Document:

Ace Limited 1998 Long-Term Incentive Plan

 Exhibit 10.31 
  
 Conformed Copy 
  
 ACE LIMITED 1998 
 LONG-TERM INCENTIVE
PLAN 
  
 (As Amended Through the Third Amendment) 

 TABLE OF CONTENTS 
  

					
	 	  	 	  	Page

	SECTION 1	  	    GENERAL	  	1
			
	 1.1.
	  	Purpose	  	1
			
	 1.2.
	  	Participation	  	1
			
	 1.3.
	  	Operation, Administration, and Definitions	  	1
			
	SECTION 2	  	    OPTIONS AND SARS	  	1
			
	 2.1.
	  	Definitions	  	1
			
	 2.2.
	  	Exercise Price	  	2
			
	 2.3.
	  	Exercise	  	2
			
	 2.4.
	  	Payment of Option Exercise Price	  	2
			
	 2.5.
	  	Settlement of Award	  	2
			
	SECTION 3	  	    OTHER STOCK AWARDS	  	3
			
	 3.1.
	  	Definitions	  	3
			
	 3.2.
	  	Restrictions on Awards	  	3
			
	SECTION 4	  	    OPERATION AND ADMINISTRATION	  	4
			
	 4.1.
	  	Effective Date	  	4
			
	 4.2.
	  	Shares Subject to Plan	  	4
			
	 4.3.
	  	General Restrictions	  	6
			
	 4.4.
	  	Tax Withholding	  	6
			
	 4.5.
	  	Use of Shares	  	6
			
	 4.6.
	  	Dividends and Dividend Equivalents	  	6
			
	 4.7.
	  	Payments	  	6
			
	 4.8.
	  	Transferability	  	7
			
	 4.9.
	  	Form and Time of Elections	  	7
			
	 4.10.
	  	Agreement With Company	  	7
			
	 4.11.
	  	Action by Company or Subsidiary	  	7
			
	 4.12.
	  	Gender and Number	  	7
			
	 4.13.
	  	Limitation of Implied Rights	  	7
			
	 4.14.
	  	Benefits Under Qualified Retirement Plans	  	8
			
	 4.15.
	  	Evidence	  	8
			
	SECTION 5	  	    CHANGE IN CONTROL	  	8

  

 -i- 

 TABLE OF CONTENTS 
 (continued) 
  

					
	 	  	 	  	Page

	 SECTION 6
	  	    COMMITTEE	  	8
			
	 6.1.
	  	Administration	  	8
			
	 6.2.
	  	Powers of Committee	  	8
			
	 6.3.
	  	Delegation by Committee	  	9
			
	 6.4.
	  	Information to be Furnished to Committee	  	9
			
	 SECTION 7
	  	    AMENDMENT AND TERMINATION	  	9
			
	 SECTION 8
	  	    DEFINED TERMS	  	10

  

 -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. 
  

	(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; 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: 
  

	(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)	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. 

  

	(c)	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. 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. 
  

	(a)	A “Stock Unit” Award is the grant of a right to receive shares of Stock in the future. 

  

	(b)	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. 

  

	(c)	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. 

  

	(d)	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. 

  
 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: 
  

	(a)	Any such Award shall be subject to such conditions, restrictions and contingencies as the Committee shall determine. 

  

	(b)	 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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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). 

  

	(c)	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). 

  
 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: 
  

	(a)	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). 

  

	(b)	Subject to this subsection 4.2, the number of shares of Stock available for Awards under the Plan shall be 21,252,007. 

  

	(c)	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. 

  

 4 

	(d)	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 maximum number of shares of Stock available for delivery under the Plan. 

  

	(e)	Subject to paragraph 4.2(f), the following additional maximums are imposed under the Plan: 

  
 (i) The maximum number of shares of Stock that may be issued by Options intended to be ISOs shall be
8,000,000 shares. 
  
 (ii) The maximum number of
shares that may be covered by Awards granted to any one individual pursuant to Section 2 (relating to Options and SARs) shall be 6,000,000 shares during any one-calendar-year period. 
  
 (iii) The maximum number of shares of Stock that may be issued in conjunction with Awards granted pursuant
to Section 3 (relating to Other Stock Awards) shall equal the sum of 2,500,000 shares plus the number of shares of Stock subject to Awards granted in replacement of awards given up by persons who became employed by the Company and the Subsidiaries
in connection with the acquisition described in the acquisition agreement dated as of January 11, 1999 by and among the Company, CIGNA Corporation, and CIGNA Holdings, Inc. 
  
 (iv) For Stock Unit Awards, Restricted Stock Awards, Restricted Stock Unit Awards and Performance Share
Awards that are intended to be “performance-based compensation” (as that term is used for purposes of Code section 162(m)), no more than 2,000,000 shares of Stock may be subject to such Awards granted to any one individual during any
one-calendar-year period (regardless of when such shares are deliverable). 
  
 (v) For Performance Unit Awards that are intended to be “performance-based compensation” (as that term is used for purposes of Code section 162(m)), no more than $5,000,000 may be subject to such Awards
granted to any one individual during any one-calendar-year period (regardless of when such amounts are deliverable). 
  

	(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. 

  

 5 

 4.3. 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 liability to deliver any shares of Stock under the Plan or make any other distribution of benefits under
the Plan unless such delivery or distribution would comply 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. 

  
 4.4. 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, 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). 
  
 4.5. Use of Shares.
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. 
  
 4.6. Dividends and Dividend Equivalents. An Award (including without limitation an Option or SAR Award) may provide
the Participant with the right to receive dividend payments 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. 
  
 4.7. Payments. Awards may be settled through cash payments, the delivery of shares of Stock, the granting of
replacement Awards, or combination thereof as the Committee shall determine. Any Award settlement, including payment deferrals, 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, including 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. 
  

 6 

 4.8. 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. 
  
 4.9. 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. 
  
 4.10.
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 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. 
  
 4.11. 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. 
  
 4.12. 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. 
  
 4.13. 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 their 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 

  

 7 

	 	 
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. 

  
 4.14. 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. 
  
 4.15. 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 5 
  
 CHANGE IN CONTROL 
  
 Subject to the provisions of paragraph 4.2(f) (relating to the adjustment of
shares), and except as otherwise provided in the Plan or the Award Agreement reflecting the applicable Award, upon the occurrence of a Change in Control: 
  

	(a)	All outstanding Options (regardless of whether in tandem with SARs) shall become fully exercisable. 

  

	(b)	All outstanding SARs (regardless of whether in tandem with Options) shall become fully exercisable. 

  

	(c)	All Stock Units, Restricted Stock, Restricted Stock Units, Performance Shares, and Performance Units shall become fully vested. 

  
 SECTION 6 
  
 COMMITTEE 
  
 6.1. 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 6. The Compensation Committee of the Board shall serve as the “Committee” under the Plan, except as otherwise determined by the Board. If the Committee does not exist, or for any other
reason determined by the Board, the Board may take any action under the Plan that would otherwise be the responsibility of the Committee. 
  
 6.2. 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 

  

 8 

	 	 
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 7) 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 of
the Company, and applicable corporate law. 

  
 6.3.
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. 
  
 6.4. 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 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 7 
  
 AMENDMENT AND TERMINATION 
  
 The Board may, at any time, amend or terminate the Plan, 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; provided that adjustments pursuant to subject to
paragraph 4.2(f) shall not be subject to the foregoing limitations of this Section 7. 
  

 9 

 SECTION 8 
  

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

	(a)	Award. The term “Award” shall mean any award or benefit granted under the Plan, including, without limitation, the grant of Options, SARs, Stock Unit Awards,
Restricted Stock Awards, Restricted Stock Unit Awards, Performance Share Awards, and Performance Unit Awards. 

  

	(b)	Board. The term “Board” shall mean 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; 
  
 (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). 
  

 10 

 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” shall mean any employee of the Company or a Subsidiary, and any consultant, director,
or other person providing services to 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 or service provider
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. 

  

	(h)	Subsidiaries. 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. 

  

	(i)	Stock. The term “Stock” shall mean ordinary shares of stock of the Company. 

  

 11Performance Based Restricted Stock Award Terms

 Exhibit 10.39 
 Performance Based Restricted Stock Award Terms 
 under the 
 ACE Limited 2004 Long-Term Incentive Plan 
 The Participant has been granted a Performance Based Restricted Stock Award by ACE Limited (the “Company”) under the ACE Limited 2004 Long-Term Incentive Plan (the “Plan”). The Performance Based
Restricted Stock Award for which the Grant Date occurs in 2006 and any associated Premium Award shall be subject to the following Performance Based Restricted Stock Award Terms: 
 1. Terms of Award. The following words and phrases used in these Performance Based Restricted Stock Award Terms shall have the meanings set forth in this paragraph 1: 
  

	(a)	The “Participant” is                     , who is the individual
recipient of the Performance Based Restricted Stock Award on the specified Grant Date. 

  

	(b)	The “Grant Date” is [Insert Date]. 

  

	(c)	The number of “Covered Performance Shares” is             , which is 25% of that portion of the
Participant’s annual Long-Term Incentive Award which is granted in the form of restricted shares for the year in which the Grant Date occurs, as reflected in the corporate records and shown in the Record-Keeping System in the Participant’s
individual account records. 

 Other words and phrases used in these Performance Based Restricted Stock Award Terms are defined pursuant to
paragraph 10 or elsewhere in these Performance Based Restricted Stock Award Terms. 
 2. Restricted Period. Subject to the limitations of these
Performance Based Restricted Stock Award Terms, the “Restricted Period” for each Installment of Covered Performance Shares of the Performance Based Restricted Stock Award shall begin on the Grant Date and end as described below (but only
if the Date of Termination has not occurred before the end of the Restricted Period): 
  

	(a)	The Restricted Period shall end with respect to one quarter (1/4) of the Covered Performance Shares (the “First Installment”) on the one-year anniversary of the Grant
Date if the Performance Goal has been satisfied for the measurement period beginning on the Grant Date and ending on such one-year anniversary (the “First Installment Primary Performance Measurement Period”). If the Performance Goal with
respect to the First Installment Primary Performance Measurement Period has not been satisfied on the one-year anniversary of the Grant Date, then the Restricted Period for the First Installment shall end on the earliest of the two-year, three-year,
or four-year anniversary of the Grant Date on which the Performance Goal has been satisfied for the measurement period beginning on the Grant Date and ending on such two-year, three-year, or four-year anniversary date, as applicable (any such later
measurement period referred to herein as the “First Installment Secondary Performance Measurement Period”). 

	(b)	The Restricted Period shall end with respect to one quarter (1/4) of the Covered Performance Shares (the “Second Installment”) on the two-year anniversary of the
Grant Date if the Performance Goal has been satisfied for the measurement period beginning on the one-year anniversary of the Grant Date and ending on the two-year anniversary of the Grant Date (the “Second Installment Primary Performance
Measurement Period”). If the Performance Goal has not been satisfied with respect to the Second Installment Primary Performance Measurement Period on the two-year anniversary of the Grant Date, then the Restricted Period for the Second
Installment shall end on the earlier of the three-year anniversary or the four-year anniversary of the Grant Date on which the Performance Goal has been satisfied for the measurement period beginning on the one-year anniversary of the Grant Date and
ending on such three-year or four-year anniversary date, as applicable (any such later measurement period referred to herein as the “Second Installment Secondary Performance Measurement Period”). 

  

	(c)	The Restricted Period shall end with respect to one quarter (1/4) of the Covered Performance Shares (the “Third Installment”) on the three-year anniversary of the
Grant Date if the Performance Goal has been satisfied for the measurement period beginning on the two-year anniversary of the Grant Date and ending on the three-year anniversary of the Grant Date (the “Third Installment Primary Performance
Measurement Period”). If the Performance Goal has not been satisfied with respect to the Third Installment Primary Performance Measurement Period on the three-year anniversary of the Grant Date, then the Restricted Period for the Third
Installment shall end on the four-year anniversary of the Grant Date if the Performance Goal has been satisfied for the measurement period beginning on the two-year anniversary of the Grant Date and ending on the four-year anniversary date (such
later measurement period referred to herein as the “Third Installment Secondary Performance Measurement Period”). 

  

	(d)	The Restricted Period shall end with respect to one quarter (1/4) of the Covered Performance Shares (the “Fourth Installment”) on the four-year anniversary of the
Grant Date if the Performance Goal has been satisfied for the measurement period beginning on the three-year anniversary of the Grant Date and ending on the four-year anniversary of the Grant Date (which measurement period shall be both the
“Fourth Installment Primary Performance Measurement Period” and the “Fourth Installment Secondary Performance Measurement Period”). 

 Notwithstanding the foregoing provisions of this paragraph 2, the Restricted Period with respect to any Installment shall end only upon the Committee’s certification that the Performance Goal with respect to such
Installment for the applicable Performance Measurement Period has been satisfied. Also notwithstanding the foregoing provisions of this paragraph 2, if a Change in Control occurs both (i) on or before the Date of Termination and (ii) when
the Restricted Period for one or more Installments of Covered Performance Shares has not previously occurred, the Restricted Period for such Installments shall end upon the Change in Control. 
  

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 3. Transfer and Forfeiture of Shares. The transfer and forfeiture of Installments of the Covered Performance
Shares shall be subject to the following: 
  

	(a)	Except as otherwise determined by the Committee in its sole discretion, the Participant shall forfeit any Installment of the Covered Performance Shares as of the Participant’s
Date of Termination, if such Date of Termination occurs prior to the end of the Restricted Period which applies to such Installment. 

  

	(b)	The Participant shall forfeit on the four-year anniversary of the Grant Date each Installment of the Covered Performance Shares for which the Restricted Period has not ended on or
prior to such four-year anniversary date, as a result of the Performance Goals not having been met during any Performance Measurement Period applicable to such Installment or otherwise. 

  

	(c)	If the Participant’s Date of Termination has not occurred prior to the last day of the Restricted Period with respect to any Installment of the Covered Performance Shares,
then, at the end of such Restricted Period, that Installment of Covered Performance Shares shall be transferred to the Participant free of all restrictions. 

 4. Premium Award. If the Cumulative Performance of ACE Limited during the period beginning on the Grant Date and ending on the four-year anniversary of the Grant Date (the “Premium Award Performance
Measurement Period”) satisfies the criteria described below, then the Participant shall be entitled to a “Premium Award” on the four-year anniversary of the Grant Date, which Premium Award shall be separate from the associated
Performance Based Restricted Stock Award and shall consist of the number of additional shares of Stock described below: 
  

	(a)	If the Cumulative Performance of ACE Limited exceeds the 75th percentile of the Cumulative Performance of the Peer Companies during the Premium Award Performance Measurement Period,
then the Participant shall be entitled to additional shares of Stock equal to 100% of that number of Covered Performance Shares for which the Restricted Period ended on or before the four-year anniversary of the Grant Date. 

 

	(b)	If the Cumulative Performance of ACE Limited exceeds the 65th percentile of the Cumulative Performance of the Peer Companies during the Premium Award Performance Measurement Period,
then the Participant shall be entitled to additional shares of Stock equal to 50% of that number of Covered Performance Shares for which the Restricted Period ended on or before the four-year anniversary of the Grant Date. 

 

	(c)	If the Cumulative Performance of ACE Limited exceeds the 65th percentile but is less than the 75th percentile of the Cumulative Performance of the Peer Companies during the Premium
Award Performance Measurement Period, then the Participant shall be entitled to additional shares of Stock equal to a percentage of the Covered Performance Shares for which the Restricted Period ended on or before the four-year anniversary of the
Grant Date; which percentage shall be between 50% and 100%, based on an interpolation of the ACE Limited Cumulative Performance falling between the 65th percentile and 75th percentile of the Cumulative Performance of the Peer Companies during the
Premium Award Performance Measurement Period. 

  

	(d)	If the Cumulative Performance of ACE Limited is equal to or below the 65th percentile of the Cumulative Performance of the Peer Companies during the Premium Award Performance
Measurement Period, then the Participant shall be entitled to no additional shares of Stock under this paragraph 4. 

  

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 Notwithstanding the foregoing provisions of this paragraph 4, a Participant shall be entitled to a Premium Award only
upon the Committee’s certification that the requisite Cumulative Performance has been achieved during the applicable Premium Award Performance Measurement Period. Shares of Stock awarded as a Premium Award, if any, shall be transferred to the
Participant as soon as practicable following the end of the Premium Award Performance Measurement Period. Notwithstanding any provision of this Agreement or the Plan to the contrary, the Participant shall have no right with respect to shares of
Stock which may be awarded as a Premium Award under this paragraph 4 until such shares are actually delivered to the Participant. 
 5. Withholding.
All deliveries and distributions under these Performance Based Restricted Stock Award Terms are subject to withholding of all applicable taxes. At the election of the Participant, and subject to such rules and limitations as may be established by
the Committee from time to time, such withholding obligations may be satisfied through the surrender of shares of Stock which the Participant already owns, or to which the Participant is otherwise entitled under the Plan; provided, however, that
such shares 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). 
 6. Transferability. Except as otherwise provided by the Committee, the Performance Based Restricted Stock Award may
not be sold, assigned, transferred, pledge or otherwise encumbered during the Restricted Period. 
 7. Dividends. The Participant shall not be
prevented from receiving dividends and distributions paid on the Covered Performance Shares of Performance Based Restricted Stock merely because those shares are subject to the restrictions imposed by these Performance Based Restricted Stock Award
Terms and the Plan; provided, however that no dividends or distributions shall be payable to or for the benefit of the Participant with respect to record dates for such dividends or distributions for any Covered Performance Shares occurring on or
after the date, if any, on which the Participant has forfeited those shares; nor shall any dividends or distributions be paid to or for the benefit of the Participant with respect to any shares of Stock awarded as a Premium Award if the record date
for such dividends or distributions occurs prior to the date on which such shares of Stock are transferred to the Participant as a Premium Award. 
 8.
Voting. The Participant shall not be prevented from voting the Performance Based Restricted Stock Award merely because those shares are subject to the restrictions imposed by these Performance Based Restricted Stock Award Terms and the Plan;
provided, however, that the Participant shall not be entitled to vote Covered Performance Shares with respect to record dates for any Covered Performance Shares occurring on or after the date, if any, on which the Participant has forfeited those
shares; nor shall the Participant be entitled to vote any shares of Stock which may be awarded as a Premium Award if the record date for entitlement to voting occurs prior to the date on which such shares of Stock are transferred to the Participant
as a Premium Award. 
  

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 9. Deposit of Performance Based Restricted Stock Award. Each certificate issued in respect of the Covered
Performance Shares awarded under these Performance Based Restricted Stock Award Terms shall be registered in the name of the Participant and shall be deposited in a bank designated by the Committee. 
 10. Definitions. For purposes of these Performance Based Restricted Stock Award Terms, words and phrases shall be defined as follows: 
  

	(a)	Change in Control. The term “Change in Control” shall be defined as set forth in the Plan. 

  

	(b)	Cumulative Performance. The term “Cumulative Performance” means, as to ACE Limited or the Peer Companies, the growth in tangible book value per common shares
outstanding as reported under GAAP for ACE Limited or the Peer Companies during the Premium Award Performance Measurement Period beginning on the Grant Date and ending on the fourth anniversary of the Grant Date. The Committee, in its discretion,
may adjust the reported tangible book value for ACE Limited or the Peer Companies for any Premium Award Performance Measurement Period; provided, however, that no such adjustment may result in an increase in the number of shares awarded as a Premium
Award (as described in paragraph 4) over the number of shares of Stock that would have been awarded as a Premium Award had the reported tangible book value for either ACE Limited or the Peer Companies not been adjusted. 

  

	(c)	Date of Termination. A Participant’s “Date of Termination” means, with respect to an employee, the date on which the Participant’s employment with the
Company and the Subsidiaries terminates for any reason, and with respect to a Director, the date immediately following the last day on which the Participant serves as a Director; provided that a Date of Termination shall not be deemed to occur by
reason of a Participant’s transfer of employment between the Company and a Subsidiary or between two Subsidiaries; further provided that a Date of Termination shall not be deemed to occur by reason of a Participant’s cessation of service
as a Director if immediately following such cessation of service the Participant becomes or continues to be employed by the Company or a Subsidiary, nor by reason of a Participant’s termination of employment with the Company or a Subsidiary if
immediately following such termination of employment the Participant becomes or continues to be a Director; and further provided that a Participant’s employment shall not be considered terminated while the Participant is on a leave of absence
from the Company or a Subsidiary approved by the Participant’s employer. 

  

	(d)	Director. The term “Director” means a member of the Board, who may or may not be an employee of the Company or a Subsidiary. 

  

	(e)	Peer Companies. The term “Peer Companies” means those companies listed in the S&P 500 Property Casualty Index (excluding ACE Limited) on the last day of a
Performance Measurement Period for which financial information is available for all year(s) in such Performance Measurement Period. 

  

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	(f)	Performance Goal. The term “Performance Goal” for any Primary Performance Measurement Period or Secondary Performance Measurement Period means the achievement by
ACE Limited of growth in tangible book value per common shares outstanding as reported under GAAP during such Performance Measurement Period, which growth exceeds the median growth in tangible book value per common shares outstanding as reported
under GAAP during the same Performance Measurement Period by the Peer Companies. The Committee, in its discretion, may adjust the reported tangible book value for ACE Limited or the Peer Companies for any Primary Performance Measurement Period or
Secondary Performance Measurement Period; provided, however, that no such adjustment may result in an increase in the number of Covered Performance Shares which are earned and vested at the end of any such Performance Measurement Period over the
number of Covered Performance Shares that would have been earned and vested had the reported tangible book value for either ACE Limited or the Peer Companies not been adjusted. 

  

	(g)	Performance Measurement Period. The term “Performance Measurement Period” shall mean the Primary Performance Measurement Period or the Secondary Performance
Measurement Period, as applicable, with respect to an Installment of Covered Performance Shares; and shall mean the Premium Award Performance Measurement Period with respect to a Premium Award. 

 11. Plan Definitions. Except where the context clearly implies or indicates the contrary, a word, term, or phrase used in the Plan is similarly used in these
Performance Based Restricted Stock Award Terms. 
 12. Heirs and Successors. These Performance Based Restricted Stock Terms shall be binding upon, and
inure to the benefit of, the Company and its successors and assigns, and upon any person acquiring, whether by merger, consolidation, purchase of assets or otherwise, all or substantially all of the Company’s assets and business. If any
benefits deliverable to the Participant under these Performance Based Restricted Stock Terms have not been delivered at the time of the Participant’s death, such benefits shall be delivered to the Designated Beneficiary, in accordance with the
provisions of these Performance Based Restricted Stock Terms and the Plan. The “Designated Beneficiary” shall be the beneficiary or beneficiaries designated by the Participant in a writing filed with the Committee in such form and at such
time as the Committee shall require. If a deceased Participant fails to designate a beneficiary, or if the Designated Beneficiary does not survive the Participant, any rights that would have been exercisable by the Participant and any benefits
distributable to the Participant shall be distributed to the legal representative of the estate of the Participant. If a deceased Participant designates a beneficiary and the Designated Beneficiary survives the Participant but dies before the
complete distribution of benefits to the Designated Beneficiary under these Performance Based Restricted Stock Terms, then any benefits distributable to the Designated Beneficiary shall be distributed to the legal representative of the estate of the
Designated Beneficiary. 
 13. Administration. The authority to manage and control the operation and administration of these Performance Based
Restricted Stock Award Terms shall be vested in the Committee, and the Committee shall have all powers with respect to these Performance Based Restricted Stock Award Terms as it has with respect to the Plan. Any interpretation of these Performance
Based Restricted Stock Award Terms by the Committee and any decision made by it with respect to these Performance Based Restricted Stock Award Terms are final and binding on all persons. 
  

 6 

 14. Plan and Corporate Records Govern. Notwithstanding anything in these Performance Based Restricted Stock Award
Terms to the contrary, these Performance Based Restricted Stock Award Terms shall be subject to the terms of the Plan, a copy of which may be obtained by the Participant from the office of the Secretary of the Company; and these Performance Based
Restricted Stock Award Terms are subject to all interpretations, amendments, rules and regulations promulgated by the Committee from time to time pursuant to the Plan. Notwithstanding anything in the Performance Based Restricted Stock Terms to the
contrary, in the event of any discrepancies between the corporate records regarding this award and the Record-Keeping System, the corporate records shall control. 
 15. Not An Employment Contract. The Performance Based Restricted Stock Award will not confer on the Participant any right with respect to continuance of employment or other service with the Company or any Subsidiary, nor will it
interfere in any way with any right the Company or any Subsidiary would otherwise have to terminate or modify the terms of such Participant’s employment or other service at any time. 
 16. Notices. Any written notices provided for in these Performance Based Restricted Stock Award Terms or the Plan shall be in writing and shall be deemed
sufficiently given if either hand delivered or if sent by fax or overnight courier, or by postage paid first class mail. Notices sent by mail shall be deemed received three business days after mailing but in no event later than the date of actual
receipt. Notices shall be directed, if to the Participant, at the Participant’s address indicated by the Company’s records, or if to the Company, at the Company’s principal executive office. 
 17. Fractional Shares. In lieu of issuing a fraction of a share, resulting from an adjustment of the Performance Based Restricted Stock Award pursuant to
paragraph 5.2(f) of the Plan or otherwise, the Company will be entitled to pay to the Participant an amount equal to the fair market value of such fractional share. 
 18. Amendment. These Performance Based Restricted Stock Award Terms may be amended in accordance with the provisions of the Plan, and may otherwise be amended by written agreement of the Participant and the
Company without the consent of any other person. 
 IN WITNESS WHEREOF, the Company has caused these presents to be executed in its name and
on its behalf, all as of the Grant Date. 
  

			
	ACE LIMITED
		
	By:	 	  

	Its:	 	  

  

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