Cisco 2015 Annual Report Download - page 118

14. Employee Benefit Plans
(a) Employee Stock Incentive Plans
Stock Incentive Plan Program Description As of July 25, 2015, the Company had four stock incentive plans: the 2005 Stock
Incentive Plan (the “2005 Plan”); the 1996 Stock Incentive Plan (the “1996 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 of July 25, 2015, the maximum number of shares issuable under the 2005 Plan over its term was 694 million
shares, plus the number 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, the unexercised or unsettled shares underlying the awards will again be available under the 2005 Plan. Starting
November 19, 2013, shares withheld by the Company from an award other than a stock option or stock appreciation right to
satisfy withholding tax liabilities resulting from such award will again be available for issuance, based on the fungible share ratio
in effect on the date of grant.
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 is 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 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. The majority of the performance-based and market-based RSUs vests at the
end of the three-year requisite service period or earlier if the award recipient meets certain retirement eligibility conditions. Other
performance-based RSUs, that are based on the achievement of financial and/or non-financial operating goals typically award
RSUs upon the achievement of milestones (and may require subsequent service periods), with overall vesting of the shares
underlying the award ranging from six months to three years. 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 months 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.
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