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Exhibit
10.2
ACE LIMITED 2004 LONG-TERM
INCENTIVE PLAN (As amended through the Fourth Amendment)
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
.
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(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. |
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(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).
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.
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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) |
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) |
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. |
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(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 or SAR may not be
decreased after the date of grant nor may an outstanding Option or
SAR granted under the Plan be surrendered to the Company as
consideration for the grant of a replacement Option or SAR with a
lower Exercise Price.
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:
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(a) |
The grant shall be in consideration of a Participant’s
previously performed services, or surrender of other compensation
that may be due. |
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(b) |
The grant shall be contingent on the achievement of performance
or other objectives during a specified period. |
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(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.
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3.2. Restrictions on
Awards .
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(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). |
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(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). |
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). Except as otherwise provided in the applicable plan
or arrangement, distribution of any cash incentive awards by the
Company or its Subsidiaries (whether granted this Plan or
otherwise), for a performance period ending in a calendar year,
shall be made to the Participant not later than March 15 of
the following calendar year; provided, however, that for purposes
of determining compliance with Code section 409A, a payment will be
considered to satisfy the requirement of this sentence if
distribution is made no later than the end of the calendar year
following the end of the applicable performance period.
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 on or after the ten-year anniversary of July 10,
2008, which is the date on which the Plan was amended by the Fourth
Amendment.
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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:
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(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) 19,000,000 shares of Stock (which number
includes all shares available for delivery under this clause (i)
since the establishment of the Plan in 2004, determined in
accordance with the terms of the Plan); 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. |
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(c) |
To the extent provided by the Committee, any Award may be
settled in cash rather than Stock. |
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(d) |
Shares of Stock with respect to an Award will be treated as
delivered for purposes of the determination under paragraph
(b) above, subject to the following: |
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(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, such shares shall not be deemed to have been
delivered for purposes of the determination under paragraph
(b) above. |
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(ii) |
Subject to the provisions of paragraph (i) above, the
total number of shares covered by an Award granted after July 10,
2008 will be treated as delivered for purposes of this paragraph
(b) to the extent payments or benefits are delivered to the
Participant with respect to such shares. Accordingly (A) if an
Award denominated in shares of Stock is settled in cash, the total
number of shares with respect to which such payment is made shall
be considered to have been delivered; (B) if shares covered by
an Award are used to satisfy the applicable tax withholding
obligation, the number of shares held back by the Company to
satisfy such withholding obligation shall be considered to have
been delivered; (C) 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), the
number of shares tendered to satisfy such exercise price shall be
considered to have been delivered; and (D) if cash or shares
of Stock are delivered in settlement of the exercise of an SAR, the
total number of shares with respect to which such SAR is exercised
shall be deemed delivered. |
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(e) |
Subject to paragraph 5.2(f), the following additional maximums
are imposed under the Plan. |
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(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 19,000,000 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
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 11,000,000 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 Stock but an equivalent amount
of cash is delivered in lieu of delivery of shares of Stock, the
foregoing limit shall be applied based on the methodology used by
the Committee to convert the number of shares of Stock into
cash. |
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(B) |
If delivery of Stock or cash is deferred until after shares of
Stock have been earned, any adjustment in the amount delivered to
reflect actual or deemed investment experience after the date the
shares are earned shall be disregarded. |
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(v) |
For Cash Incentive Value Awards that are intended to be
“performance-based compensation” (as that term is used
for purposes of Code section 162(m)), the maximum amount payable to
any Participant with respect to a performance period shall equal
$500,000 multiplied by the number of calendar months included in
that performance period; provided that Awards described in this
paragraph (v), 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 cash but an equivalent amount
of Stock is delivered in lieu of delivery of cash, the foregoing
limit shall be applied to the cash based on the methodology used by
the Committee to convert the cash into shares of Stock. |
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(B) |
If delivery of Stock or cash is deferred until after cash has
been earned, any adjustment in the amount delivered to reflect
actual or deemed investment experience after the date the cash is
earned shall be disregarded. |
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(f) |
The following shall apply with respect to the terms of the Plan
and Awards granted thereunder: |
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(i) |
Notwithstanding the following provisions of this paragraph (f),
in the event of any equity restructuring (within the meaning of
Financial Accounting Standards No. 123 (revised 2004)) that
causes the per share value of shares of Stock to change, such as a
stock dividend, stock split, spin off, rights offering, or
recapitalization through a large, nonrecurring cash dividend, the
Committee shall cause there to be made an equitable adjustment to
(A) the number and kind of shares available for grant under
the Plan, (B) the number of shares or Awards that may be
granted to any individual under the Plan or that may be granted
pursuant to any provision or types of Awards and (C) the
number and kind of shares or units subject to and the Exercise
Price of an Option or SAR of any then outstanding Awards of or
related to shares of Stock. |
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(ii) |
In the event of any change in corporate capitalization (other
than as described in paragraph (i) above), such as a merger,
consolida |
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