SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
RULE 14A-6(E)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
ACE Limited
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(Name of Registrant as Specified In Its Charter)
ACE Limited
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
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[LOGO OF ACE LIMITED APPEARS HERE]
NOTICE OF ANNUAL GENERAL MEETING
18 December 1998
Hamilton, Bermuda
TO THE SHAREHOLDERS OF ACE LIMITED:
The Annual General Meeting of ACE Limited (the "Company") will be held on
Friday, 5 February 1999, at 9:00 a.m. at the Hyatt Regency Grand Cayman,
Cayman Islands, British West Indies, for the following purposes:
1.To elect five directors to hold office until 2002;
2.To vote on a proposal to approve the ACE Limited 1998 Long-Term Incentive
Plan;
3. To ratify the appointment of PricewaterhouseCoopers LLP as the Company's
independent accountants for the fiscal year ending 30 September 1999; and
4.To transact such other further business, if any, as lawfully may be brought
before the meeting.
Only shareholders of record, as shown by the transfer books of the Company,
at the close of business on 15 December 1998, are entitled to notice of, and
to vote at, the Annual General Meeting.
PLEASE SIGN, DATE AND RETURN THE ENCLOSED PROXY IN THE RETURN ENVELOPE
FURNISHED FOR THAT PURPOSE, AS PROMPTLY AS POSSIBLE, WHETHER OR NOT YOU PLAN
TO ATTEND THE MEETING. IF YOU LATER DESIRE TO REVOKE YOUR PROXY FOR ANY
REASON, YOU MAY DO SO IN THE MANNER DESCRIBED IN THE ATTACHED PROXY STATEMENT.
FOR FURTHER INFORMATION CONCERNING THE INDIVIDUALS NOMINATED AS DIRECTORS, USE
OF THE PROXY AND OTHER RELATED MATTERS, YOU ARE URGED TO READ THE PROXY
STATEMENT ON THE FOLLOWING PAGES.
By Order of the Board of Directors,
Brian Duperreault
Chairman, President and Chief
Executive Officer
ACE LIMITED
THE ACE BUILDING
30 WOODBOURNE AVENUE
HAMILTON HM 08 BERMUDA
18 DECEMBER 1998
PROXY STATEMENT
The Board of Directors of ACE Limited (the "Company") is soliciting the
accompanying proxy to be voted at the Annual General Meeting of the Company to
be held at 9:00 a.m. on Friday, 5 February 1999, at the Hyatt Regency Grand
Cayman, Cayman Islands, British West Indies, and any adjournments thereof.
When the proxy is properly executed and returned, the Ordinary Shares it
represents will, subject to any direction to the contrary, be voted at the
meeting in favor of the matters specified in the "Notice of Annual General
Meeting" attached hereto.
Any shareholder giving a proxy may revoke it prior to its exercise by
providing the Secretary of the Company with written notice of revocation, by
voting in person at the Annual General Meeting or by executing a later-dated
proxy; provided, however, that the action is taken in sufficient time to
permit the necessary examination and tabulation of the subsequent proxy or
revocation before the vote is taken.
Shareholders of record as of the close of business on 15 December 1998 will
be entitled to vote at the meeting. As of the close of business on 15 December
1998, there were outstanding 193,656,476 Ordinary Shares of the Company
entitled to vote at the meeting, with each Ordinary Share entitling the holder
of record on such date to one vote (except that if, and so long as, the
Controlled Shares (defined generally to include all shares of the Company
directly, indirectly or constructively owned or beneficially owned by any
person or group of persons) of any person constitute 10% or more of the issued
Ordinary Shares, the voting rights with respect to the Controlled Shares owned
by such person shall be limited, in the aggregate, to a voting power of
approximately 10%, pursuant to a formula specified in the Company's Amended
and Restated Articles of Association (the "Articles")).
The election of each nominee for director and the approval of the ACE
Limited 1998 Long-Term Incentive Plan and the ratification of the appointment
of PricewaterhouseCoopers LLP require the affirmative vote of a majority of
the votes cast at the Annual General Meeting, provided there is a quorum
(consisting of not less than six shareholders present in person or by proxy
holding at least 50% (or, in the case of approval of the ACE Limited 1998
Long-Term Incentive Plan, over 50%) of the issued and outstanding shares
entitled to vote at the Annual General Meeting). The Company will appoint one
or more inspectors of election to count votes cast in person or by proxy.
Ordinary Shares owned by shareholders electing to abstain from voting with
respect to any proposal will be counted towards the presence of a quorum but
will have the effect of a vote against such proposal. "Broker non-votes" will
be counted towards the presence of a quorum but will not be considered present
and voting with respect to elections of directors or other matters to be voted
upon at the Annual General Meeting. Therefore, "broker non-votes" will have no
effect on the outcome of the proposals to elect directors, approve the ACE
Limited 1998 Long-Term Incentive Plan or ratify the appointment of the
Company's independent accountants.
A copy of the Company's Annual Report to Shareholders for the fiscal year
ended 30 September 1998 accompanies this Proxy Statement.
This Proxy Statement, the attached Notice of Annual General Meeting and the
accompanying proxy card are first being mailed to shareholders on or about 22
December 1998.
Other than the approval of the minutes of the 1998 Annual General Meeting,
the Company knows of no specific matter to be brought before the Annual
General Meeting which is not referred to in the attached Notice of Annual
General Meeting. If any such matter comes before the meeting, including any
shareholder proposal properly made, the proxy holders will vote proxies in
accordance with their judgment.
ELECTION OF DIRECTORS
(ITEM A ON PROXY CARD)
The Company's Articles provide that the Company's Board of Directors shall
be divided into three classes with the terms of office of each class ending in
successive years. The Company's Articles provide for a maximum of 20 directors
and empower the Board of Directors to fix the exact number of directors and
appoint persons to fill any vacancies on the Board until the next Annual
General Meeting. The Board of Directors has set the number of directors at 16.
The Executive Committee of the Company's Board of Directors has nominated
Jeffrey W. Greenberg, Meryl D. Hartzband, Donald Kramer, Walter A. Scott and
Sidney F. Wentz for election as directors of the Company to serve three-year
terms to expire at the Annual General Meeting in 2002 and until their
respective successors shall have been elected and shall have qualified. Each
of these individuals is currently serving as a director of the Company.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF THESE NOMINEES
AS DIRECTORS OF THE COMPANY.
It is the intention of the persons named as proxies, subject to any
direction to the contrary, to vote in favor of the candidates nominated by the
Board of Directors. If any one or more of the nominees is unable or unwilling
to serve, the proxies will, subject to any direction to the contrary, be voted
for such other person or persons as the Board of Directors may recommend.
Certain information with respect to the nominees for election as directors
proposed by the Company and the other directors whose terms of office as
directors will continue after the Annual General Meeting is set forth below.
NOMINEES FOR ELECTION TO TERMS EXPIRING IN 2002
Jeffrey W. Greenberg, age 47, has been a director of the Company since
November 1995. Mr. Greenberg has served as Chairman and Chief Executive
Officer of Marsh & McLennan Capital, Inc. ("MMCI") (insurance), a wholly owned
subsidiary of Marsh & McLennan Companies, Inc. ("Marsh & McLennan") since
April 1996 and as a partner of MMCI from October 1995 to April 1996. Mr.
Greenberg held various positions with American International Group Inc.
("AIG") (insurance) and its affiliates from 1978 through June 1995, having
served as Executive Vice President--Domestic Brokerage Group from 1991 through
June 1995. Mr. Greenberg is a director of Marsh & McLennan, The Spence School,
Brown University and The New York and Presbyterian Hospital.
Meryl D. Hartzband, age 44 has been a director of the Company since May
1996. Ms. Hartzband has served as a Managing Director of J.P. Morgan
International Capital Corporation (commercial and investment banking), a
subsidiary of J.P. Morgan & Co. Incorporated ("J.P. Morgan") since August
1994. From 1982 through August 1994, Ms. Hartzband was employed with J.P.
Morgan in various capacities.
Donald Kramer, age 61 has been a director and Vice Chairman of the Company
and President of Tempest Reinsurance Company Limited ("Tempest"), a subsidiary
of the Company, since July 1996. Mr. Kramer served as Chairman or Co-Chairman
of the Board of Tempest from its formation in September 1993 until July 1996.
Tempest was acquired by the Company on 1 July 1996. Prior to the formation of
Tempest, he was President of Kramer Capital Corporation (venture capital
investments) from March to September 1993, President of Carteret Federal
Savings Bank (banking) from August 1991 to March 1993, Chairman of the Board
of NAC Re Corporation (reinsurance) from June 1985 to June 1993, Chairman of
the Board and Chief Executive Officer of KCP Holding Company (insurance) from
July 1986 to August 1991 and of its affiliates, KCC Capital Managers
(insurance investments) and Kramer Capital Consultants, Inc. (insurance
investments), as well as Chairman of the Board of its subsidiary, National
American Insurance Company of California (insurance) from September 1988 to
August 1991. Mr. Kramer is a director of National Benefit Life Insurance
Company of New York City, a wholly-owned subsidiary of Citigroup and a
director of the Board of the Brooklyn College Foundation.
2
Walter A. Scott, age 61, has been a director of the Company since September
1989. Mr. Scott served as a consultant to the Company from October 1994 until
September 1996. Mr. Scott served as Chairman, President and Chief Executive
Officer of the Company from March 1991 until his retirement in September 1994
and as President and Chief Executive Officer from September 1989 to March
1991. Mr. Scott is a director of Overseas Partners Limited, and Annuity and
Life Re, Ltd. Mr. Scott is also a trustee of Lafayette College.
Sidney F. Wentz, age 66, has been a director of the Company since May 1993.
Mr. Wentz has served as the Chairman of the Board of Trustees of The Robert
Wood Johnson Foundation (charitable foundation) since 1989. From February 1987
until July 1988, Mr. Wentz served as Chairman and Chief Executive Officer of
Crum & Forster, Inc. (insurance). Mr. Wentz is a director of Castle Energy
Corporation, a director of The Bank of Somerset Hills, and a trustee of Drew
University.
DIRECTORS WHOSE TERMS OF OFFICE WILL CONTINUE AFTER THIS MEETING
Directors Whose Terms Expire in 2000
Michael G. Atieh, age 45, has been a director of the Company since September
1991. Mr. Atieh has served as Senior Vice President--Sales of Merck-Medco
Managed Care, L.L.C. (managed health care), an indirect wholly owned
subsidiary of Merck & Co., Inc. ("Merck") (pharmaceuticals) since April 1994,
as Vice President--Public Affairs of Merck from January 1994 to April 1994 and
as Treasurer of Merck from April 1990 to December 1993.
Bruce L. Crockett, age 54, has been a director of the Company since May
1995. Mr. Crockett is currently a private investor. Mr. Crockett served as
President and Chief Executive Officer of COMSAT Corporation ("COMSAT")
(information services) from February 1992 until July 1996 and as President and
Chief Operating Officer of COMSAT from April 1991 to February 1992. Mr.
Crockett was an employee of COMSAT since 1980 and held various operational and
financial positions including Vice President and Chief Financial Officer. Mr.
Crockett is a director of International Business Network for World Commerce &
Industry, Ltd., CIGNAL Global Communications, AIM Mutual Funds Boards and
INROADS, Inc. Mr. Crockett is also a member of the Board of Trustees of the
University of Rochester.
Thomas J. Neff, age 61, has been a director of the Company since May 1997.
Mr. Neff has been with Spencer Stuart & Associates, N.A. ("Spencer Stuart")
(executive search consulting) since 1976 serving as President of Spencer
Stuart from 1979 to 1996. Since 1996, Mr. Neff has served as chairman of
Spencer Stuart U.S. Mr. Neff is a director of various mutual funds managed by
Lord, Abbett & Co.
Robert W. Staley, age 63, has been a director of the Company since January
1986. Mr. Staley has been employed with Emerson Electric Co. ("Emerson")
(electric equipment) since 1975, serving as Vice Chairman of Emerson since
November 1988. Mr. Staley is a director of Emerson.
Gary M. Stuart, age 58, has been a director of the Company since March 1988.
Mr. Stuart has served as Vice President and Treasurer of Union Pacific
Corporation (transportation) since January 1990. Mr. Stuart is a director of
Wasatch Insurance, Ltd.
Directors Whose Terms Expire in 2001
Brian Duperreault, age 51 has been a director and Chairman, President and
Chief Executive Officer of the Company since October 1994. Prior to joining
the Company, Mr. Duperreault had been employed with AIG since 1973 and served
in various senior executive positions with AIG and its affiliates from 1978
until September 1994, most recently as Executive Vice President, Foreign
General Insurance and, concurrently, as Chairman and Chief Executive Officer
of American International Underwriters Inc., a subsidiary of AIG, from April
1994 to September 1994. Mr. Duperreault was President of American
International Underwriters Inc. from 1991 to April 1994, and chief executive
officer of AIG affiliates in Japan and Korea from 1989 until 1991. Mr.
Duperreault serves as director of the Bank of N.T. Butterfield & Son
(Bermuda).
3
Robert M. Hernandez, age 54 has been a director of the Company since
September 1985. Mr. Hernandez has served as Vice Chairman and Chief Financial
Officer of USX Corporation ("USX") (a diversified company) since December
1994, as Executive Vice President--Accounting & Finance and Chief Financial
Officer of USX from November 1991 until November 1994 and as Senior Vice
President--Finance & Treasurer from October 1990 to October 1991. Mr.
Hernandez is a director and chairman of RTI International Metals, Inc.,
formerly RMI Titanium Company; a director of Marinette Marine Corporation,
Transtar, Inc. and USX; a trustee of the BlackRock Funds, formerly, Compass
Capital Funds; a member of the boards of trustees of Alleghany General
Hospital and Alleghany University Hospitals-West; a director of the
Pennsylvania Chamber of Business and Industry; and a member of the
Pennsylvania Business Roundtable.
Peter Menikoff, age 57 has been a director of the Company since January
1986. Mr. Menikoff is currently a private investor. Mr. Menikoff served as
President and Chief Executive Officer of CONEMSCO, Inc. (oil and gas
drilling/production supplies, services and equipment) from April 1997 until
June 1998. Previously, Mr. Menikoff served as Executive Vice President and
Chief Administrative Officer of Tenneco Energy Resources Corporation (energy)
since June 1995. Mr. Menikoff served as a Senior Vice President of Tenneco,
Inc. (diversified industrial) from June 1994 until April 1997. Mr. Menikoff
served as Executive Vice President of Case Corporation (agricultural and
construction equipment), a subsidiary of Tenneco, Inc., from November 1991 to
June 1994. Mr. Menikoff served as Treasurer of Tenneco, Inc. from May 1989 to
November 1991.
Glen M. Renfrew, age 70, has been a director of the Company since August
1993. Mr. Renfrew retired as Managing Director and Chief Executive Officer of
Reuters Holdings plc (communications) in March 1991, having served in such
capacity since 1981. Mr. Renfrew is a director of Shorewood (Bermuda) Ltd.,
Lolla Ltd. and Bluesurf Ltd.
Robert Ripp, age 57, has been a director of the Company since December 1991.
Mr. Ripp has served as Director, Chairman and Chief Executive Officer of AMP
Incorporated (electrical connectors) since August 1998. Mr. Ripp served as
Vice President and Chief Financial Officer of AMP Incorporated from August
1994 through July 1998 and Vice President and Treasurer of International
Business Machines Corporation (electronic computer equipment) from July 1989
through September 1993.
Dermot F. Smurfit, age 54, has been a director of the Company since August
1997. Mr. Smurfit has been Joint Deputy Chairman of Jefferson Smurfit Group
plc ("Jefferson Smurfit") (paper, paperboard and packaging) since January
1984, Chairman and Chief Executive of Jefferson Smurfit's continental European
operations from 1994 to 1997, Director of Sales and Marketing since 1997, and
has held a number of other senior positions with Jefferson Smurfit. Mr.
Smurfit is also a member of the Board of the Confederation of European Paper
Industries. Mr. Smurfit is a director of Aon Groepe Nederland and of Jefferson
Smurfit.
There are no arrangements or understandings between any director and any
other person pursuant to which any director was or is selected as a director
or nominee.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
During the year ended 30 September 1998, there were six meetings of the
Board of Directors (including regularly scheduled and special meetings). All
incumbent directors, except for Jeffrey W. Greenberg, attended at least 75% of
the aggregate of such meetings and of the meetings held by all committees of
the Board of which they were a member (or of such meetings during such
directors' tenure on the Board of Directors).
The Board of Directors has established four standing committees: the Audit
Committee, the Compensation Committee, the Executive Committee and the Finance
Committee.
Audit Committee
The Audit Committee is composed entirely of non-management directors and
reviews the adequacy and effectiveness of the Company's external auditors and
their audit report. The Audit Committee is comprised of
4
Sidney F. Wentz (Chairman), Bruce L. Crockett, Meryl D. Hartzband, Thomas J.
Neff and Glen M. Renfrew. The Audit Committee held four meetings during the
year ended 30 September 1998.
Compensation Committee
The Compensation Committee has responsibility for determining executive
compensation. The Compensation Committee is comprised of Bruce L. Crockett
(Chairman), Jeffrey W. Greenberg, Robert M. Hernandez, Thomas J. Neff and
Sidney F. Wentz. The Compensation Committee held four meetings during the year
ended 30 September 1998.
Executive Committee
Except as expressly limited by applicable law, the Company's Memorandum or
Articles or by the Board of Directors, the Executive Committee may exercise
all the powers and authorities of the Board of Directors between meetings of
the full Board of Directors. The Executive Committee also has responsibility
for nominating directors. The Executive Committee will consider a
shareholder's suggestion for candidates if mailed to: Secretary, ACE Limited,
The ACE Building, 30 Woodbourne Avenue, Hamilton HM 08 Bermuda. Any such
suggestion with respect to directors to be elected at the Annual General
Meeting to be held in 2000 must be received not later than 7 December 1999 and
must comply with Article 40 of the Company's Articles. The Executive Committee
is comprised of Robert M. Hernandez (Chairman), Brian Duperreault, Jeffrey W.
Greenberg, Donald Kramer and Robert W. Staley. The Executive Committee held
four meetings during the year ended 30 September 1998.
Finance Committee
The Finance Committee is responsible for recommending asset allocations to
the Board of Directors, approving the guidelines which provide standards to
ensure portfolio liquidity and safety, and approving investment managers and
custodians for portfolio assets. The Finance Committee is comprised of Peter
Menikoff (Chairman), Michael G. Atieh, Robert Ripp, Walter A. Scott, Dermot F.
Smurfit and Gary M. Stuart. The Finance Committee held four meetings during
the year ended 30 September 1998.
DIRECTOR COMPENSATION
Pursuant to the Company's 1995 Outside Directors Plan, non-management
directors of the Company are awarded an annual "retainer award" in the form of
Ordinary Shares having a fair market value of $35,000 (or a pro rata portion
thereof for less than full years of service). The retainer award is made as of
the date of the Company's annual general meeting, and the fair market value of
the Ordinary Shares is determined as of that date. The value of any fractional
share is generally distributed in cash. Directors vest in the retainer award
shares as of the day immediately preceding the next annual general meeting.
All retainer award shares become fully vested upon a "change in control" of
the Company (as defined in the plan), or if the director ceases service as a
director because of death or disability. If a director ceases service as a
director for any other reason, all unvested retainer award shares are
forfeited.
In addition, each director who serves as the chairman of any committee of
the Board during any plan year quarter is awarded a "committee chairman award"
as of the first business day of the next following plan quarter (generally
ninety-day periods following the annual general meeting), which award is the
number of Ordinary Shares having a fair market value, determined as of such
date, of $1,250 per quarter. All shares awarded as a committee chairman award
are fully vested at the time of award. In addition, a director may elect to
receive his committee chairman award in cash.
Directors are also paid $3,000 for attendance at each meeting of the Board
of Directors and $1,000 for attendance at each meeting of a committee of the
Board of Directors. Directors are also reimbursed for their reasonable
expenses in connection with Board service.
5
A director may elect to defer the receipt of Ordinary Shares or cash
otherwise payable.
CERTAIN BUSINESS RELATIONSHIPS
Certain shareholders of the Company and their affiliates, including the
employers of or entities otherwise associated with certain directors and
officers and their affiliates, have purchased insurance from the Company on
terms the Company believes were no more favorable to these insureds than those
made available to other customers.
The Company and its subsidiaries pay to affiliates of Marsh & McLennan
normal and customary commissions for brokerage activities performed in
connection with the placing of insurance. William M. Mercer, Incorporated
("Mercer"), an employee benefits consulting firm and a wholly owned subsidiary
of Marsh & McLennan, advises the Compensation Committee of the Company's Board
of Directors and receives customary fees in connection therewith.
BENEFICIAL OWNERSHIP OF ORDINARY SHARES
DIRECTORS AND OFFICERS
The following tables set forth information, as of 4 December 1998, with
respect to the beneficial ownership of Ordinary Shares by Brian Duperreault,
the Company's Chairman, President and Chief Executive Officer (the Company's
"CEO"), the Company's other four most highly compensated executive officers
(the "Named Executive Officers"), each of the Company's directors and by all
directors and executive officers of the Company as a group. Unless otherwise
indicated, the named individual has sole voting and investment power over the
Ordinary Shares under the column "Ordinary Shares Beneficially Owned." The
Ordinary Shares owned by each director and each executive officer constitute
less than one percent of the outstanding Ordinary Shares. The Ordinary Shares
owned by all directors and executive officers as a group constitute
approximately 2.16% of the outstanding Ordinary Shares.
ORDINARY
ORDINARY SHARES
SHARES SUBJECT RESTRICTED
BENEFICIALLY TO ORDINARY
NAME OF BENEFICIAL OWNER OWNED OPTION(1) SHARES(2)
------------------------ ------------ --------- ----------
Brian Duperreault....... 273,059 675,000 280,000
Donald Kramer........... 108,723 1,032,730 20,725
Dominic J. Frederico.... 10,082 115,000 89,850
William J. Loschert (3). 106,019 336,000 18,875
Christopher Z. Marshall. 97,325 324,000 48,850
Michael G. Atieh (3).... 6,189 -- 1,068
Bruce L. Crockett (3)... 5,786 -- 1,068
Jeffrey W. Greenberg.... 22,311 -- 1,068
Meryl D. Hartzband (4).. -- -- --
Robert M. Hernandez (3). 19,819 -- 1,068
Peter Menikoff (3)...... 14,275 -- 1,068
Thomas J. Neff (3)...... 2,429 -- 1,068
Glen M. Renfrew......... 5,400 -- 1,068
Robert Ripp (3)......... 7,689 -- 1,068
Walter A. Scott (3)..... 223,761 305,000 1,068
Dermot F. Smurfit....... 441 -- 1,068
Robert W. Staley (4).... 7,611 -- 1,068
Gary M. Stuart (3)...... 5,289 -- 1,068
6
ORDINARY
ORDINARY SHARES
SHARES SUBJECT RESTRICTED
BENEFICIALLY TO ORDINARY
NAME OF BENEFICIAL OWNER OWNED OPTION(1) SHARES(2)
------------------------ ------------ --------- ----------
Sidney F. Wentz (5)............... 11,188 -- 1,068
All directors and executive offi-
cers as a group
(23 individuals)................. 27,396 2,787,730 472,184
- --------
(1) Represents Ordinary Shares which the reporting person has the right to
acquire within 60 days of 4 December 1998 pursuant to options.
(2) The reporting person has the right to vote (but not dispose of) the
Ordinary Shares listed under "Restricted Ordinary Shares."
(3) The amounts included under "Ordinary Shares Beneficially Owned" and
"Restricted Ordinary Shares" include certain Ordinary Shares for which the
reporting person has elected to defer receipt. The reporting person has
the right to dispose of (but not to vote) such Ordinary Shares.
(4) Ms. Hartzband and Mr. Staley serve as officers or are otherwise affiliated
with significant shareholders of the Company. The number of Ordinary
Shares beneficially owned by such shareholders is set forth below.
(5) Includes 6,000 Ordinary Shares owned by Mr. Wentz's wife.
Each of the Company's directors named below is an officer of or otherwise
affiliated with a significant shareholder of the Company. The following table
sets forth the name of each such director, the name of the affiliated
shareholder (or the ultimate parent of such shareholder) and the number of
Ordinary Shares beneficially owned as of 11 December 1998, by such shareholder
(or the ultimate parent of such shareholder).
PERCENT
OF
NUMBER OF TOTAL
ORDINARY ORDINARY
NAME OF SHAREHOLDER SHARES SHARES
NAME OUTSTANDING
---- ------------------- --------- -----------
Meryl D. Hartzband........ J. P. Morgan & Co. Incorporated 3,205,020 1.66%
Robert W. Staley.......... Emerson Electric Co. 621,816 *
- --------
* Represents less than one percent of the outstanding Ordinary Shares.
OTHER BENEFICIAL OWNERS
The following table sets forth information regarding each person known by
the Company (including corporate groups) to own of record or beneficially own
more than five percent of the Company's outstanding Ordinary Shares as of the
dates indicated below.
NUMBER OF
SHARES PERCENT
BENEFICIALLY OF
NAME AND ADDRESS OF BENEFICIAL OWNER OWNED CLASS
------------------------------------ ------------ -------
Oppenheimer Capital (1).......................... 27,449,329 14.17%
Oppenheimer Tower
World Financial Center
New York, New York 10281
American Express Financial Corporation (2)....... 13,284,319 6.86%
IDS Tower--10
Minneapolis, Minnesota 55440-0010
Wellington Management Company (3)................ 12,699,204 6.56%
75 State Street
Boston, Massachusetts 02109
7
NUMBER OF
SHARES PERCENT
BENEFICIALLY OF
NAME AND ADDRESS OF BENEFICIAL OWNER OWNED CLASS
------------------------------------ ------------ -------
Jennison Associates (4)........................... 10,563,900 5.46%
466 Lexington Avenue
New York, NY 10017
State Street Research & Management Company (5).... 9,775,697 5.05%
One Financial Center, 30th Floor
Boston, Massachusetts 02111-2690
- --------
(1) Based upon information contained in a Schedule 13G filed by Oppenheimer
Capital ("Oppenheimer") on 10 March 1998, information contained in a 13F
filed on 14 August 1998 for the quarter ending 30 June 1998 by PIMCO
Advisers L.P. on behalf of Oppenheimer, and information provided by
Oppenheimer as of 4 December 1998. According to such Schedules 13G and
13F, Oppenheimer is a registered investment advisor under Section 203 of
the Investment Advisers Act of 1940. As a result of Oppenheimer's role as
investment adviser, it may be deemed to be the beneficial owner of the
27,449,329 Ordinary Shares having the sole power to dispose of and vote
the shares under its written guidelines established by its Management
Board.
(2) Based upon information contained in a Schedule 13G jointly filed by
American Express Company and American Express Financial Corporation on 29
January 1998, information contained in a Schedule 13F-E filed on 21
October 1998 and information provided by American Express Financial
Corporation as of 7 December 1998. According to such Schedules 13G and
13F-E, American Express Company is a Parent Holding Company in accordance
with Rule 13d-1(b)(1)(ii)(G) and American Express Financial Corporation is
a registered investment adviser under Section 203 of the Investment
Advisers Act of 1940.
(3) Based on information contained in a Schedule 13G filed by Wellington
Management Company, LLP ("WMC") on 12 February 1998, information contained
in a Schedule 13F filed on 13 November 1998, and information provided by
WMC as of 7 December 1998. WMC is a registered investment adviser under
the Investment Advisers Act of 1940 and a Parent Holding Company, in
accordance with Rule 13d-1(b)(1)(ii)(G), of Wellington Trust Company, NA,
75 State Street, Boston, MA 02109, a wholly-owned subsidiary of WMC, and a
bank as defined in Section 3(a)(6) of the Securities Exchange Act of 1934.
As of 7 December 1998, WMC, in its capacity as investment adviser, may be
deemed to have beneficial ownership of 12,699,204 Ordinary Shares that are
owned by numerous investment advisory clients, none of which is known to
have such interest with respect to more than five percent of the class.
(4) Based upon information obtained from Jennison Associates as of 4 December
1998.
(5) Based upon information contained in a Schedule 13G filed by State Street
Research & Management Company ("SSRMC") on 4 February 1998, information
contained in a Schedule 13F filed on 14 August 1998 and information
obtained from SSRMC and State Street Bank and Trust Company as of 4
December 1998. SSRMC, a subsidiary of State Street Bank and Trust Company,
is a registered investment advisor under Section 203 of the Investment
Advisers Act of 1940. As of 4 December 1998, the 9,775,697 Ordinary Shares
reported above were owned by various investment advisory clients of SSRMC,
none of which is known to have such interest with respect to more than
five percent of the class.
Other than as disclosed above, there are no persons who own of record, or
are known by the Company to beneficially own, as of 4 December 1998, more than
five percent of the Company's outstanding Ordinary Shares.
8
EXECUTIVE COMPENSATION
The following table sets forth, in summary form, compensation earned by the
Company's CEO and by the Named Executive Officers of the Company for the
periods presented.
SUMMARY COMPENSATION TABLE
LONG-TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
----------------------------------- ------------------------
SECURITIES
RESTRICTED UNDERLYING
NAME AND FISCAL OTHER ANNUAL STOCK OPTIONS/ ALL OTHER
PRINCIPAL POSITION (1) YEAR SALARY BONUS(2) COMPENSATION(3) AWARDS(4) SARS(#)(5) COMPENSATION(6)
---------------------- ------ -------- ---------- --------------- ---------- ---------- ---------------
Brian Duperreault....... 1998 $662,500 $1,400,000 $207,758 $1,185,000(7) 120,000 $309,375
Chairman, President and
Chief 1997 531,258 1,200,000 221,693 5,400,000(7) 180,000 259,689
Executive Officer of ACE
Limited 1996 468,720 650,000 191,241 585,000(7) 180,000 167,808
Donald Kramer........... 1998 493,750 500,000 2,000 296,250(7) 50,000 149,063
Vice Chairman of ACE
Limited, 1997 468,750 475,000 2,750 270,000(7) 60,000 141,563
President of Tempest Re-
insurance 1996 112,500 337,500 -- 146,250(7) 75,000 67,500
Company Limited
130,163(8)
Dominic J. Frederico.... 1998 361,250 350,000 160,769 2,221,875(7) 75,000 106,688
President, A.C.E. Insur-
ance 1997 310,000 300,000 185,498 540,000(7) 90,000 91,500
Co. Ltd. 1996 267,507 127,500 121,884 117,000(7) 60,000 59,251
49,725(8)
William J. Loschert..... 1998 363,750 300,000 172,503 296,250(7) 50,000 99,563
Chairman, ACE UK Limited 1997 326,250 250,000 141,807 270,000(7) 60,000 86,438
1996 311,250 131,250 53,322 117,000(7) 60,000 66,375
51,187(8)
Christopher Z. Marshall. 1998 341,250 300,000 9,534 1,185,000(7) 40,000 96,188
Chief Financial Officer
of 1997 308,750 225,000 3,473 270,000(7) 60,000 80,063
ACE Limited 1996 286,254 127,500 -- 117,000(7) 60,000 62,063
49,725(8)
- --------
(1) Mr. Kramer's employment with the Company began on 1 July 1996. With
respect to the fiscal year ended 30 September 1996, the salary reported
for Mr. Kramer represents Mr. Kramer's salary from 1 July 1996, the date
on which Tempest was acquired by the Company, through 30 September 1996
and the bonus reported for Mr. Kramer represents his bonus for the year
ended 30 September 1996 which the Company agreed to pay in connection with
its acquisition of Tempest.
(2) Bonuses for the year ended 30 September 1996 for Messrs. Kramer, Loschert,
Marshall and Frederico reflect their election to forgo up to 25% of their
annual bonus in return for the receipt of restricted Ordinary Shares with
a fair market value equal to 115% of the amount of the foregone bonus. See
Note 8 below.
(3) Other annual compensation for the year ended 30 September 1998 includes
commuting and living allowances in respect of Messrs. Duperreault,
Frederico and Loschert in the amounts of $203,683, $158,619 and $172,503,
respectively; for the year ended 30 September 1997 includes commuting and
living allowances in respect of Messrs. Duperreault, Frederico and
Loschert in the amounts of $188,004, $136,000 and $141,807, respectively;
and for the year ended 30 September 1996 includes commuting and living
allowances in respect of Messrs. Duperreault, Frederico and Loschert in
the amounts of $170,004, $96,000 and $41,400, respectively.
(4) As of 30 September 1998, the number and value of restricted Ordinary
Shares held by each of the above named executive officers was: Mr.
Duperreault--280,000 ($8,400,000), Mr. Kramer--20,725 ($621,750), Mr.
Frederico--89,850 ($2,695,500), Mr. Loschert--18,875 ($566,250) and Mr.
Marshall--48,850
9
($1,465,500). Such values were determined by multiplying the number of
shares by $30.00 (the closing price of the Ordinary Shares on the New York
Stock Exchange (the "NYSE") on 30 September 1998).
(5) This column has been adjusted to give effect to the three-for-one stock
split of the Ordinary Shares. The record date for the stock split was 17
February 1998 and certificates were mailed to shareholders in connection
with the stock split on 2 March 1998.
(6) All other compensation with respect to the year ended 30 September 1998
represents contributions by the Company to defined contribution plans on
behalf of the named individuals for the above amounts.
(7) The value of the restricted shares awarded to the individuals in respect
of the year ended 30 September 1998 was determined by multiplying the
number of shares awarded by the closing price of the Ordinary Shares on
the NYSE on 12 November 1998 ($29.6250), in each case the date of the
award. The value of the restricted shares awarded to the individuals in
respect of the year ended 30 September 1997 was determined by multiplying
the number of shares awarded by the closing price of the Ordinary Shares
on the NYSE on 12 November 1997 ($30.00, as adjusted to give effect to the
stock split), in each case the date of the award. The value of the
restricted shares awarded to the individuals in respect of the year ended
30 September 1996 was determined by multiplying the number of shares
awarded by the closing price of the Ordinary Shares on the NYSE on (i)
with respect to Mr. Duperreault, 4 December 1996 ($19.83, as adjusted to
give effect to the stock split) and (ii) with respect to the Named
Executive Officers, 14 November 1996 ($19.50, as adjusted to give effect
to the stock split), in each case the date of the award. The number of
restricted Ordinary Shares awarded to each of the CEO and the Named
Executive Officers, as adjusted to give effect to the stock split, was:
FISCAL FISCAL FISCAL
NAME 1998 1997 1996
---- ------ ------- ------
Brian Duperreault................................... 40,000 180,000 30,000
Donald Kramer....................................... 10,000 9,000 7,500
Dominic J. Frederico................................ 75,000 18,000 6,000
William J. Loschert................................. 10,000 9,000 6,000
Christopher Z. Marshall............................. 40,000 9,000 6,000
With respect to each of the 10,000 restricted Ordinary Shares awarded to
Mr. Kramer and Mr. Loschert in 1998, the restrictions with respect to one-
third of the Ordinary Shares lapse at the end of each of the second, third
and fourth anniversary of the date of the awards. With respect to the
75,000 restricted Ordinary Shares awarded to Mr. Frederico and the 40,000
restricted Ordinary Shares awarded to Mr. Marshall in 1998, the
restrictions with respect to one-third of the Ordinary Shares lapse at the
end of each of the third, fourth and fifth anniversary of the date of the
award. With respect to the 40,000 restricted Ordinary Shares awarded to Mr.
Duperreault in 1998, 8,000 restricted Ordinary Shares vest on 12 November
2001, 16,000 restricted Ordinary Shares vest on 12 November 2002, and
16,000 restricted Ordinary Shares vest on 12 November 2003. With respect to
the awards in 1997 and 1996, other than 150,000 of the 180,000 restricted
Ordinary Shares awarded to Mr. Duperreault in 1997, the restrictions with
respect to one-third of the Ordinary Shares lapse at the end of each of the
first, second and third anniversary of the date of the award. With respect
to such 150,000 restricted Ordinary Shares, 30,000 restricted Ordinary
Shares vest on 12 November 2000, 60,000 restricted Ordinary Shares vest on
12 November 2001 and 60,000 restricted Ordinary Shares vest on 12 November
2002. During the restricted period, the executive officers are entitled to
vote the Ordinary Shares and receive dividends.
(8) In addition to the restricted shares discussed in (7) above, the Company's
executive officers, other than Mr. Duperreault, were given the option to
elect to forgo up to 25% of their annual bonus in return for the receipt
of restricted Ordinary Shares with a fair market value equal to 115% of
the amount of the foregone bonus. The value of the restricted shares shown
for Messrs. Kramer, Loschert, Marshall and Frederico was determined by
multiplying the number of shares acquired in respect of their foregone
bonuses by the closing
10
price of the Ordinary Shares on the NYSE on 14 November 1996 ($19.50, as
adjusted to give effect to the stock split), the date of acquisition. The
restrictions with respect to one-third of the Ordinary Shares lapse at the
end of each of the first, second and third anniversary of the date of the
award. During the restricted period, the executive officers are entitled to
vote the Ordinary Shares and receive dividends.
The following table sets forth information concerning awards of stock
options under the Company's 1995 Long Term Incentive Plan and the Equity
Linked Incentive/Stock Appreciation Rights Plan made to the Company's CEO and
to the Named Executive Officers during the year ended 30 September 1998. No
stock appreciation rights ("SARs") were awarded during the year ended 30
September 1998.
OPTION GRANTS IN LAST FISCAL YEAR
NUMBER OF PERCENT OF TOTAL
OPTIONS OPTIONS EXERCISE POTENTIAL REALIZED VALUE
AWARDED IN AWARDED TO OR BASE AT ASSUMED ANNUAL RATE
FISCAL EMPLOYEES IN PRICE OF STOCK PRICE APPRECIATION
1998(1) FISCAL 1998 ($/SH)(1) EXPIRATION DATE FOR OPTION TERM
---------- ---------------- --------- ---------------- ----------------------------
NAME 5% 10%
---- ------------- --------------
Brian Duperreault....... 180,000(2) 7.39% $30.00 12 November 2007 $3,396,031 $8,606,209
Donald Kramer........... 60,000(2) 2.46 30.00 12 November 2007 1,132,010 2,868,736
Dominic J Frederico..... 90,000(2) 3.69 30.00 12 November 2007 1,698,015 4,303,105
William J. Loschert..... 60,000(2) 2.46 30.00 12 November 2007 1,132,010 2,868,736
Christopher Z. Marshall. 60,000(2) 2.46 30.00 12 November 2007 1,132,010 2,868,736
- --------
(1) These columns have been adjusted to give effect to the three-for-one stock
split of the Ordinary Shares. The record date for the stock split was 17
February 1998 and certificates were mailed to shareholders in connection
with the stock split on 2 March 1998.
(2) Options vest one-third on the first, second and third anniversary of the
grant.
The following table sets forth information concerning the number of options
exercised and the value received in fiscal 1998, the number of unexercised
stock options outstanding at 30 September 1998, and the value of any
unexercised in-the-money stock options outstanding at such time, held by the
Company's CEO and the Named Executive Officers. There were no SARs outstanding
at 30 September 1998.
OPTION EXERCISES IN LAST FISCAL YEAR AND OPTION VALUES AT 30 SEPTEMBER 1998
NUMBER OF
SECURITIES
UNDERLYING VALUE OF
UNEXERCISED UNEXERCISED
OPTIONS/SARS AT IN-THE-MONEY
FISCAL YEAR-END OPTIONS AT FISCAL
SHARES VALUE (#) YEAR-END ($)
ACQUIRED REALIZED EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE (1) ($) UNEXERCISABLE UNEXERCISABLE
---- -------------- ---------- ----------------- ---------------------
Brian Duperreault....... 195,000 $4,642,248 615,000/630,000 $11,336,864/9,588,744
Donald Kramer........... -- -- 1,032,730/65,000 22,236,583/262,500
Dominic J. Frederico.... -- -- 115,000/125,000 1,299,375/1,089,375
William J. Loschert..... -- -- 336,000/108,000 4,438,255/909,756
Christopher Z. Marshall. -- -- 324,000/108,000 4,334,255/909,756
- --------
(1) This column has been adjusted to give effect to the three-for-one stock
split of the Ordinary Shares. The record date for the stock split was 17
February 1998 and certificates were mailed to shareholders in connection
with the stock split on 2 March 1998.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee of the Company's Board of Directors has
responsibility for determining the compensation of the Company's executive
officers. None of the members of the Compensation Committee was an officer or
employee of the Company.
11
EMPLOYMENT AGREEMENTS
The following is intended to be a summary of the terms of the employment
agreements entered into between the Company and the executive officers named
below.
The Company has entered into an agreement with Brian Duperreault, pursuant
to which he is to serve as Chairman, President and Chief Executive Officer of
the Company. The agreement provides for a base salary of $550,000 per year,
subject to increase. Effective 1 January 1999, Mr. Duperreault's annual base
salary will be $800,000. The agreement also provides for an annual
discretionary bonus. Mr. Duperreault is also eligible to participate in the
Company's benefit plans. Pursuant to an Option and Restricted Share Agreement
and Plan entered into in connection with Mr. Duperreault's employment
agreement, Mr. Duperreault was awarded 300,000 restricted shares and options
to purchase 900,000 Ordinary Shares at $7.542 per Ordinary Share (each as
adjusted to give effect to the stock split). The restrictions with respect to
60,000 of the aforementioned restricted shares expired on 30 September 1996,
the restrictions with respect to 120,000 of the aforementioned restricted
shares expired on 30 September 1997 and the restrictions with respect to an
additional 60,000 of the aforementioned restricted shares expired on 30
September 1998. The aforementioned restrictions with respect to the remaining
60,000 shares will lapse on 30 September 1999. The aforementioned options with
respect to 300,000 Ordinary Shares became exercisable on 30 September 1997 and
the aforementioned options with respect to an additional 300,000 Ordinary
Shares became exercisable on 30 September 1998. The remaining aforementioned
options with respect to 300,000 Ordinary Shares will become exercisable on 30
September 1999. The aforementioned options will expire on 30 September 2004.
During the 1998 fiscal year Mr. Duperreault exercised the aforementioned
options with respect to 195,000 Ordinary Shares. The restrictions with respect
to the aforementioned restricted shares will lapse, and the aforementioned
options will become immediately exercisable, in the event of Mr. Duperreault's
death or disability, the termination of Mr. Duperreault's employment without
cause or in the event of a "change in control" (as defined). In the event of
termination of Mr. Duperreault's employment with the Company for any other
reason, Mr. Duperreault will forfeit any options which were not exercisable on
his termination date and any restricted shares for which the restricted period
had not yet lapsed. Mr. Duperreault may exercise any of the options which were
or which become exercisable on his termination date for a period of one year
if his termination is by reason of his death or disability or by the Company
without cause and for 30 days if such termination is by the Company for cause
or voluntarily by Mr. Duperreault. The agreement also provides Mr. Duperreault
with customary executive benefits, including participation in the Company's
retirement plan, the Company's supplemental executive retirement plan, various
insurance plans, reimbursement of housing and certain personal travel expenses
and, generally, such other benefit programs as are available to the Company's
other senior executives. The agreement is now subject to automatic annual one-
year renewals unless notice of non-renewal is provided by the Company's Board
of Directors and has been so renewed through 30 September 1999. In addition,
if, following a change in control, Mr. Duperreault's employment is terminated
without cause, his salary and benefits will continue for 12 months and he will
be entitled to any previously awarded but unpaid bonus and a bonus for any
uncompleted fiscal year based upon the bonus for the last completed fiscal
year and the number of days in the then current fiscal year in which he was
employed. Pursuant to the agreement, Mr. Duperreault has agreed not to engage
in any activity in Bermuda or the Cayman Islands for a period of 12 months
following termination of his employment with the Company that would compete
with any business being conducted by the Company or its subsidiaries, or which
was actively being developed by the Company or its subsidiaries during the
term of Mr. Duperreault's employment.
A "change in control" under Mr. Duperreault's employment agreement is
generally deemed to occur when (i) any person becomes the beneficial owner of
50% or more of the voting stock 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 the 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 are 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
12
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.
The Company has entered into an agreement with Dominic J. Frederico,
pursuant to which he is to serve as President, A.C.E. Insurance Company, Ltd.
The agreement currently provides for a base salary of $320,000 per year,
subject to increase, an annual discretionary bonus plus participation in the
Company's benefit plans. Effective 1 January 1999, Mr. Frederico's annual base
salary will be $525,000. Pursuant to his agreement, Mr. Frederico was awarded
options to purchase 30,000 Ordinary Shares at $7.625 per Ordinary Share (as
adjusted to give effect to the stock split). The options became exercisable
with respect to 15,000 Ordinary Shares on 9 January 1998 and the options with
respect to the remaining 15,000 Ordinary Shares become exercisable on 9
January 1999 and expire on 9 January 2005. The agreement also provides Mr.
Frederico with customary executive benefits, including participation in the
Company's retirement plan, the Company's supplemental executive retirement
plan, various insurance plans, reimbursement of housing and certain personal
travel expenses and, generally, such other benefit programs as are available
to the Company's other senior executives. The agreement is now subject to
automatic annual one-year renewals unless notice of non-renewal is provided by
the Company and has been so renewed through 1 January 2000. Upon termination
without cause, Mr. Frederico's salary and benefits are agreed to continue for
24 months and any previously awarded but unpaid bonus is to be paid. Pursuant
to the agreement, Mr. Frederico has agreed not to engage in any activity in
the United States, Bermuda or the Cayman Islands for a period of 12 months
following his termination of employment with the Company that would compete
with the business of the Company.
The Company has entered into an agreement with William J. Loschert which
currently provides for a base salary of $330,000 per year, subject to
increase, an annual discretionary bonus plus participation in the Company's
benefit plans. Effective 1 January 1999, Mr. Loschert's annual base salary
will be $400,000. The agreement also provides Mr. Loschert with customary
executive benefits, including participation in the Company's retirement plan,
the Company's supplemental executive retirement plan, various insurance plans,
reimbursement of housing and certain personal travel expenses and, generally,
such other benefit programs as are available to the Company's other senior
executives. The term of Mr. Loschert's agreement is automatically extended
with each extension of, and for the term of, Mr. Loschert's work permit,
unless notice of non-renewal is provided by either party. Upon Mr. Loschert's
resignation within six months after a "change in control" (as defined below),
if he makes certain good faith determinations regarding changes in the nature
of his duties, or upon termination without cause, Mr. Loschert's salary and
benefits are agreed to continue for the balance of his term of employment and
any previously awarded but unpaid bonus is to be paid. Pursuant to the
agreement, Mr. Loschert has agreed not to engage in any activity in the United
States, Bermuda or the Cayman Islands for a period of 24 months following his
termination of employment with the Company that would compete with the
business of the Company.
The Company has entered into an agreement with Christopher Z. Marshall which
currently provides for a base salary of $315,000 per year, subject to increase
by the Company's Chief Executive Officer, an annual discretionary bonus plus
participation in the Company's benefit plans. Effective 1 January 1999, Mr.
Marshall's annual base salary will be $475,000. The agreement also provides
Mr. Marshall with customary executive benefits, including participation in the
Company's retirement plan, the Company's supplemental executive retirement
plan, various insurance plans and, generally, such other benefit programs as
are available to the Company's other senior executives. The agreement is for a
three-year term, but provides for automatic one-year extensions after the
first year of each three-year term, unless notice of non-renewal is provided
by either party. Upon Mr. Marshall's resignation within six months after a
"change in control" (as defined below), if he makes certain good faith
determinations regarding changes in the nature of his duties, or upon
termination without cause, Mr. Marshall's salary and benefits are agreed to
continue for the balance of his term of employment and any previously awarded
but unpaid bonus is to be paid. Pursuant to the agreement, Mr. Marshall has
agreed not
13
to engage in any activity in the United States, Bermuda or the Cayman Islands
for a period of 24 months following his termination of employment with the
Company that would compete with the business of the Company.
As used in Messrs. Loschert's and Marshall's employment agreements, a
"change in control" generally means a change in the beneficial ownership of
the Company's voting stock, a change in the composition of the Company's Board
of Directors or a sale of the Company's assets if (A) any person (or group or
association, as defined in Section 13(d) of the Securities Exchange Act of
1934, of persons) (other than (1) a trustee or other fiduciary of securities
held under an employee benefit plan of the Company, (2) a corporation owned
directly or indirectly by the shareholders of the Company in substantially the
same proportions as their ownership of the Company or (3) any person in which
the officer has a substantial equity interest) acquires 50% or more of the
combined voting power of the outstanding securities of the Company having a
right to vote at the election of directors; (B) there is a sale of all or
substantially all of the assets of the Company; or (C) there shall cease to be
a majority of the Board of Directors of the Company whose members are either
(1) previous members of the Board of Directors or (2) recommended for election
by a vote of at least two-thirds of the members of the Board of Directors or a
committee thereof.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors (the "Committee") is
comprised entirely of independent, non-management directors. The Committee has
responsibility for developing and implementing the Company's compensation
policy for senior management, and for determining the compensation for the
executive officers of the Company. The goal of the Committee is to achieve
fair compensation for the individuals and to enhance shareholder value by
continuing to closely align the financial rewards of management with those of
the Company's shareholders.
The Company's compensation program is structured to support the human
resource requirements of its business. The Company seeks to attract and retain
qualified executives who are creative, motivated and dedicated. With respect
to its executive officers, the Company competes with specialty insurers,
property and casualty insurers and financial companies world-wide, although
primarily with companies based in North America and the United Kingdom. The
Committee is aware of the unique circumstances which relate to the attraction
and retention of superior executives in Bermuda, and attempts to create and
administer a compensation program to achieve that result.
Each executive's total compensation is generally comprised of three
components: salary, annual incentive compensation awards and long-term
incentive compensation awards. The mix of an officer's total compensation is
generally based upon the level of the officer's position, with more senior
officers receiving a greater percentage of their total compensation in the
form of incentive compensation (i.e. variable compensation), and a lesser
percentage in the form of salary (i.e. fixed compensation).
Salary and incentive compensation awards are reviewed annually for
competitiveness and are determined in large part by reference to compensation
levels for comparable positions at comparable companies based in the United
States, Bermuda, and the United Kingdom. The Company targets the upper
quartile of its applicable peer group in establishing incentive compensation,
and the median to third quartile in establishing salaries. Actual salary and
incentive compensation may be above or below such targets based on individual
and corporate performance during the prior fiscal year.
Because the Company's business activities can result in significant earnings
fluctuations from year to year, each executive's contribution to the
advancement of long-term corporate goals is also considered. These factors
include, among other things, underwriting and financial results, business
production, development of management team and strategic steps such as
development of new products and lines of business, geographical spread of
business and acquisitions.
14
SALARY
In determining the salary of each senior executive, the Committee has been
assisted by William M. Mercer, Incorporated, an independent consulting firm,
which annually accumulates data from a peer group of comparable companies. The
data is analyzed to establish competitive salary ranges for comparable
positions primarily in insurance companies of approximately equal size, market
capitalization and complexity. The Company's Chief Executive Officer makes
recommendations to the Committee with respect to the salary of each senior
executive other than himself. The Committee discusses these recommendations,
and the relevant data, and then determines the senior executives' salaries.
The Committee meets separately to determine the salary of the Company's Chief
Executive Officer.
ANNUAL INCENTIVE COMPENSATION
At the conclusion of each fiscal year, the Committee reviews with the
Company's Chief Executive Officer the performance of each senior executive
against goals established at the beginning of the year. Based upon the overall
performance of the Company and the contribution by the individuals in
achieving that performance by attaining the established goals, the Company's
Chief Executive Officer recommends to the Committee annual incentive
compensation levels for each senior executive. The Committee considers his
recommendations, and the relevant data, and then determines the annual
incentive compensation for each senior executive.
The Committee meets separately to evaluate the performance of the Chief
Executive Officer and determine his annual incentive award.
LONG-TERM INCENTIVE COMPENSATION
At the Annual General Meeting held in February 1996, shareholders adopted
the ACE Limited 1995 Long-Term Incentive Plan (the "1995 Plan"). In
furtherance of the objectives of the 1995 Plan, the Committee established a
set of goals, including:
(i) increasing officer ownership of the Company's outstanding shares to an
aggregate of approximately 2.5% of outstanding shares over a five to
seven year period;
(ii) awarding long-term incentive awards at more competitive levels
annually; and
(iii) providing capital accumulation opportunities that foster attraction
and retention of key management employees by linking their interests
with shareholder interests.
With respect to guidelines for administering the 1995 Plan, the Committee
makes long-term compensation awards based on individual and Company
performance, and on the practices of a group of generally comparable insurance
companies. While the 1995 Plan provides for a range of types of awards, the
Committee has generally made awards in the form of stock options and/or
restricted stock. The Committee believe that awards of stock options, which
reward Company stock price appreciation over the long term, are particularly
appropriate in light of the nature of the Company's business and long-term
business plans. The Committee also believes that restricted stock awards,
particularly those with delayed vesting, are crucial in helping to retain high
caliber executives in an increasingly competitive labor market.
The Company has proposed a new long-term incentive plan, the ACE Limited
1998 Long-Term Incentive Plan (the "1998 Plan"), for approval by shareholders
at the 1999 Annual General Meeting. The 1998 Plan increases the number of
shares available for awards, reflecting the growth in the size and number of
employees of the Company, especially as a result of recent acquisition
activity and reflecting the Company's commitment to aligning its executives
with long-term shareholder interest by making equity an important component of
compensation packages. The provisions of the 1998 Plan are generally
consistent with the 1995 Plan. The primary changes in the 1998 Plan have been
made to reflect certain tax and regulatory developments that have occurred
since the 1995 Plan was approved.
15
CHIEF EXECUTIVE OFFICER'S FISCAL 1998 COMPENSATION
As set forth in the Summary Compensation Table above, Mr. Duperreault's
total annual compensation for the year ended 30 September 1998 was $2,264,775.
Such annual compensation consisted of salary of $662,500 pursuant to Mr.
Duperreault's employment agreement described elsewhere herein (see "Employment
Agreements"), an annual incentive award of $1,400,000 and $202,275 in other
annual compensation. In determining Mr. Duperreault's annual and long-term
incentive awards and adjustments to his salary, the Committee considered the
Company's continued exceptional financial and operating performance during the
year ended 30 September 1998, as well as the completion of certain strategic
initiatives, including diversification through significant acquisition
activity. The Committee also considered data as to the compensation levels and
components of the chief executive officers of a peer group of generally
comparable insurance companies and the Company's financial performance
relative to those companies, as prepared by Mercer.
Under U.S. income tax rules, Section 162(m) of the Code limits the
deductibility of annual compensation in excess of $1 million paid to the
Company's Chief Executive Officer and any of the four other highest paid
officers. However, compensation is exempt from this limit if it qualifies as
"performance based compensation." The limit has no direct application to the
Company, because the Company is not subject to U.S. income taxes. However, if
a U.S. subsidiary has an employee who is among the five most highly
compensated officers, that subsidiary's deduction will be subject to this
limit. To preserve the deduction for the subsidiary, the Company has designed
the 1998 Plan to enable awards thereunder to constitute "performance-based
compensation" and not be counted toward the $1 million limit.
Although the Compensation Committee will consider deductibility under
Section 162(m) with respect to the compensation arrangements for executive
officers who may be employed by subsidiaries subject to U.S. income tax,
deductibility will not be the sole factor used in determining appropriate
levels or methods of compensation. Since Company objectives may not always be
consistent with the requirements for full deductibility, the Company and
subsidiaries may enter into compensation arrangements under which payments
would not be deductible under Section 162(m).
The foregoing report has been approved by all members of the Committee.
Bruce L. Crockett (Chairman)
Jeffrey W. Greenberg
Robert M. Hernandez
Thomas J. Neff
Sidney F. Wentz
16
PERFORMANCE GRAPH
Set forth below is a line graph comparing the dollar change in the
cumulative total shareholder return on the Company's Ordinary Shares from 25
March 1993 through 30 September 1998 as compared to the cumulative total
return of the Standard & Poor's 500 Stock Index and the cumulative total
return of the Standard & Poor's Property-Casualty Insurance Index. The chart
depicts the value on each of 30 September 1993, 1994, 1995, 1996, 1997 and
1998 of a $100 investment made on 25 March 1993, with all dividends
reinvested.
[PERFORMANCE GRAPH APPEARS HERE]
Ace S&P 500 S&P Property-
Limited Index Casualty Insurance Index
------- ------- ------------------------
3/25/93 $100 $100 $100
9/30/93 $117 $103 $100
9/30/94 $ 86 $107 $ 83
9/30/95 $126 $139 $119
9/30/96 $197 $167 $134
9/30/97 $353 $235 $207
9/30/98 $342 $256 $189
17
APPROVAL OF THE ACE LIMITED 1998 LONG-TERM INCENTIVE PLAN
(ITEM B ON PROXY CARD)
A proposal will be presented at the Annual General Meeting to approve the
ACE Limited 1998 Long-Term Incentive Plan (the "1998 Plan") which was approved
by the Board of Directors on 13 November 1998, subject to shareholder
approval. A summary of the material provisions of the 1998 Plan is set forth
below and is qualified in its entirety by reference to the Plan as set forth
in Exhibit A hereto.
PURPOSE
The purpose of the 1998 Plan is to (a) attract and retain employees; (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 price appreciation of the Ordinary Shares of
the Company and thereby promote the long-term financial interest of the
Company, including the growth in value of the Company's equity and enhancement
of long-term shareholder return.
The Company currently has in place the 1995 Plan pursuant to which the
Company can make equity based awards totaling 5% of its outstanding stock. The
Company has proposed the 1998 Plan at this time because it believes strongly
in the merits of linking executives' overall compensation opportunities to the
enhancement of long-term shareholder return. The Company uses equity based
compensation, such as options and restricted stock, as key elements of its
executives' compensation packages. The Company has grown considerably since
the 1995 Plan was adopted, in large part because of acquisitions. Although
some of the recent acquisitions were stock transactions, some were cash
transactions which did not increase the number of outstanding shares of the
Company and, therefore, did not increase the number of shares available for
awards under the 1995 Plan. Because the Company has more employees as a result
of its growth and because the Company believes it is important for its
employees to have an equity interest in the Company, the Board of Directors
has approved the 1998 Plan, and is recommending it to shareholders for
approval. The Company has previously established a set of compensation
objectives aimed at increasing officer ownership of the Company's Ordinary
Shares. Adoption of the 1998 Plan will help achieve this goal and is necessary
in order for the Company to continue making equity awards to its employees at
competitive levels. In addition to making additional shares available for
compensation packages, the 1998 Plan has been designed to comply with certain
tax and regulatory developments that have occurred since the 1995 Plan was
adopted, providing the Company with additional flexibility in designing
compensation packages.
To achieve the foregoing objectives, the 1998 Plan provides for the grant of
non-qualified and incentive stock options, stock appreciation rights ("SARs"),
stock units, restricted stock units, performance shares, performance units and
restricted stock.
GENERAL
The 1998 Plan is administered by a designated committee (the "Committee").
The Compensation Committee of the Board of Directors shall serve as the
Committee except as otherwise determined by the Board of Directors. The
Committee selects from the eligible individuals those persons to whom awards
under the 1998 Plan will be granted ("Participants"), the types of awards to
be granted and the applicable terms, conditions, performance criteria,
restrictions and other provisions of such awards. The Committee may delegate
all or any portion of its responsibilities or powers under the 1998 Plan to
persons selected by it, except to the extent inconsistent with Rule 16b-3
promulgated under section 16 of the Securities Exchange Act of 1934 ("Exchange
Act") or other applicable rules. Rule 16b-3 exempts employee plan transactions
meeting certain requirements from the short-swing trading profit recovery
provisions of section 16.
18
The number of Ordinary Shares subject to awards under the 1998 Plan during
any fiscal year of the Company shall equal (a) 5% of the adjusted average of
the outstanding Ordinary Shares, as that number is determined by the Company
to calculate fully diluted earnings per share for the preceding fiscal year;
reduced by (b) any Ordinary Shares granted pursuant to awards under the 1998
Plan, and any Ordinary Shares subject to any outstanding awards under the 1998
Plan. Any shares allocated to an award which expires, lapses, is forfeited or
terminated for any reason without issuance of shares (whether or not cash or
other consideration is paid to Participant in respect of such shares) may
again become subject to awards under the 1998 Plan. The following additional
limits shall apply to awards under the 1998 Plan: (i) no more than 8,000,000
Ordinary Shares may be issued for incentive stock option awards; (ii) no more
than 2,000,000 Ordinary Shares may be issued for stock unit awards, restricted
stock awards, restricted stock unit awards, performance share awards and
performance unit awards; (iii) no more than 6,000,000 Ordinary Shares may be
issued for options and SARs granted to any one individual in any one-calendar-
year period; (iv) no more than 2,000,000 Ordinary Shares may be issued for
stock unit awards, restricted stock awards, restricted stock unit awards, and
performance share awards that are intended to be "performance-based
compensation" (as described below) granted to any one individual during any
one-calendar-year period; and (v) no more than $5,000,000 may be covered by
performance unit awards that are intended to be "performance-based
compensation" granted to any one individual during any one-calendar-year
period. The Ordinary Shares with respect to which awards may be made under the
1998 Plan shall be shares currently authorized but unissued, or shares
purchased in the open market by a direct or indirect wholly owned subsidiary
of the Company. The Company may contribute to the subsidiary an amount
sufficient to accomplish the purchase in the open market of the shares to be
so acquired. At the discretion of the Committee, an award under the 1998 Plan
may be settled in cash rather than stock. The closing price with respect to
the Company's Ordinary Shares on 15 December 1998 was $27 11/16 per share.
The Committee may use shares of stock available under the 1998 Plan as the
form of payment for compensation, grants or rights earned or due under any
other compensation plans or arrangements of the Company or a subsidiary,
including the plans and arrangements of the Company or a subsidiary assumed in
business combinations.
In the event of a corporate transaction involving the Company (including,
without limitation, any stock dividend, stock split, extraordinary cash
dividend, recapitalization, reorganization, merger, consolidation, split-up,
spin-off, combination or exchange of shares), the Committee may adjust awards
to preserve the benefits or potential benefits of the awards. Action by the
Committee may include: (i) adjustment of the number and kind of shares which
may be delivered under the 1998 Plan; (ii) adjustment of the number and kind
of shares subject to outstanding awards; (iii) adjustment of the exercise
price of outstanding options and SARs; and (iv) any other adjustments that the
Committee determines to be equitable.
Except as otherwise provided by the Committee, awards under the 1998 Plan
are not transferable except as designated by the Participant by will or by
laws of descent and distribution.
Generally, upon a Change in Control all outstanding options and SARs will
become fully exercisable and all stock units, restricted stock, restricted
stock units, performance shares and performance units will become fully
vested. A "Change of Control" is generally deemed to occur when (i) any person
becomes the beneficial owner of 50% or more of the voting stock 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
effective date of the 1998 Plan; 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; (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 are 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
19
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.
All employees of the Company and its subsidiaries and any consultant,
director or other person providing services to the Company or a subsidiary are
eligible to become Participants in the 1998 Plan. As of 30 September 1998, the
Company and its subsidiaries had 642 employees. The specific employees who
initially will be granted awards under the 1998 Plan and the type and amount
of any such awards will be determined by the Committee.
OPTIONS
The Committee may grant options to purchase the Company's Ordinary Shares
which may be either incentive stock options or non-qualified stock options.
The purchase price of an Ordinary Share under each option shall not be less
that the fair market value of an Ordinary Share on the date the option is
granted. The option shall be exercisable in accordance with the terms
established by the Committee. The full purchase price of each Ordinary Share
purchased upon the exercise of any option shall be paid at the time of
exercise. Except as otherwise determined by the Committee, the purchase price
shall be payable in cash or in Ordinary Shares (valued at fair market value as
of the day of exercise), or in any combination thereof. The Committee, in its
discretion, may impose such conditions, restrictions, and contingencies on
Ordinary Shares acquired pursuant to the exercise of an option or SAR as the
Committee determines to be desirable.
STOCK APPRECIATION RIGHTS
The Committee may grant an SAR in connection with all or any portion of a
previously or contemporaneously granted option or independent of any option
grant. An SAR entitles the Participant to receive the amount by which the fair
market value of a specified number of shares on the exercise date exceeds an
exercise price established by the Committee, which shall not be less that 100%
if the fair market value of the Ordinary Shares at the time the SAR is
granted. Such excess amount shall be payable in Ordinary Shares, in cash, or
in a combination thereof, as determined by the Committee.
OTHER STOCK AWARDS
The Committee may grant stock units (a right to receive Ordinary Shares in
the future), performance shares (a right to receive Ordinary Shares or stock
units contingent upon achievement of performance or other objectives),
performance units (a right to receive a designated dollar amount of Ordinary
Shares contingent on achievement of performance other objectives) and
restricted stock and restricted stock units (a grant of Ordinary Shares and
the right to receive Ordinary Shares in the future, respectively, with such
shares or rights subject to a risk of forfeiture or other restrictions that
lapse upon the achievement of one or more goals relating to completion of
service by the Participant or the achievement of performance or other
objectives, as determined by the Committee). Any such award shall be subject
to such conditions, restrictions and contingencies as the Committee
determines. If the grant of a restricted stock award or a restricted stock
unit award is not made in lieu of other compensation, and vesting of the award
is conditioned on the completion of a specified period of service rather than
the attainment of performance objectives, then the required period of service
for vesting shall be not less than three years (subject to acceleration upon
the Participant's death, disability, retirement, change in control or
involuntary termination, to the extent determined by the Committee).
A U.S. income tax deduction will generally be unavailable for annual
compensation in excess of $1 million paid to any of the five most highly
compensated officers of a public corporation. However, amounts that constitute
"performance-based compensation" are not counted toward the $1 million limit.
The Committee may designate any award described in the preceding paragraph as
intended to be "performance-based compensation." Any awards so designated
shall be conditioned on the achievement of one or more performance measures,
as required by Code section 162(m). The performance measures that may be used
by the Committee for such awards shall be based on any one or more of the
following Company, subsidiary, operating unit or division performance
measures, as selected by the Committee: gross premiums written; net premiums
written; net premiums earned;
20
net investment income; losses and loss expenses; underwriting and
administrative expenses; operating expenses; cash flow(s); operating income;
earnings before interest and taxes; net income; stock price; dividends;
strategic business objectives, consisting of one or more objectives based on
meeting specified cost targets, business expansion goals, and goals relating
to acquisitions or divestitures; or any combination thereof. Each goal may be
expressed on an absolute and/or relative basis, may be based on or otherwise
employ comparisons based on internal targets, the past performance of the
Company and/or the past or current performance of other companies, and in the
case of earnings-based measures, may use or employ comparisons relating to
capital, shareholders' equity and/or shares outstanding, investments or to
assets or net assets.
AMENDMENT AND TERMINATION
The 1998 Plan may be amended or terminated at any time by the Board,
provided that no amendment or termination may adversely affect the rights of
any Participant without the Participant's written consent.
UNITED STATES INCOME TAX CONSIDERATION
The following is a brief description of the U.S. federal income tax
treatment that will generally apply to awards under the 1998 Plan based on
current U.S. income taxation with respect to Participants who are subject to
U.S. income tax.
NON-QUALIFIED OPTIONS
The grant of a non-qualified option will not result in taxable income to the
Participant. Except as described below, the Participant will realize ordinary
income at the time of exercise in an amount equal to the excess of the fair
market value of the Ordinary Shares acquired over the exercise price for those
shares. Gains or losses realized by the Participant upon disposition of such
shares will be treated as capital gains and losses, with the basis in such
Ordinary Shares equal to the fair market value of the shares at the time of
exercise.
INCENTIVE STOCK OPTIONS
The grant of an incentive stock option will not result in taxable income to
the Participant. The exercise of an incentive stock option will not result in
taxable income to the Participant provided that the Participant was, without a
break in service, an employee of the Company or a subsidiary during the period
beginning on the date of the grant of the option and ending on the date three
months prior to the date of exercise (one year prior to the date of exercise
if the Participant is disabled, as that term is defined in the Code).
The excess of the fair market value of the Ordinary Shares at the time of
the exercise of an incentive stock option over the exercise price is an
adjustment that is included in the calculation of the Participant's
alternative minimum taxable income for the tax year in which the incentive
stock option is exercised. For purposes of determining the Participant's
alternative minimum tax liability for the year of disposition of the shares
acquired pursuant to the incentive stock option exercise, the Participant will
have a basis in those shares equal to the fair market value of the Ordinary
Shares at the time of exercise.
If the Participant does not sell or otherwise dispose of the stock within
two years from the date of the grant of the incentive stock option or within
one year after the transfer of such stock to the Participant, then, upon
disposition of such Ordinary Shares, any amount realized in excess of the
exercise price will be taxed to the Participant as capital gain. A capital
loss will be recognized to the extent that the amount realized is less than
the exercise price.
If the foregoing holding period requirements are not met, the Participant
will generally realize ordinary income at the time of the disposition of the
shares, in an amount equal to the lesser of (i) the excess of the fair market
value of the Ordinary Shares on the date of exercise over the exercise price,
or (ii) the excess, if any, of the amount realized upon disposition of the
shares over the exercise price. If the amount realized exceeds the
21
value of the shares on the date of exercise, any additional amount will be
capital gain. If the amount realized is less than the exercise price, the
Participant will recognize no income, and a capital loss will be recognized
equal to the excess of the exercise price over the amount realized upon the
disposition of the shares.
STOCK APPRECIATION RIGHTS
The grant of an SAR will not result in taxable income to the Participant.
Upon exercise of an SAR, the amount of cash or the fair market value of
Ordinary Shares received will be taxable to the Participant as ordinary income.
Gains and losses realized by the Participant upon disposition of any such
shares will be treated as capital gains and losses, with the basis in such
shares equal to the fair market value of the shares at the time of exercise.
PERFORMANCE SHARES AND PERFORMANCE UNITS
A Participant who has been granted performance share award or performance
unit award will not realize taxable income at the time of grant. The
Participant will have compensation income at the time of distribution equal to
the amount of cash received and the then fair market value of the distributed
shares.
RESTRICTED AND OTHER STOCK
A Participant who has been granted a restricted stock award will not realize
taxable income at the time of grant, assuming that the restrictions constitute
a "substantial risk of forfeiture" for U.S. income tax purposes. Upon the
vesting of Ordinary Shares subject to an award, the holder will realize
ordinary income in an amount equal to the then fair market value of those
shares. Gains or losses realized by the Participant upon disposition of such
shares will be treated as capital gains and losses, with the basis in such
shares equal to the fair market value of the shares at the time of vesting.
Dividends paid to the holder during the restriction period, if so provided,
will also be compensation income to the Participant. A Participant may elect
pursuant to section 83(b) of the Code to have income recognized at the date of
grant of a restricted stock award and to have the applicable capital gain
holding period commence as of that date.
WITHHOLDING OF TAXES
The Company may withhold amounts from Participants to satisfy withholding tax
requirements. Subject to guidelines established by the Committee, Participants
may have Ordinary Shares withheld from awards or may tender Ordinary Shares to
the Company to satisfy tax withholding requirements.
TAX DEDUCTION
The Company is not subject to U.S. income taxes. However, if an award is
granted to a Participant employed by a subsidiary that is a U.S. taxpayer, the
subsidiary will be entitled to a deduction equal to an amount equal to the
amount of income includible in the Participant's income.
A U.S. income tax deduction will generally be unavailable for annual
compensation in excess of $1 million paid to any of the five most highly
compensated officers of a public corporation. However, amounts that constitute
"performance-based compensation" are not counted toward the $1 million limit.
If a U.S. subsidiary has an employee who is among the five most highly
compensated officers, that subsidiary's deduction will be subject to this
limit. To preserve the deduction for the subsidiary, the Company has designed
the 1998 Plan to enable awards thereunder to constitute "performance-based
compensation" and not be counted toward the $1 million limit.
CHANGE IN CONTROL
Any acceleration of the vesting or payment of awards under the 1998 Plan in
the event of a change in control in the Company may cause part or all of the
consideration involved to be treated as an "excess parachute
22
payment" under the Code, which may subject the Participant to a 20% excise tax
and preclude deduction by a subsidiary.
TAX ADVICE
The preceding discussion is based on U.S. tax laws and regulations presently
in effect, which are subject to change, and the discussion does not purport to
be a complete description of the U.S. income tax aspects of the 1998 Plan. A
Participant may also be subject to state and local taxes in connection with
the grant of awards under the 1998 Plan. The Company suggests that
Participants consult with their individual tax advisors to determine the
applicability of the tax rules to the awards granted to them in their personal
circumstances.
THE BOARD OF DIRECTORS RECOMMENDS THE APPROVAL OF THE ACE LIMITED 1998 LONG-
TERM INCENTIVE PLAN.
RATIFICATION OF APPOINTMENT OF INDEPENDENT ACCOUNTANTS
(ITEM C ON PROXY CARD)
The appointment of independent accountants is approved annually by the Board
of Directors and ratified by the Company's shareholders. The decision of the
Board of Directors is based on the recommendation of the Audit Committee. In
making its recommendation, the Audit Committee reviews both the audit scope
and estimated fees for professional services for the coming year. The Board of
Directors has authorized the engagement of PricewaterhouseCoopers LLP as the
Company's independent accountants for the year ending 30 September 1999. The
Company has had a working association with PricewaterhouseCoopers LLP since
1985; PricewaterhouseCoopers LLP has had the responsibility for examining the
consolidated financial statements of the Company and its subsidiaries since
1985.
Representatives of PricewaterhouseCoopers LLP will attend the Annual General
Meeting and will have an opportunity to make a statement if they wish. They
will also be available to answer questions at the meeting.
THE BOARD OF DIRECTORS RECOMMENDS RATIFICATION OF THE APPOINTMENT OF
PRICEWATERHOUSECOOPERS LLP AS THE COMPANY'S INDEPENDENT ACCOUNTANTS.
SHAREHOLDER PROPOSALS FOR 2000 ANNUAL MEETING
If you wish to submit a proposal to be considered for inclusion in the proxy
material for the next annual meeting, please send it to the Secretary, ACE
Limited, The ACE Building, 30 Woodbourne Avenue, Hamilton HM 08 Bermuda. Under
the rules of the Securities and Exchange Commission, proposals must be
received no later than 24 August 1999 and otherwise comply with the
requirements of the U.S. Securities and Exchange Commission to be eligible for
inclusion in the Company's 2000 Annual General Meeting proxy statement and
form of proxy.
The Company's Articles provide that if a shareholder desires to submit a
proposal for consideration at an annual general meeting, or to nominate
persons for election as directors, written notice of such shareholders's
intent to make such a proposal or nomination must be given and received by the
Secretary of the Company at the principal executive offices of the Company not
later than 60 days prior to the anniversary date of the immediately preceding
annual general meeting. With respect to the 2000 annual general meeting, such
written notice must be received on or prior to 7 December 1999. The notice
must meet the requirements set forth in the Company's Articles of Association.
Under the circumstances described in, and upon compliance with, Rule 14a-4(c)
under the Exchange Act, management proxies would be allowed to use their
discretionary voting authority to vote on any proposal with respect to which
the foregoing requirements have been met.
23
SOLICITATION OF PROXIES
The cost of solicitation of proxies will be borne by the Company.
Solicitation will be made by mail, and may be made by directors, officers and
employees, personally or by telephone or facsimile. Proxy cards and materials
also will be distributed to beneficial owners of Ordinary Shares through
brokers, custodians, nominees and other parties, and the Company expects to
reimburse such parties for their charges and expenses. Corporate Investor
Communications, Inc. has been retained to assist the Company in the
solicitation of proxies at a fee estimated not to exceed $5,000, plus out-of-
pocket expenses.
OTHER MATTERS
The Board of Directors of the Company does not know of any matters which may
be presented at the Annual General Meeting other than those specifically set
forth in the Notice of Annual General Meeting. If any other matters come
before the meeting or any adjournment thereof, the persons named in the
accompanying form of proxy and acting thereunder will vote in accordance with
their best judgment with respect to such matters.
By Order of the Board of Directors,
Brian Duperreault
Chairman, President and Chief
Executive Officer
24
EXHIBIT A
ACE LIMITED 1998
LONG-TERM INCENTIVE PLAN
TABLE OF CONTENTS
GENERAL..................................................................... 1
Purpose................................................................... 1
Participation............................................................. 1
Operation, Administration, and Definitions................................ 1
OPTIONS AND SARS............................................................ 1
Definitions............................................................... 1
Exercise Price............................................................ 1
Exercise.................................................................. 2
Payment of Option Exercise Price.......................................... 2
Settlement of Award....................................................... 2
OTHER STOCK AWARDS.......................................................... 2
Definitions............................................................... 2
Restrictions on Awards.................................................... 2
OPERATION AND ADMINISTRATION................................................ 3
Effective Date............................................................ 3
Shares Subject to Plan.................................................... 3
General Restrictions...................................................... 4
Use of Shares............................................................. 5
Dividends and Dividend Equivalents........................................ 5
Payments.................................................................. 5
Transferability........................................................... 5
Form and Time of Elections................................................ 5
Agreement With Company.................................................... 5
Action by Company or Subsidiary........................................... 5
Gender and Number......................................................... 5
Limitation of Implied Rights.............................................. 6
Benefits Under Qualified Retirement Plans................................. 6
Evidence.................................................................. 6
CHANGE IN CONTROL........................................................... 6
COMMITTEE................................................................... 6
Administration............................................................ 6
Powers of Committee....................................................... 7
Delegation by Committee................................................... 7
Information to be Furnished to Committee.................................. 7
AMENDMENT AND TERMINATION................................................... 7
DEFINED TERMS............................................................... 7
i
ACE LIMITED 1998
LONG-TERM INCENTIVE PLAN
SECTION 1
GENERAL
1.1. Purpose. The ACE Limited Long-Term Incentive Plan (the "Plan") has been
established by ACE Limited (the "Company") to (i) attract and retain persons
eligible to participate in the Plan; (ii) motivate Participants, by means of
appropriate incentives, to achieve long-range goals; (iii) provide incentive
compensation opportunities that are competitive with those of other similar
companies; and (iv) further identify Participants' interests with those of the
Company's other shareholders through compensation that is based on the
Company's ordinary shares of stock; and thereby promote the long-term
financial interest of the Company and the Subsidiaries, 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
Eligible Individuals (including transferees of Eligible Individuals to the
extent the transfer is permitted by the Plan and the applicable Award
Agreement), 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, 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. Awards may be granted as alternatives to or replacement of awards
granted or outstanding under the Plan, or any other plan or arrangement of the
Company or a Subsidiary (including a plan or arrangement of a business or
entity, all or a portion of which is acquired by the Company or a Subsidiary).
1.3. Operation, Administration, and Definitions. The operation and
administration of the Plan, including the Awards made under the Plan, shall be
subject to the provisions of Section 4 (relating to operation and
administration). Capitalized terms in the Plan shall be defined as set forth
in the Plan (including the definition provisions of Section 8 of the Plan).
SECTION 2
OPTIONS AND SARS
2.1. Definitions.
(a) The grant of an "Option" entitles the Participant to purchase shares of
Stock at an Exercise Price established by the Committee. Any Option granted
under this Section 2 may be either an incentive stock option (an "ISO") or a
non-qualified option (an "NQO"), as determined in the discretion of the
Committee. An "ISO" is an Option that is intended to satisfy the requirements
applicable to an "incentive stock option" described in section 422(b) of the
Code. An "NQO" 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.
(b) A stock appreciation right (an "SAR") entitles the Participant to
receive, in cash or Stock (as determined in accordance with subsection 2.5),
value equal to (or otherwise based on) the excess of: (a) the Fair Market
Value of a specified number of shares of Stock at the time of exercise; over
(b) an Exercise Price established by the Committee.
2.2. Exercise Price. The "Exercise Price" of each Option and SAR granted
under this Section 2 shall be established by the Committee or shall be
determined by a method established by the Committee at the time the Option or
SAR is granted; except that the Exercise Price shall not be less than 100% of
the Fair Market Value of a share of Stock on the date of grant (or, if
greater, the par value of a share of Stock).
2.3. Exercise. An Option and an SAR shall be exercisable in accordance with
such terms and conditions and during such periods as may be established by the
Committee.
2.4. Payment of Option Exercise Price. The payment of the Exercise Price of
an Option granted under this Section 2 shall be subject to the following:
(a) Subject to the following provisions of this subsection 2.4, the full
Exercise Price for shares of Stock purchased upon the exercise of any
Option shall be paid at the time of such exercise (except that, in the case
of an exercise arrangement approved by the Committee and described in
paragraph 2.4(c), payment may be made as soon as practicable after the
exercise).
(b) The Exercise Price shall be payable in cash or by tendering, by
either actual delivery of shares or by attestation, shares of Stock
acceptable to the Committee, and valued at Fair Market Value as of the day
of exercise, or in any combination thereof, as determined by the Committee.
(c) The Committee may permit a Participant to elect to pay the Exercise
Price upon the exercise of an Option by irrevocably authorizing a third
party to sell shares of Stock (or a sufficient portion of the shares)
acquired upon exercise of the Option and remit to the Company a sufficient
portion of the sale proceeds to pay the entire Exercise Price and any tax
withholding resulting from such exercise.
2.5. Settlement of Award. Shares of Stock delivered pursuant to the exercise
of an Option or SAR shall be subject to such conditions, restrictions and
contingencies as the Committee may establish in the applicable Award
Agreement. Settlement of SARs may be made in shares of Stock (valued at their
Fair Market Value at the time of exercise), in cash, or in a combination
thereof, as determined in the discretion of the Committee. The Committee, in
its discretion, may impose such conditions, restrictions and contingencies
with respect to shares of Stock acquired pursuant to the exercise of an Option
or an SAR as the Committee determines to be desirable.
SECTION 3
OTHER STOCK AWARDS
3.1. Definitions.
(a) A "Stock Unit" Award is the grant of a right to receive shares of Stock
in the future.
(b) A "Performance Share" Award is a grant of a right to receive shares of
Stock or Stock Units which is contingent on the achievement of performance or
other objectives during a specified period.
(c) A "Performance Unit" Award is a grant of a right to receive a designated
dollar value amount of Stock which is contingent on the achievement of
performance or other objectives during a specified period.
(d) A "Restricted Stock" Award is a grant of shares of Stock, and a
"Restricted Stock Unit" Award is the grant of a right to receive shares of
Stock in the future, with such shares of Stock or right to future delivery of
such shares of Stock subject to a risk of forfeiture or other restrictions
that will lapse upon the achievement of one or more goals relating to
completion of service by the Participant, or achievement of performance or
other objectives, as determined by the Committee.
3.2. Restrictions on Awards. Each Stock Unit Award, Restricted Stock Award,
Restricted Stock Unit Award, Performance Share Award and Performance Unit
Award shall be subject to the following:
(a) Any such Award shall be subject to such conditions, restrictions and
contingencies as the Committee shall determine.
(b) The Committee may designate whether any such Award being granted to
any Participant is intended to be "performance-based compensation" as that
term is used in section 162(m) of the Code. Any such Awards designated as
intended to be "performance-based compensation" shall be conditioned on the
achievement of one or more Performance Measures, to the extent required by
Code section 162(m). The
2
Performance Measures that may be used by the Committee for such Awards
shall be based on any one or more of the following Company, Subsidiary,
operating unit or division performance measures, as selected by the
Committee: gross premiums written; net premiums written; net premiums
earned; net investment income; losses and loss expenses; underwriting and
administrative expenses; operating expenses; cash flow(s); operating
income; earnings before interest and taxes; net income; stock price;
dividends; strategic business objectives, consisting of one or more
objectives based on meeting specified cost targets, business expansion
goals, and goals relating to acquisitions or divestitures; or any
combination thereof. Each goal may be expressed on an absolute and/or
relative basis, may be based on or otherwise employ comparisons based on
internal targets, the past performance of the Company and/or the past or
current performance of other companies, and in the case of earnings-based
measures, may use or employ comparisons relating to capital, shareholders'
equity and/or shares outstanding, investments or to assets or net assets.
For Awards under this Section 3 intended to be "performance-based
compensation," the grant of the Awards and the establishment of the
Performance Measures shall be made during the period required under Code
section 162(m).
(c) If the right to become vested in a Restricted Stock Award or
Restricted Stock Unit Award granted under this Section 3 is conditioned on
the completion of a specified period of service with the Company or the
Subsidiaries, without achievement of Performance Measures or other
performance objectives being required as a condition of vesting, and
without it being granted in lieu of other compensation, then the required
period of service for vesting shall be not less than three years (subject
to acceleration of vesting, to the extent permitted by the Committee, in
the event of the Participant's death, disability, retirement, change in
control or involuntary termination).
SECTION 4
OPERATION AND ADMINISTRATION
4.1. Effective Date. Subject to the approval of the shareholders of the
Company at the Company's 1999 annual meeting of its shareholders, the Plan
shall be effective as of November 13, 1998 (the "Effective Date"); provided,
however, that to the extent that Awards are granted under the Plan prior to
its approval by shareholders, the Awards shall be contingent on approval of
the Plan by the shareholders of the Company at such annual meeting. 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 Awards may be granted under the Plan after the ten-year
anniversary of the Effective Date.
4.2. Shares Subject to Plan. The shares of Stock for which Awards may be
granted under the Plan shall be subject to the following:
(a) 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).
(b) The number of shares of Stock available for Awards under the Plan
during any fiscal year of the Company shall equal (i) five percent 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 (ii) any shares of Stock granted pursuant to Awards
under the Plan, and any shares of Stock subject to any outstanding award
under the Plan.
(c) To the extent provided by the Committee, any Award may be settled in
cash rather than Stock. To the extent any shares of Stock covered by an
Award are not delivered to a Participant or beneficiary because the Award
is forfeited or canceled, or the shares of Stock are not delivered because
the Award is settled in
3
cash or used to satisfy the applicable tax withholding obligation, such
shares shall not be deemed to have been delivered for purposes of
determining the maximum number of shares of Stock available for delivery
under the Plan.
(d) If the exercise price of any Option granted under the Plan is
satisfied by tendering shares of Stock to the Company (by either actual
delivery or by attestation), only the number of shares of Stock issued net
of the shares of Stock tendered shall be deemed delivered for purposes of
determining the maximum number of shares of Stock available for delivery
under the Plan.
(e) Subject to paragraph 4.2(f), the following additional maximums are
imposed under the Plan:
(i) The maximum number of shares of Stock that may be issued by
Options intended to be ISOs shall be 8,000,000 shares.
(ii) The maximum number of shares that may be covered by Awards
granted to any one individual pursuant to Section 2 (relating to
Options and SARs) shall be 6,000,000 shares during any one-calendar-
year period.
(iii) The maximum number of shares of Stock that may be issued in
conjunction with Awards granted pursuant to Section 3 (relating to
Other Stock Awards) shall be 2,000,000 shares.
(iv) For Stock Unit Awards, Restricted Stock Awards, Restricted Stock
Unit Awards and Performance Share Awards that are intended to be
"performance-based compensation" (as that term is used for purposes of
Code section 162(m)), no more than 2,000,000 shares of Stock may be
subject to such Awards granted to any one individual during any one-
calendar-year period (regardless of when such shares are deliverable).
(v) For Performance Unit Awards that are intended to be "performance-
based compensation" (as that term is used for purposes of Code section
162(m)), no more than $5,000,000 may be subject to such Awards granted
to any one individual during any one-calendar-year period (regardless
of when such amounts are deliverable).
(f) In the event of a corporate transaction involving the Company
(including, without limitation, any stock dividend, stock split,
extraordinary cash dividend, recapitalization, reorganization, merger,
consolidation, split-up, spin-off, combination or exchange of shares), the
Committee may adjust Awards to preserve the benefits or potential benefits
of the Awards. Action by the Committee may include: (i) adjustment of the
number and kind of shares which may be delivered under the Plan; (ii)
adjustment of the number and kind of shares subject to outstanding Awards;
(iii) adjustment of the Exercise Price of outstanding Options and SARs; and
(iv) any other adjustments that the Committee determines to be equitable.
4.3. General Restrictions. Delivery 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 deliver 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 (including, without
limitation, the requirements of the United States Securities Act of 1933),
and the applicable requirements of any securities exchange or similar
entity.
(b) To the extent that the Plan provides for issuance of stock
certificates to reflect the issuance of shares of Stock, the issuance may
be effected on a non-certificated basis, to the extent not prohibited by
applicable law or the applicable rules of any stock exchange.
4.4. Tax Withholding. All distributions under the Plan are subject to
withholding of all applicable taxes, and the Committee may condition the
delivery of any shares or other benefits under the Plan on satisfaction of the
applicable withholding obligations. The Committee, in its discretion, and
subject to such requirements as the Committee may impose prior to the
occurrence of such withholding, may permit such withholding obligations to
4
be satisfied through cash payment by the Participant, through the surrender of
shares of Stock which the Participant already owns, or through the surrender
of shares of Stock to which the Participant is otherwise entitled under the
Plan.
4.5. Use of Shares. Subject to the overall limitation on the number of
shares of Stock that may be delivered under the Plan, the Committee may use
available shares of Stock as the form of payment for compensation, grants or
rights earned or due under any other compensation plans or arrangements of the
Company or a Subsidiary, including the plans and arrangements of the Company
or a Subsidiary assumed in business combinations.
4.6. Dividends and Dividend Equivalents. An Award (including without
limitation an Option or SAR Award) may provide the Participant with the right
to receive dividend payments or dividend equivalent payments with respect to
Stock subject to the Award (both before and after the Stock subject to the
Award is earned, vested, or acquired), which payments may be either made
currently or credited to an account for the Participant, and may be settled in
cash or Stock as determined by the Committee. Any such settlements, and any
such crediting of dividends or dividend equivalents or reinvestment in shares
of Stock, may be subject to such conditions, restrictions and contingencies as
the Committee shall establish, including the reinvestment of such credited
amounts in Stock equivalents.
4.7. Payments. Awards may be settled through cash payments, the delivery of
shares of Stock, the granting of replacement Awards, or combination thereof as
the Committee shall determine. Any Award settlement, including payment
deferrals, may be subject to such conditions, restrictions and contingencies
as the Committee shall determine. The Committee may permit or require the
deferral of any Award payment, subject to such rules and procedures as it may
establish, which may include provisions for the payment or crediting of
interest, or dividend equivalents, including converting such credits into
deferred Stock equivalents. Each Subsidiary 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 Subsidiary by
the Participant. Any disputes relating to liability of a Subsidiary for cash
payments shall be resolved by the Committee.
4.8. Transferability. Except as otherwise provided by the Committee, Awards
under the Plan are not transferable except as designated by the Participant by
will or by the laws of descent and distribution.
4.9. 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.
4.10. Agreement With Company. An Award under the Plan shall be subject to
such terms and conditions, not inconsistent with the Plan, as the Committee
shall, in its sole discretion, prescribe. The terms and conditions of any
Award to any Participant shall be reflected in such form of written document
as is determined by the Committee. A copy of such document shall be provided
to the Participant, and the Committee may, but need not require that the
Participant sign a copy of such document. Such document is referred to in the
Plan as an "Award Agreement" regardless of whether any Participant signature
is required.
4.11. Action by Company or Subsidiary. Any action required or permitted to
be taken by the Company or any Subsidiary 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 applicable law or applicable rules of any
stock exchange) by a duly authorized officer of such company.
4.12. 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.
5
4.13. Limitation of Implied Rights.
(a) Neither a Participant nor any other person shall, by reason of
participation in the Plan, acquire any right in or title to any assets, funds
or property of the Company or any Subsidiary whatsoever, including, without
limitation, any specific funds, assets, or other property which the Company or
any Subsidiary, 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 Stock or amounts, if any, payable under the Plan, unsecured by any assets
of the Company or any Subsidiary, and nothing contained in the Plan shall
constitute a guarantee that the assets of the Company or any Subsidiary 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 participating employee or other individual the
right to be retained in the employ of the Company or any Subsidiary or the
right to continue to provide services to the Company or any Subsidiary, 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 rights as a shareholder of the Company prior to the date on which
the individual fulfills all conditions for receipt of such rights.
4.14. Benefits Under Qualified Retirement Plans. Except as otherwise
provided by the Committee, 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 and
other plans maintained by the Participant's employer. The term "Qualified
Retirement Plan" means any plan of the Company or a Subsidiary that is
intended to be qualified under section 401(a) of the Code.
4.15. 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.
SECTION 5
CHANGE IN CONTROL
Subject to the provisions of paragraph 4.2(f) (relating to the adjustment of
shares), and except as otherwise provided in the Plan or the Award Agreement
reflecting the applicable Award, upon the occurrence of a Change in Control:
(a) All outstanding Options (regardless of whether in tandem with SARs)
shall become fully exercisable.
(b) All outstanding SARs (regardless of whether in tandem with Options)
shall become fully exercisable.
(c) All Stock Units, Restricted Stock, Restricted Stock Units,
Performance Shares, and Performance Units shall become fully vested.
SECTION 6
COMMITTEE
6.1. 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 this Section 6. The Compensation Committee of the Board shall
serve as the "Committee" under the Plan, except as otherwise determined by the
Board. If the Committee does not exist, or for any other reason determined by
the Board, the Board may take any action under the Plan that would otherwise
be the responsibility of the Committee.
6
6.2. Powers of Committee. The Committee's administration of the Plan shall
be subject to the following:
(a) Subject to the provisions of the Plan, the Committee will have the
authority and discretion to select from among the Eligible Individuals
those persons who shall 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 (subject to the
restrictions imposed by Section 7) to cancel or suspend Awards.
(b) To the extent that the Committee determines that the restrictions
imposed by the Plan preclude the achievement of the material purposes of
the Awards in jurisdictions outside the United States, the Cayman Islands,
and Bermuda, the Committee will have the authority and discretion to modify
those restrictions as the Committee determines to be necessary or
appropriate to conform to applicable requirements or practices of
jurisdictions outside of the United States, the Cayman Islands, and
Bermuda.
(c) 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 Award Agreement
made pursuant to the Plan, and to make all other determinations that may be
necessary or advisable for the administration of the Plan.
(d) Any interpretation of the Plan by the Committee and any decision made
by it under the Plan is final and binding on all persons.
(e) In controlling and managing the operation and administration of the
Plan, the Committee shall take action in a manner that conforms to the
Memorandum and Articles of Association of the Company, and applicable
corporate law.
6.3. Delegation by Committee. Except to the extent prohibited by applicable
law or the applicable rules of a stock exchange, 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.
6.4. Information to be Furnished to Committee. The Company and Subsidiaries
shall furnish the Committee with such data and information as it determines
may be required for it to discharge its duties. The records of the Company and
Subsidiaries as to an employee's or Participant's employment (or other
provision of services), termination of employment (or cessation of the
provision of services), 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.
SECTION 7
AMENDMENT AND TERMINATION
The Board may, at any time, amend or terminate the Plan, provided that no
amendment or termination may, in the absence of written consent to the change
by the affected Participant (or, if the Participant is not then living, the
affected beneficiary), adversely affect the rights of any Participant or
beneficiary under any Award granted under the Plan prior to the date such
amendment is adopted by the Board; provided that adjustments pursuant to
subject to paragraph 4.2(f) shall not be subject to the foregoing limitations
of this Section 7.
SECTION 8
DEFINED TERMS
In addition to the other definitions contained herein, the following
definitions shall apply:
(a) Award. The term "Award" shall mean any award or benefit granted under
the Plan, including, without limitation, the grant of Options, SARs, Stock
Unit Awards, Restricted Stock Awards, Restricted Stock Unit Awards,
Performance Share Awards, and Performance Unit Awards.
7
(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 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;
(ii) 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;
(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 United States 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) Dollars. As used in the Plan, the term "dollars" or numbers preceded
by the symbol "$" shall mean amounts in United States dollars.
(f) Eligible Individual. For purposes of the Plan, the term "Eligible
Individual" shall mean any employee of the Company or a Subsidiary, and any
consultant, director, or other person providing services to the Company or
a Subsidiary. An Award may be granted to an employee or other individual
providing services, in connection with hiring, retention or otherwise,
prior to the date the employee or service provider first performs services
for the Company or the Subsidiaries, provided that such Awards shall not
become vested prior to the date the employee or service provider first
performs such services.
(g) Fair Market Value. 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.
(h) Subsidiaries. For purposes of the Plan, the term "Subsidiary" means
any corporation, partnership, joint venture or other entity during any
period in which at least a fifty percent voting or profits interest is
8
owned, directly or indirectly, by the Company (or by any entity that is a
successor to the Company), and any other business venture designated by the
Committee in which the Company (or any entity that is a successor to the
Company) has a significant interest, as determined in the discretion of the
Committee.
(i) Stock. The term "Stock" shall mean ordinary shares of stock of the
Company.
9
PROXY
-----
The undersigned hereby appoints Brian Duperreault, Christopher Z. Marshall,
Peter Mear and Keith P. White as Proxies, each with the power to appoint his
substitute, and hereby authorizes each of them to represent and to vote, as
designated below, all the Ordinary Shares of ACE Limited which the undersigned
is entitled to vote at the Annual General Meeting to be held on 5 February 1999
or any adjournment thereof.
(Continued on Reverse)
ACE LIMITED
P.O. BOX 11138
NEW YORK, N.Y. 10203-0138
A. Election of Directors
For Election to Term Expiring in 2002: Jeffrey W. Greenberg, Meryl D.
Hartzband, Donald Kramer, Walter A. Scott and Sidney F. Wentz.
For _________ Withheld _________ Exceptions* _________
*Exceptions ____________________________
To vote your shares for all Director nominees, mark the "For" box on Item A. To
withhold voting for all nominees, mark the "withheld" box. If you do not wish
your shares voted "For" a particular nominee, mark the "Exceptions" box and
enter the name(s) of the exception(s) in the space provided.
B. Proposal to approve the ACE Limited 1998 Long-Term Incentive Plan.
For _________ Against _________ Abstain _________
C. Proposal to ratify the appointment of PricewaterhouseCoopers LLP as the
Company's independent accountants for the fiscal year ending 30 September
1999.
For _________ Against _________ Abstain _________
In their discretion, the Proxies are authorized to vote upon such other further
business, if any, as lawfully may be brought before the meeting.
If you have either an Address Change or Comments on the other side of the card,
mark here.
Address Change and/or Comments Mark Here ____________________
When signing as attorney, as executor, administrator, trustee or guardian,
please give full title as such. If a corporation, please sign in full corporate
name by President or other authorized officer.
If a partnership or limited liability company, please sign in partnership or
limited liability company name by authorized person.
DATED _______________, 199_
SIGNED ________________________
This proxy when properly executed will be voted in the manner directed herein by
the undersigned shareholder.
If no direction is made, this proxy will be voted for the nominees listed above,
for the ACE Limited 1998 Long-Term Incentive Plan and for the ratification of
accountants.
Please sign exactly as name appears hereon. When shares are held by joint
tenants, both should sign.
Votes must be indicated (x) in Black or Blue ink.
Sign, Date and Return Proxy Card Promptly Using the Enclosed Envelope.