respective boards of directors, and on all Eligible
Employees, Participants and other persons claiming rights under the Plan.
ARTICLE 9
Amendments
All amendments to this Plan shall be in writing and shall be effective when
approved by the Board of Directors. Unless otherwise expressly provided by
an amendment or the Board of Directors, no amendment to this Plan shall
apply to grants of Substitute Restricted Stock made before the effective
date of the amendment. A Participant's rights with respect to outstanding
Substitute Restricted Stock grants may not be abridged by any amendment,
modification or termination of the Plan without the Participant's consent.
ARTICLE 10
Other Provisions
10.1 Effective Date. This Plan is effective as of the Closing Date, as that
term is used in the Acquisition Agreement (the "Effective Date").
10.2 Duration of the Plan. The Plan shall remain in effect until all rights
granted under this Plan have been satisfied by the issuance of Ordinary
Shares no longer subject to restriction, or terminated under the terms of
this Plan.
10.3 Early Termination. Notwithstanding the provisions of Section 10.2, the
Board of Directors may terminate this Plan at any time; but no such action
by the Board of Directors shall adversely affect the rights of Participants
which exist under this Plan immediately before its termination.
10.4 General Restriction. No Ordinary Shares issued pursuant to this Plan
shall be sold or distributed by a Participant until all appropriate
listing, registration and qualification requirements and consents and
approvals have been obtained, free of any condition unacceptable to the
Board of Directors. In no event shall the value, amount or form of
consideration for any award under the Plan be less than the value or
amount, or in other than the form, required by applicable law.
10.5 Withholding Taxes. Upon the vesting of any Restricted Stock, the
Company and the Subsidiaries shall have the right at their option to:
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(a) require the Participant (or personal representative or
beneficiary) to remit an amount sufficient to satisfy federal,
state and local withholding taxes; or
(b) deduct, from any amount payable, the minimum amount of any taxes
the Company or the Subsidiary may be required to withhold with
respect to such transaction.
The Committee may require, or permit, the Participant to remit such amount
in whole or in part in Ordinary Shares, provided such amount is not in
excess of the amount necessary to satisfy the minimum applicable tax
withholding requirements. If the Committee permits a Participant to elect
to remit such amount in Ordinary Shares, any such election shall be made on
or prior to the date the withholding obligation arises and be subject to
the disapproval of the Committee. The Committee may establish such
additional conditions as it deems appropriate. If the Participant remits
such amount in Ordinary Shares, the number of Ordinary Shares delivered to
or on behalf of a Participant shall be reduced by the number of shares so
remitted. Ordinary Shares so remitted shall be valued using the Fair Market
Value of Ordinary Shares as of the date the withholding obligation arises.
10.6 Safekeeping of Certificates. The certificate evidencing Ordinary
Shares awarded by a Substitute Restricted Stock grant shall be retained for
safekeeping by the Company or a Subsidiary, or by a custodian appointed by
the Company or a Subsidiary, except the Committee may in its discretion
cause the certificate to be delivered to the Participant after a Substitute
Restricted Stock grant. The Company or the Subsidiary will deliver any such
retained certificates that are not subject to a Restricted Period to the
Participant within a reasonable period after a Participant requests
delivery of such certificates.
10.7 Future Participation Not Guaranteed. Participation in the Plan is not
in and of itself to be construed as evidence of a right to participate in
any other equity plan adopted by the Company.
10.8 Termination of Employment. The Company and each Subsidiary retain the
right to terminate the employment of any employee at any time for any
reason or no reason, and an award or grant under the Plan to an Eligible
Employee is not, and shall not be construed in any manner to be, a waiver
of such right.
10.9 Successors. Any successor (whether direct or indirect, by purchase,
merger, consolidation or otherwise) to all or substantially all of the
business or assets of the Company, shall assume the liabilities of the
Company under this Plan and perform any duties and responsibilities in the
same manner and to the same extent that the Company would be required to
perform if no such succession had taken place.
10.10 Construction. The terms used in this Plan shall include the feminine
as well as the masculine gender and the plural as well as the singular, as
the context in which they are used requires.
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