Exhibit 10.1

CONSULTING SERVICES AGREEMENT

THIS CONSULTING SERVICES AGREEMENT (“Agreement”) is made and entered into, as of
the effective date set forth on the signature page hereof, by and between GTS
Consulting, LLC (“GTS”) and ACE American Insurance Company, a Pennsylvania
corporation (“ACE”).

WHEREAS, Gary Schmalzriedt (“Executive”) is presently employed as Chairman of
ACE Overseas General; and

WHEREAS, the Executive will retire from ACE effective September 30, 2006; and

WHEREAS, ACE considers it essential to obtain the benefit of the Executive’s
experience as an executive officer of ACE during the period immediately
following the Executive’s termination of employment;

WHEREAS, to induce GTS to execute this Agreement for Executive’s services as a
consultant, the parties desire to enter into a written Consulting Services
Agreement;

NOW, THEREFORE, in consideration of the mutual promises set forth herein, and
other good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, the parties hereby agree as follows:

1. Termination of Employment. Executive will retire from ACE effective
September 30, 2006.

2. Independent Contractor. From October 1, 2006 until September 30, 2007, ACE
shall retain GTS as an independent contractor, and nothing herein shall be
construed or deemed as creating any other relationship during that time. From
October 1, 2006 until September 30, 2007, Executive shall not hold the title of
Chairman ACE Overseas General and shall not have the authority of that officer
position to act on behalf of ACE.

3. Consulting Services. From October 1, 2006 to September 30, 2007, GTS hereby
agrees to provide and perform for the benefit of ACE the duties and
responsibilities described below and in addition those as may be prescribed from
time to time by the Board of Directors of ACE Limited and/or the Chief Executive
Officer of ACE Limited (“Consulting Services”). GTS shall ensure that Executive
shall devote such time and attention to the Consulting Services as may be
necessary or required to complete such Consulting Services. Executive shall be
permitted to travel at the request of ACE management in the performance of the
Consulting Services in accordance with the ACE Executive Travel Policy.
Executive shall be entitled to fly business class for all business travel on
airplanes.

For the term of the Agreement, GTS through Executive will, as requested by ACE
and agreed to by GTS, such agreement not to be unreasonably withheld, provide
services to Employer which

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relate to matters for which Executive was responsible in connection with his
former position with Employer or which relate to the establishment and operation
of a training program known as a “War College.” Executive will serve as Dean of
the War College and in such role, will design the curriculum, solicit
instructors and be responsible for delivery of the program. Upon reasonable
advanced notice, Executive will make himself available during the term of this
Agreement to provide Consulting Services for periods of time as reasonably
required by Employer and will report to Evan Greenberg concerning the provision
of Consulting Services.

4. Termination of this Agreement. ACE may terminate this Agreement with or
without cause at ACE’s discretion and convenience at any time prior to
September 30, 2007 by giving the Executive thirty (30) days prior written
notice. In addition, ACE may terminate this Agreement immediately for cause,
which shall include the failure to perform the Consulting Services, without
prior written notice and such termination shall be effective immediately upon
notice to the Executive. In the event that this Agreement is terminated for
cause, all consideration described in paragraph 5 below shall cease as of the
date this Agreement is terminated. “Cause” shall mean embezzlement of ACE funds,
habitual insobriety or drug abuse during business hours or while performing the
Consulting Services, conviction of a crime involving moral turpitude, or gross
negligence in the performance of the Executive’s Consulting Services which gross
negligence has had a material adverse effect on the consolidated business,
assets, properties or financial condition of ACE or its affiliates. If the
Agreement is terminated without cause, Executive will still receive the
consideration set forth in paragraphs 5(a), (b) and (c) below.

5. Consideration. As consideration for the GTS’s performance of the Consulting
Services from October 1, 2006 through September 30, 2007, ACE shall compensate
the Executive as follows:

 

  a. GTS will receive a total of $100,000 for time worked on the Consulting
Services during the term of the Agreement, plus reasonable out-of-pocket
expenses of Executive, which are approved, documented, and consistent with
Employer’s Travel and Expense Policy;

 

  b. fees for Consulting Services and expenses will be paid on a quarterly basis
in 4 equal installments of $25,000;

 

  c. subject to approval by the Compensation Committee of the ACE Limited Board
of Directors, all unvested options to purchase shares of ACE Limited stock held
by Executive on the Retirement Date will not be forfeited but will continue to
vest in accordance with and remain subject to the terms and conditions of the
awards under the applicable ACE Limited Long Term Incentive Plan. As a result of
this provision, Executive’s awards of Incentive Stock Options will be converted
to Non-Qualified Stock Options;

 

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  d. subject to approval by the Compensation Committee of the ACE Limited Board
of Directors, all restricted shares of ACE Limited stock will continue to vest
during the term of the Agreement, as though Executive’s termination of
employment occurred on the last day of the term of the Agreement. Such
restricted shares shall be subject to the following additional conditions:

(i) Executive will incur a tax liability for the restricted shares of ACE
Limited stock as said shares vest, and

(ii) continued vesting in the restricted shares is expressly conditioned on
Executive continuing to perform Consulting Services under this Agreement to the
satisfaction of Employer during the term of the Agreement.

 

  e. GTS and Executive shall have sole responsibility for paying any federal,
state or local taxes.

6. Confidential Information. The GTS and Executive recognize and acknowledge
that while employed by ACE, the Executive had access to, has learned and been
provided with, and has prepared and created, certain confidential and
proprietary business information and trade secrets for ACE; and, further, the
Executive hereby acknowledges and agrees that all corporate records and other
confidential information not released to the public, all trade secrets and all
other confidential or proprietary information of ACE, in each case relating to
the business and operations of ACE, are confidential and the sole property of
ACE (collectively referred to as “Confidential Information”). The Executive and
GTS acknowledge that, in their performance of the Consulting Services, they may
become privy to Confidential Information. GTS and Executive agree not to use or
disclose any Confidential Information except in the regular or normal course of
the their performance of the Consulting Services. On September 30, 2007, or upon
the termination of this Agreement, if earlier, the GTS and Executive will
surrender to ACE all written Confidential Information in their possession.
Further, GTS and Executive agree that, on September 30, 2007, or upon the
termination of this Agreement, if earlier, not to use or cause to be used for
the Executive’s own benefit or for the benefit of any third parties, or to
disclose to any third party, in any manner, directly or indirectly, any
Confidential Information.

7. Indemnification. ACE shall indemnify and hold harmless the Executive against
any claims, causes of action, liabilities, debts, and judgments, as well as any
and all reasonable costs and expenses, including reasonable attorneys’ fees,
that may be incurred by the Executive in any threatened, pending, or completed
action, suit, or proceeding, whether civil, criminal, or administrative, or
investigative and whether formal or informal, because of the Executive’s
performance of the Consulting Services described in this Agreement, unless and
to the extent determined to be caused by the Executive’s gross negligence or
willful misconduct.

8. Covenant Not to Compete. From October 1, 2006 until September 30, 2007, GTS
and the Executive shall not, without the prior written consent of ACE, directly
or indirectly, own,

 

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manage or operate or participate in the ownership, management or operation of,
or be connected as an officer, director, employee, partner or shareholder with,
any business entity which competes with or which is engaged in activities in
competition with those activities conducted by ACE or any of its parents,
subsidiaries or affiliates, within the geographic territory served by ACE;
provided, however, that ownership of five percent (5%) or less of a class of
outstanding securities of or other ownership interests in such a business entity
shall not constitute a breach or violation of the foregoing covenant. In the
event that the provisions of this paragraph 8 should ever be deemed to exceed
the time or geographic limitations permitted by applicable law, then such
provisions shall be deemed reformed to the maximum permissible time of
geographic limitations.

9. No Right to Employment. Nothing in this Agreement shall create any right in
the Executive to employment with ACE or any affiliate of ACE.

10. Severability and Survival. In the event any provision of this Agreement
shall be determined to be invalid, the remainder of this Agreement shall
continue in full force and effect. The duties and obligations of GTS and the
Exeuctive set forth herein with respect to ACE’s Confidential Information, and
the provisions hereof relating to such duties and obligations, shall survive
indefinitely completion of the Consulting Services and the termination of this
Agreement for any reason.

11. Captions. Captions contained in this Agreement are inserted for convenience
only and in no way define, limit or extend the scope of intent of any provision
of this Agreement.

12. Arbitration and Applicable Law. GTS, Executive and ACE agree that any
disagreements, disputes, or claims arising out of or relating to the validity of
this Agreement or how it is interpreted or implemented and those involving in
any way, or related to Executive’s employment with ACE or the termination of
that employment, shall be resolved exclusively by arbitration in Philadelphia,
Pennsylvania, in accordance with the Employment Dispute Resolution Rules of the
American Arbitration Association and judgment upon the award rendered by the
Arbitrator may be entered in any court having jurisdiction over the matter. The
terms and conditions of this Agreement shall be construed and enforced according
to the laws of the Commonwealth of Pennsylvania, without regard to Pennsylvania
conflicts of laws principles.

13. Assignment. This is a contract for the personal services of the Executive.
GTS may not assign this Agreement or delegate Executive’s duties hereunder
without the prior written consent of ACE and any attempted assignment or
delegation shall be of no force or effect.

14. Entire Agreement; Amendments. There are no representations, agreements,
arrangements, or understandings, oral or written, as to the Consulting Services
to be performed and provided under this Agreement except as expressed herein.
This Agreement may not be amended except in a writing signed by both parties
hereto.

 

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15. Notice. Any written notice under this Agreement shall be personally
delivered to the other party or sent by certified or registered mail, return
receipt requested and postage prepaid, to ACE at 436 Walnut Street,
Philadelphia, Pa. 19106, c/o Phillip Cole and to the Executive at the most
recent home address of which he has informed ACE, or, as to either party, to
such other address as either party may from time to time specify by written
notice.

IN WITNESS WHEREOF, the parties have executed this Agreement intending to be
legally bound as of the effective date set forth below.

 

GTS CONSULTING, LLC

 

Gary T. Schmalzriedt, President ACE AMERICAN INSURANCE COMPANY

 

Phillip B. Cole, Global Human Resource Officer Effective Date:  

 

 

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