1
June 19, 1997
Mr. Edward Dunlop
[address]
Dear Mr. Dunlop:
In order to induce you to remain in the employ of The Chubb Corporation
(the "Company") and in consideration of your continuing in the Company's employ,
the Company agrees to provide the severance benefits specified below on the
terms and subject to the conditions stated. However, in the absence of a Change
in Control of the Company, as defined below, nothing in this Agreement shall
affect the Company's normal right to terminate your employment or your right to
leave its employ.
1. Change in Control. For purposes of this Agreement a Change in
Control will be deemed to have occurred
(A) if following (i) a tender or exchange offer for voting
securities of the Company, (ii) a proxy contest for the election of Directors of
the Company or (iii) a merger or consolidation or sale of all or substantially
all of the business or assets of the Company, the Directors of the Company
immediately prior to the initiation of such event cease to constitute a majority
of the Board of Directors of the Company upon the occurrence of such event or
within one year after such event, or
(B) if any "person" or "group" (as defined under the
beneficial ownership rules of Sections 12(d)(3) and 14(d)(2) of the Securities
Exchange Act of 1934 and Rule 13d-3 thereunder) acquires ownership or control,
or power to control, 25% or more of the outstanding voting securities of the
Company without prior approval or ratification by a majority of the Company's
Directors in office at the time of such event.
2. Conditions to Severance Benefits. The benefits provided for in
Section 5 shall be payable or accrue to you if (a) a Change in Control has
occurred and (b) your employment with the Company has terminated within two
years after the Change in Control, other
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Mr. Edward Dunlop
June 19,1997
Page 2.
than termination by reason of (i) your death, (ii) your retirement at normal
retirement age ("Retirement") under the Company's pension plan as in effect
immediately prior to the Change in Control, (iii) your voluntary termination
other than for Good Reason, (iv) your retirement for Disability or (v) your
discharge for cause.
Termination by you of your employment for "Good Reason" shall mean
termination by you of your employment, subsequent to a Change in Control,
because of:
(A) the assignment to you, without your express written
consent, of any duties inconsistent with your positions, duties,
responsibilities, authority and status with the Company and its principal
subsidiaries immediately prior to such Change in Control, or a change in your
reporting responsibilities, titles or offices as in effect immediately prior to
the Change in Control, or any removal of you from or any failure to re-elect you
to any of such positions, except in connection with the termination of your
employment for Cause, Disability, Retirement, as a result of your death or by
you without Good Reason;
(B) a reduction by the Company in your base salary as in
effect at the time of such Change in Control;
(C) a failure by the Company to continue (or to replace with
equivalent plans) the Performance Share Plan, the Annual Incentive Compensation
Plan or any other Bonus Plan in which you participated for the year immediately
preceding such Change in Control (the "Bonus Plans") which are in effect at the
time of such Change in Control or a failure by the Company to continue you as a
participant in such Bonus Plans (or equivalent plans) on a basis which would
entitle you to receive under such Bonus Plans (or equivalent plans) amounts at
least equal to the average amounts you received pursuant to such Bonus Plans for
the three years preceding such Change in Control;
(D) the Company's requiring you to maintain your principal
office or conduct your principal activities anywhere other than at the Company's
principal executive offices in the New York Metropolitan area, including
Somerset County, New Jersey;
(E) the failure by the Company to continue in effect (or to
replace with equivalent plans) the Company's Capital Accumulation Plan or any
other compensation plan, any stock ownership plan, stock purchase plan, stock
option plan, life insurance plan, health and accident plan, financial services
plan, hospital-medical plan, dental plan, or disability plan in which you are
participating or eligible to participate at the time of such Change in Control,
or the taking of any action by the Company which would adversely affect your
participation in or materially reduce your benefits under any such plans (or
equivalent plans) or
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Mr. Edward Dunlop
June 19, 1997
Page 3.
deprive you of any material fringe benefit enjoyed or to be enjoyed by you at
the time of such Change in Control;
(F) the failure by the Company to obtain the assumption of the
agreement to perform this Agreement by any successor as contemplated in Section
7 hereof;
(G) any purported termination of your employment which is not
effected pursuant to a Notice of Termination satisfying the applicable
requirements with respect to such Notice; or
(H) a determination made by you in good faith, whether before
or after the date you are eligible for early retirement under the Company's
pension plan, that as a result of such Change in Control you are not able to
discharge your duties effectively; or
(I) any termination of this Agreement pursuant to Section 6
prior to the expiration of two years from the occurrence of the Change in
Control.
Termination of your employment for "Cause" shall mean termination
because of (A) the willful and continued failure by you substantially to perform
your duties with the Company and its principal subsidiaries (other than any such
failure resulting from your incapacity due to physical or mental illness), after
a demand for substantial performance is delivered to you by the Chief Executive
Officer of the Company, which specifically identifies the manner in which such
executive believes that you have not substantially performed your duties, or (B)
the willful engaging by you in misconduct which is materially injurious to the
Company, monetarily or otherwise. For purposes of this paragraph, no act, or
failure to act, on your part shall be considered "willful" unless done, or
omitted to be done, by you not in good faith and without reasonable belief that
your action or omission was in or not opposed to the best interests of the
Company. Notwithstanding the foregoing, you shall not be deemed to have been
terminated for Cause unless and until there shall have been delivered to you a
copy of a Notice of Termination from the Chief Executive Officer of the Company
after reasonable notice to you and an opportunity for you, together with your
counsel, to be heard before the Board of Directors, and a finding that in the
good faith opinion of the Board you were guilty of conduct set forth above in
clauses (A) or (B) of the first sentence of this paragraph and specifying the
particulars thereof in detail.
Termination of your employment for Disability shall mean termination in
accordance with the provisions of the Company's Long Term Disability Plan as in
effect immediately preceding the Change in Control.
3. Notice of Termination. Any purported termination of your employment
shall be communicated by written Notice of Termination to the other party
hereto. For purposes of this Agreement, a "Notice of Termination" shall mean a
notice which shall indicate the specific
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Mr. Edward Dunlop
June 19, 1997
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termination provision in this Agreement relied upon and shall set forth in
reasonable detail the facts and circumstances claimed to provide a basis for
termination of your employment under the provision so indicated. No purported
termination of your employment by the Company shall be effective if it is not
effected pursuant to a Notice of Termination satisfying the requirements of this
Section 3.
4. Date of Termination. "Date of Termination" shall mean (A) if your
employment is terminated for Disability, 30 days after Notice of Termination is
given (provided that you shall not have returned to the performance of your
duties on a full-time basis during such 30-day period) and (B) if your
employment is terminated for any other reason, the date on which a Notice of
Termination is given.
5. Severance Benefits. Subject to the conditions in Section 2, on
termination of your employment you shall be entitled to the following benefits:
(A) You shall be entitled to an amount (the "Severance
Compensation") equal to 2 times the sum of (i) one year's salary at the annual
rate in effect at the time of the Change in Control and (ii) the average for the
three calendar years preceding such Change in Control of your bonuses under the
Annual Incentive Compensation Plan (1984) (or successor plan), provided,
however, that your Severance Compensation shall not be greater than the amount
you would have received as salary and such bonuses from the Company had you
remained in the employ of the Company from the Date of Termination until your
normal retirement date under the Company's pension plan (on the assumption that
your salary would remain at the same annual rate as in effect at the time of
Change in Control and that your annual bonuses would be the average for the
three calendar years preceding such Change in Control of such bonuses). The
Severance Compensation will be payable in full on the Date of Termination.
(B) The Company shall also pay to you an amount equal to all
legal fees and expenses incurred by you as a result of such termination
(including all such fees and expenses, if any, incurred in contesting or
disputing any such termination or in seeking to obtain or enforce or retain any
right or benefit provided by this Agreement);
(C) The Company shall maintain in full force and effect, for
your continued benefit until the earlier of (a) two years after the Date of
Termination or, (b) your commencement of full time employment with a new
employer, all life insurance, hospital-medical, dental, health and accident, and
disability plans in which you were entitled to participate immediately prior to
such Change in Control, provided that your continued participation is possible
under the general terms and provisions of such plans and programs. In the event
that your participation in any such plan or program is barred for any reason
whatsoever, the
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Mr. Edward Dunlop
June 19, 1997
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Company shall arrange to provide you with benefits substantially similar to
those which you are entitled to receive under such plan or program;
(D) You shall not be required to mitigate the amount of any
payment provided for in this Section 5 by seeking other employment or otherwise,
nor shall the amount of any payment provided for in this Section 5 be reduced by
any compensation earned by you as the result of employment by another employer
after the Date of Termination or otherwise.
6. Term of Agreement. This Agreement shall have an initial term of two
(2) years from the date hereof and shall be automatically extended at the
expiration of said two-year period for successive two (2) year periods unless
the Company gives you one year's prior written notice that it is terminating
this Agreement at the expiration of the then current two year period.
7. Successors; Binding Agreement.
(A) The Company will require any purchaser of all or
substantially all of the business or assets of the Company, by agreement in form
and substance satisfactory to you to assume 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 purchase had taken place. As used in this Agreement,
"Company" shall mean the Company as hereinbefore defined and any successor to
its business or assets as aforesaid which executes and delivers the agreement
provided for in this Section 7(A) or which otherwise becomes bound by all the
terms and provisions of this Agreement by operation of law.
(B) This Agreement shall inure to the benefit of and be
enforceable by your personal or legal representatives, executors,
administrators, successors, heirs, distributees, divisees and legatees. If you
should die while any amount would still be payable to you hereunder if you had
continued to live, all such amounts, unless otherwise provided herein, shall be
paid in accordance with the terms of this Agreement to your devisee, legatee or
other designee or, if there be no such designee, to your estate.
8. Notices. For the purposes of this Agreement, notices and all other
communications provided for in the Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed by certified or
registered mail, return receipt requested, postage prep aid, addressed to the
respective addresses set forth on the first page of this Agreement, provided
that all notices to the Company shall be directed to the attention of the
Chairman of the Company, with a copy to the Secretary of the Company, or to such
other address as either party may have furnished to the other in writing in
accordance herewith, except that notice of change of address shall be effective
only upon receipt.
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June 19, 1997
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9. Miscellaneous. No provisions of this Agreement may be modified,
waived or discharged unless such waiver, modification or discharge is agreed to
in writing signed by you and such officer as may be specifically designated by
the Board of Directors of the Company. No waiver by either party hereto at any
time of any breach by the other party hereto of or compliance with, any
condition or provision of this Agreement to be performed by such other party
shall be deemed a waiver of similar or dissimilar provisions or conditions at
the same or at any prior or subsequent time. No agreements or representations,
oral or otherwise, express or implied, with respect to the subject matter hereof
have been made by either party which are not expressly set forth in this
Agreement; provided, however that this Agreement shall not supersede or in any
way affect the rights, duties or obligations you may have under any other
written agreement with the Company. This Agreement shall be governed by, and
construed in accordance with, the laws (other than principles of conflicts of
laws) of the State of New York.
10. Validity. The invalidity or unenforceability of any provision of
this Agreement in any respect shall not affect the validity or enforceability of
such provision in any other respect or of any other provision of this Agreement,
all of which shall remain in full force and effect.
If the foregoing correctly sets forth our understanding on the subject
matter hereof kindly sign and return to the Company the enclosed copy hereof
which will thereupon become our binding agreement.
Sincerely,
THE CHUBB CORPORATION
/s/ Dean R. O'Hare
By_____________________
Dean R. O'Hare
Chairman
Agreed to this day
of July 13, 1997
/s/ Edward Dunlop
Edward Dunlop