Exhibit 10.3


 


THE
CHUBB CORPORATION

LONG-TERM STOCK

INCENTIVE PLAN (2004)


 


Performance
Share Award Agreement


 


This PERFORMANCE SHARE AWARD AGREEMENT, dated as of March 3,
2005, 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 Qualified
Termination of Employment on or after December 31, 2005 or (ii) the Committee
determines, in its discretion, pursuant to Section 4(b), that the
Participant will not


 


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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), and on a form acceptable to the Committee,
not later than June 30, 2007 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, 2009 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) the first date
on which the Participant has both reached age 60 and terminated employment with
the Corporation and all other members of the Corporation’s controlled group of
entities.  Once either of the conditions
described in the immediately preceding sentence has been satisfied, settlement
shall occur as soon as practicable thereafter (and in the case of condition (i),
not later than March 15, 2009) 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, 2005, 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 the first date on which the Participant has attained age 60 (or, in the
case of the Participant’s death, would have attained age 60).  If a Participant terminates employment after
reaching age 60, is a “specified employee” (as that term is defined in Section 409A(a)(2)(B)(i)
of the Code) at the time he or she terminates employment, and is scheduled to
have his or her Performance Shares settled pursuant to condition (ii), no
settlement shall be made until at least six months after such termination of
employment, or the Participant’s death, if earlier.


 


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3.                                       Vesting
Criteria Applicable to Performance Shares.


 


(a)                                                  Performance
Cycle.  The Performance Cycle for
this Award shall commence on May 1, 2005, and shall end on December 31,
2007.


 


(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 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


 


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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 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, 2005, 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


 


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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,
2005, 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.


 


(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 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.


 


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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 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.  A Participant shall not, without prior
written authorization from the Corporation, 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.  A Participant shall not during his or her
employment with the Corporation or any of the Subsidiaries and for a period of one
year following any termination of such employment relationship, directly or
indirectly, solicit, persuade, encourage or induce any individual employed by
the


 


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Corporation or any of the
Subsidiaries during the above-referenced time periods to become employed by or
associated with any person or entity other than the Corporation or any of the Subsidiaries,
which employs the Participant or for which the Participant serves as an
officer, director, shareholder, partner or consultant, or with any firm related
to any such person or entity or to permit any other person or entity to do so
on the Participant’s behalf.


 


(c)                                  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.


 


(d)                                 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.  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 six 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 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.


 


(e)                                  Reformation.  The Participant agrees that the provisions of
this Section 10 are necessary and reasonable to protect the Corporation in
the conduct


 


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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.


 


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.


 


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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.


 


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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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