<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
[ ] Confidential, for the Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
</TABLE>
THE CHUBB CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
(5) Total fee paid:
------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
------------------------------------------------------------------------
(3) Filing Party:
------------------------------------------------------------------------
(4) Date Filed:
------------------------------------------------------------------------
<PAGE> 2
THE CHUBB CORPORATION
15 MOUNTAIN VIEW ROAD, P.O. BOX 1615, WARREN, NEW JERSEY 07061-1615
------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
The Annual Meeting of Shareholders of The Chubb Corporation will be held at
15 Mountain View Road, Warren, New Jersey on April 25, 2000 at 11:00 A.M., local
time, for the following purposes:
1. To elect 14 Directors to serve until the next Annual Meeting of
Shareholders and until their respective successors are elected and shall
qualify.
2. To approve the selection of independent auditors for the year
2000.
3. To approve The Chubb Corporation Long-Term Stock Incentive Plan
(2000), such Plan being set forth as Exhibit A to the accompanying Proxy
Statement.
4. To act on a shareholder proposal for a special executive
compensation review and report.
5. To act on a shareholder proposal to amend the Corporation's
By-Laws with respect to the Corporation's Shareholder Rights Plan.
6. To transact such other business as may properly be brought before
the meeting and any adjournment thereof.
Shareholders of record at the close of business on March 6, 2000 will be
entitled to notice of and to vote at the Annual Meeting and any adjournment
thereof.
By order of the Board of Directors,
HENRY G. GULICK
Vice President and Secretary
Dated: March 24, 2000
- --------------------------------------------------------------------------------
TO ASSURE YOUR REPRESENTATION AT THE MEETING, PLEASE FILL IN, SIGN, DATE
AND RETURN THE PROXY SUBMITTED HEREWITH, IN THE ENCLOSED ADDRESSED ENVELOPE OR
FOLLOW THE DIRECTIONS ACCOMPANYING THE PROXY TO VOTE USING A TOUCH-TONE
TELEPHONE OR BY ACCESSING THE WORLD WIDE WEB. THE GIVING OF SUCH PROXY WILL NOT
AFFECT YOUR RIGHT TO REVOKE SUCH PROXY BY APPROPRIATE WRITTEN NOTICE OR TO VOTE
IN PERSON SHOULD YOU LATER DECIDE TO ATTEND THE MEETING.
<PAGE> 3
THE CHUBB CORPORATION
15 MOUNTAIN VIEW ROAD, P.O. BOX 1615, WARREN, NEW JERSEY 07061-1615
------------------
PROXY STATEMENT
------------------
March 24, 2000
The Proxy accompanying this Proxy Statement is solicited by the Board of
Directors of The Chubb Corporation to be voted at the Annual Meeting of
Shareholders on April 25, 2000 and at any adjournment thereof. The Proxy may be
revoked by appropriate written notice at any time before it is exercised. See
"Voting, Solicitation of Proxies, Shareholder Proposals and Nominations."
A copy of the Corporation's Annual Report to Shareholders for 1999
accompanies this Proxy Statement and Proxy which are first being mailed to
Shareholders on March 24, 2000.
As of March 6, 2000, the record date for the determination of Shareholders
entitled to vote at the Annual Meeting, 175,026,579 shares of Common Stock of
the Corporation were issued and outstanding. Each share of Common Stock entitles
the holder to one vote on all matters brought before the Annual Meeting.
THE CORPORATION WILL FURNISH, WITHOUT CHARGE, TO ANY RECORD HOLDER OR
BENEFICIAL OWNER OF ITS COMMON STOCK ON SUCH RECORD DATE, UPON RECEIPT OF A
WRITTEN REQUEST, A COPY OF ITS ANNUAL REPORT TO THE SECURITIES AND EXCHANGE
COMMISSION ON FORM 10-K. WRITTEN REQUESTS SHOULD BE DIRECTED TO THE CHUBB
CORPORATION TO THE ATTENTION OF HENRY G. GULICK, VICE PRESIDENT AND SECRETARY,
15 MOUNTAIN VIEW ROAD, P.O. BOX 1615, WARREN, NEW JERSEY 07061-1615.
The Corporation is a holding company with subsidiaries principally engaged
in the business of property and casualty insurance. Its principal subsidiaries
are Federal Insurance Company ("Federal"), Chubb Executive Risk Inc., Executive
Risk Indemnity Inc., Executive Risk Speciality Insurance Company, Quadrant
Indemnity Company, Pacific Indemnity Company ("Pacific"), Vigilant Insurance
Company ("Vigilant"), Great Northern Insurance Company ("Great Northern"), Chubb
Insurance Company of Canada ("Chubb Canada"), Chubb Insurance Company of
Australia, Limited, Chubb Insurance Company of Europe, S.A. and Bellemead
Development Corporation ("Bellemead").
ELECTION OF DIRECTORS
The following persons have been nominated by the Board of Directors to
serve as Directors until the next Annual Meeting of Shareholders and until their
respective successors shall be elected and shall qualify. All of the nominees
were elected as members of the Board of Directors at the 1999 Annual Meeting.
Pursuant to the provisions of the By-Laws, the Board of Directors has fixed the
number of Directors to be elected at 14. In the event that any of the nominees
should be unable or unwilling to serve as a Director, it is intended that the
Proxy will be voted for such person, if any, as shall be designated by the Board
of Directors. However, the Board of Directors has no reason to believe that any
nominee will be unable or unwilling to serve as a Director.
<PAGE> 4
NOMINEES FOR DIRECTOR
<TABLE>
<CAPTION>
NAME AGE(1)
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<S> <C>
ZOE BAIRD PHOTO ZOE BAIRD, age 47. President, The Markle Foundation since
January 1998. Ms. Baird first became a Director of the
Corporation in June 1998. For six years, until the end of
1996, Ms. Baird was Senior Vice President and General
Counsel of Aetna, Inc. During 1997, she was Senior Visiting
Scholar and Senior Research Associate at Yale Law School.
Ms. Baird founded and currently chairs Lawyers for Children
America, is a member of the Council on Foreign Relations and
the American Law Institute and is on the Board of the
Mexican American Legal Defense and Education Fund and Save
the Children. Ms. Baird is a member of the Board of
Trustees, James A. Baker, III Institute for Public Policy.
She also serves on the President's Foreign Intelligence
Advisory Board and the International Competition Policy
Advisory Board to the Attorney General of the United States.
JOHN C. BECK PHOTO JOHN C. BECK, age 68. Member, Beck, Mack & Oliver LLC, an
investment counseling firm. Mr. Beck has been associated
with Beck, Mack & Oliver since 1958 and first became a
partner in 1962. He first became a Director of the
Corporation in 1988. Mr. Beck is also a Director of Russell
Reynolds Associates, Inc.
SHEILA P. BURKE PHOTO SHEILA P. BURKE, age 49. Executive Dean and Lecturer in
Public Policy of the John F. Kennedy School of Government,
Harvard University. Ms. Burke first became a Director of the
Corporation in 1997. For the ten years prior to her
appointment as Executive Dean in 1996, Ms. Burke served as
Chief of Staff to the United States Senate Majority Leader
Bob Dole. She serves on the Board of Directors of Picker
Institute, Boston, MA and Wellpoint Health Networks Inc. She
is a Trustee of Marymount University, Arlington, VA and the
University of San Francisco, a member of the Kaiser
Foundation Commission on Medicaid and the Uninsured, a
member of the Board of Directors of the Center for Health
Care Strategies, Inc. and a member of the Board of Directors
of Community Health Systems, Inc.
JAMES I. CASH, JR. JAMES I. CASH, JR., age 52. The James E. Robison Professor
of Business Administration, Harvard University. Professor
Cash has been a member of the Harvard Business School
faculty since 1976. Professor Cash first became a Director
of the Corporation in 1996. He is also a Director of
Cambridge Technology Partners, Inc., General Electric
Company, Knight-Ridder, Inc., State Street Corporation and
WinStar Communications, Inc. He is a Trustee of the
Massachusetts General Hospital. Professor Cash is also an
overseer for the Boston Museum of Science.
PERCY CHUBB, III PERCY CHUBB, III, age 65. Former Vice Chairman of the
Corporation. Mr. Chubb retired as an officer of the
Corporation and employee on February 1, 1997 and served as a
consultant through January 31, 1999. Prior to his retirement
he had served as Vice Chairman since June 1986. Prior to his
election as Vice Chairman, Mr. Chubb had been an Executive
Vice President since 1981. He had also served as Vice
Chairman of Bellemead, a Senior Vice President of Federal
and Chairman of Chubb Canada. Mr. Chubb had been associated
with Chubb since 1958. He first became a Director of the
Corporation in 1978.
</TABLE>
2
<PAGE> 5
<TABLE>
<CAPTION>
NAME AGE(1)
------------------------------------------------------------
<S> <C>
JOEL J. COHEN PHOTO JOEL J. COHEN, age 62. Managing Director, Investment Banking
Department, and Director, Mergers and Acquisitions,
Donaldson, Lufkin & Jenrette Securities Corporation since
October 1989. He first became a Director of the Corporation
in 1984. Mr. Cohen was a consultant from February 1988 until
October 1989. Mr. Cohen had been General Counsel:
Presidential Task Force on Market Mechanisms from November
1987 through January 1988 and a Partner of Davis Polk &
Wardwell, attorneys, until September 1987. He had been
associated with Davis Polk & Wardwell from 1963 until
September 1987 and became a Partner in 1969. Mr. Cohen is
also a Director of Maersk, Inc.
JAMES M. CORNELIUS JAMES M. CORNELIUS, age 56. Chairman, Guidant Corporation.
Mr. Cornelius has been associated with Guidant Corporation
since September 1994 when he was elected Chairman of the
Board of Directors of Guidant Corporation. From 1986 to
1994, he was Vice President of Finance and Chief Financial
Officer and Director of Eli Lilly and Company. He first
became a Director of the Corporation in 1998. Mr. Cornelius
is currently a Director of Guidant Corporation, Lilly
Industries Inc. and American United Life Insurance Company
and he serves as a Trustee of the University of Indianapolis
and Treasurer of the Board of Governors of the Indianapo-
lis Museum of Art.
DAVID H. HOAG DAVID H. HOAG, age 60. Former Chairman and Chief Executive
Officer, The LTV Corporation from January 1991 until his
retirement on February 1, 1999. Mr. Hoag also served as
President and Chief Executive Officer of LTV Steel Company
from 1983 until 1990. Mr. Hoag had been associated with The
LTV Corporation since 1960. He first became a Director of
the Corporation in 1994. Mr. Hoag is also a Director of
Brush Wellman Inc., The Lubrizol Corporation, M.A. Hanna
Company, NACCO Industries, Inc. and Chairman of the Federal
Reserve Board of Cleveland. Mr. Hoag is also a Trustee of
Allegheny College and University Hospitals - Cleveland.
DEAN R. OHARE PHOTO DEAN R. O'HARE, age 57. Chairman and Chief Executive Officer
of the Corporation since September 1996. Prior to September
1996, Mr. O'Hare had been Chairman, President and Chief
Executive Officer of the Corporation since January 1995.
Prior to January 1995, Mr. O'Hare had been Chairman and
Chief Executive Officer since June 1988. Mr. O'Hare had been
President from 1986 until 1988, an Executive Vice President
since 1985 and a Senior Vice President since 1979. He is
Chairman and President of Federal, Vigilant and Great
Northern, and Chairman of Bellemead, Pacific and Chubb &
Son, a division of Federal Insurance Company ("Chubb &
Son"). Mr. O'Hare has been associated with Chubb since 1963.
He first became a Director of the Corporation in 1984. Mr.
O'Hare is also a Director of the Fluor Corporation.
WARREN B. RUDMAN WARREN B. RUDMAN, age 69. Partner, Paul, Weiss, Rifkind,
Wharton & Garrison, attorneys, since January 1993. Senator
Rudman first became a Director of the Corporation in 1993.
Prior to January 1993, Senator Rudman had been a United
States Senator from New Hampshire since 1980. He is also on
the Board of Governors of the American Stock Exchange, a
Director of Allied Waste Industries, Inc., Collins & Aikman
Corporation, Boston Scientific and Raytheon Company and a
Director of several funds in the Dreyfus Family of Mutual
Funds. Senator Rudman is also Chairman of the President's
Foreign Intelligence Advisory Board and Co-Chairman of the
Concord Coalition and serves on the Senior Advisory Board of
the Institute of Politics of the John F. Kennedy School of
Government at Harvard University.
</TABLE>
3
<PAGE> 6
<TABLE>
<CAPTION>
NAME AGE(1)
------------------------------------------------------------
<S> <C>
SIR DAVID G. SCHOLEY SIR DAVID G. SCHOLEY, CBE, age 64. Senior Advisor, Warburg
PHOTO Dillon Read since September 1997. Prior to September 1997,
Sir David had been Chairman of the International Advisory
Council, Swiss Bank Corporation since November 1995. He had
been Chairman of SBC Warburg, the investment banking
division of Swiss Bank Corporation, from February 1995 until
November 1995. Prior to February 1995, Sir David had been
Executive Chairman of S.G. Warburg Group plc since 1984. He
first became a Director of the Corporation in 1991. Sir
David is a Director of Anglo American plc, Close Brothers
Group plc and Vodafone Airtouch plc. He is also Chairman,
Board of Governors, of Wellington College, a Trustee of the
Glyndebourne Arts Trust and The National Portrait Gallery
and Governor of the National Institute of Economic and
Social Research.
RAYMOND G. H. SEITZ RAYMOND G.H. SEITZ, age 59. Vice Chairman, Lehman Bros.
International (Europe) since April 1995 following his
retirement as Ambassador of the United States of America to
the Court of St. James's. He first became a Director of the
Corporation in 1994. Previously he was Assistant Secretary
of State for European and Canadian Affairs from 1989 to
1991. Ambassador Seitz had served in the United States
Foreign Service since 1966 wherein he held many positions in
the U.S. and abroad. Ambassador Seitz is also a Director of
Authoriszor, Inc., British Airways plc, Cable & Wireless Co.
plc, Marconi plc, Cable & Wireless HKT Limited and Rio Tinto
plc. He is a Trustee of the National Gallery, the Royal
Academy and the World Monument Fund and a member of the
Advisory Board of Stanford University.
LAWRENCE M. SMALL LAWRENCE M. SMALL, age 58. Secretary of the Smithsonian
Institution since January 2000. Mr. Small had been President
and Chief Operating Officer of Fannie Mae since September
1991. He first became a Director of the Corporation in 1989.
Prior to September 1991, when Mr. Small joined Fannie Mae,
he had served as Vice Chairman and Chairman of the Executive
Committee of Citicorp and Citibank, N.A. since January 1990.
He had been associated with Citibank since 1964. Mr. Small
also serves on the Boards of Marriott International, Inc.,
New York City's Spanish Repertory Theatre, Mt. Sinai-New
York University Medical Center and Health System, the
National Gallery, the Kennedy Center for the Performing Arts
and the Woodrow Wilson Center for International Scholars.
JAMES M. ZIMMERMAN PHOTO JAMES M. ZIMMERMAN, age 56. Chairman and Chief Executive
Officer of Federated Department Stores, Inc. He has been
associated with Federated Department Stores, Inc. since
1965. Mr. Zimmerman was elected to his present position in
May 1997. Prior to that he had been President and Chief
Operating Officer since March 1988. He first became a
Director of the Corporation in 1998. Mr. Zimmerman is also a
Director of Federated Department Stores, Inc. and H.J. Heinz
Company.
</TABLE>
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(1) As of April 25, 2000.
4
<PAGE> 7
BENEFICIAL SHARE OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS
The following table lists Chubb stock-based holdings, including the
beneficial ownership of the Corporation's Common Stock by Directors, the Chief
Executive Officer, the four most highly compensated executive officers other
than the Chief Executive Officer and Directors and executive officers as a
group, in accordance with the definitions adopted by the Securities and Exchange
Commission under Rule 13d-3 of the Securities Exchange Act of 1934, as amended
(the "Act"). No Director or officer beneficially owns as much as one half of 1%
of the outstanding Common Stock, except for Mr. Chubb, whose beneficial
ownership reflected in the table is .61%.
<TABLE>
<CAPTION>
NUMBER OF SHARES OF
COMMON STOCK
BENEFICIALLY OWNED
NAME MARCH 6, 2000(1) DEFERRAL PLAN(2) TOTAL
---- ------------------- ---------------- -----
<S> <C> <C> <C>
Zoe Baird............................... 4,500 -- 4,500(3)
John C. Beck............................ 100,373 14,304 114,677(4)(23)
Sheila P. Burke......................... 12,265 -- 12,265(5)
James I. Cash, Jr. ..................... 16,200 -- 16,200(6)
Percy Chubb, III........................ 1,069,291 -- 1,069,291(7)(23)
Joel J. Cohen........................... 48,900 11,823 60,723(8)
James M. Cornelius...................... 13,000 1,136 14,136(9)
David H. Hoag........................... 21,000 255 21,255(10)
Thomas C. MacAvoy....................... 28,900 336 29,236(11)
Dean R. O'Hare.......................... 677,062 -- 677,062(12)(22)(23)
Warren B. Rudman........................ 28,200 2,034 30,234(13)
Sir David G. Scholey, CBE............... 33,000 2,834 35,834(14)(23)
Raymond G. H. Seitz..................... 20,200 1,279 21,479(15)
Lawrence M. Small ...................... 95,770 1,010 96,780(16)(23)
James M. Zimmerman...................... 8,100 -- 8,100(17)
John J. Degnan.......................... 197,531 -- 197,531(18)(22)(23)
David B. Kelso.......................... 117,108 -- 117,108(19)(22)
Thomas F. Motamed....................... 97,002 -- 97,002(20)(22)
Michael O'Reilly........................ 194,592 -- 194,592(21)(22)
Directors and Executive Officers as a
group ................................ 3,879,807 35,011 3,914,818(23)
</TABLE>
- ---------------
(1) Each person has sole voting and investment power with respect to the
shares listed, unless otherwise indicated.
(2) Includes compensation allocated to the Market Value Account of the
Deferred Compensation Plan for Non-Employee Directors (See "Directors'
Compensation" on page 8). The value of units allocated to this account is based
upon the market value of the Corporation's Common Stock.
(3) Includes 4,000 shares that may be purchased within 60 days pursuant to
The Chubb Corporation Stock Option Plan for Non-Employee Directors (1996).
(4) Includes 52,773 shares held in accounts managed by Beck, Mack & Oliver
LLC, for which Mr. Beck disclaims beneficial ownership, 1,000 shares held in a
trust for Mr. Beck's benefit and 44,000 shares that may be purchased within 60
days pursuant to The Chubb Corporation Stock Option Plans for Non-Employee
Directors.
(5) Includes 12,000 shares that may be purchased within 60 days pursuant
to The Chubb Corporation Stock Option Plan for Non-Employee Directors (1996).
(6) Includes 16,000 shares that may be purchased within 60 days pursuant
to The Chubb Corporation Stock Option Plans for Non-Employee Directors.
(7) Includes 3,195 shares held by trusts for Mr. Chubb's benefit, 19,084
shares owned by a member of Mr. Chubb's family who lives in his home, 1,404
shares held in trusts of which a member of Mr. Chubb's family who lives in his
home is trustee, 790,888 shares owned by the Victoria Foundation Inc., of which
Mr. Chubb is President and one of 14 trustees, 61,376 shares which Mr. Chubb has
a right to purchase within 60 days under The Chubb Corporation Long-Term Stock
Incentive Plans and 12,000 shares that may be
5
<PAGE> 8
purchased within 60 days pursuant to The Chubb Corporation Stock Option Plan for
Non-Employee Directors (1996). Mr. Chubb disclaims beneficial ownership of
811,376 of such shares.
(8) Includes 40,000 shares that may be purchased within 60 days pursuant
to The Chubb Corporation Stock Option Plans for Non-Employee Directors.
(9) Includes 8,000 shares that may be purchased within 60 days pursuant to
The Chubb Corporation Stock Option Plan for Non-Employee Directors (1996).
(10) Includes 20,000 shares that may be purchased within 60 days pursuant
to The Chubb Corporation Stock Option Plans for Non-Employee Directors.
(11) Includes 20,540 shares that may be purchased within 60 days pursuant
to The Chubb Corporation Stock Option Plans for Non-Employee Directors.
(12) Includes 708 shares held by members of Mr. O'Hare's family who live in
his home, 5,262 shares held by a family limited partnership and 531,011 shares
that may be purchased within 60 days pursuant to The Chubb Corporation Long-Term
Stock Incentive Plans. Mr. O'Hare disclaims beneficial ownership of 5,970 of
such shares.
(13) Includes 28,000 shares that may be purchased within 60 days pursuant
to The Chubb Corporation Stock Option Plans for Non-Employee Directors.
(14) Includes 100 shares owned by a member of Sir David Scholey's family
who lives in his home, of which Sir David disclaims beneficial ownership and
32,000 shares that may be purchased within 60 days pursuant to The Chubb
Corporation Stock Option Plans for Non-Employee Directors.
(15) Includes 20,000 shares that may be purchased within 60 days pursuant
to The Chubb Corporation Stock Option Plans for Non-Employee Directors.
(16) Includes 3,470 shares held in a trust of which Mr. Small is a trustee
of which Mr. Small disclaims beneficial ownership and 40,000 shares that may be
purchased within 60 days pursuant to The Chubb Corporation Stock Option Plans
for Non-Employee Directors.
(17) Includes 8,000 shares that may be purchased within 60 days pursuant to
The Chubb Corporation Stock Option Plan for Non-Employee Directors (1996).
(18) Includes 432 shares held by members of Mr. Degnan's family who live in
his home, 168,779 shares which Mr. Degnan has the right to purchase within 60
days under The Chubb Corporation Long-Term Stock Incentive Plans and 3,520
shares in the Corporation Stock Fund of the Capital Accumulation Plan of The
Chubb Corporation, Chubb & Son Inc. and Participating Affiliates. Mr. Degnan
disclaims beneficial ownership of 432 of such shares.
(19) Includes 101,480 shares which Mr. Kelso has the right to purchase
within 60 days under The Chubb Corporation Long-Term Stock Incentive Plan
(1996).
(20) Includes 79,610 shares which Mr. Motamed has the right to purchase
within 60 days under The Chubb Corporation Long-Term Stock Incentive Plans and
831 shares in the Corporation Stock Fund of the Capital Accumulation Plan of The
Chubb Corporation, Chubb & Son Inc. and Participating Affiliates.
(21) Includes 146,810 shares which Mr. O'Reilly has the right to purchase
within 60 days under The Chubb Corporation Long-Term Stock Incentive Plans.
(22) Includes 2,027, 650, 2,278, 2,899 and 2,906 shares which were
allocated to Messrs. Degnan, Kelso, Motamed, O'Hare and O'Reilly, respectively,
pursuant to The Chubb Corporation Employee Stock Ownership Plan (the "ESOP").
(23) Such shares include the shares reflected above as to which Messrs.
Beck, Chubb, Degnan, O'Hare, Scholey and Small disclaim beneficial ownership,
27,659 shares which executive officers other than those listed in the table
above disclaim beneficial ownership, 26,475 shares which were allocated to
executive officers other than those listed in the table above pursuant to the
ESOP, 564,110 shares which executive officers other than those listed in the
table above have the right to purchase within 60 days under The Chubb
Corporation Long-Term Stock Incentive Plans and 8,470 shares in the Corporation
Stock Fund of the Capital Accumulation Plan of The Chubb Corporation, Chubb &
Son Inc. and Participating Affiliates which are beneficially owned by four
executive officers other than those listed in the table above. All Directors and
executive officers as a group own 2.2% of the outstanding Common Stock.
6
<PAGE> 9
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
As required by Securities and Exchange Commission rules, the Corporation
notes that Ralph E. Jones, III, an Executive Vice President of Chubb & Son, a
division of Federal Insurance Company, failed to include in his initial Form 3
filing on December 16, 1999, shares of Common Stock held for his children. These
holdings were reported on an amended Form 3 filed December 27, 1999. Charles M.
Luchs, an Executive Vice President of Chubb & Son, a division of Federal
Insurance Company, was late in reporting eight sales of Common Stock dating back
to December 1997. These sales were reported on a Form 4 on February 22, 2000.
CERTAIN SHAREHOLDERS
As of March 6, 2000 the Royal & Sun Alliance Insurance Group plc ("Royal &
Sun Alliance") at 30 Berkeley Square, London, WIX 5HA, England held 9,023,916
shares of Common Stock of the Corporation (approximately 5.2% of the outstanding
Common Stock at March 6, 2000). Royal & Sun Alliance has reported that it holds
such shares for the purpose of investment.
Sanford C. Bernstein & Co., Inc. ("Bernstein"), 767 Fifth Avenue, New York,
New York 10004 has filed a Schedule 13G under the Securities Exchange Act of
1934 indicating that as of December 31, 1999 it beneficially owned 9,676,568
shares of Common Stock (approximately 5.5% of the outstanding Common Stock at
December 31, 1999) for the accounts of its discretionary clients. Bernstein has
reported that the shares were acquired in the ordinary course of business and
were not acquired for the purpose of and do not have the effect of changing or
influencing the control of the Corporation and were not acquired in connection
with or as a participant in any transaction having such purpose or effect.
The Board of Directors knows of no other beneficial owner of five percent
or more of the Corporation's Common Stock nor does it know of any arrangement
which may at a subsequent date result in a change in control of the Corporation.
See "Transactions with Certain Shareholders."
AUDIT, ORGANIZATION & COMPENSATION AND NOMINATING COMMITTEES
The Board of Directors has, among other Committees, an Audit Committee, an
Organization & Compensation Committee and a Nominating Committee.
The Audit Committee is composed of Messrs. Cohen (Chairman), Cash,
Cornelius and Seitz, and Ms. Baird and Ms. Burke. No officer of the Corporation
or of any of its subsidiaries may serve on the Audit Committee. In 1999, the
Committee met four times. The functions of the Audit Committee include reviewing
the accounting principles and practices employed by the Corporation and, to the
extent the Committee deems appropriate, of the Corporation's subsidiaries;
meeting with the Corporation's independent auditors to review their reports on
their audits of the Corporation's accounts, their comments on the internal
accounting controls and internal audit procedures of the Corporation and the
actions taken by management with regard to such comments; and recommending
annually to the Board of Directors the appointment of the Corporation's
independent auditors. The Committee has the power at its discretion to order
interim and surprise audits and to perform such other duties as may be assigned
to it from time to time by the Board of Directors.
The Organization & Compensation Committee is composed of Messrs. Small
(Chairman), Cornelius, Hoag, Rudman and Ms. Burke. No officer of the Corporation
or any of its subsidiaries may serve on the Organization & Compensation
Committee. In 1999, the Committee met five times. The Committee monitors the
performance and oversees the promotion of the senior executive officers of the
Corporation and its principal operating subsidiaries and periodically consults
with the Chief Executive Officer and other members of senior management
regarding the development of qualified replacements to succeed key executives
and other aspects of succession planning. The Committee determines overall
compensation policy for senior management of the Corporation, recommending to
the Board of Directors new compensation programs or changes in existing programs
which the Committee finds appropriate. Any action to be taken with regard to the
salary of any employee of the Corporation or any of its subsidiaries, which is
in excess of certain amounts, is subject to ratification by the Committee. In
addition, the Committee performs administrative functions pursuant to The Chubb
Corporation Director's Charitable Award Program, The Chubb Corporation Long-
7
<PAGE> 10
Term Stock Incentive Plan (1992), The Chubb Corporation Long-Term Stock
Incentive Plan (1996) (the "Long-Term Stock Incentive Plans"), the Annual
Incentive Compensation Plan (1996) (the "Annual Incentive Compensation Plan"),
The Profit Sharing Plan of The Chubb Corporation, Chubb & Son Inc. and
Participating Affiliates (1987) (the "Profit Sharing Plan (1987)"), The Chubb
Corporation Investment Department/Chubb Asset Managers, Inc. Incentive
Compensation Plan (the "Investment Department Incentive Plan"), the Stock
Purchase Plan (1989) of The Chubb Corporation (the "Stock Purchase Plan (1989)")
and The Chubb Corporation Executive Deferred Compensation Plan and ratifies
certain awards made pursuant to incentive or bonus plans of subsidiaries of the
Corporation.
The Nominating Committee is composed of Messrs. Hoag (Chairman), Cohen and
Rudman. The Committee seeks out, evaluates and recommends qualified nominees for
election as Directors, considers Director performance before recommending
re-election and makes recommendations concerning the size and composition of the
Board. In 1999, the Committee met two times. The Committee will consider
Shareholder recommendations for Director nominees, provided that such
recommendations are submitted to the Corporation in accordance with the same
requirements and procedures as are set forth in the Corporation's By-Laws for
nominations by Shareholders of persons for election as directors at an Annual
Meeting. These requirements and procedures are summarized under "Voting,
Solicitation of Proxies, Shareholder Proposals and Nominations" on page 32 of
this Proxy Statement. For additional information on this process, Shareholders
should write to Henry G. Gulick, Vice President and Secretary, The Chubb
Corporation, 15 Mountain View Road, P.O. Box 1615, Warren, New Jersey
07061-1615.
DIRECTORS' ATTENDANCE
In 1999, there were five meetings of the Board of Directors of the
Corporation. All of the incumbent Directors attended 75% or more of the
aggregate of the Board and the respective Committee meetings.
DIRECTORS' COMPENSATION
All Directors of the Corporation are also directors of Federal. It is the
practice of the Corporation's Board of Directors to hold concurrent meetings
with the Board of Directors of Federal.
Each Director receives an annual stipend in the amount of $35,000, all of
which is paid by the Corporation. In addition, a meeting fee of $1,500 is paid
to Directors for each meeting of the Board of Directors attended. Directors
receive a fee of $1,500 for each Committee meeting attended. In those instances
where the Boards or Committees of the Corporation and Federal meet concurrently,
each shares proportionately in the payment of the fees. In addition, members of
the Finance Committee, the Executive Committee, the Organization & Compensation
Committee, the Audit Committee, the Nominating Committee and the Pension &
Profit Sharing Committee receive an annual stipend from the Corporation of
$7,500. The Chairmen of the Audit Committee and of the Organization &
Compensation Committee receive annual stipends from the Corporation of $15,000
for service on those Committees in lieu of the foregoing Committee stipends. As
members of the International Advisory Board of The Chubb Corporation, Messrs.
O'Hare, Scholey and Seitz received meeting fees of $5,000 each in 1999.
Directors who are officers of the Corporation receive meeting fees for
attendance at Directors' meetings only and do not receive stipends or fees for
Committee meetings.
Pursuant to the Deferred Compensation Plan for Non-Employee Directors
adopted by the Corporation in 1987, Directors may elect to defer, until a date
specified, receipt of all or a portion of their compensation. This plan provides
that, in addition to a Cash Account upon which amounts deferred earn interest
compounded quarterly, at the prime rate of Citibank, N.A. in effect on certain
specified dates, amounts deferred may also be allocated to a Market Value
Account, the value of which is based upon the market value of the Corporation's
Common Stock from time to time, a Shareholder's Equity Account, the value of
which is based upon the book value of the Corporation's Common Stock established
on an annual basis, or a combination of such accounts. At its regular Board
meeting in December 1995, the Board of Directors adopted guidelines suggesting
that eligible Non-Employee Directors voluntarily defer 50% of all stipends into
the Market Value Account starting in 1996. At March 6, 2000, deferred
compensation accounts were maintained for nine
8
<PAGE> 11
Directors, all of whom are currently deferring compensation pursuant to this
plan. For 1999, Directors deferred $548,750 of compensation from the Corporation
and its subsidiaries. During 1999, Messrs. Hoag and Small agreed to waive the
right to receive $239,528 and $204,897 previously deferred under the Plan in
connection with the purchase of a life insurance policy on the life of each
Director and their respective spouses under the Corporation's Estate Enhancement
Program and in connection therewith recognized imputed income of $12.53 and
$46.13, respectively, for the premiums paid by the Corporation for these
policies. The cost of the life insurance policies to the Corporation will not
exceed the after-tax cost the Corporation expected to incur in connection with
the payment of previously deferred amounts under the Plan. At December 31, 1999,
the aggregate account values reflecting Directors' deferrals and earnings on
such deferrals were as follows: $1,971,568 for the Market Value Account,
$1,006,137 for the Shareholder's Equity Account and $46,649 for the Cash
Account.
DIRECTOR'S CHARITABLE AWARD PROGRAM
Effective January 1, 1992, the Corporation established the Director's
Charitable Award Program. Under the Program, which is administered by the
Organization & Compensation Committee, each Non-Employee Director following his
or her first election to the Board of Directors by Shareholders may recommend
that the Corporation direct one or more charitable contributions totalling
$500,000 to eligible tax exempt organizations. Generally, eligible Directors are
paired, and contributions are made to the organizations selected by a Director
upon the death of the second paired Director. At March 6, 2000, 13 eligible
Directors were participating in the Program. The Program may be funded by the
Corporation through, among other vehicles, the purchase of life insurance
policies on the lives of the Directors. Individual Directors derive no financial
benefit from this Program since all charitable deductions accrue solely to the
Corporation. The Program may be terminated at any time by the Organization &
Compensation Committee.
NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN
The Chubb Corporation Stock Option Plan for Non-Employee Directors (1988)
was adopted by the Board of Directors and approved by Shareholders in 1988 and
was amended, extended and renamed The Chubb Corporation Stock Option Plan for
Non-Employee Directors (1992) by the Board of Directors and approved by
Shareholders in 1992. Upon the recommendation of the Board of Directors, it was
again extended, amended and approved by Shareholders in 1996 as The Chubb
Corporation Stock Option Plan for Non-Employee Directors (1996) (the "1996
Non-Employee Directors Plan"). The 1996 Non-Employee Directors Plan provides
that an aggregate of 400,000 shares of Common Stock of the Corporation be
available for issuance upon exercise of options granted thereunder. The 1996
Non-Employee Directors Plan shall terminate on the day following the 2001 Annual
Meeting of Shareholders.
The 1996 Non-Employee Directors Plan is administered by the Board of
Directors. Only Eligible Directors, as defined, may receive options under the
1996 Non-Employee Directors Plan. There are currently 14 Eligible Directors.
Following the election of Directors, as of the date of each Annual Meeting that
occurs while the 1996 Non-Employee Directors Plan is in effect, each individual
who is then an Eligible Director will be granted an option to purchase 4,000
shares of Common Stock of the Corporation. The purchase price per share of the
Common Stock deliverable upon exercise of the option shall be 100% of the fair
market value per share of Common Stock on the day the option is granted.
Options granted under the 1996 Non-Employee Directors Plan are
non-statutory options. The options shall be exercisable in whole or in part at
all times after the date of grant and are transferable to certain members of the
optionee's immediate family. All outstanding options held by an optionee shall
be automatically canceled upon termination of the optionee's service as an
Eligible Director, except for terminations due to retirement and under certain
other specified circumstances.
In the case of certain mergers, consolidations or combinations of the
Corporation with or into other corporations, or in the event of a Change of
Control of the Corporation, as defined, the holder of each option then
outstanding shall have, unless the Board of Directors determines otherwise, the
right to receive on the date or effective date of such event a cash payment in
an amount calculated as set forth in the Non-Employee Directors Plans.
9
<PAGE> 12
EXECUTIVE COMPENSATION AND CERTAIN TRANSACTIONS
I. SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
ANNUAL COMPENSATION COMPENSATION
---------------------------- -----------------------
AWARDS PAYOUTS
---------- ----------
SECURITIES
RESTRICTED UNDERLYING ALL OTHER
STOCK OPTIONS/ LTIP COMPEN-
NAME AND PRINCIPAL POSITION YEAR SALARY(1) BONUS(2) AWARDS(3) SARS(4) PAYOUTS(5) SATION(6)
- --------------------------- ---- --------- -------- ---------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Dean R. O'Hare........... 1999 $991,107 $ 800,000 $143,234 222,480 $448,508 $227,246
Chairman and 1998 925,424 850,000 250,184 73,245 826,775 290,660
Chief Executive Officer 1997 882,001 1,542,400 327,642 99,250 673,920 216,669
Thomas F. Motamed........ 1999 347,693 400,000 107,402 70,226 75,935 97,244
Executive Vice President 1998 296,154 425,000 187,593 23,755 110,237 88,798
1997 187,235 431,045 204,608 8,000 132,352 39,844
John J. Degnan........... 1999 381,040 350,000 89,509 67,838 203,436 95,491
President 1998 350,193 400,000 156,387 28,500 308,651 115,842
1997 312,693 615,254 204,608 33,000 240,697 77,569
Michael O'Reilly......... 1999 372,685 300,000 89,509 65,450 131,099 92,869
Executive Vice President 1998 351,520 325,000 156,387 23,755 220,473 103,580
1997 334,062 437,081 204,608 18,000 307,364 58,619
David B. Kelso........... 1999 408,347 250,000 85,960 65,450 196,192 88,758
Executive Vice President 1998 387,116 325,000 156,387 23,755 330,710 111,261
1997 362,500 528,750 204,608 30,000 -- 28,610
</TABLE>
- ---------------
(1) Includes directors fees for 1999, 1998 and 1997 of $12,500, $11,000, $12,000
for Mr. O'Hare.
(2) Includes for Messrs. O'Hare, Motamed, Degnan, O'Reilly and Kelso amounts
paid for such years under the Annual Incentive Compensation Plan (including
certain amounts for 1998 and 1999 that were deferred at the election of
certain of these executives) and for 1997 under the Profit Sharing Plan
(1987).
(3) For 1999, represents the fair market value of performance-based restricted
stock awarded at 100% of fair market value as of the March 2, 2000 award
date ($47.9688 per share) without diminution in value attributable to the
restrictions on such stock under the Long-Term Stock Incentive Plan. The
awards generally become vested three years after the date of grant, but may
vest earlier upon death, disability, retirement or other termination with
the consent of the Organization & Compensation Committee. Dividends declared
on the Common Stock of the Corporation are paid on outstanding restricted
stock awards. For the purposes of the Securities and Exchange Commission's
compensation reporting rules, outstanding performance share awards are
treated as equivalent to restricted stock units. The total number and value
(based on a per share price at December 31, 1999 of $56.3125) of performance
shares outstanding for the three year periods ending December 31, 2000 and
2001 are 23,512 ($1,324,020) for Mr. O'Hare, 13,405 ($754,869) for Mr.
Motamed, 13,227 ($744,845) for Mr. Degnan, 11,441 ($644,271) for Mr.
O'Reilly and 11,911 ($670,738) for Mr. Kelso. The total outstanding
nonvested Restricted Stock award balances as of March 2, 2000 were 11,320
shares ($612,543) for Mr. O'Hare, 7,968 shares ($430,016) for Mr. Motamed,
7,073 shares ($382,729) for Mr. Degnan, 7,073 shares ($382,729) for Mr.
O'Reilly and 6,999 shares ($379,179) for Mr. Kelso. Dollar values are based
on a value per share of $56.3125 on December 31, 1999 for awards outstanding
on such date and $47.9688 per share on March 2, 2000 for awards granted on
such date.
(4) Includes options granted in such years under the Long-Term Stock Incentive
Plan. See Options/SAR Grants table below for more information on the 1999
grants.
(5) Includes payments made in settlement of performance share awards for Messrs.
O'Hare, Motamed, Degnan and O'Reilly for the three year periods ended
December 31, 1997, 1998 and 1999 and for
10
<PAGE> 13
Mr. Kelso for the three year periods ended December 31, 1998 and 1999. Also
includes for Mr. O'Reilly deferred payments under the long-term segment of
the Investment Department Incentive Plan paid in 1997 and 1998 for
performance periods ended December 31, 1993 and 1994, respectively.
(6) Includes allocations for 1999, 1998 and 1997 under the qualified Capital
Accumulation Plan and the Capital Accumulation Excess Benefit Plan of
$73,144, $96,577 and $84,733 for Mr. O'Hare, $30,908, $28,846 and $12,023
for Mr. Motamed, $31,242, $38,008 and $30,508 for Mr. Degnan, $29,707,
$33,727 and $23,975 for Mr. O'Reilly and $29,333, $36,485 and $7,442 for Mr.
Kelso and allocations for 1999, 1998 and 1997 under the ESOP qualified plan
and the ESOP excess plan of $154,102, $194,083 and $131,936 for Mr. O'Hare,
$66,267, $59,952 and $27,821 for Mr. Motamed, $64,249, $77,834 and $47,061
for Mr. Degnan, $63,162, $69,853 and $34,644 for Mr. O'Reilly and $59,425,
$74,776 and $21,168 for Mr. Kelso. Includes $69 for Mr. Motamed which
represents an amount imputed as income in connection with the Corporation's
payment of a premium on a life insurance policy on the lives of Mr. Motamed
and his spouse in exchange for the relinquishing by Mr. Motamed of the right
to receive under the Pension Program a lump sum amount equal to $300,000
plus interest in accordance with his participation in the Corporation's
Estate Enhancement Program.
II. OPTIONS/SAR GRANTS TABLE
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
------------------------------------------------------- POTENTIAL REALIZED
% OF VALUE
TOTAL AT ASSUMED ANNUAL
NUMBER OF OPTIONS/ RATES
SECURITIES SARS OF STOCK PRICE
UNDERLYING GRANTED TO EXERCISE APPRECIATION FOR
OPTIONS/ EMPLOYEES OR BASE OPTION TERM(3)
SARS IN FISCAL PRICE ------------------------
NAME GRANTED(1) YEAR(2) PER SHARE EXPIRATION DATE 5% 10%
---- ---------- ---------- --------- --------------- ---------- ---
<S> <C> <C> <C> <C> <C> <C>
Dean R. O'Hare........... 222,480 5.1% $59.7813 March 10, 2009 $8,364,389 $21,197,004
Thomas F. Motamed........ 70,226 1.6% 59.7813 March 10, 2009 2,640,227 6,690,853
John J. Degnan........... 67,838 1.5% 59.7813 March 10, 2009 2,550,447 6,463,333
Michael O'Reilly......... 65,450 1.5% 59.7813 March 10, 2009 2,460,667 6,235,814
David B. Kelso........... 65,450 1.5% 59.7813 March 10, 2009 2,460,667 6,235,814
</TABLE>
- ---------------
(1) The number of shares for each person represents a stock option granted under
the Long-Term Stock Incentive Plan without a related stock appreciation
right. The options that expire on March 10, 2009 are exercisable for 50% of
the number of shares shown on March 10, 2000 and 100% on March 10, 2001. The
exercise price for each stock option is not less than the fair market value
of the Corporation's Common Stock on the date of grant. After they become
exercisable, these options are transferable to certain members of the
optionee's immediate family. There is an option restoration feature with
each option which provides that the optionee can receive a separate option
grant when previously owned shares are exchanged in a stock-for-stock
exercise if the market price on date of exercise is at least 25% higher than
the exercise price. The restoration option will be a non-statutory option,
the number of option shares will equal the number of exchanged shares used
to exercise the original option, the exercise price will be the fair market
value on the grant date of the restoration option, the term will be for the
length of time remaining in the original option and the restoration option
will be immediately exercisable. The restoration feature does not apply to
options transferred by the optionee.
(2) Based on total grants in 1999 of 4,396,970 shares.
(3) The assumed 5% and 10% annual rates of stock price appreciation used in the
table are prescribed by the proxy rules and are not intended to forecast
possible future appreciation in the price of the Corporation's Common Stock.
11
<PAGE> 14
III. AGGREGATED OPTION/SAR EXERCISES AND FISCAL YEAR-END
OPTION/SAR VALUE TABLE
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES
UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS/SARS OPTIONS/SARS
AT FY-END AT FY-END(1)
SHARES ACQUIRED VALUE EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE REALIZED UNEXERCISABLE UNEXERCISABLE
---- --------------- -------- ------------- --------------------
<S> <C> <C> <C> <C>
Dean R. O'Hare................ -- -- 383,149/259,102 $3,090,942/$0
Thomas F. Motamed............. 4,191 $ 65,893 32,620/82,103 96,682/0
John J. Degnan................ -- -- 120,610/82,088 1,091,133/0
Michael O'Reilly.............. 7,800 355,659 103,208/77,327 1,213,187/0
David B. Kelso................ -- -- 56,878/77,327 133,125/0
</TABLE>
- ---------------
(1) Based on a value per share at December 31, 1999 of $56.3125.
IV. LONG-TERM INCENTIVE PLAN AWARDS TABLE
LONG-TERM INCENTIVE PLAN -- AWARDS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
PERFORMANCE OR ESTIMATED FUTURE PAYOUTS
NUMBER OF OTHER PERIOD UNDER NON-STOCK PRICE-BASED
SHARES, UNITS UNTIL PLANS (UNITS OR $)
OR OTHER MATURATION OR -----------------------------
NAME RIGHTS(1) PAYOUT THRESHOLD TARGET MAXIMUM
---- ------------- -------------- --------- ------ -------
<S> <C> <C> <C> <C> <C>
Dean R. O'Hare............................... 13,382 1999-01 6,691 13,382 20,073
Thomas F. Motamed............................ 7,945 1999-01 3,973 7,945 11,918
John J. Degnan............................... 7,527 1999-01 3,764 7,527 11,291
Michael O'Reilly............................. 6,691 1999-01 3,346 6,691 10,037
David B. Kelso............................... 6,691 1999-01 3,346 6,691 10,037
</TABLE>
- ---------------
(1) Includes performance share awards granted under the Corporation's Long-Term
Stock Incentive Plan in 1999 with respect to the three year performance
cycle ending December 31, 2001. The number of shares earned is dependent on
the achievement of a specified earnings per share target established by the
Organization & Compensation Committee for the three year period. Settlement
of the awards may be in shares or cash or a combination of both at the
discretion of the Organization & Compensation Committee.
Notwithstanding anything to the contrary set forth in any of the
Corporation's previous filings under the Securities Act of 1933, as amended, or
the Securities Exchange Act of 1934, as amended, that might incorporate future
filings, including this Proxy Statement, in whole or in part, the following
Performance Graph and the Organization & Compensation Committee Report on pages
13 through 18 shall not be incorporated by reference into any such filings.
12
<PAGE> 15
COMPARISON OF CUMULATIVE TOTAL RETURN*
AMONG THE CORPORATION'S COMMON STOCK,
THE STANDARD & POOR'S 500 STOCK INDEX AND THE STANDARD & POOR'S
PROPERTY AND CASUALTY INDEX
FIVE YEAR COMPARISON
<TABLE>
<CAPTION>
CHUBB S&P 500(R) S&P P&C(R)
----- ---------- ----------
<S> <C> <C> <C>
1994 100.00 100.00 100.00
1995 128.00 138.00 135.00
1996 145.00 169.00 165.00
1997 208.00 226.00 239.00
1998 181.00 290.00 223.00
1999 161.00 351.00 166.00
</TABLE>
TEN YEAR COMPARISON
<TABLE>
<CAPTION>
CHUBB S&P 500(R) S&P P&CIIII(R)
----- ---------- --------------
<S> <C> <C> <C>
1989 100.00 100.00 100.00
1990 117.00 97.00 98.00
1991 170.00 126.00 122.00
1992 200.00 136.00 143.00
1993 179.00 150.00 141.00
1994 183.00 152.00 146.00
1995 234.00 209.00 200.00
1996 285.00 257.00 243.00
1997 360.00 342.00 353.00
1998 331.00 440.00 329.00
1999 294.00 533.00 245.00
</TABLE>
- ---------------
* Assumes, for the five and ten year graphs, that the investment in the
Corporation's Common Stock and each index was $100 on December 31, 1994 and
December 31, 1989, respectively, and that all dividends were reinvested.
Making the same comparison of cumulative total return for the past one year
period ended December 31, 1999, an investment of $100 in the Corporation's
Common Stock, the Standard & Poor's 500 Stock Index and the Standard & Poor's
Property and Casualty Index would have yielded the following: Chubb, $89; S&P
500 Index, $121; and S&P Property and Casualty Index, $75.
13
<PAGE> 16
ORGANIZATION & COMPENSATION COMMITTEE REPORT
EXECUTIVE OFFICER COMPENSATION POLICIES
The Corporation's executive compensation program is designed to align
Shareholder interests with business strategy, company values and management
initiatives. It is based on the following four principles: (i) to link the
interests of management with those of Shareholders by making a substantial
portion of executive compensation depend upon the Corporation's financial
performance and by encouraging stock ownership in the Corporation, (ii) to
attract and retain superior executives by providing them with the opportunity to
earn total compensation packages that are among the most competitive in the
industry, (iii) to reward individual results by recognizing performance through
salary, annual cash incentive and long-term incentives and (iv) to manage
compensation based on the level of skill, knowledge, effort and responsibility
needed to perform the job successfully.
A position evaluation program establishes pay levels among all positions
reflecting the importance and value of similar positions to the Corporation. A
position's pay level determines a range of values within which the executive's
compensation is administered.
Executive officers' compensation includes: annual cash compensation
(consisting of base salary and annual incentive awards paid in cash) and
long-term incentive awards, as well as additional features which are available
to most other employees of the Corporation and its subsidiaries, including
profit sharing plans, pension plans, a stock purchase plan and an employee stock
ownership plan, all of which allocate payments generally based on an
individual's level of annual cash compensation.
It is the general policy of the Corporation that executive officer
compensation qualify for tax deductibility pursuant to the regulations under
Section 162(m) of the Internal Revenue Code. Under these regulations, in order
to qualify for tax deductibility, payment of compensation in excess of $1
million to the chief executive officer and the four other highest paid executive
officers must be made in accordance with performance criteria disclosed to and
approved by Shareholders and pursuant to pre-established arrangements which,
among other things, limit the exercise of discretion to increase the awards
beyond the limits initially set. The Committee believes that mathematical
formulas cannot always anticipate and fairly address every situation which may
arise. For this reason, the Committee has historically retained the authority to
adjust compensation awarded in light of extraordinary, unusual or non-recurring
events. The Committee continues to believe that this reservation of authority,
and its exercise under appropriate circumstances, operates in the best interests
of the Corporation and its Shareholders even though in exercising such
authority, compensation might not be deductible.
The Committee determines annual cash incentives based upon both performance
against financial goals and performance relative to the insurance peer
companies. It varies the size of option, performance share, and
performance-based restricted stock grants based on the company's performance
compared to its goals and the need to stay competitive with other companies
seeking people of the type Chubb seeks to attract, retain and motivate. The
value of stock options, performance shares and restricted stock is tied directly
to the stock price. The number of performance shares earned for a three year
performance period can vary from 0 to 1.5 times the targeted number of shares
based on performance against earnings per share and other selected goals. The
number of performance-based restricted shares granted is tied to the number of
performance shares earned and, thus, varies based on the same performance
measures. The value of the performance shares and performance-based restricted
shares varies up and down with the stock price.
The cornerstone of the Corporation's compensation program is to pay for
performance and the Committee believes that the Corporation's compensation
program has strong performance-based forms of executive compensation that link
the interests of management with those of Shareholders. Other than base salary,
all major elements of the Corporation's executive compensation programs vary
directly with both corporate and individual performance. As part of that, the
Committee sets difficult performance targets for executives. The Committee
varies total compensation targets for executives depending on company perform-
14
<PAGE> 17
ance. The better the company's performance in relation to the competition, the
greater the compensation opportunity for executives and vice versa. Executives
have substantial portions of their compensation at risk for annual and long-term
performance, with the largest portion at risk for the most senior executives.
In 1999, the Committee requested a nationally recognized executive
compensation consultant to provide a comprehensive annual update of the
executive officer compensation strategy and competitive position to assist it in
its analysis of pay strategy, compensation levels and types of long-term
incentives used. This review resulted in affirmation by the Committee that the
executive compensation program and strategy are appropriate and working as
intended to pay for performance. The Committee firmly endorsed the concept that
for financial comparison the Corporation's peer group is an industry comparison
group composed of property and casualty insurance companies. A second peer group
of 14 companies in the insurance and financial services industries is used to
measure the competitive position of the compensation potentially available to
the executive officers of the Corporation named in the Summary Compensation
Table. For other than the executive officers named in the Summary Compensation
Table, the Committee generally uses industry surveys which include, but are not
limited to, members of the property and casualty insurance peer group referenced
above.
ANNUAL CASH COMPENSATION
Amounts paid as base salary, including merit salary increases, are
determined by the executive's performance, placement in the salary payband
established for the executive's position and the salaries offered in the
industry for comparable positions. Outside independent consultants are
periodically used to gather and analyze industry comparisons of salary data to
ensure that the positioning of salaries in the compensation program is
competitive for comparable positions. The Committee monitors and approves
changes in base salary for senior executive officers (including the executive
officers named in the Summary Compensation Table). Promotional salary increases
reflect the executive's movement to an increased level of responsibility and are
granted when earned.
The Committee sets and approves the formulas which establish the amounts
available for annual incentive awards. For 1999, incentive awards paid to most
executive officers were determined under the Annual Incentive Compensation Plan
(1996). This plan's formula measures the Corporation's performance, including
combined loss and expense ratio ("combined ratio"), net income and operating
income return on equity against the results of an industry comparison group. Net
income under this formula is the Corporation's investment income arising from
the property and casualty insurance business and underwriting profit or loss
from that business. Each year the Committee approves goals for the combined
ratio and net income based on the outlook for business conditions that year.
After the close of business each year, the formula takes into account how well
the Corporation performed against its own goals and how well it performed
against an industry comparison group's average combined ratio and operating
income return on equity. Included in this industry comparison group are two out
of the seven companies which, along with the Corporation, comprise the Standard
& Poor's Property and Casualty Index used in the Performance Graphs on page 13
as well as five other insurance companies against which the Corporation has over
time compared itself.
The annual incentive pool actually paid is determined by weighing the
combined ratio result as well as the net income and operating income return on
equity results to generate a total award pool under the Plan. A percent is
applied to the target dollar award pool for each payband to develop a final cash
award pool. The pool can range from 0% to 200% of the target dollar award for
all participants covered by the Plan.
Amounts actually paid for annual incentive awards to executives are based
on the executive's individual performance and payband. Where applicable,
individual performance is judged on the following considerations: profit,
growth, expense control, productivity, leadership, staff development, diversity
management, performance/compensation management, innovation, collaboration and
internal/external customer service. Awards are approved by the Committee based
upon recommendations by management after year end. Annual cash compensation has
been administered to slow the growth in base salaries and place a greater
proportion of
15
<PAGE> 18
the executive's annual cash compensation at risk through the variable amounts
available for an annual incentive award.
Other annual cash incentive plans in which certain executive officers
participate include The Chubb Corporation Investment Department/Chubb Asset
Managers, Inc. Incentive Compensation Plan (the "Investment Department Incentive
Plan") and The Profit Sharing Plan (1987). The Investment Department Incentive
Plan provides both annual and long-term cash awards which are competitive with
those provided by similar financial institutions, including property and
casualty insurance companies and banks. Such awards are granted to the
Corporation's investment professionals and are based on results measured against
market indices which represent standards of investment performance regularly
used by investment analysts to compare and analyze the performance of investment
professionals responsible for managing a particular asset class. The Profit
Sharing Plan (1987) provides employees of the Corporation and its participating
subsidiaries with cash awards on a sliding scale of 0% to 4% of a participant's
eligible compensation based on a schedule relating to the consolidated return on
premiums earned by the property and casualty insurance subsidiaries of the
Corporation.
LONG-TERM INCENTIVE AWARDS
Long-term incentive awards are made under the Long-Term Stock Incentive
Plan. The Long-Term Stock Incentive Plan, which is administered by the
Committee, is an omnibus plan and provides stock based awards to eligible
employees which include most levels of management as well as the Corporation's
executive officers. The Plan was designed in consultation with a nationally
recognized executive compensation consulting firm and periodically the Committee
obtains the advice of consulting firms with regard to the ongoing administration
of the Plan. Awards granted to executive officers include stock options,
performance share awards and restricted stock awards.
Long-term incentive awards, including stock options and performance shares,
for executive officers named in the Summary Compensation Table are based on
guidelines that provide for larger awards commensurate with payband levels that
reflect competitive grant practices within a broad peer group of 14 companies in
the insurance and financial services industries. Included in the peer group of
14 companies are three of the seven companies which, along with the Corporation,
comprise the Standard & Poor's Property and Casualty Index, and additional
insurance companies against which the Corporation has over time compared itself,
as well as, insurance brokerage and financial services companies, reflecting the
fact that the Corporation also operates within the broader financial services
industry. For other than the executive officers named in the Summary
Compensation Table, the Committee generally uses industry surveys which include,
but are not limited to, the members of the industry comparison group of property
and casualty insurance companies described under the heading "Annual Cash
Compensation."
Performance share awards are generally granted annually and are earned
based on earnings per share targets or other selected corporate financial goals
for three year performance periods. As with options, the number of performance
shares granted is based on payband levels and the executive's most recent level
of performance. Payment values are dependent on the Corporation's stock price at
the end of the performance period, thus linking executives' interests directly
with Shareholders, as well as the achievement of selected corporate financial
goals. The number of performance shares actually earned and paid out for each
three year performance period can vary from 0% to 150% of the original target
award based on the attainment of these corporate goals. In 1999, a performance
goal was established for the three year performance period ending in 2001
reflecting a cumulative operating earnings per share target for such period. In
connection with the previously reported implementation of the cost control
initiative in the first quarter of 1998, the Committee determined that it would
be appropriate to adjust the calculation of operating income for the three year
performance period ended December 31, 1999 so that the intended benefit of such
related awards, as initially proposed, was preserved.
The Committee in 1999 established an overall pool and, for selected senior
executives, individual maximum awards for performance-based restricted stock
awards. The overall pool established for the performance cycle ending December
31, 2001 was set not to exceed 15% of the same number of performance
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<PAGE> 19
shares deemed earned for the performance share cycle concluding on such date.
Allocations for selected senior executives were based on their potential
performance and long range contributions to the Corporation.
Non-performance-based restricted stock awards are granted to a limited
number of executive officers in positions requiring specialized skills and
knowledge that do not entail the broad management responsibilities most
appropriately tied to performance share grants and performance-based restricted
stock grants and are also granted to attract and retain other selected
employees, including executive officers.
CEO COMPENSATION
Mr. O'Hare is a participant in all of the aforementioned components of the
executive compensation program except regular restricted stock awards. The value
of his compensation from each component of the program is a direct reflection of
both his individual performance and the Corporation's performance as described
below. Over 85% of Mr. O'Hare's compensation is in the form of variable pay.
Mr. O'Hare's salary was reviewed in March 2000 under the Corporation's
normal merit guidelines. Based upon the Committee's judgment of his performance
during the 12 month review period, Mr. O'Hare received an increase of 3.1% to a
new annual salary of $1,000,000. This was primarily designed to reward Mr.
O'Hare for his performance but also to limit his salary so that it would not
exceed $1 million in order to qualify for tax deductibility pursuant to the
regulations under Section 162(m) of the Internal Revenue Code. The principal
performance criteria considered by the Committee were the Corporation's relative
performance versus competitors in key financial measures such as earnings per
share, net income, operating income, return on equity and revenue against
established targets. Additional criteria considered were industry leadership,
corporate citizenship and succession planning. Additional considerations were
Mr. O'Hare's achievement in 1999 in successfully continuing the expansion of the
Corporation's global business and the increase in business from a program to
identify and accelerate new growth initiatives. In addition, in connection with
its acquisition by the Corporation in July 1999, Mr. O'Hare successfully managed
the integration of Executive Risk into the Chubb organization.
Mr. O'Hare's annual cash incentive award for 1999 was $800,000 which
represents a decrease of 5.9% from the incentive award paid for 1998. The
Corporation achieved a combined loss and expense ratio of 102.8% which
outperformed the combined ratio average of 107.5% for the industry comparison
group referred to above under the discussion concerning Annual Cash
Compensation. In addition, the Corporation achieved 79% of its net income goal
(as defined under the Annual Incentive Compensation Plan)and recorded an
operating earnings return on equity of 9.5% which surpassed the industry
comparison group's average of 8.1%. The Committee considered these results as
well as Mr. O'Hare's leadership skills and financial management talent in
determining the incentive award paid to him.
In March 1999, Mr. O'Hare was granted 13,382 performance shares for the
three-year performance period ending December 31, 2001 and was granted stock
options for 222,480 shares. The Committee recognized that the Corporation
achieved very good results in 1998 as measured by, among other things, the
principal performance criteria described above. The Committee decided to award
grants that were very competitive within the property and casualty insurance
peer group referenced under the general discussion concerning Long-Term
Incentive Awards after consultation with a nationally recognized executive
compensation consultant who provided a comprehensive annual update of the
executive officer compensation strategy and competitive position.
With respect to performance shares granted in February 1997 for the
three-year performance period which ended December 31, 1999, the cumulative
earnings per share, as adjusted, during this performance period were below the
target established by the Committee in 1997. On this basis, Mr. O'Hare earned
performance shares having a value of $448,508, compared with the performance
share award payment made last year of $826,775.
On March 2, 2000, Mr. O'Hare was awarded 2,986 shares of performance-based
restricted stock for 1999 results. The shares had a fair market value on the
award date of $143,234 (without regard to any diminution in value attributable
to the restrictions on the shares). This compares with his performance-based
restricted stock award of 1998 of $250,184. The Committee believes that the
percentage of the performance-based
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<PAGE> 20
restricted stock pool awarded to Mr. O'Hare reflects his contribution to the
Corporation's results and directly relates to the financial interests of
Shareholders, management and employees.
The foregoing report has been furnished by the following members of the
Board of Directors of the Corporation who comprised the Organization &
Compensation Committee:
<TABLE>
<S> <C>
Lawrence M. Small (Chairman) David H. Hoag
Sheila P. Burke Warren B. Rudman
James M. Cornelius
</TABLE>
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<PAGE> 21
PENSION PROGRAM
Eligible employees of the Corporation and certain of its subsidiaries
participate in the Pension Plan of The Chubb Corporation, Chubb & Son Inc. and
Participating Affiliates (the "Pension Plan"). As in effect during 1999, the
Pension Plan provides to each such employee annual retirement income beginning
at age 65 equal to the product of (x) the total number of years of participation
in the Pension Plan (but not more than 35 years) and (y) the difference between
(i) 1 3/4% of average compensation for the five years in the last ten years of
participation prior to retirement during which the employee was most highly paid
("final average earnings") and (ii) an amount related to the employee's primary
Social Security benefit.
The Employee Retirement Income Security Act of 1974, as amended ("ERISA"),
and the Internal Revenue Code of 1986, as amended (the "Code"), impose maximum
limitations on the annual amount of a pension which may be paid under a funded
defined benefit plan such as the Pension Plan. The Pension Plan complies with
these limitations. The Board of Directors adopted, effective as of January 1,
1976, an unfunded benefit equalization plan of the type permitted by ERISA which
will provide annual payments to persons who are participants under the Pension
Plan and their beneficiaries. Such payments will be equal to the difference
between (a) the benefits which would be payable to such persons under the
Pension Plan, without taking into consideration the limitations imposed by ERISA
and the Code and (b) the maximum annual benefits to which such persons are
entitled under the Pension Plan by reason of such limitations.
The table which follows shows the estimated annual benefits payable upon
retirement to persons in specified remuneration and years-of-service
classifications under the Pension Plan and the unfunded benefit equalization
plan (referred to collectively as the "Pension Program"). The retirement
benefits shown are based upon retirement at the age of 65 and computed on the
basis of straight life annuity benefits. Such benefits, as shown in the
following table, are subject to an offset of an amount related to the primary
Social Security benefits in an amount approved by the Internal Revenue Service
in effect at the time of retirement.
ESTIMATED ANNUAL RETIREMENT BENEFITS PAYABLE AT AGE 65
STRAIGHT LIFE ANNUITY BASIS
TO AN EMPLOYEE RETIRING IN 2000
<TABLE>
<CAPTION>
FINAL
AVERAGE YEARS OF CREDITED SERVICE
EARNINGS --------------------------------------------------------------------
-------- 15 20 25 30 35 OR MORE
<C> <S> <C> <C> <C> <C> <C>
$ 100,000 ................. $ 26,250 $ 35,000 $ 43,750 $ 52,500 $ 61,250
200,000 ................. 52,500 70,000 87,500 105,000 122,500
400,000 ................. 105,000 140,000 175,000 210,000 245,000
600,000 ................. 157,500 210,000 262,500 315,000 367,500
800,000 ................. 210,000 280,000 350,000 420,000 490,000
1,000,000 ................. 262,500 350,000 437,500 525,000 612,500
1,300,000 ................. 341,250 455,000 568,750 682,500 796,250
1,600,000 ................. 420,000 560,000 700,000 840,000 980,000
1,800,000 ................. 472,500 630,000 787,500 945,000 1,102,500
2,000,000 ................. 525,000 700,000 875,000 1,050,000 1,225,000
2,200,000 ................. 577,500 770,000 962,500 1,155,000 1,347,500
2,400,000 ................. 630,000 840,000 1,050,000 1,260,000 1,470,000
2,600,000 ................. 682,500 910,000 1,137,500 1,365,000 1,592,500
2,800,000 ................. 735,000 980,000 1,225,000 1,470,000 1,715,000
3,000,000 ................. 787,500 1,050,000 1,312,500 1,575,000 1,837,500
</TABLE>
Remuneration covered by the Pension Program includes salary (including
salary contributed to the Capital Accumulation Plan of The Chubb Corporation,
Chubb & Son Inc. and Participating Affiliates),
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<PAGE> 22
overtime and awards under The Chubb Corporation Annual Incentive Compensation
Plans, the Investment Department Incentive Plan and the Profit Sharing Plan
(1987) in the year paid rather than the year earned.
With respect to the individuals named in the Summary Compensation Table on
page 10, Messrs. Degnan, Kelso, Motamed, O'Hare and O'Reilly have, for the
purposes of the Pension Program, 8, 2 1/2, 21 1/2, 35 and 29 years of credited
service, respectively, and their 1999 remuneration for purposes of the Pension
Program was $781,039, $733,346, $772,693, $1,828,606 and $742,685, respectively.
In 1999, Mr. Motamed relinquished the right to receive under the Pension Program
a lump sum amount equal to $300,000 plus interest in accordance with his
participation in the Corporation's Estate Enhancement Program.
EXECUTIVE SEVERANCE AGREEMENTS
Pursuant to a recommendation by the Organization & Compensation Committee
and authorization by the Board of Directors, the Corporation has in force
severance agreements with five executive officers of the Corporation. Each
agreement becomes operative only upon a "Change in Control" that occurs when the
officer is in the employ of the Corporation. Under the agreements, a "Change in
Control" occurs if (a) following a tender or exchange offer for voting
securities of the Corporation, a proxy contest for election of the directors, or
a merger or consolidation or sale of all or substantially all of its business or
assets, its directors immediately prior to such event cease to constitute a
majority of the Board of Directors when such event occurs or within one year
thereafter or (b) any person or group acquires 25% or more of the outstanding
voting securities of the Corporation without prior approval by a majority of the
Directors then in office. Such agreements have an initial term of two years and
are automatically extended for successive two year periods unless the
Corporation gives one year's prior notice that it is terminating an agreement at
the end of the then current two year period.
If a change in control occurs and the officer's employment with the
Corporation terminates within two years thereafter (other than by reason of
death, disability, retirement at normal retirement age, discharge for cause, or
voluntary termination by the officer except for Good Reason), the officer
becomes entitled to the severance benefits described below. Termination for
"Good Reason" means termination because of, among other things, the involuntary
assignment of such officer to duties inconsistent with the officer's position
prior to such Change in Control; reduction of the officer's base salary or
bonus; the Corporation acting with adverse effect upon the officer's benefits
under any benefit plans in which the officer is participating at the time of
such Change in Control; or a determination made by the officer in good faith
that as a result of such change in control the officer cannot discharge the
officer's duties effectively.
Upon such termination, the officer's severance benefits shall equal a
multiple of 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 of the officer's annual
awards under the Corporation's incentive compensation plans for the three years
preceding such Change in Control. The multiple is four in the case of Mr. O'Hare
and two in the case of the other officers. Also, the Corporation must maintain
in force the insurance and disability benefits available to the officer
immediately prior to the Change in Control, or their equivalents, for two years
after such termination or until the earlier commencement of new, full-time
employment by the officer. The officer is not required to mitigate the amount of
any payments by seeking other employment. The Corporation must pay all legal
fees and expenses incurred by the officer as a result of such termination,
including any incurred in seeking to enforce the severance agreement.
As of March 6, 2000, payments to the officers with whom the Corporation has
severance agreements would have been as follows: Mr. John J. Degnan, $1,700,000;
Mr. David B. Kelso, $1,573,333; Mr. Thomas F. Motamed, $1,633,333; Mr. Dean R.
O'Hare, $8,200,000 and Mr. Michael O'Reilly, $1,480,400. The Corporation does
not believe that payment of these amounts would have a material adverse effect
on the financial or operating condition of the Corporation. Agreements under the
Long-Term Stock Incentive Plans provide for the accelerated payment or vesting
of awards granted under such plans under certain circumstances in the event of a
Change in Control of the Corporation.
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<PAGE> 23
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Organization & Compensation Committee is composed of Messrs. Small
(Chairman), Cornelius, Hoag, Rudman and Ms. Burke. No current or former officers
or employees of the Corporation or any of its subsidiaries serves on the
Organization & Compensation Committee. No executive officer of the Corporation
has served on the compensation committee of another corporation except Mr.
O'Hare who serves on the Organization and Compensation Committee of the Fluor
Corporation.
TRANSACTIONS WITH DIRECTORS AND THEIR ASSOCIATES
Mr. Percy Chubb, III retired as an officer of the Corporation and from
employment on February 1, 1997. Through January 31, 1999, Mr. Chubb served as a
consultant to the Corporation for which he was paid $100,000 per annum in
quarterly installments on the last day of each calendar quarter.
Mr. Joel J. Cohen is a Managing Director of Donaldson, Lufkin & Jenrette
Securities Corporation ("DLJ"), which firm provides securities brokerage and
investment advisory services to the Corporation and its subsidiaries. In
addition, certain subsidiaries of the Corporation participate as limited
partners in an investment partnership of which DLJ Merchant Banking Inc. is the
managing general partner.
Sir David G. Scholey, CBE is Senior Advisor, Warburg Dillion Read, the
investment banking division of UBS AG. Warburg Dillon Read provides certain
securities transaction services to the Corporation and its subsidiaries through
its affiliate companies.
Ambassador Raymond G. H. Seitz is a Vice Chairman of Lehman Bros.
International (Europe), which firm and its affiliated companies provide
securities transaction services to the Corporation and its subsidiaries.
The Corporation believes that the above transactions were effected on terms
as favorable to the Corporation and its subsidiaries as could have been obtained
from other sources in view of the nature of the services rendered.
In 1999, various subsidiaries of the Corporation had transactions in the
ordinary course of their business with certain Directors and officers of the
Corporation and their associates in connection with policies of insurance issued
to them by such subsidiaries. All employees of the Corporation and certain of
its subsidiaries are offered the opportunity to obtain property and casualty
personal insurance from various subsidiaries of the Corporation at a price
representing a maximum discount of 10% from the regular price.
TRANSACTIONS WITH CERTAIN SHAREHOLDERS
The Corporation has relationships with insurance companies which are
subsidiaries of Royal & Sun Alliance, an insurance holding company organized
under the laws of England (collectively, the "Sun Group"). As reported, the Sun
Group as of March 6, 2000 was the beneficial owner of approximately 5.2% of the
Corporation's Common Stock, acquired solely for the purpose of investment.
In the regular course of their international business, the Corporation's
property and casualty insurance subsidiaries may and do assume and cede
reinsurance to and from insurance companies which are subsidiaries of Royal &
Sun Alliance, as they do with other insurers on similar terms and conditions.
The Corporation believes that such transactions are all on terms as
favorable to the Corporation as those available from unrelated third parties.
21
<PAGE> 24
APPROVAL OF SELECTION OF
INDEPENDENT AUDITORS
The Board of Directors, acting upon the recommendation of the Audit
Committee, recommends for approval by the Shareholders the selection of Ernst &
Young LLP ("Ernst & Young") as the independent auditors of the Corporation for
the year 2000. Ernst & Young has acted as such auditors for the Corporation for
many years.
In addition to its principal service of auditing the financial statements
of the Corporation and its subsidiaries, Ernst & Young provided certain
non-audit services for the Corporation and its subsidiaries during 1999, and
such services were reviewed by the Audit Committee. In reviewing such services,
the Audit Committee determined that the nature of the services and the estimated
fees to be charged would have no adverse effect on the independence of the
auditors.
Representatives of Ernst & Young are expected to be present at the Annual
Meeting and to have the opportunity to make a statement should they desire to do
so and to be available to respond to appropriate questions.
22
<PAGE> 25
ITEM 3 -- PROPOSAL TO APPROVE THE CHUBB CORPORATION LONG-TERM STOCK INCENTIVE
PLAN (2000)
PROPOSAL TO APPROVE THE CHUBB CORPORATION
LONG-TERM STOCK INCENTIVE PLAN (2000)
INTRODUCTION
For many years, the Corporation has had in effect stock based incentive
plans providing to management and key employees various types of awards,
including stock options, performance shares and restricted stock, among others.
These programs reflect the Board's continuing belief that stock ownership by
senior management and other key employees serves to attract, retain and motivate
such personnel and benefits the Corporation by giving such individuals a
personal financial interest in the Corporation's continued success. In light of
the Corporation's expanded usage of options to a greater number of employees and
after consultation with a nationally recognized independent compensation
consulting firm, the Organization & Compensation Committee of the Board of
Directors (the "Committee") recommended, and in March 2000 the Board of
Directors adopted, subject to Shareholder approval, The Chubb Corporation
Long-Term Stock Incentive Plan (2000) (the "2000 Long-Term Incentive Plan").
Subject to share availability, the 1996 Long-Term Incentive Plan will continue
in effect in accordance with its terms, although, in no event can awards under
the 1996 Plan be made after December 31, 2001.
The 2000 Long-Term Incentive Plan authorizes 13,000,000 new shares.
The 2000 Long-Term Incentive Plan is essentially the same as the 1996
Long-Term Incentive Plan except that it reduces the total number of Shares
authorized to be granted as restricted stock, restricted stock units or
performance shares and to increase the amount of the awards that may be granted
to a participant in any calendar year.
SUMMARY OF THE 2000 LONG-TERM INCENTIVE PLAN
The following summary of the 2000 Long-Term Incentive Plan is qualified in
its entirety by reference to the complete text of the 2000 Long-Term Incentive
Plan, which is attached to this Proxy Statement as Exhibit A.
The 2000 Long-Term Incentive Plan provides the Committee with the authority
to approve grants of stock options, stock appreciation rights, performance
shares, restricted stock and restricted stock units. The maximum number of
shares of Common Stock in respect of which stock based awards may be granted
under the 2000 Long-Term Incentive Plan is 13,000,000. Not more than 1,500,000
of the total shares authorized under the Plan may be granted as restricted
stock, restricted stock units or performance shares. Subject to these
limitations, the shares to be delivered under the 2000 Long-Term Incentive Plan
may be made available from the authorized but unissued shares of the Corporation
or from shares reacquired by the Corporation. Certain shares subject to lapsed
or cancelled awards or options under the 1989, 1992 or 1996 Long-Term Incentive
Plans will be available for new options and other awards under the 2000
Long-Term Incentive Plan. Also, shares tendered to the Corporation in
satisfaction or partial satisfaction of the exercise price of any award or
options under such plans or shares delivered or withheld to satisfy tax
obligations will increase the number of shares available for awards under the
2000 Long-Term Incentive Plan.
In addition, in order to comply with tax rules contained in Section 162(m)
of the Internal Revenue Code, the 2000 Long-Term Incentive Plan provides that no
participant may receive in any calendar year stock options and stock
appreciation rights on more than 1,000,000 shares or performance shares,
restricted stock and restricted stock unit awards on more than 80,000 shares.
The 2000 Long-Term Incentive Plan will be administered by the Committee.
The Committee shall have the sole and complete authority to adopt, alter and
repeal such administrative rules, guidelines and practices governing the
operation of the 2000 Long-Term Incentive Plan as it shall deem advisable, and
to interpret its terms and provisions. The Committee may delegate to one or more
executive officers the power to make awards to participants who are not
executive officers, provided that the Committee shall fix the maximum
23
<PAGE> 26
amount of such awards for the group and for any one participant. All employees
of the Corporation and its subsidiaries who, in the opinion of the Committee,
have the capacity for contributing in a substantial manner to the successful
performance of the Corporation are eligible to participate in the 2000 Long-Term
Incentive Plan. It is anticipated that the determinations by the Committee of
which eligible individuals will be granted options and awards and the terms
thereof will be based on each individual's present and potential contribution to
the success of the Corporation and its subsidiaries. It is estimated that
approximately 2,600 employees may be eligible to participate in the 2000
Long-Term Incentive Plan, although it is not contemplated that every eligible
employee will receive all of the different types of awards available under the
2000 Long-Term Incentive Plan.
Stock options and/or stock appreciation rights may be granted under the
2000 Long-Term Incentive Plan at the discretion of the Committee, which also has
discretion to fix the exercise price of such options and stock appreciation
rights at a price not less than 100% of the Fair Market Value, as defined, of
the underlying shares at the time of grant. Options granted under the 2000
Long-Term Incentive Plan may be either non-statutory options or incentive stock
options. Stock appreciation rights may be granted in tandem with or unrelated to
options granted under the 2000 Long-Term Incentive Plan and, if in tandem with
an option, may be granted at the time of such option grant or thereafter. The
committee has broad discretion as to the terms and conditions upon which options
shall be exercisable, but under no circumstances may an option or stock
appreciation right have a term exceeding ten years from date of grant. The
option exercise price may be satisfied in cash or, at the discretion of the
Committee, by exchanging shares owned by the optionee for at least six months,
or by a combination of cash and shares.
In the event that a participant is permitted to and does exercise an option
granted under the 2000 Long-Term Incentive Plan by delivering shares, the
Committee is authorized to grant or provide for the automatic grant of a
Restoration Option to such optionee, subject to the satisfaction of such
conditions or criteria as the Committee shall establish from time to time. A
Restoration Option shall entitle the participant to purchase a number of shares
equal to the number surrendered in payment of the exercise price of the original
option, at a per share exercise price equal to not less than 100% of the per
share Fair Market Value on the date of grant of such Restoration Option.
Restoration Options shall have a term not longer than the term remaining on the
original option and shall contain such other terms and conditions as the
Committee shall determine.
Upon the exercise of a stock appreciation right with respect to a share,
the participant is entitled to receive the excess of the Fair Market Value of
such share over the grant price of such right. The Committee has the authority
to determine whether the value of a stock appreciation right is paid in cash or
shares or a combination of both.
The Committee has the discretion to grant performance shares, the payment
of which is conditioned upon meeting a performance goal, to determine the value
of each performance share, to determine the number of such shares for each
performance cycle and the duration of each performance cycle, to establish
performance goals based on one or more of the following: operating earnings, net
earnings, return on equity, income, market share, shareholder return, combined
ratio, level of expenses or growth in revenue and to adjust such goals as it
deems equitable to reflect unusual or non-recurring events affecting the
Corporation or changes in tax law or accounting principles or other factors, and
to determine the number of performance shares which have been earned based on
performance relative to such performance goals. Payment valued in respect of
earned performance shares may, at the discretion of the Committee, be
distributed in the form of cash or shares or a combination of both.
Awards of restricted stock or restricted stock units under the 2000
Long-Term Incentive Plan may be made at the discretion of the Committee and will
consist of shares or units representing such shares granted to a participant
which are subject to forfeiture and to restrictions on transfer. At the time of
an award of shares of restricted stock, a participant will have the benefits of
ownership in respect of such shares, including the right to vote such shares and
receive dividends thereon and other distributions, subject to the restrictions
set forth in the 2000 Long-Term Incentive Plan and in the instrument evidencing
such award. The shares of restricted
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<PAGE> 27
stock may not be sold, assigned, transferred, pledged or otherwise encumbered
until the restrictions have lapsed. The Committee has authority to determine the
duration of the restricted period, which shall generally be not less than one
year, the conditions under which restricted stock and restricted stock units may
be forfeited, as well as the other terms and conditions of such awards,
including the establishment of performance goals for the grant of restricted
stock based on one or more of the performance criteria described above.
Restricted stock units may be paid, at the discretion of the Committee, in cash
or shares or a combination of both.
Awards under the 2000 Long-Term Incentive Plan may provide that the
participant has the right to receive currently or on a deferred basis dividends
or dividend equivalents and/or other cash payments in addition to or in lieu of
such award, all as the Committee shall determine.
If the Committee determines 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 shares at a price substantially below fair market value, or other
similar corporate event affects the shares such that an adjustment is required
in order to preserve the benefits intended under the 2000 Long-Term Incentive
Plan, then the Committee has discretion to make equitable adjustments in the
number and kind of shares which thereafter may be awarded or optioned under the
2000 Long-Term Incentive Plan, the number and kind of shares subject to
outstanding options and awards, and the respective grant or exercise prices
and/or, if appropriate, to provide for the payment of cash to a participant who
has an outstanding option or award.
The Committee has broad discretion as to the specific terms and conditions
of each award and any rules applicable thereto, including but not limited to the
effect thereon of the death, retirement or other termination of employment of
the participant and the effect, if any, of a change in control of the
Corporation. The terms of each award are to be evidenced in writing and
delivered to the participant. The awards authorized under the 2000 Long-Term
Incentive Plan are subject to applicable tax withholding requirements and may
not be assigned or transferred, except by will or the laws of descent and
distribution pursuant to a qualified domestic relations order, or to the
optionee's immediate family under rules established by the Committee.
No option or award may be granted under the 2000 Long-Term Incentive Plan
after December 31, 2005 except for Restoration Options, which shall continue to
be granted as long as options granted under the 2000 Long-Term Incentive Plan
are outstanding. The 2000 Long-Term Incentive Plan may be amended or terminated
at any time by the Board of Directors except that no amendment may be made
without Shareholder approval if such approval is necessary to comply with any
tax or regulatory requirement, including any approval requirement which is a
prerequisite for exemptive relief from Section 16(b) of the Act, with which the
Committee determines it is advisable for the Corporation to comply.
FEDERAL INCOME TAX CONSEQUENCES
(1) With respect to non-statutory options: When an optionee exercises an
option, the difference between the option price and any higher fair market value
of the shares on the date of exercise will be ordinary income to the optionee
and will be allowed as a deduction for Federal income tax purposes to the
employer. When an optionee disposes of shares acquired by the exercise of the
option, any amount received in excess of the market value of the shares on the
date of exercise will be treated as long or short term capital gain, depending
upon the holding period of the shares. If the amount received is less than the
market value of the shares on the date of exercise, the loss will be treated as
long or short term capital loss, depending upon the holding period of the
shares. If pursuant to the authority of the Committee an optionee transfers an
option by gift, the optionee will still have ordinary income upon the exercise
of the option by the transferee equal to the excess of the fair market value of
the shares on the date of exercise over the option price. The transfer of an
option by gift may also result in a gift tax liability to the optionee depending
on the fair market value of the option at the time of such transfer. If the
option is exercisable at the time of the transfer the gift will occur at the
time of transfer
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but the Internal Revenue Service has ruled that if the option is not exercisable
at the time of transfer the gift will be deemed to occur on the date the option
becomes exercisable.
(2) With respect to incentive stock options: When an optionee exercises an
incentive stock option while employed by the Corporation or a subsidiary or
within the three month (one year for disability) period after termination of
employment by reason of retirement or death, no ordinary income will be
recognized by the optionee at that time, but the excess (if any) of the fair
market value of the shares acquired upon such exercise over the option price
will be an adjustment to taxable income for purposes of the Federal alternative
minimum tax applicable to individuals. If the shares acquired upon exercise are
not disposed of prior to the expiration of one year after the date of transfer
and two years after the date of grant of the option, the excess (if any) of the
sales proceeds over the aggregate option price of such shares will be long term
capital gain, but the employer will not be entitled to any tax deduction with
respect to such gain. If the shares are disposed of prior to the expiration of
such periods (a "disqualifying disposition"), the excess of the fair market
value of such shares at the time of exercise over the aggregate option price
(but not more than the gain on the disposition if the disposition is a
transaction on which a loss, if realized, would be recognized) will be ordinary
income at the time of such disqualifying disposition and the employer will be
entitled to a Federal tax deduction in a like amount. If an incentive stock
option is exercised by the optionee more than three months (one year for
disability) after termination of employment, the tax consequences are the same
as described above in (1) for non-statutory stock options.
(3) With respect to restricted stock: In the absence of an election by a
participant, as explained below, the grant of restricted stock will not result
in taxable income to the participant or a deduction to the employer in the year
of grant. The value of such restricted stock will be taxed to a participant in
the year in which the restrictions lapse. Alternatively, a participant may elect
to treat as income in the year of grant the fair market value of the restricted
stock on the date of grant, provided the participant makes the election within
30 days after the date of such grant. If such an election were made, a
participant would not be allowed to deduct at a later date the amount included
as taxable income if he should forfeit the shares of restricted stock to the
Corporation. The amount of ordinary income recognized by a participant is
deductible by the employer in the year such income is recognized by the
participant, provided such amount constitutes reasonable compensation to the
participant. If the election described above is not made, then prior to the
lapse of restrictions, dividends paid on the shares subject to such restrictions
will be taxable to the participant as additional compensation in the year
received free of restrictions and the employer will be allowed a corresponding
deduction.
(4) With respect to stock appreciation rights and restricted stock units:
Generally, when a participant exercises stock appreciation rights granted to him
under the 2000 Long-Term Incentive Plan or receives payment with respect to
restricted stock units granted to him under the 2000 Long-Term Incentive Plan,
the amount of cash and the fair market value of the shares received will be
ordinary income to such participant and will be allowed as a deduction for
Federal income tax purposes to the employer.
(5) Certain additional special rules apply if the exercise price for an
option is paid for in shares previously owned by the optionee rather than in
cash.
The foregoing discussion summarizes the Federal income tax consequences of
the 2000 Long-Term Incentive Plan based on current provisions of the Code, which
are subject to change. The summary does not cover any state or local tax
consequences of participation in the 2000 Long-Term Incentive Plan.
------------------------
The affirmative vote of a majority of the shares of Common Stock of the
Corporation represented and voting at the Annual Meeting is required for
approval of the proposal to adopt the 2000 Long-Term Incentive Plan.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" THE ADOPTION OF
THE 2000 LONG-TERM INCENTIVE PLAN.
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ITEM 4 -- SHAREHOLDER PROPOSAL REQUESTING A SPECIAL COMPENSATION REVIEW AND
REPORT
We received requests from Trillum Asset Management, 711 Atlantic Avenue,
Boston, MA 02111-2809 the beneficial owner of 50 shares of our common stock, par
value $1 per share (the "Common Stock") and from the Unitarian Universalist
Service Committee, 130 Prospect Street, Cambridge, MA 02139-1845 the beneficial
owner of 400 shares of our Common Stock (the "Proponents") to include the
following supporting statement and shareholder proposal (collectively, the
"Proposal") in this Proxy Statement.
SUPPORTING STATEMENT:
FINANCIAL AND SOCIAL ACCOUNTABILITY IN EXECUTIVE COMPENSATION
We believe that both social and financial criteria should be factors in
fixing compensation packages for top corporate officers. Public scrutiny on
compensation has reached a new intensity -- not just for the Chief Executive
Officer, but for all executives. Too often, top executives receive considerable
increases in compensation packages even when corporate financial performance is
mediocre or poor and stockholders watch dividends slip and stock prices drop.
Increases in CEO compensation continue to dwarf the compensation increases
enjoyed by employees. In the 1990's, while corporate profits rose 108%, workers'
pay rose 28% while CEO pay increased by 481%.
Shareholders need to be vigilant and challenge executive pay packages that
reward bad social or financial performance, asking themselves: if top officers'
pay for a given year should be reduced if the company suffers from poor
corporate citizenship that harms our corporate image or results in costly fines,
protracted litigation, loss of government contracts, or significant loss of
market share on their watch.
Companies such as Bristol-Myers Squibb, Eastman Kodak, IBM and Procter and
Gamble have reported to shareholders on how they integrate these factors into
their compensation packages, understanding the importance of being socially
responsible.
We believe these questions deserve the careful scrutiny of our Board of
Directors and the Compensation Committee and go beyond what the SEC requires a
company to include in the annual proxy statement.
THE SHAREHOLDER PROPOSAL:
RESOLVED: Shareholders request the Board institute a special Executive
Compensation Review and prepare a report available to shareholders four months
from the date of the annual meeting, with the results of the review and
recommended changes in practice. This review shall cover pay, benefits, perks,
stock options, and special arrangements in the compensation packages for top
executives. The review should focus on the following questions:
1. Ways to link executive compensation more closely to financial
performance with proposed criteria and formulae.
2. Ways to link compensation to corporate social performance (e.g.,
incentives given for meeting or surpassing certain goals such as
increasing investments targeted toward the revitalization of distressed
urban and rural areas).
3. Comparison of compensation packages for company officers with lowest
paid company employees in the U.S. and around the world.
4. Whether there should be a ceiling on top executives' salaries to prevent
our company from paying excessive compensation or a ratio linking the
top salary and the lowest salary.
5. Whether compensation should be frozen in the event of massive layoffs.
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CORPORATION'S RESPONSE
YOUR DIRECTORS RECOMMEND A VOTE AGAINST THIS PROPOSAL.
In its report contained annually in the Corporation's Proxy Statement, the
Corporation's Organization & Compensation Committee details annually to
shareholders the executive compensation practices of the Corporation, the
principles behind its programs and the integration of performance measures,
including overall corporate financial results, in determining compensation
provided to its executives. The Committee, composed of five non-management
directors, in conjunction with independent consulting firms carefully reviews
the Corporation's compensation practices in light of overall market developments
so that the total compensation available to its executives is in line with those
companies with which the Corporation competes for management talent and enables
the Corporation to attract, motivate and retain such executives.
The Corporation believes that the criteria considered by the Organization &
Compensation Committee remains the best way to evaluate and compensate its
executives and that the information provided annually in the Organization &
Compensation Committee's report in the Proxy Statement is the most appropriate
method to communicate this information to shareholders. The Corporation does not
believe the preparation of the report called for in the shareholder proposal
would yield any benefit which would justify the effort and expense necessary to
issue such report.
FOR THE ABOVE REASONS, THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST THE
PROPOSAL. PROXIES SOLICITED BY THE BOARD WILL BE VOTED AGAINST THE PROPOSAL
UNLESS A SHAREHOLDER HAS INDICATED OTHERWISE IN VOTING THE PROXY.
ITEM 5 -- SHAREHOLDER PROPOSAL TO AMEND THE CORPORATION'S BY-LAWS WITH REGARD TO
THE CORPORATION'S RIGHTS PLAN
We received a request from the Eastern States Health and Welfare Fund of
the Union of Needletrades, Industrial and Textile Employees, 3100 L Street,
N.W., Suite 210, Washington, D.C. 20037 (the "Proponent"), the beneficial owner
of 11,900 shares of our common stock, par value $1 per share (the "Common
Stock") to include the following supporting statement and shareholder proposal
(collectively, the "Proposal") in this Proxy Statement.
SUPPORTING STATEMENT:
In June 1989 the Board of Directors adopted a Rights Plan giving Chubb
shareholders certain rights to purchase a share of a new class of preferred
stock for each share of common stock (the "1989 Rights Plan"). These rights are
a form of corporate anti-takeover device known as a "poison pill." The Board
acted without obtaining shareholder approval, and the Rights Plan was set to
expire after ten years on June 12, 1999.
Last year a shareholder proposed amending Chubb's by-laws to require a
shareholder vote before any Rights Plan was adopted or extended. The proposed
by-law also sought to rescind any extension of the 1989 Rights Plan beyond its
June 1999 expiration date and to rescind any new Rights Plan adopted after that
date.
In March 1999, with the annual meeting only six weeks away, the Board of
Directors voted to redeem the 1989 Rights Plan and to adopt a new Rights Plan
that expires in March 2009.
At the annual meeting in April 1999, 70% of the shareholder votes cast were
voted in favor of this by-law. Notwithstanding this expression of shareholder
views, Chubb refused to adopt this by-law, arguing that it is invalid and does
not in any event apply to the new Rights Plan, which was adopted before the June
1999 expiration date.
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We believe that Chubb's board and management are insufficiently sensitive
to this shareholder vote. We are therefore submitting a proposed by-law to
require prior shareholder approval of new rights plans and the termination of
any rights or plan in existence on the date this by-law is adopted.
WE URGE YOU TO VOTE FOR THIS RESOLUTION.
THE SHAREHOLDER PROPOSAL:
RESOLVED; pursuant to Section 2.9 of the New Jersey Business Corporation
Act and Article X of the By-Laws of the Chubb Corporation ("Company"), the
shareholders hereby amend the By-Laws to add the following Article XI, which
shall take effect immediately upon adoption at the shareholder meeting where
this resolution is considered:
"ARTICLE XI."
"Shareholder Rights Plans"
"The company shall not adopt any rights plan, share purchase rights plan or
similar agreement, commonly known as a "poison pill," which is designed to
impede, or has the effect of impeding, the acquisition of a block of stock in
excess of a specified threshold and/or merger or other transaction between a
significant shareholder and the Company, unless such plan or agreement has
previously been approved by holders of a majority of the votes cash at the
shareholder meeting where the matter is considered. The Company shall promptly
redeem any such rights or otherwise terminate any such plan in existence on the
date this By-law is adopted, including without limitation the rights plan
adopted by the Company in 1999. Notwithstanding any other provisions of the
By-laws, this By-law may not be amended, modified or repealed, except by holders
of a majority of the votes cast at the shareholder meeting where the matter is
considered."
CORPORATION'S RESPONSE
YOUR DIRECTORS RECOMMEND A VOTE AGAINST THE BY-LAW PROPOSAL.
Rights Plans. We believe that shareholder rights plans, commonly known as
"poison pills", have become an accepted part of the American corporate
landscape. Today, many publicly traded corporations have rights plans. And in
New Jersey, the legislature has specifically endorsed them.
Rights plans provide public companies with an indispensable tool in dealing
with hostile takeover attempts. Rights plans are designed to exact a substantial
economic penalty, running to the benefit of the shareholders of a company, from
a corporate raider who takes specified steps to complete a hostile takeover of
the company. A raider typically will not choose to step over the line and incur
the penalty.
But rights plans do not absolutely preclude takeovers. To the contrary, a
corporation's board of directors has the power to "redeem" the rights, and
thereby remove the rights plan as an obstacle to a takeover. In Chubb's case,
any decision to redeem the rights plan or to keep it in place, would be made by
a board that consists almost entirely of independent, non-management directors.
The decision is also subject to the directors' fiduciary duties of care and
loyalty.
In essence, rights plans give boards of directors the power to negotiate,
on behalf of the corporation and all of its constituencies, with potential
acquirers to obtain a higher price, and the power to seek more desirable
economic alternatives to a hostile takeover. Rights plans also prevent bidders
from using certain types of coercive and abusive takeover tactics. Independent
economic studies have shown that the power to combat such abusive tactics and
negotiate have not deterred takeover attempts, and, to the contrary, have
actually increased the economic value that shareholders have received in
acquisitions.
Invalidity of the By-Law Proposal under New Jersey Law. It is well
established under New Jersey case law that by-law provisions contrary to
statutory law or the company's certificate of incorporation are illegal.
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Since the By-Law Proposal contemplates a by-law amendment that contradicts
specific provisions of the New Jersey Business Corporation Act and is
inconsistent with Chubb's Certificate of Incorporation, Chubb believes (based
upon the advice of outside legal counsel) that the By-Law Proposal would, if
adopted, be invalid under New Jersey law. Briefly stated, the statutory
provisions upon which our outside counsel rely confer exclusive authority upon
the board of directors to govern a New Jersey corporation's business and affairs
and expressly validate rights plans (unless otherwise provided in a pre-existing
certificate of incorporation). There is no such limitation in Chubb's
Certificate of Incorporation. In addition, the New Jersey statute provides that
a corporation's directors in evaluating any takeover proposal may consider the
long-term as well as short-term interests of the corporation and its
shareholders as well as the interests of other corporate constituencies.
Moreover, if based upon such considerations, a board of directors determines
that a particular takeover is not in the best interests of the corporation, the
board has no duty to facilitate, or refrain from impeding, such takeover, and
would therefore have no duty to redeem a rights plan.
Chubb believes that, among other things, the By-Law Proposal conflicts with
this statutory arrangement by purporting to strip the Board of Directors of
those powers granted to it by the New Jersey legislature and by requiring a
blanket redemption of the existing rights without consideration by the Board of
Directors of the merits of any particular takeover offer. In an action pending
in the United States District Court for the District of New Jersey, the
Corporation is asking for a declaratory judgment that the By-Law Proposal is
invalid, that any shareholder vote in favor of the By-Law Proposal be set aside
and that the By-Law's proponent be enjoined from taking any action to implement
such by-law.
Chubb is Not the Appropriate Target for a Proposal of this
Nature. Although it is not possible to determine the motivations of either the
shareholder that has submitted the By-Law Proposal or of any shareholders who
may vote in favor of it, your Board of Directors does not believe that Chubb
fits the profile of corporations that are the likely targets of this type of
shareholder activism. In particular:
- Chubb does not have a classified or "staggered" board of directors;
- Chubb's charter does not contain a "fair price" provision;
- Chubb has only one director, our Chairman, who is an officer or
employee of Chubb; and
- Chubb's Board has, among other committees, an audit committee, a
compensation committee and a nominating committee, none of which
includes any director who is an officer or employee of Chubb.
In our judgment, the Corporation's Rights Plan provides an appropriate
measure of protection against potential raiders who are not willing or able to
make a fair offer to our shareholders or who would present a threat to other
corporate constituencies including the policyholders of our subsidiary insurance
companies. In addition, the rights plan provides for periodic review by a
committee of independent directors who will evaluate whether the rights plan
continues to be in the best interests of the Corporation and you, our
shareholders. This review has and will occur annually. This committee will also
evaluate the plan in the event the Corporation is subject to an unsolicited
takeover offer. If the committee concludes that maintaining the plan is no
longer in the best interests of our shareholders or the Corporation (because,
for example, the bidder is offering a fair and adequate price and has structured
the offer to treat all shareholders fairly), the committee will recommend
redemption of the rights to the Board of Directors. This independent director
review is designed to ensure that board members who are not subject to possible
conflicts of interest which might arise from employment by the Corporation are
satisfied that the Rights Plan continues to serve the purposes underlying its
adoption.
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Pending Litigation. The Corporation is currently litigating the validity
of the By-Law Proposal in the United States District Court for the District of
New Jersey. In the event the Proposal is approved at the Annual Meeting, the
Corporation intends to defer any action until a final judgment as to its
legality is issued by an appropriate court.
FOR THE ABOVE REASONS, THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST THE
PROPOSAL. PROXIES SOLICITED BY THE BOARD WILL BE VOTED AGAINST THE PROPOSAL
UNLESS A SHAREHOLDER HAS INDICATED OTHERWISE IN VOTING THE PROXY.
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VOTING, SOLICITATION OF PROXIES, SHAREHOLDER
PROPOSALS AND NOMINATIONS
The Proxy, if returned properly executed or voted as directed by touch-tone
telephone or by accessing the World Wide Web and not subsequently revoked by
written notice delivered to the Secretary of the Corporation, will be voted in
accordance with the choice made by the Shareholder with respect to the proposals
listed thereon. If the authority to vote for the Board of Directors' nominees,
or any such nominee, for election as a Director is not withheld, the Proxy will
be voted for the election of the Board of Directors' nominees for election as
Directors. If a choice is not made to vote with respect to the proposal to
approve the Long-Term Stock Incentive Plan (2000), the proxy will be voted for
such proposal. If a choice is not made to vote with respect to the selection of
independent auditors for the year 2000, the proxy will be voted for such
proposal. If a choice is not made to vote with respect to the shareholder
proposal regarding the request for a special compensation review and report, the
proxy will be voted against such proposal. If a choice is not made to vote with
respect to the shareholder proposal to amend the Corporation's By-Laws with
respect to the Corporation's rights plan, the proxy will be voted against such
proposal.
Under New Jersey law and the Corporation's By-Laws, each share of Common
Stock outstanding on the record date is entitled to one vote at the Annual
Meeting of Shareholders, and the presence in person or by proxy of the holders
of shares entitled to cast a majority of the votes constitutes a quorum. Votes
are tabulated by the Corporation's transfer agent using the transfer agent's
automated system. Under New Jersey law, Directors are elected by a plurality of
the votes cast at the meeting. Approval of the selection of independent auditors
and approval of the shareholder proposal regarding the request for a special
executive compensation review and report and the shareholder proposal to amend
the Corporation's By-Laws as respects the Corporation's rights plan require the
affirmative vote of a majority of the votes cast by Shareholders entitled to
vote at the Annual Meeting. Proxies submitted with abstentions and broker
non-votes are included in determining whether or not a quorum is present. Votes
withheld for the election of Directors have no impact on the election of
Directors, except that votes withheld may result in another individual receiving
a higher number of votes. Abstentions will not be counted in tabulating the
votes with respect to the approval of selection of independent auditors and the
two shareholder proposals. Broker non-votes will not be counted in tabulating
the votes with respect to the proposals presented to Shareholders.
The Board of Directors is aware of no matters other than those specifically
stated in the Notice of Annual Meeting which are to be presented for action at
the meeting. However, should any further matter requiring a vote of the
Shareholders arise, it is the intention of the persons named in the Proxy to
vote the Proxy in accordance with their judgment.
The cost of this solicitation of proxies is being borne by the Corporation.
In addition to the solicitation of proxies by use of the mails, the Corporation
may use the services of one or more Directors, officers or other regular
employees of the Corporation (who will receive no additional compensation for
their services in such solicitation) to solicit proxies personally and by
telephone. Arrangements will be made with brokerage firms and other custodians,
nominees and fiduciaries to forward solicitation material to the beneficial
owners of the shares held of record by such persons and the Corporation will
reimburse them for reasonable expenses actually incurred by them in so doing. In
addition, the Corporation has retained Georgeson Shareholder Communications
Inc., New York, New York, to aid in the solicitation of proxies by mail, in
person and by telephone for a fee which is estimated not to exceed $25,000 plus
out-of-pocket expenses.
Proposals by Shareholders intended to be presented at the 2001 Annual
Meeting must be received by the Corporation no later than November 24, 2000 in
order to be qualified for inclusion in the Corporation's Proxy Statement and
form of proxy for such meeting. Under the Corporation's By-Laws, proposals
intended to be presented at an Annual Meeting without inclusion in the
Corporation's Proxy Statement for the meeting, and/or nominations of persons for
election as directors at an Annual Meeting, may be made by a shareholder who was
a shareholder of record at the time of the giving of notice to the Corporation
of such proposal or nomination, who is entitled to vote at such Annual Meeting
and who complies with the notice procedures set forth in the Corporation's
By-Laws. For such business and/or nominations to be properly brought before an
Annual Meeting, written notice thereof shall be delivered to the Secretary of
the Corporation at the principal executive offices of the Corporation not less
than 90 nor more than 120 days prior to the first anniversary of the preceding
year's Annual Meeting. Such notice shall set forth (A) as to such business that
the shareholder
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proposes to bring before the meeting, a brief description of such business, the
reasons for conducting such business at the meeting, any material interest of
such shareholder in such business and the beneficial owner, if any, on whose
behalf the proposal is made, (B) as to each person whom the shareholder proposes
to nominate for election as a director, all information relating to such person
that would be required to be disclosed in a solicitation of proxies for the
election of such person as a director pursuant to Regulation 14A under the
Securities Exchange Act of 1934 (including such person's written consent to
being named in the Proxy Statement as a nominee and to serving as a director if
so elected); and (C) as to the shareholder giving the notice and the beneficial
owner, if any, on whose behalf the proposal or nomination is made (1) the name
and address of such shareholder, as they appear on the Corporation's books, and
of such beneficial owner and (2) the class and number of shares of the
Corporation which are owned beneficially and of record by such shareholder and
such beneficial owner.
A copy of Article III, Section 10, of the Corporation's By-Laws, which
covers the foregoing matters, is available without charge to stockholders of
record upon written request to the Corporation at its principal executive
offices, attention: Henry G. Gulick, Vice President and Secretary, 15 Mountain
View Road, P.O. Box 1615, Warren, New Jersey 07061-1615.
By order of the Board of Directors,
HENRY G. GULICK
Vice President and Secretary
March 24, 2000
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EXHIBIT A
THE CHUBB CORPORATION
LONG-TERM STOCK INCENTIVE PLAN (2000)
SECTION 1. PURPOSE
The purposes of The Chubb Corporation Long-Term Stock Incentive Plan (the
"Plan") are to promote the interests of The Chubb Corporation and its
shareholders by (i) attracting and retaining executive personnel and other key
employees of outstanding ability; (ii) motivating executive personnel and other
key employees, by means of performance-related incentives, to achieve
longer-range performance goals; and (iii) enabling such employees to participate
in the long-term growth and financial success of The Chubb Corporation.
SECTION 2. DEFINITIONS
"Affiliate" shall mean any corporation or other entity which is not a
Subsidiary but as to which the Corporation possesses a direct or indirect
ownership interest.
"Award" shall mean a grant or award under Section 6 through 9, inclusive,
of the Plan, as evidenced in a written document delivered to a Participant as
provided in Section 10(b).
"Board of Directors" shall mean the Board of Directors of the Corporation.
"Code" shall mean the Internal Revenue Code of 1986, as amended from time
to time.
"Committee" shall mean the Organization & Compensation Committee of the
Board of Directors.
"Common Stock" or "Stock" shall mean the Common Stock, $1.00 par value, of
the Corporation.
"Corporation" shall mean The Chubb Corporation.
"Designated Beneficiary" shall mean the beneficiary designated by the
Participant, in a manner determined by the Committee, to receive amounts due the
Participant in the event of the Participant's death. In the absence of an
effective designation by the Participant, Designated Beneficiary shall mean the
Participant's estate.
"Employee" shall mean (i) an officer or employee of the Employer and (ii)
an advisor or consultant to the Employer. For purposes of this Plan, for persons
described in clause (ii) above, employment and termination of employment shall
mean the maintenance of, or termination of, as the case may be, such person's
relationship as an advisor or consultant to the Employer.
"Employer" shall mean the Corporation and any Subsidiary or Affiliate.
"Fair Market Value" shall mean the average of the highest and lowest sales
prices reported for consolidated trading of issues listed on the New York Stock
Exchange on the date in question, or, if the 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 Stock was so traded.
"Fiscal Year" shall mean the fiscal year of the Corporation.
"Incentive Stock Option" shall mean a stock option granted under Section 6
which is intended to meet the requirements of Section 422 of the Code.
"Non-statutory Stock Option" shall mean a stock option granted under
Section 6 which is not intended to be an Incentive Stock Option.
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"Option" shall mean an Incentive Stock Option or a Non-statutory Stock
Option and shall include a Restoration Option.
"Participant" shall mean an Employee who is selected by the Committee to
receive an Award under the Plan.
"Payment Value" shall mean the dollar amount assigned to a Performance
Share which shall be equal to the Fair Market Value of the Common Stock on the
day of the Committee's determination under Section 8(c)(l) with respect to the
applicable Performance Cycle.
"Performance Cycle" or "Cycle" shall mean the period of years selected by
the Committee during which the performance is measured for the purpose of
determining the extent to which an award of Performance Shares has been earned.
"Performance Goals" shall mean the objectives established by the Committee
for a Performance Cycle, for the purpose of determining the extent to which
Performance Shares which have been contingently awarded for such Cycle are
earned.
"Performance Share" shall mean an award granted pursuant to Section 8 of
the Plan expressed as a share of Common Stock.
"Prior Plans" shall mean The Chubb Corporation Long-Term Stock Incentive
Plan (1996), The Chubb Corporation Long-Term Stock Incentive Plan (1992) and the
Long-Term Stock Incentive Plan (1989).
"Restoration Option" shall mean a stock option granted pursuant to Section
6(d).
"Restricted Period" shall mean the period of time selected by the Committee
during which a grant of Restricted Stock or Restricted Stock Units may be
forfeited to the Corporation.
"Restricted Stock" shall mean shares of Common Stock contingently granted
to a Participant under Section 9 of the Plan.
"Restricted Stock Unit" shall mean a fixed or variable dollar denominated
unit contingently awarded under Section 9 of the Plan.
"Stock Appreciation Right" shall mean a right granted under Section 7.
"Subsidiary" shall mean any business entity in which the Corporation
possesses directly or indirectly fifty percent (50%) or more of the total
combined voting power.
SECTION 3. ADMINISTRATION
The Plan shall be administered by the Committee. The Committee shall have
sole and complete authority to adopt, alter and repeal such administrative
rules, guidelines and practices governing the operation of the Plan as it shall
from time to time deem advisable, and to interpret the terms and provisions of
the Plan. The Committee may delegate to one or more executive officers of the
Corporation the power to make Awards to Participants who are not executive
officers or directors of the Corporation provided the Committee shall fix the
maximum amount of such Awards for the group and a maximum for any one
Participant. The Committee's decisions shall be binding upon all persons,
including the Corporation, shareholders, an Employer, Employees, Participants
and Designated Beneficiaries.
SECTION 4. ELIGIBILITY
All Employees who, in the opinion of the Committee, have the capacity for
contributing in a substantial measure to the successful performance of the
Corporation are eligible to be Participants in the Plan.
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SECTION 5. MAXIMUM AMOUNT AVAILABLE FOR AWARDS
(a) The maximum number of shares of Stock in respect of which Awards may be
made under the Plan shall be 13,000,000 shares of Common Stock, provided,
however, that in the event (i) an Award in respect of shares under the Plan or
the Prior Plans is settled for cash or expires or is terminated unexercised as
to any shares of Common Stock covered thereby, (ii) any Award under the Plan or
the Prior Plans in respect of shares is cancelled or forfeited for any reason
without the delivery of shares of Common Stock, (iii) any Option or other Award
granted is exercised through the delivery of shares of Common Stock, or (iv) tax
obligations are satisfied through the delivery or withholding of shares of
Common Stock, the number of shares of Common Stock available for Awards under
the Plan shall be increased after December 31, 2001 by the number of shares not
delivered in connection with any such Award or so surrendered, delivered or
withheld to the extent such shares are not used under The Chubb Corporation
Long-Term Stock Incentive Plan (1996). Not more than 1,500,000 shares may be
awarded as Restricted Stock, Restricted Stock Units or Performance Shares and
not more than 13,000,000 shares may be awarded as incentive stock options.
Subject to the foregoing, shares of Common Stock may be made available from the
authorized but unissued shares of the Corporation or from shares reacquired by
the Corporation, including shares purchased in the open market.
(b) No Employee may be granted under the Plan in any calendar year Options
or Stock Appreciation Rights on more than 1,000,000 shares of Common Stock and
no Employee may be granted in any calendar year more than 80,000 Performance
Shares, Restricted Stock or Restricted Stock Units.
(c) 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 Plan, 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 which
thereafter may be awarded or optioned and sold or made the subject of Stock
Appreciation Rights under the Plan including the limitations described in
Section 5(b) above, (2) the number and kind of shares subject to outstanding
Options and other Awards, and (3) the grant, exercise or conversion price with
respect to any of the foregoing and/or, if deemed appropriate, make provision
for cash payment to a Participant or a person who has an outstanding Option or
other Award provided, however, that the number of shares subject to any Option
or other Award shall always be a whole number.
SECTION 6. STOCK OPTIONS
(a) Grants. Subject to the provisions of the Plan, the Committee shall
have sole and complete authority to determine the Employees to whom Options
shall be granted, the number of shares to be covered by each Option, the option
price therefor and the conditions and limitations applicable to the exercise of
the Option including but not limited to, whether, and to what extent and under
what circumstances amounts payable upon exercise of an Option shall be deferred
at the election of the holder of such Option. The Committee shall have the
authority to grant Incentive Stock Options, or to grant Non-statutory Stock
Options, or to grant both types of options. In the case of Incentive Stock
Options, the terms and conditions of such grants shall be subject to and comply
with such rules as may be prescribed by Section 422 of the Code, as from time to
time amended, and any implementing regulations.
(b) Option Price. The Committee shall establish the option price at the
time each Option is granted, which price shall not be less than 100% of the Fair
Market Value of the Common Stock on the date of grant.
(c) Exercise. (1) Each Option shall be exercisable at such times and
subject to such terms and conditions as the Committee may, in its sole
discretion, specify in the applicable Award or thereafter including but not
limited to broker assisted cashless exercises; provided, however, that in no
event may any Option granted hereunder be exercisable after the expiration of
ten years from the date of such grant. The Committee
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may impose such conditions with respect to the exercise of Options, including
without limitation, any relating to the application of federal or state
securities laws, as it may deem necessary or advisable.
(2) No shares shall be delivered pursuant to any exercise of an Option
until payment in full of the option price therefor is received by the
Corporation. Such payment may be made in cash, or its equivalent, or, if and to
the extent permitted by the Committee, by exchanging shares of Common Stock
owned for at least six months by the optionee (which are not the subject of any
pledge or other security interest), or by a combination of the foregoing,
provided that the combined value of all cash and cash equivalents and the Fair
Market Value of any such Common Stock so tendered to the Corporation, valued as
of the date of such tender, is at least equal to such option price.
(d) Restoration Options. In the event that any Participant delivers shares
of Common Stock in payment of the exercise price of any Option granted hereunder
in accordance with Section 6(c)(2), the Committee shall have the authority to
grant or provide for the automatic grant of a Restoration Option to such
Participant. The grant of a Restoration Option shall be subject to the
satisfaction of such conditions or criteria as the Committee in its sole
discretion shall establish from time to time. A Restoration Option shall entitle
the holder thereof to purchase a number of shares of Common Stock equal to the
number of such shares so delivered upon exercise of the original Option and, in
the discretion of the Committee, the number of shares, if any, tendered to the
Corporation to satisfy any withholding tax liability arising in connection with
the exercise of the original Option. A Restoration Option shall have a per share
exercise price of not less than 100% of the per share Fair Market Value of the
Common Stock on the date of grant of such Restoration Option, a term not longer
than the remaining term of the original Option at the time of exercise thereof,
and such other terms and conditions as the Committee in its sole discretion
shall determine.
SECTION 7. STOCK APPRECIATION RIGHTS
(a) The Committee may, with sole and complete authority, grant Stock
Appreciation Rights in tandem with an Option, in addition to an Option, or
freestanding and unrelated to an Option. Stock Appreciation Rights granted in
tandem with or in addition to an Option may be granted either at the same time
as the Option or at a later time. Stock Appreciation Rights shall not be
exercisable after the expiration of ten years from the date of grant and shall
have an exercise price of not less than 100% of the Fair Market Value of the
Common Stock on the date of grant.
(b) A Stock Appreciation Right shall entitle the Participant to receive
from the Corporation an amount equal to the excess of the Fair Market Value of a
share of Common Stock on the exercise of the Stock Appreciation Right over the
grant price thereof. The Committee shall determine upon the exercise of a Stock
Appreciation Right whether such Stock Appreciation Right shall be settled in
cash, shares of Common Stock or a combination of cash and shares of Common
Stock.
SECTION 8. PERFORMANCE SHARES
(a) The Committee shall have sole and complete authority to determine the
Employees who shall receive Performance Shares and the number of such shares for
each Performance Cycle, and to determine the duration of each Performance Cycle
and the value of each Performance Share. There may be more than one Performance
Cycle in existence at any one time, and the duration of Performance Cycles may
differ from each other.
(b) The Committee shall establish Performance Goals for each Cycle based on
any one or more of the following: the operating earnings, net earnings, return
on equity, income, market share, shareholder return, combined ratio, level of
expenses or growth in revenue. During any Cycle, the Committee may adjust the
Performance Goal for such Cycle as it deems equitable in recognition of unusual
or non-recurring events affecting the Corporation, changes in applicable tax
laws or accounting principles, or such other factors as the Committee may
determine.
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(c) (1) As soon as practicable after the end of a Performance Cycle, the
Committee shall determine the number of Performance Shares which have been
earned on the basis of performance in relation to the established Performance
Goals.
(2) Payment Values of earned Performance Shares shall be distributed to the
Participant or, if the Participant has died, to the Participant's Designated
Beneficiary, as soon as practicable after the expiration of the Performance
Cycle and the Committee's determination under paragraph (1), above. The
Committee shall determine whether Payment Values are to be distributed in the
form of cash and/or shares of Common Stock.
SECTION 9. RESTRICTED STOCK AND RESTRICTED STOCK UNITS
(a) Subject to the provisions of the Plan, the Committee shall have sole
and complete authority to determine the Employees to whom shares of Restricted
Stock and Restricted Stock Units shall be granted, the number of shares of
Restricted Stock and the number of Restricted Stock Units to be granted to each
Participant, the duration of the Restricted Period during which, and the
conditions under which, the Restricted Stock and Restricted Stock Units may be
forfeited to the Corporation, and the other terms and conditions of such Awards.
The Restricted Period shall consist of at least one year (which may be shortened
or waived by the Committee at any time in its discretion) with respect to one or
more Participants or Awards outstanding. In its discretion, the Committee may
establish performance conditions with respect to awards of Restricted Stock and
Restricted Stock Units based on one or more of the same items listed in Section
8(b) in respect of Performance Shares during a performance period selected by
the Committee.
(b) Shares of Restricted Stock and Restricted Stock Units may not be sold,
assigned, transferred, pledged or otherwise encumbered, except as herein
provided, during the Restricted Period. Certificates issued in respect of shares
of Restricted Stock shall be registered in the name of the Participant and
deposited by such Participant, together with a stock power endorsed in blank,
with the Corporation. At the expiration of the Restricted Period, the
Corporation shall deliver such certificates to the Participant or the
Participant's legal representative. Payment for Restricted Stock Units shall be
made from the Corporation in cash and/or shares of Common Stock, as determined
at the sole discretion of the Committee.
SECTION 10. GENERAL PROVISIONS
(a) Withholding. The Employer shall have the right to deduct from all
amounts paid to a Participant in cash (whether under this Plan or otherwise) any
amount of taxes required by law to be withheld in respect of Awards under this
plan as may be necessary in the opinion of the employer to satisfy the required
tax withholding based on the minimum tax withholding rates. In the case of
payments of Awards in the form of Common Stock, at the Committee's discretion
the Participant may be required to pay to the Employer the amount of any taxes
required to be withheld with respect to such Common Stock or, in lieu thereof,
the Employer shall have the right to retain (or the Participant may be offered
the opportunity to elect to tender) the number of shares of Common Stock whose
Fair Market Value equals such amount required to be withheld.
(b) Awards. Each Award hereunder shall be evidenced in writing, delivered
to the Participant and shall specify the terms and conditions thereof and any
rules applicable thereto, including but not limited to the effect on such Award
of the death, retirement or other termination of employment of the Participant
and the effect thereon, if any, of a change in control of the Corporation.
(c) Nontransferability. (i) Except as provided in (ii) below, no Award
shall be assignable or transferable, and no right or interest of any Participant
shall be subject to any lien, obligation or liability of the Participant, except
by will or the laws of descent and distribution.
(ii) Notwithstanding subparagraph (i) above, the Committee may determine
that an Award may be transferred pursuant to a qualified domestic relations
order, as determined by the Committee or its designee or that an Option may be
transferred by an Employee to one or more members of the Employee's immediate
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<PAGE> 41
family, to a partnership of which the only partners are members of the
Employee's immediate family, or to a trust established by the Employee for the
benefit of one or more members of the Employee's immediate family. For this
purpose immediate family means the Employee's spouse, parents, children,
grandchildren and the spouses of such parents, children and grandchildren. A
transferee described in this subparagraph may not further transfer an Option. An
option transferred pursuant to this subparagraph shall remain subject to all of
the applicable provisions of the Plan and the written option agreement.
(d) No Right to Employment. No person shall have any claim or right to be
granted an Award, and the grant of an Award shall not be construed as giving a
Participant the right to be retained in the employ of the Employer. Further, the
Employer expressly reserves the right at any time to dismiss a Participant free
from any liability, or any claim under the Plan, except as provided herein in
any agreement entered into with respect to an Award.
(e) No Rights as Shareholder. Subject to the provisions of the applicable
Award, no Participant or Designed Beneficiary shall have any rights as a
shareholder with respect to any shares of Common Stock to be distributed under
the Plan until he or she has become the holder thereof. Notwithstanding the
foregoing, in connection with each grant of Restricted Stock hereunder, the
applicable Award shall specify if and to what extent the Participant shall not
be entitled to the rights of a shareholder in respect of such Restricted Stock.
(f) Construction of the Plan. The validity, construction, interpretation,
administration and effect of the Plan and of its rules and regulations, and
rights relating to the Plan, shall be determined solely in accordance with the
laws of New York.
(g) Effective Date. Subject to the approval of the shareholders of the
Corporation, the Plan shall be effective on April 25, 2000. No Options or Awards
may be granted under the Plan after December 31, 2005; provided, however, that
the authority for grant of Restoration Options hereunder in accordance with
Section 6(d) shall continue, subject to the provisions of Section 5, as long as
any Option granted hereunder remains outstanding.
(h) Amendment of Plan. The Board of Directors may amend, suspend or
terminate the Plan or any portion thereof at any time, provided that no
amendment shall be made without stockholder approval if such approval is
necessary to comply with any tax or regulatory requirement, including for these
purposes any approval requirement which is a prerequisite for exemptive relief
under Section 16(b) of the Securities Exchange Act of 1934 with which the
Committee has determined it is necessary or desirable to have the Corporation
comply. Notwithstanding anything to the contrary contained herein, the Committee
may amend the Plan in such manner as may be necessary so as to have the Plan
conform with the local rules and regulations.
(i) Amendment of Award. The Committee may amend, modify or terminate any
outstanding Award with the Participant's consent at any time prior to payment or
exercise in any manner not inconsistent with the terms of the Plan, including
without limitation, (i) to change the date or dates as of which (A) an Option or
Stock Appreciation Right becomes exercisable; (B) a Performance Share is deemed
earned; (C) Restricted Stock becomes nonforfeitable; or (ii) to cancel and
reissue an Award under such different terms and conditions as it determines
appropriate, except that an outstanding stock option shall not be amended to
reduce its original exercise price other than in connection with a transaction
described in Section 5(c).
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<PAGE> 42
THE CHUBB CORPORATION
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
OF THE CORPORATION FOR THE ANNUAL MEETING TO BE HELD ON APRIL 25, 2000
P The undersigned shareholder of THE CHUBB CORPORATION (the "Corporation")
R acknowledges receipt of the Notice of the Annual Meeting of Shareholders
O and Proxy Statement each dated March 24, 2000 and the undersigned revokes
X all prior proxies and appoints DEAN R. O'HARE, HENRY G. GULICK and PHILIP
Y J. SEMPIER, and each of them, proxies for the undersigned to vote all
shares of Common Stock of the Corporation, which the undersigned would be
entitled to vote at the Annual Meeting of Shareholders to be held at 15
Mountain View Road, Warren, New Jersey at 11:00 a.m. on April 25, 2000 and
any adjournment or postponement thereof, on all matters coming properly
before said meeting.
This card also provides voting instructions for any shares of Chubb Common
Stock held on the undersigned's behalf in The Chubb Corporation Employee
Stock Ownership Plan and Capital Accumulation Plan.
On matters for which you do not specify a choice, your shares will be voted
in accordance with the recommendation of the Board of Directors.
Nominees for the Election of Directors are:
01. Zoe Baird 08. David H. Hoag
02. John C. Beck 09. Dean R. O'Hare
03. Sheila P. Burke 10. Warren B. Rudman
04. James I. Cash, Jr. 11. Sir David G. Scholey, CBE
05. Percy Chubb, III 12. Raymond G. H. Seitz
06. Joel J. Cohen 13. Lawrence M. Small
07. James M. Cornelius 14. James M. Zimmerman
-----------
PLEASE MARK, SIGN, DATE AND RETURN PROXY CARD SEE REVERSE
PROMPTLY USING THE ENCLOSED ENVELOPE. SIDE
-----------
FOLD AND DETACH HERE
<PAGE> 43
Please mark your
[X] votes as in this 1816
example.
WHEN PROPERLY EXECUTED THIS PROXY WILL BE VOTED IN THE MANNER DIRECTED HEREIN BY
THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE VOTED
FOR PROPOSALS 1, 2 AND 3 AND AGAINST PROPOSALS 4 AND 5. THIS PROXY WILL ALSO
SERVE TO INSTRUCT THE TRUSTEES OF THE CHUBB CORPORATION EMPLOYEE STOCK OWNERSHIP
PLAN AND CAPITAL ACCUMULATION PLAN TO SIMILARLY VOTE ANY SHARES HELD FOR THE
UNDERSIGNED IN SUCH PLANS.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" BOARD PROPOSALS 1, 2 AND 3.
FOR WITHHELD
1. Election of Directors / / / /
(see reverse)
To withhold authority to vote for any nominee, specify name below:
_________________________________________________________________
2. On independent auditors FOR AGAINST ABSTAIN
/ / / / / /
FOR AGAINST ABSTAIN
3. Approval of Long-Term Stock
Incentive Plan / / / / / /
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "AGAINST" THE
FOLLOWING SHAREHOLDER PROPOSALS.
FOR AGAINST ABSTAIN
4. Shareholder proposal for a special
executive compensation review and
report / / / / / /
FOR AGAINST ABSTAIN
5. Shareholder proposal to amend
the Corporation's By-Laws with
respect to the Corporation's
Shareholder Rights Plan / / / / / /
When signing as attorney, executor, administrator, trustee or guardian, please
give full title as such. If the signer is a corporation, sign the full corporate
name by duly authorized offer.
SIGNATURE(S)_________________________________________________ DATE______________
- --------------------------------------------------------------------------------
- FOLD AND DETACH HERE -
CHUBB
PROXY VOTING INSTRUCTION CARD
Your vote is important. Casting your vote in one of the three ways described on
this instruction card votes all common shares of The Chubb Corporation that
you are entitled to vote and gives voting instructions for any common shares
held on your behalf in The Chubb Corporation Employee Stock Ownership Plan and
Capital Accumulation Plan.
Please consider the issues discussed in the proxy statement and cast your vote
by:
[COMPUTER GRAPHIC] - Accessing the World Wide Web site
http://www.eproxyvote.com/cb to vote via the
Internet.
[TELEPHONE GRAPHIC] - Using a touch-tone telephone to vote by phone
toll free from the U.S. or Canada. Simply dial
1-877-PRX-VOTE (1-877-779-8683) and follow the
instructions. When you are finished voting, your
vote will be confirmed and the call will end.
[ENVELOPE GRAPHIC] - Completing, dating, signing and mailing the
proxy card in the postage-paid envelope included
with the proxy statement or sending it to The
Chubb Corporation c/o First Chicago Trust
Company of New York, a division of EquiServe,
P.O. Box 8666, Edison, New Jersey 08818-9159.
You can vote by phone or via the Internet anytime prior to 12:00 midnight,
Eastern Time, on April 24, 2000. You will need the control number printed at
the top of this instruction card to vote by phone or via the Internet. Do not
return your proxy card if you are voting by telephone or the Internet.
