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Sample Business Contracts

Severance Agreement - ACE London Services Ltd. and John Charman

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                                                                 16 May 2001


                             WITHOUT PREJUDICE
                            SUBJECT TO CONTRACT

John Charman

BY HAND

Dear John,

Compromise Agreement

I am writing to set out the terms relating to the termination of your
employment with ACE London Services Limited (the "Company") on 17 March
2001 (the "Termination Date").

1.       The Company confirms that you have been paid your basic salary and
         have received your other contractual benefits (including pension
         contributions) up to and including the Termination Date. Your P45
         form and final payslip were sent to you on 5 April 2001.

2.       You will be reimbursed all expenses incurred in the performance
         of your duties in accordance with normal policy.

3.       On receipt by Allen & Overy, for and on behalf of the Company,
         of your signed acceptance of these terms and a letter from your
         solicitor to us in the form attached as Appendix 1 you will
         receive a payment from the Company by direct credit into your bank
         account of (pound)3,597,241 ("the Notice Payment"), as a payment in
         lieu of notice, pursuant to your Service Agreement dated 9 July
         1998 ("the Service Agreement"). Tax will be deducted from the
         Notice Payment at UK basic rate only, the P45 form having been
         delivered. You acknowledge that the Notice Payment must be
         declared in full in your tax return and that any further tax that
         may be due on the Notice Payment will be payable by you. You
         undertake to indemnify the Company in respect of any additional
         tax for which the Company has to account in respect of these terms
         in accordance with paragraph 19 below.

4.       The Company will pay you the sum of (pound)51,700 as compensation
         for loss of employment ("the Compensation Payment" which together
         with the Notice Payment is referred to as "the Payment"). The
         first (pound)30,000 of the Compensation Payment will be paid to you
         tax free for the time being and tax will be deducted from the
         remainder of the Compensation Payment at UK basic rate only, the
         P45 form having been delivered. You acknowledge that the
         Compensation Payment must be declared in full in your tax return
         and that any further tax that may be due on the Compensation
         Payment will be payable by you. You undertake to indemnify the
         Company in respect of any additional tax for which the Company has
         to account in respect of these terms in accordance with paragraph
         19 below.

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5.       On receipt by Allen & Overy, for and on behalf of the Company,
         of your signed acceptance of these terms and a letter from your
         solicitor to us in the form attached as Appendix 1 the Company
         will make (subject always to Inland Revenue permitted limits and
         any restrictions imposed by the pension provider) a payment of up
         to (pound) 500,000 into the Company sponsored executive pension
         scheme for your benefit with Scottish Life Assurance (Members
         Policy No. E\628069 Scheme Ref. No. DPP-L/1190) and will provide
         you with simultaneous written confirmation of such payment. If the
         Company is unable to pay the full amount of (pound)500,000 into
         your personal pension plan, it shall pay the balance
         of (pound)500,000 by direct credit into your bank account after
         deduction of tax at UK basic rate only. Where payment is made to
         your bank account, you undertake to indemnify the Company in
         respect of any additional tax for which the Company has to account
         in respect of these terms in accordance with paragraph 19 below.

6.       The Company will continue the private healthcare cover for you
         and your family with BUPA until and including 30 April 2002 on the
         same basis as it did immediately prior to the Termination Date

7.       By signing the letter of even date attached as Appendix 2 you
         resign as a director and as a trustee and officer (with effect
         from the Termination Date) of each Group Company, including,
         without limitation, those listed in Appendix 2. In these terms
         "Group Company" means any one of the Company, its subsidiaries,
         ACE Limited and any subsidiary (as defined by section 736 of the
         Companies Act 1985) of ACE Limited and all ACE managed Lloyds'
         syndicates and any predecessor or incidental syndicates and "the
         Group" has the corresponding meaning.

8.       The Company will pay you forthwith the sum of (pound)8,300 as
         compensation for the personal items that were removed from your
         office and have not been replaced, provided that (1) you have
         notified the Police of the disappearance of these items prior to
         the date of this Agreement who have given the report a crime
         reference number and (2) you have provided to the Company a
         certified copy of a receipt confirming the identity and value of
         the said personal items in relation to the bracelets and in the
         case of the DVD player, evidence to show the cost of replacing the
         item. This sum is not subject to deduction of tax as it is not an
         emolument of your employment. It is further agreed that if payment
         of compensation has taken place and the items are subsequently

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         discovered by any person, they will belong to the Company and you
         will forthwith deliver the items to it, should they be located by
         or on your behalf. You further confirm that you have now retrieved
         all other valuable personal items from the Company and that you
         have no further claim to make in this regard. You are not aware of
         whether all personal documents have been returned to you. Should
         any personal documents belonging to you be recovered by the
         Company they will be returned to you forthwith.

9.       You confirm that you have returned to the Company all documents
         and computer disks and other media in your possession or provided
         to you or created in the course of your employment or your holding
         office with any Group Company or relating to, or containing
         information relating to, any Group Company, all credit or charge
         cards, keys, personal computers and all other property belonging
         to any Group Company in your possession, custody or control. You
         also confirm that you have not kept or made a copy of anything
         referred to in this paragraph.

10.      By entering into this Agreement, you affirm that Clauses 12 and
         14 of the Service Agreement shall remain in force and confirm that
         that you will continue to owe to the Company the obligations set
         out in those clauses and you abide by them in their entirety. As
         the "Restriction Period" as defined in clause 14 of your Service
         Agreement is for twelve months from the Termination Date, this
         "Restriction Period" shall expire on 16 March 2002, after which
         time clauses 14.2(a) and 14.2(b) of your Service Agreement shall
         no longer apply. You also confirm that you will abide by the
         obligations imposed upon you by the Deed of Covenant dated 9th
         July, 1998 between yourself, Tarquin Limited, Charman Group
         Limited, Tarquin Underwriters Limited, Charman Underwriting
         Agencies Limited and their successors and assigns. As the
         "Restriction Period" as defined in the Deed of Covenant is the
         later of 24 months from the date of the Deed or twelve months from
         the Termination Date, this "Restriction Period" shall expire on 16
         March 2002 after which time clauses 4.1 and 4.2 of the Deed of
         Covenant shall no longer apply.

11.      Having resigned as a director of the Company and from such other
         offices which you hold within the Group, you will not conduct
         yourself in any way which is inconsistent with having surrendered
         your authority, whether in matters of the internal administration
         of any Group Company or externally. You will not represent
         yourself as being a director of, employed by or connected in any
         way with, any Group Company.

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12.      Both parties agree:

         (a)     to keep the terms of this Agreement and all discussions and
                 other correspondence on this subject confidential and not
                 to disclose them to any other person, except to a
                 professional adviser who has agreed to be bound by this
                 restriction (and in your case your immediate family) and
                 except as may be required by law or regulatory authorities
                 or with the other party's prior written consent;

         (b)     not (except where legally required to do so as part of any
                 legal or regulatory investigation or proceedings) to make,
                 publish or issue or cause to be made, published or issued
                 any untrue or disparaging or derogatory statements
                 whatsoever concerning you or the Company and/or any Group
                 Company or its or their business, products, practices,
                 policies or any other internal Company or Group matter or
                 otherwise in respect of the Company or any Group Company
                 in its or their relations with its/their suppliers,
                 customers, clients, investors, shareholders, bankers,
                 brokers or advisers or concerning any of the officers,
                 directors, agents or employees of the Company or any Group
                 Company.

         (c)     not (except where legally required to do so as part of
                 any legal or regulatory investigation or proceedings) to
                 make any statement which may have the effect of damaging
                 or lowering the reputation of either party (in the
                 Company's case this includes any Group Company or any of
                 its officers or employees).

13.      You further agree that you will not:

         (a)     (except where legally required to do so by any legal or
                 regulatory investigation or proceedings) make, publish or
                 issue or cause to be made, published or issued any
                 statement whatsoever (whether to the Company's
                 shareholders or to investors, investment analysts or to
                 journalists or to the press or to any other person
                 whatsoever) concerning the private affairs of the Company
                 and any Group Company including, without limitation,
                 finances or business dealings (including previous business
                 negotiations and/or strategic discussions with any party)
                 dealings, accounts, accounting policies, reporting
                 methods, forecasts, business plans or any similar
                 confidential information concerning or belonging to the
                 Company or any Group Company of which you were aware by
                 reason of your employment by or office within the Company
                 or any Group Company.


<PAGE>



14.      You confirm that:

         (a)      in so far as you are aware you have not withheld any
                  material information concerning matters of which you were
                  solely aware on behalf of the Company up to the
                  Termination Date where withholding such information would
                  reasonably be expected to be materially detrimental to
                  the financial results of the Company;

         (b)      to the best of your knowledge and belief you are not in
                  breach and have not breached any material term (express or
                  implied) of your contract of employment;

         (c)      your advisers have given the Company's advisers brief
                  details of every complaint that you have or may have
                  against the Company or any Group Company or any of its
                  officers or employees arising out of your employment or
                  its termination, or otherwise about which you are aware
                  at the date of the Agreement ("the Complaints");

         (d)      you have not presented an originating application to an
                  office of the employment tribunals or issued a claim form
                  in the High Court or County Court in connection with your
                  employment or its termination,

         and you undertake that neither you nor anyone acting on your
         behalf will present any further such complaint or present or issue
         an originating application or claim form.

15.1     These terms are offered without any admission of liability
         whatsoever (save as to the basis upon which the Notice Payment is
         made, namely as a payment in lieu of notice) and are in full and
         final settlement of all claims in all jurisdictions that you may
         have as at the date hereof against any Group Company (or any of
         its officers or employees) arising out of or in connection with
         your position as a director of any Group Company, any other
         offices you hold within the Group and your contract of employment
         with any Group Company or its termination or in any other respect
         save as provided for in paragraphs 15.2 and 15.3 below and with
         the exception of accrued pension. Specifically you acknowledge
         that you have carefully considered the facts and circumstances
         relating to your employment by the Company and its termination and
         you accept that the Payment is paid as compensation in full and
         final settlement of any costs, claims, expenses and/or rights of
         action you have or may have arising against the Company and any
         Group Company howsoever arising (whether under common law, statute
         or otherwise and whether arising in the United Kingdom or

<PAGE>

         elsewhere in the world) and including but not limited to a claim
         for unfair dismissal arising from the fact and/or the manner of
         your dismissal and/or any other claims under the Equal Pay Act
         1970, Sex Discrimination Act 1975, Race Relations Act 1976, Trade
         Union and Labour Relations (Consolidation) Act 1992, Employment
         Rights Act 1996, Disability Discrimination Act 1995, Working Time
         Regulations 1998, Human Rights Act 1998, Public Interest
         Disclosure Act 1998, Employment Relations Act 1999 and/or in
         respect of which a Conciliation Officer is authorised to act or
         any claims arising as a consequence of the United Kingdom's
         membership of the European Union, any claim for payment or pension
         loss, payment in lieu of notice, holiday pay, or any other benefit
         or remuneration accrued during your employment which you have or
         may have against the Company and any Group Company and any
         directors, employees and/or consultants of such parties whether
         arising directly or indirectly out of your employment or its
         termination and you hereby waive such costs, claims, expenses
         and/or rights of action.

15.2     The waiver of rights given by you in paragraph 15.1 includes any
         rights of action that you have or may have against the Company,
         any Group Company or any of its officers or employees in
         connection with the Complaints.

15.3     The waiver of rights given by you in paragraph 15.1 above does not
         include any rights of action that you have or may have as a
         shareholder of ACE Limited or of any Group Company against any
         Group Company or any of its or their officers or employees), save
         in relation to the Complaints, where your rights as a shareholder
         of ACE Limited and any Group Company are hereby waived. In all
         other respects, your rights as a shareholder of ACE Limited are
         unaffected by this Agreement.

15.4     It is the understanding of both parties that as at 17 March 2001
         the known shareholdings in ACE Limited of yourself and your family
         trusts are as follows:

         (a)      your personal holding is 844,420 shares, including the
                  tranche of 5000 Restricted Stock Awards vested on 18
                  November 2000 and excluding all of the other unvested
                  Restricted Stock Awards and all of the Stock Options
                  (whether exercised or not) granted to you under the ACE
                  1995 Long-Term Incentive Plan referred to in paragraph 18
                  of this agreement;

         (b)      the holding of Dragon Holdings Trust (account reference JT49)
                  is 1,713,688 shares; and

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         (c)      the holding of the JRC Children's Settlement Trust (account
                  reference JT48) is 259, 969 shares.

16.      The Company confirms to you that it has notified you in writing of
         all complaints and that it is not aware of any claims that it or
         any Group Company or any of its or their officers or employees has
         or may have against you as at the date hereof.

17.      The Company agrees to pay your legal fees up to (pound)86,000 plus
         the VAT thereon in connection with taking advice on the
         termination of your employment and the terms of this Agreement to
         be paid directly to your lawyer (after receipt by the Company of
         an invoice addressed to you and marked payable by the Company
         within 14 days of the receipt of that invoice).

18.      Both parties acknowledge that you have been awarded stock options
         and restricted stock awards in respect of ACE Limited under the
         ACE 1995 Long-Term Incentive Plan (as amended) ("Plan").

         (a)     We will procure that the Board of ACE Limited will
                 exercise its discretion under the Plan to procure that the
                 restricted stock in ACE Limited awarded to you and
                 summarised below will, notwithstanding the termination of
                 your employment, continue to vest (which for the avoidance
                 of doubt shall mean that the Restricted Period in relation
                 to each award of such restricted stock will cease and such
                 stock may be dealt with by you in accordance with the
                 terms of the awards of such restricted stock) as if your
                 employment with the Company were to continue until and
                 including 8 July 2003. Any restricted stock awards that
                 have not vested on 8 July 2003 shall lapse and be
                 forfeited with immediate effect on that date. The decision
                 to and the exercise of this discretion shall be
                 unconditional and irrevocable and evidenced by the
                 delivery to you of a certified copy extract of the minutes
                 of the board meeting of ACE Limited dated 11 May 2001 to
                 that effect on which you may rely for these purposes
                 together with an agreement (in the form approved by you as
                 annexed to this Agreement as Appendix 3) executed by or on
                 behalf of ACE Limited, you and the Company on the date of
                 this Agreement which varies the agreements pursuant to
                 which awards of restricted stock have been granted to you.

         (b)     We will procure that the board of ACE Limited will
                 exercise its discretion to procure that the stock options
                 in ACE Limited awarded to you and summarised below will,
                 notwithstanding the termination of your employment,
                 continue to vest and may be exercisable by you in full
                 without restriction under the rules of the Plan either in
                 relation to exercise or once exercised in relation to
                 dealings or otherwise and may be exercised by you in

<PAGE>

                 accordance with their terms after vesting, as if your
                 employment with the Company were to continue until and
                 including 8 July 2003. Any stock option awards that have
                 not vested on 8 July 2003 shall lapse and be forfeited on
                 that date. The period for the exercise of all stock
                 options awarded to you that have become exercisable shall
                 be extended to any time on or before the tenth anniversary
                 of the date of grant of each such option. The decision to
                 and the exercise of this discretion shall be unconditional
                 and irrevocable and evidenced by the delivery to you of a
                 certified copy extract of the minutes of the board meeting
                 of ACE Limited dated 11 May 2001 to that effect on which
                 you may rely for these purposes together with an agreement
                 (in the form approved by you as annexed to this Agreement
                 as Appendix 3) executed by or on behalf of ACE Limited,
                 you and the Company on the date of this Agreement which
                 varies the agreements pursuant to which awards of stock
                 options have been granted to you.

         (c)     You acknowledge that you will incur an income tax
                 liability for which the Company may be liable in whole or
                 in part to account to the Inland Revenue upon the
                 exercise of your stock option(s) and/or on the vesting of
                 your restricted stock award(s). For the avoidance of
                 doubt any liability for secondary class 1 National
                 Insurance Contributions shall be borne by the Company.

         (d)     This paragraph (d) will apply if you do not wish to
                 utilise ACE Limited's and the Company's cashless exercise
                 facility in respect of your stock options. At the same
                 time as you give any notice to ACE Limited to exercise
                 some or all of your stock options(s) (the "Exercise
                 Notice") accompanied by a remittance in US dollars for the
                 full exercise price, you will provide a copy of the
                 Exercise Notice to the Company together with a remittance
                 in pounds sterling in favour of the Company of an amount
                 equal to your best estimate of the amount in respect of
                 your income tax liability arising as a result of that
                 exercise for which the Company is required to account to
                 the Inland Revenue ("the Estimated Tax Amount"). Subject
                 to any changes in the law or the published practice of the
                 Inland Revenue after the date of this agreement, the
                 Estimated Tax Amount will be computed by reference to the
                 basic rate of UK income tax prevailing at the time of the
                 Exercise Notice and your gain on exercise of the relevant
                 stock option(s) determined by reference to the latest

<PAGE>

                 quoted price of the relevant underlying shares on the day
                 of the Exercise Notice available to you after consulting
                 the most up to date sources and the rate of exchange from
                 US dollars to Sterling based on the spot rate quoted by
                 Barclays Bank on that day for amounts exceeding
                 (pound)50,000. If the Company's liability to
                 account in respect of your income tax in respect of the
                 exercise of your stock option(s) falls to be computed on a
                 different basis at the time of the Exercise Notice from
                 the basis set out above you will provide a remittance to
                 the Company based on your best estimate of the amount the
                 Company is liable to account for to the Inland Revenue in
                 respect of your income tax liability arising as a result
                 of the exercise in place of the remittance computed on the
                 basis set out above. If the Estimated Tax Amount is less
                 or greater than the actual amount of tax for which the
                 Company is required to account to the Inland Revenue you
                 will pay the difference to the Company, or the Company
                 will refund the difference to you (the "Adjustment
                 Payment"), as appropriate, within 10 business days of
                 demand. The Company will account to the Inland Revenue for
                 the amount for which the Company is required to account to
                 the Revenue in respect of your income tax liability
                 arising as a result of the exercise of your relevant stock
                 options. The Company will account to the Inland Revenue in
                 respect of your income tax liability arising on exercise
                 of your stock option(s) even if you claim that you are not
                 resident in the United Kingdom at the time of exercise and
                 the Estimated Tax Amount (and actual tax amount) will be
                 so computed. If, as a consequence of a change in the law
                 or a change in the published Inland Revenue practice, it
                 is established that the Company is not liable to account
                 to the Inland Revenue in respect of the exercise of your
                 stock option(s) if you are not resident in the United
                 Kingdom and you provide satisfactory evidence to the
                 Company that the Inland Revenue accepts that you are not
                 United Kingdom resident at the time of exercise, then you
                 will not be required to account to the Company for the
                 Estimated Tax Amount (or actual tax amount) under this
                 paragraph (d).

         (e)     This paragraph (e) will apply if you wish to utilise ACE
                 Limited's and the Company's cashless exercise facility in
                 respect of your stock options. At the same time as you
                 give any notice to ACE Limited of your intention to
                 exercise some or all of your stock options(s) (the "
                 Notice of Intention to Exercise"), you will provide a copy
                 of the Notice of Intention to Exercise to the Company
                 together with several signed but undated formal notices of
                 exercise and a remittance in favour of the Company of an
                 amount equal to your best estimate of the tax liability
                 which would arise if the relevant stock options were
                 exercised at the time of the Notice of Intention to
                 Exercise and for which the Company would have been

<PAGE>

                 required to account to the Inland Revenue (the "Estimated
                 Tax Amount"). Subject to any changes in the law or the
                 published practice of the Inland Revenue after the date of
                 this agreement the Estimated Tax Amount will be computed
                 by reference to the basic rate of UK income tax prevailing
                 at the time of the Notice of Intention to Exercise and
                 your gain on exercise of the relevant stock option(s)
                 determined by reference to the latest available quoted
                 price of the relevant underlying shares on the day of the
                 Notice of Intention to Exercise and the rate of exchange
                 from US dollars to Sterling based on the spot rate quoted
                 by Barclays Bank on that day for amounts
                 exceeding(pound)50,000. If the Company's liability to
                 account in respect of your income tax in respect of the
                 exercise of your stock option(s) falls to be computed on a
                 different basis at the time you give the Notice of
                 Intention to Exercise from the basis set out above you
                 will provide a remittance to the Company based on your
                 best estimate of the amount of the Company's liability to
                 account to the Inland Revenue in respect of your income
                 tax liability arising as a result of such exercise in
                 place of the remittance computed on the basis set out
                 above. When ACE Limited and/or the Company confirms that
                 the relevant stock option(s) will be treated as being
                 exercised in one or more tranches and notifies ACE
                 Limited's and/or your agents to that effect, the relevant
                 stock option(s) shall be exercised in one or more tranches
                 (and the relevant formal notice(s) of exercise will be
                 dated accordingly) and the aggregate amount in respect of
                 your income tax liability in respect of the exercise of
                 the relevant stock options for which the Company is
                 required to account to the Inland Revenue will be
                 recomputed based on the achieved sale price(s)
                 (representing the market value(s)) on the relevant day or
                 days on which each tranche was exercised and the Company
                 will account to the Inland Revenue for that amount as
                 being the amount which the Company is required to account
                 in respect of your income tax liability arising on the
                 exercise of the relevant stock options. If the aggregate
                 tax liability exceeds the Estimated Tax Amount remitted to
                 the Company on the day the Notice of Intention to Exercise
                 was given, you will remit the additional tax liability to
                 the Company within 10 business days of demand. If the
                 aggregate tax liability is less than the Estimated Tax
                 Amount remitted to the Company on the day the Notice of
                 Intention to Exercise was given the Company will reimburse
                 you for that difference within 10 business days of demand.
                 The Company will provide you with details of the aggregate
                 tax liability. The Company will account to the Inland
                 Revenue in respect of your income tax liability arising on
                 the exercise of your stock option(s) even if you claim
                 that you are not resident in the United Kingdom at the
                 time of exercise and, the Estimated Tax Amount (and actual
                 tax amount) will be so computed. If, as a consequence of a
                 change in the law or a change in the published Inland
                 Revenue practice, it is established that the Company is
                 not liable to account to the Inland Revenue in respect of
                 the exercise of your stock option(s) if you are not
                 resident in the United Kingdom and you provide

<PAGE>

                 satisfactory evidence to the Company that the Inland
                 Revenue accepts you are not United Kingdom resident at the
                 time of exercise, then you will not be required to account
                 to the Company for the Estimated Tax Amount (or actual tax
                 amount) under this paragraph (e). If ACE Limited and/or
                 the Company establishes arrangements for its employees and
                 former employees generally under which the cashless
                 exercise facility may be used to recoup an amount equal to
                 the amount for which the Company is liable to account to
                 the Inland Revenue in respect of the tax liability arising
                 on exercise of the stock option(s), the Company and/or ACE
                 Limited will notify you of such arrangements promptly and
                 they will be extended to you at your request.

         (f)     Unless paragraph (g) below applies ACE Limited and the
                 Company shall operate all their normal procedures in
                 respect of restricted stock award(s) so as to recoup an
                 amount equal to the amount of your income tax arising on
                 the vesting of your restricted stock awards for which the
                 Company is required to account to the Inland Revenue.
                 This would be the retention or cancellation or non-issue
                 to you of such proportion of the shares underlying the
                 restricted stock award which has vested with a market
                 value (on the date of vesting) equal to the amount for
                 which the Company is required by law to account to the
                 Inland Revenue in respect of your income tax liability
                 arising on the vesting of the relevant restricted stock
                 award.

         (g)     This paragraph (g) applies if you give notice in writing
                 to the Company and ACE Limited not later than the
                 thirtieth day before the date on which any of your
                 restricted stock awards is due to vest that you wish to
                 receive the gross number of shares comprised in the
                 restricted stock award on vesting (rather than the net
                 amount after tax in accordance with paragraph (f)) ("Gross
                 Vesting Notice"). If you give a Gross Vesting Notice you
                 shall remit to the Company an amount equal to your best
                 estimate the amount in respect of your income tax
                 liability arising as a result of that vesting for which
                 the Company is required to account to the Inland Revenue
                 (the "Estimated Tax Amount"). Subject to any changes in
                 the law or the published practice of the Inland Revenue
                 after the date of this Agreement the Estimated Tax Amount
                 will be computed by reference to the basic rate of UK
                 income tax prevailing at the time the relevant restricted
                 stock award vests and the latest available quoted price of
                 the shares comprised in the relevant stock award and the
                 latest available rate of exchange from US dollars to

<PAGE>

                 sterling based on the spot rate quoted by Barclays Bank
                 for amounts exceeding(pound)50,000. Provided the Company
                 receives the Estimated Tax Amount on or before the date on
                 which the relevant restricted stock award vests paragraph
                 (f) above shall not apply and you shall be entitled to the
                 gross amount of the restricted stock award on the relevant
                 vesting date (but if the Estimated Tax Amount has not been
                 received by that date the normal procedures for recouping
                 the Company's liability to account for income tax in
                 respect of the restricted stock award that vests shall
                 apply). All necessary adjustments shall apply as at the
                 date on which the relevant restricted stock award vests
                 and shall be based on the market value of the underlying
                 stock concerned and the appropriate exchange rate on that
                 day (and you shall account to the Company for any
                 deficiency and the Company shall account to you for any
                 excess compared to the Estimated Tax Amount) and the
                 Company shall account to the Inland Revenue accordingly.
                 The Company will account to the Inland Revenue in respect
                 of your income tax liability arising on the vesting of
                 your restricted stock award(s) even if you claim that you
                 are not resident in the United Kingdom at the time of
                 vesting and the Estimated Tax Amount (and actual tax
                 amount) will be so computed. If, as a consequence of a
                 change in the law or a change in the published Inland
                 Revenue practice, it is established that the Company is
                 not liable to account to the Inland Revenue in respect of
                 the vesting of your restricted stock award(s) if you are
                 not resident in the United Kingdom and you provide
                 satisfactory evidence to the Company that the Inland
                 Revenue accepts that you are not United Kingdom resident
                 at the time of vesting, then you will not be required to
                 account to the Company for the Estimated Tax Amount (or
                 actual tax amount) under this paragraph (g).

         (h)     If the Company's liability to account for any amount in
                 respect of your income tax in respect of the exercise of
                 stock option(s) or the vesting of restricted stock
                 award(s) exceeds the amount which the Company recoups
                 under the procedures set out above in this clause you
                 agree to indemnify, and keep indemnified, the Company
                 against any such excess liability. The Company shall not
                 be entitled to recover twice from you in respect of the
                 same liability.

         (i)     If you use the cashless exercise facility in respect of
                 any of your stock option(s) or if you wish to retain any
                 shares you acquire on exercise of your stock option(s) or
                 any of your restricted stock after it has vested and you
                 consider that there has been delay by any agent acting on
                 behalf of ACE Limited in implementing any of the
                 procedures required to deal with your instructions, you
                 may notify us in writing of your concerns. If you so
                 notify us we will transmit your concerns to that agent and
                 use all reasonable endeavours to encourage that agent to
                 carry out your instructions efficiently and without
                 further delay. Any such agent operates its own procedures
                 over which ACE Limited does not have any control.

<PAGE>

         (j)     Both parties agree that the following table summarises
                 the stock options and restricted stock to which you are
                 entitled and to which this paragraph 18 applies:

              Stock Options                                 Vesting
              -------------                                 -------

  Date of      No. of    Exercise Price      No.                     Date
  Grant        Shares

  12           100,000    $29.625            33,333        12 November, 1999
  November,
  1998                                       33,333        12 November, 2000
                                             33,334        12 November, 2001

  18           60,000     $19.3125           20,000        18 November, 2000
  November,
  1999                                       20,000        18 November, 2001
                                             20,000        18 November, 2002

  22           66,000     $36.30             22,000        22 February, 2002
  February,
  2001                                       22,000        22 February, 2003
                                             22,000        22 February 2004


                       Restricted Stock Awards
                       -----------------------               Vesting
                                                             -------

  Date of Award         No. of Shares            No.              Date

  18 November, 1999     20,000                   5,000      18 November, 2000
                                                 5,000      18 November, 2001
                                                 5,000      18 November, 2002
                                                 5,000      18 November, 2003

  22 February, 2001     27,500                   6,875      22 February, 2002

                                                 6,875      22 February, 2003
                                                 6,875      22 February, 2004
                                                 6,875      22 February, 2005

<PAGE>

                 For the avoidance of doubt, the table on Stock Options
                 includes all Stock Options whether vested or unvested and
                 the table on Restricted Stock Awards includes all
                 Restricted Stock awards whether vested or unvested.

         (k)     We have provided duplicate copies of each of the
                 agreements reflecting the awards of restricted stock and
                 stock options referred to above.

         (l)     The Company confirms to you that the exercise price of
                 $36.30 for the stock options which were granted to you on
                 22 February 2001 is the same exercise price for all
                 employees of the Company who were granted stock options at
                 that time.

         (m)     The Company confirms that you have not been granted
                 options under the ACE Limited Approved UK Stock Option
                 Programme approved on 24 November 1997.

19.      You will be liable for and will indemnify and hold harmless the
         Company in respect of any liability incurred by the Company to
         account for any of your income tax in respect of the Payment under
         or by virtue of any regulations made under Section 203 Income and
         Corporation Tax Act 1988 or otherwise and/or any penalty, fine
         and/or amount of any interest payable by the Company to the Inland
         Revenue as a result of any delay, non-disclosure or other fault by
         you arising from any liability for such taxation, whether arising
         under or by virtue of the said Section 203 Income and Corporation
         Tax Act 1988 or otherwise provided that before meeting any
         assessment raised against the Company by any competent authority,
         the Company will inform you of any such assessment within 21 days
         of receiving the same and will provide you with its reasonable
         co-operation to challenge any such assessment

20.      It is confirmed that, subject to any relevant restrictions at
         law, you are free and unrestricted to deal in stock of ACE
         Limited.

21.      You agree to give all reasonable assistance (at all reasonable
         times on reasonable notice save where a witness order has been
         served at short notice) to the Group upon request, with disputes
         which may arise or have arisen (whether or not proceedings of any
         kind have been instituted) with any Group Company where you have
         relevant knowledge in relation to that dispute, including without
         limitation, attending meetings, providing statements and acting as
         a witness for the Company or any Group Company, as appropriate.
         The Company agrees to meet your reasonable expenses incurred in
         providing such assistance and in addition shall pay you a daily
         rate of (pound)5,000 plus VAT for any day or part of a day spent
         providing such assistance save that if you spend less than one
         hour on one occasion in any 24 hour period providing such

<PAGE>

         assistance then the fee for this time spent shall be(pound)1,000
         plus VAT. For the avoidance of doubt, the obligation to pay for
         assistance shall extend to any case where you are named as a
         representative party in proceedings (whether in court or in
         arbitration) arising out of or in connection with the operation of
         any Group Company's business.

22.      You warrant that at the time of entering into this Agreement save
         for the Complaints you are not aware of any reason why any other
         matter could represent a "protected and qualifying disclosure" for
         the purposes of the provisions of the Public Interest Disclosure
         Act 1998, or of the Employment Rights Act 1996 which (1) arose or
         may have arisen during the period of your employment with the
         Company and (2) could be the subject of any claim on your part.

23.      The Company will on any reasonable request by a prospective
         employer or employment agency or regulatory authority or
         prospective business partner or prospective investor provide a
         written reference in the form attached as Appendix 4 and will
         respond to any oral or written enquiries in a manner consistent
         with this reference and without adding a gloss of any kind.

24.      The Company will maintain in force on a continuing basis
         Directors' and Officers' liability insurance in respect of the
         period during which you were a director of the Company or any
         Group Company at the same level of cover as that enjoyed by
         members of the Board of ACE Limited or the relevant Group Company,
         as appropriate. You shall not be required to pay any part of the
         Company's retention or aggregate deductible relating to this
         insurance.

25.      Except as expressly stated in paragraphs 15.1 and 28.1 of this
         letter, a person who is not a party to this agreement may not
         enforce any of its terms under the Contracts (Rights of Third
         Parties) Act 1999.

26.      There are in place various employee trusts and schemes (the
         "trusts"), for the benefit of employees of Group Companies. For
         the avoidance of doubt such trusts include the Charman Group
         Limited 1993 Executive Share Option Scheme, the Methuen Employee
         Trust and any of their successors or assigns. You do not qualify
         as a beneficiary of and you confirm that you waive all rights and
         entitlements which you may have to receive, or otherwise seek, any
         payment or benefit in relation to those trusts.

<PAGE>

27.      These terms are governed by English law. You and the Company agree
         to submit to the exclusive jurisdiction of the English courts as
         regards any claim or matter arising in connection with these
         terms.

28.1.    The provisions of these paragraphs 28.1 and 28.2 are recited
         here for the avoidance of doubt, and do not limit the foregoing
         provisions of this Agreement. Except for a claim based upon a
         breach of this Agreement, you, on behalf of yourself and the other
         Employee Releasors, release and forever discharge the Company and
         the other Company Releasees from any and all Claims which you now
         have or claim, or might hereafter have or claim (or the other
         Employee Releasors may have, to the extent that it is derived from
         a Claim which you may have), against the Company Releasees based
         upon or arising out of any matter or thing whatsoever, occurring
         or arising on or before the date of this Agreement, to the extent
         that the Claim arises out of or relates to your employment by any
         Group Company (including your service as a director of any of the
         Group Companies) and/or your termination or resignation therefrom
         (with the exception of accrued pension rights), and shall include,
         without limitation, Claims arising out of or related to the
         Service Agreement, and Claims arising under (or alleged to have
         arisen under) the following laws or requirements of the United
         States (including the states therein) (a) Title VII of the Civil
         Rights Act of 1964, as amended; (b) The Civil Rights Act of 1991;
         (c) Section 1981 through 1988 of Title 42 of the United States
         Code, as amended; (d) the Employee Retirement Income Security Act
         of 1974, as amended; (e) The Immigration Reform Control Act, as
         amended; (f) The Americans with Disabilities Act of 1990, as
         amended; (g) The National Labor Relations Act, as amended; (h) The
         Fair Labor Standards Act, as amended; (I) The Occupational Safety
         and Health Act, as amended; (j) The Family and Medical Leave Act
         of 1993; (k) any state anti-discrimination law; (l) any state wage
         and hour law; (m) any other local, state or federal law,
         regulation or ordinance; (n) any public policy, contract, tort, or
         common law; or (o) any allegation for costs, fees, or other
         expenses including attorneys' fees incurred in these matters. For
         the avoidance of doubt this waiver of rights by you does not
         include any claim which you have or may have (or the Employee
         Releasors may have to the extent that it is derived from a claim
         which you may have) as a shareholder of ACE Limited against any
         Group Company or any of the Company Releasees, save in relation to
         the Complaints where your rights as a shareholder are waived.


<PAGE>

28.2     For purposes of the General Release and Waiver, the terms set
         forth below shall have the following meanings:

                   o  the term "Claims" shall include any and all rights,
                      claims, demands, debts, dues, sums of money,
                      accounts, attorneys' fees, complaints, judgements,
                      executions, actions and causes of action of any
                      nature whatsoever, cognizable at law or equity;

                   o  the term "Company Releasees" shall include each of
                      the Group Companies and their officers, directors,
                      trustees, members, representatives, agents,
                      employees, shareholders, partners, attorneys,
                      assigns, administrators and fiduciaries under any
                      employee benefit plan of any of the Group Companies,
                      and insurers, and their predecessors and successors;
                      and

                   o  the term "Employee Releasors" shall include you and
                      your family, heirs, executors, representatives,
                      agents, insurers, administrators, successors,
                      assigns, and any other person claiming through you.

29       To the extent that you are entitled to continuing benefit under
         clause 100 of the Articles of Association of ACE Limited and any
         indemnity on similar terms contained in the Articles of
         Association, Bye Laws or other constitutional documents of any
         Group Company the Company will procure that you shall continue to
         enjoy that benefit.

30.      The Company is entering into this Agreement on behalf of itself
         and its Group Companies. The Company warrants that the signature
         and performance of the Agreement are within the corporate powers
         of the Company, have been duly authorised by all necessary
         corporate action and do not contravene either the Memorandum or
         Articles of Association of the Company nor any law, rule,
         regulation or requirement applicable to the Company.


Please signify your agreement to these terms by signing and returning to me
the enclosed duplicate of this letter.

Yours sincerely,

BRIAN DUPERREAULT
Brian Duperreault
Director of ACE London Services Limited and of ACE Limited
For and on behalf of the Company and all of the Group Companies

<PAGE>

I agree to the terms set out in the Company's letter above and confirm that
the conditions regulating compromise agreements under the Employment Rights
Act 1996, the Disability Discrimination Act 1995, the Sex Discrimination
Act 1975, the Race Relations Act 1976, the Equal Pay Act 1970, the Trade
Union and Labour Relations (Consolidation) Act 1992, the Working Time
Regulations 1998, the Human Rights Act 1998, the Public Interest Disclosure
Act 1998 have been satisfied in relation to this Agreement.

In particular I confirm that I have taken independent legal advice from
Jane Mann of Fox Williams on the terms and effect of this letter and my
rights against the Company and any other Group Company and on the basis of
that advice I accept those terms. Ms Mann has confirmed to me that she is a
qualified solicitor holding a current practising certificate and that she
or her firm has an insurance policy in force covering the risk of a claim
by me in respect of any loss arising in consequence of her advice, less any
deductible, uninsurable or excess.


Signature:        JOHN CHARMAN

Date:             16TH MAY 2001


<PAGE>


                                 APPENDIX 1
16 May 2001

FORM OF SOLICITOR'S LETTER

I , Jane Mann. of Fox Williams refer to the letter dated 16 May 2001 from
Ace London Services Limited to John Charman (the "Letter"). I am a
qualified solicitor holding a current practising certificate as a partner
in the firm of Fox Williams. The firm has an insurance policy in force
covering the risk of a claim by Mr Charman in respect of any loss arising
in consequence of my advice, less any deductible, uninsurable or excess. I
have advised Mr Charman regarding his rights against the Company (and any
Group company as referred to in the Letter) (including his rights under the
statutes referred to in the Letter) and the effect of agreeing to the terms
set out in the Letter.



<PAGE>

                                 APPENDIX 2

          [Resignation of directorships and other offices letter]


                                                                 16 May, 2001

To whom it may concern:

Resignation of directorships and other offices letter

Without claim for compensation for loss of office or otherwise (but without
prejudice to any claim I may have for damages for breach of my employment
agreement with ACE London Services Limited dated 9 July 1998), I hereby
resign and if requested by the Company will at the cost of the Company do
all things reasonably necessary to resign, effective from 17 March, 2001,
from all positions I currently hold (including directorships, officerships,
trusteeships, active underwriter positions and powers-of-attorney) with all
subsidiaries and managed syndicates of ACE Limited, a Cayman Islands
company, including, without limitation, the following companies and
syndicates:

ACE London Aviation Limited
ACE London Underwriting Limited
ACE Underwriting Agencies Limited
ACE UK Underwriting Limited
ACE Capital Limited
ACE Capital II Limited
ACE Capital III Limited
ACE Capital IV Limited
ACE Capital V Limited
ACE Capital VI Limited
ACE Capital VII Limited
ACE European Markets Reinsurance Limited
ACE European Markets Insurance Limited
ACE Financial Services Limited
ACE London Holdings Limited
ACE London Investments Limited
ACE London Group Limited
ACE (CG) Limited
ACE Group Holdings Limited
ACE Global Markets Limited
ACE Insurance SA NV
ACE UK Limited
ACE UK Holdings Limited
ACE Tarquin
ACE Tempest Reinsurance Limited
ACE London Services Limited
ACE Underwriting Services Limited
ACE (PM) Limited
AGM Underwriting Limited
ACE Trustees Limited
ACE (CR) Holdings

<PAGE>

ACE (RGB) Holdings Limited
Ridge Underwriting Agencies Limited
ACE Holdings (Gibraltar) Limited
ACE Underwriting Agencies Limited Retirement Benefits Scheme
Charman Underwriting Agencies Retirement Benefits Scheme
All ACE managed Lloyd's syndicates including but not limited to 488, 2488,
483, 375, 112, 490, 47, 122, 219, 484, 1171, 48, 925, 960, and any
predecessor or incidental syndicate.


------------------------------------
John Charman


<PAGE>


                                 APPENDIX 3


DATED                                                                    2001
-------------------------------------------------------------------------------




                              ACE LIMITED (1)

                              JOHN CHARMAN (2)

                                  - and -

                      ACE LONDON SERVICES LIMITED (3)




-------------------------------------------------------------------------------

                       DEED OF VARIATION IN RELATION
                         TO AWARDS OF STOCK OPTIONS
                    AND RESTRICTED STOCK IN ACE LIMITED

-------------------------------------------------------------------------------




<PAGE>



                             TABLE OF CONTENTS

1.   INTERPRETATION.......................................................3
2.   VARIATIONS...........................................................4
3.   WARRANTIES...........................................................5
4.   NO WAIVER............................................................6
5.   MISCELLANEOUS........................................................6
6.   THIRD PARTY RIGHTS...................................................6
7.   VARIATION............................................................6
8.   COUNTERPARTS.........................................................6
9.   ENGLISH LAW..........................................................6



<PAGE>



THIS DEED OF VARIATION  is made                                           2001
BETWEEN:

(1)      ACE LIMITED a company incorporated under the laws of the Cayman
         Islands whose address is The ACE Building, 30 Woodbourne Avenue,
         Hamilton HM08 Bermuda ("ACE");

(2)      JOHN CHARMAN of Dell House, Wildernesse Avenue, Sevenoaks, Kent
         TN15 OEA ("Mr Charman"); and

(3)      ACE LONDON SERVICES LIMITED a company incorporated in England and
         Wales (Company no: 3205604) whose registered office is at Crosby
         Court, 38 Bishopsgate, London EC2N 4DL ("Ace London").


INTRODUCTION

(A)      Mr Charman has been awarded stock options in ACE in accordance
         with the terms of the Plan (as defined below) and pursuant to the
         provisions of the relevant stock option agreement, brief
         particulars of which are summarised in Schedule 1 ("Stock Option
         Awards"). Copies of such stock option agreements are annexed
         hereto ("Stock Option Agreements").

(B)      Mr Charman has been awarded restricted stock in ACE in accordance
         with the terms of the Plan (as defined below) and pursuant to the
         provisions of the relevant restricted stock agreement, brief
         particulars of which are summarised in Schedule 2 ("Restricted
         Stock Awards"). Copies of such restricted stock agreements are
         annexed hereto ("Restricted Stock Agreements").

(C)      This Deed of Variation is entered into pursuant and is
         supplemental to the provisions of a compromise agreement entered
         into today between ACE London and Mr Charman which sets out the
         terms relating to the termination of Mr Charman's employment with
         ACE London ("Compromise Agreement").

(D)      Amongst other things, it is a requirement of the Compromise
         Agreement that the terms on which the Stock Option Awards and the
         Restricted Stock Awards have been granted are varied in accordance
         with this Deed of Variation.

(E)      The Board of ACE, acting by its Compensation Committee, has
         exercised its discretions under the Plan to procure that the terms
         on which the Stock Option Awards and the Restricted Stock Awards
         have been granted are varied in accordance with the terms of the
         Compromise Agreement and this Deed of Variation.

NOW THIS DEED WITNESSES
IT IS AGREED as follows:

1.       INTERPRETATION

1.1      In this Deed of Variation and its recitals and schedules, save
         where otherwise expressly provided or unless the context provides
         otherwise:-


         "Compromise Agreement"         has the meaning given in recital (C);

         "Plan"                         means the ACE Limited 1995 Long-Term
                                        Incentive Plan dated 15 February
                                        1996 as amended;

<PAGE>

         "Restricted Stock Agreements"  has the meaning given in recital (B);

         "Restricted Stock Awards"      has the meaning given in recital (B);

         "Stock Option Agreements"      has the meaning given in recital (A);

         "Stock Option Awards"          has the meaning given in recital (A);


1.2      In this Deed of Variation and its recitals and schedules, save
         where otherwise expressly provided or unless the context provides
         otherwise:

         1.2.1    words importing one gender shall be treated as importing
                  any gender, words importing individuals shall be treated
                  as importing bodies corporate, corporations,
                  unincorporated associations and partnerships and vice
                  versa, words importing the singular include the plural
                  and vice versa and words importing the whole shall be
                  treated as including a reference to any part;

         1.2.2    clause, schedule and annexe headings and the list of
                  contents are inserted for ease of reference only and
                  shall not affect construction;

         1.2.3    references to recitals, clauses, schedules and annexures
                  are to the recitals and clauses of and the schedules and
                  annexures to this Deed of Variation.

2.       VARIATIONS

2.1      Notwithstanding the earlier termination of the employment of Mr
         Charman, it is agreed that for the purposes of the Stock Option
         Awards and the Restricted Stock Awards, the Date of Termination
         (as such expression is defined and used in the Plan, Stock Option
         Agreements and the Restricted Stock Agreements) of Mr Charman's
         employment with ACE London shall be deemed to be 8 July 2003 to
         the effect that:-

2.2      all Stock Option Awards shall continue to vest in accordance with
         the terms of the Stock Option Agreements as if Mr Charman's
         employment with Ace London continues until and including 8 July
         2003; and

2.3      all Restricted Stock Awards shall continue to vest (which for the
         avoidance of doubt shall mean that the Restricted Period (as such
         expression is defined in the Plan and used in the Restricted Stock
         Agreements) in relation to each award of such restricted stock
         will cease and such stock may be dealt with by Mr Charman at that
         time) in accordance with the terms of the Restricted Stock
         Agreements as if Mr Charman's employment with ACE London continues
         until and including 8 July 2003.

2.4      For the avoidance of doubt, no restrictions will be imposed under
         the rules of the Plan on Mr Charman's dealings or otherwise in
         relation to stock in ACE comprising restricted stock that has
         vested or stock options that have been exercised.

<PAGE>

2.5      Once exercisable in accordance with their terms, all Stock Option
         Awards may be exercised at any time within the period of ten years
         from the date of grant of each such Stock Option Award.

2.6      The Stock Option Agreements and the Restricted Stock Agreements
         shall in each case, to the extent relevant, be varied in
         accordance with the provisions referred to above, but in all other
         respects the terms on which the Stock Option Awards and Restricted
         Stock Awards have been granted shall be unchanged. The variation
         of each such Stock Option Agreement and Restricted Stock Agreement
         (as applicable) is made unconditionally and irrevocably as from
         the date of this Deed of Variation.

2.7      For the avoidance of doubt, all Restricted Stock Awards that have
         not vested and Stock Option Awards that have not become
         exercisable by 8 July 2003 shall be forfeited on that date and
         shall lapse.

3.       WARRANTIES

3.1      ACE and ACE London jointly and severally warrant to Mr Charman in
         the following terms:-

3.1.1    the Board of ACE, acting by its Compensation Committee, has
         lawfully and properly exercised its discretion under the Plan and
         the Stock Option Agreements to vary the terms on which the Stock
         Option Awards have been granted in accordance with the provisions
         of clause 2 above;

3.1.2    the Board of ACE, acting by its compensation committee, has
         lawfully and properly exercised its discretion under the Plan and
         the Restricted Stock Agreements to vary the terms on which
         Restricted Stock Awards have been granted in accordance with the
         provisions of clause 2 above;

3.1.3    the information given in the Schedules to this Deed of Variation
         is a true and accurate summary of all the awards of restricted
         stock and stock options in ACE that have been granted to Mr
         Charman under the Plan and he has not been granted restricted
         Stock and Stock options in ACE under any other plan of ACE;

3.1.4    as at the date hereof each of them has full authority, power and
         capacity under their respective memorandum and articles of
         association or other constitutional documents to enter into and
         perform the terms of this Deed of Variation;

3.1.5    the execution and performance by each of them of the terms of this
         Deed of Variation have been duly authorised by all necessary
         corporate action on their respective parts without any further
         proceedings or action being required;

3.1.6    this Deed of Variation has been duly executed and delivered by
         each of them and constitutes a valid, legal and binding legal
         obligation enforceable against each of them in accordance with the
         terms of this Deed of Variation;

3.1.8    each of their Directors or other persons executing on their behalf
         this Deed of Variation are duly authorised;

3.1.8    the execution and performance by each of them of this Deed of
         Variation is not subject to the approval or consent of any third
         party, governmental authority or regulatory body or otherwise, or
         if such approval or consent is required, it has been duly
         obtained.

<PAGE>

4.       NO WAIVER

4.1.     No failure to exercise and no delay in exercising on the part of
         any party any right, power of privilege under this Deed of
         Variation shall operate as a waiver, nor shall any single or
         partial exercise of any right, power or privilege preclude any
         other or further exercise of it or the exercise of any other
         right, power or privilege.

4.2      In the event that any party shall expressly waive any breach,
         default or omission under this Deed of Variation, no such waiver
         shall apply to, or shall operate as, a waiver of similar breaches,
         defaults or omissions or be deemed a waiver of any other breach,
         default or omission under this Deed of Variation.

4.3      The rights and remedies of each of the parties in connection with
         this Deed of Variation are cumulative and are not exclusive of any
         rights or remedies provided by law.

5.       MISCELLANEOUS

5.1      ACE and ACE London shall jointly and severally do all such things
         as may be within their power to ensure that the provisions of this
         Deed of Variation are observed and performed and shall indemnify
         and keep Mr Charman indemnified against any costs or losses
         suffered by him as a result of any failure so to do.

5.2      In the event of any provision contained in this Deed of Variation
         or any part of it being declared invalid or unenforceable, all
         other clauses contained in this Deed of Variation shall remain in
         full force and effect and shall not be affected by it.

5.3      Save in the case of fraud, this Deed of Variation, the Compromise
         Agreement, the Stock Option Agreements, the Restricted Stock
         Agreements and the Plan embody the entire understanding between
         the parties in relation to their subject matter and there are no
         promises, terms, conditions or obligations, oral or written,
         expressed or implied, other than those contained herein or therein
         and together they supersede any prior agreement between the
         parties.

6.       THIRD PARTY RIGHTS

6.1      A person who is not a party to this Deed of Variation has no right
         under the Contracts (Rights of Third Parties) Act 1999 to enforce
         any term of this Deed of Variation. This clause does not affect
         any right or remedy of a third party which exists or is available
         otherwise than by operation of that Act.

7.       VARIATION

7.1      This Deed of Variation may only be varied in writing signed by all
         the parties or their respective duly authorised representatives.

8.       COUNTERPARTS

8.1      This Deed of Variation may be executed in any number of
         counterparts all of which when executed shall constitute one and
         the same agreement.

<PAGE>

9.       ENGLISH LAW

9.1      This Deed of Variation shall be governed by and construed in
         accordance with English Law and the parties submit to the
         non-exclusive jurisdiction of the English courts in relation to
         all matters, claims and disputes arising out of or in connection
         with this Deed of Variation or any document supplemental to it.


EXECUTED AS A DEED the day and year first before written



<PAGE>


                                 SCHEDULE 1



              Stock Options                                 Vesting
              -------------                                 -------

  Date of      No. of    Exercise Price      No.                     Date
  Grant        Shares

  12th         100,000    $29.625            33,333        12th November, 1999
  November,
  1998                                       33,333        12th November, 2000
                                             33,334        12th November, 2001

  18th         60,000     $19.3125           20,000        18th November, 2000
  November,
  1999                                       20,000        18th November, 2001
                                             20,000        18th November, 2002

  22th         66,000     $36.30             22,000        22th February, 2002
  February,
  2001                                       22,000        22th February, 2003
                                             22,000        22th February 2004


For the avoidance of doubt, the table of Stock Options includes all Stock
Options whether vested or unvested.

The awards of stock options were made pursuant to the Stock Option
Agreements under the Plan made between Mr Charman and ACE dated 12 November
1998, 18 November 1999 and 22 February 2001.


<PAGE>


                                 SCHEDULE 2


                       Restricted Stock Awards
                       -----------------------               Vesting
                                                             -------

  Date of Award         No. of Shares            No.              Date

  18 November, 1999     20,000                   5,000      18 November, 2000

                                                 5,000      18 November, 2001
                                                 5,000      18 November, 2002
                                                 5,000      18 November 2003

  22 February, 2001     27,500                   6,875      22 February, 2002

                                                 6,875      22 February, 2003
                                                 6,875      22 February 2004
                                                 6,875      22 February 2005


For the avoidance of doubt, the table of Restricted Stock awards includes
all Restricted Stock awards whether vested or unvested.

The awards of restricted stock were made pursuant to Restricted Stock
Agreements under the Plan made between Mr Charman and ACE and dated 18
November 1999 and 22 February 2001.


<PAGE>


EXECUTED and DELIVERED by ACE        )
Limited by means of these signatures )
and delivered:                       )

                                           Director


                                           Director/Secretary



EXECUTED and DELIVERED by ACE       )
London Services Limited by means of )
these signatures and delivered:     )

                                          Director


                                          Director/Secretary


EXECUTED as a DEED by              )
John Charman in the presence of:   )












<PAGE>


                                 APPENDIX 4

                              Agreed Reference



John Charman was employed by ACE London Services Limited as Chief Executive
Officer from 9 July 1988 (when ACE Limited acquired Charman Underwriting
Agencies Limited) until 17 March 2001. During this time he was responsible
for the management of the Lloyd's operations. He was appointed President,
ACE International and assumed responsibility for all of the ACE Group's
operations outside Bermuda and the US with effect from 1 February 2001.

ACE Limited and ACE London Services Limited have no reason to doubt Mr
Charman's honesty and integrity and are not aware of any impropriety in his
financial or other dealings.

This reference is given without liability on the part of ACE Limited and
ACE London Services Limited and the writer.