Exhibit 10.31
Conformed Copy
ACE LIMITED 1998
LONG-TERM INCENTIVE
PLAN
(As Amended Through the Third
Amendment)
TABLE OF CONTENTS
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Page
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SECTION 1
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GENERAL
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1
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1.1.
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Purpose
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1
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1.2.
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Participation
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1
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1.3.
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Operation,
Administration, and Definitions
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1
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SECTION
2
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OPTIONS AND
SARS
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1
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2.1.
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Definitions
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1
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2.2.
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Exercise
Price
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2
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2.3.
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Exercise
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2
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2.4.
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Payment of
Option Exercise Price
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2
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2.5.
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Settlement of
Award
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2
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SECTION
3
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OTHER STOCK
AWARDS
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3
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3.1.
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Definitions
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3
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3.2.
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Restrictions on
Awards
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3
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SECTION
4
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OPERATION AND
ADMINISTRATION
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4
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4.1.
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Effective
Date
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4
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4.2.
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Shares Subject
to Plan
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4
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4.3.
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General
Restrictions
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6
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4.4.
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Tax
Withholding
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6
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4.5.
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Use of
Shares
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6
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4.6.
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Dividends and
Dividend Equivalents
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6
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4.7.
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Payments
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6
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4.8.
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Transferability
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7
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4.9.
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Form and Time
of Elections
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7
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4.10.
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Agreement With
Company
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7
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4.11.
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Action by
Company or Subsidiary
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7
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4.12.
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Gender and
Number
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7
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4.13.
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Limitation of
Implied Rights
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7
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4.14.
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Benefits Under
Qualified Retirement Plans
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8
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4.15.
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Evidence
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8
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SECTION
5
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CHANGE IN
CONTROL
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8
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TABLE OF CONTENTS
(continued)
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Page
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SECTION 6
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COMMITTEE
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8
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6.1.
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Administration
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8
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6.2.
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Powers of
Committee
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8
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6.3.
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Delegation by
Committee
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9
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6.4.
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Information to
be Furnished to Committee
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9
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SECTION 7
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AMENDMENT AND
TERMINATION
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9
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SECTION 8
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DEFINED TERMS
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10
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-ii-
ACE LIMITED 1998
LONG-TERM INCENTIVE
PLAN
(As Amended Through the Third
Amendment)
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 .
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(a)
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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.
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(b)
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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.
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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:
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(a)
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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).
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(b)
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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.
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(c)
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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.
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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.
2
SECTION 3
OTHER STOCK AWARDS
3.1. Definitions .
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(a)
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A “Stock
Unit” Award is the grant of a right to receive shares of
Stock in the future.
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(b)
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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.
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(c)
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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.
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(d)
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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.
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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:
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(a)
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Any such Award
shall be subject to such conditions, restrictions and contingencies
as the Committee shall determine.
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(b)
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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
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
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3
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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).
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(c)
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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 full 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).
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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:
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(a)
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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).
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(b)
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Subject to this
subsection 4.2, the number of shares of Stock available for Awards
under the Plan shall be 21,252,007.
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(c)
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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 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.
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(d)
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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
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