Exhibit 10.3


 


THE CHUBB CORPORATION LONG-TERM STOCK 

INCENTIVE PLAN (2004)


 


Performance Share Award Agreement


 


This PERFORMANCE SHARE AWARD AGREEMENT, dated as of                      ,
2006, is by and between The Chubb Corporation (the “Corporation”) and [               ]
(the “Participant”), pursuant to The Chubb Corporation Long-Term Stock
Incentive Plan (2004) (the “Plan”). Capitalized terms that are not
defined herein shall have the same meanings given to such terms in the Plan. If
any provision of this Agreement conflicts with any provision of the Plan (as
either may be interpreted from time to time by the Committee), the Plan shall
control.


 


WHEREAS, pursuant to the
provisions of the Plan, the Committee has authorized the grant to the
Participant of Performance Shares in accordance with the terms and conditions
of this Agreement; and


 


WHEREAS, the Participant and the
Corporation desire to enter into this Agreement to evidence and confirm the
grant of such Performance Shares on the terms and conditions set forth herein.


 


NOW THEREFORE, the Participant
and the Corporation agree as follows:


 


1.             Grant
of Performance Shares.  Pursuant to
the provisions of the Plan, the Corporation on the date set forth above (the “Grant
Date”) has granted and hereby evidences the grant to the Participant,
subject to the terms and conditions set forth herein and in the Plan, of an
Award of
[               ]
Performance Shares (the “Award”).


 


2.             Payment
of Earned Performance Shares.


 


(a)           Settlement
of Performance Shares.  Subject to
the provisions of this Section 2, Section 4 and Section 5, the Payment Value of
each Performance Share covered by the Award which the Committee determines, in
writing, to be earned pursuant to Section 3 shall be paid by the Corporation on
a date (the “vesting date”) as soon as administratively practicable after (but
no later than 21⁄2 months after the calendar year end coincident with) the end of
the Performance Cycle described in Section 3(a). Payments hereunder shall be
made in cash, shares of Stock, or a combination thereof, as determined by the
Committee in its sole discretion. Notwithstanding the aforementioned, the
vesting date shall be the last day of the Performance Cycle if (i) the
Participant experiences a Qualifying Termination of Employment on or after
December 31, 2006 or (ii) the Committee determines, in its discretion,
pursuant to Section 4(b), that the Participant will not forfeit his or her
rights to Performance Shares upon his or her termination of employment for
other reasons; in either case, provided the Committee determines, in writing,
that Performance Shares are to be awarded hereunder.


 

















 


(b)           Voluntary
Deferral.  Notwithstanding the
provisions of Section 2(a), the Participant may elect, by election filed with
the Corporation under its Key Employee Deferred Compensation Plan (2005) (or
any successor plan or program) (the “Deferred Compensation Plan”), and on a
form acceptable to the Committee, not later than June 30, 2008 and subject to
such terms and conditions as the Committee may specify, to have any payment
that may become due in respect of Performance Shares covered by the Award
deferred until such later time as shall be specified in such election (or, if
applicable, the date determined pursuant to Section 2(c)).


 


(c)           Mandatory
Deferral of Payment of Earned Performance Shares.  Notwithstanding anything contained in Section
2(a) or 2(b) to the contrary (unless the payment date elected pursuant to
Section 2(b) is later than the payment date specified herein, in which case
Section 2(b) shall control), if the Corporation’s Ending Average Value is less
than the Corporation’s Beginning Average Value (as such terms are defined in
Section 3(c)), no settlement shall be made in respect of any Performance Shares
earned in accordance with Section 3 until the earlier of (i) the first
date on or before March 10, 2010 on which the average of the averages of the
highest and lowest sales prices of the Stock reported for consolidated trading
of issues listed on the New York Stock Exchange for the 15 trading days prior
to such date exceeds the Beginning Average Value and (ii) March 10, 2011. Once
either of the conditions described in the immediately preceding sentence has
been satisfied, settlement shall occur as soon as practicable thereafter (in
the case of condition (i), not later than March 15, 2010, and in the case of
condition (ii) not later than April 9, 2011) in cash, shares of Stock or a
combination thereof, as determined by the Committee in its sole discretion. If
the Participant experiences a Qualified Termination of Employment on or after
December 31, 2006, or if the Committee determines, in its discretion pursuant
to Section 4(b), that the Participant will not forfeit his or her rights to
Performance Shares upon his or her termination of employment for other reasons,
settlement shall not occur until March 10, 2011.


 


3.             Vesting
Criteria Applicable to Performance Shares.


 


(a)           Performance
Cycle.  The Performance Cycle for
this Award shall commence on May 1, 2006, and shall end on December 31, 2008.


 


(b)           Performance
Goal.  The Performance Goal for the
Performance Cycle is the total return per share of Stock to the Corporation’s
shareholders, inclusive of dividends paid (regardless of whether paid in cash
or property, which dividends shall be deemed reinvested in Stock), during the
Performance Cycle in comparison to the total return per share of stock,
inclusive of dividends paid (regardless of whether paid in cash or property,
which dividends shall be deemed reinvested in stock), achieved by the companies
(i) which are in the Standard & Poors 500 Index (the “S&P 500”)
on the date the Performance Cycle begins and (ii) which continue to file
public reports pursuant to the Act for the entirety of the Performance Cycle
(such companies, the “Comparison Companies”). For the avoidance of
doubt, a company included in the S&P 500 on the date the Performance Cycle
commences that is not


 


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included in the S&P 500 at the conclusion of the Performance Cycle
will be a Comparison Company as long as it files public reports pursuant to the
Act for the entire Performance Cycle (and any company first included in the
S&P 500 after the start of the Performance Cycle would not be a Comparison
Company).


 


(c)           Comparison
of Total Shareholder Return.  Except
as provided in Section 5, the Performance Shares covered by the Award shall be
deemed earned based on where the Corporation’s total shareholder return during
the Performance Cycle ranks in relation to the total shareholder returns of the
Comparison Companies during such period. For purposes of calculating the total
shareholder return of the Corporation and the Comparison Companies during the
Performance Cycle, the value of each such company’s stock at the beginning and
end of the Performance Cycle shall be established based on the average of the
averages of the high and low trading prices of the applicable stock on the
principal exchange on which the stock trades for the 15 trading days occurring
immediately prior to the beginning or end of the Performance Cycle, as the case
may be. Such averages for each such company (including the Corporation) shall
be referred to herein as the “Beginning Average Value” and the “Ending Average
Value.” As soon as practicable after the completion of the Performance Cycle,
the total shareholder returns of the Comparison Companies will be calculated
and ranked from highest to lowest. The Corporation’s total shareholder return
will then be ranked in terms of which percentile it would have placed in among
the Comparison Companies. In calculating the total shareholder return with
respect to either the Corporation or any of the Comparison Companies, the
Committee shall make or shall cause to be made such appropriate adjustments to
the calculation of total shareholder return for such entity (including, without
limitation, adjusting the Beginning Average Value) as shall be necessary or
appropriate to avoid an artificial increase or decrease in such return as a
result of a stock split (including a reverse stock split), recapitalization or
other similar event affecting the capital structure of such entity that does
not involve the issuance of the entity’s securities in exchange for money,
property or other consideration.


 


(d)           Percentage
of Performance Shares Earned.  The
extent to which Performance Shares shall become earned on the vesting date
described in Section 2(a) shall be determined according to the following
schedule:


 




	
  Relative

  Performance

  Level Percentile

  	
   

  	
  Percent of

  Performance

  Shares Earned

  	
   

  
	
  85th or higher

  	
   

  	
  200

  	
  %

  
	
  50th

  	
   

  	
  100

  	
  %

  
	
  25th

  	
   

  	
  50

  	
  %

  
	
  Under 25th

  	
   

  	
  0

  	
  %

  






 


To the extent that the Corporation’s total shareholder
return ranks in a percentile between the 25th and the 50th percentile, or
between the 50th and the 85th percentile, of comparative performance, then the
number of Performance Shares earned on the vesting


 


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date shall be determined by multiplying the relative
percentile of comparative performance achieved by the Corporation by two (e.g.,
if the Corporation’s total shareholder return would have placed in the 40th
percentile, then 80% of the Performance Shares covered by the Award become
earned on the vesting date; if the Corporation’s total shareholder return would
have placed in the 75th percentile, then 150% of the Performance Shares covered
by the Award become earned on the vesting date).


 


4.             Termination
of Employment.  Except as provided in
this Section 4 or in Section 5, the Participant shall not have any right to any
payment hereunder unless the Participant is employed by the Corporation or a
Subsidiary on the date the Performance Shares subject to this Award are settled
pursuant to Section 2(a) (or would have been settled without regard to any
other provision of Section 2).


 


(a)           Qualifying
Termination of Employment.  If the
Participant’s employment terminates by reason of a Qualifying Termination of
Employment on or after December 31, 2006, the Participant shall be entitled to
receive the same Payment Values (without pro-ration) in respect of the
Performance Shares covered by the Award as would have been payable, and at the
same time and subject to the same conditions, had his or her employment
continued until the end of the Performance Cycle.


 


(b)           Termination
for any Other Reason.  Unless otherwise
determined by the Committee, if the Participant’s employment is terminated
prior to the date on which the Performance Shares subject to this Award are
settled pursuant to Section 2(a) (or would have been settled without regard to
any other provision of Section 2) for any reason other than a Qualifying
Termination of Employment occurring on or after December 31, 2006, all of the
Participant’s rights to Performance Shares covered by the Award shall be
immediately forfeited and canceled without further action by the Corporation or
the Participant as of the date of such termination of employment. Notwithstanding
the preceding sentence, the Participant’s Performance Shares shall be
immediately forfeited and cancelled without further action by the Corporation
or the Participant upon the Participant’s termination of employment for Cause.
For purposes of the Award, the term “Retirement” shall mean a termination of
the Participant’s employment other than for Cause at or after the Participant’s
normal retirement age or earliest retirement date, in each case as specified in
the Corporation’s Pension Plan. Accordingly, all of the Participant’s
Performance Shares shall be forfeited and cancelled without further action by
the Corporation or the Participant as of the date a Participant is terminated
for Cause, whether prior to, on, or after the Participant’s normal retirement
age or earliest retirement date, in each case as specified in the Corporation’s
Pension Plan.


 


(c)           Transfers
between the Corporation and Subsidiaries; Leaves, Other Absences and Suspension.
 Transfer from the Corporation to a
Subsidiary, from a Subsidiary to the Corporation, or from one Subsidiary to
another shall not be considered a termination of employment. Any question
regarding whether a Participant’s employment has terminated in connection with
a leave of absence or other absence from


 


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active employment shall be determined by the Committee, in its sole
discretion, taking into account the provisions of applicable law and the
Corporation’s generally applicable employment policies and practices. The
Committee may also suspend the operation of the termination of employment
provisions of this Agreement for such period and upon such terms and conditions
as it may deem necessary or appropriate to further the interests of the
Corporation.


 


(d)           Termination
Pursuant to a Change in Control.  Notwithstanding
the provisions of Section 4(b), if the Participant’s employment is
involuntarily terminated other than for Cause or if the Participant terminates
employment due to death or Disability, in all such cases on or after the date
the Corporation’s shareholders approve a Change in Control pursuant to
subsections (iii) or (iv) of such definition but prior to the consummation of
such Change in Control, the Participant shall be treated as having continued
employment through, and terminated employment immediately after, such Change in
Control.


 


5.             Change
in Control.  Notwithstanding anything
in Section 2 or 3 to the contrary, in the event a Change in Control occurs,
Performance Shares covered by the Award not previously forfeited pursuant to
Section 4 shall be treated in accordance with Section 9 of the Plan, in which
case the Performance Shares covered by the Award shall become earned and
payable as provided in Sections 9(a)(ii) and 9(a)(iii) of the Plan or, if
applicable, be honored, assumed or substituted for in accordance with Section
9(b) of the Plan. Notwithstanding the foregoing, if the Performance Shares shall
become earned and payable as provided in Sections 9(a)(ii) and 9(a)(iii) of the
Plan, but the accelerated payment of the Performance Shares would subject the
Participant to taxation under Section 409A of the Code, then the payment due to
the Participant shall not be made until the earliest permissible payment date
(including, but not limited to, the vesting date) that would not subject the
Participant to taxation under Section 409A of the Code.


 


6.             Adjustment
in Capitalization.  In the event that
the Committee shall determine that any stock dividend, stock split, share
combination, extraordinary cash dividend, recapitalization, reorganization,
merger, consolidation, split-up, spin-off, combination, exchange of shares,
warrants or rights offering to purchase Stock at a price substantially below
fair market value, or other similar corporate event affects the Stock such that
an adjustment is required in order to preserve, or to prevent the enlargement
of, the benefits or potential benefits intended to be made available under this
Award, then the Committee shall, in its sole discretion, and in such manner as
the Committee may deem equitable, adjust any or all of the number and kind of
Performance Shares subject to this Award and/or, if deemed appropriate, make provision
for a cash payment to the person holding this Award, provided, however, that,
unless the Committee determines otherwise, the number of Performance Shares
subject to this Award shall always be a whole number.


 


7.             Restrictions
on Transfer.  Performance Shares may
not be sold, assigned, hypothecated, pledged or otherwise transferred or
encumbered in any manner except (i) by will or the laws of descent and
distribution or (ii) to a “Permitted


 


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Transferee”(as defined in Section 11(b) of the Plan) with the
permission of, and subject to such conditions as may be imposed by, the
Committee.


 


8.             No
Rights as a Shareholder.  Until
shares of Stock are issued, if at all, in satisfaction of the Corporation’s
obligations under this Award, in the time and manner specified in Section 2 or
5, the Participant shall have no rights as a shareholder.


 


9.             Notice.
 Any notice given hereunder to the
Corporation shall be addressed to The Chubb Corporation, Attention Secretary,
15 Mountain View Road, P.O. Box 1615, Warren, New Jersey 07061-1615, and any
notice given hereunder to the Participant shall be addressed to the Participant
at the Participant’s address as shown on the records of the Corporation.


 


10.           Restrictive
Covenants.  As a condition to the
receipt of the Award made hereby, the Participant agrees to be bound by the
terms and conditions hereof and of the Plan, including the following
restrictive covenants:


 


(a)           Non-Disclosure.
The Participant shall not, without prior written authorization from the Committee,
disclose to anyone outside the Corporation, or use (other than in the
Corporation’s or any of the Subsidiaries’ business), any confidential
information or material relating to the business of the Corporation or any of
the Subsidiaries that is acquired by the Participant either during or after
employment with the Corporation or any of the Subsidiaries.


 


(b)           Non-Solicitation.
Unless the Participant has received prior written authorization from the
Committee, the Participant shall not during his or her employment or service
with the Corporation or any of the Subsidiaries and for a period of one (1)
year following any termination of such employment or service relationship (the “Restricted
Period”):


 


(i)            Directly
or indirectly, employ, solicit, persuade, encourage or induce any individual
employed by the Corporation or any of the Subsidiaries to become employed by or
associated with any person or entity other than the Corporation or any of the
Subsidiaries; or


 


(ii)           Directly
or indirectly, solicit business on behalf of a Competitive Business from any
Customer with whom the Participant has had, or employees reporting to the
Participant have had, personal contact or dealings with on behalf of the
Corporation or any of the Subsidiaries during the one (1) year period preceding
the Restricted Period.


 


(c)           Non-Competition.
Unless the Participant has received prior written authorization from the
Committee, the Participant shall not, whether during his or her employment or
service with the Corporation or any of the Subsidiaries or during the
Restricted Period, directly or indirectly compete with the business of the
Corporation or any of the Subsidiaries by becoming an officer, agent, employee,
consultant, partner or director of a Competitive Business, or otherwise render
services to or assist or hold an


 


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interest (except as a less than one (1) percent shareholder of a public
company) in any Competitive Business.


 


“Customer” shall
mean a person or entity to which the Corporation or any of the Subsidiaries is
at the time providing services.


 


“Competitive Business”
shall mean any person or entity (including any joint venture, partnership,
firm, corporation or limited liability company) that engages, directly or
indirectly, in the property and casualty insurance business, including, but not
limited to, commercial insurance, personal insurance, specialty insurance,
surety, excess and surplus lines and/or reinsurance, and/or any other business
which is a significant business of, the Corporation and the Subsidiaries as of
the date of the Participant’s termination of employment or service with the
Corporation or any of the Subsidiaries; provided however, that a business set
forth above shall not be considered a “Competitive Business” in the event that,
as of the date of the Participant’s termination of employment or service with
the Corporation or any of the Subsidiaries, such business is no longer a
business of the Corporation or any of the Subsidiaries.


 


(d)           Inventions.
 A Participant shall disclose promptly
and assign to the Corporation all right, title, and interest in any invention
or idea, patentable or not, made or conceived by the Participant during
employment by the Corporation or any of the Subsidiaries, relating in any
manner to the actual or anticipated business, research or development work of
the Corporation or any of the Subsidiaries and shall do anything reasonably
necessary to enable the Corporation or any of the Subsidiaries to secure a
patent, copyright or any other intellectual property rights where appropriate
in the United States and in foreign countries.


 


(e)           Relief
with Respect to Violations of Covenants.  Failure to comply with the provisions of this
Section 10 at any point before payment in respect of earned Performance Shares
covered by the Award is made pursuant to the provisions of Section 2 or 5 shall
cause all Performance Shares covered by the Award to be cancelled and rescinded
without any payment therefor. For the avoidance of doubt, following a failure
to comply with this Section 10, payments in respect of any portion of the
Performance Shares covered by the Award that have been deferred under the
Deferred Compensation Plan in accordance with Section 2 hereof shall be
forfeited, and accordingly the Participant shall have no further right to
receive any such payment(s). In the event that all or any portion of the
Performance Shares covered by this Award shall have been settled in accordance
with the terms of this Agreement within twelve (12) months of the date on which
any breach by the Participant of any of the provisions of this Section 10 shall
have first occurred, the Committee may require that the Participant repay (with
interest or appreciation (if any), as applicable, determined up to the date
payment is made), and the Participant shall promptly repay, to the Corporation
the value of any cash or property (including the Fair Market Value of any
Stock) conveyed to the Participant within such period in respect of such
Performance Shares. Additionally, the Participant agrees that the Corporation
shall be entitled to an injunction, restraining order or such other equitable
relief restraining the Participant from committing any violation of the


 


7

















 


covenants or obligations contained in this Section 10. These rescission
rights and injunctive remedies are cumulative and are in addition to any other
rights and remedies the Corporation may have at law or in equity. The Participant
acknowledges and agrees that the covenants and obligations in this Section 10
relate to special, unique and extraordinary matters and that a violation or
threatened violation of any of the terms of such covenants or obligations will
cause the Corporation and the Subsidiaries irreparable injury for which
adequate remedies are not available at law.


 


(f)            Reformation.
 The Participant agrees that the
provisions of this Section 10 are necessary and reasonable to protect the
Corporation in the conduct of its business. If any restriction contained in
this Section 10 shall be deemed to be invalid, illegal or unenforceable by
reason of the extent, duration or geographical scope hereof, or otherwise, then
the court making such determination shall have the right to reduce such extent,
duration, geographical scope or other provisions hereof, and in its reduced
form such restriction shall then be enforceable in the manner contemplated
hereby.


 


11.           Withholding.
 The Corporation shall have the right to
deduct from all amounts paid to the Participant in cash in respect of
Performance Shares covered by the Award any amount of taxes required by law to
be withheld as may be necessary in the opinion of the Corporation to satisfy
tax withholding required under the laws of any country, state, province, city
or other jurisdiction. In the case of any payments of Performance Shares
covered by the Award in the form of Stock, at the Committee’s discretion, the
Participant shall be required to either pay to the Corporation the amount of
any taxes required to be withheld with respect to such Stock or, in lieu
thereof, the Corporation shall have the right to retain (or the Participant may
be offered the opportunity to elect to tender) the number of shares of Stock
whose Fair Market Value equals such amount required to be withheld.


 


12.           Committee
Discretion; Delegation.  Notwithstanding
anything contained in this Agreement to the contrary, the Committee may take
any action that is authorized under the terms of the Plan that is not contrary to
the express terms hereof, including permitting the Participant to receive (upon
such terms and conditions as the Committee shall determine) all or a portion of
the Performance Shares covered by the Award, up to the maximum amount that
would have been payable, despite the termination of the Participant’s
employment prior to the settlement date specified pursuant to Section 2(a). Nothing
in this Agreement shall limit or in any way restrict the power of the
Committee, consistent with the terms of the Plan, to delegate any of the powers
reserved to it hereunder to such person or persons as it shall designate from
time to time.


 


13.           No
Right to Continued Employment.  Neither
the execution and delivery hereof nor the granting of the Award shall
constitute or be evidence of any agreement or understanding, express or
implied, on the part of the Corporation or any of the Subsidiaries to employ or
continue the employment of the Participant for any period.


 


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14.           Governing
Law.  The Award and the legal
relations between the parties shall be governed by and construed in accordance
with the laws of the State of New Jersey (without reference to the principles
of conflicts of law).


 


15.           Signature
in Counterpart.  This Agreement may
be signed in counterparts, each of which shall be an original, with the same
effect as if the signature thereto and hereto were upon the same instrument.


 


16.           Binding
Effect; Benefits.  This Agreement
shall be binding upon and inure to the benefit of the Corporation and the
Participant and their respective successors and permitted assigns. Nothing in
this Agreement, express or implied, is intended or shall be construed to give
any person other than the Corporation or the Participant or their respective
successors or assigns any legal or equitable right, remedy or claim under or in
respect of any agreement or any provision contained herein.


 


17.           Amendment.
 This Agreement may not be altered,
modified or amended except by a written instrument signed by the Corporation
and the Participant.


 


18.           Sections
and Other Headings.  The section and
other headings contained in this Agreement are for reference purposes only and
shall not affect the meaning or interpretation of this Agreement.


 


IN WITNESS WHEREOF, the
Corporation, by its duly authorized officer, and the Participant have executed
this Agreement in duplicate as of the day and year first above written.


 


	
   

  	
  THE
  CHUBB CORPORATION

  
	
   

  	
  By:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Secretary

  
	
   

  	
   

  
	
   

  	
  By:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Participant

  



 


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