Document:

EXHIBIT 10.28

SVB
FINANCIAL GROUP

2006
EQUITY INCENTIVE PLAN

1.             Purposes
of the Plan.  The purposes of this
Plan are:

·                                          to
attract and retain the best available personnel for positions of substantial
responsibility,

·                                          to
provide incentives to individuals who perform services to the Company, and

·                                          to
promote the success of the Company’s business.

The Plan permits the
grant of Incentive Stock Options, Nonstatutory Stock Options, Restricted Stock,
Restricted Stock Units, Stock Appreciation Rights, Performance Units,
Performance Shares and other stock or cash awards as the Administrator may
determine.

2.             Definitions.  As used herein, the following definitions
will apply:

 

(a)           “Administrator”
means the Board or any of its Committees as will be administering the Plan, in
accordance with Section 4 of the Plan.

 

(b)           “Affiliate” means any
corporation or any other entity (including, but not limited to, partnerships
and joint ventures) controlling, controlled by, or under common control with
the Company.

 

(c)           “Applicable Laws”
means the requirements relating to the administration of equity-based awards
under U.S. state corporate laws, U.S. federal and state securities laws, the
Code, any stock exchange or quotation system on which the Common Stock is
listed or quoted and the applicable laws of any foreign country or jurisdiction
where Awards are, or will be, granted under the Plan.

 

(d)           “Award”
means, individually or collectively, a grant under the Plan of Options,
Restricted Stock, Restricted Stock Units, Stock Appreciation Rights,
Performance Units, Performance Shares and other stock or cash awards as the
Administrator may determine.

(e)           “Award
Agreement” means the written or electronic agreement setting forth the
terms and provisions applicable to each Award granted under the Plan.  The Award Agreement is subject to the terms
and conditions of the Plan.

(f)            “Board”
means the Board of Directors of the Company.

 

(g)           “Cause”
means:

(i)    An act of embezzlement, fraud, dishonesty, or breach of fiduciary
duty to the Company; or

(ii)   A deliberate disregard of the rules of the Company which results
in loss, damage or injury to the Company, or

(iii)  Any unauthorized disclosure of any of the secrets or confidential
information of the Company, or

(iv)  Inducing any client or customer of the Company to break any
contract with the Company or inducing any principal for whom the Company acts
as agent to terminate such agency relations; or

(v)   Engaging in any conduct which constitutes unfair competition with
the Company; or

(vi)  Any act which results in the Participant being removed from any
office of the Company by any bank regulatory agency.

(h)           “Change in Control” means the consummation of any
of the following transactions:

(i)    A merger or consolidation of Silicon Valley Bank (the “Bank”) or
the Company with any other corporation, other than a merger or consolidation
which would result in beneficial owners of the total voting power in the
election of directors represented by the voting securities (“Voting Securities”)
of the Bank or the Company (as the case may be) outstanding immediately prior
thereto continuing to beneficially own securities representing (either by
remaining outstanding or by being converted into voting securities of the
surviving entity) at least fifty percent (50%) of the total Voting Securities
of the Bank or the Company, or of such surviving entity, outstanding
immediately after such merger or consolidation;

(ii)   The filing of a plan of
liquidation or dissolution of the Bank or the closing of the sale, lease,
exchange or other transfer or disposition by the Bank or the Company of all or
substantially all of the Bank’s assets;

(iii)  Any person (as such term is
used in Sections 13(d) and 14(d) of the Exchange Act, other than (A) a trustee
or other fiduciary holding securities under an employee benefit plan of the
Bank or the Company, (B) a corporation owned directly or indirectly by the
stockholders of the Company in substantially the same proportions as their
beneficial ownership of stock in the Company, or (C) the Company (with respect
to the Company’s ownership of the stock of the Bank), is or becomes the
beneficial owner (within the meaning of Rule 13d-3 under the Exchange Act),
directly or indirectly, of the securities of the Bank or the Company
representing fifty percent (50%) or more of the Voting Securities; or

(iv)  Any person (as such term is used
in Sections 13(d) or 14(d) of the Exchange Act), other than (A) a trustee or
other fiduciary holding securities under an employee

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benefit plan of the Bank or the Company, (B)
a corporation owned directly or indirectly by the stockholders of the Company
in substantially the same proportions as their ownership of stock in the Bank,
or (C) the Company (with respect to the Company’s ownership of the stock of the
Bank) is or becomes the beneficial owner (within the meaning or Rule 13d-3
under the Exchange Act), directly or indirectly, of the securities of the Bank
or the Company representing twenty-five percent (25%) or more of the Voting
Securities of such corporation, and  within twelve (12) months of the occurrence of
such event, a change in the composition of the Board occurs as a result of
which sixty percent (60%) or fewer of the Directors are Incumbent
Directors.  For purposes of this
definition, Incumbent Directors will mean
Directors who either (A) are Directors as of the date hereof, (B) are elected,
or nominated for election, to the Board with the affirmative votes of at least
a majority of the Directors who are Incumbent Directors described in (A) above
at the time of such election or nomination, or (C) are elected, or nominated
for election, to the Board with the affirmative votes of at least a majority of
the Directors who are Incumbent Directors described in (A) or (B) above at the
time of such election or nomination.  Notwithstanding
the foregoing, “Incumbent Directors” will not include an individual whose
election or nomination to the Board occurs in order to provide representation
for a person or group of related persons who have initiated or encouraged an
actual or threatened proxy contest relating to the election of Directors.

(i)            “Code”
means the Internal Revenue Code of 1986, as amended.  Any reference to a section of the Code herein
will be a reference to any successor or amended section of the Code.

(j)            “Committee”
means a committee
of Directors or of other individuals satisfying Applicable Laws appointed by
the Board in accordance with Section 4 hereof.

(k)           “Common
Stock” means the common stock of the Company.

(l)            “Company”
means SVB Financial Group, a Delaware corporation, or any successor thereto.

(m)          “Consultant”
means any person, including an advisor, engaged by the Company or its
Affiliates to render services to such entity.

(n)           “Determination
Date” means the latest possible date that will not jeopardize the
qualification of an Award granted under the Plan as “performance-based
compensation” under Section 162(m) of the Code.

(o)           “Director”
means a member of the Board.

(p)           “Disability”
means total and permanent disability as defined in Section 22(e)(3) of the
Code, provided
that in the case of Awards other than Incentive Stock Options, the
Administrator in its discretion may determine whether a permanent and total
disability exists in accordance with uniform and non-discriminatory standards
adopted by the Administrator from time to time.

(q)           “Employee”
means any person, including Officers and Directors, employed by the Company or
its Affiliates.  Neither service as a
Director nor payment of a director’s fee by the Company will be sufficient to
constitute “employment” by the Company.

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(r)            “Exchange
Act” means the Securities Exchange Act of 1934, as amended.

(s)           “Fair
Market Value” means, as of any date, the value of Common Stock as the
Administrator may determine in good faith by reference to the price of such
stock on any established stock exchange or a national market system on the day
of determination if the Common Stock is so listed on any established stock
exchange or a national market system.  If
the Common Stock is not listed on any established stock exchange or a national
market system, the value of the Common Stock will be determined by the
Administrator in good faith.

(t)            “Fiscal Year” means the fiscal year of
the Company.

(u)           “Incentive
Stock Option” means an Option that by its terms qualifies and is otherwise
intended to qualify as an incentive stock option within the meaning of
Section 422 of the Code and the regulations promulgated thereunder.

(v)           “Nonstatutory
Stock Option” means an Option that by its terms does not qualify or is not
intended to qualify as an Incentive Stock Option.

(w)          “Officer”
means a person who is an officer of the Company within the meaning of
Section 16 of the Exchange Act and the rules and regulations promulgated
thereunder.

(x)            “Option”
means a stock option granted pursuant to the Plan.

(y)           “Parent”
means a “parent corporation,” whether now or hereafter existing, as defined in
Section 424(e) of the Code.

(z)            “Participant” means the holder of an
outstanding Award.

(aa)         “Performance
Goals” will have the meaning set forth in Section 11 of the Plan.

(bb)         “Performance
Period” means any Fiscal Year of the Company or such other period as
determined by the Administrator in its sole discretion.

(cc)         “Performance
Share” means an Award denominated in Shares which may be earned in whole or
in part upon attainment of Performance Goals or other vesting criteria as the
Administrator may determine pursuant to Section 10.

(dd)         “Performance
Unit” means an Award which may be earned in whole or in part upon
attainment of Performance Goals or other vesting criteria as the Administrator
may determine and which may be settled for cash, Shares or other securities or
a combination of the foregoing pursuant to Section 10.

(ee)         “Period
of Restriction” means the period during which the transfer of Shares of
Restricted Stock are subject to restrictions and therefore, the Shares are
subject to a substantial risk of forfeiture. 
Such restrictions may be based on the passage of time, the achievement
of target levels of performance, or the occurrence of other events as
determined by the Administrator.

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(ff)           “Plan”
means this 2006 Equity Incentive Plan.

(gg)         “Restricted
Stock” means
Shares issued pursuant to an Award of Restricted Stock under Section 8 of
the Plan, or issued pursuant to the early exercise of an Option.

(hh)         “Restricted Stock Unit” means a
bookkeeping entry representing an amount equal to the Fair Market Value of one
Share, granted pursuant to Section 9. 
Each Restricted Stock Unit represents an unfunded and unsecured
obligation of the Company.

(ii)           “Rule
16b-3” means Rule 16b-3 of the Exchange Act or any successor to Rule 16b-3,
as in effect when discretion is being exercised with respect to the Plan.

(jj)           “Section 16(b)”
means Section 16(b) of the Exchange Act.

(kk)         “Service
Provider” means an Employee, Director or Consultant.

(ll)           “Share”
means a share of the Common Stock, as adjusted in accordance with
Section 14 of the Plan.

(mm)       “Stock
Appreciation Right” means an Award, granted alone or in connection with an
Option, that pursuant to Section 7 is designated as a Stock Appreciation
Right.

(nn)         “Subsidiary”
means a “subsidiary corporation,” whether now or hereafter existing, as defined
in Section 424(f) of the Code.

(oo)         “Successor
Corporation” has the meaning given to such term in Section 14(c) of the
Plan.

3.             Stock Subject to the Plan.

(a)           Stock
Subject to the Plan.  Subject to the
provisions of Section 14 of the Plan, the maximum aggregate number of Shares that may
be awarded and sold under the Plan is 3,000,000 Shares plus (i) any Shares which have been reserved but not issued under the
Company’s 1997 Equity Incentive Plan (the “1997 Plan”) as of the date of
stockholder approval of this Plan and (ii) any Shares subject to stock
options or similar awards granted under the 1997 Plan that expire or otherwise
terminate without having been exercised in full and Shares issued pursuant to
awards granted under the 1997 Plan that are forfeited to or repurchased by the
Company.  The Shares may be authorized,
but unissued, or reacquired Common Stock.

(b)           Full
Value Awards.  Any Shares subject to
Awards granted with an exercise price less than the Fair Market Value on the
date of grant of such Awards will be counted against the numerical limits of
this Section 3 as two Shares for every one Share subject thereto.  Further, if Shares acquired pursuant to any
such Award are forfeited or repurchased by the Company and would otherwise
return to the Plan pursuant to Section 3(c), two times the number of Shares so
forfeited or repurchased will return to the Plan and will again become
available for issuance.

(c)           Lapsed
Awards.  If an Award expires or
becomes unexercisable without having been exercised in full, or, with respect
to Restricted Stock, Restricted Stock Units,

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Performance Shares or Performance Units, is forfeited to or repurchased
by the Company, the unpurchased Shares (or for Awards other than Options and
Stock Appreciation Rights, the forfeited or repurchased Shares) which were
subject thereto will become available for future grant or sale under the Plan (unless
the Plan has terminated).  With respect to Stock Appreciation Rights,
all of the Shares covered by the Award (that is, Shares actually issued
pursuant to a Stock Appreciation Right, as well as the Shares that represent
payment of the exercise price) will cease to be available under the Plan.  However, Shares that have actually been
issued under the Plan under any Award will not be returned to the Plan and will
not become available for future distribution under the Plan; provided, however,
that if unvested Shares of Restricted Stock, Restricted Stock Units,
Performance Shares or Performance Units are repurchased by the Company or are
forfeited to the Company, such Shares will become available for future grant
under the Plan.  Shares used to pay the
tax and exercise price of an Award will not become available for future grant
or sale under the Plan.  To the extent an
Award under the Plan is paid out in cash rather than Shares, such cash payment
will not result in reducing the number of Shares available for issuance under
the Plan.  Notwithstanding the foregoing
and, subject to adjustment provided in Section 14, the maximum number of
Shares that may be issued upon the exercise of Incentive Stock Options will equal
the aggregate Share number stated in Section 3(a), plus, to the extent
allowable under Section 422 of the Code, any Shares that become available
for issuance under the Plan under this Section 3(c).

4.             Administration of the Plan.

(a)           Procedure.

(i)    Multiple
Administrative Bodies.  Different
Committees with respect to different groups of Service Providers may administer
the Plan.

(ii)   Section 162(m).  To the extent that the Administrator
determines it to be desirable to qualify Awards granted hereunder as “performance-based
compensation” within the meaning of Section 162(m) of the Code, the Plan
will be administered by a Committee of two or more “outside directors” within
the meaning of Section 162(m) of the Code.

(iii)  Rule
16b-3.  To the extent desirable to
qualify transactions hereunder as exempt under Rule 16b-3, the transactions
contemplated hereunder will be structured to satisfy the requirements for
exemption under Rule 16b-3.

(iv)  Other
Administration.  Other than as
provided above, the Plan will be administered by (A) the Board or
(B) a Committee, which committee will be constituted to satisfy Applicable
Laws.

(b)           Powers
of the Administrator.  Subject to the
provisions of the Plan, and in the case of a Committee, subject to the specific
duties delegated by the Board to such Committee, the Administrator will have
the authority, in its discretion:

(i)    to
determine the Fair Market Value;

(ii)   to
select the Service Providers to whom Awards may be granted hereunder;

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(iii)  to determine the
terms and conditions, not inconsistent with the terms of the Plan, of any Award
granted hereunder;

(iv)  to
construe and interpret the terms of the Plan and Awards granted pursuant to the
Plan;

(v)   to
prescribe, amend and rescind rules and regulations relating to the Plan,
including rules and regulations relating to sub-plans established for the
purpose of satisfying applicable foreign laws;

(vi)  to
modify or amend each Award (subject to Section 19(c) of the Plan).  Notwithstanding the previous sentence, the
Administrator may not: (A) modify or amend an Option or Stock Appreciation
Right to reduce the exercise price of such Option or Stock Appreciation Right
after it has been granted (except for adjustments made pursuant to
Section 14), (B) cancel any outstanding Option or Stock Appreciation Right
and immediately replace it with a new Option or Stock Appreciation Right with a
lower exercise price, or (C) accelerate the vesting provisions contained in
Sections 8(e), 9(b), or 10(c) other
than upon or in connection with a Change in Control or upon or in connection
with a Participant’s termination of service due to death, Disability or
retirement;

(vii) to
authorize any person to execute on behalf of the Company any instrument
required to effect the grant of an Award previously granted by the
Administrator;

(viii)   to allow a Participant to defer the receipt of the payment of cash
or the delivery of Shares that would otherwise be due to such Participant under
an Award pursuant to such procedures as the Administrator may determine; and

 

(ix)   to
make all other determinations deemed necessary or advisable for administering
the Plan.

(c)           Effect
of Administrator’s Decision. 
The Administrator’s decisions, determinations and interpretations will
be final and binding on all Participants and any other holders of Awards.

5.             Eligibility.  Nonstatutory Stock Options, Restricted Stock,
Restricted Stock Units, Stock Appreciation Rights, Performance Units,
Performance Shares and such other cash or stock awards as the Administrator
determines may be granted to Service Providers. 
Incentive Stock
Options may be granted only to employees of the Company or any Parent or
Subsidiary of the Company.

6.             Stock Options.

(a)           Limitations.

(i)    Each
Option will be designated in the Award Agreement as either an Incentive Stock
Option or a Nonstatutory Stock Option. 
However, notwithstanding such designation, to the extent that the
aggregate Fair Market Value of the Shares with respect to which Incentive Stock
Options are exercisable for the first time by the Participant during any
calendar year

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(under all plans of the Company and any Parent or Subsidiary) exceeds
$100,000, such Options will be treated as Nonstatutory Stock Options.  For purposes of this Section 6(a),
Incentive Stock Options will be taken into account in the order in which they
were granted.  The Fair Market Value of
the Shares will be determined as of the time the Option with respect to such
Shares is granted.

(ii)   The
following limitations will apply to grants of Options:

(1)           No
Service Provider will be granted, in any Fiscal Year, Options to purchase more
than 250,000 Shares.

(2)           In
connection with his or her initial service, a Service Provider may be granted
Options to purchase up to an additional 500,000 Shares, which will not count
against the limit set forth in Section 6(a)(2)(ii)(1) above.

(3)           The
foregoing limitations will be adjusted proportionately in connection with any
change in the Company’s capitalization as described in Section 14.

(4)           If
an Option is cancelled in the same Fiscal Year in which it was granted (other
than in connection with a transaction described in Section 14), the
cancelled Option, as applicable, will be counted against the limits set forth
in subsections (1) and (2) above.

(5)           The
exercise price for an Option may not be reduced.  This will include, without limitation, a
repricing of the Option as well as an Option exchange program whereby the
Participant agrees to cancel an existing Option in exchange for an Option,
Stock Appreciation Right or other Award.

(b)           Term
of Option.  The Administrator will
determine the term of each Option in its sole discretion.  Any Option granted under the Plan will not be
exercisable after the expiration of seven (7) years from the date of grant or
such shorter term as may be provided in the Award Agreement.  Moreover, in the case of an Incentive Stock
Option granted to a Participant who, at the time the Incentive Stock Option is
granted, owns stock representing more than ten percent (10%) of the total
combined voting power of all classes of stock of the Company or any Parent or
Subsidiary, the term of the Incentive Stock Option will be five (5) years from
the date of grant or such shorter term as may be provided in the Award
Agreement.

(c)           Option
Exercise Price and Consideration.

(i)    Exercise
Price.  The per share exercise price
for the Shares to be issued pursuant to exercise of an Option will be
determined by the Administrator, but will be no less than 100% of the Fair Market Value per Share on the
date of grant.  In addition, in
the case of an Incentive Stock Option granted to an Employee who, at the time
the Incentive Stock Option is granted, owns stock representing more than ten
percent (10%) of the voting power of all classes of stock of the Company or any
Parent or Subsidiary, the per Share exercise price will be no less than 110% of
the Fair Market Value per Share on the date of grant.  Notwithstanding
the foregoing provisions of this Section 6(c), Options may be granted with a
per Share exercise price of less than 100% of the Fair Market Value per Share
on the date of grant pursuant to a transaction described in, and in a manner
consistent with, Section 424(a) of the Code.

 

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(ii)   Waiting
Period and Exercise Dates.  At the
time an Option is granted, the Administrator will fix the period within which
the Option may be exercised and will determine any conditions that must be
satisfied before the Option may be exercised.

(iii)  Form
of Consideration.  The Administrator
will determine the acceptable form(s) of consideration for exercising an
Option, including the method of payment, to the extent permitted by Applicable
Laws.

(d)                   Exercise of Option.

(i)    Procedure
for Exercise; Rights as a Stockholder. 
Any Option granted hereunder will be exercisable according to the terms
of the Plan and at such times and under such conditions as determined by the
Administrator and set forth in the Award Agreement.  An Option may not be exercised for a fraction
of a Share.

An
Option will be deemed exercised when the Company receives: (i) notice of
exercise (in such form as the Administrator specify from time to time) from the
person entitled to exercise the Option, and (ii) full payment for the
Shares with respect to which the Option is exercised (together with an
applicable withholding taxes).  No
adjustment will be made for a dividend or other right for which the record date
is prior to the date the Shares are issued, except as provided in
Section 14 of the Plan.

(ii)   Termination
of Relationship as a Service Provider. 
If a Participant ceases to be a Service Provider, other than upon the
Participant’s termination for Cause or as the result of the Participant’s death
or Disability, the Participant may exercise his or her Option within such
period of time as is specified in the Award Agreement to the extent that the
Option is vested on the date of termination (but in no event later than the
expiration of the term of such Option as set forth in the Award
Agreement).  In the absence of a
specified time in the Award Agreement, the Option will remain exercisable for
three (3) months following the Participant’s termination.  Unless otherwise provided by the
Administrator, if on the date of termination the Participant is not vested as
to his or her entire Option, the Shares covered by the unvested portion of the
Option will revert to the Plan.  If after
termination the Participant does not exercise his or her Option within the time
specified by the Administrator, the Option will terminate, and the Shares
covered by such Option will revert to the Plan.

(iii)  Disability
of Participant.  If a Participant
ceases to be a Service Provider as a result of the Participant’s Disability,
the Participant may exercise his or her Option within such period of time as is
specified in the Award Agreement to the extent the Option is vested on the date
of termination (but in no event later than the expiration of the term of such
Option as set forth in the Award Agreement). 
In the absence of a specified time in the Award Agreement, the Option
will remain exercisable for twelve (12) months following the Participant’s
termination.  Unless otherwise provided
by the Administrator, if on the date of termination the Participant is not vested
as to his or her entire Option, the Shares covered by the unvested portion of
the Option will revert to the Plan.  If
after termination the Participant does not exercise his or her Option within
the time specified herein, the Option will terminate, and the Shares covered by
such Option will revert to the Plan.

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(iv)  Death
of Participant.  If a Participant
dies while a Service Provider, the Option may be exercised following the
Participant’s death within such period of time as is specified in the Award Agreement
to the extent that the Option is vested on the date of death (but in no event
may the option be exercised later than the expiration of the term of such
Option as set forth in the Award Agreement), by the Participant’s designated
beneficiary, provided such beneficiary has been designated prior to Participant’s
death in a form acceptable to the Administrator.  If no such beneficiary has been designated by
the Participant, then such Option may be exercised by the personal
representative of the Participant’s estate or by the person(s) to whom the
Option is transferred pursuant to the Participant’s will or in accordance with
the laws of descent and distribution.  In
the absence of a specified time in the Award Agreement, the Option will remain
exercisable for twelve (12) months following Participant’s death.  Unless otherwise provided by the
Administrator, if at the time of death Participant is not vested as to his or
her entire Option, the Shares covered by the unvested portion of the Option
will immediately revert to the Plan.  If
the Option is not so exercised within the time specified herein, the Option
will terminate, and the Shares covered by such Option will revert to the Plan.

(v)   Termination for Cause. 
If a Participant’s status as a Service Provider is terminated for Cause,
then the Option will immediately terminate, and the Shares covered by such
Option will revert to and again become available for issuance under the Plan.

(vi)  Other Termination.  A
Participant’s Award Agreement may also provide that if the exercise of the
Option following the termination of Participant’s status as a Service Provider
(other than upon the Participant’s death or Disability) would result in
liability under Section 16(b), then the Option will terminate on the earlier of
(A) the expiration of the term of the Option set forth in the Award Agreement,
or (B) the 10th day after the last date on which such exercise would result in
such liability under Section 16(b). 
Finally, a Participant’s Award Agreement may also provide that if the
exercise of the Option following the termination of the Participant’s status as
a Service Provider (other than upon the Participant’s death or disability)
would be prohibited at any time solely because the issuance of Shares would
violate the registration requirements under the Securities Act, then the Option
will terminate on the earlier of (A) the expiration of the term of the Option,
or (B) the expiration of a period of three (3) months after the termination of
the Participant’s status as a Service Provider during which the exercise of the
Option would not be in violation of such registration requirements.

7.             Stock Appreciation Rights.

(a)           Grant
of Stock Appreciation Rights. 
Subject to the terms and conditions of the Plan, a Stock Appreciation
Right may be granted to Service Providers at any time and from time to time as
will be determined by the Administrator, in its sole discretion.

(b)           Number
of Shares.  The Administrator will
have complete discretion to determine the number of Stock Appreciation Rights
granted to any Participant, provided that during any Fiscal Year, no
Participant will be granted Stock Appreciation Rights covering more than
250,000 Shares.  Notwithstanding the
foregoing limitation, in connection with a Participant’s initial service as an
Employee, an Employee may be granted Stock Appreciation Rights covering up to
an additional 500,000 Shares.

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(c)           Exercise
Price and Other Terms.  The
Administrator, subject to the provisions of the Plan, will have complete
discretion to determine the terms and conditions of Stock Appreciation Rights
granted under the Plan, provided, however, that the exercise price will be not less than 100%
of the Fair Market Value of a Share on the date of grant.

(d)           Stock
Appreciation Right Agreement.  Each
Stock Appreciation Right grant will be evidenced by an Award Agreement that
will specify the exercise price, the term of the Stock Appreciation Right, the
conditions of exercise, and such other terms and conditions as the
Administrator, in its sole discretion, will determine.

(e)           Expiration
of Stock Appreciation Rights.  A
Stock Appreciation Right granted under the Plan will expire upon the date
determined by the Administrator, in its sole discretion, and set forth in the
Award Agreement.  Notwithstanding the
foregoing, the rules of Section 6(d) also will apply to Stock Appreciation
Rights.

(f)            Payment
of Stock Appreciation Right Amount. 
Upon exercise of a Stock Appreciation Right, a Participant will be
entitled to receive payment from the Company in an amount determined by
multiplying:

(i)    The
difference between the Fair Market Value of a Share on the date of exercise
over the exercise price; times

(ii)   The
number of Shares with respect to which the Stock Appreciation Right is
exercised.

At the discretion
of the Administrator, the payment upon Stock Appreciation Right exercise may be
in cash, in Shares of equivalent value, or in some combination thereof.

8.             Restricted Stock.

(a)           Grant
of Restricted Stock.  Subject to the
terms and provisions of the Plan, the Administrator, at any time and from time
to time, may grant Shares of Restricted Stock to Service Providers in such
amounts as the Administrator, in its sole discretion, will determine.

(b)           Restricted
Stock Agreement.  Each Award of
Restricted Stock will be evidenced by an Award Agreement that will specify the
Period of Restriction, the number of Shares granted, and such other terms and
conditions as the Administrator, in its sole discretion, will determine.  Notwithstanding the foregoing sentence, during
any Fiscal Year no Participant will receive more than an aggregate of 125,000
Shares of Restricted Stock; provided, however, that in connection with a
Participant’s initial service as an Employee, an Employee may be granted an
aggregate of up to an additional 250,000 Shares of Restricted Stock.  Unless the Administrator determines
otherwise, Shares of Restricted Stock will be held by the Company as escrow
agent until the restrictions on such Shares have lapsed.

(c)           Transferability.  Except as provided in this Section 8, Shares
of Restricted Stock may not be sold, transferred, pledged, assigned, or
otherwise alienated or hypothecated until the end of the applicable Period of
Restriction.

 11
 

 

(d)           Other
Restrictions.  The Administrator, in
its sole discretion, may impose such other restrictions on Shares of Restricted
Stock as it may deem advisable or appropriate.

(e)           Removal
of Restrictions.  Except as otherwise
provided in this Section 8, Shares of Restricted Stock covered by each
Restricted Stock grant made under the Plan will be released from escrow as soon
as practicable after the last day of the Period of Restriction.  The restrictions will lapse at a rate determined
by the Administrator; provided, however, that, with respect to Restricted Stock
granted to Employees, and except as otherwise provided in Section 14(c), Shares
of Restricted Stock will not vest more rapidly than one-third (1/3rd) of the total number of Shares of Restricted Stock
subject to an Award each year from the date of grant (or, if applicable, the
date an Employee begins his or her employment with the Company or any Parent or
Subsidiary of the Company), unless the Administrator determines that the Award
is to vest upon the achievement of performance criteria and the period for
measuring such performance will cover at least twelve (12) months.  Notwithstanding the foregoing sentence, the
Administrator, in its sole discretion, may provide at the time of or following
the date of grant for accelerated vesting for an Award of Restricted Stock upon
or in connection with a Change in Control or upon or in connection with a
Participant’s termination of service due to death, Disability
or retirement.

(f)            Voting
Rights.  During the Period of
Restriction, Service Providers holding Shares of Restricted Stock granted
hereunder may exercise full voting rights with respect to those Shares, unless
the Administrator determines otherwise.

(g)           Dividends
and Other Distributions.  During the
Period of Restriction, Service Providers holding Shares of Restricted Stock
will be entitled to receive all dividends and other distributions paid with
respect to such Shares unless otherwise provided in the Award Agreement.  If any such dividends or distributions are
paid in Shares, the Shares will be subject to the same restrictions on
transferability and forfeitability as the Shares of Restricted Stock with
respect to which they were paid.

(h)           Return
of Restricted Stock to Company.  On
the date set forth in the Award Agreement, the Restricted Stock for which
restrictions have not lapsed will revert to the Company and again will become
available for grant under the Plan.

9.             Restricted Stock Units.

(a)           Grant.  Restricted Stock Units may be granted at any
time and from time to time as determined by the Administrator.  Each Restricted Stock Unit grant will be
evidenced by an Award Agreement that will specify such other terms and
conditions as the Administrator, in its sole discretion, will determine,
including all terms, conditions, and restrictions related to the grant, the number
of Restricted Stock Units and the form of payout, which, subject to
Section 9(d), may be left to the discretion of the Administrator.  Notwithstanding the anything to the contrary
in this subsection (a), during any Fiscal Year of the Company, no Participant
will receive more than an aggregate of 125,000 Restricted Stock Units;
provided, however, that in connection with a Participant’s initial service as
an Employee, an Employee may be granted an aggregate of up to an additional
250,000 Restricted Stock Units.

 

 12

 

(b)           Vesting Criteria
and Other Terms.  The Administrator
will set vesting criteria in its discretion, which, depending on the extent to
which the criteria are met, will determine the number of Restricted Stock Units
that will be paid out to the Participant. 
Each Award of Restricted Stock Units will be evidenced by an Award
Agreement that will specify the vesting criteria, and such other terms and
conditions as the Administrator, in its sole discretion, will determine; provided, however, that, with respect to
Restricted Stock Units granted to Employees, and except as otherwise provided
in Section 14(c), an
Award of Restricted Stock Units will not vest more rapidly than
one-third (1/3rd) of the total number of Restricted Stock
Units subject to an Award each year from the date of grant (or, if applicable,
the date an Employee begins his or her employment with the Company or any
Parent or Subsidiary of the Company), unless the Administrator determines that
the Award is to vest upon the achievement of performance criteria and the
period for measuring such performance will cover at least twelve (12)
months.  Notwithstanding the foregoing
sentence, the Administrator, in its sole discretion, may provide at the time of
or following the date of grant for accelerated vesting for an Award of
Restricted Stock Units upon or in connection with a Change in Control or upon
or in connection with a Participant’s termination of service due to death,
Disability or retirement.

(c)           Earning
Restricted Stock Units.  Upon meeting
the applicable vesting criteria, the Participant will be entitled to receive a
payout as specified in the Award Agreement.

(d)           Form and Timing
of Payment.  Payment of earned
Restricted Stock Units will be made as soon as practicable after the date(s)
set forth in the Award Agreement.  The
Administrator, in its sole discretion, may pay earned Restricted Stock Units in
cash, Shares, or a combination thereof. 
Shares represented by Restricted Stock Units that are fully paid in cash
again will be available for grant under the Plan.

(e)           Cancellation.  On
the date set forth in the Award Agreement, all unearned Restricted Stock Units
will be forfeited to the Company.

10.           Performance Units and Performance
Shares.

(a)           Grant
of Performance Units/Shares. 
Performance Units and Performance Shares may be granted to Service
Providers at any time and from time to time, as will be determined by the
Administrator, in its sole discretion. 
The Administrator will have complete discretion in determining the
number of Performance Units/Shares granted to each Participant provided that
during any Fiscal Year, (a) no Participant will receive Performance Units
having an initial value greater than $1,000,000, and (b) no Participant will
receive more than 125,000 Performance Shares. 
Notwithstanding the foregoing limitation, in connection with a
Participant’s initial service as an Employee, an Employee may be granted up to
an additional 250,000 Performance Shares.

(b)           Value
of Performance Units/Shares.  Each
Performance Unit will have an initial value that is established by the
Administrator on or before the date of grant. 
Each Performance Share will have an initial value equal to the Fair
Market Value of a Share on the date of grant.

(c)           Performance Objectives and Other Terms.  The
Administrator will set performance objectives or other vesting provisions
(including, without limitation, continued status as

 13
 

 

a
Service Provider) in its discretion which, depending on the extent to which
they are met, will determine the number or value of Performance Units/Shares
that will be paid out to the Participant. 
The Administrator may set performance objectives based upon the
achievement of Company wide, divisional, or individual goals, or any other
basis determined by the Administrator in its discretion.  Each Award of Performance Units/Shares will
be evidenced by an Award Agreement that will specify the Performance Period,
and such other terms and conditions as the Administrator, in its sole
discretion, will determine; provided, however, that, with respect to
Performance Units/Shares granted to Employees, and except as otherwise provided
in Section 14(c), Performance Units/Shares will not vest more rapidly than
one-third (1/3rd) of the total number of Performance
Units/Shares subject to an Award each year from the date of grant (or, if
applicable, the date an Employee begins his or her employment with the Company
or any Parent or Subsidiary of the Company), unless the Administrator
determines that the Award is to vest upon the achievement of performance criteria
and the period for measuring such performance will cover at least twelve (12)
months.  Notwithstanding the foregoing
sentence, the Administrator, in its sole discretion, may provide at the time of
or following the date of grant for accelerated vesting for an Award of
Performance Units/Shares upon or in connection with a Change in Control or upon
or in connection with a Participant’s termination of service due to death,
Disability or retirement.

(d)           Earning of
Performance Units/Shares.  After the
applicable Performance Period has ended, the holder of Performance Units/Shares
will be entitled to receive a payout of the number of Performance Units/Shares
earned by the Participant over the Performance Period, to be determined as a
function of the extent to which the corresponding performance objectives or
other vesting provisions have been achieved.

(e)           Form
and Timing of Payment of Performance Units/Shares.  Payment of earned Performance Units/Shares
will be made as soon as practicable after the expiration of the applicable
Performance Period.  The Administrator,
in its sole discretion, may pay earned Performance Units/Shares in the form of
cash, in Shares (which have an aggregate Fair Market Value equal to the value
of the earned Performance Units/Shares at the close of the applicable
Performance Period) or in a combination thereof.

(f)            Cancellation
of Performance Units/Shares.  On the
date set forth in the Award Agreement, all unearned or unvested Performance
Units/Shares will be forfeited to the Company, and again will be available for
grant under the Plan.

11.           Performance Goals.  Awards of Restricted Stock, Restricted Stock
Units, Performance Shares and Performance Units and other incentives under the
Plan may be made subject to the attainment of performance goals relating to one
or more business criteria within the meaning of Section 162(m) of the Code and
may provide for a targeted level or levels of achievement (“Performance Goals”)
including assets; bond rating; cash flow; cash position; earnings before
interest and taxes; earnings before interest, taxes, depreciation and
amortization; earnings per Share; economic profit; economic value added; equity
or stockholder’s equity; growth in earnings; growth in revenue; market share;
net income; net profit; net sales; noninterest
income as percent of total income; operating earnings; operating income;
profit before tax; ratio of debt to debt plus equity; ratio of operating
earnings to capital spending; results
of regulatory reviews and examinations;  return
on equity; return on net
assets; return on sales; revenue; sales growth; or total return to
stockholders.  Any Performance Goals may
be used to measure the performance of the Company as

 14
 

 

a whole or a business
unit of the Company and may be measured relative to a peer group or index.  The Performance Goals may differ from
Participant to Participant and from Award to Award.  Prior to the Determination Date, the
Administrator will determine whether any significant element(s) will be
included in or excluded from the calculation of any Performance Goal with
respect to any Participant.  In all other
respects, Performance Goals will be calculated in accordance with the Company’s
financial statements, generally accepted accounting principles, or under a
methodology established by the Administrator prior to the issuance of an Award,
which is consistently applied and identified in the financial statements,
including footnotes, or the management discussion and analysis section of the
Company’s annual report.

12.           Leaves of Absence.  Unless the Administrator provides otherwise,
vesting of Awards granted hereunder will be suspended during any unpaid leave
of absence.  A Service Provider will not
cease to be an Employee in the case of (i) any leave of absence approved
by the Company or (ii) transfers between locations of the Company or
between the Company and its Affiliates. 
For purposes of Incentive Stock Options, no such leave may exceed ninety
(90) days, unless reemployment upon expiration of such leave is guaranteed by
statute or contract.  If reemployment
upon expiration of a leave of absence approved by the Company is not so
guaranteed, then three (3) months following the 91st day of such leave any
Incentive Stock Option held by the Participant will cease to be treated as an
Incentive Stock Option and will be treated for tax purposes as a Nonstatutory
Stock Option.

13.           Transferability of Awards.  Unless determined otherwise by the
Administrator, an Award may not be sold, pledged, assigned, hypothecated,
transferred, or disposed of in any manner other than by will or by the laws of
descent or distribution and may be exercised, during the lifetime of the
Participant, only by the Participant.  If
the Administrator makes an Award transferable, such Award will contain such
additional terms and conditions as the Administrator deems appropriate.

14.           Adjustments; Dissolution or
Liquidation; Merger or Change in Control.

(a)           Adjustments.  In the event that any dividend
or other distribution (whether in the form of cash, Shares, other securities,
or other property), recapitalization, stock split, reverse stock split,
reorganization, merger, consolidation, split-up, spin-off, combination,
repurchase, or exchange of Shares or other securities of the Company, or other
change in the corporate structure of the Company affecting the Shares occurs,
the Administrator, in order to prevent diminution or enlargement of the
benefits or potential benefits intended to be made available under the Plan,
may (in its sole discretion) adjust the number and class of Shares that may be
delivered under the Plan and/or the number, class, and price of Shares covered
by each outstanding Award, and the numerical Share limits set forth in
Sections 3, 6, 7, 8, 9 and 10.

(b)           Dissolution
or Liquidation.  In the event of the
proposed dissolution or liquidation of the Company, the Administrator will
notify each Participant as soon as practicable prior to the effective date of
such proposed transaction.  To the extent
it has not been previously exercised, an Award will terminate immediately prior
to the consummation of such proposed action.

(c)           Change
in Control.  In the event of a Change
in Control, each outstanding Award will be assumed or an equivalent option or
right substituted by the successor corporation or a Parent or Subsidiary of the
successor corporation (the “Successor Corporation”).  In the event that 

 15
 

 

the Successor Corporation refuses to assume or substitute for the
Award, the Participant will fully vest in and have the right to exercise all of
his or her outstanding Options and Stock Appreciation Rights, including Shares
as to which such Awards would not otherwise be vested or exercisable, all
restrictions on Restricted Stock will lapse, and, with respect to Restricted
Stock Units, Performance Shares and Performance Units, all Performance Goals or
other vesting criteria will be deemed achieved at target levels and all other
terms and conditions met.  In addition,
if an Option or Stock Appreciation Right becomes fully vested and exercisable
in lieu of assumption or substitution in the event of a Change in Control, the
Administrator will notify the Participant in writing or electronically that the
Option or Stock Appreciation Right will be fully vested and exercisable for a
period of time determined by the Administrator in its sole discretion, and the
Option or Stock Appreciation Right will terminate upon the expiration of such
period.

For
the purposes of this subsection (c), an Award will be considered assumed if,
following the Change in Control, the Award confers the right to purchase or
receive, for each Share subject to the Award immediately prior to the Change in
Control, the consideration (whether stock, cash, or other securities or
property) or, in the case of a Stock Appreciation Right upon the exercise of
which the Administrator determines to pay cash or a Performance Share or
Performance Unit which the Administrator can determine to pay in cash, the fair
market value of the consideration received in the merger or Change in Control
by holders of Common Stock for each Share held on the effective date of the
transaction (and if holders were offered a choice of consideration, the type of
consideration chosen by the holders of a majority of the outstanding Shares);
provided, however, that if such consideration received in the Change in Control
is not solely common stock of the Successor Corporation, the Administrator may,
with the consent of the Successor Corporation, provide for the consideration to
be received upon the exercise of an Option or Stock Appreciation Right or upon
the payout of a Performance Share or Performance Unit, for each Share subject
to such Award (or in the case of Performance Units, the number of implied
shares determined by dividing the value of the Performance Units by the per
share consideration received by holders of Common Stock in the Change in
Control), to be solely common stock of the Successor Corporation equal in fair
market value to the per share consideration received by holders of Common Stock
in the Change in Control.

Notwithstanding
anything in this Section 14(c) to the contrary, an Award that vests, is earned
or paid-out upon the satisfaction of one or more Performance Goals will not be
considered assumed if the Company or its successor modifies any of such
Performance Goals without the Participant’s consent; provided, however, a
modification to such Performance Goals only to reflect the Successor
Corporation’s post-Change in Control corporate structure will not be deemed to
invalidate an otherwise valid Award assumption.

15.           Tax Withholding

(a)           Withholding
Requirements.  Prior to the delivery
of any Shares or cash pursuant to an Award (or exercise thereof), the Company
will have the power and the right to deduct or withhold, or require a
Participant to remit to the Company, an amount sufficient to satisfy federal,
state, local, foreign or other taxes (including the Participant’s FICA
obligation) required to be withheld with respect to such Award (or exercise
thereof).

(b)           Withholding
Arrangements.  The Administrator, in
its sole discretion and pursuant to such procedures as it may specify from time
to time, may permit a Participant to satisfy 

 16
 

 

such tax withholding obligation, in whole or in part by (a) paying
cash, (b) electing to have the Company withhold otherwise deliverable cash or
Shares having a Fair Market Value equal to the amount required to be withheld,
(c) delivering to the Company already-owned Shares having a Fair Market Value
equal to the amount required to be withheld, or (d) selling a sufficient number of Shares
otherwise deliverable to the Participant through such means as the
Administrator may determine in its sole discretion (whether through a broker or
otherwise) equal to the amount required to be withheld.  The amount of the withholding requirement
will be deemed to include any amount which the Administrator agrees may be
withheld at the time the election is made, not to exceed the amount determined
by using the maximum federal, state or local marginal income tax rates
applicable to the Participant with respect to the Award on the date that the
amount of tax to be withheld is to be determined.  The Fair Market Value of the Shares to be
withheld or delivered will be determined as of the date that the taxes are
required to be withheld.

16.           No Effect on Employment or Service.  Neither the Plan nor any Award will confer
upon a Participant any right with respect to continuing the Participant’s
relationship as a Service Provider with the Company, nor will they interfere in
any way with the Participant’s right or the Company’s right to terminate such
relationship at any time, with or without cause, to the extent permitted by
Applicable Laws.

17.           Date of Grant.  The date of grant of an Award will be, for
all purposes, the date on which the Administrator makes the determination
granting such Award, or such other later date as is determined by the
Administrator.  Notice of the
determination will be provided to each Participant within a reasonable time
after the date of such grant.

18.           Term of Plan.  Subject to Section 22  of the Plan, the Plan will become effective upon its
adoption by the Board.  It will continue
in effect for a term of ten (10) years unless terminated earlier under
Section 19  of the Plan.

19.           Amendment and Termination of the
Plan.

(a)           Amendment
and Termination.  The Administrator
may at any time amend, alter, suspend or terminate the Plan.

(b)           Stockholder
Approval.  The Company will obtain
stockholder approval of any Plan amendment to the extent necessary and
desirable to comply with Applicable Laws.

(c)           Effect
of Amendment or Termination.  No
amendment, alteration, suspension or termination of the Plan will impair the
rights of any Participant, unless mutually agreed otherwise between the
Participant and the Administrator, which agreement must be in writing and
signed by the Participant and the Company. 
Termination of the Plan will not affect the Administrator’s ability to
exercise the powers granted to it hereunder with respect to Awards granted
under the Plan prior to the date of such termination.

20.           Conditions Upon Issuance of Shares.

(a)           Legal
Compliance.  Shares will not be
issued pursuant to the exercise of an Award unless the exercise of such Award
and the issuance and delivery of such Shares will comply

 17
 

 

with Applicable Laws and will be further subject to the approval of
counsel for the Company with respect to such compliance.

(b)           Investment
Representations.  As a condition to
the exercise of an Award, the Company may require the person exercising such
Award to represent and warrant at the time of any such exercise that the Shares
are being purchased only for investment and without any present intention to
sell or distribute such Shares if, in the opinion of counsel for the Company,
such a representation is required.

21.           Inability to Obtain Authority.  The inability of the Company to obtain
authority from any regulatory body having jurisdiction, which authority is
deemed by the Company’s counsel to be necessary to the lawful issuance and sale
of any Shares hereunder, will relieve the Company of any liability in respect
of the failure to issue or sell such Shares as to which such requisite
authority will not have been obtained.

22.           Stockholder Approval.  The Plan will be subject to approval by the
stockholders of the Company within twelve (12) months after the date the Plan
is adopted.  Such stockholder approval
will be obtained in the manner and to the degree required under Applicable
Laws.

 

 18Exhibit 10.1

 

THE TRAVELERS COMPANIES, INC.

AMENDED AND RESTATED 2004 STOCK INCENTIVE
PLAN

1.                                       Purpose. The purposes of The Travelers
Companies, Inc. Amended and Restated 2004 Stock Incentive Plan (the “Plan”) are
(i) to attract and retain Employees by providing competitive compensation
opportunities, (ii) to provide Employees with incentive-based compensation in
the form of Company Common Stock, (iii) to attract and compensate non-employee
directors for service as Board and committee members, (iv) to encourage
decision making based upon long-term goals, and (v) to align the interest of
Employees and non-employee directors with that of the Company’s shareholders by
encouraging such persons to acquire a greater ownership position in the
Company.

2.                                       Definitions. Wherever used herein, the
following terms shall have the respective meanings set forth below:

“Award”
means an award to a Participant made in accordance with the terms of the Plan.

“Board”
means the Board of Directors of the Company.

“Code”
means the Internal Revenue Code of 1986, as amended from time to time, and any
successor thereto.

“Company”
means The Travelers Companies, Inc.

“Committee”
means the Compensation Committee of the Board, or a subcommittee of that
committee, consisting of no less than two directors, all of whom shall qualify
as “independent directors” within the meaning of Rule 303A of the New York
Stock Exchange, as “outside directors” within the meaning of Section 162(m) of
the Code, and as “non-employee directors” within the meaning of Rule 16b-3
under the Exchange Act.

“Common
Stock” means the common stock of the Company.

“Change
of Control” means the first to occur of (i) any “person” within the meaning of
Section 14(d) of the Exchange Act, other than the Company, a subsidiary or any employee
benefit plan(s) sponsored by the Company or any subsidiary, is or becomes the “beneficial
owner” (as defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of fifty percent (50%) or more of the then-outstanding Common
Stock, other than pursuant to a purchase of Common Stock from the Company; (ii)
individuals who constitute the Board on the effective date of this Plan, cease
for any reason to constitute at least a majority thereof, provided that any
person becoming a director subsequent to the effective date of this Plan, whose
election, or nomination for election by the Company’s shareholders, was
approved by a vote of at least three quarters of the directors comprising the
Board on the effective date of this Plan (either by a specific vote or by
approval of the proxy statement of the Company in which such person is named as
a

nominee
for director, without objection to such nomination) shall be, for purposes of
this clause (ii), considered as though such person were a member of the Board
on the effective date of this Plan; (iii) any plan or proposal for the
liquidation of the Company is adopted by the shareholders of the Company; (iv)
all or substantially all of the assets of the Company are sold, liquidated or
distributed (in one or a series of related transactions); or (v) there occurs a
reorganization, merger, consolidation or other corporate transaction involving
the Company (a “Transaction”), in each case, with respect to which the
shareholders of the Company immediately prior to such Transaction do not,
immediately after the Transaction, own more than fifty percent (50%) of the
combined voting power of the Company or other entity resulting from such
Transaction in substantially the same proportion as their ownership of the
voting power of the Company immediately prior to such Transaction.

“Employee”
means an employee, including non-employee directors, as defined in General
Instruction A to the Registration Statement on Form S-8 promulgated under the
Securities Act of 1933, as amended, or any successor form or statute, as
determined by the Committee.

“Exchange
Act” means the Securities Exchange Act of 1934, as amended from time to time,
and any successor thereto.

“Fair
Market Value” means, as of a specified date, one of the following as determined
by the Committee, each of which shall be based on trading prices of a share of
Common Stock on the New York Stock Exchange or on any national securities
exchange on which the shares of Common Stock are then listed, or if the shares
were not traded on such date, then on the next preceding date on which such
shares of Common Stock were traded, all as reported by such source as the
Committee may select: (i) the average of the high and low trading prices on
such date, (ii) the closing price on such date or (iii) the closing price on
the next preceding trading day.

“ISO”
means an incentive stock option as defined in Section 422 of the Code.

“Option
Proceeds” means the cash actually received by the Company for the exercise
price in connection with the exercise of a stock option granted under the Plan
or the Prior Plans that is exercised after the effective date of the Plan plus
the tax benefit that could be realized by the Company as a result of such stock
option exercise, which tax benefit shall be determined by multiplying (a) the
amount that is deductible for federal income tax purposes as a result of such
stock option exercise (currently, equal to the amount upon which the
Participant’s withholding tax obligation is calculated) times (b) the maximum
federal corporate income tax rate for the year of exercise. To the extent a
Participant pays the exercise price and/or withholding taxes with shares of
Common Stock, Option Proceeds shall not be calculated with respect to the
amounts so paid with shares.

“Participant”
means an Employee who is selected by the Committee to participate in the Plan.

“Performance
Conditions” may, for purposes of Awards under the Plan, include one or more of:
earnings per share, earnings before interest and tax, net income, adjusted net
income, operating income, stock price, total shareholder return, market share,
return on equity, cash return on equity, achievement of profit, loss and/or
expense ratio, revenue targets, cash flows, book value, return on assets or
return on capital. Such Performance Conditions may be based on the attainment
of levels set for such financial measures with respect to the Company or any
subsidiary, division, business unit, or any combination thereof and may be set
as an absolute measure or relative to a designated peer group or index of
comparable companies. Such Performance Conditions shall be set and defined by
the Committee within the time period prescribed by Section 162(m) of the Code.
Unless specifically determined by the Committee at the time a Performance
Condition is set, the satisfaction of any Performance Condition shall be
determined without regard to any change in accounting rules which becomes
effective following the time such Performance Condition is set.

“Prior
Plans” means The St. Paul Companies, Inc. Amended and Restated 1994 Stock
Incentive Plan and the Travelers Property Casualty Corp. 2002 Stock Incentive
Plan (including the Travelers Property Casualty Corp. Compensation Plan for Non-Employee
Directors).

3.                                       Shares Subject to the
Plan.
Subject to adjustment as provided in Section 20, the number of shares of Common
Stock which shall be available and reserved for grant of Awards under the Plan
shall be 35,000,000. The shares of Common Stock issued under the Plan may come
from authorized and unissued shares or shares purchased in the open market. No
Participant may, in any consecutive thirty-six (36) month period, be granted
Awards of stock options and stock appreciation rights under Sections 7 and 8 of
the Plan, respectively, with respect to more than 3,000,000 shares of Common
Stock or more than 1,000,000 shares of restricted stock under Section 9 of the
Plan, each of which numbers shall be subject to adjustment as provided in
Section 20.

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, shall thereafter again
be available for grant under the Plan. If the exercise price of any stock
option is satisfied by delivering shares of Common Stock to the Company (by
tender of such shares or attestation) or by authorizing the Company to retain shares
of Common Stock, only the number of shares of Common Stock delivered to the
Participant net of shares of Common Stock delivered to the Company (by tender
or attestation) or retained by the Company shall be deemed delivered for
purposes of determining the maximum number of shares of Common Stock available
for grant under the Plan. To the extent any shares of Common Stock subject to
an Award are not delivered to a Participant because such shares are used to
satisfy an applicable tax or other withholding obligations, such shares shall
not be deemed to have been delivered for purposes of determining the maximum
number of shares of Common Stock available for grant under the Plan. Shares of
Common Stock purchased by the Company on the open market using Option Proceeds
shall also be available for grant under the Plan; 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 as otherwise provided
by the Committee, the provisions of this paragraph shall also apply to any
awards granted under the Prior Plans that are outstanding on the effective date
of the Plan. In addition, the number of shares of Common Stock available for
grant under the Plan shall not be reduced by shares subject to Awards granted
upon the assumption of or in substitution for awards granted by a business or
entity that is merged into or acquired by (or whose assets are acquired by) the
Company.

4.                                       Administration.

4.1                               Committee Authority. The Committee shall have full and
exclusive power to administer and interpret the Plan, to grant Awards and to
adopt such administrative rules, regulations, procedures and guidelines
governing the Plan and the Awards as it may deem necessary in its discretion,
from time to time. The Committee’s authority shall include, but not be limited
to, the authority to:

(i)                                   determine the type and
timing of Awards to be granted under the Plan;

(ii)                                select
Award recipients and determine the extent of their participation; and

(iii)
                            establish all other terms, conditions,
restrictions and limitations applicable to Awards and the shares of Common
Stock issued pursuant to Awards, including, but not limited to, those relating
to a Participant’s retirement, death,
disability, leave of absence or termination of employment.

The Committee’s right to make any decision,
interpretation or determination under the Plan shall be in its sole and
absolute discretion.

4.2                               Administration of the Plan. The administration of the Plan shall be
managed by the Committee. The Committee shall have the power to prescribe and
modify, as necessary, the form of Award document, to correct any defect, supply
any omission or clarify any inconsistency in the Plan and/or in any Award
document and to take such actions and make such administrative determinations
that the Committee deems appropriate in its discretion. Any decision of the
Committee in the administration and interpretation of the Plan, as described
herein, shall be final, binding and conclusive on all parties concerned,
including the Company, its shareholders and subsidiaries and all Participants.

4.3                               Delegation of Authority. The Committee may at
any time delegate to a committee of the Board or one or more officers of the
Company some or all of its authority over the administration of the Plan, with
respect to persons who are not subject to the reporting requirements of Section
16(a) of the Exchange Act or “covered employees” described in Section 162(m) of
the Code.

5.                                       Eligibility. The Committee shall determine
which Employees shall be eligible to receive Awards. No Employee shall have at
any time the right to receive an Award, or having been selected for an Award,
to receive any further Awards.

The Committee may also grant stock options,
stock appreciation rights, restricted stock, performance awards or other Awards
under the Plan in substitution for, or in connection with the assumption of,
existing options, stock appreciation rights, restricted stock, performance
awards or other awards granted, awarded or issued by another entity and assumed
or otherwise agreed to be provided for by the Company pursuant to or by reason
of a transaction involving a merger, consolidation, plan of exchange,
acquisition of property or stock, separation, reorganization or liquidation to
which the Company or any subsidiary is a party. The terms and conditions of the
substitute Awards may vary from the terms and conditions set forth in the Plan
to the extent the Committee at the time of the grant may deem appropriate to
conform, in whole or in part, to the provisions of the awards in substitution
for which they are granted.

6.                                       Awards. Awards under the Plan may consist of:
non-qualified stock options, ISOs, stock appreciation rights, restricted stock,
performance awards and any other stock-based awards, including deferred stock
units.

7.                                       Stock Options.

7.1                               Types of Options. Stock options granted under the Plan may
be non-qualified stock options, ISOs or any other type of stock option
permitted under the Code, as determined by the Committee and evidenced by the
document governing the Award.

7.2                            ISOs. The terms and conditions of any ISO
shall be subject to the provisions of Section 422 of the Code and the terms,
conditions, limitations and administrative procedures established by the
Committee. At the discretion of the Committee, ISOs may be granted to any
employee of the Company and its subsidiaries, as such term is defined in
Section 424(f) of the Code (each, a “Subsidiary”). No ISO may be granted to any
Participant who, at the time of such grant, owns more than ten percent (10%) of
the total combined voting power of all classes of stock of the Company or of
any Subsidiary, unless (i) the exercise price for such ISO is at least
one-hundred and ten percent (110%) of the Fair Market Value of a share of
Common Stock on the date the ISO is granted, and (ii) the date on which such
ISO terminates is a date not later than the day preceding the fifth anniversary
of the date on which the ISO is granted. Any Participant who disposes of shares
acquired upon the exercise of an ISO either within two years after the date of
grant of such ISO or within one year after the transfer of such shares to the
Participant, shall notify the Company of such disposition and of the amount
realized upon such disposition. The maximum number of shares of Common Stock
available under the Plan for issuance as ISOs shall be 35,000,000.

All stock options granted under the Plan are
intended to be nonqualified stock options, unless the applicable Award document
expressly states that the stock option is intended to be an ISO. If a stock
option is intended to be an ISO, and if for any reason such stock option (or
portion thereof) shall not qualify as an ISO, then, to the extent of such
nonqualification, such stock option (or portion thereof) shall be regarded as a
nonqualified stock option granted under the Plan; provided that such stock
option (or portion thereof) otherwise complies with the Plan’s requirements
relating to nonqualified stock options.

7.3                               Exercise Price and Period. The Committee shall establish the
exercise price, which price (other than for substitute options pursuant to
Section 5) shall be no less than the Fair

Market Value of a share of the Common Stock on
the date of grant. Each stock option may be exercised in whole or in part on
the terms provided in the Award document. The Committee also shall establish the
period during which a stock option is exercisable, provided that in no event
may a stock option be exercisable for a period of more than ten (10) years from
the date of grant, and in no event may a stock option become exercisable
earlier than one year after the date of grant, except in the case of:

(i)                                    a Change of Control if so provided by the
Committee;

(ii)                                 an earlier date specifically approved by
the Committee to attract a key executive to join the Company; or

(iii)                              a stock option issued as a substitute
option pursuant to Section 5.

When a stock option is no longer exercisable, it
shall be deemed to have lapsed or expired.

7.4                               Manner of Exercise. The exercise price of each share as to
which a stock option is exercised and, if requested, the amount of any federal,
state, local or foreign withholding taxes, shall be paid in full at the time of
such exercise. The exercise of any stock option shall be contingent on and
subject to such payment of the exercise price and withholding taxes, or the
arrangement for the satisfaction of such payments in a manner satisfactory to
the Committee. Such payment shall be made in any of the following forms:

(i)                                    in cash (including check, bank draft or
money order),

(ii)                                 by delivery of shares of Common Stock
owned by the Participant (by tender of such shares or by attestation) having a
Fair Market Value as of the date of exercise equal to the exercise price for
the total number of shares as to which the option is exercised, plus applicable
taxes, if requested, subject to (A) the shares so delivered being “mature
shares” for purposes of the applicable accounting rules then in effect, or
otherwise having such characteristics as are required, if necessary, in order
to avoid adverse accounting consequences to the Company on account of use of
such shares to pay the exercise price and (B) such other guidelines for the
tender of Common Stock as the Committee may establish,

(iii)                              if approved by the Committee in the
related Award document or other action by the Committee, authorization of the
Company to retain from the total number of shares of Common Stock as to which
the option is exercised that number of shares of Common Stock having a Fair
Market Value as of the date of exercise equal to the exercise price for the
total number of shares as to which the option is exercised, plus applicable
taxes, if requested, and

(iv)                             such other consideration as the Committee
deems appropriate, or by a combination of cash, shares of Common Stock,
retention of shares and such other consideration.

The Committee may, with the consent of the
Participant, cancel any outstanding stock option in consideration of a cash
payment in an amount not greater than the excess, if any, of the aggregate Fair
Market Value (on the date of such cancellation) of the shares subject to the
stock option over the aggregate exercise price of such stock option; provided,
however, that the Participant’s consent is not required for such a cancellation
pursuant to Section 13 hereof.

8.                                      Stock Appreciation
Rights.
An Award of a stock appreciation right shall entitle the Participant, subject
to terms and conditions determined by the Committee, to receive upon exercise
of the stock appreciation right all or a portion of the excess of the Fair
Market Value of a specified number of shares of Common Stock as of the date of
exercise of the stock appreciation right over a specified strike price, which
price shall be no less than the Fair Market Value of a share of the Common
Stock on the date of grant of the stock appreciation right or the date of grant
of a previously granted related stock option, as determined by the Committee in
its discretion. A stock appreciation right may be granted in connection with a
previously or contemporaneously granted stock option, or independent of any
stock option. If issued in connection with a stock option, the Committee may
impose a condition that the exercise of a stock appreciation right cancels the
stock option with which it is connected and exercise of the connected stock
option cancels the stock appreciation right. Each stock appreciation right may
be exercised in whole or in part on the terms provided in the Award document.
Stock appreciation rights granted independent of any stock option shall be
exercisable for such period as specified by the Committee, but in no event may
stock appreciation rights become exercisable less than one year after the date
of grant, except in the case of:

(i)                                    a Change of Control if so provided by the
Committee;

(ii)                                 an earlier date specifically approved by
the Committee to attract a key executive to join the Company; or

(iii)                              a stock appreciation right issued as a
substitute stock appreciation right pursuant to Section 5.

In
addition, in no event may a stock appreciation right be exercisable for a
period of more than ten (10) years. When a stock appreciation right is no
longer exercisable, it shall be deemed to have lapsed or terminated. Except as
otherwise provided in the applicable agreement, upon exercise of a stock
appreciation right, payment to the Participant shall be made in the form of
cash, shares of Common Stock or a combination of cash and shares of Common
Stock as promptly as practicable after such exercise. The Award document may
provide for a limitation upon the amount or percentage of the total
appreciation on which payment (whether in cash and/or shares of Common Stock)
may be made in the event of the exercise of a stock appreciation right. The
Committee may, with the consent of the Participant, cancel any outstanding
stock appreciation right in consideration of a cash payment in an amount not in
excess of the difference between the aggregate Fair Market Value (on the date
of such cancellation) of any shares subject to the stock appreciation right and
the aggregate strike price

of
such Shares; provided, however, that the Participant’s consent is not required
for such a cancellation in connection with the purchase of such stock
appreciation right pursuant to Section 13 hereof.

9.                                    Restricted Stock. Restricted stock may be granted in the
form of actual shares of Common Stock, which shall be evidenced by a
certificate with an appropriate legend, or in uncertificated direct
registration form, registered in the name of the Participant but held by the
Company until the end of the restricted period, or share units, as determined
by the Committee. As a condition to the receipt of an award of restricted stock
in the form of actual shares of Common Stock, a Participant may be required to
execute any stock powers, escrow agreements or other documents as may be
determined by the Committee. Any conditions, limitations, restrictions, vesting
and forfeiture provisions shall be established by the Committee in its
discretion. No portion of an Award of restricted stock may vest as to any of
the shares subject to the Award earlier than one year from the date of grant,
except in the case of:

(i)                                         a
Change of Control if so provided by the Committee;

(ii)                                      death,
retirement or disability if so provided by the Committee; or

(iii)                               
restricted stock issued as a substitute Award pursuant to Section 5.

The
Committee may, on behalf of the Company, approve the purchase by the Company of
any shares subject to an Award of restricted stock, to the extent vested, for
an amount equal to the aggregate Fair Market Value of such shares on the date
of purchase. Awards of restricted stock may provide the Participant with
dividends or dividend equivalents (pursuant to Section 17) and voting rights,
if in the form of actual shares, prior to vesting. With respect to Awards of
restricted stock intended to qualify as “performance-based compensation” under
Section 162(m) of the Code, the Committee shall establish and administer
Performance Conditions in the manner described in Section 162(m) and Treasury
Regulations promulgated thereunder as an additional condition to the vesting or
payment, as applicable, of such Awards.

10.                              Performance Awards. Performance awards may be in the form of
performance shares valued with reference to a share of Common Stock or
performance units valued with reference to an amount of property (including
cash) other than shares of Common Stock. Performance awards may also be granted
in the form of any other stock-based Award. Performance awards shall entitle a
Participant to future payments based upon the attainment of Performance
Conditions established in writing by the Committee. Payment shall be made in
cash, shares of Common Stock or any combination thereof, as determined by the
Committee. The Award document establishing a performance award may establish
that a portion of a Participant’s Award will be paid for performance that
exceeds the minimum target but falls below the maximum target available to the
Award. With respect to Awards of restricted stock intended to qualify as “performance-based
compensation” under Section 162(m) of the Code, the Committee shall establish
and administer Performance Conditions in the manner described in Section 162(m)
and Treasury Regulations promulgated thereunder as an additional condition to
the vesting or payment, as applicable, of such performance awards. The Award
document shall also provide for the timing of payment, which shall not be
earlier than one year from date of grant, except in the case of:

(i)                                     a Change of Control if so provided by the
Committee;

(ii)                                  an earlier date specifically approved by
the Committee to attract a key executive to join the Company; or

(ii)                                  a performance award issued as a
substitute Award pursuant to Section 5.

Following the conclusion or acceleration
of the period of time designated for attainment of the Performance Conditions,
the Committee shall determine the extent to which the Performance Conditions
have been attained and shall then cause to be delivered to the Participant (i)
a number of shares of Common Stock equal to the number of performance shares or
the value of such performance units determined by the Committee to have been
earned, and/or (ii) cash equal to the Fair Market Value of such number of
performance shares or the value of performance units, as the Committee shall
elect or as shall have been stated in the applicable Award document. In no
event may performance awards be granted to a single Participant in any 12-month
period (i) in respect of more than 250,000 shares of Common Stock (if the Award
is denominated in shares of Common Stock) or (ii) having a maximum payment with
a value greater than $10,000,000 (if the Award is denominated in other than
shares of Common Stock).

11.                                 Other Stock-Based Awards. The Committee may issue
unrestricted shares of Common Stock, or other awards denominated in Common
Stock (including but not limited to phantom stock and deferred stock units), to
Participants, alone or in tandem with other Awards, in such amounts and subject
to such terms and conditions as the Committee shall from time to time in its
sole discretion determine. With respect to such Awards intended to qualify as “performance-based
compensation” under Section 162(m) of the Code, the Committee shall establish
and administer Performance Conditions in the manner described in Section 162(m)
and Treasury Regulations promulgated thereunder as an additional condition to
the vesting and payment of such Awards. In no event may other stock-based
Awards described in this Section 11 be granted to a single Participant in
respect of more than 250,000 shares of Common Stock in any 12-month period. The
terms and conditions of any such other stock-based Awards subject to time-based
restrictions on vesting will be limited as specified in Section 9 for Awards of
restricted stock.

12.                                 Award Documents. Each Award under the Plan
shall be evidenced by an Award document (which may consist of a term sheet or
an agreement, and may be provided in electronic form) setting forth the terms
and conditions, as determined by the Committee, which shall apply to such
Award, in addition to the terms and conditions specified in the Plan. The
Committee may, in its discretion, place terms in the Award documents that
provide for the acceleration of any time periods relating to the exercise or
realization of any Awards so that such Awards may be exercised or realized in
full on or before a date fixed by the Committee, in connection with a Change of
Control.

13.                                Change of Control. The Committee may, in its
discretion, at the time an Award is made hereunder or at any time prior to,
coincident with or after the time of a Change of Control:

(i)                                     provide for the purchase
of such Awards, upon the Participant’s consent, for an amount of cash equal to
the amount which could have been obtained upon the exercise or realization of
such rights had such Awards been currently exercisable or payable, provided
that the Participant’s consent shall not be required if the Committee takes
such action in connection with the consummation of a Change of Control;

(ii)                                  make such adjustment to
the Awards then outstanding as the Committee deems appropriate to reflect such
transaction or change; and/or

(iii)                               cause the Awards then outstanding to be
assumed, or new rights substituted therefore, by the surviving corporation in
such Change of Control.

The Committee may, in its discretion, include such
further provisions and limitations in any Award document as it may deem
equitable and in the best interests of the Company.

14.                               Withholding. The Company and its subsidiaries shall
have the right to deduct from any payment to be made pursuant to the Plan, or
to require prior to the issuance or delivery of any shares of Common Stock or
the payment of cash under the Plan, any taxes (whether federal, state, local or
foreign) to be withheld therefrom. The Committee may, in its discretion, permit
a Participant to elect to satisfy such withholding obligation by any of the
methods pursuant to which the exercise price of a stock option may be paid
pursuant to Section 7. Any satisfaction of tax obligations through the
withholding of shares may only be up to the statutory minimum tax rate. Any
fraction of a share of Common Stock required to satisfy such obligation shall
be disregarded and the amount due shall instead be paid in cash to the
Participant.

15.                                 Transferability. Except as provided in this
Section, during the lifetime of a Participant to whom an Award is granted, only
that Participant (or that Participant’s legal representative in the case of
disability) may exercise a stock option or stock appreciation right, or receive
payment with respect to restricted stock, a performance award or any other
Award. The Committee may permit (on such terms, conditions and limitations as
it determines), an Award of restricted stock, stock options, stock appreciation
rights, performance shares or performance units or other Awards to be
transferred or transferable to the extent permissible by law and, in the case
of an ISO, to the extent permissible under Section 422 of the Code. Other than
as stated in the preceding sentence, no Award may be assigned, alienated,
pledged, attached, sold or otherwise transferred or encumbered by a Participant
otherwise than by will or by the laws of descent and distribution, and any such
purported assignment, alienation, pledge, attachment, sale, transfer or
encumbrance shall be void and unenforceable against the Company.

16.                                 Deferrals and Settlements. The Committee may
require or permit Participants to elect to defer the issuance of shares or the
settlement of Awards in cash under such rules and procedures as it may
establish under the Plan. It may also provide that deferred settlements include
the payment or crediting of interest or dividend equivalents on the deferral
amounts.

17.                                  Dividends and Dividend Equivalents. An
Award (including without limitation a stock option or stock appreciation right)
may, if so determined by the Committee, provide the

Participant with the right to
receive dividend payments or dividend equivalent payments with respect to
Common Stock subject to the Award (both before and after the Common Stock
subject to the Award is earned, vested or acquired), which payments may be
either made currently or credited to an account for the Participant, and may be
settled in cash or Common Stock, as determined by the Committee. Any such
settlements, and any such crediting of dividends or dividend equivalents or
reinvestment in shares of Common Stock, may be subject to such conditions,
restrictions and contingencies as the Committee shall establish, including the
reinvestment of such credited amounts in Common Stock equivalents.

18.                                   No Right to Awards or Employment. No person
shall have any claim or right to be granted an Award, and the grant of an Award
shall not be construed as giving a Participant the right to continue in the
employ of the Company or its subsidiaries. Further, the Company and its
subsidiaries expressly reserve the right at any time to dismiss a Participant
without any liability, or any claim under the Plan, except as expressly
provided herein or in any Award document entered into hereunder.

19.                                  Rights as a Shareholder. Unless the Committee
determines otherwise, a Participant shall not have any rights as a shareholder
with respect to shares of Common Stock covered by an Award until the date the
Participant becomes the holder of record with respect to such shares. No adjustment
will be made for dividends or other rights for which the record date is prior
to such date, except as provided in Section 17.

20.                                  Adjustment of and Changes in Common Stock. In
the event of any equity restructuring (within the meaning of Financial
Accounting Standard No. 123 (revised 2004), the Committee shall cause there to
be made a substitution or adjustment, as it determines to be equitable in order
to prevent a dilution or enlargement of rights relative to other shareholders
of Common Stock, to the number and kind of shares of Common Stock or other
securities issued or reserved for issuance pursuant to the Plan and to
outstanding Awards (including but not limited to the number and kind of shares
of Common Stock or other securities to which such Awards are subject, and the
exercise or strike price of such Awards) to the extent such other Awards would
not otherwise automatically adjust in the equity restructuring; provided, in
each case, that with respect to ISOs, no such adjustment shall be authorized to
the extent that such adjustment would cause such options to violate Section
422(b) of the Code or any successor provision; provided further, that no such
adjustment shall be authorized under this Section to the extent that such
adjustment would cause an Award to be subject to adverse tax consequences under
Section 409A of the Code. In the event of a change in corporate capitalization
other than an equity restructuring, which may include a merger, consolidation,
or any other business combination (within the meaning of Financial Accounting
Standard No. 141), or any partial or complete liquidation of the Company, such
substitutions or adjustments described in the foregoing sentence may be made as
determined to be equitable by the Committee to prevent dilution or enlargement
of rights relative to other shareholders of Common Stock. In either case, any
such substitution or adjustment shall be conclusive and binding for all
purposes of the Plan. Unless otherwise determined by the Committee, the number of
shares of Common Stock subject to an Award shall always be a whole number. In
no event shall an outstanding stock option or stock appreciation right be
amended for the sole purpose of decreasing the exercise price or strike price
thereof, except in accordance with Section 21 of the Plan.

21.                                  Amendment; Repricing. The Board may amend,
suspend or terminate the Plan or any portion thereof at any time, provided that
(i) no amendment shall be made without shareholder approval if such approval is
necessary in order for the Plan to continue to comply with the rules of the New
York Stock Exchange or if such approval is necessary in order for the Company
to avoid being denied a tax deduction under Section 162(m) of the Code, and
(ii) no amendment, suspension or termination may adversely affect any
outstanding Award without the consent of the Participant to whom such Award was
made. Except for adjustments pursuant to Section 20, in no event may any stock
option or stock appreciation right granted under the Plan be amended to
decrease the exercise price or strike price thereof, as the case may be, or be
cancelled in conjunction with the grant of any new stock option or stock
appreciation right with a lower exercise price or strike price, as the case may
be, or otherwise be subject to any action that would be treated, for accounting
purposes or under the rules of the New York Stock Exchange, as a “repricing” of
such stock option or stock appreciation right, unless such amendment,
cancellation or action is approved by the Company’s shareholders in accordance
with applicable law and rules of the New York Stock Exchange.

22.                                 Government and Other Regulations. The
obligation of the Company to settle Awards in Common Stock shall be subject to
all applicable laws, rules, and regulations, and to such approvals by
governmental agencies as may be required. Notwithstanding any terms or
conditions of any Award to the contrary, the Company shall be under no
obligation to offer to sell or to sell and shall be prohibited from offering to
sell or selling any shares of Common Stock pursuant to an Award unless such
shares have been properly registered for sale pursuant to the Securities Act of
1933 with the Securities and Exchange Commission or unless the Company has
received an opinion of counsel, satisfactory to the Company, that such shares
may be offered or sold without such registration pursuant to an available
exemption therefrom and the terms and conditions of such exemption have been
fully complied with. The Company shall be under no obligation to register for
sale under the Securities Act of 1933 any of the shares of Common Stock to be
offered or sold under the Plan. If the shares of Common Stock offered for sale
or sold under the Plan are offered or sold pursuant to an exemption from
registration under the Securities Act of 1933, the Company may restrict the
transfer of such shares and may legend the Common Stock certificates
representing such shares in such manner as it deems advisable to ensure the
availability of any such exemption.

23.                                 Relationship to Other Benefits. No
payment under the Plan shall be taken into account in determining any benefits
under any pension, retirement, profit sharing, group insurance or other benefit
plan of the Company or any subsidiary or affiliate of the Company except as
otherwise specifically provided in such other plan.

24.                                 Governing Law. The Plan shall be construed
and its provisions enforced and administered in accordance with the laws of the
State of Minnesota applicable to contracts made and performed wholly within
such state by residents thereof.

25.                                 Effective Date. The original version of this
Plan became effective on July 28, 2004 and this amendment and restatement of
the Plan is effective on December 13, 2006. Subject

to earlier termination pursuant
to Section 21, the Plan shall have a term often (10) years from its effective
date.

26.                                  Foreign Employees. Awards may be granted
to Participants who are foreign nationals or employed outside the United
States, or both, on such terms and conditions different from those applicable
to Awards to Participants employed in the United States as may, in the judgment
of the Committee, be necessary or desirable in order to recognize differences
in local law or tax policy. The Committee also may impose conditions on the
exercise or vesting of Awards in order to minimize the Company’s obligation
with respect to tax equalization for Employees on assignments outside their
home country.

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