Cisco 2010 Annual Report Download - page 69

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 471.4 million shares of the Company’s common stock have been reserved for
issuance as of July 31, 2010. 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 is scheduled to
terminate on January 3, 2020. The Company issued 27 million, 28 million, and 19 million shares under the Purchase Plan in fiscal
2010, 2009, and 2008, respectively. As of July 31, 2010, 156 million shares were available for issuance under the Purchase Plan.
(b) Employee Stock Incentive Plans
Stock Incentive Plan Program Description As of July 31, 2010, 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.
Prior to November 12, 2009, the number of shares available for issuance under the 2005 Plan was reduced by 2.5 shares for
each share awarded as a stock grant or stock unit. Pursuant to an amendment approved by the Company’s shareholders on
November 12, 2009, following that amendment 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, stock, stock units, 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 ten 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.
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 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, has the
discretion to use a different vesting schedule and have done so from time to time.
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