Travelers 2003 Annual Report Download - page 134

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
11. INCENTIVE PLANS
Travelers Board of Directors, in connection with the IPO, adopted the Travelers Property Casualty Corp. 2002
Stock Incentive Plan (the 2002 Incentive Plan). The 2002 Incentive Plan permits grants of stock options,
restricted stock, deferred stock and other stock-based awards. The purposes of the 2002 Incentive Plan are to
attract and retain employees by providing compensation opportunities that are competitive with other companies,
provide incentives to those employees who contribute significantly to Travelers long-term performance and
growth, and align employees’ long-term financial interests with those of Travelers shareholders. The maximum
number of shares of class A common stock that may be issued pursuant to awards granted under the 2002
Incentive Plan is 120.0 million shares.
Travelers Board of Directors, in connection with the IPO, also adopted the Travelers Property Casualty Corp.
Compensation Plan for Non-Employee Directors (the Directors Plan). Under the Directors Plan, the directors
receive their annual fees in the form of Travelers common stock. Each director may choose to receive a portion
of their fees in cash to pay taxes. Directors may also defer receipt of shares of class A common stock to a future
distribution date or upon termination of their service. The shares of class A common stock issued under the
Directors Plan come from the 2002 Incentive Plan.
Stock Option Programs
Travelers has established stock option programs pursuant to the 2002 Incentive Plan: the Management stock
option program and the Wealthbuilder stock option program (see also Restricted Stock and Deferred Stock
Programs below). The Management stock option program provides for the granting of stock options to officers
and key employees of Travelers and its participating subsidiaries. The Wealthbuilder stock option program
provides for the granting of stock options to all employees meeting certain requirements. The exercise price of
options is equal to the fair market value of Travelers class A common stock at the time of grant. Generally,
options vest 20% each year over a five-year period and may be exercised for a period of ten years from the date
of the grant only if the optionee is employed by Travelers, and for certain periods after employment termination,
depending on the cause of termination. The Management stock option program also permits an employee
exercising an option to be granted a new option (a reload option) in an amount equal to the number of shares of
class A common stock used to satisfy both the exercise price and withholding taxes due upon exercise of an
option. The reload options are granted at an exercise price equal to the fair market value of the class A common
stock on the date of grant, vest six months after the grant date and are exercisable for the remaining term of the
related original option. The reload feature is not available for initial option grants after January 23, 2003. The
Wealthbuilder stock option program does not contain a reload feature.
Prior to the IPO, Travelers participated in various stock option plans sponsored by its former affiliate, Citigroup,
that provided for the granting of stock options in Citigroup common stock to officers and key employees, and, in
the case of certain stock option programs, to all employees meeting specific requirements.