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Cisco doles out 162 million stock options

Company's distribution includes 1.5 million shares for Chief Executive John Chambers.

Cisco Systems, the largest maker of Internet networking gear, doled out 162 million merit-based common stock options to employees, including 1.5 million to CEO John Chambers.

The company disclosed the option grants on Monday in a filing with the Securities and Exchange Commission.

Chambers' options vest over seven years, according to the filing, which means he will not be able to exercise or purchase them until 2011. But if he were to give up his president and CEO titles while still working for the company, he could exercise those options three years after stepping down from his post.

Chambers began his career at Cisco 13 years ago and has been chief executive since 1995. For the last few years he has taken only $1 in salary and has refused cash bonuses. The CEO has received millions of stock options over the years.

In addition to the options granted to Chambers, Cisco allocated 160.5 million merit-based options to other employees in the company. These options, including the ones granted to Chambers, have an exercise price of $19.18 per share, which represents Monday's closing selling price per share of Cisco's common stock on the Nasdaq.

Since the company was founded, stock options have been an important piece of Cisco's compensation package. The company has allocated additional options to be distributed from time to time.

Cisco said in its last quarterly report that it had 6.76 billion shares outstanding as of May 21. The company also said it had 1.365 billion options outstanding as of May 1, with a weighted average exercise price of $25.15 per share and 396 million options available for grant.

For the past few years the company has strenuously lobbied against proposals by the Financial Accounting Standards Board that would require all companies to list the cost of employee stock options in corporate income statements.

New rules are expected to go into effect next year. In June, the Committee on Financial Services for the House of Representatives passed a bill that would block these new changes. Cisco and others opposed to option expensing say that current practices provide investors with enough information to calculate the financial impact of employees exercising stock options.