Exhibit 10.1

 

ACE LIMITED

2004 LONG-TERM INCENTIVE PLAN

(As amended through the First 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.

 

(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

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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.

 

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

 

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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).

 

(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

 

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“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.

 

  (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).

 

  (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:

 

  (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.

 

  (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.

 

  (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 an 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:

 

  (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.

 

  (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.

 

(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 (which may include, without limitation, (I)
replacement of Awards with other Awards which the Committee determines have
comparable value and which are based on stock of a company resulting from the
transaction, and (II) cancellation of the Award in return for cash payment of
the current value of the Award,

 

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determined as though the Award is fully vested at the time of payment, provided
that in the case of an Option, the amount of such payment may be the excess of
value of the Stock subject to the Option at the time of the transaction over the
exercise price).

 

5.3. 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
obligation to deliver any shares of Stock or make any other distribution of
benefits under the Plan unless such delivery or distribution complies 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.

 

5.4. 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. Except as otherwise provided by the
Committee, such withholding obligations may be satisfied (i) through cash
payment by the Participant; (ii) through the surrender of shares of Stock which
the Participant already owns (provided, however, that to the extent shares
described in this clause (ii) are used to satisfy more than the minimum
statutory withholding obligation, as described below, then, except as otherwise
provided by the Committee, payments made with shares of Stock in accordance with
this clause (ii) shall be limited to shares held by the Participant for not less
than six months prior to the payment date); or (iii) through the surrender of
shares of Stock to which the Participant is otherwise entitled under the Plan,
provided, however, that such shares under this clause (iii) may be used to
satisfy not more than the Company’s minimum statutory withholding obligation
(based on minimum statutory withholding rates for Federal and state tax
purposes, including payroll taxes, that are applicable to such supplemental
taxable income).

 

5.5. Grant and Use of Awards. 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). 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.
Notwithstanding the provisions of subsection 2.2, Options and SARs granted under
the Plan in replacement for awards under plans and arrangements of the Company
or a Subsidiary assumed in business combinations may provide for Exercise Prices
that are less than the Fair Market Value of the Stock at the time of the
replacement grants, if the Committee determines that such Exercise Price is
appropriate to preserve the economic benefit of the award.

 

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5.6. Dividends and Dividend Equivalents. An Award (including without limitation
an Option or SAR Award) may provide the Participant with the right to receive
dividend 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.

 

5.7. Settlement of Awards. The obligation to make payments and distributions
with respect to Awards may be satisfied through cash payments, the delivery of
shares of Stock, the granting of replacement Awards, or combination thereof as
the Committee shall determine. Satisfaction of any such obligations under an
Award, which is sometimes referred to as “settlement” of the Award, 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, and may include 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.

 

5.8. 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.

 

5.9. 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.

 

5.10. 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 (including electronic)
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.

 

5.11. 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.

 

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5.12. 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.

 

5.13. 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 its 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.

 

5.14. 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.

 

5.15. 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 6

CHANGE IN CONTROL

 

Subject to the provisions of paragraph 5.2(f) (relating to the adjustment of
shares), the occurrence of a Change in Control shall have the effect, if any,
with respect to any Award as set forth in the Award Agreement or, to the extent
not prohibited by the Plan or the Award Agreement, as provided by the Committee.

 

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SECTION 7

COMMITTEE

 

7.1. 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 7. The Committee shall be selected by the Board,
and shall consist solely of two or more members of the Board. If the Committee
does not exist, or for any other reason determined by the Board, and to the
extent not prohibited by applicable law or the applicable rules of any stock
exchange, the Board may take any action under the Plan that would otherwise be
the responsibility of the Committee.

 

7.2. 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 8) 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, and applicable corporate law.

 

7.3. 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.

 

7.4. 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

 

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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 8

AMENDMENT AND TERMINATION

 

The Board may, at any time, amend or terminate the Plan, and may amend any Award
Agreement, 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; and further provided
that adjustments pursuant to paragraph 5.2(f) shall not be subject to the
foregoing limitations of this Section 8; and further provided that the
provisions of subsection 2.6 (relating to Option repricing) cannot be amended
unless the amendment is approved by the Company’s shareholders. Approval by the
Company’s shareholders will be required for any material revision to the terms
of the Plan, with the Committee’s determination of “material revision” to take
into account the exemptions under the rules of the New York Stock Exchange.

 

SECTION 9

DEFINED TERMS

 

In addition to the other definitions contained herein, the following definitions
shall apply:

 

(a) Award. The term “Award” means any award or benefit granted under the Plan,
including, without limitation, the grant of Options, SARs, Full Value Awards,
and Cash Incentive Awards.

 

(b) Board. The term “Board” means 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;

 

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  (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” means any employee of the Company or a Subsidiary, and any
consultant, director, or other person providing services to the Company or a
Subsidiary; provided, however, that an ISO may only be granted to an employee of
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 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.

 

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(h) Performance Measures. The “Performance Measures” shall be based on any one
or more of the following Company, Subsidiary, operating unit or division
performance measures: 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.

 

(i) Subsidiary. 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 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.

 

(j) Stock. The term “Stock” means mean ordinary shares of stock of the Company.

 

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