Exhibit 10.3

 

[***] Certain information on this page has been omitted and filed separately
with the Securities and Exchange Commission. Confidential treatment has been
requested with respect to the omitted portions.

 

Ikanos Communications, Inc.
2006 Sales Compensation Plan
For Vice President Worldwide Sales

 

Version 2.6

 

1.             Purpose

 

1.1.          Attraction, retention and motivation. The goal of this plan is to
attract, retain, and motivate the best salespeople in the industry through
clearly specified sales goals and a pay-for-performance philosophy.

 

1.1.1.       Attraction. Earn higher than the industry norm through the no-cap
quarterly revenue-based and margin-based commission and the no-cap annual
revenue-based and margin-based commission with multiplier.

 

1.1.2.       Retention. Participants are rewarded with an Annual Commission paid
after year end results are final.

 

1.1.3.       Motivation. OEM Design Win Incentives and Strategic Telco Win
Incentives

 

1.2.          Communicate the company goals. Another goal of the Plan is to
communicate what the company wants you to focus on:

 

1.2.1.       Exceeding quarterly revenue targets

 

1.2.2.       Exceeding quarterly margin targets

 

1.2.3.       Winning strategic Telco tenders

 

1.2.4.       Winning OEM designs and launching new products

 

1.2.5.       Teamwork to meet above goals

 

1.3.          Pay for performance. The company believes in pay for performance
and rewards sales performance with a no-cap revenue-based commission plan.

 

2.             Overview

 

The Ikanos 2006 Sales Compensation Plan is composed of:

 

2.1.          Salary

 

2.2.          Performance Pay

 

2.2.1.       Commission based on meeting Quarterly Target Revenue and Target
Margin Goals

 

2.2.2.       Annual Commission based on exceeding Annual Target Revenue and
Target Margin Goals

 

2.2.3.       Incentives to win OEM designs and launch new products

 

2.2.4.       Incentives to win strategic Telco tenders

 

2.3.          Stock Options

 

2.4.          Benefits

 

2.5.          Car Allowance

 

3.             Definitions

 

3.1.          Performance Pay – Variable compensation calculated based on
performance to goals and typically paid on a quarterly and annual basis.

 

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3.2.          FAE – Field Applications Engineers

 

3.3.          Salary – Compensation usually referred to as “Base Salary” paid on
a regular basis.

 

3.4.          Commission – Compensation that varies as a function of performance
against assigned tasks or goals.

 

3.5.          Benefits – A form of compensation allocated to or for the purchase
of employee benefits such as company health care plan/s. In some cases, the
employee may pay some portion of the cost of these benefits

 

3.6.          Target Customers – OEM’s, Distributors or Contract Manufacturers
that purchase products or services from Ikanos.

 

3.7.          Target OEM Design Wins – Ikanos chipsets that have fulfilled a
system vendor’s specifications and have been designed into a specific end
product.

 

3.8.          Target Commission – Variable compensation amount limited to a
specific time period.

 

3.9.          Quarterly Target Revenue Goal – Quarterly revenue target toward
which the effort of an employee is directed.

 

3.10.        Annual Target Revenue Goal - Fiscal year revenue target toward
which the effort of an employee is directed.

 

3.11.        Quarterly Target Margin Quota - Quarterly margin target toward
which the effort of an employee is directed.

 

3.12.        Annual Target Margin Quota - Fiscal year margin target toward which
the effort of an employee is directed

 

3.13.        Actual Revenue – [***]

 

3.14.        Actual Margin – Gross margin that has been reported by the company
following any necessary review or audit by the Company’s independent CPA’s.

 

3.15.        Teamwork – Work and activities of a group of employees who
individually contribute to the productivity of the whole.

 

3.16.        Sales Teams – A group of employees associated together in work or
activities.

 

3.17.        Shared Quota – a quota that is shared amongst two or more sales
people.

 

3.18.        OEM – Original Equipment Manufacturer that typically sells and
supports equipment to Telco’s.

 

4.             Eligibility

 

4.1.          Sales managers, sales directors, sales operations managers and
sales vice presidents are eligible for commissions and incentives under this
Plan while employed by the Company.

 

4.2.          FAE’s are eligible for incentives under this Plan while employed
by the Company.

 

5.             Deadlines

 

5.1.          The following Table 1 determines the deadlines involved in the
calculation and payment of your commissions and incentives.

 

5.2.          Adjustments to your Plan Summary for Shared Quotas, OEM Design Win
Targets, and Strategic Telco Wins may be approved prior to the beginning of each
quarter on the dates below by the CEO.

 

5.3.          In the event that OEM Design Win Claim Forms or Strategic Telco
Win Claim Forms are not submitted by the Plan participant before the deadline
then the OEM Design Win and/or the Strategic Telco Win shall not be paid for the
current quarter.

 

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5.4.          Provided that the Plan participants submit their Claim Forms, in
the event of a delay in disbursement of payment, you will be eligible for a
recoverable draw for the amount of 50% of your performance pay for that quarter.

 

Table 1. Deadlines

 

Deadlines 2006

 

Q1

 

Q2

 

Q3

 

Q4

 

 

 

 

 

 

 

 

 

 

 

Sales - Adjustments to your Plan Summary for the following quarter

 

[***]

 

[***]

 

[***]

 

[***]

 

 

 

 

 

 

 

 

 

 

 

Sales – Last day to ship Products

 

[***]

 

[***]

 

[***]

 

[***]

 

 

 

 

 

 

 

 

 

 

 

Sales - OEM Design Win and Strategic Telco Win Claim Forms submitted from Sales
to Finance

 

[***]

 

[***]

 

[***]

 

[***]

 

 

 

 

 

 

 

 

 

 

 

Finance - Complete Review of Claims when submitted

 

[***]

 

[***]

 

[***]

 

[***]

 

 

 

 

 

 

 

 

 

 

 

HR, Finance – PANs Completed

 

[***]

 

[***]

 

[***]

 

[***]

 

 

 

 

 

 

 

 

 

 

 

HR – CEO signed off

 

[***]

 

[***]

 

[***]

 

[***]

 

 

 

 

 

 

 

 

 

 

 

Payroll - Payments Disbursed

 

[***]

 

[***]

 

[***]

 

[***]

 

 

6.             Salary

 

6.1.          The Company will pay you a regular fixed salary paid in 26 (US
employees) or 12 (international office employees) pay periods based on your Plan
Summary.

 

7.             Commission on Revenue

 

7.1.          Target Revenue. The Annual Operating Plan as published to the
Ikanos Board of Directors sets your Target Quarterly Revenue and your Target
Annual Revenue at the time the 2006 Sales Plan is approved. In the event that
the Annual Operating Plan revenue is increased your Plan Summary revenue target
shall not be increased. In the event that the Annual Operating Plan revenue is
decreased, you may be eligible for a change to your Plan Summary if approved by
the Vice President of Worldwide Sale and the CEO. The Plan Summary lists your
Target Quarterly Revenue and Target Annual Revenue. A copy of the Annual
Operating Plan is attached.

 

7.2.          Target Commission. Your Plan Summary lists the dollar amounts of
your Target Quarterly Commission and your Target Annual Commission.

 

7.3.          Calculation of Quarterly Revenue Commission. Quarterly Revenue
Commission shall be calculated as follows unless otherwise limited in your Plan
Summary:

 

Quarterly Revenue Commission = (Actual Quarterly Revenue/Target Quarterly
Revenue)*Target Quarterly Revenue Commission

 

3

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7.4.          Calculation of Annual Revenue Commission. If your Actual Annual
Revenue is over 100% of your Target Annual Revenue, then you are eligible for
the Annual Revenue Commission. Annual Revenue Commission shall be calculated as
follows:

 

Annual Revenue Commission = 2*((Actual Annual Revenue/Target Annual
Revenue)-1)*Target Annual Revenue Commission

 

7.5.          No Cap on Commissions. Quarterly and Annual Commission on Revenue
shall not be capped.

 

8.             Commission on Margin

 

8.1.          Target Margin. The Annual Operating Plan as published to the
Ikanos Board of Directors sets your Target Quarterly Margin and your Target
Annual Margin at the time the 2006 Sales Plan is approved. In the event that the
Annual Operating Plan revenue is increased your Plan Summary revenue target
shall not be increased. In the event that the Annual Operating Plan revenue is
decreased, you may be eligible for a change to your Plan Summary if approved by
the Vice President of Worldwide Sales and the CEO. The Plan Summary lists your
Target Quarterly Margin and Target Annual Margin

 

8.2.          Target Margin Commission. Your Plan Summary lists the dollar
amounts of your Target Quarterly Margin Commission and your Target Annual Margin
Commission.

 

8.3.          Calculation of Quarterly Margin Commission. Quarterly Margin
Commission shall be calculated as follows:

 

Quarterly Margin Commission = (Actual Quarterly Margin/Target Quarterly
Margin)*Target Quarterly Margin Commission

 

8.4.          Calculation of Annual Margin Commission. If your Actual Annual
Margin is over 100% of your Target Annual Margin, then you are eligible for the
Annual Margin Commission. Annual Margin Commission shall be calculated as
follows:

 

Annual Margin Commission = 2*((Actual Annual Margin/Target Annual
Margin)-1)*Target Annual Margin Commission

 

8.5.          No Cap on Commissions. Quarterly and Annual Commission on Revenue
shall not be capped.

 

9.             OEM Design Win Incentives

 

9.1.          Target OEM Design Wins. If you believe you have earned an OEM
Design Win Incentive from one of your listed OEM Design Wins (listed in your
Plan Summary), [***] AND, depending on the region, shipments of at least [***]
CO ports for Asia and EU and [***] CO ports for North America or a minimum of
[***] CPE ports regardless of which region. Shipments must occur before the date
of your claim. Lastly an OEM Design Win Claim Form must be submitted prior to
the dates specified in Table 1 above.

 

9.2.          Target OEM Design Win Incentive Amount. Your Plan Summary lists
the dollar amount of your OEM Design Win Incentive.

 

9.3.          Qualifying OEM Design Wins. To qualify for an OEM Design Win
Incentive, the OEM customer and product must be listed on your Plan Summary
before the beginning of each quarter. Each OEM Design Win shall be assigned a
weighting factor measured in points and listed in your Plan Summary. Points
shall be assigned in reference to revenue and margin opportunity or by strategic
significance.

 

9.4.          Claiming OEM Design Win Incentive. If you believe you have earned
an OEM Design Win Incentive from one of your listed OEM Design Wins (listed in
your Plan Summary), then you must complete and submit as OEM Design Win Claim
Form to the VP of WW Sales AND shipments of at least [***] CO ports or at least
[***] CPE ports to a Target

 

4

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OEM Customer must occur before the date of your claim. Lastly an OEM Design Win
Claim Form must be submitted prior to the dates specified in Table 1 above.

 

9.5.          Late Claim Forms. If you fail to submit your Claim Form on the
dates specified in Table 1 above, then your claim will not be included in that
quarter’s compensation. You may submit a new claim form in the following fiscal
quarter under this Plan. If you fail to submit your claim form in the fourth
fiscal quarter of this year, then your claim will not be included in this year’s
compensation calculations.

 

9.6.          Calculation of OEM Design Win Incentive. OEM Design Win Incentives
shall be calculated as dollars per point times the Target OEM Design Win points.
The dollars per point and points per Target OEM Customer are listed in your Plan
Summary.

 

9.7.          OEM Design Win Not Achieved in the Quarter Specified. In the event
that an OEM Design Win is not achieved in the quarter specified in your plan
summary, the OEM Design Win rolls into the following quarter, except for Q4.

 

10.          Strategic Telco Win Incentive

 

10.1.        Target Strategic Telco Customers. Your Plan Summary lists your
Target Strategic Telco Customers eligible for Strategic Telco Win Incentives.
You may request to have new Strategic Telco Win opportunities to be added to
your list of targets by submitting an amended Plan Summary to your immediate
supervisor and the VP of Sales for signature approval. If you have not obtained
the appropriate signatures on the amended Plan Summary by the end of the fiscal
quarter for the following quarter, your new Strategic Telco Win opportunities
will not be included in your compensation for the following quarter.

 

10.2.        Strategic Telco Win Incentive Amount. Your Plan Summary also states
the dollar amount of your Strategic Telco Win Incentive.

 

10.3.        Qualifying Strategic Telco Wins. To qualify for this Incentive, the
Telco customer must be listed on your Plan Summary before the beginning of each
quarter. You may request to have new Target Strategic Telco Win opportunities to
be added to your list of targets for the following quarter by submitting an
amended Plan Summary to your immediate supervisor and the VP of Worldwide Sales
for signature approval. If you have not obtained the required signatures on the
amended Plan Summary by the dates set in the Table 1 above in the appropriate
quarter, your requested new Target Strategic Telco Wins will NOT be included in
your compensation for the following quarter.

 

10.4.        Claiming Strategic Telco Wins. If you believe you have earned a
Strategic Telco Win from one of your Strategic Telcos (as listed in your Plan
Summary) then complete and submit a Strategic Telco Win Claim Form to the VP of
WW Sales along with evidence which shall include, but is not limited to, any of
the following forms:

 

•

Telco or OEM press release or Ikanos joint press release stating Ikanos has been
selected by the Telco or OEM for the Telco deployment;

 

 

•

Official written communication from Telco or OEM to Ikanos stating that Ikanos
has been selected by the Telco or OEM for the Telco deployment;

 

 

•

Official meeting minutes sent to all attendees of a CEO-to-CEO or CEO-to-GM
meeting at either Telco or OEM where the customer CEO or GM officially states
that Ikanos has been selected for the Strategic Telco deployment;

 

 

•

Official meeting minutes sent to all attendees of a VP-to-VP or VP-to-GM meeting
at either Telco or OEM where the customer VP or GM officially states that Ikanos
has been selected for the Strategic Telco deployment; or

 

5

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•

Written certification by Ikanos VP of Sales and CEO stating that the Strategic
Telco has been won.

 

10.5.        Awarding Strategic Telco Wins. Strategic Telco Win Incentives shall
be awarded upon claim forms signed by the Vice President of Human Resources and
the CEO. Each Strategic Telco Win may only be claimed once.

 

11.           Payment Process

 

11.1.        Operations Sales Manager will provide to finance analyst and
assistant controller a summary commission worksheet signed by the VP of WW
sales. This summary sheet will list, by eligible sales personnel, the actual
revenue by customer, quota, percentage achieved, quarterly revenue commission
payment, total design win points, OEM design win incentive payment, and
strategic telco incentive payment.

 

11.2.        Finance analyst and assistant controller will sign off on the
summary commission worksheet, after validating summaries from detail reports.
After signing off, finance analyst and assistant controller will obtain CFO and
CEO signatures on the summary commission worksheet.

 

11.3.        After the summary commission worksheet has been signed, HR will
complete requisite personnel action notices (PANs) and attach originals of
signed summary worksheet. VP of HR will sign off on PANs and PANs and summaries
will be submitted to Finance for payment.

 

12.          Stock Options

 

12.1.        All FAE’s, sales managers, sales directors, sales operations
managers, and sales vice presidents eligible under this Plan qualify for Stock
Options at the date of hire and also are eligible for consideration for
additional stock options based on their performance during the annual option
grant process.

 

13.          Spot Bonus

 

13.1.        All FAE’s, sales managers, sales directors and sales vice
presidents are eligible for spot bonuses in accordance with the Company’s bonus
policy and practices.

 

14.          First quarter of employment guarantee

 

14.1.        From your employment start date with the Company or any of its
subsidiaries to end of your first full fiscal quarter, your Performance Pay as
defined in your Plan Summary shall be paid at 100% (pro-rated for the numbers of
calendar days you were employed in that quarter).

 

15.          Other Duties

 

15.1.        From time to time you may be assigned to perform other duties.
These might include, but are not limited to, such tasks as collecting market
research data, arranging press tours, participating in technical standards
meetings, language translation, and setting up trade show booths. Such duties
are a normal part of your job for which the company pays you a salary. Other
duties may be assigned by your supervisor.

 

16.          Employee Benefits

 

16.1.        You will be eligible to participate in the company employee
benefits programs - See HR.

 

17.          Termination of Employment

 

17.1.        If your employment is terminated (voluntary or involuntary), you
will be eligible for a pro-rated % of your target performance pay calculated as
follows:

 

6

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17.1.1.     (Days worked in the quarter / Days in the quarter) * your Earned
Quarterly Revenue Commission. (Days are calendar days)

 

17.1.2.     No payment for Annual Revenue Commission.

 

17.1.3.     OEM Design Win Incentive Claim Forms and the evidence of the win
must be submitted before your last day of employment for OEM design wins
occurring between the first day of the quarter and the date your termination.
The dollar amount shall be calculated as specified in Section 8.5.

 

17.1.4.     Strategic Win Incentive Claim Forms and the evidence of the win must
be submitted before your last day of employment for OEM design wins occurring
between the first day of the quarter and the date your termination. The dollar
amount shall be calculated as specified in Section 9.5.

 

18.          Changes to the Compensation Plan

 

18.1.        The company may change, quotas, commissions, or any other part of
this plan at any time.

 

19.          With-Holding

 

19.1.        Commissions paid to employees will be subject to all of the
standard with-holding requirements of the country from which they are paid.

 

20.          General Provisions

 

20.1 This plan does not constitute an employment agreement and does not replace
Ikanos’ “at-will” employment policy. This plan supersedes all prior plans.

 

21.          Approvals

 

 

 

 

 

 

Chris Smith, Vice President of Human Resources

 

Date

 

 

 

 

 

 

 

 

 

Rajesh Vashist, President and CEO

 

Date

 

 

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