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Exhibit
10.37
Conformed Copy
ACE LIMITED 2004
LONG-TERM INCENTIVE
PLAN
(As amended through the
Second Amendment thereof, effective November 16,
2006)
SECTION 1
GENERAL
1.1. Purpose . The ACE
Limited 2004 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.
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 5
(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 9).
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. 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);
provided, however, that the Committee, in its discretion, may
establish an Exercise Price of an Option or SAR granted under this
Section 2 that varies based on the stock price of a comparator
group of companies or such other index as is selected by the
Committee (resulting in an Exercise Price that may at times be less
than the Fair Market Value of a share of Stock on the date of
grant); and further provided that such variable price shall not be
used if the Committee intends that the Options or SARs be
Performance-Based Compensation and/or the Options be Incentive
Stock Options, and the use of such variable pricing would preclude
such treatment.
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. In no event, however, shall an Option or SAR
expire later than ten years after the date of its grant.
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) |
Subject to applicable law, the Exercise Price shall be payable
in cash, by promissory note, 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; provided that, except as otherwise provided by the
Committee, payments made with shares of Stock in accordance with
this paragraph (b) shall be limited to shares held by the
Participant for not less than six months prior to the payment
date. |
| (c) |
Subject to applicable law, 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 . Settlement of Options and SARs is subject to subsection
5.7.
2.6. No Repricing .
Except for either adjustments pursuant to paragraph 5.2(f)
(relating to the adjustment of shares), or reductions of the
Exercise Price approved by the Company’s shareholders, the
Exercise Price for any outstanding Option may not be decreased
after the date of grant nor may an outstanding Option granted under
the Plan be surrendered to the Company as consideration for the
grant of a replacement Option with a lower Exercise
Price.
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2.7. Grants of Options and
SARs . An Option may but need not be in tandem with an SAR, and
an SAR may but need not be in tandem with an Option. If an Option
is in tandem with an SAR, the Exercise Price of both the Option and
SAR shall be the same, and the exercise of the Option or SAR with
respect to a share of Stock shall cancel the corresponding tandem
SAR or Option right with respect to such share. If an SAR is in
tandem with an Option but is granted after the grant of the Option,
or if an Option is in tandem with an SAR but is granted after the
grant of the SAR, the later granted tandem Award shall have the
same Exercise Price as the earlier granted Award, but the Exercise
Price for the later granted Award may be less than the Fair Market
Value of the Stock at the time of such grant.
SECTION 3
FULL VALUE
AWARDS
3.1. Definition . A
“Full Value” Award is a grant of one or more shares of
Stock or a right to receive one or more shares of Stock in the
future, with such grant subject to one or more of the following, as
determined by the Committee:
| (a) |
The grant shall be in consideration of a Participant’s
previously performed services, or surrender of other compensation
that may be due. |
| (b) |
The grant shall be contingent on the achievement of performance
or other objectives during a specified period. |
| (c) |
The grant shall be 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. |
The grant of Full Value Awards may also
be subject to such other conditions, restrictions and
contingencies, as determined by the Committee.
3.2. Restrictions on
Awards .
| (a) |
The Committee may designate a Full Value Award granted to any
Participant as “performance-based compensation” as that
term is used in section 162(m) of the Code. To the extent required
by Code section 162(m), any Full Value Award so designated shall be
conditioned on the achievement of one or more performance
objectives. The performance objectives shall be based on
Performance Measures selected by the Committee. For Awards under
this Section 3 intended to be “performance-based
compensation,” the grant of the Awards and the establishment
of the performance objectives shall be made during the period
required under Code section 162(m). |
| (b) |
If the right
to become vested in a Full Value Award 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 (whether or not related to the Performance
Measures) 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
CASH INCENTIVE
AWARDS
A Cash Incentive Award is the
grant of a right to receive a payment of cash (or in the discretion
of the Committee, Stock having value equivalent to the cash
otherwise payable) that is contingent on achievement of performance
or other objectives over a specified period established by the
Committee. The grant of Cash Incentive Awards may also be subject
to such other conditions, restrictions and contingencies, as
determined by the Committee. The Committee may designate a Cash
Incentive Award granted to any Participant as
“performance-based compensation” as that term is used
in section 162(m) of the Code. To the extent required by Code
section 162(m), any such Award so designated shall be conditioned
on the achievement of one or more performance objectives. The
performance objectives shall be based on Performance Measures as
selected by the Committee. For Awards under this Section 4
intended to be “performance-based compensation,” the
grant of the Awards and the establishment of the performance
objectives shall be made during the period required under Code
section 162(m).
SECTION 5
OPERATION AND
ADMINISTRATION
5.1. Effective Date .
Subject to the approval of the shareholders of the Company at the
Company’s 2004 annual meeting of its shareholders, the Plan
shall be effective as of February 25, 2004 (the
“Effective Date”); provided, however, that, to the
extent not prohibited by applicable law or the applicable rules of
any stock exchange, Awards may be granted 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.
5.2. Shares and Other
Amounts 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 (i) shares currently authorized but
unissued; (ii) to the extent permitted by applicable law,
currently held or acquired by the Company as treasury shares,
including shares purchased in the open market or in private
transactions; or (iii) shares purchased in the open market by
a direct or indirect wholly-owned subsidiary of the Company (as
determined by the Chairman, the Chief Executive Officer or any
executive officer 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, the Chief Executive Officer or any
executive officer of the Company). |
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| (b) |
Subject to the following provisions of this subsection 5.2, the
maximum number of shares of Stock that may be delivered to
Participants and their beneficiaries under the Plan shall be equal
to the sum of: (i) 15,000,000 shares of Stock; and
(ii) any shares of Stock that are represented by awards
granted under the ACE Limited 1995 Long-Term Incentive Plan, the
ACE Limited 1995 Outside Directors Plan, the ACE Limited 1998
Long-Term Incentive Plan, and the ACE Limited 1999 Replacement
Long-Term Incentive Plan (the “Prior Plans”) that are
forfeited, expire or are canceled after the Effective Date without
delivery of shares of Stock or which result in the forfeiture of
the shares of Stock back to the Company to the extent that such
shares would have been added back to the reserve under the terms of
the applicable Prior Plan. |
| (c) |
To the extent provided by the Committee, any Award may be
settled in cash rather than Stock. |
| (d) |
Only shares of Stock, if any, actually delivered to the
Participant or beneficiary on an unrestricted basis with respect to
an Award shall be treated as delivered for purposes of the
determination under paragraph (b) above, regardless of whether
the Award is denominated in Stock or cash. Consistent with the
foregoing: |
| |
(i) |
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 on
an unrestricted basis (including, without limitation, by reason of
the Award being 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 the determination under
paragraph (b) above. |
| |
(ii) |
If the exercise price of any Option granted under the Plan or
any Prior Plan, or the tax withholding obligation with respect to
any Award granted under the Plan or any Prior 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 number of shares of Stock available for
delivery under the Plan. |
| (e) |
Subject to paragraph 5.2(f), the following additional maximums
are imposed under the Plan. |
| |
(i) |
The maximum number of shares of Stock that may be delivered to
Participants and their beneficiaries with respect to ISOs granted
under the Plan shall be 15,000,000 shares; provided, however, that
to the extent that shares not delivered must be counted against
this limit as a condition of satisfying the rules applicable to
ISOs, such rules shall apply to the limit on ISOs granted under the
Plan. |
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(ii) |
The maximum
number of shares that may be covered by Awards granted to any one
Participant during any one calendar-year period pursuant to
Section 2 (relating to Options and SARs) shall be 1,000,000
shares. For purposes of this paragraph (ii), if an Option is in
tandem with an SAR, such that the exercise of the Option or SAR
with respect to a share of Stock cancels the tandem SAR
or
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Option right,
respectively, with respect to such share, the tandem Option and SAR
rights with respect to each share of Stock shall be counted as
covering but one share of Stock for purposes of applying the
limitations of this paragraph (ii).
|
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(iii) |
The maximum number of shares of Stock that may be issued in
conjunction with Awards granted pursuant to Section 3
(relating to Full Value Awards) shall be 10,000,000
shares. |
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(iv) |
For Full Value Awards that are intended to be
“performance-based compensation” (as that term is used
for purposes of Code section 162(m)), no more than 500,000 shares
of Stock may be delivered pursuant to such Awards granted to any
Participant during any one-calendar-year period; provided that
Awards described in this paragraph (iv), that are intended to be
performance-based compensation, shall be subject to the
following: |
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(A) |
If the Awards are denominated in |
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