Travelers 2005 Annual Report Download - page 196

THE ST. PAUL TRAVELERS COMPANIES, INC.AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
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13. INCENTIVE PLANS
The Company, following the merger, adopted The St. Paul Travelers Companies, Inc. 2004 Stock
Incentive Plan (the2004 Incentive Plan) in July 2004. The purposes of the 2004 Incentive Plan are to
reward the efforts of the Company’s non-employee directors, executive officers and other employees and
to attract new personnel by providing incentives in the form of stock-based awards. The 2004 Incentive
Plan permits grants of nonqualified stock options, incentive stock options, stock appreciation rights,
restricted stock, deferred stock, stock units, performance awards and other stock-based or stock-
denominated awards with respect to the Company’s common stock. The number of shares of the
Company’s common stock authorized for grant under the 2004 Incentive Plan is 35 million shares, subject
to additional shares that may be available for awards as described below.
In connection with the adoption of the 2004 Incentive Plan, the legacy Travelers Property Casualty
Corp. 2002 Stock Incentive Plan (legacy TPC 2002 Incentive Plan) and the legacy St. Paul Global Stock
Option Plan (legacy Global Stock Option Plan), which ceased granting awards after 2001, were terminated.
The legacy St. Paul Amended and Restated 1994 Stock Incentive Plan (legacy SPC 1994 Stock Plan) had
expired on May 4, 2004 by its own terms, and other legacy SPC stock plans had either terminated or had no
shares available for future grant. The legacy TPC 2002 Incentive Plan was the only plan pursuant to which
TPC could make stock-based awards prior to the merger. Outstanding grants were not affected by the
plans’ termination including the grant of reload options related to prior option grants under the legacy
TPC 2002 Incentive Plan and the legacy SPC 1994 Stock Plan.
The 2004 Incentive Plan is the only plan pursuantto which future stock-based awards may be granted.
In addition to the 35 million shares initially authorized for issuance under the 2004 Incentive Plan, the
followingwill not be counted towards the 35 million shares available and will be available for future grants
under the 2004 Incentive Plan: (i) shares of common stock subject to an award that expires unexercised,
that is forfeited, terminated or canceled, that is settled in cash or other forms of property, or otherwise
does not result in the issuance of shares of common stock, in whole or in part; (ii) shares that are used to
pay the exercise price of stock options and shares used to pay withholding taxes on awards generally; and
(iii) shares purchased by the Company on the open market using cash option exercise proceeds; provided,
however, that the increase in the number of shares of common stock available for grant pursuant to such
market purchases shall not be greater than the number that could be repurchased at fair market value on
the date of exercise of the stock option giving rise to such option proceeds.
Except for shares delivered to or retained in the legacy TPC 2002 Incentive Plan in connection with
the withholding of taxes applicable to the exercise of outstanding options that have reload features, the
provisions of the preceding paragraph that result in shares becoming available for future grants under the
2004 Incentive Plan also apply to any awards granted under the legacy SPC 1994 Stock Plan and the legacy
TPC 2002 Incentive Plan that were outstanding on the effective date of the 2004 Incentive Plan.
The Company, following the merger, also adopted a compensation program for non-employee
directors (the2004 Director Compensation Program). Under the 2004 Director Compensation Program,
non-employee directors’ compensation consists of an annual retainer, a deferred stock award and a stock
option award.Each non-employee director may choose to receive all or a portion of his or her annual
retainer and any committee chair or co-chair fees paid in the form of cash, common stock or deferred
stock. Deferred stock for the annual retainer, and committee chair and co-chair fees, is elected pursuant to
the St. Paul Travelers Deferred Compensation Plan for Non-Employee Directors that the Board adopted
after the merger and is vested upon grant. The annual deferred stock awards vest one year after the date of