Cisco 2009 Annual Report Download - page 68

Notes to Consolidated Financial Statements
13. Employee Benefit Plans
(a) Employee Stock Purchase Plan
The Company has an Employee Stock Purchase Plan, which includes its subplan, the International Employee Stock Purchase Plan
(together, the “Purchase Plan”), under which 321.4 million shares of the Company’s stock have been reserved for issuance. Effective July 1,
2009, eligible employees are offered shares through a 24-month offering period, which consists of four consecutive 6-month purchase
periods. Employees may purchase a limited number of shares of the Company’s stock at a discount of up to 15% of the lesser of the market
value at the beginning of the offering period or the end of each 6-month purchase period. Prior to July 1, 2009 the offering period was six
months. The Purchase Plan terminates on January 3, 2010. The Company issued 28 million, 19 million, and 17 million shares under the
Purchase Plan in fiscal 2009, 2008, and 2007, respectively. As of July 25, 2009, 33 million shares were available for issuance under the
Purchase Plan.
(b) Employee Stock Incentive Plans
Stock Incentive Plan Program Description As of July 25, 2009, the Company had five stock incentive plans: the 2005 Stock Incentive Plan
(the “2005 Plan”); the 1996 Stock Incentive Plan (the “1996 Plan”); the 1997 Supplemental Stock Incentive Plan (the “Supplemental Plan”); the
Cisco Systems, Inc. SA Acquisition Long-Term Incentive Plan (the “SA Acquisition Plan”); and the Cisco Systems, Inc. WebEx Acquisition
Long-Term Incentive Plan (the “WebEx Acquisition Plan”). In addition, the Company has, in connection with the acquisitions of various
companies, assumed the share-based awards granted under stock incentive plans of the acquired companies or issued share-based
awards in replacement thereof. Share-based awards 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 share-based awards are based on competitive
practices, operating results of the Company, government regulations, and other factors. Since the inception of the stock incentive plans, the
Company has granted share-based awards to a significant percentage of its employees, and the majority has been granted to employees
below the vice president level. The Company’s primary stock incentive plans are summarized as follows:
2005 Plan As amended on November 15, 2007, the maximum number of shares issuable under the 2005 Plan over its term is 559 million
shares plus the amount of any shares underlying awards outstanding on November 15, 2007 under the 1996 Plan, the SA Acquisition Plan
and the WebEx Acquisition Plan that are forfeited or are terminated for any other reason before being exercised or settled. However, any
shares underlying awards outstanding on November 15, 2007 under the 1996 Plan, the SA Acquisition Plan, and the WebEx Acquisition
Plan that expire unexercised at the end of their maximum terms will not be considered to become available for reissuance under the 2005
Plan. If any awards granted under the 2005 Plan are forfeited or are terminated for any other reason before being exercised or settled, then
the shares underlying the awards will again be available under the 2005 Plan. The number of shares available for issuance under the 2005
Plan is, subsequent to November 15, 2007, reduced by 2.5 shares for each share awarded as stock grants or stock units.
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 non-employee 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% or 25% of the option shares one year from the date of grant and then ratably over the following 48 or 36 months, respectively. Stock
grants and stock units will generally vest with respect to 20% or 25% of the shares covered by the grant on each of the first through fifth or
fourth anniversaries of the date of the grant, respectively. The Compensation and Management Development Committee of the Board of
Directors has the discretion to use different vesting schedules. 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 non-statutory stock options, and such awards may
provide that the stock grants will be forfeited in the event that the related non-statutory stock options are exercised.
66 Cisco Systems, Inc.