Cisco 2003 Annual Report Download - page 55

Shareholders’ Rights Plan
In June 1998, the Board of Directors approved a Shareholders’ Rights Plan (“Rights Plan”). The Rights Plan is intended to protect
shareholders’ rights in the event of an unsolicited takeover attempt. It is not intended to prevent a takeover of the Company on
terms that are favorable and fair to all shareholders and will not interfere with a merger approved by the Board of Directors. Each
right entitles shareholders to buy a unit equal to a portion of a new share of Series A Preferred Stock of the Company. The rights
will be exercisable only if a person or a group acquires or announces a tender or exchange offer to acquire 15% or more of the
Company’s common stock.
In the event the rights become exercisable, the Rights Plan allows for Cisco shareholders to acquire, at an exercise price of $108
per right owned, stock of the surviving corporation having a market value of $217, whether or not Cisco is the surviving corporation.
The rights, which expire in June 2008, are redeemable for $0.00017 per right at the approval of the Board of Directors.
Preferred Stock
Under the terms of the Company’s Articles of Incorporation, the Board of Directors may determine the rights, preferences, and terms
of the Company’s authorized but unissued shares of preferred stock.
Comprehensive Income (Loss)
The components of comprehensive income (loss), net of tax, are as follows (in millions):
Years Ended July 26, 2003 July 27, 2002 July 28, 2001
Net income (loss) $3,578 $1,893 $ (1,014)
Other comprehensive income (loss):
Change in unrealized gains and losses on investments 502 215 (5,765)
Tax effect (150) 9 1,953
Change in unrealized gains and losses on investments, net of tax 352 224 (3,812)
Other 29 24 7
Total $3,959 $2,141 $ (4,819)
The change in unrealized gains and losses on investments of $502 million and $215 million during fiscal 2003 and 2002, respectively,
included the effects of the recognition of charges in the Consolidated Statements of Operations of $412 million and $858 million
during the respective first quarter periods attributable to the impairment of certain publicly traded equity securities. The impairment
charges were related to the decline in the fair value of the Company’s publicly traded equity investments below their cost basis that
was judged to be other-than-temporary.
10. EMPLOYEE BENEFIT PLANS
Employee Stock Purchase Plans
The Company has an Employee Stock Purchase Plan and an International Employee Stock Purchase Plan (the “Purchase Plans”),
under which 221.4 million shares of the Company’s common stock have been reserved for issuance. Eligible employees may purchase a
limited number of shares of the Company’s common stock at a discount of up to 15% of the market value at certain plan-defined
dates. The Purchase Plans terminate on January 3, 2005. In fiscal 2003, 2002, and 2001, the shares issued under the Purchase Plans
were 23 million, 22 million, and 13 million shares, respectively. At July 26, 2003, 65 million shares were available for issuance under
the Purchase Plans.
Employee Stock Option Plans
Stock Option Program Description The Company has two plans under which it grants options: the 1996 Stock Incentive Plan (the “1996
Plan”) and the 1997 Supplemental Stock Incentive Plan (the “Supplemental Plan”).
Stock option grants are designed to reward employees for their long-term contributions to the Company and provide incentives for
them to remain with the Company. The number and frequency of stock option grants are based on competitive practices, operating
results of the Company, and government regulations. Since the inception of the 1996 Plan, the Company has granted options to all
of its employees, and the majority has been granted to employees below the vice president level. No options have been granted to
directors or executive officers under the Supplemental Plan.
2003 ANNUAL REPORT 53