EXHIBIT 10.12
CISCO SYSTEMS, INC.
WORLDWIDE
SENIOR MANAGEMENT INCENTIVE PLAN
EVP, SR VP, VP, DIRECTOR
FY 2000
I. INTRODUCTION
A. THE OBJECTIVE OF THE SENIOR MANAGEMENT INCENTIVE PLAN is to
financially reward Executive Vice Presidents, Senior Vice Presidents,
Vice Presidents, Directors and employees in Grades 13 and 14 for their
contributions to the success and profitability of Cisco Systems, Inc.
B. PARTICIPANTS: This plan applies solely to Vice Presidents and
Directors of Cisco Systems or participating Cisco subsidiaries in the
following positions:
POSITION
Executive Vice President
Senior Vice President
Vice President
Director (excluding Sales Positions)
Employees in Grades 13 and 14
Any exceptions to the above will need to be approved in writing by the
President. The participant must be employed in a bonus-eligible
position on or before the first working day of the last fiscal quarter
of Fiscal Year 2000 and must be employed on the last working day of
that year to be eligible for an FY99 bonus. Participants may not be
concurrently enrolled in any other bonus, sales or incentive plan.
Participants in the Plan with less than one year of service will be
eligible for a prorated bonus amount. In no event will any individual
accrue any right or entitlement to a bonus under this Plan unless that
individual is employed by Cisco Systems or a participating Cisco
subsidiary on the last working day of Fiscal Year 2000.
C. EFFECTIVE DATE: The Plan is effective for the Fiscal Year 2000,
beginning August 1, 1999 through July 29, 2000.
D. CHANGES IN PLAN: The Company presently has no plans to change the
Senior Management Incentive Plan during the fiscal year. However, the
Company reserves the right to modify the Senior Management Bonus Plan
in total or in part, at any time. Any such change must be in writing
and signed by the President. The President or plan designers reserve
the right to interpret the plan document as needed.
E. ENTIRE AGREEMENT: This Plan is the entire agreement between Cisco
Systems, Inc. and the employee regarding the subject matter of this
Plan and supersedes all prior compensation or incentive plans or any
written or verbal representations regarding the subject matter of this
Plan.
II. BONUS PLAN ELEMENTS
A. BASE SALARY is determined by the participant's manager, on the Focal
review date scheduled for either August 1, April 1, or October 1 of
each year. The annual base salary in effect at the end of the Fiscal
Year 2000 represents the basis for the bonus calculation.
Worldwide Senior Management Incentive Plan FY2000 Page 2 of 5
B. BONUS TARGET PERCENTAGE is a percentage level of base salary
determined by the position.
C. INDIVIDUAL PERFORMANCE MULTIPLIER is based upon the manager's
evaluation of performance and contribution for the fiscal year. This
factor may range from 0.90 - 1.30. The assigned factor may also be a
zero resulting in no bonus based on the manager's evaluation of
performance and contribution. A written performance evaluation is
required in conjunction with any assigned factor of zero.
Employees who were given corrective feedback, on a Performance
Improvement Plan and/or performing at a level of "Not Satisfactory"
(N), at any time during the fiscal year may receive a lower Individual
Performance Multiplier resulting in a lower bonus. The assigned
multiplier may also be a zero resulting in no bonus based on the
manager's evaluation of performance and contribution. A written
performance evaluation is required in conjunction with any assigned
factor of zero.
D. COMPANY PERFORMANCE MULTIPLIER is based upon achieving an established
worldwide Revenue target and a worldwide Profit Before Interest and
Tax (PBIT) target per the current Plan. The PBIT achievement to target
is more heavily weighted relative to the worldwide Revenue target.
Typically, 80% of each objective must be achieved for any bonus to be
paid. Maximum payout under the Plan is 200% or a multiplier of two.
When the Revenue and PBIT percentages of goal fall between the stated
percentages on the matrix, the Company Performance Multiplier will be
determined using a straight-line interpolation approach. The
applicable targets for Fiscal Year 2000 are approved by the Cisco
Board of Directors within the first 90 days of the fiscal year.
EXAMPLE: COMPANY PERFORMANCE
-------------------
Actual Revenue Performance is 100% of goal
Actual PBIT Performance is 110% of goal
COMPANY PERFORMANCE MULTIPLIER = 1.30
-------------------------------------
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E. CUSTOMER SATISFACTION MULTIPLIER is based upon achievement of an
overall worldwide customer satisfaction survey score. The multiplier
may range from 0.95 - 1.20 based on the following criteria:
F. COMPANY STRATEGIC PERFORMANCE MULTIPLIER measures Cisco's annual
revenue growth compared to select competitor company annual revenue
growth. (Revenue is measured quarterly and combined to determine
annual revenue growth percentage.) The multiplier is determined based
on the revenue growth difference of Cisco and the selected competitor
companies. The multiplier may range from 0.90 to 1.30.
EXAMPLE: Cisco Annual Revenue Growth is 30%
Select Competitor Company Revenue Growth is 20%
30% - 20% = 10% or 10 points
Multiplier = 1.1
G. PRORATION MULTIPLIER accounts for the number of calendar days during
the fiscal year that the employee was in the bonus-eligible position.
For example, the Proration Multiplier for an employee who has been on
the Plan the entire year will be "1.00". For an employee who has been
on the plan for 6 months, this factor will be "0.50". Employees in the
following situations will have a proration factor of less than "1.00":
o Participants in the Plan who transferred to a new position not
governed by any incentive plan.
o Employees who transferred from one bonus-eligible position to
another bonus-eligible position. Employees in this situation will
have their bonus prorated based on length of time in each
position.
o Employees who have been on the Plan less than 12 months (such as
a new hire).
o Employees who have been on a leave of absence of any length
during the fiscal year.
o Employees who have been on the Plan, terminated their employment,
and returned to a bonus-eligible position all in the same fiscal
year.
o Employees working less than a 40-hour week will receive bonuses
prorated according to the following schedule:
20 - 39 hours/week: prorated according to the average number
of hours worked
< 20 hours/week: not bonus eligible
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Any modification to the above schedule must be approved by the
next-level Manager and Compensation in advance of the year-end close
date.
H. BONUS FORMULA AND CALCULATION EXAMPLE: Assume a base salary of
$195,000 at the 40% level, individual performance multiplier of 1.10,
company performance multiplier of 1.30, a customer satisfaction
multiplier of 1.05, a company strategic performance multiplier of 1.10
and a proration multiplier of 1.00. Sample Calculation
In this example, the total bonus equals 66.1% of base salary.
I. MIDYEAR BONUS PAYMENTS: If the Company Performance Multiplier is at a
minimum of 1.00 (midyear revenue and PBIT), a partial payment will be
distributed to eligible employees midway through the fiscal year. This
advance will be 50% of the bonus target by level, reduced by any
advances, unearned commission advances, draws, or prorations and
appropriate state and federal withholdings. The bonuses will be paid
to employees who have met job expectations and were hired on or before
the first day of the second quarter of Fiscal Year 2000 and are active
on the day of distribution. For example, a Director would receive an
advance equal to 20% of base salary. In no event, however, will any
right or entitlement to such a partial payment accrue to any eligible
participant unless that individual is employed by Cisco Systems or a
participating Cisco subsidiary on the distribution date.
If the Company Performance Multiplier is not at a minimum of 1.00
(midyear revenue and PBIT), a partial payment may be distributed to
employees midway through the fiscal year. This payment will be 25% of
the bonus target by level. For example, a Director would receive an
advance equal to 10% of base salary. If the company performance fails
to achieve minimum revenue and PBIT targets resulting in no year-end
payout, an additional 25% of the bonus target may be paid.
Employees who are given corrective feedback, on a Performance
Improvement Plan and/or are performing at a level of "Not
Satisfactory" (N) at the end of the second quarter are not eligible to
receive a partial payout midway through the fiscal year. Employees who
have entered into a Mutual Separation Agreement may not be eligible to
receive a midyear bonus payout or year-end payout based on manager
discretion. An employee may not be eligible to receive a midyear
payout based on manager discretion and subject to Human Resources
concurrence.
III. PROCEDURES AND PRACTICES
A. PROCEDURE:
1. A copy of the Plan will be made available to each participant.
2. All bonus payments will be made after the company's collection of
all applicable withholding taxes.
B. BUSINESS CONDUCT: It is the established policy of Cisco Systems, Inc.
to conduct business with the highest standards of business ethics.
Cisco 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. Gifts, favors and entertainment are allowed such
that they are consistent with our business practice, do not violate
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any applicable laws, are of limited value ($50.00 or less) and would
not embarrass Cisco if publicly disclosed.
C. TRANSFERS AND TERMINATIONS: Employees who are participants in the
Senior Management Incentive Plan and who transfer to a new position
not governed by this Plan will be eligible on a pro-rata basis for the
applicable period and paid as defined by the Plan. Employees who
transfer into the plan from another plan will be subject to proration
as well. Payments from the plan are subject to reduction by advances,
unearned commission advances, draws or prorations and appropriate
state and federal withholdings. Any exceptions to the Plan must be
designated in writing and approved by the President.
A participant must be employed as of the last working day of the
fiscal year to be eligible for the year-end bonus. A participant must
be employed on the day of distribution to receive a partial midyear
payment under paragraph II-I. If an employee terminates prior to the
applicable date, the employee will not be eligible for such bonus or
partial payment.
D. EMPLOYMENT AT WILL: The employment of all Plan participants at Cisco
Systems, Inc. or the participating Cisco subsidiaries is for an
indefinite period of time and is terminable at any time by either
party, with or without cause being shown or advance notice by either
party. This Plan shall not be construed to create a contract of
employment for a specified period of time between Cisco Systems, Inc.
or a participating Cisco subsidiary and any Plan participant.
E. PARTICIPATING CISCO SUBSIDIARY: For the 2000 Fiscal Year, the
following Cisco subsidiaries will be participating subsidiaries in the
plan:
Cisco Technology, Inc.
Cisco Systems Sales and Services, Inc.
Cisco Systems Finance, Inc.