Travelers 2013 Annual Report Download - page 239

THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
13. SHARE-BASED INCENTIVE COMPENSATION (Continued)
legacy plans, including the grant of reload options related to prior option grants under the legacy plans.
As of December 31, 2012, there were no longer any options eligible for reload.
The 2004 Incentive Plan is currently the only plan pursuant to 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 following will 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. These provisions also apply to awards granted under the legacy
share-based incentive compensation plans that were outstanding on the effective date of the 2004
Incentive Plan.
The Company also has a compensation program for non-employee directors (the Director
Compensation Program). Under the Director Compensation Program, non-employee directors’
compensation consists of an annual retainer, a deferred stock award, committee chair fees and a lead
director fee. Each non-employee director may choose to receive all or a portion of his or her annual
retainer in the form of cash or deferred stock units which vest upon grant. The annual deferred stock
awards vest in full one day prior to the date of the Company’s annual meeting of shareholders
occurring in the year following the year of the grant date, subject to continued service. The deferred
stock awards may accumulate, including reinvestment dividends, until distribution either in a lump sum
six months after termination of service as a director or, if the director so elects, in annual installments
beginning at least six months following termination of service as a director. The shares of deferred
stock units issued under the Director Compensation Program are awarded under the 2004 Incentive
Plan.
Stock Option Awards
Stock option awards granted to eligible officers and key employees have a ten-year term. Prior to
January 1, 2007, stock options were granted with an exercise price equal to the fair market value of the
Company’s common stock on the day preceding the date of grant. Beginning January 1, 2007, all stock
options are granted with an exercise price equal to the closing price of the Company’s common stock
on the date of grant. The stock options granted generally vest upon meeting certain years of service
criteria. Except as the Compensation Committee of the Board may allow in the future, stock options
cannot be sold or transferred by the participant. The stock options granted under the 2004 Incentive
Plan vest three years after grant date (cliff vest).
In addition to the stock option awards described above, certain stock option awards that were
granted under legacy plans permitted an employee exercising an option to be granted a new option (a
reload option) at an exercise price equal to the closing price of the Company’s common stock on the
date on which the original option was exercised. The reload option was permitted on certain stock
option awards granted prior to January 2003 at an amount equal to the number of shares of the
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