Citibank 2009 Annual Report Download - page 163

153
Stock Option Programs
The Company has a number of stock option programs for its non-employee
directors, officers and employees. Generally, in January 2008, 2007 and
2006, stock options were granted only to CAP and FA CAP participants who
elected to receive stock options in lieu of restricted or deferred stock awards,
and to non-employee directors who elected to receive their compensation in
the form of a stock option grant. Beginning in 2009, CAP participants, and
directors may no longer elect to receive stock options. Occasionally, stock
options also may be granted as sign-on awards. All stock options are granted
on Citigroup common stock with exercise prices that are no less than the fair
market value at the time of grant (which is defined under the plan to be the
NYSE closing price on the trading day immediately preceding the grant date,
or on the grant date for grants to certain officers). Generally, options granted
from 2003 through 2009 have six-year terms, and vest ratably over three- or
four-year periods; however, directors’ options cliff vest after two years, and
vesting schedules for sign-on grants may vary. The sale of shares acquired
through the exercise of employee stock options granted from 2003 through
2008 (and FA CAP options granted in 2009) is restricted for a two-year period
(and may be subject to the stock ownership commitment of senior executives
thereafter).
Prior to 2003, Citigroup options, including options granted since the date
of the merger of Citicorp and Travelers Group, Inc., generally vested at a rate
of 20% per year over five years (with the first vesting date occurring 12 to 18
months following the grant date) and had 10-year terms. Certain options,
mostly granted prior to January 1, 2003, and with 10-year terms, permit an
employee exercising an option under certain conditions to be granted new
options (reload options) in an amount equal to the number of common
shares used to satisfy the exercise price and the withholding taxes due upon
exercise. The reload options are granted for the remaining term of the related
original option and vest after six months. Reload options may in turn be
exercised using the reload method, given certain conditions. An option may
not be exercised using the reload method unless the market price on the date
of exercise is at least 20% greater than the option exercise price.
On October 29, 2009, Citigroup made a one-time broad-based option
grant to employees worldwide. The options have a six-year term, and
generally vest in three equal installments over three years, beginning on
the first anniversary of the grant date. The options were awarded with a
strike price equal to the NYSE closing price on the trading day immediately
preceding the date of grant ($4.08). The CEO and other employees whose
2009 compensation was subject to structures approved by the Special Master
did not participate in this grant.
In January 2009, members of the Management Executive Committee
received 10% of their awards as performance-priced stock options, with an
exercise price that placed the awards significantly “out of the money” on
the date of grant. Half of each executive’s options have an exercise price of
$17.85 and half have an exercise price of $10.61. The options were granted
on a day on which Citi’s closing price was $4.53. The options have a 10-year
term and vest ratably over a four-year period.
On January 22, 2008, Vikram Pandit, CEO, was awarded stock options to
purchase three million shares of common stock. The options vest 25% per
year beginning on the first anniversary of the grant date and expire on the
tenth anniversary of the grant date. One-third of the options have an exercise
price equal to the NYSE closing price of Citigroup stock on the grant date
($24.40), one-third have an exercise price equal to a 25% premium over
the grant-date closing price ($30.50), and one-third have an exercise price
equal to a 50% premium over the grant date closing price ($36.60). The first
installment of these options vested on January 22, 2009. These options do not
have a reload feature.
From 1997-2002, a broad base of employees participated in annual option
grant programs. The options vested over five-year periods, or cliff vested after
five years, and had 10-year terms but no reload features. No grants have been
made under these programs since 2002.