This excerpt taken from the C DEF 14A filed Mar 20, 2009.
The 2009 plan has a five-year term and an initial share authorization of 250 million shares (subject to adjustment, as described below). However, for purposes of counting the number of shares available for grant, the 2009 plan provides that each share of common stock subject to a restricted or deferred stock award (or other full-value award) will be counted as an award of 2.3 shares; each share subject to a stock option or stock appreciation right (sar) will be counted as an award of one share. Accordingly, if all shares authorized for issuance under the plan are awarded subject to stock options or sars, the maximum number of shares that may be issued will be 250 million shares; if all available shares are awarded as full-value awards, the maximum number of shares that may be issued will be 108 million shares.
Shares of common stock issued pursuant to awards granted under the 2009 plan may be shares that have been authorized but not yet issued, or previously issued shares that we have reacquired.
We recently announced offers to exchange publicly traded preferred securities and preferred securities owned by the U.S. government and certain private parties for shares of common stock. Because the number of common shares to be issued in these exchange transactions exceeds the total number of shares held in treasury or currently authorized under our corporate charter but not yet issued, an amendment of our charter increasing the number of authorized shares will be necessary to consummate these exchanges. Stockholders will be asked to approve a proposal to amend our charter separately from this proxy statement and the 2009 annual meeting.
Many of the shares held in our treasury or authorized for issuance under our charter are being reserved for issuance upon the exercise of warrants that will be issued as interim securities in the private exchange transactions (the warrants will be become exercisable only if preferred securities are tendered in the exchange and common stockholders fail to approve an amendment to the charter authorizing the issuance of additional common shares). In addition, our ability to re-purchase our common stock in the market is currently restricted pursuant to the terms of specific government relief under tarp. Because the maximum number of shares that we would be allowed to grant subject to awards under the 2009 plan may exceed the number of shares remaining available in our treasury or for issuance under our charter, and none can be repurchased at this time, our ability to make awards under the 2009 plan may be constrained unless and until a charter amendment authorizing the issuance of additional shares of common stock is approved by stockholders, or Citi is again permitted to repurchase its shares in the market. The share authorization to be included in the charter amendment proposal in connection with the exchange transactions will provide for sufficient shares to support the maximum 250 million shares (subject to adjustment, as described in the following paragraph) that may be subject to awards granted under the 2009 plan.
If the public exchange transactions are consummated, and if the proposal to amend our charter is approved and the private exchange transactions are consummated, the number of shares available for grant under the 2009 plan is expected to be proportionately increased to reflect the increase in the number of shares of common stock outstanding that will result from issuing new shares of common stock in exchange for outstanding preferred securities. The adjustment will ensure that the percentage of outstanding common equity to be authorized for grant under the plan will not be reduced by the issuance of new shares of common stock in the exchange transactions. (The adjustment provision of the 2009 plan is described on page 82).
As further described below, the 2009 plan prohibits liberal share counting practices that would permit shares used to pay option exercise prices or withheld to pay taxes on awards to be subject to new awards.
Due to unprecedented dislocations in the markets, Citis stock price has fallen to unprecedented lows. At current market prices, it is anticipated that most of the shares authorized for grant under the 2009 plan would be subject to awards granted in the first plan year. At higher market prices, fewer shares would be needed than at lower prices. If necessary, management will propose that stockholders approve an increase in the number of shares available for future grants under the 2009 plan, possibly as soon as the annual meeting in April 2010.
The 2009 plan is substantially similar to the amended and restated 1999 plan that stockholders approved on April 19, 2005; the 1999 plan was further amended on October 17, 2006, and amended and restated effective January 1, 2009 (the amendments to the 1999 plan subsequent to April 19, 2005, were technical in nature and did not require stockholder approval).
The 2009 plan (as did the 1999 plan) includes the following features that protect the interests of our stockholders:
In addition to the reduced term (five years) and reduced share authorization (expected to be sufficient for only one year), the 2009 plan contains several other enhancements, including the following:
We discuss below our current grant practices and how dilution will be affected if the 2009 plan is approved. This discussion is followed by a summary of the terms and provisions of the 2009 plan.