8-KLeadership ChangesRegulation FDExhibits & Filings

CISCO SYSTEMS, INC. 8-K Report, Executive Changes (Nov 12, 2009)

Filed November 12, 2009For Securities:CSCO

Summary

This Form 8-K filing by Cisco Systems, Inc. (CSCO) on November 12, 2009, details significant updates to the company's equity compensation plans, approved by shareholders at the Annual Meeting on the same date. The primary focus is the amendment and restatement of the 2005 Stock Incentive Plan (SIP) and the Employee Stock Purchase Plan (ESPP). These changes are designed to enhance Cisco's ability to attract and retain talent by providing more flexible and efficient equity award mechanisms. Key modifications to the SIP include a "share recycling" feature where unexercised awards from previous plans become available for reissuance under the SIP, and a "1.5x share pool charge" for grants, which could accelerate the depletion of the authorized share pool but also provides for more efficient use of shares. The ESPP has been extended by ten years and authorized an additional 150 million shares, offering greater long-term participation opportunities for employees. Additionally, the filing disclosed recent merit-based equity grants for fiscal year 2010, totaling approximately 40 million restricted stock units and 3.6 million stock options.

Key Highlights

  • 1Shareholder approval granted for amendment and restatement of the 2005 Stock Incentive Plan (SIP) and the Employee Stock Purchase Plan (ESPP) effective November 12, 2009.
  • 2The SIP now treats each stock grant or vested stock unit as 1.5 shares for calculating eligibility to issue shares from the plan's pool.
  • 3Unexercised awards from prior Cisco stock incentive plans can now be re-issued under the amended SIP, enhancing share availability.
  • 4Maximum term for stock options and stock appreciation rights under the SIP is capped at ten years from the grant date.
  • 5The ESPP term extended by ten years (to January 3, 2020) and an additional 150 million shares authorized for issuance.
  • 6Greater flexibility introduced for international employee participation in the ESPP, allowing for sub-plans that may not strictly adhere to Section 423 of the Internal Revenue Code.
  • 7Disclosure of fiscal year 2010 merit-based equity grants: approximately 40 million restricted stock units and 3.6 million stock options granted on November 12, 2009.

Frequently Asked Questions

The main changes involved the amendment and restatement of the 2005 Stock Incentive Plan (SIP) and the Employee Stock Purchase Plan (ESPP). Key updates to the SIP include a new calculation for share pool usage (1.5 shares per grant) and the ability to re-issue shares from unexercised awards of previous plans. The ESPP's term was extended by ten years, and an additional 150 million shares were authorized.

This change means that for every share granted or vested under the SIP, 1.5 shares will be deducted from the total pool of shares authorized for issuance under the plan. This could potentially accelerate the depletion of the authorized share pool compared to a 1:1 ratio, but it also reflects a mechanism designed to efficiently utilize shares for incentive purposes.

The extension of the ESPP by ten years and the authorization of 150 million additional shares indicate Cisco's continued commitment to offering its employees an opportunity to purchase company stock at a favorable price over a longer term. This is intended to foster employee ownership and align their interests with the company's long-term performance.

On November 12, 2009, Cisco's Compensation and Management Development Committee approved merit-based grants for fiscal year 2010. These included approximately 40 million restricted stock units and about 3.6 million stock options. The stock options were granted at an exercise price of $23.40 per share, which was the closing price on that date.