EXHIBIT 10.3



 



Exhibit 10.3



	 	 	 
	THE CHUBB CORPORATION	 	
SPECIAL

NON EMPLOYEE DIRECTOR

Stock Option Agreement

(Nonstatutory)









This Agreement dated the 5th day of December 2002


W I T N E S S E T H :


     1.     The Chubb Corporation (the “Corporation”) on the date set forth above
has granted and hereby evidences the grant to Lawrence M. Small (the
“Optionee”), subject to the terms and conditions set forth herein the option
(the “Option”) to purchase from the Corporation an aggregate of 3,634 shares of
Common Stock, $1.00 par value, of the Corporation (“Common Stock”), at the
purchase price of $57.78, such price constituting the Fair Market Value of
Common Stock on the date of grant, with the Option to be exercisable as
hereinafter provided. For the purposes of this Agreement, Fair Market Value
shall be the average of the highest and lowest per share sales prices as
reported for consolidated trading of issues listed on the New York Stock
Exchange on the date in question, or, if the Common Stock shall not have traded
on such date, the average of the highest and lowest per share sales prices on
the first date prior thereto on which the Common Stock was so traded. The
Option is intended to be a Nonstatutory Option which does not qualify as an
incentive stock option within the meaning of Section 422 of the Internal
Revenue Code of 1986, as amended. The Option is not granted pursuant to any
plan of the Corporation or its subsidiaries.


     2.     Subject to the terms and conditions hereof, the Option shall be
exercisable in whole or in part at all times from the date hereof until
the termination of the Option on December 5, 2012. Any exercise of the
Option shall be made by giving the Corporation written notice of exercise
specifying the number of shares to be purchased. The notice of exercise
shall be accompanied by tender to the Corporation of the full purchase
price of said shares and the related amount of income taxes required to
be withheld by the Corporation, if any. Payment of the purchase price of
the shares shall be made in cash, check, shares of Common Stock (valued
at Fair Market Value as set forth above) or a combination of the
foregoing.


     3.     Without limiting the generality of paragraph 1 hereof, it is
understood and agreed that the Option is subject to the following
conditions:



		
	 	     (a) Except as provided in (b) below, no option shall be
assignable or transferable, no right or interest of any Optionee
shall be subject to any lien, obligation or liability of the
Optionee, except by will or the laws of descent and distribution,
and during the lifetime of the Optionee to whom an option is
granted, it may be exercised only by the Optionee or by the
Optionee’s legal guardian or legal representative. Notwithstanding
the above, options may be transferred pursuant to a qualified
domestic relations order.




		
	 	     (b) Notwithstanding subparagraph (a) above, the Board may
determine that an option may be transferred by an Optionee to one or
more members of the Optionee’s immediate family, to a partnership of
which the only partners are members of the Optionee’s immediate
family, or to a trust established by the Optionee for the benefit of
one or more members of the Optionee’s immediate family. For this
purpose immediate family means the Optionee’s spouse, parents,
children, grandchildren and the spouses of such parents, children
and grandchildren. A transferee described in this subparagraph may
not further transfer an option. Subject to such conditions that may
be determined by the Board or a person or persons designated by the
Board, an option transferred pursuant to this subparagraph shall
remain subject to all of the applicable provisions of this written
option agreement.




		
	 	     (c) Neither the Optionee nor any legal representative,
legatee, transferee, or distributee of the Optionee shall be deemed
to be a holder of or possess any shareholder rights with respect to
any shares subject to the Option prior to the issuance of such
shares upon exercise of such Option.



 






 






     4.     Restoration Options.



		
	 	     (a) Subject to the conditions of paragraph 4(b) below, in the
event the Optionee exercises the Option, in whole or in part, and
pays the purchase price by delivering shares of Common Stock, the
Optionee shall automatically be granted on the date of such exercise
a Restoration Option. Such Restoration Option shall be a
Non-Statutory Stock Option for the number of shares so tendered
plus, if applicable, any shares of Common Stock tendered to satisfy
withholding tax liability arising in connection with such exercise,
shall have a purchase price equal to the Fair Market Value of a
share of Common Stock on the date of such exercise, shall be
exercisable from the date of grant of such Restoration Option until
the expiration date specified in paragraph 2, above, or the time
provided in paragraph 7, below whichever is earlier, and shall be
reflected in a Restoration Option Agreement furnished to the
Optionee as soon as practicable after the date of such exercise.




		
	 	     (b) Paragraph 4(a) shall not be applicable (I) to an exercise
of this Option after December 4, 2009, (ii) to an exercise of this
Option when the Fair Market Value of a share of Common Stock is not
at least $72.23, (iii) to an exercise of this Option at any time
after the Optionee has terminated service as a Director of the
Corporation for any reason, or (iv) if the Corporation determines
that Paragraph 4(a) shall not be applicable.



     5.     In the event of a stock split, stock dividend, subdivision or
combination of shares or other change in corporate structure affecting
the shares of Common Stock, the number of shares subject to the Option
shall be increased or decreased proportionately, as the case may be, with
appropriate corresponding adjustment in the purchase price per share of
stock thereunder.


     6.     In the case of (I) any merger, consolidation or combination of
the Corporation with or into another corporation (other than a merger,
consolidation or combination in which the Corporation is the continuing
corporation and which does not result in its outstanding Common Stock
being converted into or exchanged for different securities, cash or other
property, or any combination thereof or a sale of all or substantially
all of the assets of the Corporation or (ii) a Change in Control (as
defined below) of the Corporation, the holder of each Option (including
for purposes of this Section any Restoration Option ) then outstanding
immediately prior to such Change in Control shall (unless the Board
determines otherwise) have the right to receive on the date or effective
date of such event an amount in exchange for such Options equal to the
excess of the Fair Market Value on such date of (a) the securities, cash
or other property, or combination thereof, receivable upon such merger,
consolidation or combination in respect of a share of Common Stock, in
the cases covered by clause (i) above, or in the case of a sale of assets
referred to in such clause (i) above, a share of Common Stock, or (b)
the final tender offer price in the case of a tender offer resulting in a
Change in Control or (c) the value of the Common Stock covered by the
Option as determined by the Board, in the case of Change in Control by
reason of any other event, over the exercise price of such Option,
multiplied by the number of shares of Common Stock subject to such
Option. Unless otherwise determined by the Board, such amount will be
payable fully in cash.


     Any determination by the Board made pursuant to this Section 6 will
be made as to all outstanding options and shall be made (a) in cases
covered by clause (i) above, prior to the occurrence of such event, (b)
in the event of a tender or exchange offer, prior to the purchase of any
Common Stock pursuant thereto by the offeror and (c) in the case of a
Change in Control by reason of any other event, just prior to or as soon
as practicable after such Change in Control.


     A “Change in Control” shall be deemed to have occurred if (a) any
person, or any two or more person acting as a group, and all affiliates
of such person or persons, shall own beneficially 25% of more of the
Common Stock outstanding, or (b) if following (i) a tender or exchange
offer for voting securities of the Corporation (other than any such offer
made by the Corporation), or (ii) a proxy contest for the election of
directors of the Corporation, the persons who were directors of the
Corporation immediately before the initiation of such event (or directors
who were appointed by such directors) cease to constitute a majority of
the Board of Directors of the Corporation upon the completion of such
tender or exchange offer or proxy contest or within one year after such
completion.


     7.     In the event that the Optionee’s service as a Director
terminates, the Option shall be automatically cancelled except that upon
termination of an Optionee’s service as a Director for any reason other
than the death of the Optionee, all outstanding options held by such
Optionee on the date of such termination shall expire at the earlier of
(i) the date five years from the date upon which the Optionee ceases to
be a Director, or (ii) the original termination date of the Option. In
the event of the death of an Optionee (whether before or after
termination of service as a Director), all outstanding options held by
such Optionee (and not previously


2






 




cancelled or expired) on the date of such death shall be fully
exercisable by the Optionee’s legal representative within one year after
the date of death.


     8.     Any notice given hereunder to the Corporation shall be addressed
to The Chubb Corporation, attention Corporate Secretary, 15 Mountain View
Road, P.O. Box 1615, Warren, New Jersey 07061-1615, and any notice given
hereunder to the Optionee shall be addressed to him at his address as
shown on the records of the Corporation.


     9.     The Optionee agrees to be bound by the terms and conditions
hereof.


     In Witness Whereof, the Corporation, by its duly authorized officer,
and the Optionee have executed this Agreement in duplicate as of the day
and year first above written.



	 	 	 
	 	 	
The Chubb Corporation
	 	 	
By
	 	 	


	 	 	
  Secretary
	
	
	
	

	 	 	

	
	
	
	



	 	 	


	 	 	
Lawrence M. Small



3