Document:

EMPLOYMENT AGREEMENT: FINNEGAN

 

Exhibit 10.1

EXECUTION COPY

EMPLOYMENT AGREEMENT

     AGREEMENT by and between The Chubb Corporation (the “Company”), and John
D. Finnegan (the “Executive”) dated as of the 21st day of January, 2003.

     WHEREAS, the Board of Directors of the Company (the “Board”) has
determined that it is in the best interests of the Company and its shareholders
to employ the Executive as the Company’s President and Chief Executive Officer
and to have the Executive become a member of the Board;

     WHEREAS, the Company desires to employ the Executive and to enter into an
agreement embodying the terms of such employment; and

     WHEREAS, the Executive desires to enter into this Agreement and to accept
such employment, subject to the terms and provisions of this Agreement;

     NOW, THEREFORE, in consideration of the premises and mutual covenants
contained herein and for other good and valuable consideration, the receipt of
which is mutually acknowledged, the Company and the Executive (individually a
“Party” and together the “Parties”) agree as follows:

          1. Effective Date. The “Effective Date” shall mean December 1, 2002.

          2. Employment Period. The Company hereby agrees to employ the Executive,
and the Executive hereby agrees to be employed by the Company subject to the
terms and conditions of this Agreement, for the period commencing on the
Effective Date and ending on the third anniversary thereof (the “Initial
Term”), provided that, commencing on December 1, 2003, the employment period
shall be extended each day by one day to create a new two-year term until, at
any time on or after such date, the Company or the Executive delivers a written
notice (a “Notice of Non-Renewal”) to the other Party that the employment
period shall expire at the end of such two-year term (the Initial Term as so
extended, the “Employment Period”).

          3. Terms of Employment. (a) Position and Duties. (i) During the
Employment Period, (A) the Executive shall serve as the President and Chief
Executive Officer of the Company and shall be responsible for the general
management of the Company, with such authority, duties and responsibilities as
are commensurate with such positions and as may be consistent with such
positions (taking into account the duties and responsibilities of the
non-executive Chairman of the Board, if any), reporting directly to the Board,
and (B) the Executive’s principal location of employment shall be at the
principal headquarters of the Company; provided, that the Executive may be
required under reasonable business circumstances to travel outside of such
location in connection with performing his duties under this Agreement. In
addition, the Company shall cause the Executive to be appointed as a member of
the Board as of the Effective Date, and following such date, the Executive
shall remain on the Board, subject to Section 4(g), and shall perform his
duties as a director of the Company conscientiously and faithfully.

 

 

               (ii) The Executive agrees that during the Employment Period, he shall
devote substantially all of his business time, energies and talents to serving
as the Company’s President and Chief Executive Officer, perform his duties
conscientiously and faithfully subject to the reasonable and lawful directions
of the Board, and in accordance with each of the Company’s corporate governance
and ethics guidelines, conflict of interests policies and code of conduct
(collectively, the “Company Policies”) applicable to all Company employees or
senior executives generally and copies of which have been or will be provided
to the Executive within a reasonable period of time following the adoption of
the particular Company Policy. During the Employment Period, it shall not be a
violation of this Agreement for the Executive, subject to the requirements of
Section 8, to (A) serve on corporate, civic or charitable boards or committees;
provided, that, the Parties agree that the Executive shall not serve on any
corporate boards (other than as provided in this Agreement) prior to December
1, 2003, (B) deliver lectures or fulfill speaking engagements and (C) manage
personal investments, so long as such activities do not materially inhibit or
interfere with the performance of the Executive’s responsibilities as the
President and Chief Executive Officer or as a director of the Company in
accordance with this Agreement.

          (b) Compensation. (i) Base Salary. During the Employment Period, the
Executive shall receive an annualized base salary (“Annual Base Salary”) of not
less than $1,200,000, payable pursuant to the Company’s normal payroll
practices. During the Employment Period, the current Annual Base Salary shall
be reviewed for increase only (and once increased shall never be decreased) at
such time as the salaries of senior officers of the Company are reviewed
generally, provided that, the Executive’s first such review shall occur no
earlier than calendar year 2004. The Executive and the Company shall in good
faith attempt to mitigate any loss of the Company’s tax deduction under Section
162(m) of the Internal Revenue Code of 1986, as amended (the “Code”), with
respect to the Executive’s Annual Base Salary.

               (ii) Annual Bonus. For each fiscal year completed during the Employment
Period, the Executive shall be eligible to receive an annual cash bonus
(“Annual Bonus”) based upon performance targets that are established by the
compensation committee of the Board, provided that, the Executive’s target
Annual Bonus shall be at least 125% of his Annual Base Salary (the “Target
Bonus”) and his maximum Annual Bonus shall be at least 250% of his Annual Base
Salary. Notwithstanding the foregoing, with respect to fiscal year 2002, the
Executive shall receive an Annual Bonus equal to the product of (A) the Target
Bonus and (B) 1/12, and with respect to fiscal year 2003, the Executive shall
receive an Annual Bonus at least equal to the Target Bonus. The Executive and
the Company shall in good faith attempt to mitigate any loss of the Company’s
tax deduction under Section 162(m) of the Code with respect to the Executive’s
Annual Bonus.

               (iii) Retirement Benefits.

		
	 	          A. General. The Executive shall become a participant in any
qualified or nonqualified retirement plans maintained by the Company,
including but not limited to the Pension Plan, the Pension Excess Plan,
the Chubb Capital Accumulation Plan (“CCAP”), the Excess CCAP, the
Employee Stock Ownership Plan (“ESOP”), and the Excess ESOP, in each
case, as amended from time to time, in accordance with the eligibility
conditions set forth in each such plan. The Executive shall become a

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	 	participant in any retirement plan that is available to senior
executives of the Company. In addition, the Executive shall receive a
Pension SERP, CCAP SERP and ESOP SERP, as described herein.

		
	 	          B. Pension SERP. The Executive shall be entitled to an annual
supplemental pension benefit from the Company equal to 6% of the
Executive’s “Final Average Compensation” (as defined below) for each full
year (with fractional credit for partial years) that the Executive serves
as an employee of the Company, up to a maximum of 60% of the Executive’s
Final Average Compensation. This annual benefit shall be reduced by (1)
any amounts payable to the Executive under the Pension Plan and the
Pension Excess Plan or any other additional, successor or replacement
pension plan of the Company, (2) any pension benefits payable to the
Executive by the entity that employed the Executive as of November 3,
2002 (the “Previous Employer”) or any of its affiliates, and (3) the
Executive’s primary Social Security benefit as determined by the Company.
For purposes of determining the discount (if any) for early commencement
of payments, the column in Table I of Section 3.2 of the Pension Plan
under the heading “At Least 25 Years” shall be applied to the gross SERP
benefit prior to the application of any offsets. For purposes of
determining Pension SERP benefits payable in the form of a joint and
survivor annuity, the factors contained in Table A (“Subsidized”) of the
Pension Plan shall be used. “Final Average Compensation” shall mean the
annualized average of the Executive’s “SERP Compensation” (as hereinafter
defined) during the highest-paid five calendar years out of the last ten
calendar years of the Executive’s employment with the Company, or the
final 60 months of the Executive’s employment with the
Company if higher, or if the Executive has been employed by the
Company less than 60 months, the total number of months of the
Executive’s employment.
“SERP Compensation” shall mean the sum of (x) the Executive’s Annual
Base Salary paid under Section 3(b)(i), (y) Annual Bonus paid under
Section 3(b)(ii) and (z) profit-sharing payments made under the Profit
Sharing Plan, disregarding in each case any amount deferred for any
reason. The Pension SERP benefit shall be payable in accordance with the
payment option elected by the Executive, in accordance with the election
procedures set forth in the Pension Excess Plan. Except as specifically
provided in this Agreement, the other terms and conditions of the Pension
SERP shall be governed by the terms of the Pension Excess Plan as if the
benefits under the Pension SERP were paid from the Pension Excess Plan.

		
	 	          C. CCAP SERP. The Executive shall be entitled to a lump sum
benefit, within 30 days after the Date of Termination (as defined in
Section 4(f)), equal to (a) the amount of the Company matching
contribution that would have been credited to the Executive under the
CCAP and Excess CCAP if the Executive were eligible to receive such
matching contributions during the period from the Effective Date until
the date that the Executive first becomes eligible to receive company
matching contributions under the CCAP and Excess CCAP, accumulated with
interest at the rate of five percent per year for the period beginning on
the date the Executive would have been credited for such amount under the
CCAP and Excess CCAP and ending on the Date of Termination, plus (b) the
amount, if any, that the Executive forfeits under the CCAP and Excess
CCAP as the result of a termination of his employment (other than as
described in clause (E) below) prior to his becoming 100% vested in the
benefits payable under such plans, plus (c) an additional amount (if any)
representing the benefits that the Executive would have received,
accumulated with interest at the rate of five percent per year for the
period

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	 	beginning on the date the Executive would have accrued the benefit
and ending on the Date of Termination, had, for all purposes of
determining the Executive’s benefits under the CCAP and Excess CCAP, the
Executive been deemed to have 27 years of service with the Company as of
the Effective Date, provided that the payments in this clause (c) shall
not be duplicative of the payments in clauses (a) and (b) above.

		
	 	          D. ESOP SERP. The Executive shall be entitled to a lump sum
benefit, within 30 days after the Date of Termination, equal to (a) the
amount of money that would have been credited to the Executive under the
ESOP and Excess ESOP if the Executive were eligible for those plans,
during the period from the Effective Date until the date that the
Executive first becomes eligible to join the ESOP and Excess ESOP,
accumulated with interest at the rate of five percent per year for the
period beginning on the date the Executive would have been credited for
such amount under the ESOP and Excess ESOP and ending on the Date of
Termination, plus (b) the amount, if any, that the Executive forfeits
under the ESOP and Excess ESOP as the result of a termination of his
employment (other than as described in clause (E) below) prior to his
becoming 100% vested in the benefits payable under such plans, plus (c)
an additional amount (if any) representing the benefits that the
Executive would have received, accumulated with interest at the rate of
five percent per year for the period beginning on the date the Executive
would have accrued the benefit and ending on the Date of Termination,
had, for all purposes of determining the Executive’s benefits under the
ESOP and Excess ESOP, the Executive been deemed to have 27 years of
service with the Company as of the Effective Date (other than for
purposes of determining the Executive’s eligibility to diversify his ESOP
and Excess ESOP accounts), provided that the payments in this clause (c)
shall not be duplicative of the payments in clauses (a) and (b) above.

		
	 	          E. Certain Terminations During Initial Term. In the event that,
prior to the end of the Initial Term, the Executive (i) resigns without
Good Reason (as defined in Section 4(c)) or (ii) is terminated for Cause
(as defined in Section 4(b)), the Executive shall not be entitled to
receive any of the Pension SERP, CCAP SERP and ESOP SERP, as described
above, and the Company shall not be obligated to pay such benefits to the
Executive.

               (iv) Cash Payment. As compensation for the forfeiture of the following
awards from the Previous Employer: (x) 11/12 times the Executive’s 2002 annual
bonus under the Previous Employer’s Annual Incentive Plan, (y) the Executive’s
2002 Leadership Challenge Grant and (z) the Executive’s 2000-2002 performance
stock payout, a cash payment will be made to the Executive equal to the value
of such forfeited incentives within 10 days of substantiation of the value of
such incentives based on extrapolation from amounts earned by other executives
under such programs as set forth in the Previous Employer’s annual proxy
statement and/or such other sources that reasonably demonstrate to the Company
that such amounts would have been earned by the Executive had he remained
employed by the Previous Employer through the date payment of such forfeited
incentives would have been made, provided that, the aggregate amounts payable
pursuant to this Section 3(b)(iv) shall be subject to a maximum of $3,000,000,
provided, further, that any amounts payable by or on behalf of the Previous
Employer with respect to, or in cancellation of, the foregoing incentives shall
reduce

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(but not below zero) on a dollar-for-dollar basis the amounts payable
pursuant to this Section 3(b)(iv).

               (v) Make Whole Stock Option. As compensation for the forfeiture of the
560,099 options to purchase the Previous Employer’s common stock (the “Previous
Employer Options”), as disclosed previously to the Company, the Company shall
grant to the Executive as of the date immediately following the Effective Date
(the “Grant Date”) a stock option (the “Replacement Option”) under The Chubb
Corporation Long-Term Stock Incentive Plan (the “Plan”) with a Black-Scholes
value equal to the Black-Scholes value of the Previous Employer’s Options as of
the last trading date prior to the Grant Date. The Black-Scholes values to be
calculated under this Section 3(b)(v) shall be determined as soon as reasonably
practicable following the last trading date prior to the Grant Date in a manner
consistent with the methodology used by Mercer Human Resources Consulting (the
“Firm”) for valuing stock options granted to employees of its publicly-traded
clients during the year 2002 through the Grant Date. The Replacement Option
shall have a ten-year term and shall vest and become exercisable in three equal
installments on the first anniversary of the Grant Date, the second anniversary
of the Grant Date and the third anniversary of the Effective Date, provided
that, the Executive remains in the employ of the Company through each such
date. The exercise price per share of the Replacement Option shall be the
average of the highest and lowest sales prices of the Company’s common stock,
par value $1.00 per share (the “Common Stock”) reported for consolidated
trading on the New York Stock Exchange as of the date on which the award is
granted, or, if the Common Stock shall not have been traded on such date, the
average of such highest and lowest sales prices on the first day prior thereto
on which the Common Stock was so traded (the “Fair Market Value”). Except as
specifically set forth herein, the Replacement Option shall have the same terms
and conditions as similar grants made by the Company to senior executives
generally in 2002, as such terms are set forth in the award agreement attached
as Exhibit A. Any amounts payable by or on behalf of the Previous Employer
with respect to, or in the cancellation of, the Previous Employer Options (or
any reduction in the actual number of the forfeited stock options from the
Previous Employer to less than 560,099) shall reduce (but not below zero) on a
dollar-for-dollar basis the Black-Scholes value of the Replacement Option.

               (vi) Make Whole Restricted Stock. As compensation for the forfeiture of
performance awards for the 2001-2003 and 2002-2004 award cycles at the Previous
Employer, the Company shall grant to the Executive on the Grant Date a number
of restricted shares of Common Stock under the Plan with a Fair Market Value of
$3.6 million as of the Grant Date (the “Restricted Stock”). The restrictions
with respect to the Restricted Stock shall lapse 50% per year beginning on the
first anniversary of the Effective Date, provided that, the Executive remains
in the employ of the Company through each such date. Except as specifically
set forth herein, the Restricted Stock shall have the same terms and conditions
as similar grants made by the Company to senior executives generally in 2002 as
such terms are set forth in the award agreement attached as Exhibit B. Any
amounts payable by or on behalf of the Previous Employer with respect to, or in
cancellation of, the Previous Employer’s performance awards referenced in this
Section 3(b)(vi) shall reduce (but not below zero) on a dollar-for-dollar basis
the Fair Market Value of the Restricted Stock to be granted to the Executive.

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               (vii) Stock Option Award. As of the Grant Date, the Executive shall be
granted an option to purchase a number of shares of Common Stock under the
Plan, and such option shall have a Black-Scholes value equal to $6,000,000 (the
“Option”). The Black-Scholes value to be calculated under this Section
3(b)(vii) shall be determined on or as soon as reasonably practicable following
the Grant Date in a manner consistent with the methodology used by the Firm for
valuing stock options granted to employees of its publicly traded clients
during the year 2002 through the Grant Date. Except as specifically set forth
herein, the Option shall have the same terms and conditions as similar grants
that have been made by the Company to senior executives generally in 2002, as
such terms are set forth in the award agreement attached as Exhibit C.
One-half of the Black-Scholes value of the Option (i.e., $3 million) shall be
granted to the Executive in the form of an option to purchase shares with an
exercise price per share equal to the Fair Market Value and the other half of
the Black-Scholes value of the Option (i.e., $3 million) shall be granted to
the Executive in the form of an option to purchase shares with an exercise
price per share equal to the product of (A) 1.25 and (B) the Fair Market Value.

               (viii) Performance Share Award. The Executive shall be granted at such
time in calendar year 2003 as such awards are granted to the Company’s senior
executives generally a performance share award with respect to the 2003 – 2005
performance award period with respect to shares of Common Stock having a target
Fair Market Value on the date of grant equal to $1,800,000, subject to the
terms and conditions applicable to the Company’s senior executives generally.

               (ix) Other Benefits. During the Employment Period, the Executive shall be
entitled to participate in all welfare, perquisites, fringe benefit, and other
benefit plans, practices, policies and programs, as may be in effect from time
to time, for senior executives of the Company generally. The fringe benefits
and perquisites described in the preceding sentence shall include: appropriate
use of Company aircraft (for business travel only); long-term disability
benefits as provided to other senior executives, but with an annual benefit of
not less than 60% of the Executive’s current Annual Base Salary; for
Executive’s automobile benefit, use of a Company-provided car and driver (for
business use only and in lieu of any car stipend); club dues and membership
(including initiation fees) at one country club; annual financial counseling as
provided to other senior executives; and death benefits under group life plans
or supplemental plans with a benefit of no less than five times the Executive’s
current Annual Base Salary. In addition, following the Executive’s retirement
or any termination of his employment, the Executive shall be entitled to
retiree health benefits pursuant to the retiree health plans, practices,
programs and policies of the Company (or under programs providing the same
benefits), and for purposes of determining the amount of the Executive’s
contributions and benefits under such plans, practices, programs and policies,
the Executive shall be considered to have 27 years of service with the Company
as of the Effective Date (and shall be considered to have been hired before
January 1, 1999 for purposes of determining his eligibility for
Company-subsidized benefits) (the “Executive’s Retiree Health Benefits”),
provided, that the Executive shall not be entitled to the Executive’s Retiree
Health Benefits in the event that prior to the end of the Initial Term (i) the
Executive resigns without Good Reason (as defined below) or (ii) is terminated
for Cause (as defined below). As of the Effective Date, the Executive shall
also become a participant in the Company’s Profit Sharing Plan, and for all
purposes of such plan, shall be considered to have 27 years of service with the
Company as of the Effective Date, provided, that the Executive shall not be
entitled to receive any benefits under such plan in the event that prior

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to the end of the Initial Term (i) the Executive resigns without Good
Reason or (ii) is terminated for Cause.

               (x) Expenses. During the Employment Period, the Executive shall be
entitled to receive prompt reimbursement for business expenses reasonably
incurred by the Executive in accordance with the Company’s policies, as may be
in effect from time to time, for its senior executives generally.

               (xi) Vacation. During the Employment Period, the Executive shall be
entitled to paid vacation in accordance with the Company’s policies, as may be
in effect from time to time, for its senior executives generally, provided
that for purposes of determining the Executive’s vacation benefits, the
Executive shall be considered to have 27 years of service with the Company as
of the Effective Date.

               (xii) Change-in-Control Benefits.

		
	 	          A. The Executive shall receive the change-in-control benefits
provided to senior executives of the Company generally (it being
understood that in lieu of the executive severance agreement provided to
other senior executives of the Company, the Executive shall receive the
Change in Control Employment Agreement (“CIC Agreement”) entered into
simultaneously with this Agreement) under the Company’s compensation
plans (including vesting of any equity awards in the manner provided to
other senior executives of the Company generally). In addition, anything
in this Agreement to the contrary notwithstanding, at all times during
the Employment Period and at all times after the Employment Period, in
the event it shall be determined that any Payment (as defined below)
would be subject to the Excise Tax (as defined below), then the Executive
shall be entitled to receive an additional payment (the “Gross-Up
Payment”) in an amount such that, after payment by the Executive of all
taxes (and any interest or penalties imposed with respect to such taxes),
including, without limitation, any income and employment taxes (and any
interest and penalties imposed with respect thereto) and Excise Tax
imposed upon the Gross-Up Payment, the Executive retains an amount of the
Gross-Up Payment equal to the Excise Tax imposed upon the Payments. The
Company’s obligation to make Gross-Up Payments under this Section
3(b)(xii) shall not be conditioned upon the Executive’s termination of
employment.

		
	 	          B. Subject to the provisions of Section 3(b)(xii)(C), all
determinations required to be made under this Section 3(b)(xii),
including whether and when a Gross-Up Payment is required, the amount of
such Gross-Up Payment and the assumptions to be utilized in arriving at
such determination, shall be made by a nationally recognized certified
public accounting firm selected by the Company and approved by the
Executive, with such approval not being unreasonably withheld (the
“Accounting Firm”). The Accounting Firm shall provide detailed
supporting calculations both to the Company and the Executive within 15
business days of the receipt of notice from the Executive that there has
been a Payment or such earlier time as is requested by the Company. All
fees and expenses of the Accounting Firm shall be borne solely by the
Company. Any Gross-Up Payment, as determined pursuant to this Section
3(b)(xii), shall be paid by the Company to the Executive within 5 days of
the receipt of the Accounting Firm’s

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	 	determination. Any determination by the Accounting Firm shall be
binding upon the Company and the Executive. As a result of the
uncertainty in the application of Section 4999 of the Code at the time of
the initial determination by the Accounting Firm hereunder, it is
possible that Gross-Up Payments that will not have been made by the
Company should have been made (the “Underpayment”), consistent with the
calculations required to be made hereunder. In the event the Company
exhausts its remedies pursuant to Section 3(b)(xii)(C) and the Executive
thereafter is required to make a payment of any Excise Tax, the
Accounting Firm shall determine the amount of the Underpayment that has
occurred and any such Underpayment shall be promptly paid by the Company
to or for the benefit of the Executive.

		
	 	          C. The Executive shall notify the Company in writing of any claim by
the Internal Revenue Service that, if successful, would require the
payment by the Company of the Gross-Up Payment. Such notification shall
be given as soon as practicable, but no later than 10 business days after
the Executive is informed in writing of such claim. The Executive shall
apprise the Company of the nature of such claim and the date on which
such claim is requested to be paid. The Executive shall not pay such
claim prior to the expiration of the 30-day period following the date on
which the Executive gives such notice to the Company (or such shorter
period ending on the date that any payment of taxes with respect to such
claim is due). If the Company notifies the Executive in writing prior to
the expiration of such period that the Company desires to contest such
claim, the Executive shall:

		
	 	          a. give the Company any information reasonably requested
by the Company relating to such claim,

		
	 	          b. take such action in connection with contesting such
claim as the Company shall reasonably request in writing from
time to time, including, without limitation, accepting legal
representation with respect to such claim by an attorney
reasonably selected by the Company,

		
	 	          c. cooperate with the Company in good faith in order
effectively to contest such claim, and

		
	 	          d. permit the Company to participate in any proceedings
relating to such claim;

		
	 	provided, however, that the Company shall bear and pay directly all costs
and expenses (including additional interest and penalties) incurred in
connection with such contest, and shall indemnify and hold the Executive
harmless, on an after-tax basis, for any Excise Tax and income and
employment tax (including interest and penalties) imposed as a result of
such representation and payment of costs and expenses. Without
limitation on the foregoing provisions of this Section 3(b)(xii)(C), the
Company shall control all proceedings taken in connection with such
contest, and, at its sole discretion, may pursue or forgo any and all
administrative appeals, proceedings, hearings and conferences with the
applicable taxing authority in respect of such claim and may, at its sole
discretion, either direct the Executive to pay the tax claimed and sue
for a refund or contest the claim

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	 	in any permissible manner, and the Executive agrees to prosecute such
contest to a determination before any administrative tribunal, in a court
of initial jurisdiction and in one or more appellate courts, as the
Company shall determine; provided, however, that, if the Company directs
the Executive to pay such claim and sue for a refund, the Company shall
advance the amount of such payment to the Executive, on an interest-free
basis, and shall indemnify and hold the Executive harmless, on an
after-tax basis, from any Excise Tax and income and employment tax
(including interest or penalties) imposed with respect to such advance or
with respect to any imputed income in connection with such advance; and
provided, further, that any extension of the statute of limitations
relating to payment of taxes for the taxable year of the Executive with
respect to which such contested amount is claimed to be due is limited
solely to such contested amount. Furthermore, the Company’s control of
the contest shall be limited to issues with respect to which the Gross-Up
Payment would be payable hereunder, and the Executive shall be entitled
to settle or contest, as the case may be, any other issue raised by the
Internal Revenue Service or any other taxing authority.

		
	 	          D. If, after the receipt by the Executive of a Gross-Up Payment or
an amount advanced by the Company pursuant to Section 3(b)(xii)(C), the
Executive becomes entitled to receive any refund with respect to the
Excise Tax to which such Gross-Up Payment relates or with respect to such
claim, the Executive shall (subject to the Company’s complying with the
requirements of Section 3(b)(xii)(C), if applicable) promptly pay to the
Company the amount of such refund (together with any interest paid or
credited thereon after taxes applicable thereto). If, after the receipt
by the Executive of an amount advanced by the Company pursuant to Section
3(b)(xii)(C), a determination is made that the Executive shall not be
entitled to any refund with respect to such claim and the Company does
not notify the Executive in writing of its intent to contest such denial
of refund prior to the expiration of 30 days after such determination,
then such advance shall be forgiven and shall not be required to be
repaid and the amount of such advance shall offset, to the extent
thereof, the amount of Gross-Up Payment required to be paid.

		
	 	          E. Notwithstanding any other provision of this Section 3(b)(xii),
the Company may, in its sole discretion, withhold and pay over to the
Internal Revenue Service or any other applicable taxing authority, for
the benefit of the Executive, all or any portion of any Gross-Up Payment,
and the Executive hereby consents to such withholding.

		
	 	          F. Definitions. The following terms shall have the following
meanings for purposes of this Section 3(b)(xii):

		
	 	          a. “Excise Tax” shall mean the excise tax imposed by
Section 4999 of the Code, together with any interest or
penalties imposed with respect to such excise tax.

		
	 	          b. A “Payment” shall mean any payment or distribution in
the nature of compensation (within the meaning of Section
280G(b)(2) of the Code) by any member of the Affiliated Group
to or for

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	 	the benefit of the Executive, whether paid or payable
pursuant to this Agreement or otherwise.

		
	 	          G. Exclusive Gross-Up. In the event that the Executive becomes
entitled to a Gross-Up Payment hereunder, the Executive shall not be
entitled to a Gross-Up Payment under Section 8 of the CIC Agreement.

          (c) Other Entities. The Executive agrees to serve, without additional
compensation, as an officer and director for each of the Company’s
subsidiaries, partnerships, joint ventures, limited liability companies and
other affiliates, including entities in which the Company has a significant
investment (collectively, the Company and such entities, the “Affiliated
Group”), as determined by the Company, provided, that such service does not
materially interfere with the Executive’s performance of his duties and
responsibilities as the President and Chief Executive Officer of the Company.
As used in this Agreement, the term “affiliates” shall include any entity
controlled by, controlling, or under common control with the Company.

          4. Termination of Employment. (a) Death or Disability. The Executive’s
employment shall terminate automatically upon the Executive’s death during the
Employment Period. If the Company determines in good faith that the Disability
of the Executive has occurred during the Employment Period (pursuant to the
definition of Disability set forth below), it may provide the Executive with
written notice in accordance with Section 12(b) of this Agreement of its
intention to terminate the Executive’s employment. In such event, the
Executive’s employment with the Company shall terminate effective on the 30th
day after receipt of such notice by the Executive (the “Disability Effective
Date”), provided that, within the 30-day period after such receipt, the
Executive shall not have returned to full-time performance of the Executive’s
duties. For purposes of this Agreement, “Disability” shall mean the inability
of the Executive to perform his duties with the Company on a full-time basis
for six consecutive months as a result of incapacity due to mental or physical
illness which is determined to be total and permanent by a licensed physician
mutually selected by (i) the Company or its insurers and (ii) the Executive or
the Executive’s legal representative. If the Parties cannot agree on a
licensed physician, each Party shall select a licensed physician and the two
physicians shall select a third who shall be the approved licensed physician
for this purpose.

          (b) Cause. The Company may terminate the Executive’s employment during
the Employment Period with or without Cause. For purposes of this Agreement,
“Cause” shall mean:

               (i) the Executive’s willful and continued failure to substantially perform
his duties under this Agreement, other than any such failure resulting from
incapacity due to physical or mental illness, which failure has continued after
a written demand for substantial performance, signed by a duly authorized
member of the Board, is delivered to the Executive, specifying the manner in
which the Executive has failed to substantially perform; or

               (ii) the Executive’s willful engagement in any malfeasance, fraud,
dishonesty or gross misconduct, each of which must (x) be in connection with
his position as the President and Chief Executive Officer of the Company (or as
a director of the Company or an

10

 

officer or director of any member of the Affiliated Group) and (y)
materially damage the Company economically or otherwise; or

               (iii) the Executive’s conviction of, or plea of guilty or nolo contendere
to, a felony; or

               (iv) the Executive’s breach of Section 13(c) of this Agreement that
materially damages or could reasonably be expected to materially damage the
Company economically or otherwise; or

               (v) the Executive’s material breach of Section 8 or Section 13(b) of this
Agreement.

For purposes of this provision, no act or failure to act on the part of the
Executive shall be considered “willful” unless it is done, or omitted to be
done, by the Executive in bad faith and without reasonable belief that the
Executive’s act or omission was in the best interests of the Company. A
termination of employment of the Executive shall not be deemed to be for Cause
unless and until there shall have been delivered to the Executive a copy of a
resolution duly adopted by the affirmative vote of not less than two-thirds of
the entire membership of the Board (not including the Executive) at a meeting
of the Board called and held for such purpose (after at least ten days’ written
notice is provided to the Executive and the Executive is given an opportunity,
together with counsel, to be heard before the Board), finding that, in the good
faith opinion of the Board, the Executive is guilty of the conduct described in
subparagraph (i), (ii), (iii), (iv) or (v) above, and specifying the
particulars thereof in detail.

          (c) Good Reason. The Executive’s employment may be terminated by the
Executive for Good Reason. If (x) an event or circumstance set forth in
clauses (i) through (viii) below shall have occurred and the Executive provides
the Company with written notice thereof within a reasonable period of time
after the Executive has knowledge of the occurrence or existence of such event
or circumstance, which notice shall specifically identify the event or
circumstance that the Executive believes constitutes Good Reason, (y) the
Company fails to correct the circumstance or event so identified within 15 days
after the receipt of such notice, and (z) the Executive resigns within 90 days
after the date of delivery of the notice referred to in clause (x) above, the
Executive shall be considered to have resigned for Good Reason. For purposes
of this Agreement, “Good Reason” shall mean, in the absence of the Executive’s
express written consent (and except in consequence of a prior termination of
the Executive’s employment), the occurrence of any of the following:

               (i) a reduction by the Company in the Executive’s highest Annual Base
Salary or a reduction in the Executive’s Target Bonus as a percentage of the
Executive’s Annual Base Salary; or

               (ii) the failure of the Executive to be appointed to any of the positions
described in Section 3(a)(i) or his removal from any such position (other than
pursuant to Section 4(g) or pursuant to a termination of the Executive’s
employment for death, Disability or Cause); or

11

 

               (iii) a material diminution in the Executive’s duties or responsibilities
(other than as a result of the Executive’s physical or mental incapacity) or
the assignment to the Executive of duties or responsibilities materially
inconsistent with the Executive’s position and status as the President and
Chief Executive Officer of the Company; or

               (iv) a material change in the Executive’s reporting relationship so that
the Executive no longer reports solely to the Board in his positions as
President and Chief Executive Officer; or

               (v) a breach by the Company of any of its material obligations to the
Executive under this Agreement; or

               (vi) the Company requiring the Executive’s principal location of
employment to be at any office or location more than 50 miles from the current
principal headquarters of the Company in Warren, New Jersey (other than to the
extent agreed to or requested by the Executive); or

               (vii) a breach by the Company of Section 10 or Section 13(a) of this
Agreement; or

               (viii) any failure by the Company to comply with and satisfy Section 9(b)
of this Agreement.

          (d) Voluntary Termination. The Executive may voluntarily terminate his
employment without Good Reason (other than due to death, Disability or
retirement), and such termination shall not be deemed to be a breach of this
Agreement.

          (e) Notice of Termination. Any termination by the Company for Cause, or
by the Executive for Good Reason, shall be communicated by Notice of
Termination to the other Party hereto given in accordance with Section 12(b) of
this Agreement. For purposes of this Agreement, a “Notice of Termination”
means a written notice which (i) indicates the specific termination provision
in this Agreement relied upon, (ii) to the extent applicable, sets forth in
reasonable detail the facts and circumstances claimed to provide a basis for
termination of the Executive’s employment under the provision so indicated and
(iii) if the Date of Termination (as defined below) is other than the date of
receipt of such notice, specifies the termination date (which date shall be not
more than thirty days after the giving of such notice). The failure by the
Executive or the Company to set forth in the Notice of Termination any fact or
circumstance which contributes to a showing of Good Reason or Cause shall not
waive any right of the Executive or the Company, respectively, hereunder or
preclude the Executive or the Company, respectively, from asserting such fact
or circumstance in enforcing the Executive’s or the Company’s rights hereunder.

          (f) Date of Termination. “Date of Termination” means (i) if the
Executive’s employment is terminated by the Company for Cause, or by the
Executive for Good Reason, the date of receipt of the Notice of Termination or
any later date specified therein within 30 days of such notice, as the case may
be, (ii) if the Executive’s employment is terminated by the Company other than
for Cause or Disability, or if the Executive voluntarily resigns without Good
Reason, the date on which the terminating Party notifies the other Party of
such termination,

12

 

(iii)  if the Executive’s employment is terminated by reason of death, the
date of death of the Executive, (iv) if the Executive’s employment is
terminated by the Company due to Disability, the Disability Effective Date, or
(v) if the Executive’s employment is terminated by the Executive or the Company
as a result of a Notice of Non-Renewal, the second anniversary of such notice.

          (g) Resignation from All Positions. Notwithstanding any other provision
of this Agreement, upon the termination of the Executive’s employment for any
reason, unless otherwise requested by the Board, the Executive shall
immediately resign from all positions that he holds or has ever held with the
Company and any other member of the Affiliated Group (and with any other
entities with respect to which the Company has requested the Executive to
perform services), including, without limitation, the Board and all boards of
directors of any member of the Affiliated Group. The Executive hereby agrees
to execute any and all documentation to effectuate such resignations upon
request by the Company, but he shall be treated for all purposes as having so
resigned upon termination of his employment, regardless of when or whether he
executes any such documentation.

          5. Obligations of the Company upon Termination. (a) Good Reason; Other
Than for Cause; Non-Renewal. If, during the Employment Period, (1) the Company
shall terminate the Executive’s employment other than for Cause, death or
Disability, (2) the Executive shall terminate employment for Good Reason, or
(3) in the event of a Notice of Non-Renewal delivered to the Executive by the
Company:

               (i) the Company shall pay to the Executive in a lump sum in cash within 30
days (except as specifically provided in Sections 5(a)(i)(A)(3) and
5(a)(i)(A)(4)) after the Date of Termination the aggregate of the following
amounts:

		
	 	          A. the sum of (1) the Executive’s Annual Base Salary and any accrued
vacation pay through the Date of Termination, (2) the Executive’s
business expenses that are reimbursable pursuant to Section 3(b)(x) but
have not been reimbursed by the Company as of the Date of Termination,
(3) the Executive’s Annual Bonus for the fiscal year immediately
preceding the fiscal year in which the Date of Termination occurs if such
bonus has been determined but not paid as of the Date of Termination (at
the time such Annual Bonus would otherwise have been paid) and (4) the
product of (x) the Annual Bonus that the Executive would have earned, if
any, for the fiscal year in which the Date of Termination occurs if the
Executive had been employed by the Company for the full plan year, based
on the Company’s and the Executive’s actual performance payable at the
time such Annual Bonus would otherwise have been paid, and (y) a
fraction, the numerator of which is the number of days in the fiscal year
in which the Date of Termination occurs through the Date of Termination,
and the denominator of which is 365, in each case, to the extent not
theretofore paid; and

		
	 	          B. the amount equal to the product of (x) the Severance Multiple (as
defined below) and (y) the sum of (I) the Executive’s Annual Base Salary
and (II) the average Annual Bonus paid to the Executive in respect of the
last three completed fiscal years immediately prior to the Date of
Termination or such lesser number of completed fiscal years that the
Executive was employed by the Company as of the Date of

13

 

		
	 	Termination, provided that, such amount in clause (II) shall not be
less than the Target Bonus if the Date of Termination occurs during
fiscal year 2002 or 2003; and

               (ii) any stock options, restricted stock, performance shares and any other
stock-based long-term incentive compensation award held by the Executive
(whether granted under this Agreement or otherwise) shall vest immediately
(with option exercisability continuing until the first to occur of the fifth
anniversary of the Date of Termination or the end of the scheduled option
term); and

               (iii) the Executive shall be treated for purposes of accrual of benefits
(age and service) under the SERP, as if the Executive had remained an active
employee of the Company following the Date of Termination for a number of years
equal to the Severance Multiple, provided that, for purposes of this Section
5(a)(iii) only, in the event that the Date of Termination occurs within 2.5
years after the Effective Date, the Executive’s aggregate number of years of
service under the Pension SERP shall be no less than five years, and if the Date of
Termination occurs in 2003 or in 2004, but prior to the determination of the
Executive’s Annual Bonus for 2003, the Executive’s compensation for purposes of
determining the Executive’s “Final Average
Compensation” under the Pension SERP shall
include the Target Bonus with respect to year 2003; and

               (iv) for a number of years (full and partial) after the Executive’s Date
of Termination equal to the Severance Multiple (the “Continuation Period”), the
Company shall continue health and other welfare benefits to the Executive and,
if applicable, the Executive’s family at least equal to those that would have
been provided to them in accordance with the plans, programs, practices and
policies of the Company if the Executive’s employment had not been terminated;
provided, that the Executive continues to make all required contributions;
provided, however, that, if the Executive becomes re-employed with another
employer and is eligible to receive such benefits under another
employer-provided plan, the health and other welfare benefits described herein
shall no longer be provided by the Company. Following the Continuation Period,
the Executive shall be entitled to the Executive’s Retiree Health Benefits; and

               (v) to the extent not theretofore paid or provided, the Company shall
timely pay or provide to the Executive any other amounts or benefits required
to be paid or provided or which the Executive is eligible to receive under any
plan, program, policy or practice or contract or agreement (other than any
severance plan, program, policy or practice or contract or agreement) of the
Company and its affiliates (such amounts and benefits, the “Other Benefits”) in
accordance with the terms and normal procedures of each such plan, program,
policy or practice, based on accrued benefits through the Date of Termination.

Notwithstanding anything contained herein to the contrary, the Executive shall
be entitled to receive from the Company a full tax gross-up with respect to any
excise tax imposed on him under Section 4999 of the Code with respect to any
payments or benefits from the Company or any member of its Affiliated Group as
provided for under Section 3(b)(xii). Except with respect to payments and
benefits under Sections 5(a)(i)(A)(1), 5(a)(i)(A)(2) and 5(a)(v), all payments
and benefits to be provided under this Section 5(a) shall be subject to the
Executive’s execution and non-revocation of a release substantially in the form
attached hereto as Exhibit D.

14

 

For purposes of a termination set forth in Section 5(a)(1) or 5(a)(2), the
“Severance Multiple” shall mean 2.5. In the event of a termination of
employment set forth in Section 5(a)(3), the Severance Multiple shall be 2.5 if
the Executive’s Date of Termination as a result of the Company providing the
Executive with a Notice of Non-Renewal (the “Non-Renewal Termination Date”) is
prior to the Executive’s attainment of age 58; if the Non-Renewal Termination
Date is prior to the Executive’s attainment of age 59 and on or after the
Executive’s attainment of age 58, the Severance Multiple shall mean 2.0; in the
event that the Non-Renewal Termination Date is prior to the Executive’s
attainment of age 60 and on or after the Executive’s attainment of age 59, the
Severance Multiple shall mean 1.5; in the event that the Non-Renewal
Termination Date is prior to the Executive’s attainment of age 61 and on or
after the Executive’s attainment of age 60, the Severance Multiple shall mean
1.0; and in the event that the Non-Renewal Termination Date is prior to the
Executive’s attainment of age 62 and on or after the Executive’s attainment of
age 61, the Severance Multiple shall mean 0.5. If the Non-Renewal Termination
Date is on or after the Executive’s attainment of age 62, the Severance
Multiple shall mean 0.0.

The Parties agree that any amounts due under this Section 5(a) are in the
nature of severance payments considered to be reasonable by the Company and are
not in the nature of a penalty.

          (b) Cause; Other than for Good Reason. If the Executive’s employment
shall be terminated for Cause or the Executive terminates his employment
without Good Reason during the Employment Period (including by providing to the
Company a Notice of Non-Renewal), this Agreement shall terminate without
further obligations to the Executive other than the obligation to pay or
provide to the Executive the Executive’s Retiree Health Benefits (subject to
the provisions of Section 3(b)(ix)), an amount equal to the amount set forth in
clauses (1) and (2) of Section 5(a)(i)(A) above, and the timely payment or
provision of the Other Benefits, in each case to the extent theretofore unpaid.

          (c) Death. If the Executive’s employment is terminated by reason of the
Executive’s death during the Employment Period, this Agreement shall terminate
without further obligations to the Executive’s legal representatives under this
Agreement, other than the obligation to pay or provide to the Executive’s
beneficiaries the Executive’s Retiree Health Benefits (if applicable), an
amount equal to the amount set forth in clauses (1), (2), (3) and (4) of
Section 5(a)(i)(A) above, and the timely payment or provision of the Other
Benefits, including any applicable life insurance benefits.

          (d) Disability. If the Executive’s employment is terminated by reason of
the Executive’s Disability during the Employment Period, this Agreement shall
terminate without further obligations to the Executive, other than the
obligation to pay or provide to the Executive the Executive’s Retiree Health
Benefits, an amount equal to the amount set forth in clauses (1), (2), (3) and
(4) of Section 5(a)(i)(A) above, and the timely payment or provision of Other
Benefits, including any applicable disability benefits.

          6. Non-Exclusivity of Rights. Except as specifically provided otherwise,
nothing in this Agreement shall prevent or limit the Executive’s continuing or
future participation in any plan, program, policy or practice provided by the
Company, or any of its subsidiaries for which the Executive is otherwise
eligible, nor, subject to Section 12(f), shall

15

 

anything herein limit or otherwise affect such rights as the Executive may
have under any contract or agreement with the Company or its subsidiaries;
provided, that, the Executive shall not receive severance benefits or excise
tax gross-up under both this Agreement and the CIC Agreement, and the CIC
Agreement shall supercede this Agreement during the period the CIC Agreement is
applicable. Amounts which are vested benefits or which the Executive is
otherwise entitled to receive under any plan, policy, practice or program of or
any contract or agreement with the Company or its subsidiaries at or subsequent
to the Date of Termination shall be payable in accordance with such plan,
policy, practice or program or contract or agreement except as explicitly
modified by this Agreement.

          7. Full Settlement. The Company’s obligation to make the payments
provided for in this Agreement and otherwise to perform its obligations
hereunder shall not be affected by any set-off, counterclaim, recoupment,
defense, or other claim, right or action that the Company may have against the
Executive or others. In no event shall the Executive be obligated to seek
other employment or take any other action by way of mitigation of the amounts
payable to the Executive under any of the provisions of this Agreement and such
amounts shall not be reduced as a result of a mitigation duty whether or not
the Executive obtains other employment. In the event of any dispute between
the Company and the Executive under this Agreement during or after termination
of the Executive’s employment, the Company agrees to pay, to the full extent
permitted by law, all professional fees, costs and expenses which the Executive
may reasonably incur as a result of any such contest. The Company shall pay
directly all professional fees and expenses reasonably incurred by the
Executive in connection with the negotiation and preparation of this Agreement,
subject to a maximum of $100,000.

          8. Covenants.

          (a) Confidential Information. The Executive shall hold in a fiduciary
capacity for benefit of the Affiliated Group, all secret or confidential
information, knowledge or data relating to the Affiliated Group and its
businesses (including, without limitation, any proprietary and not publicly
available information concerning any processes, methods, trade secrets,
research or secret data, costs, names of users or purchasers of their
respective products or services, business methods, operating procedures or
programs or methods of promotion and sale) that the Executive has obtained or
obtains during the Executive’s employment by the Affiliated Group that is not
public knowledge (other than as a result of the Executive’s violation of this
Section 8(a)) (“Confidential Information”). For the purposes of this Section
8(a), information shall not be deemed to be publicly available merely because
it is embraced by general disclosures or because individual features or
combinations thereof are publicly available. The Executive shall not
communicate, divulge or disseminate Confidential Information at any time during
or after the Executive’s employment with the Affiliated Group, except with
prior written consent of the Company, or as otherwise required by law or legal
process or as such disclosure or use may be required in the course of the
Executive performing his duties and responsibilities as the President and Chief
Executive Officer of the Company. Notwithstanding the foregoing provisions, if
the Executive is required to disclose any such confidential or proprietary
information pursuant to applicable law or a subpoena or court order, the
Executive shall promptly notify the Company in writing of any such requirement
so that the Company or the appropriate member of the Affiliated Group may seek
an appropriate protective order or other appropriate remedy or waive compliance
with the provisions hereof. The Executive shall reasonably cooperate with the

16

 

Affiliated Group to obtain such a protective order or other remedy. If
such order or other remedy is not obtained prior to the time the Executive is
required to make the disclosure, or the Company waives compliance with the
provisions hereof, the Executive shall disclose only that portion of the
confidential or proprietary information which he is advised by counsel that he
is legally required to so disclose. All records, files, memoranda, reports,
customer lists, drawings, plans, documents and the like that the Executive
uses, prepares or comes into contact with during the course of the Executive’s
employment shall remain the sole property of the Company and/or the Affiliated
Group, as applicable, and shall be turned over to the Company upon termination
of the Executive’s employment.

          (b) Non-Recruitment of Affiliated Group Employees. The Executive shall
not, at any time during the Restricted Period (as defined in this Section
8(b)), without the prior written consent of the Company, directly or
indirectly, contact, solicit, recruit, or employ (whether as an employee,
officer, director, agent, consultant or independent contractor) any person who
is or was at any time during the previous twelve months an employee,
representative, officer or director of any member of the Affiliated Group.
Further, during the Restricted Period, the Executive shall not take any action
that could reasonably be expected to have the effect of encouraging or inducing
any employee, representative, officer or director of any member of the
Affiliated Group to cease their relationship with any member of the Affiliated
Group for any reason, except for terminations of employment in the ordinary
course of business. This Section 8(b) shall not apply to recruitment of
employees for the Affiliated Group and shall not apply to the Executive’s
personal administrative staff who perform secretarial-type functions. The
“Restricted Period” shall mean the period of Executive’s employment with the
Company and its subsidiaries and the additional period ending on the second
anniversary of the Date of Termination.

          (c) No Competition — Solicitation of Business. During the Restricted
Period, the Executive shall not, either directly or indirectly, compete with
the business of the Company by (i) becoming an officer, agent, employee,
partner or director of any other corporation, partnership or other entity, or
otherwise render services to or assist or hold an interest (except as a less
than 1-percent shareholder of a publicly traded company), in any Competitive
Business (as defined below), or (ii) soliciting, servicing, or accepting the
business of (A) any active customer of any member of the Affiliated Group, or
(B) any person or entity who is or was at any time during the previous twelve
months a customer of any member of the Affiliated Group. “Competitive
Business” shall mean any person or entity (including any joint venture,
partnership, firm, corporation, or limited liability company) that engages in
(1) the property and casualty insurance business, including commercial
insurance, personal insurance, specialty insurance, surety, excess and surplus
lines and/or reinsurance, (2) the accident and health insurance business other
than if incident to providing life insurance, (3) any of the businesses in
which Chubb Financial Solutions is engaged during the Restricted Period, (4)
the insurance agency or brokerage business, and/or (5) any other significant
business of the Company or any of its subsidiaries as of the Date of
Termination, provided that a business set forth in clauses (1) through (4)
shall not be considered a “Competitive Business” in the event that, as of the
Date of Termination, such business (i) is not a business of the Company or any
of its subsidiaries or (ii) is no longer a business of the Company or any of
its subsidiaries.

17

 

          (d) Remedies. The Executive acknowledges and agrees that the terms of
Section 8: (i) are reasonable in light of all of the circumstances, (ii) are
sufficiently limited to protect the legitimate interests of the Company and its
subsidiaries, (iii) impose no undue hardship on the Executive and (iv) are not
injurious to the public. The Executive further acknowledges and agrees that
(x) the Executive’s breach of the provisions of Section 8 will cause the
Company irreparable harm, which cannot be adequately compensated by money
damages, and (y) if the Company elects to prevent the Executive from breaching
such provisions by obtaining an injunction against the Executive, there is a
reasonable probability of the Company’s eventual success on the merits. The
Executive consents and agrees that if the Executive commits any such breach or
threatens to commit any breach, the Company shall be entitled to temporary and
permanent injunctive relief from a court of competent jurisdiction, without
posting any bond or other security and without the necessity of proof of actual
damage, in addition to, and not in lieu of, such other remedies as may be
available to the Company for such breach, including the recovery of money
damages. The Parties further acknowledge and agree that the provisions of
Section 12(a) below are accurate and necessary because (A) this Agreement is
entered into in the State of New Jersey, (B) as of the Effective Date, New
Jersey will have a substantial relationship to the Parties and to this
transaction, (C) as of the Effective Date, New Jersey will be the headquarters
state of the Company, which has operations nationwide and has a compelling
interest in having its employees treated uniformly within the United States,
(D) the use of New Jersey law provides certainty to the Parties in any covenant
litigation in the United States, and (E) enforcement of the provision of this
Section 8 would not violate any fundamental public policy of New Jersey or any
other jurisdiction. If any of the provisions of Section 8 are determined to be
wholly or partially unenforceable, the Executive hereby agrees that this
Agreement or any provision hereof may be reformed so that it is enforceable to
the maximum extent permitted by law. If any of the provisions of this Section
8 are determined to be wholly or partially unenforceable in any jurisdiction,
such determination shall not be a bar to or in any way diminish the Company’s
right to enforce any such covenant in any other jurisdiction.

          9. Successors. (a) This Agreement is personal to the Executive and
without the prior written consent of the Company shall not be assignable by the
Executive other than by will or the laws of descent and distribution. This
Agreement shall inure to the benefit of and be enforceable by the Executive’s
legal representatives. This Agreement shall inure to the benefit of and be
binding upon the Company and its successors and assigns.

          (b) No rights or obligations of the Company under this Agreement may be
assigned or transferred by the Company except that such rights or obligations
may be assigned or transferred pursuant to a merger or consolidation in which
the Company is not the continuing entity, or the sale or liquidation of all or
substantially all or a substantial portion of the assets of the
Company; provided, however, that the assignee or transferee is the successor to all or
substantially all or a substantial portion of the assets of the Company and
such assignee or transferee assumes the liabilities, obligations and duties of
the Company, as contained in this Agreement, either contractually or as a
matter of law. The Company shall cause any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all or a substantial portion of its business and/or assets to
assume expressly and agree to perform this Agreement within 15 days after such
succession in the same manner and to
the same extent that the Company would be required to perform it if no
such succession had taken place. A breach of this Section 9(b) shall be deemed
to be Good Reason under Section

18

 

4(c)(viii). As used in this Agreement,
“Company” shall mean the Company as hereinbefore defined and any successor to
its business and/or assets as aforesaid which assumes and agrees to perform
this Agreement by operation of law, or otherwise.

          10. Financial Representation. The Company represents to the Executive
that, as of the Effective Date, all financial statements for each quarter and
fiscal year since January 1, 1999 (as filed in the Company’s Forms 10-K and
10-Q reports) fairly present in all material respects the financial condition
and results of operations of the Company in conformity with GAAP as of the
applicable reporting dates, except as reported in the notes and year-end
adjustments to those financial statements.

          11. Indemnification. The Company shall indemnify the Executive as an
officer, director and employee of the Company and any member of the Affiliated
Group and in the same amounts to the maximum extent permitted under Article
Twelfth of the Company’s Restated Certificate of Incorporation, the Company’s
by-laws and applicable law. The Company shall maintain directors’ and
officers’ liability insurance coverage during the Executive’s employment and
thereafter for the duration of any period of limitations during which any
action, if any, may be brought against the Executive for his service as an
officer, director or employee of the Company and any member of the Affiliated
Group and in the same amounts, and on the same terms and conditions as
applicable to other former senior executives and directors of the Company.

          12. Miscellaneous. (a) This Agreement shall be governed by and construed
in accordance with the laws of the State of New Jersey, without reference to
principles of conflict of laws. The Parties hereto irrevocably agree to submit
to the jurisdiction and venue of the courts of the State of New Jersey, in any
action or proceeding brought with respect to or in connection with this
Agreement. The captions of this Agreement are not part of the provisions
hereof and shall have no force or effect. This Agreement may not be amended or
modified otherwise than by a written agreement executed by the Parties hereto
or their respective successors and legal representatives.

          (b) All notices and other communications hereunder shall be in writing and
shall be given by hand delivery to the other Party or by registered or
certified mail, return receipt requested, postage prepaid, addressed as
follows:

	 	 	 
	 	 	
If to the Executive:
	 	 	 
	 	 	
At the most recent address on file for the Executive at the Company.
	 	 	 
	 	 	
With a copy to:
	 	 	 
	 	 	
Stewart Reifler, Esq.
	 	 	
Vedder, Price, Kaufman & Kammholz
	 	 	
805 Third Avenue
	 	 	
New York, New York 10022

19

 

	 	 	 
	 	 	
If to the Company:
	 	 	 
	 	 	
The Chubb Corporation
	 	 	
15 Mountain View Road
	 	 	
Warren, New Jersey 07059
	 	 	 
	 	 	
Attention: General Counsel
	 	 	 
	 	 	
With a copy to:
	 	 	 
	 	 	
Michael S. Katzke, Esq.
	 	 	
Wachtell, Lipton, Rosen & Katz
	 	 	
51 West 52nd Street
	 	 	
New York, New York 10019
	 	 	 
	 	 	
or to such other address as either Party shall have furnished to the
other in writing in accordance herewith. Notice and communications shall
be effective when actually received by the addressee.

          (c) The invalidity or unenforceability of any provision of this Agreement
shall not affect the validity or enforceability of any other provision of this
Agreement.

          (d) Notwithstanding any other provision of this Agreement, the Company may
withhold from any amounts payable or benefits provided under this Agreement any
Federal, state, and local taxes as shall be required to be withheld pursuant to
any applicable law or regulation.

          (e) The Executive’s or the Company’s failure to insist upon strict
compliance with any provision of this Agreement or the failure to assert any
right the Executive or the Company may have hereunder, shall not be deemed to
be a waiver of such provision or right or any other provision or right of this
Agreement.

          (f) From and after the Effective Date, this Agreement shall supersede any
other employment, severance or change-in-control agreement between the Parties
with respect to the subject matter hereof, including without limitation the
Term Sheet dated as of November 3, 2002, but not including the CIC Agreement.

          13. Representations. (a) The Company hereby represents and warrants to
the Executive that it is fully authorized and empowered to enter into this
Agreement and to perform its obligations hereunder and that the performance of
its obligations under this Agreement will not violate any agreement between it
and any other person, firm or organization.

          (b) The Executive hereby represents and warrants to the Company that (i)
the Executive is not party to any contract, understanding, agreement or policy,
whether or not written, with the Previous Employer or otherwise, that would be
breached by the Executive’s entering into, or performing services under, this
Agreement, (ii) to the Executive’s knowledge, the letter provided to the
Company prior to the date hereof by the Executive from the Previous

20

 

Employer, dated November 25, 2002 (the “Letter”),
completely and accurately reflects the compensation and benefits from the
Previous Employer (A) to which the Executive is entitled and (B) that will be
forfeited by the Executive, as a result of the Executive’s termination of
employment with the Previous Employer, and (iii) to the Executive’s knowledge,
except as set forth in the Letter, no severance or termination payments or
benefits have been provided or will be provided by the Previous Employer or any
of its affiliates to the Executive. In the event that the Executive receives
or learns that he will receive any material severance or termination payments
or benefits other than as reflected in the Letter, the Executive agrees to
inform the Company in writing within 30 days of the receipt or knowledge of
such severance or termination payments or benefits.

          (c) The Executive further represents that he has disclosed to the Company
in writing all material (i) threatened claims that (x) are unresolved and still
outstanding as of the Effective Date and (y) have been received by the
Executive in writing during the 24 months prior to the Effective Date, (ii)
existing claims, and (iii) pending claims, in each case, against him of which
he is aware, if any, as a result of his employment with the Previous Employer
or his membership on any boards of directors which could be reasonably expected
to be materially damaging to the Executive monetarily, reputationally or
otherwise.

21

 

          IN WITNESS WHEREOF, the Executive has hereunto set the Executive’s hand
and, pursuant to the authorization from its Board of Directors, the Company has
caused these presents to be executed in its name and on its behalf, all as of
the day and year first above written.

	 	/s/ John D. Finnegan
	 

	 	JOHN D. FINNEGAN	 

	 	THE CHUBB CORPORATION

	 	By:	/s/ Lawrence M. Small

	 	Title:	Chair, Organization and
Compensation Cmte

22

 

	 	 	 
	THE CHUBB CORPORATION

LONG-TERM STOCK

INCENTIVE PLAN (2000)	 	
Employee Stock Option Award

Nonstatutory

EXHIBIT A

	1.	 	Pursuant to the provisions of The Chubb Corporation Long-Term Stock
Incentive Plan (2000) (the “Plan”), The Chubb Corporation (the
“Corporation”) on the date set forth below granted and hereby evidences
the grant, subject to the terms and conditions set forth herein and in the
Plan, the option (the “Option”) to purchase from the Corporation 250,920
shares of Common Stock, $1.00 par value, of the Corporation, at the
purchase price of $58.425 per share, the Option to be exercisable as
hereinafter provided. The option is intended to be a nonstatutory stock
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.
All capital terms used herein which are not otherwise defined herein shall
have the meaning specified in the Plan.
	 
	2.	 	Subject to the terms and conditions hereof and of the Plan, the Option
shall become exercisable in three equal installments of 83,640 shares on
the first, second and third anniversaries of December 2, 2002, provided
that the Optionee remains in the employ of the Corporation through each
such date.
	 
	 	 	Any exercise of the Option shall be made by giving the Corporation or its
designee written notice of exercise specifying the number of shares to be
purchased and specifying whether, and to what extent, the option is being
exercised. 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, unless
the Optionee has elected to have shares withheld to satisfy such income
tax withholding in accordance with the rules promulgated by the
Committee. Payment of the purchase price of the shares shall be made in
cash, check, shares of Common Stock of the Corporation, or a combination
of the foregoing provided, however, that the Committee may, in its sole
discretion, prohibit or limit the use of shares of Common Stock of the
Corporation as part or full payment of the purchase price.
	 
	3.	 	Without limiting the generality of paragraph 1 hereof, it is understood
and agreed that the Option is subject to the following conditions:

	 	(a)	 	The Option shall not in any event be exercisable after the
close of business on December 1, 2012;
	 
	 	(b)	 	The Option shall not be transferred except by will or the
laws of descent and distribution and, during the lifetime of the
Optionee, shall be exercised only by the Optionee or by the
Optionee’s guardian or legal representative unless the Committee
determines that permitting such an exercise by a guardian or legal
representative will violate any applicable federal or state law; and
	 
	 	(c)	 	Neither the Optionee nor any legal representative, legatee,
or distributes 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 the
Option.

(Page 1 of 4)

 

	 	 	 
	THE CHUBB CORPORATION

LONG-TERM STOCK

INCENTIVE PLAN (2000)	 	
Employee Stock Option Award

Nonstatutory

	 	(d)	 	The grant of the Option should be considered extraordinary,
and is not part of the Optionee’s regular compensation. The
granting of options may be terminated at any time, and this current
grant does not confer any right or expectation that awards will be
made to the Optionee in the future.

	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 Nonstatutory Stock
Option for the number of shares so tendered plus, if applicable, any
shares of Common Sock tendered to satisfy withholding tax liability
arising in connection with such exercise, shall have a purchase price per
share 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 earlier of (i) the expiration date specified
in paragraph 3(a) above or the time provided in paragraph 7(a), (b) or (c)
below, as applicable, and shall be reflected in a Restoration Option Award
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 the
Option after December 2, 2009, (ii) to an exercise of the Option when the
Fair Market Value of a share of Common Stock is not at least $73.03,
(iii) to an exercise of the Option at any time after the Optionee has
terminated employment with the Corporation for any reason, or (iv) if the
Committee determines that paragraph 4(a) shall not be applicable.
	 
	5.	 	The granting of the Option shall not constitute nor be evidence of any
agreement or understanding, express or implied, on the part of the
Corporation or any of its Subsidiaries to employ or continue the
employment of the Optionee for any period.
	 
	6.	 	In the event that the Committee shall determine that any stock dividend,
extraordinary cash dividend, recapitalization, reorganization, merger,
consolidation, split-up, spin-off, combination, exchange of shares,
warrants or rights offering to purchase Common Stock at a price
substantially below fair market value, or other similar corporate event
affects the Common Stock such that an adjustment is required in order to
preserve the benefits or potential benefits intended to be made available
under the Option, then the Committee shall, in its sole discretion, and in
such manner as the Committee may deem equitable, adjust any or all of (1)
the number and kind of shares, subject to the Option and (2) the exercise
price with respect to the Option and/or, if deemed appropriate, make
provision for a cash payment to the person holding the Option provided,
however, that the number of shares subject to the Option shall always be a
whole number.

(Page 2 of 4)

 

	 	 	 
	THE CHUBB CORPORATION

LONG-TERM STOCK

INCENTIVE PLAN (2000)	 	
Employee Stock Option Award

Nonstatutory

	7.	 	Termination of Employment.

	 	(a)	 	Except as provided in subparagraph (b) and subparagraph (c)
of this paragraph 7, the Option shall be automatically cancelled
upon the Optionee’s termination of employment.
	 
	 	(b)	 	Upon termination of the Optionee’s employment for retirement
on or after Optionee’s Normal Retirement Date or Earliest Retirement
Age under the Corporation’s Pension Plan, or by reason of the
disability (as defined in such Pension Plan) of the Optionee, or for
any reason with the consent of the Committee, the Option if
outstanding for one year prior to such termination date shall be
fully exercisable by the Optionee after the date of such termination
through the expiration date of the Option specified in accordance
with paragraph 3 (a), above. In the event of death of the Optionee
(whether before or after termination of employment), the Option if
outstanding for one year prior to such death (if not previously
cancelled) shall be fully exercisable by the Optionee’s legal
representative through the expiration date of the Option specified
in accordance with paragraph 3 (a) above.
	 
	 	(c)	 	Upon termination of the Participant’s employment that would
give rise to benefits under Section 5(a) of the Employment Agreement
by and between the Corporation and the Participant effective as of
December 1, 2002, the Option shall vest in accordance with the terms
therein.
	 
	 	(d)	 	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. Nor shall it
be considered a termination of employment if the Optionee is placed
on a military or sick leave or such other leave of absence which is
considered as continuing intact the employment relationship.

	8.	 	Mergers, Sales and Change in Control. 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 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 business or assets of the Corporation
or (ii) a Change in Control (as defined below) of the Corporation, the
Option if then outstanding shall become exercisable in full.
	 
	 	 	A “Change in Control” shall be deemed to have occurred if (a) any person,
or any two or more persons acting as a group, and all affiliates of such
person or persons, shall own beneficially 25% or more of the Common Stock
outstanding, or (b) following (i) a tender or exchange offer for voting
securities of the Corporation, or (ii) a proxy contest for the election
of directors of the Corporation, the persons who were directors of the

(Page 3 of 4)

 

	 	 	 
	THE CHUBB CORPORATION

LONG-TERM STOCK

INCENTIVE PLAN (2000)	 	
Employee Stock Option Award

Nonstatutory

	 	 	Corporation immediately before the initiation of such event cease to
constitute a majority of the Board of Directors of the Corporation upon
the completion of such tender or exchange offer to proxy contest or
within one year after such completion.
	 
	9.	 	Any notice to be given hereunder to the Corporation, other than with
respect to option exercises, 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 Optionee shall be
addressed to him at this address as shown on the records of the
Corporation.
	 
	10.	 	The Optionee agrees to be bound by the terms and conditions hereof and of
the Plan.
	 
	11.	 	Governing Law. The Option and the legal relations between the parties
shall be governed by and construed in accordance with the internal laws of
the State of New York.

	 	 	 	 	 
	 	 	 	 	THE CHUBB CORPORATION
	 	 	 	 	 
	 	 	
By:	 	/s/ Henry G. Gulick
	 	 	 	 	

	 	 	 	 	Secretary
	 	 	 	 	 
	 	 	
Date:
	 	December 2, 2002
	 	 	 	 	

(Page 4 of 4)

 

	 	 	 
	THE CHUBB CORPORATION

LONG-TERM STOCK

INCENTIVE PLAN (2000)	 	
Restricted Stock Award

EXHIBIT B

	1.	 	Pursuant to the provisions of The Chubb Corporation Long-Term Stock
Incentive Plan (2000) (the “Plan”), The Chubb Corporation (the
“Corporation”) on the date set forth below granted and hereby evidences
the grant to John D. Finnegan (the “Participant”), subject to the terms
and conditions set forth herein and in the Plan, a Restricted Stock Award
(the “Award”) of 61,617 shares of Restricted Stock (“Restricted Shares”).
All capitalized terms used herein which are not otherwise defined herein
shall have the meaning specified in the Plan.
	 
	2.	 	It is understood and agreed that the grant of Restricted Shares evidenced
hereby is subject to the following conditions:

	 	(a)	 	Except as provided in paragraph 4 and 5, the Restriction
Period for shares pursuant to this Award shall be as follows: for
30,809 shares granted under this Award, December 2, 2003; for 30,808
shares granted under this Award, December 2, 2004. Certificates
evidencing the Restricted Shares shall be issued by the Corporation
and registered in the name of the Participant on the stock transfer
books of the Corporation but during the Restriction Period, such
certificates shall bear all appropriate legend, such legend to be
removed only if, and when, the Restriction Period ends as provided
herein. As a condition to receiving this Award, Participant shall
deliver to the Corporation the attached stock power duly endorsed in
blank. Notwithstanding the above, the Participant shall be entitled
to exercise all rights, except the rights specifically prohibited by
paragraph 2(c), otherwise held by an owner of a share of Common
Stock, including the right to receive free of restrictions all cash
dividends paid on such Common Stock.
	 
	 	(b)	 	In order to comply with any applicable securities laws, the
Corporation may require the Participant (i) to furnish evidence
satisfactory to the Corporation (including a written and signed
representation letter) to the effect that all Restricted Shares were
acquired for investment only and not for resale or distribution and
(ii) to agree that all Restricted Shares shall only be sold by the
Participant following registration under the Securities Act of 1933
or pursuant to an exemption therefrom.
	 
	 	(c)	 	During the Restriction Period, the Restricted Shares may not
be sold, hypothecated, pledged or otherwise transferred in any
manner except by will or the laws of descent and distribution or as
otherwise specifically permitted herein.

	3.	 	The Award shall not constitute nor be evidence of any agreement or
understanding, express or implied, on the part of the Corporation or any
of its Subsidiaries to employ or continue the employment of the
Participant for any period.
	 
	4.	 	Termination of Employment.

	 	(a)	 	Except as provided in subparagraph (b) and subparagraph (c)
of this paragraph 4, the Restricted Shares shall be automatically
forfeited upon the Participant’s

(Page 1 of 4)

 

	 	 	 
	THE CHUBB CORPORATION

LONG-TERM STOCK

INCENTIVE PLAN (2000)	 	
Restricted Stock Award

	 	 	 	termination of employment during
the Restriction Period. Upon any forfeiture of Restricted Shares
hereunder, ownership of such shares shall be transferred to the
Corporation and the Participant shall cease to have any ownership
interest in such shares as of the date of such forfeiture.
	 
	 	(b)	 	Upon termination of the Participant’s employment for
retirement on or after Participant’s Normal Retirement Date under
the Corporation’s Pension Plan, or by reason of death or disability
(as defined in such Pension Plan) of the Participant or for any
reason with the consent of the Committee, there shall be distributed
to the Participant (or the Participant’s Designated Beneficiary in
the case of the Participant’s death) the number of Restricted Shares
equal to the number of Restricted Shares times a fraction the
numerator of which is the number of full calendar months from
December 2, 2002 to the date of such termination of employment and
the denominator of which is 24, and all other Restricted Shares
shall be forfeited, provided, however, that the Committee may
determine that the Participant (or the Designated Beneficiary) is
entitled to receive a greater number of Restricted Shares up to but
not exceeding the number of Restricted Shares which would have been
distributed had the Participant continued to be employed until
December 2, 2004.
	 
	 	(c)	 	Upon termination of the Participant’s employment that would
give rise to benefits under Section 5(a) of the Employment Agreement
by and between the Corporation and the Participant effective as of
December 1, 2002, the Restricted Shares shall vest in accordance
with the terms therein.
	 
	 	(d)	 	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. Nor shall it
be considered a termination of employment if the Participant is
placed on a military or sick leave or such other leave of absence
which is considered as continuing intact the employment
relationship; in such a case, the employment relationship shall be
continued until the later of the date when the leave equals ninety
days or the date when a Participant’s right to reemployment shall no
longer be guaranteed either by law or by contract.

	5.	 	Change in Control. 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
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 business or assets of the Corporation or (ii) a
Change in Control (as defined below) of
the Corporation, which occurs on or after December 2, 2003 (any such
event described in (i) or (ii) which occurs on or after December 2, 2003
being hereinafter referred to as a “Change Event”), Restricted Shares not
previously forfeited pursuant to paragraph 4 shall become vested and
nonforfeitable.

(Page 2 of 4)

 

	 	 	 
	THE CHUBB CORPORATION

LONG-TERM STOCK

INCENTIVE PLAN (2000)	 	
Restricted Stock Award

	 	 	A “Change in Control” shall be deemed to have occurred if (a) any person,
or any two or more persons acting as a group, and all affiliates of such
person or persons, shall own beneficially 25% or more of the Common Stock
outstanding, or (b) following (i) a tender or exchange offer for voting
securities of 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 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.
	 
	6.	 	In the event that the Committee shall determine that any stock dividend,
extraordinary cash dividend, recapitalization, reorganization, merger,
consolidation, split-up, spin-off, combination, exchange of shares,
warrants or rights offering to purchase Common Stock at a price
substantially below fair market value, or other similar corporate event
affects the Common Stock such that an adjustment is required in order to
preserve 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 shares (or other property) subject to this Award
and/or, if deemed appropriate, make provision for a cash payment to the
person holding this Award provided, however, that the number of Restricted
Shares subject to this Award shall always be a whole number.
	 
	7.	 	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.
	 
	8.	 	The Participant agrees to be bound by the terms and conditions hereof and
of the Plan.
	 
	9.	 	Cancellation and Rescission of Restricted Stock Award. The Committee may
also cancel any Restricted Stock Award at any time, and the Corporation
shall have the additional rights set forth below in this paragraph 9, if
the Participant is not in compliance with all applicable provisions of
this Award agreement and the Plan including the following conditions:

	 	(a)	 	A Participant shall not, without prior written authorization
from the Corporation, disclose to anyone outside the Corporation, or
use in other than the Corporation’s or any of its Subsidiaries’
business, any confidential information or material relating to the
business of the Corporation or any of the Corporation’s Subsidiaries
that is acquired by the Participant either during or after
employment with the Corporation or any of the Corporation’s
Subsidiaries.
	 
	 	(b)	 	A Participant shall not during his or her employment with the
Corporation or any of its Subsidiaries and for a period of one (1)
year following any termination of such employment relationship
directly or indirectly solicit, persuade, encourage or induce any
individual employed by the Corporation or any of its Subsidiaries
during the above-referenced time periods to become employed by or
associated 

(Page 3 of 4)

 

	 	 	 
	THE CHUBB CORPORATION

LONG-TERM STOCK

INCENTIVE PLAN (2000)	 	
Restricted Stock Award

	 	 	 	with any person or entity other than the Corporation or
any of its Subsidiaries which employs Participant or for which
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 Participant’s
behalf.
	 
	 	(c)	 	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 its Subsidiaries, relating
in any manner to the actual or anticipated business, research or
development work of the Corporation or any of its Subsidiaries and
shall do anything reasonably necessary to enable the Corporation or
any of its Subsidiaries to secure a patent, copyright or any other
intellectual property rights where appropriate in the United States
and in foreign countries.
	 
	 	(d)	 	Failure to comply with the provisions of this paragraph 9
prior to, or during the six months after, the end of the Restriction
Period pursuant to the Restricted Stock Award shall cause the
Restricted Stock Award to be rescinded. The Corporation shall
notify the Participant in writing of any such rescission within two
years after the end of the Restricted Period provided, however, that
the Corporation may, in its discretion, in any individual case
provide for waiver in whole or in part of compliance with the
provisions of this paragraph 9. Within ten days after receiving
such a notice from the Corporation, the Participant shall pay to the
Corporation the amount of any gain realized or payment received as a
result of the vesting of the Restricted Stock Award. Such payment
shall be made either in cash and/or by returning to the Corporation
the number of shares of Stock that the Participant received in
connection with the rescinded Restricted Stock Award.

	10.	 	Governing Law. The Award and the legal relations between the parties
shall be governed by and construed in accordance with the internal laws of
the State of New York.

	 	 	 	 	 
	 	 	 	 	THE CHUBB CORPORATION
	 	 	 	 	 
	 	 	
By:	 	/s/ Henry G. Gulick
	 	 	 	 	

	 	 	 	 	Secretary
	 	 	 	 	 
	 	 	
Date:
	 	December 2, 2002
	 	 	 	 	

(Page 4 of 4)

 

	 	 	 
	THE CHUBB CORPORATION	 	
Employee Stock Option Award
	LONG-TERM STOCK	 	
Nonstatutory
	INCENTIVE PLAN (2000)	 	
EXHIBIT C

	1.	 	Pursuant to the provisions of The Chubb Corporation Long-Term Stock
Incentive Plan (2000) (the “Plan”), The Chubb Corporation (the
“Corporation”) on the date set forth below granted and hereby evidences
the grant, subject to the terms and conditions set forth herein and in the
Plan, the option (the “Option”) to purchase from the Corporation 133,618
shares of Common Stock, $1.00 par value, of the Corporation, at the
purchase price of $58.425 per share, the Option to be exercisable as
hereinafter provided. The option is intended to be a nonstatutory stock
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.
All capital terms used herein which are not otherwise defined herein shall
have the meaning specified in the Plan.
	 
	2.	 	Subject to the terms and conditions hereof and of the Plan, the Option
shall become exercisable in two equal installments of 66,809 shares on the
first and second anniversaries of December 2, 2002, provided that the
Optionee remains in the employ of the Corporation through each such date.
	 
	 	 	Any exercise of the Option shall be made by giving the Corporation or its
designee written notice of exercise specifying the number of shares to be
purchased and specifying whether, and to what extent, the option is being
exercised. 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, unless
the Optionee has elected to have shares withheld to satisfy such income
tax withholding in accordance with the rules promulgated by the
Committee. Payment of the purchase price of the shares shall be made in
cash, check, shares of Common Stock of the Corporation, or a combination
of the foregoing provided, however, that the Committee may, in its sole
discretion, prohibit or limit the use of shares of Common Stock of the
Corporation as part or full payment of the purchase price.
	 
	3.	 	Without limiting the generality of paragraph 1 hereof, it is understood
and agreed that the Option is subject to the following conditions:

	 	(a)	 	The Option shall not in any event be exercisable after the
close of business on December 1, 2012;
	 
	 	(b)	 	The Option shall not be transferred except by will or the
laws of descent and distribution and, during the lifetime of the
Optionee, shall be exercised only by the Optionee or by the
Optionee’s guardian or legal representative unless the Committee
determines that permitting such an exercise by a guardian or legal
representative will violate any applicable federal or state law; and
	 
	 	(c)	 	Neither the Optionee nor any legal representative, legatee,
or distributes 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 the
Option.

(Page 1 of 4)

 

	 	 	 
	THE CHUBB CORPORATION	 	
Employee Stock Option Award
	LONG-TERM STOCK	 	
Nonstatutory
	INCENTIVE PLAN (2000)	 	

	 	(d)	 	The grant of the Option should be considered extraordinary,
and is not part of the Optionee’s regular compensation. The
granting of options may be terminated at any time, and this current
grant does not confer any right or expectation that awards will be
made to the Optionee in the future.

	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 Nonstatutory Stock
Option for the number of shares so tendered plus, if applicable, any
shares of Common Sock tendered to satisfy withholding tax liability
arising in connection with such exercise, shall have a purchase price per
share 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 earlier of (i) the expiration date specified
in paragraph 3(a) above (ii) or the time provided in paragraph 7(a), (b)
or (c) below, as applicable, and shall be reflected in a Restoration
Option Award 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 the
Option after December 2, 2009, (ii) to an exercise of the Option when the
Fair Market Value of a share of Common Stock is not at least $73.03,
(iii) to an exercise of the Option at any time after the Optionee has
terminated employment with the Corporation for any reason, or (iv) if the
Committee determines that paragraph 4(a) shall not be applicable.

	5.	 	The granting of the Option shall not constitute nor be evidence of any
agreement or understanding, express or implied, on the part of the
Corporation or any of its Subsidiaries to employ or continue the
employment of the Optionee for any period.

	6.	 	In the event that the Committee shall determine that any stock dividend,
extraordinary cash dividend, recapitalization, reorganization, merger,
consolidation, split-up, spin-off, combination, exchange of shares,
warrants or rights offering to purchase Common Stock at a price
substantially below fair market value, or other similar corporate event
affects the Common Stock such that an adjustment is required in order to
preserve the benefits or potential benefits intended to be made available
under the Option, then the Committee shall, in its sole discretion, and in
such manner as the Committee may deem equitable, adjust any or all of (1)
the number and kind of shares, subject to the Option and (2) the exercise
price with respect to the Option and/or, if deemed appropriate, make
provision for a cash payment to the person holding the Option provided,
however, that the number of shares subject to the Option shall always be a
whole number.
	 
	7.	 	Termination of Employment.

	 	(a)	 	Except as provided in subparagraph (b) and subparagraph (c)
of this paragraph 7, the Option shall be automatically cancelled
upon the Optionee’s termination of employment.

(Page 2 of 4)

 

	 	 	 
	THE CHUBB CORPORATION	 	
Employee Stock Option Award
	LONG-TERM STOCK	 	
Nonstatutory
	INCENTIVE PLAN (2000)	 	

	 	(b)	 	Upon termination of the Optionee’s employment for retirement
on or after Optionee’s Normal Retirement Date or Earliest Retirement
Age under the Corporation’s Pension Plan, or by reason of the
disability (as defined in such Pension Plan) of the Optionee, or for
any reason with the consent of the Committee, the Option if
outstanding for one year prior to such termination date shall be
fully exercisable by the Optionee after the date of such termination
through the expiration date of the Option specified in accordance
with paragraph 3 (a), above. In the event of death of the Optionee
(whether before or after termination of employment), the Option if
outstanding for one year prior to such death (if not previously
cancelled) shall be fully exercisable by the Optionee’s legal
representative through the expiration date of the Option specified
in accordance with paragraph 3 (a) above.
	 
	 	(c)	 	Upon termination of the Participant’s employment that would
give rise to benefits under Section 5(a) of the Employment Agreement
by and between the Corporation and the Participant effective as of
December 1, 2002, the Option shall vest in accordance with the terms
therein.
	 
	 	(d)	 	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. Nor shall it
be considered a termination of employment if the Optionee is placed
on a military or sick leave or such other leave of absence which is
considered as continuing intact the employment relationship.

	8.	 	Mergers, Sales and Change in Control. 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 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 business or assets of the Corporation
or (ii) a Change in Control (as defined below) of the Corporation, the
Option if then outstanding shall become exercisable in full.
	 
	 	 	A “Change in Control” shall be deemed to have occurred if (a) any person,
or any two or more persons acting as a group, and all affiliates of such
person or persons, shall own beneficially 25% or more of the Common Stock
outstanding, or (b) following (i) a tender or exchange offer for voting
securities of 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 cease to
constitute a majority of the Board of Directors of the Corporation upon
the completion of such tender or exchange offer to proxy contest or
within one year after such completion.
	 
	9.	 	Any notice to be given hereunder to the Corporation, other than with
respect to option exercises, 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

(Page 3 of 4)

 

	 	 	 
	THE CHUBB CORPORATION	 	
Employee Stock Option Award
	LONG-TERM STOCK	 	
Nonstatutory
	INCENTIVE PLAN (2000)	 	

	 	 	hereunder to the Optionee shall be addressed to him at this address as
shown on the records of the Corporation.
	 
	10.	 	The Optionee agrees to be bound by the terms and conditions hereof and of
the Plan.
	 
	11.	 	Governing Law. The Option and the legal relations between the parties
shall be governed by and construed in accordance with the internal laws of
the State of New York.

	 	 	 	 	 
	 	 	THE CHUBB CORPORATION
	 	 	 	 	 
	 	 	
By:	 	/s/ Henry G. Gulick
	 	 	 	 	

Secretary
	 	 	 	 	 
	 	 	
Date:
	 	December 2, 2002

(Page 4 of 4)

 

EXHIBIT D

Form of Release

     (a)  In consideration for the payment of the severance described in the
Executive employment agreement with the Company (the “Employment Agreement”),
dated as of January 9, 2003, the Executive for himself, and for his heirs, administrators,
representatives, executors, successors and assigns (collectively “Releasers”)
does hereby irrevocably and unconditionally release, acquit and forever
discharge the Company, its subsidiaries, affiliates and divisions and their
respective, current and former, trustees, officers, directors, partners,
shareholders, agents, employees, consultants, independent contractors and
representatives, including without limitation all persons acting by, through
under or in concert with any of them (collectively, “Releasees”), and each of
them from any and all charges, complaints, claims, liabilities, obligations,
promises, agreements, controversies, damages, remedies, actions, causes of
action, suits, rights, demands, costs, losses, debts and expenses (including
attorneys’ fees and costs) of any nature whatsoever, known or unknown, whether
in law or equity and whether arising under federal, state or local law and in
particular including any claim for discrimination based upon race, color,
ethnicity, sex, age (including the Age Discrimination in Employment Act of
1967), national origin, religion, disability, or any other unlawful criterion
or circumstance, which the Executive and Releasers had, now have, or may have
in the future against each or any of the Releasees, including under the New
Jersey Law Against Discrimination, the New Jersey Conscientious Employee
Protection Act, the Employment Agreement, and the Change in Control Employment
Agreement (collectively “Executive/Releaser Actions”) from the beginning of the
world until the date hereof.

     (b)  The Executive acknowledges that: (i) this entire Release is written
in a manner calculated to be understood by him; (ii) he has been advised to
consult with an attorney before executing this Release; (iii) he was given a
period of twenty-one days within which to consider this Release; and (iv) to
the extent he executes this Release before the expiration of the twenty-one day
period, he does so knowingly and voluntarily and only after consulting his
attorney. The Executive shall have the right to cancel and revoke this Release
by delivering notice to the Company pursuant to the notice provision of Section
12 of the Employment Agreement prior to the expiration of the seven-day period
following the date hereof, and the severance benefits under the Employment
Agreement shall not become effective, and no payments or benefits shall be made
or provided thereunder, until the day after the expiration of such seven-day
period (the “Revocation Date”). Upon such revocation, this Release and the
severance provisions of the Employment Agreement shall be null and void and of
no further force or effect.

     (c)  Notwithstanding anything herein to the contrary, the sole matters to
which the Release do not apply are: (i) the Executive’s rights of
indemnification and directors and officers liability insurance coverage to
which he was entitled immediately prior to
           with regard to his service
as an officer of the Company (including, without limitation, under Section 11
of the Employment Agreement); (ii) the Executive’s rights under any
tax-qualified pension or claims for accrued vested benefits under any other
employee benefit plan, policy or arrangement maintained by the Company or under
COBRA; or (iii) the Executive’s rights under Sections 3(b)(xii), 5, 7, 9 and 11
of the Employment Agreement which are intended to survive termination of
employment.

 

     (d)  This Release is the complete understanding between the Executive and
the Company in respect of the subject matter of this Release and supersedes all
prior agreements relating to the same subject matter. The Executive has not
relied upon any representations, promises or agreements of any kind except
those set forth herein in signing this Release.

     (e)  In the event that any provision of this Release should be held to be
invalid or unenforceable, each and all of the other provisions of this Release
shall remain in full force and effect. If any provision of this Release is
found to be invalid or unenforceable, such provision shall be modified as
necessary to permit this Release to be upheld and enforced to the maximum
extent permitted by law.

     (f)  This Release is to be governed and enforced under the laws of the
State of New Jersey (except to the extent that New Jersey conflicts of law
rules would call for the application of the law of another jurisdiction).

     (g)  This Release inures to the benefit of the Company and its successors
and assigns.

	 	

EXECUTIVECHANGE IN CONTROL EMPLOYMENT AGREEMENT: FINNEGAN

 

Exhibit 10.2

EXECUTION COPY

CHANGE IN CONTROL EMPLOYMENT AGREEMENT

         
      AGREEMENT, dated as of the 21st day of January, 2003
(this “Agreement”), by
and between The Chubb Corporation (the “Company”), and John D. Finnegan (the
“Executive”).

         
      WHEREAS, the Board of Directors of the Company
(the “Board”), has
determined that it is in the best interests of the Company and its shareholders
to assure that the Company will have the continued dedication of the Executive,
notwithstanding the possibility, threat or occurrence of a Change in Control
(as defined herein). The Board believes it is imperative to diminish the
inevitable distraction of the Executive by virtue of the personal uncertainties
and risks created by a pending or threatened Change in Control and to encourage
the Executive’s full attention and dedication to the current Company and in the
event of any threatened or pending Change in Control, and to provide the
Executive with compensation and benefits arrangements upon a Change in Control
that ensure that the compensation and benefits expectations of the Executive
will be satisfied and that are competitive with those of other corporations.
Therefore, in order to accomplish these objectives, the Board has caused the
Company to enter into this Agreement.

               NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:

               Section 1. Certain Definitions. (a) “Effective Date” means the first
date during the Change in Control Period (as defined herein) on which a Change
in Control occurs. Notwithstanding anything in this Agreement to the contrary,
if a Change in Control occurs and if the Executive’s employment with the
Company is terminated prior to the date on which the Change in Control occurs,
and if it is reasonably demonstrated by the Executive that such termination of
employment (1) was at the request of a third party that has taken steps
reasonably calculated to effect a Change in Control or (2) otherwise arose in
connection with or anticipation of a Change in Control, then “Effective Date”
means the date immediately prior to the date of such termination of employment.

               (b) “Change in Control Period” means the period commencing on the date
hereof and ending on the third anniversary of the date hereof; provided,
however, that, commencing on the date one year after the date hereof, and on
each annual anniversary of such date (such date and each annual anniversary
thereof, the “Renewal Date”), unless previously terminated, the Change in
Control Period shall be automatically extended so as to terminate three years
from such Renewal Date, unless, at least 60 days prior to the Renewal Date, the
Company shall give notice to the Executive that the Change in Control Period
shall not be so extended.

               (c) “Affiliated Company” means any company controlled by, controlling or
under common control with the Company.

               (d) “Change in Control” means:

               (1) The acquisition by any individual, entity or group (within the meaning
of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as
amended (the “Exchange Act”)) (a “Person”) of beneficial ownership (within the
meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or more of
either (A) the then-outstanding shares of common stock of the Company (the
“Outstanding Company Common Stock”) or (B) the combined voting

 

 

power of the then-outstanding voting securities of the Company entitled to
vote generally in the election of directors (the “Outstanding Company Voting
Securities”); provided, however, that, for purposes of this Section 1(d), the
following acquisitions shall not constitute a Change in Control: (i) any
acquisition directly from the Company, (ii) any acquisition by the Company,
(iii) any acquisition by any employee benefit plan (or related trust) sponsored
or maintained by the Company or any Affiliated Company or (iv) any acquisition
by any corporation pursuant to a transaction that complies with Sections
1(d)(3)(A), 1(d)(3)(B) and 1(d)(3)(C);

               (2) Any time at which individuals who, as of the date hereof, constitute
the Board (the “Incumbent Board”) cease for any reason to constitute at least a
majority of the Board; provided, however, that any individual becoming a
director subsequent to the date hereof whose election, or nomination for
election by the Company’s shareholders, was approved by a vote of at least a
majority of the directors then comprising the Incumbent Board shall be
considered as though such individual were a member of the Incumbent Board, but
excluding, for this purpose, any such individual whose initial assumption of
office occurs as a result of an actual or threatened election contest with
respect to the election or removal of directors or other actual or threatened
solicitation of proxies or consents by or on behalf of a Person other than the
Board;

               (3) Consummation of a reorganization, merger, statutory share exchange or
consolidation or similar corporate transaction involving the Company or any of
its subsidiaries, a sale or other disposition of all or substantially all of
the assets of the Company, or the acquisition of assets or stock of another
entity by the Company or any of its subsidiaries (each, a “Business
Combination”), in each case unless, following such Business Combination, (A)
all or substantially all of the individuals and entities that were the
beneficial owners of the Outstanding Company Common Stock and the Outstanding
Company Voting Securities immediately prior to such Business Combination
beneficially own, directly or indirectly, more than 50% of the then-outstanding
shares of common stock and the combined voting power of the then-outstanding
voting securities entitled to vote generally in the election of directors, as
the case may be, of the corporation resulting from such Business Combination
(including, without limitation, a corporation that, as a result of such
transaction, owns the Company or all or substantially all of the Company’s
assets either directly or through one or more subsidiaries) in substantially
the same proportions as their ownership immediately prior to such Business
Combination of the Outstanding Company Common Stock and the Outstanding Company
Voting Securities, as the case may be, (B) no Person (excluding any corporation
resulting from such Business Combination or any employee benefit plan (or
related trust) of the Company or such corporation resulting from such Business
Combination) beneficially owns, directly or indirectly, 20% or more of,
respectively, the then-outstanding shares of common stock of the corporation
resulting from such Business Combination or the combined voting power of the
then-outstanding voting securities of such corporation, except to the extent
that such ownership existed prior to the Business Combination, and (C) at least
a majority of the members of the board of directors of the corporation
resulting from such Business Combination were members of the Incumbent Board at
the time of the execution of the initial agreement or of the action of the
Board providing for such Business Combination; or

               (4) Approval by the shareholders of the Company of a complete liquidation
or dissolution of the Company.

2

 

               Section 2. Employment Period. The Company hereby agrees to continue the
Executive in its employ, subject to the terms and conditions of this Agreement,
for the period commencing on the Effective Date and ending on the third
anniversary of the Effective Date (the “Employment Period”). The Employment
Period shall terminate upon the Executive’s termination of employment for any
reason.

               Section 3. Terms of Employment. (a) Position and Duties. (1) During
the Employment Period, (A) the Executive’s position (including status, offices,
officer and board positions, titles and reporting relationships), authority,
duties and responsibilities shall be at least commensurate in all material
respects with the most significant of those held, exercised and assigned at any
time during the 12-month period immediately preceding the Effective Date and
(B) the Executive’s services shall be performed at the office where the
Executive was employed immediately preceding the Effective Date or at any other
location less than 35 miles from such office.

               (2) During the Employment Period, and excluding any periods of vacation
and sick leave to which the Executive is entitled, the Executive agrees to
devote reasonable attention and time during normal business hours to the
business and affairs of the Company and, to the extent necessary to discharge
the responsibilities assigned to the Executive hereunder, to use the
Executive’s reasonable best efforts to perform faithfully and conscientiously
such responsibilities. During the Employment Period, it shall not be a
violation of this Agreement for the Executive to (A) serve on corporate, civic
or charitable boards or committees, provided, that, the Executive shall not
serve on any corporate boards (other than as provided in this Agreement) prior
to December 1, 2003, (B) deliver lectures, fulfill speaking engagements or
teach at educational institutions and (C) manage personal investments, so long
as such activities do not materially interfere with the performance of the
Executive’s responsibilities as an employee of the Company in accordance with
this Agreement. It is expressly understood and agreed that, to the extent that
any such activities have been conducted by the Executive prior to the Effective
Date, the continued conduct of such activities (or the conduct of activities
similar in nature and scope thereto) subsequent to the Effective Date shall not
thereafter be deemed to interfere with the performance of the Executive’s
responsibilities to the Company.

               (b) Compensation. (1) Base Salary. During the Employment Period, the
Executive shall receive an annual base salary (the “Annual Base Salary”) at an
annual rate at least equal to 12 times the highest monthly base salary paid or
payable, including any base salary that has been earned but deferred, to the
Executive by the Company and the Affiliated Companies in respect of the
12-month period immediately preceding the month in which the Effective Date
occurs. The Annual Base Salary shall be paid at such intervals as the Company
pays executive salaries generally. During the Employment Period, the Annual
Base Salary shall be reviewed at least annually for increase (but not
decrease), beginning no more than 12 months after the last salary increase
awarded to the Executive prior to the Effective Date. Any increase in the
Annual Base Salary shall not serve to limit or reduce any other obligation to
the Executive under this Agreement. The Annual Base Salary shall not be
reduced after any such increase and the term “Annual Base Salary” shall refer
to the Annual Base Salary as so increased.

               (2) Annual Bonus. In addition to the Annual Base Salary, the Executive
shall be awarded, for each fiscal year ending during the Employment Period, an
annual bonus (the

3

 

“Annual Bonus”) in cash at least equal to the Executive’s highest bonus
earned (and disregarding any amounts deferred either by the Company or by the
Executive) under the Company’s Annual Incentive Compensation Plan, or any
comparable bonus under any predecessor or successor plan, for the last three
full fiscal years prior to the Effective Date (or for such lesser number of
full fiscal years prior to the Effective Date for which the Executive was
eligible to earn such a bonus, and annualized in the case of any bonus earned
for a partial fiscal year) (the “Recent Annual Bonus”). (If the Executive has
not been eligible to earn such a bonus for any period prior to the Effective
Date, the “Recent Annual Bonus” shall mean the Executive’s target annual bonus
for the year in which the Effective Date occurs.) Each such Annual Bonus shall
be paid no later than the end of the third month of the fiscal year next
following the fiscal year for which the Annual Bonus is awarded, unless the
Executive shall elect to defer the receipt of such Annual Bonus.

               (3) Incentive, Savings and Retirement Plans. During the Employment
Period, the Executive shall be entitled to participate in all cash incentive
and equity incentive, plans, practices, policies, and programs applicable
generally to other peer executives of the Company and the Affiliated Companies,
but in no event shall such plans, practices, policies and programs provide the
Executive with incentive opportunities (measured with respect to both regular
and special incentive opportunities, to the extent, if any, that such
distinction is applicable, but excluding for this purpose any such
opportunities set forth in Sections 3(b)(iii), 3(b)(iv), 3(b)(v), 3(b)(vi),
3(b)(vii) and 3(b)(viii) of the Employment Agreement by and between the Company
and the Executive effective as of the 1st day of December, 2002 (the
“Employment Agreement”)), less favorable, in the aggregate, than the most
favorable of those provided by the Company and the Affiliated Companies for the
Executive under such plans, practices, policies and programs as in effect at
any time during the 12-month period immediately preceding the Effective Date
or, if more favorable to the Executive, those provided generally at any time
after the Effective Date to other peer executives of the Company and the
Affiliated Companies. Without limiting the generality of the foregoing, in the
event that the Executive has not received the benefits under Sections 3(b)(iv)
and 3(b)(viii) of the Employment Agreement as of the Effective Date, the
Executive shall receive the benefits described therein at such time and on such
terms as are provided therein.

               (4) Retirement Benefits.

	 	 	 	              (A) General. During the Employment Period, the Executive shall
be entitled to participate in all savings and retirement plans,
practices, policies, and programs applicable generally to other
peer executives of the Company and the Affiliated Companies, but in
no event shall such plans, practices, policies and programs provide
the Executive with savings opportunities and retirement benefit
opportunities, in each case, less favorable, in the aggregate, than
the most favorable of those provided by the Company and the
Affiliated Companies for the Executive under such plans, practices,
policies and programs as in effect at any time during the 12-month
period immediately preceding the Effective Date or, if more
favorable to the Executive, those provided generally at any time
after the Effective Date to other peer executives of the Company
and the Affiliated Companies. In addition, the Executive shall
receive a Pension SERP, CCAP SERP and ESOP SERP, as described
herein and shall be a participant in any qualified or nonqualified
retirement plans maintained by the Company, including but not
limited to the

4

 

	 	 	 	Pension Plan, the Pension Excess Plan, the Chubb Capital
Accumulation Plan (“CCAP”), the Excess CCAP, the Employee Stock
Ownership Plan (“ESOP”), and the Excess ESOP, in each case, as
amended from time to time, in accordance with the eligibility
conditions set forth in each such plan.
	 
	 	 	 	                (B) Pension SERP. The Executive shall be entitled to an
annual supplemental pension benefit from the Company equal to 6% of
the Executive’s “Final Average Compensation” (as defined below) for
each full year (with fractional credit for partial years) that the
Executive serves as an employee of the Company, up to a maximum of
60% of the Executive’s Final Average Compensation. This annual
benefit shall be reduced by (1) any amounts payable to the
Executive under the Pension Plan and the Pension Excess Plan or any
other additional, successor or replacement pension plan of the
Company, (2) any pension benefits payable to the Executive by the
entity that employed the Executive as of November 3, 2002 or any of
its affiliates, and (3) the Executive’s primary Social Security
benefit as determined by the Company. For purposes of determining
the discount (if any) for early commencement of payments, the
column in Table I of Section 3.2 of the Pension Plan under the
heading “At Least 25 Years” shall be applied to the gross SERP
benefit prior to the application of any offsets. For purposes of
determining Pension SERP benefits payable in the form of a joint
and survivor annuity, the factors contained in Table A
(“Subsidized”) of the Pension Plan shall be used. “Final Average
Compensation” shall mean the annualized average of the Executive’s
“SERP Compensation” (as hereinafter defined) during the
highest-paid five calendar years out of the last ten calendar years
of the Executive’s employment with the Company, or the final 60
months of the Executive’s employment with the Company if higher.
“SERP Compensation” shall mean the sum of (x) the Executive’s
Annual Base Salary paid under Section 3(b)(1), (y) Annual Bonus
paid under Section 3(b)(2) and (z) profit-sharing payments made
under the Profit Sharing Plan, disregarding in each case any amount
deferred for any reason. The Pension SERP benefit shall be payable
in accordance with the payment option elected by the Executive, in
accordance with the election procedures set forth in the Pension
Excess Plan. Except as specifically provided in this Agreement,
the other terms and conditions of the Pension SERP shall be
governed by the terms of the Pension Excess Plan as if the benefits
under the Pension SERP were paid from the Pension Excess Plan.
	 
	 	 	 	                (C) CCAP SERP. The Executive shall be entitled to a lump sum
benefit, within 30 days after the Date of Termination (as defined
in Section 4(e)), equal to (a) the amount of the Company matching
contribution that would have been credited to the Executive under
the CCAP and Excess CCAP if the Executive were eligible to receive
such matching contributions during the period from December 1, 2002
until the date that the Executive first becomes eligible to receive
Company matching contributions under the CCAP and Excess CCAP,
accumulated with interest at the rate of five percent per year for
the period beginning on the date the Executive would have been
credited for such amount under the CCAP and Excess CCAP and ending
on the Date of Termination, plus (b) the amount, if any, that the
Executive forfeits under the CCAP and Excess CCAP as

5

 

	 	 	 	the result of a termination of his employment (other than as
described in clause (E) below) prior to his becoming 100% vested in
the benefits payable under such plans, plus (c) an additional
amount (if any) representing the benefits that the Executive would
have received, accumulated with interest at the rate of five
percent per year for the period beginning on the date the Executive
would have accrued the benefit and ending on the Date of
Termination, had, for all purposes of determining the Executive’s
benefits under the CCAP and Excess CCAP, the Executive been deemed
to have 27 years of service with the Company as of December 1,
2002, provided that the payments in this clause (c) shall not be
duplicative of the payments in clauses (a) and (b) above.
	 
	 	 	 	                (D) ESOP SERP. The Executive shall be entitled to a lump sum
benefit, within 30 days after the Date of Termination, equal to (a)
the amount of money that would have been credited to the Executive
under the ESOP and Excess ESOP if the Executive were eligible for
those plans, during the period from December 1, 2002 until the date
that the Executive first becomes eligible to join the ESOP and
Excess ESOP, accumulated with interest at the rate of five percent
per year for the period beginning on the date the Executive would
have been credited for such amount under the ESOP and Excess ESOP
and ending on the Date of Termination, plus (b) the amount, if any,
that the Executive forfeits under the ESOP and Excess ESOP as the
result of a termination of his employment (other than as described
in clause (E) below) prior to his becoming 100% vested in the
benefits payable under such plans, plus (c) an additional amount
(if any) representing the benefits that the Executive would have
received, accumulated with interest at the rate of five percent per
year for the period beginning on the date the Executive would have
accrued the benefit and ending on the Date of Termination, had, for
all purposes of determining the Executive’s benefits under the ESOP
and Excess ESOP, the Executive been deemed to have 27 years of
service with the Company as of December 1, 2002 (other than for
purposes of determining the Executive’s eligibility to diversify
his ESOP and Excess ESOP accounts), provided that the payments in
this clause (c) shall not be duplicative of the payments in clauses
(a) and (b) above.
	 
	 	 	 	                (E) Certain Terminations Prior to December 1, 2005. In the
event that, prior to December 1, 2005, the Executive (i) resigns
without Good Reason (as defined in Section 4(c)) or (ii) is
terminated for Cause (as defined in Section 4(b)), the Executive
shall not be entitled to receive any of the Pension SERP, CCAP SERP
and ESOP SERP, as described above, and the Company shall not be
obligated to pay such benefits to the Executive.

               (5) Welfare Benefit Plans. During the Employment Period, the Executive
and/or the Executive’s family, as the case may be, shall be eligible for
participation in and shall receive all benefits under welfare benefit plans,
practices, policies and programs provided by the Company and the Affiliated
Companies (including, without limitation, medical, prescription, dental,
vision, disability, employee life, group life, accidental death and travel
accident insurance plans and programs) to the extent applicable generally to
other peer executives of the Company and the Affiliated Companies, but in no
event shall such plans, practices, policies and programs

6

 

provide the Executive with benefits that are less favorable, in the
aggregate, than the most favorable of such plans, practices, policies and
programs in effect for the Executive at any time during the 12-month period
immediately preceding the Effective Date or, if more favorable to the
Executive, those provided generally at any time after the Effective Date to
other peer executives of the Company and the Affiliated Companies, provided,
that during the Employment Period, the Executive shall be entitled to receive
death benefits under group life plans or supplemental plans with a benefit of
no less than five times the Executive’s current Annual Base Salary. In
addition, following the Executive’s retirement or any termination of his
employment, the Executive shall be entitled to retiree health benefits pursuant
to the retiree health plans, practices, programs and policies of the Company
(or under programs providing the same benefits), and for purposes of
determining the amount of the Executive’s contributions and benefits under such
plans, practices, programs and policies, the Executive shall be considered to
have 27 years of service with the Company as of December 1, 2002 (and shall be
considered to have been hired before January 1, 1999 for purposes of
determining his eligibility for Company-subsidized benefits) (the “Executive’s
Retiree Health Benefits”), provided, that the Executive shall not be entitled
to the Executive’s Retiree Health Benefits in the event that prior to December
1, 2005 (i) the Executive resigns without Good Reason (as defined below) or
(ii) is terminated for Cause (as defined below).

               (6) Expenses. During the Employment Period, the Executive shall be
entitled to receive prompt reimbursement for all reasonable expenses incurred
by the Executive in accordance with the most favorable policies, practices and
procedures of the Company and the Affiliated Companies in effect for the
Executive at any time during the 12-month period immediately preceding the
Effective Date or, if more favorable to the Executive, as in effect generally
at any time thereafter with respect to other peer executives of the Company and
the Affiliated Companies.

               (7) Fringe/Other Benefits. During the Employment Period, the Executive
shall be entitled to fringe benefits, including, without limitation,
appropriate use of Company aircraft (for business travel only); long-term
disability benefits as provided to other senior executives, but with an annual
benefit of not less than 60% of the Executive’s current Annual Base Salary; for
Executive’s automobile benefit, use of a Company-provided car and driver (for
business use only and in lieu of any car stipend); club dues and membership
(including initiation fees) at one country club; annual financial counseling as
provided to other senior executives, in accordance with the most favorable
plans, practices, programs and policies of the Company and the Affiliated
Companies in effect for the Executive at any time during the 12-month period
immediately preceding the Effective Date or, if more favorable to the
Executive, as in effect generally at any time thereafter with respect to other
peer executives of the Company and the Affiliated Companies. The Executive
shall also participate in the Company’s Profit Sharing Plan, and for all
purposes of such plan, shall be considered to have 27 years of service with the
Company as of December 1, 2002, provided, that the Executive shall not be
entitled to receive any benefits under such plan in the event that prior to
December 1, 2005 (i) the Executive resigns without Good Reason or (ii) is
terminated for Cause.

               (8) Office and Support Staff. During the Employment Period, the Executive
shall be entitled to an office or offices of a size and with furnishings and
other appointments, and to exclusive personal secretarial and other assistance,
at least equal to the most favorable of the foregoing provided to the Executive
by the Company and the Affiliated Companies at any time

7

 

during the 12-month period immediately preceding the Effective Date or, if
more favorable to the Executive, as provided generally at any time thereafter
with respect to other peer executives of the Company and the Affiliated
Companies.

               (9) Vacation. During the Employment Period, the Executive shall be
entitled to paid vacation in accordance with the most favorable plans,
policies, programs and practices of the Company and the Affiliated Companies as
in effect for the Executive at any time during the 12-month period immediately
preceding the Effective Date or, if more favorable to the Executive, as in
effect generally at any time thereafter with respect to other peer executives
of the Company and the Affiliated Companies, provided that for purposes of
determining the Executive’s vacation benefits, the Executive shall be
considered to have 27 years of service with the Company as of December 1, 2002.

               Section 4. Termination of Employment. (a) Death or Disability. The
Executive’s employment shall terminate automatically if the Executive dies
during the Employment Period. If the Company determines in good faith that the
Disability (as defined herein) of the Executive has occurred during the
Employment Period (pursuant to the definition of “Disability”), it may give to
the Executive written notice in accordance with Section 11(b) of its intention
to terminate the Executive’s employment. In such event, the Executive’s
employment with the Company shall terminate effective on the 30th day after
receipt of such notice by the Executive (the “Disability Effective Date”),
provided that, within the 30 days after such receipt, the Executive shall not
have returned to full-time performance of the Executive’s duties. For purposes
of this Agreement, “Disability” shall mean the inability of the Executive to
perform his duties with the Company on a full-time basis for six consecutive
months as a result of incapacity due to mental or physical illness which is
determined to be total and permanent by a licensed physician mutually selected
by (i) the Company or its insurers and (ii) the Executive or the Executive’s
legal representative. If the parties cannot agree on a licensed physician,
each party shall select a licensed physician and the two physicians shall
select a third who shall be the approved licensed physician for this purpose.

               (b) Cause. The Company may terminate the Executive’s employment during
the Employment Period for Cause. “Cause” means:

	 	 	        (1) The Executive’s willful and continued failure to substantially
perform the Executive’s duties (as contemplated by Section 3(a)(1)(A))
with the Company or any Affiliated Company (other than any such failure
resulting from incapacity due to physical or mental illness or following
the Executive’s delivery of a Notice of Termination for Good Reason),
which failure has continued after a written demand for substantial
performance, signed by a duly authorized member of the Board, is
delivered to the Executive, specifying the manner in which the Executive
has failed to substantially perform, or
	 
	 	 	        (2) the Executive’s willful engaging in gross misconduct in
connection with his position as an officer or director with the Company
or any of the Affiliated Companies that is materially and demonstrably
injurious to the Company, or
	 
	 	 	        (3) the Executive’s conviction of, or plea of guilty or nolo
contendere to, a felony.

8

 

For purposes of this Section 4(b), no act, or failure to act, on the part of
the Executive shall be considered “willful” unless it is done, or omitted to be
done, by the Executive in bad faith and without reasonable belief that the
Executive’s action or omission was in the best interests of the Company. Any
act, or failure to act, based upon authority given pursuant to a resolution
duly adopted by the Board or based upon the lawful and reasonable directives of
the Board or based upon the advice of counsel for the Company shall be
conclusively presumed to be done, or omitted to be done, by the Executive in
good faith or in the best interests of the Company. The cessation of
employment of the Executive shall not be deemed to be for Cause unless and
until there shall have been delivered to the Executive a copy of a resolution
duly adopted by the affirmative vote of not less than three-quarters of the
entire membership of the Board (excluding the Executive, if the Executive is a
member of the Board) at a meeting of the Board called and held for such purpose
(after reasonable notice is provided to the Executive and the Executive is
given an opportunity, together with counsel for the Executive, to be heard
before the Board), finding that, in the good faith opinion of the Board, the
Executive is guilty of the conduct described in Section 4(b)(1), 4(b)(2) or
4(b)(3), and specifying the particulars thereof in detail.

               (c) Good Reason. The Executive’s employment may be terminated by the
Executive for Good Reason or by the Executive voluntarily without Good Reason.
“Good Reason” means:

	 	 	        (1) the assignment to the Executive of any duties inconsistent in
any respect with the Executive’s position (including status, offices,
titles and reporting relationships), authority, duties or
responsibilities as contemplated by Section 3(a), or any other diminution
in such position, authority, duties or responsibilities (whether or not
occurring solely as a result of the Company’s ceasing to be a publicly
traded entity), excluding for this purpose an isolated, insubstantial and
inadvertent action not taken in bad faith and that is remedied by the
Company promptly after receipt of notice thereof given by the Executive;
	 
	 	 	        (2) any failure by the Company to comply with any of the provisions
of Section 3(b), other than an isolated, insubstantial and inadvertent
failure not occurring in bad faith and that is remedied by the Company
promptly after receipt of notice thereof given by the Executive;
	 
	 	 	        (3) the Company’s requiring the Executive (i) to be based at any
office or location other than as provided in Section 3(a)(1)(B), (ii) to
be based at a location other than the principal executive offices of the
Company if the Executive was employed at such location at any time during
the 30-day period immediately preceding the Effective Date, or (iii) to
travel on Company business to a substantially greater extent than
required during the 12-month period immediately prior to the Effective
Date;
	 
	 	 	        (4) the removal of the Executive as a member of the Board, or the
failure of the Executive to be reelected as a member of the Board;
	 
	 	 	        (5) any purported termination by the Company of the Executive’s
employment otherwise than as expressly permitted by this Agreement; or

9

 

	 	 	        (6) any failure by the Company to comply with and satisfy Section
10(c).

For purposes of this Section 4(c), any good faith determination of Good Reason
made by the Executive shall be conclusive. The Executive’s mental or physical
incapacity following the occurrence of an event described above in clauses (1)
through (6) shall not affect the Executive’s ability to terminate employment
for Good Reason.

               (d) Notice of Termination. Any termination by the Company for Cause, or
by the Executive for Good Reason, shall be communicated by Notice of
Termination to the other party hereto given in accordance with Section 11(b).
“Notice of Termination” means a written notice that (1) indicates the specific
termination provision in this Agreement relied upon, (2) to the extent
applicable, sets forth in reasonable detail the facts and circumstances claimed
to provide a basis for termination of the Executive’s employment under the
provision so indicated, and (3) if the Date of Termination (as defined herein)
is other than the date of receipt of such notice, specifies the Date of
Termination (which Date of Termination shall be not more than 30 days after the
giving of such notice). The failure by the Executive or the Company to set
forth in the Notice of Termination any fact or circumstance that contributes to
a showing of Good Reason or Cause shall not waive any right of the Executive or
the Company, respectively, hereunder or preclude the Executive or the Company,
respectively, from asserting such fact or circumstance in enforcing the
Executive’s or the Company’s respective rights hereunder.

               (e) Date of Termination. “Date of Termination” means (1) if the
Executive’s employment is terminated by the Company for Cause, or by the
Executive for Good Reason, the date of receipt of the Notice of Termination or
any later date specified in the Notice of Termination, (which date shall not be
more than 30 days after the giving of such notice), as the case may be, (2) if
the Executive’s employment is terminated by the Company other than for Cause or
Disability, the date on which the Company notifies the Executive of such
termination, and (3) if the Executive resigns without Good Reason, the date on
which the Executive notifies the Company of such termination, and (4) if the
Executive’s employment is terminated by reason of death or Disability, the date
of death of the Executive or the Disability Effective Date, as the case may be.

               Section 5. Obligations of the Company upon Termination. (a) Good Reason;
Other Than for Cause, Death or Disability. If, during the Employment Period,
the Company terminates the Executive’s employment other than for Cause or
Disability or the Executive terminates employment for Good Reason:

	 	 	        (1) the Company shall pay to the Executive, in a lump sum in cash
within 30 days after the Date of Termination (except as specifically
provided in Section 5(a)(1)(A)(iii)), the aggregate of the following
amounts:

	 	 	 	        (A) the sum of: (i) the Executive’s Annual Base Salary
through the Date of Termination; (ii) the Executive’s business
expenses that are reimbursable pursuant to Section 3(b)(6) but have
not been reimbursed by the Company as of the Date of Termination;
(iii) the Executive’s Annual Bonus for the fiscal year immediately
preceding the fiscal year in which the Date of Termination occurs
if such bonus has been determined but not paid as of the Date of
Termination (at the

10

 

	 	 	 	time such Annual Bonus would otherwise have been paid); (iv)
the product of (x) the higher of (I) the Recent Annual Bonus or
(II) the Annual Bonus paid or payable, including any bonus or
portion thereof that has been earned but deferred (and annualized
for any fiscal year consisting of less than 12 full months or
during which the Executive was employed for less than 12 full
months), for the most recently completed fiscal year during the
Employment Period, if any (such higher amount, the “Highest Annual
Bonus”) and (y) a fraction, the numerator of which is the number of
days in the current fiscal year through the Date of Termination and
the denominator of which is 365, provided that any amount payable
under this clause (iv) shall be reduced (but not below zero) by any
pro rata bonus paid to the Executive under the Annual Incentive
Compensation Plan with respect to the year in which the Date of
Termination occurs; and (v) any accrued vacation pay, in each case,
to the extent not theretofore paid (the sum of the amounts
described in subclauses (i), (ii) and (iii), the “Accrued
Obligations”);
	 
	 	 	 	        (B) the amount equal to the product of (i) three and (ii) the
sum of (x) the Executive’s Annual Base Salary and (y) the Highest
Annual Bonus; and
	 
	 	 	 	        (C) the Executive shall be treated for purposes of accrual of
benefits (age and service) under the SERP, as if the Executive had
remained an active employee of the Company following the Date of
Termination for three years, provided that, for purposes of this
Section 5(a)(1)(C) only, in the event that the Date of Termination
occurs on or prior to June 1, 2005 (as defined in Section 1 of the
Employment Agreement), the Executive’s aggregate number of years of
service under the SERP shall be no less than five years, and if the
Date of Termination occurs in 2003 or in 2004, but prior to the
determination of the Executive’s Annual Bonus for 2003, the
Executive’s compensation for purposes of determining the
Executive’s “Final Average Compensation” under the SERP shall
include $1,500,000 as the Annual Bonus with respect to year 2003;

	 	 	        (2) for three years after the Executive’s Date of Termination, or
such longer period as may be provided by the terms of the appropriate
plan, program, practice or policy (the “Continuation Period”), the
Company shall continue benefits to the Executive and/or the Executive’s
family at least equal to those that would have been provided to them in
accordance with the plans, programs, practices and policies described in
Section 3(b)(5) if the Executive’s employment had not been terminated or,
if more favorable to the Executive, as in effect generally at any time
thereafter with respect to other peer executives of the Company and the
Affiliated Companies and their families; provided, however, that, if the
Executive becomes reemployed with another employer and is eligible to
receive such benefits under another employer provided plan, the medical
and other welfare benefits described herein shall not be provided by the
Company, during such applicable period of eligibility. Following the
Continuation Period, the Executive shall be entitled to the Executive’s
Retiree Health Benefits;
	 
	 	 	        (3) any stock options, restricted stock, performance shares and any
other stock-based long-term incentive compensation award held by the
Executive (whether granted under this Agreement or otherwise) shall vest
immediately (with option exercisability continuing until the first to occur of the fifth anniversary
of the Date of Termination or the end of the scheduled option term);

11

 

	 	 	        (4) the Company shall, at its sole expense as incurred, provide the
Executive with outplacement services the scope and provider of which
shall be selected by the Executive in the Executive’s sole discretion,
provided that the cost of such outplacement shall not exceed $100,000;
and
	 
	 	 	        (5) to the extent not theretofore paid or provided, the Company
shall timely pay or provide to the Executive any Other Benefits (as
defined in Section 6).

The Parties agree that any amounts due under this Section 5(a) are in the
nature of severance payments considered to be reasonable by the Company and are
not in the nature of a penalty.

               (b) Death. If the Executive’s employment is terminated by reason of the
Executive’s death during the Employment Period, the Company shall provide the
Executive’s estate or beneficiaries with the Accrued Obligations and the timely
payment or delivery of the Other Benefits, and shall have no other severance
obligations under this Agreement. The Accrued Obligations shall be paid to the
Executive’s estate or beneficiary, as applicable, in a lump sum in cash within
30 days of the Date of Termination. With respect to the provision of the Other
Benefits, the term “Other Benefits” as utilized in this Section 5(b) shall
include, without limitation, and the Executive’s estate and/or beneficiaries
shall be entitled to receive, benefits at least equal to the most favorable
benefits provided by the Company and the Affiliated Companies to the estates
and beneficiaries of peer executives of the Company and the Affiliated
Companies under such plans, programs, practices and policies relating to death
benefits, if any, as in effect with respect to other peer executives and their
beneficiaries at any time during the 12-month period immediately preceding the
Effective Date or, if more favorable to the Executive’s estate and/or the
Executive’s beneficiaries, as in effect on the date of the Executive’s death
with respect to other peer executives of the Company and the Affiliated
Companies and their beneficiaries; provided, however, that the term “Other
Benefits” as used in this Section 5(b) shall also include the Executive’s
Retiree Health Benefits.

               (c) Disability. If the Executive’s employment is terminated by reason of
the Executive’s Disability during the Employment Period, the Company shall
provide the Executive with the Accrued Obligations and the timely payment or
delivery of the Other Benefits, and shall have no other severance obligations
under this Agreement. The Accrued Obligations shall be paid to the Executive
in a lump sum in cash within 30 days of the Date of Termination. With respect
to the provision of the Other Benefits, the term “Other Benefits” as utilized
in this Section 6(c) shall include, and the Executive shall be entitled after
the Disability Effective Date to receive, disability and other benefits at
least equal to the most favorable of those generally provided by the Company
and the Affiliated Companies to disabled executives and/or their families in
accordance with such plans, programs, practices and policies relating to
disability, if any, as in effect generally with respect to other peer
executives and their families at any time during the 12-month period
immediately preceding the Effective Date or, if more favorable to the Executive
and/or the Executive’s family, as in effect at any time thereafter generally
with respect to other peer executives of the Company and the Affiliated
Companies and their families provided, however, that the term “Other Benefits”
as used in this Section 5(c) shall also include (i) an annual
disability benefit of not less than 60% of the Executive’s Annual Base
Salary and (ii) the Executive’s Retiree Health Benefits.

12

 

               (d) Cause; Other Than for Good Reason. If the Executive’s employment is
terminated for Cause during the Employment Period, the Company shall provide to
the Executive (1) the Executive’s Annual Base Salary through the Date of
Termination, (2) the Executive’s business expenses that are reimbursable
pursuant to Section 3(b)(6) but have not been reimbursed by the Company as of
the Date of Termination, and (3) the Other Benefits, in each case, to the
extent theretofore unpaid, and shall have no other severance obligations under
this Agreement. If the Executive voluntarily terminates employment during the
Employment Period, excluding a termination for Good Reason, the Company shall
provide to the Executive the Accrued Obligations and the timely payment or
delivery of the Other Benefits, and shall have no other severance obligations
under this Agreement. In such case, all the Accrued Obligations shall be paid
to the Executive in a lump sum in cash within 30 days of the Date of
Termination.

               Section 6. Non-exclusivity of Rights. Nothing in this Agreement shall
prevent or limit the Executive’s continuing or future participation in any
plan, program, policy or practice provided by the Company or the Affiliated
Companies and for which the Executive may qualify, nor, subject to Section
11(f), shall anything herein limit or otherwise affect such rights as the
Executive may have under any other contract or agreement with the Company or
the Affiliated Companies. Amounts that are vested benefits or that the
Executive is otherwise entitled to receive under any plan, policy, practice or
program of or any other contract or agreement with the Company or the
Affiliated Companies at or subsequent to the Date of Termination (“Other
Benefits”) shall be payable in accordance with such plan, policy, practice or
program or contract or agreement, except as explicitly modified by this
Agreement. Notwithstanding the foregoing, if the Executive receives payments
and benefits pursuant to Section 5(a) of this Agreement, the Executive shall
not be entitled to any severance pay or benefits under any severance plan,
program or policy of the Company and the Affiliated Companies, unless otherwise
specifically provided therein in a specific reference to this Agreement.

               Section 7. Full Settlement. The Company’s obligation to make the payments
provided for in this Agreement and otherwise to perform its obligations
hereunder shall not be affected by any set-off, counterclaim, recoupment,
defense, or other claim, right or action that the Company may have against the
Executive or others. In no event shall the Executive be obligated to seek
other employment or take any other action by way of mitigation of the amounts
payable to the Executive under any of the provisions of this Agreement, and
such amounts shall not be reduced whether or not the Executive obtains other
employment. The Company agrees to pay as incurred (within 10 days following
the Company’s receipt of an invoice from the Executive), to the full extent
permitted by law, all legal fees and expenses that the Executive may reasonably
incur as a result of any contest (regardless of the outcome thereof) by the
Company, the Executive or others of the validity or enforceability of, or
liability under, any provision of this Agreement or any guarantee of
performance thereof (including as a result of any contest by the Executive
about the amount of any payment pursuant to this Agreement), plus, in each
case, interest on any delayed payment at the applicable federal rate provided
for in Section 7872(f)(2)(A) of the Internal Revenue Code of 1986, as amended
(the “Code”).

               Section 8. Certain Additional Payments by the Company.

13

 

               (a) Anything in this Agreement to the contrary notwithstanding, at all
times during the Change in Control Period and at all times after the Change in
Control Period, in the event it shall be determined that any Payment (as
defined below) would be subject to the Excise Tax (as defined below), then the
Executive shall be entitled to receive an additional payment (the “Gross-Up
Payment”) in an amount such that, after payment by the Executive of all taxes
(and any interest or penalties imposed with respect to such taxes), including,
without limitation, any income and employment taxes (and any interest and
penalties imposed with respect thereto) and Excise Tax imposed upon the
Gross-Up Payment, the Executive retains an amount of the Gross-Up Payment equal
to the Excise Tax imposed upon the Payments. The Company’s obligation to make
Gross-Up Payments under this Section 8 shall not be conditioned upon the
Executive’s termination of employment.

               (b) Subject to the provisions of Section 8(c), all determinations required
to be made under this Section 8, including whether and when a Gross-Up Payment
is required, the amount of such Gross-Up Payment and the assumptions to be
utilized in arriving at such determination, shall be made by a nationally
recognized certified public accounting firm selected by the Company and
approved by the Executive, with such approval not being unreasonably withheld
(the “Accounting Firm”). The Accounting Firm shall provide detailed supporting
calculations both to the Company and the Executive within 15 business days of
the receipt of notice from the Executive that there has been a Payment or such
earlier time as is requested by the Company. All fees and expenses of the
Accounting Firm shall be borne solely by the Company. Any Gross-Up Payment, as
determined pursuant to this Section 8, shall be paid by the Company to the
Executive within 5 days of the receipt of the Accounting Firm’s determination.
Any determination by the Accounting Firm shall be binding upon the Company and
the Executive. As a result of the uncertainty in the application of Section
4999 of the Code at the time of the initial determination by the Accounting
Firm hereunder, it is possible that Gross-Up Payments that will not have been
made by the Company should have been made (the “Underpayment”), consistent with
the calculations required to be made hereunder. In the event the Company
exhausts its remedies pursuant to Section 8(c) and the Executive thereafter is
required to make a payment of any Excise Tax, the Accounting Firm shall
determine the amount of the Underpayment that has occurred and any such
Underpayment shall be promptly paid by the Company to or for the benefit of the
Executive.

               (c) The Executive shall notify the Company in writing of any claim by the
Internal Revenue Service that, if successful, would require the payment by the
Company of the Gross-Up Payment. Such notification shall be given as soon as
practicable, but no later than 10 business days after the Executive is informed
in writing of such claim. The Executive shall apprise the Company of the
nature of such claim and the date on which such claim is requested to be paid.
The Executive shall not pay such claim prior to the expiration of the 30-day
period following the date on which the Executive gives such notice to the
Company (or such shorter period ending on the date that any payment of taxes
with respect to such claim is due). If the Company notifies the Executive in
writing prior to the expiration of such period that the Company desires to
contest such claim, the Executive shall:

	 	 	        (1) give the Company any information reasonably requested by the
Company relating to such claim,

14

 

	 	 	        (2) take such action in connection with contesting such claim as the
Company shall reasonably request in writing from time to time, including,
without limitation, accepting legal representation with respect to such
claim by an attorney reasonably selected by the Company,
	 
	 	 	        (3) cooperate with the Company in good faith in order effectively to
contest such claim, and
	 
	 	 	        (4) permit the Company to participate in any proceedings relating to
such claim;

provided, however, that the Company shall bear and pay directly all costs and
expenses (including additional interest and penalties) incurred in connection
with such contest, and shall indemnify and hold the Executive harmless, on an
after-tax basis, for any Excise Tax and income and employment tax (including
interest and penalties) imposed as a result of such representation and payment
of costs and expenses. Without limitation on the foregoing provisions of this
Section 8(c), the Company shall control all proceedings taken in connection
with such contest, and, at its sole discretion, may pursue or forgo any and all
administrative appeals, proceedings, hearings and conferences with the
applicable taxing authority in respect of such claim and may, at its sole
discretion, either direct the Executive to pay the tax claimed and sue for a
refund or contest the claim in any permissible manner, and the Executive agrees
to prosecute such contest to a determination before any administrative
tribunal, in a court of initial jurisdiction and in one or more appellate
courts, as the Company shall determine; provided, however, that, if the Company
directs the Executive to pay such claim and sue for a refund, the Company shall
advance the amount of such payment to the Executive, on an interest-free basis,
and shall indemnify and hold the Executive harmless, on an after-tax basis,
from any Excise Tax and income and employment tax (including interest or
penalties) imposed with respect to such advance or with respect to any imputed
income in connection with such advance; and provided, further, that any
extension of the statute of limitations relating to payment of taxes for the
taxable year of the Executive with respect to which such contested amount is
claimed to be due is limited solely to such contested amount. Furthermore, the
Company’s control of the contest shall be limited to issues with respect to
which the Gross-Up Payment would be payable hereunder, and the Executive shall
be entitled to settle or contest, as the case may be, any other issue raised by
the Internal Revenue Service or any other taxing authority.

               (d) If, after the receipt by the Executive of a Gross-Up Payment or an
amount advanced by the Company pursuant to Section 8(c), the Executive becomes
entitled to receive any refund with respect to the Excise Tax to which such
Gross-Up Payment relates or with respect to such claim, the Executive shall
(subject to the Company’s complying with the requirements of Section 8(c), if
applicable) promptly pay to the Company the amount of such refund (together
with any interest paid or credited thereon after taxes applicable thereto).
If, after the receipt by the Executive of an amount advanced by the Company
pursuant to Section 8(c), a determination is made that the Executive shall not
be entitled to any refund with respect to such claim and the Company does not
notify the Executive in writing of its intent to contest such denial of refund
prior to the expiration of 30 days after such determination, then such advance
shall be forgiven and shall not be required to be repaid and the amount of such
advance shall offset, to the extent thereof, the amount of Gross-Up Payment
required to be paid.

15

 

               (e) Notwithstanding any other provision of this Section 8, the Company
may, in its sole discretion, withhold and pay over to the Internal Revenue
Service or any other applicable taxing authority, for the benefit of the
Executive, all or any portion of any Gross-Up Payment, and the Executive hereby
consents to such withholding.

               (f) Definitions. The following terms shall have the following meanings
for purposes of this Section 8.

               (i) “Excise Tax” shall mean the excise tax imposed by Section 4999 of the
Code, together with any interest or penalties imposed with respect to such
excise tax.

               (ii) A “Payment” shall mean any payment or distribution in the nature of
compensation (within the meaning of Section
280G(b)(2) of the Code) by the
Affiliated Companies to or for the benefit of the Executive, whether paid or
payable pursuant to this Agreement or otherwise.

               Section 9. Covenants.

               (a) Confidential Information. The Executive shall hold in a fiduciary
capacity for benefit of the Affiliated Companies, all secret or confidential
information, knowledge or data relating to the Affiliated Companies and its
businesses (including, without limitation, any proprietary and not publicly
available information concerning any processes, methods, trade secrets,
research or secret data, costs, names of users or purchasers of their
respective products or services, business methods, operating procedures or
programs or methods of promotion and sale) that the Executive has obtained or
obtains during the Executive’s employment by the Affiliated Companies that is
not public knowledge (other than as a result of the Executive’s violation of
this Section 9(a)) (“Confidential Information”). For the purposes of this
Section 9(a), information shall not be deemed to be publicly available merely
because it is embraced by general disclosures or because individual features or
combinations thereof are publicly available. The Executive shall not
communicate, divulge or disseminate Confidential Information at any time during
or after the Executive’s employment with the Affiliated Companies, except with
prior written consent of the Company, or as otherwise required by law or legal
process or as such disclosure or use may be required in the course of the
Executive performing his duties and responsibilities as the President and Chief
Executive Officer of the Company. Notwithstanding the foregoing provisions, if
the Executive is required to disclose any such confidential or proprietary
information pursuant to applicable law or a subpoena or court order, the
Executive shall promptly notify the Company in writing of any such requirement
so that the Company or the appropriate member of the Affiliated Companies may
seek an appropriate protective order or other appropriate remedy or waive
compliance with the provisions hereof. The Executive shall reasonably
cooperate with the Affiliated Companies to obtain such a protective order or
other remedy. If such order or other remedy is not obtained prior to the time
the Executive is required to make the disclosure, or the Company waives
compliance with the provisions hereof, the Executive shall disclose only that
portion of the confidential or proprietary information which he is advised by
counsel that he is legally required to so disclose. All records, files,
memoranda, reports, customer lists, drawings, plans, documents and the like
that the Executive uses, prepares or comes into contact with during the course
of the Executive’s employment shall remain the sole

16

 

property of the Company and/or the Affiliated Companies, as applicable,
and shall be turned over to the Company upon termination of the Executive’s
employment.

               (b) Non-Recruitment of Affiliated Companies Employees. The Executive
shall not, at any time during the Restricted Period (as defined in this Section
9(b)), without the prior written consent of the Company, directly or
indirectly, contact, solicit, recruit, or employ (whether as an employee,
officer, director, agent, consultant or independent contractor) any person who
is or was at any time during the previous twelve months an employee,
representative, officer or director of any member of the Affiliated Companies.
Further, during the Restricted Period, the Executive shall not take any action
that could reasonably be expected to have the effect of encouraging or inducing
any employee, representative, officer or director of any member of the
Affiliated Companies to cease their relationship with any member of the
Affiliated Companies for any reason, except for terminations of employment in
the ordinary course of business. This Section 9(b) shall not apply to
recruitment of employees for the Affiliated Companies and shall not apply to
the Executive’s personal administrative staff who perform secretarial-type
functions. The “Restricted Period” shall mean the period of Executive’s
employment with the Company and its subsidiaries and the additional period
ending on the second anniversary of the Date of Termination.

               (c) No Competition — Solicitation of Business. During the Restricted
Period, the Executive shall not, either directly or indirectly, compete with
the business of the Company by (i) becoming an officer, agent, employee,
partner or director of any other corporation, partnership or other entity, or
otherwise render services to or assist or hold an interest (except as a less
than 1-percent shareholder of a publicly traded company), in any Competitive
Business (as defined below), or (ii) soliciting, servicing, or accepting the
business of (A) any active customer of any member of the Affiliated Companies,
or (B) any person or entity who is or was at any time during the previous
twelve months a customer of any member of the Affiliated Companies.
“Competitive Business” shall mean any person or entity (including any joint
venture, partnership, firm, corporation, or limited liability company) that
engages in (1) the property and casualty insurance business, including
commercial insurance, personal insurance, specialty insurance, surety, excess
and surplus lines and/or reinsurance, (2) the accident and health insurance
business other than if incident to providing life insurance, (3) any of the
businesses in which Chubb Financial Solutions is engaged during the Restricted
Period, (4) the insurance agency or brokerage business, and/or (5) any other
significant business of the Company or any of its subsidiaries as of the Date
of Termination, provided that a business set forth in clauses (1) through (4)
shall not be considered a “Competitive Business” in the event that, as of the
Date of Termination, such business (i) is not a business of the Company or any
of its subsidiaries or (ii) is no longer a business of the Company or any of
its subsidiaries.

               (d) Remedies. The Executive acknowledges and agrees that the terms of
Section 9: (i) are reasonable in light of all of the circumstances, (ii) are
sufficiently limited to protect the legitimate interests of the Company and its
subsidiaries, (iii) impose no undue hardship on the Executive and (iv) are not
injurious to the public. The Executive further acknowledges and agrees that
(x) the Executive’s breach of the provisions of Section 9 will cause the
Company irreparable harm, which cannot be adequately compensated by money
damages, and (y) if the Company elects to prevent the Executive from breaching
such provisions by obtaining an injunction against the Executive, there is a
reasonable probability of the Company’s eventual success

17

 

on the merits. The Executive consents and agrees that if the Executive
commits any such breach or threatens to commit any breach, the Company shall be
entitled to temporary and permanent injunctive relief from a court of competent
jurisdiction, without posting any bond or other security and without the
necessity of proof of actual damage, in addition to, and not in lieu of, such
other remedies as may be available to the Company for such breach, including
the recovery of money damages. The Parties further acknowledge and agree that
the provisions of Section 11(a) below are accurate and necessary because (A)
this Agreement is entered into in the State of New Jersey, (B) as of the date
hereof, New Jersey has a substantial relationship to the Parties and to this
transaction, (C) as of the date hereof, New Jersey is the headquarters state of
the Company, which has operations nationwide and has a compelling interest in
having its employees treated uniformly within the United States, (D) the use of
New Jersey law provides certainty to the Parties in any covenant litigation in
the United States, and (E) enforcement of the provision of this Section 9 would
not violate any fundamental public policy of New Jersey or any other
jurisdiction. If any of the provisions of Section 9 are determined to be
wholly or partially unenforceable, the Executive hereby agrees that this
Agreement or any provision hereof may be reformed so that it is enforceable to
the maximum extent permitted by law. If any of the provisions of this Section
9 are determined to be wholly or partially unenforceable in any jurisdiction,
such determination shall not be a bar to or in any way diminish the Company’s
right to enforce any such covenant in any other jurisdiction.

               Section 10. Successors. (a) This Agreement is personal to the Executive,
and, without the prior written consent of the Company, shall not be assignable
by the Executive other than by will or the laws of descent and distribution.
This Agreement shall inure to the benefit of and be enforceable by the
Executive’s legal representatives.

               (b) This Agreement shall inure to the benefit of and be binding upon the
Company and its successors and assigns. Except as provided in Section 10(c),
without the prior written consent of the Executive this Agreement shall not be
assignable by the Company.

               (c) The Company shall cause any successor (whether direct or indirect, by
purchase, merger, consolidation or otherwise) to all or substantially all of
the business and/or assets of the Company to assume expressly and agree to
perform this Agreement in the same manner and to the same extent that the
Company would be required to perform it if no such succession had taken place.
“Company” means the Company as hereinbefore defined and any successor to its
business and/or assets as aforesaid that assumes and agrees to perform this
Agreement by operation of law or otherwise.

               Section 11. Miscellaneous. (a) This Agreement shall be governed by and
construed in accordance with the laws of the State of New Jersey, without
reference to principles of conflict of laws. The captions of this Agreement
are not part of the provisions hereof and shall have no force or effect. This
Agreement may not be amended or modified other than by a written agreement
executed by the parties hereto or their respective successors and legal
representatives.

               (b) All notices and other communications hereunder shall be in writing and
shall be given by hand delivery to the other party or by registered or
certified mail, return receipt requested, postage prepaid, addressed as
follows:

18

 

	 	 	 
	 	 	
if to the Executive:
	
	 	 
	 	 	
At the most recent address on file with the Company
	
	 	 
	 	 	
if to the Company:
	
	 	 
	 	 	
The Chubb Corporation
	 	 	
15 Mountain View Road
	 	 	
Warren, New Jersey 07059
	
	 	 
	 	 	
Attention: General Counsel

or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notice and communications shall be effective
when actually received by the addressee.

               (c) The invalidity or unenforceability of any provision of this Agreement
shall not affect the validity or enforceability of any other provision of this
Agreement.

               (d) The Company may withhold from any amounts payable under this Agreement
such United States federal, state or local or foreign taxes as shall be
required to be withheld pursuant to any applicable law or regulation.

               (e) The Executive’s or the Company’s failure to insist upon strict
compliance with any provision of this Agreement or the failure to assert any
right the Executive or the Company may have hereunder, including, without
limitation, the right of the Executive to terminate employment for Good Reason
pursuant to Sections 4(c)(1) through 4(c)(5), shall not be deemed to be a
waiver of such provision or right or any other provision or right of this
Agreement.

               (f) The Executive and the Company acknowledge and agree that (i) prior to
the Effective Date, the Executive’s employment with the Company is subject to
the Employment Agreement and (ii) on and after the Effective Date, except as
specifically provided herein, this Agreement shall supersede any other
agreement between the parties with respect to the subject matter hereof,
including the Employment Agreement.

               (g) The Company shall indemnify the Executive as an officer, director and
employee of the Company and any member of the Affiliated Companies and in the
same amounts to the maximum extent permitted under Article Twelfth of the
Company’s Restated Certificate of Incorporation, the Company’s by-laws and
applicable law. The Company shall maintain directors’ and officers’ liability
insurance coverage during the Executive’s employment and thereafter for the
duration of any period of limitations during which any action, if any, may be
brought against the Executive for his service as an officer, director or
employee of the Company and any member of the Affiliated Companies and in the
same amounts, and on the same terms and conditions as applicable to other
former senior executives and directors of the Company.

19

 

               IN WITNESS WHEREOF, the Executive has hereunto set the Executive’s hand
and, pursuant to the authorization from the Board, the Company has caused these
presents to be executed in its name on its behalf, all as of the day and year
first above written.

	 	 	 	 	 
	 	 	/s/
John D. Finnegan

JOHN D. FINNEGAN
	 	 	 	 	 
	 	 	THE CHUBB CORPORATION
	 	 	 	 	 
	 	 	
By:	 	/s/ Lawrence M.
Small

	 	 	
Title:	 	Chair, Organization
and Compensation Cmte
	 	 	 	 	 

20

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