Cisco 2013 Annual Report Download - page 119

14. Employee Benefit Plans
(a) Employee Stock Incentive Plans
As of July 27, 2013, 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. 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.
Pursuant to an amendment approved by the Company’s shareholders on November 12, 2009, the number of shares available
for issuance under the 2005 Plan was reduced by 1.5 shares for each share awarded as a stock grant or a stock unit, and any
shares underlying awards outstanding under the 1996 Plan, the SA Acquisition Plan, and the WebEx Acquisition Plan that
expire unexercised at the end of their maximum terms become available for reissuance under the 2005 Plan. The 2005 Plan
permits the granting of stock options, restricted stock, and restricted stock units (RSUs), the vesting of which may be
performance-based or market-based along with the requisite service requirement, and stock appreciation rights to employees
(including employee directors and officers), consultants of the Company and its subsidiaries and affiliates, and non-employee
directors of the Company. Stock options and stock appreciation rights 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 prior to November 12, 2009 have an
expiration date no later than nine years from the grant date. The expiration date for stock options and stock appreciation rights
granted subsequent to the amendment approved on November 12, 2009 shall be no later than 10 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 months or 36 months, respectively. Time-based stock grants and time-based RSUs will
generally vest with respect to 20% or 25% of the shares or share units covered by the grant on each of the first through fifth or
fourth anniversaries of the date of the grant, respectively. Performance-based and market-based RSUs typically vest at the end
of the three-year requisite service period or earlier if the award recipient meets certain retirement eligibility conditions. 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.
1996 Plan The 1996 Plan expired on December 31, 2006, and the Company can 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 generally became 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 utilized a 60-month ratable vesting schedule. In addition, the Board of Directors, or other committees administering the
1996 Plan, had the discretion to use a different vesting schedule and did so from time to time.
Supplemental Plan The Supplemental Plan expired on December 31, 2007, and the Company can no longer make equity
awards under the Supplemental Plan. Officers and members of the Company’s Board of Directors were not eligible to
participate in the Supplemental Plan. Nine million shares were reserved for issuance under the Supplemental Plan.
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