Exhibit 10.1
CISCO SYSTEMS, INC.
PROFESSIONAL AND LEADERSHIP INCENTIVE PLAN
FY 2007
I. INTRODUCTION
A. The Objective of the Professional and Leadership (P&L) Incentive Plan (the
"Plan" or the "P&L Plan") is to provide eligible employees of Cisco
Systems, Inc. ("Cisco") and its "subsidiaries" (as defined in Paragraph
III.C. below), with the opportunity to receive a payment for their
contributions to the success and profitability of Cisco. Participation in
the Plan and the payment of any sums hereunder shall be in the sole and
absolute discretion of Cisco. "Cisco and its subsidiaries" are referred to
herein as "the Company."
B. Participants: This Plan applies solely to regular employees of Cisco
Systems, Inc. and its subsidiaries in salary grades 1 through 14, 083,
084, 090, 150, 200, and 888, whom Cisco in its sole discretion determines
meet the eligibility requirements set forth in Section II ("Plan
Participants"). For purposes of this Plan and unless otherwise prohibited
by applicable law, the term "regular employee" means an individual who is
deemed by Cisco to be both an employee of the Company and employed for an
unspecified or indefinite period of time.
C. Effective Date: This Plan is only effective for Cisco's fiscal year 2007
beginning July 30, 2006, through July 28, 2007 (the "Fiscal Year"). This
Plan is limited in time and will expire automatically on July 28, 2007
("Expiration Date").
D. Cisco Authority: Cisco reserves the right to interpret this Plan document
on a fully discretionary basis and to take any action, or to decline to
take any action, in relation to administration or interpretation of the
Plan including but not limited to determining employee eligibility for
participation in the Plan, and to determine the amount, if any, to be paid
under the Plan. Nothing in this Plan is intended to create an entitlement
to any employee for any incentive payment hereunder except as Cisco may
determine in its discretion. Except as otherwise herein provided, Cisco's
authority as set forth herein shall be exercised by Cisco's Senior Vice
President of Human Resources, Vice President of Compensation and Benefits,
Senior Vice President of Operations, Process and Systems, or their
respective successor(s), and such other persons to whom one or more of the
foregoing expressly delegates authority.
E. Changes in Plan: Cisco reserves the right to modify or terminate the Plan
in total or in part, at any time. Any such modification or termination
must be approved in writing by Cisco's President/CEO, Senior Vice
President of Human Resources, Vice President of Compensation and Benefits,
or Senior Vice President of Operations, Process and Systems. If any
modification or termination of the Plan affects an executive officer of
Cisco who is subject to Section 16 of the Securities Exchange Act of 1934
(an "Executive Officer"), such modification or termination
Professional & Leadership Plan FY 2007
must be approved in writing by resolution of the Cisco Systems Inc.
Compensation & Management Development Committee of the Board of Directors (the
"Compensation Committee").
F. Entire Understanding: Except as expressly set forth herein, this Plan, as
it may be modified in accordance with the foregoing, constitutes the
entire writing and understanding regarding the subject matter of this Plan
and supersedes all prior bonus and incentive plans, whether maintained by
Cisco, any holding company, subsidiary, or affiliate thereof and any
written, and/or oral agreement, understanding, or representations
regarding the subject matter of this Plan. All payments under this Plan
are fully discretionary payments. Participation in this Plan during the
Fiscal Year will not convey any entitlement to participate in this or
future plans or to the same or similar bonus benefits, nor does this Plan
constitute a guarantee or establish an obligation for Cisco to maintain a
similar plan or award similar bonus benefits in the future. Payments under
this Plan are a discretionary and extraordinary item of compensation that
are outside the normal, regular or expected compensation, and in no way
represent any portion of a Plan Participant's salary, compensation, or
other remuneration for the purpose of calculating any of the following
payments: termination, severance, redundancy, end-of-service premiums,
bonuses; long-service awards; overtime premiums; pension or retirement
benefits; and any other similar payments and extra benefits.
II. ELIGIBILITY AND INCENTIVE PLAN ELEMENTS
A. Eligibility: Assuming all other conditions of the Plan are met and that
Cisco determines in its sole discretion to make payments under the Plan,
to be considered for a discretionary bonus payment hereunder, a Plan
Participant must satisfy each of the following eligibility requirements:
1. The employee must be deemed by Cisco to be employed by Cisco or a
subsidiary as a regular employee in a P&L Plan-eligible position on or
before the first working day of the last fiscal quarter of the Fiscal
Year, and must be employed as a regular employee on the last working
day of the Fiscal Year;
2. The employee must not be providing services to Cisco or a subsidiary
as a temporary employee, intern or as an independent contractor,
consultant, or agent, under a written or oral contract or purchase
order, and must not be classified by Cisco or a subsidiary as a
temporary employee, independent contractor, consultant, or agent
(whether or not such classification is upheld upon review by a
governmental, judicial or other agency, or by an arbitrator); and
3. At both the time of calculation of the P&L Plan award and at the time
of payout, the employee:
a. must not be concurrently on a sales incentive or commission plan;
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Professional & Leadership Plan FY 2007
b. cannot have entered into an employment termination agreement
(including, but not limited to, any agreement, other than an
employment agreement or offer letter, in respect of an employee's
termination of employment);
c. must not be on a Performance Improvement Plan, letter of concern,
work plan, etc.;
d. must not be rated as "N" in his/her most recent performance evaluation; and
e. must not be deemed by Cisco to have violated the business conduct
requirements described in Paragraph III.A below.
All payments under the Plan rest within the sole and absolute discretion of
Cisco and, in particular, any payment for employees ranked by their management
in the bottom 5% to 10% of their organization and/or for employees who have been
offered an employment termination agreement (including, but not limited to, any
agreement, other than an employment agreement or offer letter, in respect of
termination of employment) must be approved in writing by Cisco's President/CEO,
Senior Vice President of Human Resources, Vice President of Compensation and
Benefits or Senior Vice President of Operations, Process and Systems or their
respective successor(s) or designee(s) or, with respect to payments to Executive
Officers, the Compensation Committee of the Board of Directors.
Employees meeting all eligibility requirements of the Plan who have less than
one year of service will be eligible to receive a discretionary P&L Plan payout
that is prorated from the effective date of participation in the Plan up to and
including the Expiration Date.
B. Elements of Calculation:
Subject to all other terms of the Plan, incentives under this Plan are
calculated in accordance with the following formula:
(Base Salary X Incentive Target Percentage) X
Company Customer Individual
Performance X Satisfaction X Performance
Factor Factor Factor
X Pro-ration Factor = Total Annual Incentive
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Professional & Leadership Plan FY 2007
1. Base Salary shall mean the annual base salary in effect (i) at the end
of Q2 of the Fiscal Year for purposes of calculating midyear advances,
if any (as described below); and (ii) at the end of Q4 of the Fiscal
Year for purposes of calculating year-end payments, if any.
"Base Salary" for Plan Participants who transfer from a position compensated
under the terms of the Sales Incentive Compensation Plan to a Plan-eligible
position will be their last salary while in a Plan-eligible position.
If the Plan Participant's salary currency changes during the Fiscal Year, the
salary currency in effect before the change will be used as the basis for the
P&L Plan calculation for the period in which that currency was in effect and the
post-change currency will be the basis for the P&L Plan calculation for the
period in which that currency was in effect. These two prorated base salary
amounts will be added together to determine the Base Salary. P&L Plan payments
will be made in the Plan Participant's salary currency in effect at the end of
Q2 of the Fiscal Year for midyear advances, if any, and at the end of Q4 of the
Fiscal Year for year-end payments, if any.
Except as otherwise required by applicable law, Base Salary shall not include
variable forms of compensation including, but not limited to, overtime, on-call
pay, lead premiums, shift differentials, bonuses, incentive compensation,
commissions, stock options, or expense allowances, or reimbursement. Payment in
lieu of Paid Time Off during active employment or upon termination is not
included in base salary for purposes of the Plan.
2. Incentive Target Percentage is a percentage of base salary determined
by the grade level of the Plan Participant's job classification and
may be changed at the discretion of Cisco at any time during the
Fiscal Year. If the target is modified, affected Plan Participants
will be notified.
Incentive Target
Grade/Level Percentage
1-4 4%
5-7 5%
8 and 9 9%
10 and 11 12%
12 25%
013, 014, 083, 084, and 090 35%
200 and 888 57.5%
150 60%
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Professional & Leadership Plan FY 2007
Plan Participants who transfer or whose grade/level is changed during the Fiscal
Year will have their Incentive Target Percentage adjusted to reflect the
applicable time spent in each grade/level.
3. Company Performance Factor is based upon Cisco's achievement of
worldwide Revenue and Profit Before Interest and Tax targets, as
determined by Cisco in its sole and absolute discretion. The Company
Performance Factor will range from 0.0 to 2.0, with financial targets
to be set in the first ninety (90) days of the fiscal year.
4. Customer Satisfaction Factor is based upon the average of two customer
satisfaction survey scores drawn from Cisco worldwide. This factor
will be calculated based on the average of Primary and Secondary
Customer Satisfaction multipliers. The Customer Satisfaction Factor
will range from 0.0 to 1.14, with customer satisfaction targets to be
set in the first ninety (90) days of the fiscal year.
5. Individual Performance Factor (IPF) is a defined term unique to this
Plan and is based upon evaluation of a number of factors, including
but not limited to a Plan Participant's individual and/or managerial
performance and contribution for the Fiscal Year, results that the
Plan Participant achieved, the importance of the results to Cisco, the
manner in which the results were achieved, teamwork and collaboration,
the extent to which the Plan Participant represented Cisco's best
interests, the Plan Participant's trend and commitment to continuous
improvement, the Plan Participant's total cash position relative to
peers and market, talent assessment relative to peers, market risk of
talent loss, and where appropriate, managerial performance in driving
key corporate objectives. The IPF will range from 0.0 to 2.0.
6. Pro-ration Factor accounts for the number of calendar or calendar
equivalent days during the Fiscal Year that the Plan Participant was
in a P&L Plan-eligible position under this Plan (or as is appropriate
in relation to mid-year advance, number of days in a P&L Plan -
eligible position during the first two quarters of the year). For
example, the Pro-ration Factor for a Plan Participant who has been in
the Plan the entire Fiscal Year will be 1.00. For a Plan Participant
who has been in the Plan for 6 months of the Fiscal Year, this factor
will be 0.50. Unless otherwise required by law or a written Company
policy, Plan Participants in the following situations will have a
Pro-ration factor of less than 1.00:
• Plan Participants who transfer to a new position not covered by the Plan.
• Plan Participants who have been in the Plan less than 12 months
(such as a new hire, or a Plan Participant who transfers from a
non-P&L Plan eligible position into a P&L Plan-eligible position).
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Professional & Leadership Plan FY 2007
• Plan Participants who have been on a leave of absence of any
duration during the Fiscal Year.
• Plan Participants working less than the applicable full-time
standard work week. Such Plan Participants will have a Pro-ration
Factor that reflects the average number of hours worked per week
during the Fiscal Year.
Notwithstanding the foregoing, the Pro-ration Factor may be modified for any
Plan Participant, provided that any modification to the Pro-ration Factor must
be approved in writing in advance of the year-end close date by the next-level
Manager and the Vice President of Compensation and Benefits, or his or her
successor or designee unless the Plan Participant is an Executive Officer, in
which case, such modification must be approved by the Compensation Committee.
7. Adjustment of Factors. The Compensation Committee may adjust any of
the above factors and may authorize funding in excess of any of these
factors.
C. Total Annual P&L Plan Incentive shall be the product of the foregoing six
factors and shall be less any advances, including, but not limited to,
mid-year advances and unearned sales incentive compensation payment
advances, draws, other outstanding debts and appropriate withholdings.
D. Incentive Formula and Calculation Example: Assuming a base salary of
$95,000, Incentive Target Percentage of 9%, Individual Performance Factor
of 1.00, Company Performance Factor of 1.00, a Customer Satisfaction
Factor of 1.05, and a Pro-ration Factor of 1.00, the Total Annual
Incentive for an employee meeting all eligibility requirements, would be
calculated as follows:
Sample Calculation
(Base Salary Incentive Target Percentage)
($95,000 X 0.09) X
Company Customer Individual
Performance Satisfaction Performance
Factor Factor Factor
1.0 X 1.05 X 1.0
Pro-ration Factor Total Annual Incentive
X 1.0 = $8,977.50*
* less any advances, including, but not limited to, mid-year advances and
unearned sales incentive compensation advances, draws, other outstanding debts,
and appropriate withholdings.
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Professional & Leadership Plan FY 2007
In this example, the total incentive equals 9.45% of base salary.
E. Midyear Advance of Year-End Incentive Payment: If, at the midpoint of the
Fiscal Year, Cisco determines, in its sole discretion, that Company
Performance Factor is at a minimum of 1.00, Cisco may elect to make an
advance of P&L Plan payments at that time. Any such payment will be
treated as an advance, and will not be more than 50% of the Incentive
Target Percentage, times Base Salary, reduced by any advances, including,
but not limited to, mid-year advances and unearned sales incentive
compensation advances, draws, other outstanding debts, and appropriate
withholdings. This advance will be deducted from the Total Annual
Incentive year-end payment, if any. Only Plan Participants who have met
job expectations (as determined in the discretion of their management),
were hired in a P&L Plan eligible position under this Plan on or before
the first working day of the second quarter of the Fiscal Year and are
actively employed as a regular employee by Cisco on the day of
distribution will be eligible to receive a midyear advance. For Plan
Participants not in a Plan - eligible position from the beginning of the
fiscal year, their mid-year advance will be prorated, provided they are
employed in such positions as of the first day of the second quarter of
the fiscal year.
If Cisco determines, in its sole and absolute discretion, that the Company
Performance Factor is not at a minimum of 1.00 at the midpoint of the Fiscal
Year, but is at least .80, then a partial mid-year advance may, at the sole
discretion of Cisco's President/CEO, be distributed at that time. Such
distribution may be made to some or all Plan Participants. Such discretionary
payment, if any, will be subject to the same terms and conditions set forth
above for a mid-year advance based on a 1.00 Company Performance Factor, except
that the maximum amount paid will be 25% of the Incentive Target Percentage,
times Base Salary.
F. Year-End Discretionary P&L Plan Payment: If the Company Performance Factor
is 0 at the end of the Fiscal Year, so that no Total Annual Incentive
year-end payment is payable under the Plan, then the President/CEO may, at
his or her sole discretion, authorize a year-end payment in an amount up
to 25% of the applicable Incentive Target Percentage, times Base Salary,
to some or all Plan Participants. In no event will an individual be
eligible for such a discretionary payment unless he or she is employed as
a regular employee on the last day of the Fiscal Year. Such discretionary
payment, if any, will be subject to reduction for any advances, including
but not limited to mid-year advances, unearned sales incentive
compensation advances, draws, other outstanding debts and appropriate
withholding.
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Professional & Leadership Plan FY 2007
G. Payments Subject to Compensation Committee Approval: Notwithstanding
anything stated herein to the contrary, all payments hereunder to
Executive Officers must be pre-approved in writing by the Compensation
Committee.
III. MISCELLANEOUS
A. Business Conduct: It is the established policy of Cisco and all of its
subsidiaries to conduct business with the highest standards of business
ethics. Among other things, employees may not offer, give, solicit or
receive any payment that could appear to be a bribe, kickback or other
irregular type of payment from anyone involved in any way with an actual
or potential business transaction. Any person determined to have violated
appropriate standards of business conduct will not be eligible for any
payment under this Plan.
B. Employment at Will: The Company is an at-will employer, which means that
an employee's employment can be terminated by the employee or the Company
at any time with or without cause to the extent permitted by applicable
law. The Company reserves the right to modify an employee's duties, title
or other terms and conditions of employment with or without cause. This
Plan cannot and should not be interpreted to alter the at-will nature of
the employment relationship between the Company and any Plan Participant,
as is set forth in documents establishing that status. In addition, none
of the terms and conditions applicable to incentive compensation
supersedes or modifies in any way the terms set forth in the Plan
Participant's Proprietary Information and Inventions Agreement.
C. Subsidiaries: This Plan applies to employees of all Cisco subsidiaries,
except where the employees of a subsidiary are expressly eligible for
participation in a bonus or incentive plan established by the subsidiary
by which they are employed, and/or where employees of a Cisco subsidiary
are expressly informed in writing that they are not eligible for
participation in this Plan. In order for employees of a subsidiary to be
eligible for this Plan, the decision to include such persons in the Plan
must be memorialized in a resolution of the Compensation Committee of the
Board of Directors. Employees of Cisco-Linksys LLC and Scientific Atlanta
are currently not eligible for participation in this Plan.
It is not Cisco's intention that employees of Cisco or its subsidiaries be
eligible for more than one bonus or incentive plan, unless expressly stated to
the contrary. The Compensation Committee, Senior Vice President of Human
Resources, Vice President of Compensation and Benefits or Senior Vice President
of Operations, Process and Systems may approve plans or arrangements for
eligible individuals that may operate as an addendum to, or an addition or
supplement to, this Plan.
D. Dispute Resolution: Plan Participants and the Company acknowledge and
agree that any and all disputes or claims arising from or relating to a
Plan Participant's recruitment to or employment with the Company
(including but not limited to disputes or claims arising from or relating
the Plan or the Cisco Systems, Inc. Company Performance Award Plan), or
the termination of the Plan Participant's
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Professional & Leadership Plan FY 2007
employment, will be resolved solely and exclusively pursuant to final and
binding arbitration in lieu of any evidentiary hearing before a government
agency and/or a court trial before a judge or jury, pursuant to the terms of
Cisco's Arbitration Agreement and Policy, a copy of which can be found at
http://wwwin.cisco.com/HR/employee/proprietary_info/agreement2arbitrate.shtml
The parties' agreement to arbitrate means that both Cisco and the Plan
Participant have expressly waived any and all rights to a trial before a court
or a jury.
IV. APPROVAL
This Plan was approved by the Compensation Committee on July 27, 2006.
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