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Exhibit 10
The Chubb Corporation
Estate Enhancement Program for Non-Employee Directors
1. Purpose
The purpose of The Chubb Corporation Estate Enhancement Program for
Non-Employee Directors (the "Plan") is to provide non-employee members of
the Board of Directors of The Chubb Corporation (the "Company") the
ability to elect life insurance coverage pursuant to a split-dollar life
insurance arrangement in return for forgoing receipt of certain benefits
under The Chubb Corporation Deferred Compensation Plan for Non-Employee
Directors.
2. Definitions
For purposes of this Plan, the following terms have the meanings set forth
below:
2.01 Adjusted Company Death Benefit means the portion of the Policy death
benefit payable to the Company solely as a result of an Alternative
Death Benefit Election being in effect for the Policy, and shall be
determined by subtracting from the amount of Policy death benefit
paid to the Company an amount equal to the portion of the Policy
death benefit that would have been paid to the Company if an
Alternative Death Benefit Election was not in effect for the Policy.
2.02 Agreement means the Agreement executed by the Participant (or other
Policy Owner) and the Company implementing the terms of this Plan.
2.03 Alternative Death Benefit means a Company-paid death benefit paid by
the Company to the Former Policy Owner's beneficiary(ies) pursuant
to an Alternative Death Benefit Election under Section 8 of the
Plan.
2.04 Alternative Death Benefit Amount means, with respect to a
Participant, an amount that, after subtracting any Company federal,
state, and local income tax savings resulting from the deductibility
of the payment for corporate tax purposes, is equal to the Adjusted
Company Death Benefit reduced by the income taxes (if any) payable
by the Company as a result of receiving the Adjusted Company Death
Benefit. The Alternative Death Benefit Amount shall be determined at
the time the payment is to be made, based on the Company's federal,
state and local income tax rate
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(calculated at the marginal tax rate then applicable to the Company,
but net of any federal deduction for state and local taxes) at the
time of the payment, and shall be determined by the Plan
Administrator.
2.05 Alternative Death Benefit Election means an election made by the
Policy Owner pursuant to Section 8 of the Plan.
2.06 Board of Directors means the Board of Directors of the Company.
2.07 Change in Control means a change in control of the Company, as such
term is defined in The Chubb Corporation Stock Option Plan for
Non-Employee Directors (1996).
2.08 Collateral Assignment means the Collateral Assignment executed by
the Policy Owner pursuant to Section 6.02 of the Plan.
2.09 Company means The Chubb Corporation.
2.10 Company Death Benefit means the portion of the Policy's death
benefit payable to Company as provided in Section 7.
2.11 Compensation means amounts a Participant agrees to forego to
participate in the Plan pursuant to Section 3.02, and shall include
all or any portion of (i) the Participant's account balance under
The Chubb Corporation Deferred Compensation Plan for Non-Employee
Directors; or (ii) any other amounts the Board of Directors deems
Compensation for the purpose of this Plan.
2.12 Director means a member of the Board of Directors of the Company who
is not an employee of the Company or a subsidiary of the Company.
2.13 Effective Date means December 10, 1998.
2.14 Elector means the person or persons who are entitled to make or
revoke an Alternative Death Benefit Election pursuant to Section
8.01.
2.15 Enrollment and Election to Forego Compensation Form means the form
used by a Participant to make an election to forego Compensation
pursuant to Section 3.02 of the Plan.
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2.16 Former Policy Owner means the person(s) or entity that is the Policy
Owner immediately prior to when an Alternative Death Benefit
Election is first made with respect to a Policy.
2.17 Insurer means, with respect to a Participant's Policy, the insurance
company issuing the Policy on the Participant's life (or on the
lives of the Participant and the Participant's spouse, in the case
of a Survivorship Policy) pursuant to the provisions of the Plan.
2.18 Participant means a Director who elects to participate in the Plan.
2.19 Participant's Coverage Amount means the portion of the Policy's
death benefit payable to the beneficiary(ies) of the Policy Owner as
provided in Section 7.
2.20 Participant Premium means the amount of premium payment, if any,
paid by the Participant, Policy Owner or Former Policy Owner
pursuant to Section 5.02.
2.21 Plan Administrator means the Board of Directors, or its designee.
2.22 Policy means the life insurance coverage acquired on the life of the
Participant (or on the lives of the Participant and the
Participant's spouse, in the case of a Survivorship Policy) by the
Company.
2.23 Policy Owner means the person or entity designated as owner on the
application for the Policy, or the person or entity to which a
Policy Owner assigns his or her interest in the Policy.
2.24 Premium means, with respect to a Policy on the life of a Participant
(or the lives of a Participant and a Participant's spouse, if the
Policy is a Survivorship Policy), the amount the Company is
obligated, pursuant to the terms of the Plan, to pay to the Insurer
with respect to such Policy.
2.25 Survivorship Policy means a Policy insuring the lives of the
Participant and a Participant's spouse, with the death benefit
payable at the death of the last survivor of the Participant and his
or her spouse.
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3. Participation
3.01 Eligibility. Any Director shall be eligible to participate in the
Plan. A Director shall become a Participant by completing such
forms, documents and procedures as specified by the Plan
Administrator. The Participant (and, in the case of a Survivorship
Policy, the Participant's spouse) shall cooperate with the Insurer
by furnishing any and all information requested by the Insurer in
order to facilitate the issuance of the Policy, including furnishing
such medical information and taking such physical examinations as
the Insurer may deem necessary. In the absence of such cooperation,
the Company shall have no obligation to the Participant to allow him
or her to participate in the Plan.
3.02 Election to Forego Compensation. As a condition of participating in
the Plan, each Participant shall be required to make an election in
which the Participant shall commit to forego the receipt of a
specified type and amount of Compensation. The Participant shall
make an election to forego Compensation by execution of an
Enrollment and Election to Forego Compensation Form prior to the
Policy effective date.
4. Amount and Type of Coverage
The amount and type of coverage provided under the Policy shall be that
amount and type specified in the Agreement.
5. Payment of Premiums
5.01 Company Payments. The Company shall pay Premiums equal to four times
the amount of the Compensation foregone by a Participant as provided
in the Enrollment and Election to Forego Compensation Form. The
Premium amount corresponding to a foregone amount related to a
balance in The Chubb Corporation Deferred Compensation Plan for
Non-Employee Directors shall be paid within thirty (30) days after
the Policy is issued.
5.02 Participant Payments. Unless otherwise provided in an Agreement, a
Participant, Policy Owner (other than the Company, if the Company
becomes the Policy Owner pursuant to Section 8), or Former Policy
Owner shall not be required to pay any portion of the Premium due on
the
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Policy. However, the Participant, Policy Owner or Former Policy
Owner may elect to pay a premium to the Insurer with respect to the
Policy.
6. Policy Ownership
6.01 Ownership. Except as otherwise provided in this Plan and related
Agreement, the Policy Owner shall be the sole and exclusive owner of
a Participant's Policy.
6.02 Company's Rights. The Company shall not have any ownership rights in
the Policy (except as provided in Section 8). The Company's rights
shall be limited to: (1) the right to receive a portion of the
Policy death benefit in the event of the payment of the Policy death
benefit while the Collateral Assignment is in effect with respect to
the Policy; and, (2) the right to receive all of the proceeds of any
surrender, withdrawal or loan processed while the Collateral
Assignment is in effect, as specified in the Agreement. In exchange
for the Company's agreement to pay the Premiums described in Section
5.01 of the Plan and the Participant's Agreement, the Policy Owner
shall execute a Collateral Assignment to the Company of the rights
provided to the Company under this Plan and related Agreement. The
Company shall have the right to direct the Policy Owner in writing
to take any required action consistent with these rights, and upon
the receipt of such written direction from the Company, the Policy
Owner promptly shall take such action as is necessary to comply
therewith. The Company shall have the right to assign any part or
all of its interest in the Policy, subject to the Policy Owner's
rights, and the terms and conditions of this Plan and related
Agreement, to any person, entity or trust by the execution of a
written instrument delivered to the Policy Owner.
6.03 Prohibited Policy Transactions. The Policy Owner shall not borrow
from, hypothecate, withdraw cash value from, surrender in whole or
in part, cancel, or in any other manner encumber a Policy without
the prior written consent of the Company (or without the prior
written consent of the Former Policy Owner, if the Company is the
Policy Owner).
6.04 Investment of Policy Cash Values. If the Policy provides the Policy
Owner with a choice of investment funds for the Policy cash values,
the Policy Owner shall invest the cash values in the funds selected
by and in the proportions specified by the Company.
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6.05 Possession of Policy. The Policy Owner shall maintain possession of
the Policy.
7. Death Benefit
Upon the death of the Participant (or the death of the survivor of the
Participant and the Participant's spouse, if the Policy is a Survivorship
Policy), the death benefit under the Policy shall be divided as follows:
a. The Company shall be entitled to receive as the Company Death
Benefit an amount equal to the sum of: (i) the Policy cash
accumulation value immediately prior to the death of the Participant
(or the death of the survivor of the Participant and the
Participant's spouse, if the Policy is a Survivorship Policy) and
before any surrender charges; plus (ii) twenty-five percent (25%) of
the face amount of the Policy. For the purposes of the preceding
sentence, the Policy face amount shall equal the sum of the face
amount at the time the Policy death benefit is paid, plus the amount
of any face amount reduction made pursuant to Section 9. If the
Policy provides for a death benefit equal to the sum of the face
amount of the Policy and any cash account or accumulation value, any
Company Death Benefit should first be paid from the cash account or
accumulation value portion of the death benefit.
b. The beneficiary(ies) of the Policy Owner shall be entitled to
receive the Participant's Coverage Amount, which shall consist of
the excess, if any, of the Policy's death benefit over the Company
Death Benefit.
8. Alternative Death Benefit Election
8.01 Alternative Death Benefit Election. The Alternative Death Benefit
Election provided for in this Section may be made or revoked by the
person or persons designated as the Elector in the Participant's
Agreement. If no such person is designated in the Agreement, or if
no designated person is living and able to make the election, the
election may be made or revoked by the Policy Owner (except that an
election cannot be made or revoked by the Company, if the Company
becomes the Policy Owner). Any such election shall be filed with the
Plan Administrator in such form as may be prescribed by the Plan
Administrator. When an Alternative Death Benefit Election is made,
the
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Policy Owner shall immediately transfer the ownership of the Policy
to the Company, and the Company shall be designated as beneficiary
to receive the entire Policy death benefit. In addition, using a
form provided by the Plan Administrator, the Former Policy Owner
shall designate a beneficiary to receive the Alternative Death
Benefit.
The Elector may revoke the Alternative Death Benefit Election. In
the event of such a revocation, the Company shall continue to be the
Policy Owner and shall, by endorsement filed with the Insurer,
provide the Former Policy Owner the right to designate a beneficiary
of an amount of Policy death benefit equal to the Participant's
Coverage Amount. The revocation of an Alternative Death Benefit
Election shall not preclude an Elector from making a later
Alternative Death Benefit Election (or from revoking such later
election).
An Alternative Death Benefit Election (or an election to revoke such
an election) shall be effective when any necessary documentation is
submitted to and accepted by the Insurer. The Policy Owner (or
Former Policy Owner, if applicable) and the Company will promptly
submit any required forms or documents to the Insurer when an
Alternative Death Benefit Election is made or revoked.
8.02 Payment of Benefit. The Alternative Death Benefit shall be paid by
the Company from the general funds of the Company, and shall not
constitute an insurance benefit. It shall be paid by the Company to
the Former Policy Owner's beneficiary(ies) within thirty (30) days
after the Company receives the death benefit for the Participant's
Policy. The amount of the payment shall be equal to the Alternative
Death Benefit Amount. As long as an Alternative Death Benefit
Election is in effect, the beneficiary(ies) of the Former Policy
Owner shall receive only the Alternative Death Benefit, and shall
not be entitled to receive any portion of any death benefits that
would become payable under the Participant's Policy.
9. Election to Reduce Policy Face Amount
The Policy Owner (except the Company, if the Company becomes a Policy
Owner) or, if applicable, the Former Policy Owner, may elect to reduce the
Policy face amount, except that the Policy face amount shall not be
reduced to an amount less than the Company Death Benefit. If the Company
is the Policy
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Owner, then, within sixty (60) days of receipt of a written request from
the Former Policy Owner, the Company shall complete and submit the
necessary forms to the Insurer to reduce the Policy face amount in
accordance with the Former Policy Owner's request.
The Company may elect, in its discretion, to unilaterally reduce the face
amount of a Participant's Policy if, based on projections provided by the
Insurer or its agent, and assuming a Policy cash value investment return
rate for all future years equal to the average of the actual rates
realized on the Policy cash values for the immediately preceding three (3)
years, the Policy would lapse: (1) in less than ten (10) years, if the
Insured (or younger surviving Insured, if the Policy is a Survivorship
Policy and both Insureds are living at the time the determination is made)
is under ninety (90) years of age; (2) in less than eight (8) years if the
Insured (or younger surviving Insured, if the Policy is a Survivorship
Policy and both Insureds are living at the time the determination is made)
is ninety (90) years of age or older, but is under ninety-five (95) years
of age; or, (3) in less than five (5) years, if the Insured (or younger
surviving Insured, if the Policy is a Survivorship Policy and both
Insureds are living at the time the determination is made) is ninety-five
(95) years of age or older. If any reduction is made pursuant to the
preceding sentence, the maximum allowable reduction shall be to the
highest face amount that would satisfy the requirements of the preceding
sentence. In exercising its discretion to reduce the face amount, the
Company shall consider whether there is a reasonable risk of Policy lapse
absent a face amount reduction, after considering the health of the
Insured(s) and other appropriate factors.
10. Change in Control
If there is a Change in Control:
a. notwithstanding any provisions to the contrary in Section 14.01, the
Plan shall become irrevocable for all Participants in the Plan at
the time of the Change in Control;
b. the Company immediately shall transfer the ownership of all
Participants' Policies owned by the Company to an irrevocable trust
created by the Company to: (i) hold any such Policies in accordance
with the terms of the Plan, and (ii) pay any Alternative Death
Benefit that becomes payable under Section 8 of this Plan; and
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c. except as otherwise provided in this Section, the provisions of the
Plan shall continue to apply as if there had been no Change in
Control.
The occurrence of a Change in Control shall not preclude a Policy Owner
from thereafter making (or revoking) an Alternative Death Benefit Election
pursuant to Section 8. However, if a Policy Owner makes an Alternative
Death Benefit Election after a Change in Control, the ownership of the
Policy shall be transferred to the trust created pursuant to this Section,
and not directly to the Company as provided in Section 8.
Notwithstanding the creation and funding of an irrevocable trust in
accordance with the provisions of this Section, the Company or its
successor shall continue to be responsible for its obligations under the
Plan to the extent not satisfied by such trust, including any Alternative
Death Benefits payable under Section 8 if such amounts are not paid by the
trust for any reason, or if the trust's assets become insufficient to pay
any required amounts.
11. Company Default
11.01 Company Default. A Company Default shall be deemed to have occurred
with respect to a Policy if the Company processes or attempts to
process a policy loan, or a complete or partial surrender, or a cash
value withdrawal without prior written approval from the Policy
Owner (or Former Policy Owner, if applicable).
11.02 Rights upon Company Default. In the event of a Company Default as
described in Section 11.01, the Policy Owner (or Former Policy
Owner, if applicable) shall have the right to require the Company to
cure the Company Default by notifying the Company in writing within
sixty (60) days after the Company Default occurs, or if later,
within thirty (30) days after the Policy Owner (or Former Policy
Owner) becomes aware of the Company Default. If the Company fails to
cure the Company Default within sixty (60) days after being notified
by the Policy Owner (or Former Policy Owner) of the Company Default,
the Policy Owner (or Former Policy Owner) shall have the right to
require the Company to transfer its interest in the Participant's
Policy to the Policy Owner (or Former Policy Owner). The Policy
Owner (or Former Policy Owner) may exercise this right by notifying
the Company, in writing, within sixty (60) days after the Company
Default occurs. Upon receipt of such notice, the Company shall
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immediately transfer its rights in the Policy to the Policy Owner
(or Former Policy Owner), either by a release of the Collateral
Assignment, or by a transfer of ownership if the Company is the
Policy Owner, and the Company shall thereafter have no rights with
respect to such Policy. A Policy Owner's (or Former Policy Owner's)
failure to exercise its rights under this Section shall not be
deemed to release the Company from any of its obligations under the
Plan, and shall not preclude the Policy Owner (or Former Policy
Owner) from seeking other remedies with respect to the Company
Default. Also, a Policy Owner's (or Former Policy Owner's) failure
to exercise its rights under this Section will not preclude the
Policy Owner (or Former Policy Owner) from exercising such rights
upon a later Company Default.
12. Governing Laws and Notices
12.01 Governing Law. This Plan shall be governed by and construed in
accordance with the substantive law of New Jersey without giving
effect to the choice of law rules of New Jersey.
12.02 Notices. All notices hereunder shall be in writing and sent by first
class mail with postage prepaid. Any notice to the Company shall be
addressed to the attention of the Corporate Secretary of The Chubb
Corporation at the principal office of the Company at 15 Mountain
View Road, Warren, NJ 07061. Any notice to the Participant (or other
Policy Owner or Former Policy Owner) shall be addressed to the
Participant (or other Policy Owner or Former Policy Owner) at the
address following such party's signature on his or her Agreement.
Any party may change its address by giving written notice of such
change to the other party pursuant to this Section.
13. Miscellaneous Provisions
13.01 Gender. The masculine pronoun includes the feminine and the singular
includes the plural where appropriate for valid construction.
13.02 Cooperation with Insurer. In order to be eligible to participate in
this Plan, the Participant (and, in the case of a Survivorship
Policy, the Participant's spouse) shall cooperate with the Insurer
by furnishing any and all information requested by the Insurer in
order to facilitate the
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issuance of the policy, including furnishing such medical
information and taking such physical examinations as the Insurer may
deem necessary. In the absence of such cooperation, the Company
shall have no obligation to the Participant to allow him or her to
participate in the Plan.
13.03 Cancellation of Policy. If the Insurer cancels the Participant's
Policy pursuant to Policy provisions related to the suicide of the
Participant (or the Participant's spouse, if the Policy is a
Survivorship Policy), a material misstatement of information,
nondisclosure of medical information, or any other Policy provision,
then no benefits shall be payable to the beneficiary(ies) of such
Participant (or other Policy Owner, or Former Policy Owner, where
applicable). In such case, after the Company receives the amount
payable to the Company as a result of the cancellation of the
Policy, the Company shall pay to the Participant (or the
Participant's estate, if the Participant has died) an amount equal
to the Compensation already foregone by the Participant in
accordance with the Participant's election under Section 3.02 plus
any amounts paid by the Participant or other Policy Owner or Former
Policy Owner under Section 5.02, or, if less, twenty-five percent
(25%) of the amount the Company receives from the Insurer upon
cancellation of the Participant's Policy.
13.04 Inconsistent Terms. In the event of any inconsistency between the
terms of this Plan as described herein and the terms of any Policy
purchased hereunder or any related Agreement, the terms of such
Policy or Agreement shall be controlling as to that Participant, or
his or her Policy Owner or Former Policy Owner, if other than the
Participant, his successor-in-interest (if any) and his or her
beneficiary or beneficiaries.
14. Amendment, Termination, Administration, and Successors
14.01 Amendment/Termination. The Board of Directors of the Company may
amend, modify or terminate the Plan at any time, but any such
amendment, modification or termination will not affect the rights of
any Participant, Policy Owner or Former Policy Owner under any
Agreement entered into with the Company prior to the date of such
amendment, modification or termination without the Participant's,
Policy Owner's or Former Policy Owner's written consent.
Notwithstanding the prior sentence of this Section, the Board of
Directors shall have the unilateral right to terminate the Plan and
cancel the Company's obligations
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hereunder and any Agreements entered into hereunder if there is any
material adverse change (as determined by the Company in its sole
discretion) in the tax or financial consequences to the Company with
respect to the Plan. In the event a Participant's Agreement is
terminated as a result of a termination of the Plan pursuant to the
preceding sentence, the Company shall immediately pay to the
Participant (or, if the Participant is not living, to the Policy
Owner, if the Policy Owner is not the Company or a trust created
pursuant to Section 10 of the Plan, or to the Former Policy Owner,
if the Policy Owner is the Company or a trust created pursuant to
Section 10 of the Plan) an amount equal to the sum of: (a) the
actual amount of Compensation foregone by the Participant under the
Agreement; (b) interest, at a rate equal to the rate that would have
been payable for such period of time under the Stable Value Fund in
The Chubb Corporation CCAP, compounded annually, on the actual
foregone Compensation from the date the Compensation was foregone to
the date the payment under this Section is made; (c) the amount of
any federal, state and local income and gift taxes paid by the
Participant and the Participant's spouse as a result of the life
insurance coverage provided under the Plan; (d) interest, at a rate
equal to the rate that would have been payable for such period of
time under the Stable Value Fund in The Chubb Corporation CCAP,
compounded annually, on any such taxes referred to in subsection (c)
of this Section 14.01 from April 15 of the year following the year
to which such taxes relate to the date the payment under this
Section is made; (e) the amount of any payment made under Section
5.02; and, (f) interest, at a rate equal to the rate that would have
been payable for such period of time under the Stable Value Fund in
The Chubb Corporation CCAP, compounded annually, on any payment
referred to in subsection (e) of this Section 14.01 from the date
such payment was made to the date the payment under this Section is
made. When a payment is made pursuant to this Section, the
Participant's Agreement shall immediately terminate and, if the
Company is not the Policy Owner, the Policy Owner shall immediately
transfer all interest in the Policy to the Company, and thereafter,
the Participant, Policy Owner (other than the Company) and Former
Policy Owner (if any) shall have no further rights or interest in
the Policy. For the purpose of this paragraph, if the Stable Value
Fund referred to does not exist for any period of time for which an
interest rate calculation is required under this paragraph, the
interest rate payable for such period shall be a comparable rate
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determined by the Plan Administrator, in its discretion, except that
any rate so determined shall not be less than 6%.
14.02 Administration. This Plan shall be administered by the Plan
Administrator. The Plan Administrator shall have the authority to
make, amend, interpret, and enforce all rules and regulations for
the administration of the Plan and decide or resolve any and all
questions, including interpretations of the Plan, as may arise in
connection with the Plan in the Plan Administrator's sole
discretion. In the administration of this Plan, the Plan
Administrator from time to time may employ agents and delegate to
them or to others such administrative duties as it sees fit. The
Plan Administrator from time to time may consult with counsel, who
may be counsel to the Company. The decision or action of the Plan
Administrator (or its designee) with respect to any question arising
out of or in connection with the administration, interpretation and
application of this Plan shall be final and conclusive and binding
upon all persons having any interest in the Plan. The Company shall
indemnify and hold harmless the Plan Administrator and any employees
of the Company or its subsidiaries to whom administrative duties
under this Plan are delegated, against any and all claims, loss,
damage, expense or liability arising from any action or failure to
act with respect to this Plan, except in the case of willful
misconduct by the Plan Administrator or such employees of the
Company or its subsidiaries.
14.03 Successors. The terms and conditions of this Plan shall inure to the
benefit of and bind the Company and the Participant and their
successors, assignees (including any Assignee), and representatives.
The Company shall have the right to absolutely and irrevocably
assign its rights, title and interest in a Policy without the
consent of the Participant (or Assignee).
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