<PAGE> 1
SCHEDULE 14A
INFORMATION REQUIRED IN PROXY STATEMENT
PROXY STATEMENT PURSUANT TO SECTION 14(a)
OF THE SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to 240.14a-11(c) or 240.14a-12
CISCO SYSTEMS, INC.
--------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
--------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
---------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
---------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE> 2
CISCO SYSTEMS, INC.
September 29, 2000
DEAR CISCO SYSTEMS SHAREHOLDER:
You are cordially invited to attend the Annual Meeting of Shareholders
("Annual Meeting") of Cisco Systems, Inc. (the "Company") which will be held at
Paramount's Great America in the Paramount Theater, located at 1 Great America
Parkway, Santa Clara, California 95054 on Tuesday, November 14, 2000, at 10:00
a.m. You will find a map with directions to the meeting on the outside back
cover of the Proxy Statement.
Details of the business to be conducted at the Annual Meeting are given in
the attached Notice of Annual Meeting and Proxy Statement.
If you do not plan to attend the Annual Meeting, please complete, sign,
date, and return the enclosed proxy promptly in the accompanying reply envelope.
Shareholders who elected to access the 2000 Proxy Statement and Annual Report
over the Internet and vote their proxy online will not be receiving a paper
proxy card. If you decide to attend the Annual Meeting and wish to change your
proxy vote, you may do so automatically by voting in person at the Annual
Meeting.
We look forward to seeing you at the Annual Meeting.
/s/ John T. Chambers
John T. Chambers
President and Chief Executive Officer
San Jose, California
YOUR VOTE IS IMPORTANT
In order to assure your representation at the Annual Meeting, you are
requested to complete, sign, and date the enclosed proxy as promptly as possible
and return it in the enclosed envelope (to which no postage need be affixed if
mailed in the United States). Please reference the Voting Electronically via the
Internet or by Telephone section on page 1 for alternative voting methods.
<PAGE> 3
CISCO SYSTEMS, INC.
170 W. TASMAN DRIVE
SAN JOSE, CALIFORNIA 95134-1706
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD NOVEMBER 14, 2000
The Annual Meeting of Shareholders ("Annual Meeting") of Cisco Systems,
Inc. (the "Company") will be held at Paramount's Great America in the Paramount
Theater, located at 1 Great America Parkway, Santa Clara, California 95054, on
Tuesday, November 14, 2000, at 10:00 a.m. for the following purposes:
1. To elect twelve members of the Board of Directors to serve until
the next Annual Meeting and until their successors have been elected and
qualified;
2. To ratify the selection of PricewaterhouseCoopers LLP as the
Company's independent accountants for the fiscal year ending July 28, 2001;
and
3. To act upon such other matters as may properly come before the
meeting or any adjournments or postponements thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice. The record date for determining those
shareholders who will be entitled to notice of, and to vote at, the Annual
Meeting and at any adjournment thereof is September 15, 2000. The stock transfer
books will not be closed between the record date and the date of the Annual
Meeting. A list of shareholders entitled to vote at the Annual Meeting will be
available for inspection at the offices of the Company.
Whether or not you plan to attend the Annual Meeting, please complete,
sign, date and return the enclosed proxy promptly in the accompanying reply
envelope. If you elected to receive the 2000 Proxy Statement and Annual Report
electronically over the Internet you will not receive a paper proxy card and
should vote online, unless you cancel your enrollment. If your shares are held
in a bank or brokerage account and you did not elect to receive the materials
through the Internet, you may be eligible to vote your proxy electronically or
by telephone. Please refer to the enclosed voting form for instructions. Your
proxy may be revoked at any time prior to the Annual Meeting. If you decide to
attend the Annual Meeting and wish to change your proxy vote, you may do so
automatically by voting in person at the Annual Meeting.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Larry R. Carter
Larry R. Carter
Secretary
San Jose, California
September 29, 2000
<PAGE> 4
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
VOTING RIGHTS AND SOLICITATION.............................. 1
Voting.................................................... 1
Voting Electronically via the Internet or by Telephone.... 1
Proxies................................................... 2
Solicitation of Proxies................................... 2
PROPOSAL NO. 1 -- ELECTION OF DIRECTORS..................... 3
General................................................... 3
Business Experience of Directors.......................... 3
Board Committees and Meetings............................. 5
Director Compensation..................................... 5
Recommendation of the Board of Directors.................. 6
PROPOSAL NO. 2 -- RATIFICATION OF INDEPENDENT ACCOUNTANTS... 6
General................................................... 6
Recommendation of the Board of Directors.................. 6
OWNERSHIP OF SECURITIES..................................... 7
Compliance with SEC Reporting Requirements................ 8
EXECUTIVE COMPENSATION AND RELATED INFORMATION.............. 8
Compensation/Stock Option Committee Report................ 8
Compensation Committee Interlocks and Insider
Participation.......................................... 10
Summary of Cash and Certain Other Compensation............ 11
Stock Options............................................. 12
Option Exercises and Holdings............................. 13
Employment Contracts, Termination of Employment, and
Change in Control Agreements........................... 13
Certain Relationships and Related Transactions............ 13
STOCK PERFORMANCE GRAPH..................................... 14
SHAREHOLDER PROPOSALS FOR 2001 PROXY STATEMENT.............. 15
FORM 10-K................................................... 15
OTHER MATTERS............................................... 15
DIRECTIONS TO PARAMOUNT'S GREAT AMERICA.....See Outside Back Cover
</TABLE>
i
<PAGE> 5
CISCO SYSTEMS, INC.
170 W. TASMAN DRIVE
SAN JOSE, CALIFORNIA 95134-1706
PROXY STATEMENT
FOR
ANNUAL MEETING OF SHAREHOLDERS
These proxy materials are furnished in connection with the solicitation of
proxies by the Board of Directors of Cisco Systems, Inc., a California
corporation (the "Company"), for the Annual Meeting of the Shareholders (the
"Annual Meeting") to be held at 10:00 a.m. on November 14, 2000, at Paramount's
Great America in the Paramount Theater, located at 1 Great America Parkway,
Santa Clara, California 95054, and at any adjournments or postponements of the
Annual Meeting. These proxy materials were first mailed on or about September
29, 2000 to all shareholders entitled to vote at the Annual Meeting.
ALL SHARE NUMBERS AND SHARE PRICES PROVIDED IN THIS PROXY STATEMENT HAVE
BEEN ADJUSTED TO REFLECT THE TWO (2)-FOR-ONE (1) SPLIT OF COMMON STOCK EFFECTED
ON MARCH 22, 2000.
PURPOSE OF MEETING
The specific proposals to be considered and acted upon at the Annual
Meeting are summarized in the accompanying Notice of Annual Meeting of
Shareholders. Each proposal is described in more detail in this Proxy Statement.
VOTING RIGHTS AND SOLICITATION
VOTING
The Company's Common Stock is the only type of security entitled to vote at
the Annual Meeting. On September 15, 2000, the record date for determination of
shareholders entitled to vote at the Annual Meeting, there were 7,164,005,490
shares of Common Stock outstanding. Each shareholder of record on September 15,
2000 is entitled to one vote for each share of Common Stock held by such
shareholder on that date. A majority of the outstanding shares of Common Stock
must be present or represented at the Annual Meeting in order to have a quorum.
Abstentions and broker non-votes are counted as present for the purpose of
determining the presence of a quorum for the transaction of business. In the
election of directors, the twelve candidates receiving the highest number of
affirmative votes will be elected. Proposal 2 requires the approval of the
affirmative vote of a majority of the outstanding voting shares of the Company
present or represented and entitled to vote at the Annual Meeting together with
the affirmative vote of a majority of the required quorum. Abstentions and
broker non-votes can have the effect of preventing approval of a proposal where
the number of affirmative votes, though a majority of the votes cast, does not
constitute a majority of the required quorum. All votes will be tabulated by the
inspector of election appointed for the Annual Meeting, who will separately
tabulate affirmative and negative votes, abstentions and broker non-votes.
VOTING ELECTRONICALLY VIA THE INTERNET OR BY TELEPHONE
Shareholders whose shares are registered directly with EquiServe may vote
either via the Internet or by calling EquiServe. Specific instructions to be
followed by any registered shareholder interested in voting via Internet or by
telephone are set forth on the enclosed proxy card. The Internet and telephone
voting procedures are designed to authenticate the shareholder's identity and to
allow shareholders to vote their shares and confirm that their instructions have
been properly recorded.
If your shares are registered in the name of a bank or brokerage firm and
you have not elected to receive your Annual Report and Proxy Statement over the
Internet, you may be eligible to vote your shares electronically over the
Internet or by telephone. A large number of banks and brokerage firms are
participating
<PAGE> 6
in the ADP Investor Communication Services online program. This program provides
eligible shareholders who receive a paper copy of the Annual Report and Proxy
Statement the opportunity to vote via the Internet or by telephone. If your bank
or brokerage firm is participating in ADP's program, your voting form will
provide instructions. If your voting form does not reference Internet or
telephone information, please complete and return the paper proxy card in the
self-addressed, postage paid envelope provided. Shareholders who elected to
receive the Annual Report and Proxy Statement over the Internet will be
receiving an e-mail by September 29, 2000 with information on how to access
shareholder information and instructions for voting.
PROXIES
Whether or not you are able to attend the Annual Meeting, you are urged to
vote your proxy, which is solicited by the Company's Board of Directors and
which will be voted as you direct on your proxy when properly completed. In the
event no directions are specified, such proxies will be voted FOR the nominees
of the Board of Directors (proposal 1), FOR proposal 2 and, in the discretion of
the proxy holders, as to other matters that may properly come before the Annual
Meeting. You may revoke or change your proxy at any time before the Annual
Meeting. To do this, send a written notice of revocation or another signed proxy
with a later date to the Secretary of the Company at the Company's principal
executive offices before the beginning of the Annual Meeting. You may also
revoke your proxy by attending the Annual Meeting and voting in person.
SOLICITATION OF PROXIES
The Company will bear the entire cost of solicitation, including the
preparation, assembly, printing, and mailing of this Proxy Statement, the proxy,
and any additional solicitation material furnished to shareholders. Copies of
solicitation material will be furnished to brokerage houses, fiduciaries, and
custodians holding shares in their names that are beneficially owned by others
so that they may forward this solicitation material to such beneficial owners.
In addition, the Company has retained Corporate Investor Communications, Inc.
("CIC") to act as a proxy solicitor in conjunction with the Annual Meeting.
Under the terms of an agreement dated August 22, 2000, the Company has agreed to
pay $10,000, plus reasonable out of pocket expenses, to CIC for proxy
solicitation services. The original solicitation of proxies by mail may be
supplemented by a solicitation by telephone, telegram, or other means by
directors, officers, or employees of the Company. No additional compensation
will be paid to these individuals for any such services. Except as described
above, the Company does not presently intend to solicit proxies other than by
mail or via the Internet.
2
<PAGE> 7
PROPOSAL NO. 1
ELECTION OF DIRECTORS
GENERAL
The names of persons who are nominees for director and their positions and
offices with the Company are set forth in the table below. The proxy holders
intend to vote all proxies received by them in the accompanying form for the
nominees listed below unless otherwise instructed. In the event any nominee is
unable or declines to serve as a director at the time of the Annual Meeting, the
proxies will be voted for any nominee who may be designated by the present Board
of Directors to fill the vacancy. As of the date of this Proxy Statement, the
Board of Directors is not aware of any nominee who is unable or will decline to
serve as a director. The twelve (12) nominees receiving the highest number of
affirmative votes of the shares entitled to vote at the Annual Meeting will be
elected directors of the Company to serve until the next Annual Meeting and
until their successors have been elected and qualified. Shareholders may not
cumulate votes in the election of directors.
<TABLE>
<CAPTION>
NOMINEES POSITIONS AND OFFICES HELD WITH THE COMPANY
-------- -------------------------------------------
<S> <C>
Carol A. Bartz........................... Director
Larry R. Carter.......................... Senior Vice President, Chief Financial Officer,
Secretary, and Director
John T. Chambers......................... President, Chief Executive Officer, and Director
Mary Cirillo............................. Director
Dr. James F. Gibbons..................... Director
Edward R. Kozel.......................... Director
James C. Morgan.......................... Director
John P. Morgridge........................ Chairman of the Board
Arun Sarin............................... Director
Donald T. Valentine...................... Vice Chairman of the Board
Steven M. West........................... Director
Jerry Yang............................... Director
</TABLE>
BUSINESS EXPERIENCE OF DIRECTORS
Ms. Bartz, 52, has been a member of the Board of Directors since November
1996. From April 1992 to present she has served as Chairman of the Board and
Chief Executive Officer of Autodesk, Inc. From April 1992 to September 1996 she
was Chairman, Chief Executive Officer and President of Autodesk, Inc. Prior to
that, she was with Sun Microsystems from August 1983 to April 1992 most recently
as Vice President of Worldwide Field Operations. Ms. Bartz also currently serves
on the Boards of Directors of BEA Systems, Inc., Cadence Design Systems, Inc.,
Network Appliance, Inc., and VA Linux Systems, Inc.
Mr. Carter, 57, was elected to the Board of Directors in July 2000. He
joined the Company in January 1995 as Vice President, Finance and
Administration, Chief Financial Officer and Secretary. In July 1997 he became
the Senior Vice President, Finance and Administration, Chief Financial Officer
and Secretary. Prior to his services at the Company he was with Advanced Micro
Devices, Inc. as the Vice President and Corporate Controller. Mr. Carter
currently serves on the Board of Directors of eSpeed, Inc., Network Appliance,
Inc., and Qlogic Corporation.
Mr. Chambers, 51, has been a member of the Board of Directors since
November 1993. He joined the Company as Senior Vice President in January 1991
and became Executive Vice President in June 1994. Mr. Chambers became President
and Chief Executive Officer of the Company as of January 31, 1995. Prior to his
services at the Company, he was with Wang Laboratories for eight years, most
recently as Senior Vice President of U.S. Operations. Mr. Chambers currently
serves on the Board of Directors of Wal-Mart
Stores, Inc.
Ms. Cirillo, 53, has been a member of the Board of Directors since February
1998. She has been Chairman and Chief Executive Officer of OPCENTER, LLC since
June 2000. She was at Deutsche Bank as
3
<PAGE> 8
Chief Executive Officer of Global Institutional Services and Divisional Board
Member of Global Technology and Services since the merger with Bankers Trust
Company from June 1999 to June 2000. She was the Executive Vice President and
Managing Director at Bankers Trust Company from July 1997 to June 1999. Prior to
joining Bankers Trust Company, she was with Citibank, N.A. for twenty years,
most recently as Senior Vice President. Ms. Cirillo also currently serves on the
Board of Directors of Quest Diagnostics, Inc.
Dr. Gibbons, 69, has been a member of the Board of Directors since May
1992. He is a Reid Weaver Dennis Professor of Electrical Engineering at Stanford
University and also Special Consul to the Stanford President for Industrial
Relations. He was Dean of the Stanford University School of Engineering from
1984 to 1996. Dr. Gibbons also currently serves on the Boards of Directors of
Lockheed Martin Corporation, El Paso Natural Gas Company, and Triton Network
Systems.
Mr. Kozel, 45, has been a member of the Board of Directors since November
1996. He has been the managing member of Open Ventures since January 2000. He
joined the Company as Director, Program Management in March 1989. In April 1992,
he became Director of Field Operations and in February 1993, he became Vice
President of Business Development. From January 1996 to April 1998 he was Senior
Vice President and Chief Technical Officer. From April 1998 to January 2000, Mr.
Kozel was the Senior Vice President, Corporate Development of the Company. Mr.
Kozel is currently on an extended leave of absence as an employee of the
Company.
Mr. Morgan, 62, has been a member of the Board of Directors since February
1998. He has been Chief Executive Officer of Applied Materials, Inc. since 1977
and also Chairman of the Board since 1987. He was President of Applied
Materials, Inc. from 1976 to 1987. He was previously a senior partner with West
Ven Management, a private venture capital partnership affiliated with Bank of
America Corporation.
Mr. Morgridge, 67, joined the Company as President and Chief Executive
Officer and was elected to the Board of Directors in October 1988. Mr. Morgridge
became Chairman of the Board on January 31, 1995. From 1986 to 1988 he was
President and Chief Operating Officer at GRiD Systems, a manufacturer of laptop
computer systems.
Mr. Sarin, 45, has been a member of the Board of Directors since September
1998. He has been the Chief Executive Officer of InfoSpace, Inc., and a member
of its Board of Directors since April 2000. He was the Chief Executive Officer
of the USA/Asia Pacific Region for Vodafone AirTouch, Plc from July 1999 to
April 2000. From February 1997 to July 1999 he was the President and Chief
Operating Officer of AirTouch Communications, Inc., a wireless
telecommunications services company. He served as President and Chief Executive
Officer of AirTouch International from April 1994 to February 1997. Mr. Sarin
joined AirTouch Communications, Inc. in 1984 and held a variety of positions,
including Vice President and General Manager, Vice President, Chief Financial
Officer and Controller, and Vice President of Corporate Strategy. Mr. Sarin
currently serves on the Boards of Directors of Vodafone Plc and Charles Schwab
Corporation.
Mr. Valentine, 68, has been a member of the Board of Directors of the
Company since December 1987 and was elected Chairman of the Board of Directors
in December 1988. He became Vice Chairman of the Board on January 31, 1995. He
has been a general partner of Sequoia Capital since 1974. Mr. Valentine
currently serves as Chairman of the Board of Directors of Network Appliance,
Inc.
Mr. West, 45, has been a member of the Board of Directors since April 1996.
He has been the President and Chief Executive Officer of Entera, Inc. since
September 1999. From January 1999 to August 1999 he was the President of the
Services Business Unit at Electronic Data Systems Corporation. He was the
President and Chief Executive Officer of Hitachi Data Systems, a joint venture
computer hardware services company owned by Hitachi, Ltd. and Electronic Data
Systems Corporation, from June 1996 to January 1999. Prior to that, Mr. West was
at Electronic Data Systems Corporation from November 1984 to June of 1996, most
recently as President of Electronic Data Systems Corporation Infotainment
Business Unit.
Mr. Yang, 31, has been a member of the Board of Directors since July 2000.
He is a founder of Yahoo! Inc., and since March 1995 has been an executive of
Yahoo! Inc. and has served as a member of its Board of Directors. Mr. Yang also
currently serves on the Board of Directors of Ziff-Davis Inc.
4
<PAGE> 9
BOARD COMMITTEES AND MEETINGS
During the fiscal year that ended on July 29, 2000, the Board of Directors
held eight meetings. During this period, all of the directors attended or
participated in more than 75% of the aggregate of (i) the total number of
meetings of the Board of Directors and (ii) the total number of meetings held by
all Committees of the Board on which each such director served.
The Company has eight standing Committees: the Acquisition Committee, the
Special Acquisition Committee, the Audit Committee, the Compensation/Stock
Option Committee, the Executive Committee, the Investment/Finance Committee, the
Nomination Committee, and the Special Stock Option Committee.
The Acquisition Committee reviews acquisition strategies and candidates
with the Company's management, approves acquisitions and also makes
recommendations to the Board of Directors. This Committee met on twelve separate
occasions during the last fiscal year. This Committee currently consists of
Messrs. Valentine, Chambers, Morgridge, and Sarin and Ms. Bartz.
The Special Acquisition Committee reviews acquisition strategies and
candidates with the Company's management, approves acquisitions valued below a
certain dollar threshold and also makes recommendations to the Board of
Directors. This committee held seven meetings during the last fiscal year. The
Committee currently consists of Messrs. Chambers and Kozel and Ms. Bartz.
The Audit Committee is responsible for reviewing the Company's financial
procedures and controls and for selecting and meeting with the independent
accountants. This Committee held four meetings during the last fiscal year. This
Committee currently consists of Ms. Cirillo and Messrs. Sarin and West.
The Compensation/Stock Option Committee is responsible for reviewing the
compensation arrangements in effect for the Company's executive officers and for
administering all the Company's employee benefit plans, including the 1996 Stock
Incentive Plan. This Committee acted by unanimous written consent on thirteen
separate occasions and met once during the last fiscal year. This Committee
currently consists of Messrs. Gibbons, and Morgan and Ms. Bartz.
The Executive Committee's duties include anything permitted by law to be
performed by the Board of Directors that does not require the full Board. This
Committee held one meeting during the last fiscal year. This Committee currently
consists of Messrs. Morgridge, Chambers, and Valentine.
The Investment/Finance Committee reviews and approves the Company's
investment policy, real estate acquisitions and leasing, and the Company's
currency, interest rate and equity risk management policies. The Committee also
reviews the Company's minority investments, fixed income assets and its
insurance management policies and programs. This Committee held three meetings
during the last fiscal year. This Committee currently consists of Messrs.
Morgridge, Kozel and Valentine and Ms. Cirillo.
The Nomination Committee is responsible for nominating new members to be
considered for the Board of Directors. This Committee held three meetings during
the last fiscal year. This Committee currently consists of Messrs. Chambers and
Gibbons, and Ms. Bartz.
The Special Stock Option Committee has concurrent authorization with the
Compensation/Stock Option Committee to make option grants under the 1996 Stock
Incentive Plan to eligible individuals other than executive officers of the
Company. This committee held no meetings during the last fiscal year with
respect to the approval of such option grants. This committee currently consists
of Messrs. Chambers and Morgridge, and Ms. Bartz.
DIRECTOR COMPENSATION
Non-employee directors were each paid a $32,000 annual retainer fee for
serving on the Board during the 2000 fiscal year except that no payment was made
to Mr. Yang who did not commence service until the end of the fiscal year.
During such fiscal year, non-employee directors were also eligible to
participate in the Discretionary Option Grant Program in effect under the 1996
Stock Incentive Plan and to receive periodic option grants under the Automatic
Option Grant Program in effect under the 1996 Plan. Directors who are
5
<PAGE> 10
also employees of the Company are eligible to receive options under the
Company's 1996 Stock Incentive Plan and to participate in the Company's 1989
Employee Stock Purchase Plan, the 401(k) Plan, and the Management Incentive
Plan.
At the Annual Meeting held on November 10, 1999, each of the following
non-employee directors re-elected to the Board received an option grant under
the Automatic Option Grant Program for 30,000 shares of Common Stock with an
exercise price of $39.75 per share: Ms. Bartz, Ms. Cirillo and Messrs. Gibbons,
Morgan, Sarin, Valentine, and West. Mr. Yang received an initial automatic
option grant for 30,000 shares on July 27, 2000 when he was first appointed to
the Board, with an exercise price of $68.00 per share. The exercise price in
effect for each option is equal to the fair market value per share of Common
Stock on the grant date. Each option has a maximum term of nine (9) years
measured from the grant date, subject to earlier termination following the
optionee's cessation of Board service. The shares subject to each 30,000-share
grant will vest in two successive equal annual installments upon the optionee's
completion of each year of Board service over the two (2)-year period measured
from the grant date. The shares subject to the 30,000-share grant made to Mr.
Yang will vest in four (4) successive equal annual installments upon the
completion of each year of Board service over the four (4)-year period measured
from the grant date. Each option is immediately exercisable for all of the
option shares; however, any shares purchased under the option will be subject to
repurchase by the Company, at the option exercise price paid per share, upon the
optionee's cessation of Board service prior to vesting in those shares. Lastly,
the option shares will immediately vest in full upon certain changes in control
or ownership of the Company or upon the optionee's death or disability while a
Board member.
RECOMMENDATION OF THE BOARD OF DIRECTORS
The Board of Directors recommends a vote FOR the election of the nominees
listed herein.
PROPOSAL NO. 2
RATIFICATION OF INDEPENDENT ACCOUNTANTS
GENERAL
The Company is asking the shareholders to ratify the Board of Director's
selection of PricewaterhouseCoopers LLP as the Company's independent accountants
for the fiscal year ending July 28, 2001. The affirmative vote of a majority of
the outstanding voting shares of the Company present or represented and entitled
to vote at the Annual Meeting, together with the affirmative vote of a majority
of the required quorum, is required to ratify the selection of
PricewaterhouseCoopers LLP as the Company's independent accountants.
In the event the shareholders fail to ratify the appointment, the Board of
Directors will reconsider its selection. Even if the selection is ratified, the
Board of Directors, in its discretion, may direct the appointment of a different
independent accounting firm at any time during the year if the Board of
Directors determines that such a change would be in the Company's and its
shareholders' best interests.
PricewaterhouseCoopers LLP has audited the Company's financial statements
annually since the 1988 fiscal year. Its representatives will be present at the
Annual Meeting, will have the opportunity to make a statement if they desire to
do so, and will be available to respond to appropriate questions.
RECOMMENDATION OF THE BOARD OF DIRECTORS
The Board of Directors recommends that the shareholders vote FOR the
ratification of the selection of PricewaterhouseCoopers LLP to serve as the
Company's independent accountants for the fiscal year ending July 28, 2001.
6
<PAGE> 11
OWNERSHIP OF SECURITIES
The following table sets forth certain information known to the Company
with respect to beneficial ownership of the Company's Common Stock as of July
29, 2000 for (i) all persons who are beneficial owners of five percent or more
of the Company's Common Stock, (ii) each director and nominee for director,
(iii) the Company's Chief Executive Officer and the other executive officers
named in the Summary Compensation Table below, and (iv) all current executive
officers and directors as a group as of July 29, 2000:
<TABLE>
<CAPTION>
NUMBER
OF SHARES
BENEFICIALLY PERCENT
NAME OWNED(1) OWNED(2)
---- ------------ --------
<S> <C> <C>
Carol A. Bartz(3)........................................... 302,928 *
Larry R. Carter(4).......................................... 3,017,935 *
John T. Chambers(5)......................................... 17,011,915 *
Mary A. Cirillo(6).......................................... 205,584 *
Gary J. Daichendt........................................... 810,062 *
James F. Gibbons............................................ 160,920 *
Edward R. Kozel(7).......................................... 1,082,973 *
Donald J. Listwin(8)........................................ 4,103,952 *
Mario Mazzola............................................... 3,217,762 *
James C. Morgan(9).......................................... 199,000 *
John P. Morgridge(10)....................................... 85,369,268 1.2
Carl Redfield............................................... 2,190,849 *
Arun Sarin.................................................. 113,000 *
Donald T. Valentine(11)..................................... 5,191,539 *
Steven M. West(12).......................................... 195,400 *
Jerry Yang(13).............................................. 69,721 *
All executive officers and directors as a group (20
Persons)(14).............................................. 132,032,748 1.8
</TABLE>
---------------
* Less than one percent.
(1) Except as indicated in the footnotes to this table and pursuant to
applicable community property laws, the persons named in the table have
sole voting and investment power with respect to all shares of Common
Stock. The number of shares beneficially owned includes Common Stock of
which such individual has the right to acquire beneficial ownership either
currently or within 60 days after July 29, 2000, including, but not limited
to, upon the exercise of an option.
(2) Percentage of beneficial ownership is based upon 7,138,431,395 shares of
Common Stock, all of which were outstanding on July 29, 2000. For each
named person, this percentage includes Common Stock of which such person
has the right to acquire beneficial ownership either currently or within 60
days of July 29, 2000, including, but not limited to, upon the exercise of
an option; however, such Common Stock shall not be deemed outstanding for
the purpose of computing the percentage owned by any other person. Such
calculation is required by General Rule 13d-3(d)(1)(i) under the Securities
Exchange Act of 1934. Based upon a review of 13G filings made with the
Securities and Exchange Commission during fiscal year 2000, there were no
5% shareholders.
(3) Includes 2,928 shares held by Carol Bartz's spouse, Bill Marr.
(4) Includes 30,796 shares held by the Carter Rev. Trust dated October 18,
1994.
(5) Includes 35,928 shares held by the Sequoia Capital VII Partnership.
(6) Includes 13,500 shares held by Mary Cirillo's spouse, Jay Goldberg.
(7) Includes 37,374 shares held by Edward R. and Sara T. Kozel, Trustees for
the Kozel Revocable Trust dated December 27, 1994.
(8) Includes 103,452 shares held by Donald Listwin's spouse, Lorene Arey.
(9) Includes 9,000 shares held by James Morgan's spouse, Rebecca Q. Morgan.
7
<PAGE> 12
(10) Includes 82,026,691 shares held by John P. Morgridge and Tashia F.
Morgridge as Trustees of the Morgridge Family Trust (UTA DTD 6/30/88).
Includes 98,188 shares held by John Morgridge's spouse, Tashia F.
Morgridge. Includes 1,865,488 shares held in the Morgridge Family
Foundation. Includes 18,088 shares held by the Sequoia Technology VI
Partnership.
(11) Includes 1,793,410 shares held by the Donald T. Valentine Family Trust
Under Agreement dated April 29, 1967. Includes 2,658,129 shares held in
total by the following partnerships in which Mr. Valentine holds a
partnership or other economic interest: 36,088 shares held by Sequoia
Technology Partners VI, 1,126 shares held by Sequoia XXIV, 124,874 shares
held by Sequoia 1995, 1,508,382 shares held by Sequoia Capital VII, 67,092
shares held by Sequoia Technology Partners VII, 656,988 shares held by
Sequoia Capital VI, 14,368 shares held by Sequoia International Partners,
66,223 shares held by Sequoia Capital VIII, 4,384 shares held by Sequoia
International Partners VIII Q, 840 shares held by Sequoia International
Technology Partners VIII, 61,064 shares held by Sequoia 1997, 108,050
shares held by SQP 1997 and 8,650 shares held by CMS Partners (collectively
the "Sequoia Entities"). Mr. Valentine disclaims beneficial ownership of
shares held by the Sequoia Entities, except to the extent of his pecuniary
interest therein.
(12) Includes 400 shares held by Steven West's spouse, Donna Karam.
(13) Includes 2,388 shares held in the Red Husley Foundation, 34,145 shares held
in the Jerry Yang Charitable Trust and 3,188 shares held in the Jerry Yang
Revocable Trust.
(14) Includes outstanding options to purchase 37,298,447 shares of Common Stock
to the extent such options are either currently exercisable or will become
exercisable within 60 days after July 29, 2000. See Note 2 with respect to
shares that have been included herein.
COMPLIANCE WITH SEC REPORTING REQUIREMENTS
Under the securities laws of the United States, the Company's directors,
executive officers, and any persons holding more than ten percent of the
Company's Common Stock are required to report their initial ownership of the
Company's Common Stock and any subsequent changes in their ownership to the
Securities and Exchange Commission ("SEC"). Specific due dates have been
established by the SEC, and the Company is required to disclose in this Proxy
Statement any failure to file by those dates. Based upon (i) the copies of
Section 16(a) reports that the Company received from such persons for their 2000
fiscal year transactions and (ii) the written representations received from one
or more of such persons that no annual Form 5 reports were required to be filed
for them for the 2000 fiscal year, the Company believes that there has been
compliance with all Section 16(a) filing requirements applicable to such
officers, directors, and ten-percent beneficial owners for such fiscal year,
except that the following individuals failed to file timely reports for such
fiscal year: Mr. Morgridge did not report his June 9, 2000 option grant for
100,000 shares on a timely filed Form 5 report for the 2000 fiscal year but
instead will report the grant on a late Form 5 filing; Ms. Cirillo failed to
report on her initial Form 3 her holdings of the Company's Common Stock at the
time she joined the Board of Directors and failed to file Form 4 reports for
certain acquisitions of the Company's Common Stock she or her spouse made during
the 1999 and 2000 fiscal years and will file a late Form 5 report for fiscal
2000 for those holdings and acquisitions; and Mr. Valentine failed to file Form
4 reports for certain acquisitions of the Company's Common Stock made by several
partnerships in which he holds a partnership or other economic interest and will
file a late Form 5 report for those acquisitions; and (ii) a Form 4 report that
was filed timely for each of Messrs. Carter, Daichendt, Gibbons, Listwin,
Morgridge, and Redfield but was inadvertently filed with the SEC without
signatures. When this was discovered, a fully executed amended Form 4 was filed
for each individual.
EXECUTIVE COMPENSATION AND RELATED INFORMATION
COMPENSATION/STOCK OPTION COMMITTEE REPORT
The Compensation/Stock Option Committee (the "Committee") of the Board of
Directors sets the compensation of the Chief Executive Officer, reviews the
design, administration and effectiveness of compensation programs for other key
8
<PAGE> 13
executives, and approves stock option grants for all executive officers. The
Committee, serving under a charter adopted by the Board of Directors, is
composed entirely of outside directors who have never served as officers of the
Company.
Compensation Philosophy and Objectives
The Company operates in the extremely competitive and rapidly changing high
technology industry. The Committee believes that the compensation programs for
the executive officers should be designed to attract, motivate and retain
talented executives responsible for the success of the Company and should be
determined within a competitive framework and based on the achievement of
designated financial targets, individual contribution, customer satisfaction and
financial performance relative to that of the Company's competitors. Within this
overall philosophy, the Committee's objectives are to:
- Offer a total compensation program that takes into consideration the
compensation practices of a group of specifically identified peer
companies (the "Peer Companies") and other selected companies with which
the Company competes for executive talent.
- Provide annual variable incentive awards that take into account the
Company's overall financial performance in terms of designated corporate
objectives and the relative performance of the Peer Companies as well as
individual contributions and a measure of customer satisfaction.
- Align the financial interests of executive officers with those of
shareholders by providing significant equity-based, long-term incentives.
Compensation Components and Process
The three major components of the Company's executive officer compensation
are: (i) base salary, (ii) variable incentive awards, and (iii) long-term,
equity-based incentive awards.
The Committee determines the compensation levels for the executive officers
with the assistance of the Company's Human Resources Department, which works
with an independent consulting firm that furnishes the Committee with executive
compensation data drawn from a nationally recognized survey of similarly sized
technology companies which have been identified as the Peer Companies. A
significant number of the Peer Companies are listed in the Hambrecht & Quist
Technology Index, which is included in the Stock Performance Graph for this
proxy statement. Certain companies not included in this Index were considered
Peer Companies because the Company competes for executive talent with those
companies. However, some organizations in the Hambrecht & Quist Technology Index
were excluded from the Peer Company list because they were not considered
competitors for executive talent or because compensation information was not
available.
The positions of the Company's CEO and executive officers were compared
with those of their counterparts at the Peer Companies, and the market
compensation levels for comparable positions were examined to determine base
salary, target incentives and total cash compensation. In addition, the
practices of the Peer Companies concerning stock option grants were reviewed and
compared.
Base Salary. The base salary for each executive officer is determined at
levels considered appropriate for comparable positions at the Peer Companies.
The Company's policy is to target base salary levels between the 25th and 50th
percentile of compensation practices at the Peer Companies.
Variable Incentive Awards. To reinforce the attainment of Company goals,
the Committee believes that a substantial portion of the annual compensation of
each executive officer should be in the form of variable incentive pay. The
annual incentive pool for executive officers is determined on the basis of the
Company's achievement of the financial performance targets established at the
beginning of the fiscal year and also includes a range for the executive's
contribution, a measure of customer satisfaction and a strategic component tied
to the Company's performance relative to a select group of competitors. The
incentive plan sets a threshold level of Company performance based on both
revenue and profit before interest and taxes that must be attained before any
incentives are awarded. Once the fiscal year's threshold is reached, specific
formulas are in place to calculate the actual incentive payment for each
officer. A target is set for each executive officer based on targets for
comparable positions at the Peer Companies and is stated in terms of an
escalating percentage of the officer's base salary for the year. In fiscal 2000,
the Company exceeded its corporate performance targets as well as the strategic
target tied to revenue performance relative to the selected competitor group.
Awards paid reflected those results plus individual accomplishments of both
corporate and functional objectives and a component based upon customer
satisfaction.
9
<PAGE> 14
Long-Term, Equity-Based Incentive Awards. The goal of the Company's
long-term, equity-based incentive awards is to align the interests of executive
officers with shareholders and to provide each executive officer with a
significant incentive to manage the Company from the perspective of an owner
with an equity stake in the business. The Committee determines the size of
long-term, equity-based incentives according to each executive's position within
the Company and sets a level it considers appropriate to create a meaningful
opportunity for stock ownership. In addition, the Committee takes into account
an individual's recent performance, his or her potential for future
responsibility and promotion, comparable awards made to individuals in similar
positions with the Peer Companies, and the number of unvested options held by
each individual at the time of the new grant. The relative weight given to each
of these factors varies among individuals at the Committee's discretion.
During fiscal 2000, the Committee made option grants to Messrs. Carter,
Chambers, Daichendt, Listwin, Mazzola and Redfield under the Company's 1996
Stock Incentive Plan. Each grant allows the officer to acquire shares of the
Company's Common Stock at a fixed price per share (the market price on the grant
date) over a specified period of time. Options granted to this group of
individuals in January 2000 and later vest in periodic installments over a five
(5)-year period, contingent upon the executive officer's continued employment
with the Company. Accordingly, the option grants will provide a return only if
the officer remains with the Company and only if the market price appreciates
over the option term.
CEO Compensation. The annual base salary for Mr. Chambers was established
by the Committee on July 12, 1999, for the period August 1, 1999 to July 29,
2000. The Committee's decision was based on both Mr. Chambers' personal
performance of his duties and the salary levels paid to chief executive officers
of the Peer Companies, but set below the 25th percentile of the surveyed data in
order to have a substantial portion of his total compensation, in the form of
variable incentive awards and stock option grants, tied to Company performance
and stock price appreciation. The Committee continues to assess the market data
for chief executive officers' salary levels at our Peer Companies to ensure that
Mr. Chambers' compensation is consistent with Cisco's stated compensation
objectives relative to base salary.
Mr. Chambers' 2000 fiscal year incentive compensation was based on the
actual financial performance of the Company in achieving designated corporate
objectives and attaining a strategic revenue objective measured against
competitor performance and also included components based upon customer
satisfaction and Mr. Chambers' personal performance. Mr. Chambers' incentive
compensation was based on the incentive plan used for all executive officers and
provided no dollar guarantees. The option grant made to Mr. Chambers during the
2000 fiscal year was awarded within substantially the same timeframe the
Committee granted stock options to other employees under the Company's
broad-based stock option program. The option grant made to Mr. Chambers was
based upon his performance and leadership with the Company and placed a
significant portion of his total compensation at risk, since the value of the
option grant depends upon the appreciation of the Company's Common Stock over
the option term.
Compliance with Internal Revenue Code Section 162(m). Section 162(m) of the
Internal Revenue Code disallows a Federal income tax deduction to publicly held
companies for compensation paid to certain of their executive officers, to the
extent that compensation exceeds $1 million per covered officer in any fiscal
year. This limitation applies only to compensation which is not considered to be
performance based. The Company's 1996 Stock Incentive Plan has been structured
so that any compensation deemed paid in connection with the exercise of option
grants made under that plan will qualify as performance-based compensation which
will not be subject to the $1 million limitation. Non-performance based
compensation paid to the Company's executive officers for the 2000 fiscal year
exceeded the $1 million limit per officer for all of the Named Officers subject
to Section 162(m). The Committee has decided that it is not appropriate at this
time to take any action to limit the Company's discretion to design the cash
compensation packages payable to the Company's executive officers.
SUBMITTED BY THE COMPENSATION/STOCK OPTION COMMITTEE
Carol Bartz, Chairman
James F. Gibbons
James C. Morgan
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Compensation/Stock Option Committee of the Company's
Board of Directors for the 2000 fiscal year were those named above in the
Compensation/Stock Option Committee Report. No
10
<PAGE> 15
member of this Committee was at any time during the 2000 fiscal year or at any
other time an officer or employee of the Company.
No executive officer of Cisco Systems, Inc. has served on the board of
directors or compensation committee of any other entity that has or has had one
or more executive officers serving as a member of the Board of Directors of
Cisco Systems, Inc.
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION
The following table sets forth the compensation earned, by the Company's
Chief Executive Officer and the four other highest-paid executive officers and
an additional individual who was no longer an executive officer at the end of
the fiscal year whose salary and bonus for the 2000 fiscal year were in excess
of $100,000, for services rendered in all capacities to the Company and its
subsidiaries for each of the last three fiscal years. No executive officer who
would have otherwise been includable in such table on the basis of salary and
bonus earned for the 2000 fiscal year has been excluded by reason of his or her
termination of employment or change in executive status during that fiscal year.
The individuals included in the table will be collectively referred to as the
"Named Officers."
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
COMPENSATION
--------------------------------------------- LONG-TERM
ANNUAL COMPENSATION OTHER ANNUAL COMPENSATION ALL OTHER
------------------------------ COMPENSATION AWARDS COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($)(1) ($)(2) OPTIONS(#) ($)(3)
--------------------------- ---- --------- ----------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
John T. Chambers............... 2000 323,319 1,000,000 0 4,000,000 1,500
President, Chief Executive 1999 305,915 637,184 0 5,000,000 1,500
Officer, Director 1998 285,622 604,895 0 5,400,000 1,500
Donald J. Listwin(4)........... 2000 455,702 902,174 0 1,000,000 0
Executive Vice President, 1999 397,399 637,280 6,306 1,000,000 0
Service Provider and Consumer 1998 332,261 598,407 21,341 1,650,000 0
Lines of Business, Corporate
Marketing
Gary J. Daichendt.............. 2000 454,591 902,174 0 1,000,000 0
Executive Vice President, 1999 368,490 591,053 0 1,200,000 0
Worldwide Operations 1998 322,132 547,697 0 1,200,000 0
Mario Mazzola(5)............... 2000 412,520 850,958 500,000 1,500
Senior Vice President, 1999 374,640 576,882 0 640,000 1,500
New Business Ventures 1998 327,353 556,839 0 1,200,000 1,500
Larry R. Carter................ 2000 386,262 861,750 0 850,000 1,500
Senior Vice President, 1999 367,063 612,131 13,085 640,000 1,500
Finance and Administration, 1998 326,439 555,152 22,431 1,350,000 1,500
Chief Financial Officer,
Secretary and Director
Carl Redfield.................. 2000 342,228 763,773 0 750,000 1,500
Senior Vice President, 1999 321,897 549,396 0 600,000 1,500
Manufacturing, WW 1998 267,559 454,909 5,222 900,000 1,500
</TABLE>
---------------
(1) The amounts shown under the Bonus column represent cash bonuses earned for
the indicated fiscal years.
(2) The amounts reported consist of reimbursement for the payment of taxes
attributable to imputed interest income on certain loans made by the Company
to the Named Officer.
(3) Represents the matching contribution which the Company made on behalf of
each Named Officer to the Company's 401(k) Plan.
(4) Following the end of the fiscal year, Mr. Listwin resigned his position with
the Company.
(5) Mr. Mazzola was no longer an executive officer subject to Section 16(a) of
the Securities Exchange Act of 1934, as amended, effective as of March 30,
2000.
11
<PAGE> 16
STOCK OPTIONS
The following table provides information with respect to the stock option
grants made during the 2000 fiscal year under the Company's 1996 Stock Incentive
Plan to the Named Officers. No stock appreciation rights were granted to the
Named Officers during the fiscal year.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
------------------------------------------------
NUMBER OF % OF TOTAL VALUE OF ASSUMED ANNUAL
SECURITIES OPTIONS RATES OF STOCK
UNDERLYING GRANTED TO PRICE APPRECIATION
OPTIONS EMPLOYEES EXERCISE FOR OPTION TERM(2)
GRANTED IN FISCAL PRICE EXPIRATION ---------------------------
NAME (1) YEAR ($/SHARE) DATE 5%($) 10%($)
---- ---------- ---------- --------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
John T. Chambers........... 4,000,000 1.3291 54.5313 01/24/09 $120,258,577 $296,202,611
Donald J. Listwin.......... 1,000,000 .3323 51.9063 01/12/09 28,617,408 70,486,040
Gary J. Daichendt.......... 1,000,000 .3323 51.9063 01/12/09 28,617,408 70,486,040
Mario Mazzola.............. 500,000 .1661 51.9063 01/12/09 14,308,704 35,243,020
Larry R. Carter............ 750,000 .2492 51.9063 01/12/09 21,463,056 52,864,530
100,000 .0332 62.7500 05/09/09 3,459,585 8,521,122
Carl Redfield.............. 650,000 .2160 51.9063 01/12/09 18,601,315 45,815,926
100,000 .0332 62.7500 05/09/09 3,459,585 8,521,122
</TABLE>
---------------
(1) Options were granted on January 12, 2000, January 24, 2000 and May 9, 2000
and have a maximum term of 9 years measured from the applicable grant date,
subject to earlier termination in the event of the optionee's cessation of
service with the Company. The stock options granted will become exercisable
for 20% of the option shares upon the completion of one year of service and
will become exercisable for the remaining shares in equal monthly
installments over the next 48 months of service thereafter. However, the
option will immediately become exercisable for all of the option shares in
the event the Company is acquired by a merger or asset sale, unless the
options are assumed by the acquiring entity, or in the event there is a
hostile change in control or ownership of the Company.
(2) There is no assurance provided to any executive officer or any other holder
of the Company's securities that the actual stock price appreciation over
the nine (9)-year option term will be at the assumed 5% or 10% annual rates
of compounded stock price appreciation or at any other defined level. Unless
the market price of the Common Stock appreciates over the option term, no
value will be realized from the option grants made to the executive
officers.
12
<PAGE> 17
OPTION EXERCISES AND HOLDINGS
The table below sets forth information with respect to the Named Officers
concerning their exercise of options during the 2000 fiscal year and the
unexercised options held by them as of the end of such year. No stock
appreciation rights were exercised during the fiscal year, and no stock
appreciation rights were outstanding at the end of the fiscal year.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
NUMBER OF VALUE OPTIONS AT JULY 29, 2000 AT JULY 29, 2000($)(1)
SHARES ACQUIRED REALIZED --------------------------- ----------------------------
NAME ON EXERCISE ($)(2) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- --------------- ------------ ----------- ------------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
John T. Chambers..... 2,500,000 $155,980,290 14,275,000 11,125,000 $779,459,996 $346,539,354
Donald J. Listwin.... 112,496 4,883,083 3,595,314 2,698,438 193,322,298 86,741,278
Gary J. Daichendt.... 1,505,722 52,717,030 660,323 2,636,459 30,827,358 83,243,828
Mario Mazzola........ 140,624 8,794,237 2,948,696 1,926,876 161,009,240 72,900,703
Larry R. Carter...... 1,634,400 48,170,629 2,879,687 2,075,313 156,746,648 64,376,930
Carl Redfield........ 790,000 37,265,767 2,032,812 1,857,188 109,227,769 57,583,209
</TABLE>
---------------
(1) Based upon the market price of $62.8125 per share, which was the closing
selling price per share of Common Stock on the Nasdaq National Market on the
last day of the 2000 fiscal year, less the option exercise price payable per
share.
(2) Based upon the market price of the purchased shares on the exercise date
less the option exercise price paid for such shares.
EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT, AND CHANGE IN CONTROL
AGREEMENTS
None of the Company's executive officers have employment or severance
agreements with the Company, and their employment may be terminated at any time
at the discretion of the Board of Directors.
Each outstanding option under the Company's 1996 Stock Incentive Plan will
vest and become immediately exercisable for all of the option shares at the time
subject to that option in the event there should occur a hostile take-over of
the Company, whether through a tender offer for more than thirty-five percent
(35%) of the Company's outstanding voting securities which the Board does not
recommend the shareholders to accept or a change in the majority of the Board as
a result of one or more contested elections for Board membership.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In January 1996, the Company loaned Gary J. Daichendt, Executive Vice
President, Worldwide Operations of the Company, $400,000. The loan was paid in
full in January 2000. The loan was interest free and was collaterized by a deed
of trust on real property.
13
<PAGE> 18
STOCK PERFORMANCE GRAPH
The graph depicted below shows the Company's stock price as an index
assuming $100 invested on July 28, 1995, along with the composite prices of
companies listed in the S&P 500 and the Hambrecht & Quist Technology Index.
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN
[PERFORMANCE GRAPH]
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------------------------
7/28/95 7/26/96 7/25/97 7/24/98 7/30/99 7/28/00
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Cisco Systems, Inc. $100 $183 $284 $523 $997 $2,017
S&P 500 100 117 177 212 254 277
Hambrecht & Quist Technology Index 100 96 162 175 283 471
----------------------------------------------------------------------------------------------------------
</TABLE>
Notwithstanding anything to the contrary set forth in any of the Company's
previous filings under the Securities Act of 1933 or the Securities Exchange Act
of 1934 that might incorporate future filings made by the Company under those
statutes, the preceding Compensation/Stock Option Committee Report on Executive
Compensation and the Company Stock Performance Graph will not be incorporated by
reference into any of those prior filings, nor will such report or graph be
incorporated by reference into any future filings made by the Company under
those statutes.
NOTES
(1) The Company's fiscal year ended on July 29, 2000.
(2) No cash dividends have been declared on the Company's Common Stock.
Shareholder returns over the indicated period should not be considered
indicative of future shareholder returns.
14
<PAGE> 19
SHAREHOLDER PROPOSALS FOR 2001 PROXY STATEMENT
Shareholder proposals that are intended to be presented at the Company's
Annual Meeting of Shareholders to be held in 2001 must be received by the
Company no later than June 1, 2001 in order to be included in the proxy
statement and related proxy materials. Please send any such proposals to Cisco
Systems, Inc., 170 W. Tasman Drive, San Jose, California 95134-1706, Attn:
Investor Relations, with a copy to the attention of the Company's Senior Vice
President, Legal and Government Affairs.
In addition, the proxy solicited by the Board of Directors for the 2001
Annual Meeting of Shareholders will confer discretionary authority to vote on
any shareholder proposal presented at that meeting, unless the Company is
provided with notice of such proposal no later than August 15, 2001.
FORM 10-K
THE COMPANY WILL MAIL WITHOUT CHARGE, UPON WRITTEN REQUEST, A COPY OF THE
COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED JULY 29, 2000,
INCLUDING THE FINANCIAL STATEMENTS, SCHEDULES, AND LIST OF EXHIBITS. REQUESTS
SHOULD BE SENT TO CISCO SYSTEMS, INC., 170 W. TASMAN DRIVE, SAN JOSE, CALIFORNIA
95134-1706, ATTN: INVESTOR RELATIONS.
OTHER MATTERS
The Board knows of no other matters to be presented for shareholder action
at the Annual Meeting. However, if other matters do properly come before the
Annual Meeting or any adjournments or postponements thereof, the Board intends
that the persons named in the proxies will vote upon such matters in accordance
with their best judgment.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ LARRY R. CARTER
Larry R. Carter
Secretary
Dated: September 29, 2000
15
<PAGE> 20
DIRECTIONS TO PARAMOUNT'S GREAT AMERICA MAP
1028-PSA-00
<PAGE> 21
DETACH HERE
PROXY
CISCO SYSTEMS, INC.
ANNUAL MEETING OF SHAREHOLDERS, NOVEMBER 14, 2000
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
OF CISCO SYSTEMS, INC.
The undersigned revokes all previous proxies, acknowledges receipt of the notice
of the shareholders meeting to be held November 14, 2000 and the proxy
statement, and appoints John T. Chambers and Larry R. Carter or either of them
the proxy of the undersigned, with full power of substitution, to vote all
shares of Common Stock of Cisco Systems, Inc. that the undersigned is entitled
to vote, either on his or her own behalf or on behalf of an entity or entities,
at the Annual Meeting of Shareholders of the Company to be held at Paramount's
Great America in the Paramount Theater, located at 1 Great America Parkway,
Santa Clara, California 95054, on Tuesday, November 14 at 10:00 a.m., and at any
adjournment or postponement thereof, with the same force and effect as the
undersigned might or could do if personally present thereat. The shares
represented by this proxy are as of September 15, 2000, and shall be voted in
the manner set forth on the reverse side.
SEE REVERSE CONTINUED AND TO BE SIGNED ON REVERSE SIDE SEE REVERSE
SIDE SIDE
<PAGE> 22
CISCO SYSTEMS, INC.
C/O EQUISERVE
P.O. BOX 9398
BOSTON, MA 02205-9398
PLEASE NOTE, ALL VOTES CAST VIA TELEPHONE OR THE INTERNET
MUST BE CAST PRIOR TO 5 P.M., EST, NOVEMBER 13, 2000.
/VOTE BY TELEPHONE/
It's fast, convenient, and immediate!
Call Toll-Free on a Touch-Tone Phone
1-877-PRX-VOTE (1-877-779-8683).
FOLLOW THESE FOUR EASY STEPS:
1. READ THE ACCOMPANYING PROXY
STATEMENT/PROSPECTUS AND PROXY CARD.
2. CALL THE TOLL-FREE NUMBER
1-877-PRX-VOTE (1-877-779-8683).
3. ENTER YOUR 14-DIGIT VOTER CONTROL NUMBER
LOCATED ON YOUR PROXY CARD ABOVE YOUR NAME.
4. FOLLOW THE RECORDED INSTRUCTIONS.
YOUR VOTE IS IMPORTANT!
Call 1-877-PRX-VOTE anytime!
/VOTE BY INTERNET/
It's fast, convenient, and your vote is immediately
confirmed and posted.
FOLLOW THESE FOUR EASY STEPS:
1. READ THE ACCOMPANYING PROXY
STATEMENT/PROSPECTUS AND PROXY CARD.
2. GO TO THE WEBSITE
HTTP://WWW.EPROXYVOTE.COM/CSCO
3. ENTER YOUR 14-DIGIT VOTER CONTROL NUMBER
LOCATED ON YOUR PROXY CARD ABOVE YOUR NAME.
4. FOLLOW THE INSTRUCTIONS PROVIDED.
YOUR VOTE IS IMPORTANT!
Go to HTTP://WWW.EPROXYVOTE.COM/CSCO anytime!
RECEIVE FUTURE PROXY MATERIALS ELECTRONICALLY. Receiving shareholder material
electronically reduces mailing and printing costs and is better for the
environment. Would you like to receive future proxy materials electronically?
If so go to: HTTP://WWW.EPROXYVOTE.COM/CSCO and follow the instructions
provided.
DO NOT RETURN YOUR PROXY CARD IF YOU ARE VOTING BY TELEPHONE OR INTERNET
ZCIS5A DETACH HERE
PLEASE MARK
/X/ VOTES AS IN
THIS EXAMPLE.
1. To elect twelve members of the Board of Directors to serve until the next
Annual Meeting and until their successors have been elected and qualified;
NOMINEES: (01)Carol A. Bartz, (02) Larry R. Carter, (03) John T. Chambers,
(04) Mary Cirillo, (05) Dr. James F. Gibbons, (06) Edward R. Kozel,
(07) James C. Morgan, (08) John P. Morgridge, (09) Arun Sarin,
(10) Donald T. Valentine, (11) Steven M. West, (12) Jerry Yang.
FOR WITHHELD
ALL / / / / FROM ALL
NOMINEES NOMINEES
/ / _____________________________________
For all nominees except as noted above
Signature: __________________ Date: ______________
2. To ratify the selection of PricewaterhouseCoopers LLP as the
Company's independent accountants for the fiscal year
ending July 28, 2001;
FOR AGAINST ABSTAIN
/ / / / / /
3. To act upon such other matters as may properly come before
the meeting or any adjournment or postponements thereof.
MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT / /
Please sign your name exactly as it appears hereon. If acting as
attorney, executor, trustee, or in other representative capacity,
sign name and title.
Signature: __________________ Date: ______________
