Exhibit 10.5


 


THE CHUBB
CORPORATION

LONG-TERM STOCK INCENTIVE PLAN

FOR NON-EMPLOYEE DIRECTORS (2004)


 


PERFORMANCE SHARE
AWARD AGREEMENT


 


This PERFORMANCE SHARE
AWARD AGREEMENT, dated as of April 25, 2006, is by and between The Chubb
Corporation (the “Corporation”) and [                ]
(the “Participant”), pursuant to The Chubb Corporation Long-Term Stock
Incentive Plan for Non-Employee Directors (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 Participant has been granted
Performance Shares; 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”).  (1)


 


2.     Payment
of Earned Performance Shares.


 


(a)           Settlement
of Performance Shares. Subject to the provisions of this Section 2 and
Section 3(e), 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 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).






(1)   The
number of Performance Shares shall be equal to the quotient of (i) $67,500
divided by (ii) the average of the high and low trading prices of the Stock on
the Grant Date, rounded up to the nearest whole number.


 

















 


Payments hereunder shall be made in cash, shares of
Stock, or a combination thereof, as determined by the Committee in its sole
discretion.


 


(b)           Voluntary
Deferral. Notwithstanding the provisions of Section 2(a), the Participant
may elect, by election filed with the Corporation (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 first date the
Participant has ceased to be a member of the Board of Directors and has
separated from service from the Corporation and all other members of the
Corporation’s controlled group of entities. Once the condition described in the
immediately preceding sentence has been satisfied, settlement shall occur as
soon as administratively practicable thereafter, in cash, shares of Stock, or a
combination thereof, as determined by the Committee in its sole discretion.


 


3.     Vesting
Criteria Applicable to Performance Shares.


 


(a)           Performance
Cycle. The Performance Cycle for this Award shall commence on January 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 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 will not be a Comparison Company).


 


(c)           Comparison
of Total Shareholder Return. Except as provided in Section 4, 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 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 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; 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).


 


(e)           Termination
of Service on the Board of Directors. The Participant’s cessation of
services as a member of the Board of Directors for any reason shall have no
effect on the rights and entitlements of the Participant to receive payment in
respect of the Performance Shares; provided, however, that if the
Participant’s service on the Board of Directors is terminated for cause, as
determined by the Committee (or if the Committee determines that the
Participant resigned from the Board of Directors in anticipation of being
removed for cause), then the Participant shall forfeit any and all rights in
respect of the Performance Shares covered by the Award and such Performance
Shares shall be immediately forfeited and cancelled without further action by
the Corporation or the Participant as of the date of such termination of
service.


 


4.     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 3 shall be treated in accordance with
Section 9 of the Plan; provided, however, that if 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.


 


5.     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.


 


6.     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
Transferee (as defined in Section 11(a) of the Plan) with the permission of,
and subject to such conditions as may be imposed by, the Committee.


 


7.     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 4, the Participant shall have no rights as a
shareholder.


 


8.     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.


 


9.     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).


 


10.   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.


 


11.   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.


 


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


 


13.   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: