Travelers 2014 Annual Report Download - page 231

Table of Contents
THE TRAVELERS COMPANIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
13. SHARE - BASED INCENTIVE COMPENSATION (Continued)
The 2014 Incentive Plan is currently the only plan pursuant to which future stock
- based awards may be granted. In addition to the 10 million
shares initially authorized for issuance under the 2014 Incentive Plan, the following will not be counted towards the 10 million shares available and
will be available for future grants under the 2014 Incentive Plan: (i) shares of common stock subject to awards that expire unexercised, that are
forfeited, terminated or canceled, that are settled in cash or other forms of property, or otherwise do 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. In addition, the 10 million
shares initially authorized for issuance under the 2014 Incentive Plan will be increased by any shares subject to awards under the 2004 Incentive
Plan that were outstanding as of May 27, 2014 and subsequently expire, are forfeited, cancelled, settled in cash or otherwise terminate without the
issuance of shares.
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 2014 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 2014 Incentive Plan and 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 common stock used to satisfy both the exercise price and withholding taxes due
upon exercise of an option and vest either six months or one year after the grant date and are exercisable for the remaining
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