Travelers 2005 Annual Report Download - page 201

THE ST. PAUL TRAVELERS COMPANIES, INC.AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
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13. INCENTIVE PLANS (Continued)
Restricted Stock, Deferred Stock and Performance Share Award Programs
2004 Incentive Plan
The Company may issue awards of restricted stock and deferred stock to eligible officers and key
employees pursuant to the 2004 Incentive Plan. Such awards include restricted stock grants under the
Capital Accumulation Program (CAP) and Equity Awards program established pursuant to the 2004
Incentive Plan. Awards issued under the CAP program are in the form of restricted stock and the number
of shares included in the restricted stock award is calculated at a 10% discount from the market price on
the date of the award and generally vest in full after a two-year period from the date of grant. The CAP
program has been discontinued following the issuance of CAP awardsin February 2006. Other restricted
stock awards issued under the Equity Awards program generally vest in full after a three-year period from
the date of grant. Except under limited circumstances, during this period the stock cannot be sold or
transferred by the participant, who is required to render service to the Company during the restricted
period. Awards granted to non-U.S. participants are in the form of deferred stock awards. These deferred
stock awards are granted at market price and generally vest after three years from the date of grant and are
subject to the same conditions as the restricted stock awards except that the shares are not issued until the
vesting criteria are satisfied.
On October 25, 2005, the Company approved a Performance Share Awards Program pursuant to the
2004 incentive plan. Under the program, the Company may issue performance share awards to certain
employees of the Company who hold positions of Vice President (or its equivalent) or above. The
performance awards represent target shares that provide the recipient the right to earn shares of the
Company’s common stock based upon the Company’s attainment of certain performance goals. The
program becomes effective beginning in 2006. The performance goals for performance awards granted in
2006 are based on the Company’s adjusted return on equity over a three-year performance period. If
performance falls short of targeted performance, none or only a portion of the shares will vest after the
three-year performance period from date of grant. If performance exceeds targeted performance, more
than 100% (up to a maximum of 160%) of target shares will vest after the three-year performance period
from date of grant.
Legacy TPC 2002 Incentive Plans
On April 1, 2004, in accordance with the merger agreement, the restricted stock awards and deferred
stock awards of the legacy TPC 2002 Incentive Plan were converted to restricted stock awards and deferred
stock awards in the Company’s commonstock. These restricted stock awards and deferred stock awards
retained substantially the same terms and conditions that were applicable prior to the conversion. The
0.4334 merger exchange ratio was applied to the outstanding TPC restricted stock awards and deferred
stock awards to reflect this conversion.
The TPC restricted stock awards granted under the legacy TPC 2002 Incentive Plan were awarded to
eligible officers and key employees through TPC’s Capital Accumulation Program (TPC CAP). Under this
plan, certain TPC CAP participants received part of their annual bonus awards in restricted stock, and at
their election, part in stock options. The number of shares included in the restricted stock award was
calculated at a 25% discount from the market price on the date of the award and generally vested in full
after a three-year period. Except under limited circumstances, during this period the stock cannot be sold
or transferred by the participant, who is required to render service to the Company during the restricted