Cisco 2007 Annual Report Download - page 66

2007 Annual Report 69
Notes to Consolidated Financial Statements
The Company’s primary stock incentive plans are summarized as follows:
2005 Plan The maximum number of shares issuable over the term of the 2005 Plan is limited to 350 million shares. The 2005 Plan permits
the granting of stock options, stock, stock units, and stock appreciation rights to employees (including employee directors and officers)
and consultants of the Company and its subsidiaries and affiliates, and nonemployee directors of the Company. Stock options granted
under the 2005 Plan have an exercise price of at least 100% of the fair market value of the underlying stock on the grant date and expire
no later than nine years from the grant date. The stock options will generally become exercisable for 20% of the option shares one year
from the date of grant and then ratably over the following 48 months. Stock grants and stock units will generally vest with respect to 20% of
the shares covered by the grant on each of the first through fifth anniversaries of the date of the grant. The Compensation and Management
Development Committee of the Board of Directors has the discretion to use a different vesting schedule. Stock appreciation rights may
be awarded in combination with stock options or stock grants and such awards shall provide that the stock appreciation rights will not be
exercisable unless the related stock options or stock grants are forfeited. Stock grants may be awarded in combination with nonstatutory
stock options, and such awards may provide that the stock grants will be forfeited in the event that the related nonstatutory stock options are
exercised. The 2005 Plan terminates at the 2007 Annual Meeting of Shareholders unless re-adopted or extended by the shareholders prior
to or on such date.
1996 Plan The 1996 Plan expired on December 31, 2006, and the Company may no longer make equity awards under the 1996 Plan. The
maximum number of shares issuable over the term of the 1996 Plan was 2.5 billion shares. Stock options granted under the 1996 Plan have
an exercise price of at least 100% of the fair market value of the underlying stock on the grant date and expire no later than nine years from
the grant date. The stock options will generally become exercisable for 20% or 25% of the option shares one year from the date of grant
and then ratably over the following 48 or 36 months, respectively. Certain other grants have utilized a 60-month ratable vesting schedule.
In addition, the Board of Directors, or other committees administering the plan, have the discretion to use a different vesting schedule and
have done so from time to time.
Supplemental Plan In 1997, the Company adopted the Supplemental Plan, under which stock options can be granted or shares can
be directly issued to eligible employees. Officers and members of the Company’s Board of Directors are not eligible to participate in the
Supplemental Plan. Nine million shares have been reserved for issuance under the Supplemental Plan. All stock option grants have an
exercise price equal to the fair market value of the underlying stock on the grant date. The Company no longer makes stock option grants
or direct share issuances under the Supplemental Plan.
Acquisition Plans In connection with the Company’s acquisitions of Scientific-Atlanta and WebEx, the Company adopted the SA Acquisition
Plan and the WebEx Acquisition Plan, respectively, each effective upon completion of the applicable acquisition. These plans constitute
assumptions, amendments, restatements, and renamings of the 2003 Long-Term Incentive Plan of Scientific-Atlanta and the WebEx
Communications, Inc. Amended and Restated 2000 Stock Incentive Plan, respectively. The plans permit the grant of stock options, stock,
stock units, and stock appreciation rights to certain employees of the Company and its subsidiaries and affiliates who had been employed
by Scientific-Atlanta or its subsidiaries or WebEx or its subsidiaries, as applicable. An aggregate of 14.8 million and 15.3 million shares of
the Company’s common stock has been reserved for issuance under the SA Acquisition Plan and the WebEx Acquisition Plan, respectively,
on a discretionary basis, subject to limitations set forth therein.
Dilutive Effect of Stock Options Weighted-average basic and diluted shares outstanding for fiscal 2007 were 6.1 billion shares and 6.3 billion
shares, respectively. For the year ended July 28, 2007, the dilutive effect of in-the-money employee stock options was approximately
208 million shares or 3.4% of the basic shares outstanding based on the Company’s average share price of $25.61.
The following table illustrates grant dilution computed based on net options granted as a percentage of shares of common stock
outstanding at the fiscal year end (in millions, except percentages):
Years Ended July 28, 2007 July 29, 2006
Shares of common stock outstanding 6,100 6,059
Granted and assumed 206 230
Canceled/forfeited/expired (54) (84)
Net stock options granted 152 146
Grant dilution 2.5% 2.4%