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Cisco SystemsA Case Study

Global Equity Compensation ForumGlobal Equity Compensation ForumIssues for Companies with a Mid-Size to Large Employee BaseIssues for Companies with a Mid-Size to Large Employee Base

Global Equity Compensation ForumGlobal Equity Compensation ForumIssues for Companies with a Mid-Size to Large Employee BaseIssues for Companies with a Mid-Size to Large Employee Base

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Stock Admin DepartmentOrganization Chart

Stock Admin DepartmentOrganization Chart

D e n ise L u isS to ck A d m in is tra to r

D a ily Tra d e s, S e ctio n 16

M a i H oT e m p

E m p lo ye e C o m m u n ica tion

M ike H omC o n tra c to r

S p e c ia l P ro je c ts

C o llee n L a d esm aS to ck A d m in is tra to r

D a ta A na lys is , S ys te m M a in t.

Je an C h unM a na g er

E S P P , D a ily T rx

R o xa n ne P o v ioS to ck A d m in is tra to r

In te rn a tio n a l S O & E S P P

K a th y Z w e rnS to ck A d m in is tra to r

A cq u is it io ns

Jo hn L amS to ck A d m in is tra to r

A cq u is it io ns

Je an W o ngP ro gra m M a na g er

A cq u is it io ns

L e ve n t A rab a ciS e n io r M an a g er

S i W h iteD ire c to r, E m p lo ye e S e rv ic es

D e n n is P o w e llV P an d C o rp o ra te C o n tro lle r

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Option Grant ActivityOption Grant Activity

-

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

90,000

95 96 97 98 99 00 01

0

5

10

15

20

New Grants

SA Staff

Domestic

International

•All Employees Eligible (38,000 Current)

•75% Domestic 25% International

•71 International Countries

•All New Hires Receive Grant

•Annual Grant Program

•Promotional Grant Program

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Option Exercise ActivityOption Exercise Activity

-

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

45,000

95 96 97 98 99 00 01

0

5

10

15

20

Exercises

SA StaffSDS

Cash* SDS/Cash

CSR

Web

Exercise Type

Order Instructions

5

Acquisition ActivityAcquisition Activity

-

5

10

15

20

25

30

93 94 95 96 97 98 99 00 01

0

5

10

15

20

Acquisitions

SA Staff

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ESPP Enrollment ActivityESPP Enrollment Activity

Participation Rate

Enrolled 81%

Not Enrolled 18%

Geographic Location

U.S. 78%

Intl 22%51 Countries

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Cisco’s International Cisco’s International DynamicsDynamics

Cisco’s International Cisco’s International DynamicsDynamics

CiscoCisco::• Has employees in 70+ countriesHas employees in 70+ countries

• Offers grants to all full-time employees, with 25+ specialized grant Offers grants to all full-time employees, with 25+ specialized grant agreementsagreements

• Offers ESPP to all full-time employees, with 10 specialized Offers ESPP to all full-time employees, with 10 specialized enrollment agreements in all countries except China, Russia, enrollment agreements in all countries except China, Russia, Ukraine, and VietnamUkraine, and Vietnam

• Withholds flat tax and more complicated date and vesting Withholds flat tax and more complicated date and vesting template driven withholding for 10 countriestemplate driven withholding for 10 countries

• Withholds varying levels of taxes for 450+ International AssigneesWithholds varying levels of taxes for 450+ International Assignees

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International ChallengesInternational ChallengesInternational ChallengesInternational Challenges

• BelgiumBelgium::

- 65%, or 2 out of 3 employees in Belgium declined their Ongoing Grant in 2000

- 60-day acceptance window poses automation challenges

- Dexia loan facility

• ChinaChina::

- Bonus Rights type program

- Like to begin offer ESPP Bonus program

• FranceFrance::

- Tracking nightmare

- New tracking and broker facility

• IsraelIsrael::

- Special broker facilities in place now

- What we hope to accomplish in the future

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International ChallengesInternational ChallengesInternational ChallengesInternational Challenges

• NetherlandsNetherlands::

- Three different tax schemes – grant, vest and exercise

• RussiaRussia::

- New tax regime and how we hope to use it

• UK & ScotlandUK & Scotland

- Approved Plan Scheme grants given to all our employees up to the maximum allowable in 2000

- All Approved Scheme grants are priced at $50 and are underwater – what do we do now?

• IA’sIA’s::

- Hypo tax and how we withhold

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SystemsSystems

SABRINA GOAL SPAGAP

Web Reporting

Stock Administration Department

• Stock Option Exercises

• Restricted Stock issuances

• Repurchases

• Electronic Acceptance and Confirmation of Stock Option Agreement

• On-Line Grant Agreement

• Automated Stock Options grant feed between People Soft and Equity Edge

• Automated recon between two systems

• Controls over grant initiation

• Reporting

• Enrollment

• Disposition

• Contribution

• Immediate access

• World wide reporting capability to Finance managers

• Employee Stock Option and ESPP information

GREEN• Stock Option Expiration

• 30 Days

• 15 Days

• 5 Days

• Daily Thereafter

Interfaces• Payroll

• Brokers

• People Soft

• Oracle GL

• Between SA Systems

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SystemsSystemsSystemsSystems

SABRINA (Options)SABRINA (Options)

• Withholds tax at exercise Withholds tax at exercise in complex situations in complex situations based on programmed based on programmed requirementsrequirements

• Withholds hypo tax for Withholds hypo tax for IA’s from E&Y fileIA’s from E&Y file

• Automated journal Automated journal entries for subs we entries for subs we withhold forwithhold for

SPA (ESPP)SPA (ESPP)

• Combines contribution Combines contribution and distribution and distribution information for 50+ information for 50+ countries into one filecountries into one file

• Converts all local Converts all local currency into USD currency into USD using period end G/L using period end G/L rates rates

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SABRINA SABRINA (Stock Admin Broker Interface Agent)(Stock Admin Broker Interface Agent)

SABRINA SABRINA (Stock Admin Broker Interface Agent)(Stock Admin Broker Interface Agent)

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SPASPA(Stock Purchase Agent)(Stock Purchase Agent)

-

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,5002001 Benchmarking

(ESPP Account Per SA EE)Impact on Productivity:• Web Based reporting for enrollments, withdrawals and changes,

contributions, refunds, and purchase data.

• Reports available on line 24/7 on a real time basis.

• Automated journal entries.

• Notification of transfers for employees.

• Automatic feed of contributions into SA systems.

• ESPP purchase will be as simple as pushing the purchase button

• A true end to end solution (Enrollment, Contribution, Purchase, Disposition, Reporting).

Stock Admin Web-site

• Initial ESPP Enrollment

• Changes to Enrollment

• ESPP Summary Reports

Employees

Stock Admin Web-site

• Initial ESPP Enrollment

• Changes to Enrollment

• ESPP Summary Reports

Employees

Equity Edge

• Maintain participant record

• Proc Contribution File

• Proc Transfer Agent File

• Proc Tax Dept File

Equity Edge

• Maintain participant record

• Proc Contribution File

• Proc Transfer Agent File

• Proc Tax Dept File

Stock AdminStock Admin

Peoplesoft

Transfers, LOA, & Terminations

Stock Purchase Agent (SPA)

• Proc Enrollment Files

• Create Contribution File

• Identify Residual Refunds

• Identify Multiple Contributions

Payroll DeptPayroll Dept

Payroll DeptPayroll Dept

Payroll DeptPayroll Dept

$$

BrokerBroker

On-line Brokerage Account

AccountingAccounting

BrokerBroker

$$

Oracle

Best in C

lass

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Internet-Based Stock Administration

Two Preferred Brokers

handle all transactions

38,000 Cisco

Employees in

70 countries

1.5 million ESPP shares purchased each qtr

Three year productivity gain = 263%

Cisco Employee Connection

View ESPP Purchases / Dispositions

View Stock Option Information

EmployeesOn-Line ESPP Disposition Reports

New Stock Administration Web-Site

Financial Reporting on the Web

Fin Mgrs

E-Mail Notifications to Employees Confirming Exercise of Options

SABRINA

On-line Trading w/Preferred Brokers

On-line S.O. Agreements/ Acceptance

On-line ESPP Sales by Purchase Lot

View Stock Option Confirmations

Brokers

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On-Line Stock AdminOn-Line Stock AdminOn-Line Stock AdminOn-Line Stock Admin

Stock Admin Portal•Grant and exercise info.•ESPP purchase and sale info. •OnLine Trading

OnLine BrokerageSalomon Smith BarneyUBS Paine WebberStock Admin

Self Service FAQ's

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