Exhibit 10.34
(TERAYON LOGO) [f25367f2536707.gif]
2006 Executive Sales Commission Plan
I. Introduction
The purpose of the Terayon (“Company”) Executive Sales Commission Plan (“Plan”)
is to motivate eligible sales executives to achieve or exceed revenue quota
objectives by rewarding results achieved. The Plan described below is effective
January 1, 2006 through December 31, 2006; it supercedes, cancels and replaces
all other Company Sales Commission Plans and Executive Commission Plans. In
addition to the Executive Sales Commission Plan, each executive receives a base
salary.
II. Eligibility
The Plan applies to worldwide sales executives in the following positions,
including but not limited to:

  •   Senior Vice President, Worldwide Sales and Support     •   Vice President,
North America Sales     •   Vice President, APAC Sales     •   Vice President,
EMEA Sales

Eligibility to participate in the Executive Sales Commission Plan ends if
(1) the employee transfers to another position not eligible to participate in
the Plan, (2) the Company terminates the Plan or modifies it in such a way that
the employee’s position is no longer eligible to participate, or (3) the
employee’s employment is terminated for any reason. Determination of which
employees are eligible for the Executive Sales Compensation Plan will be made by
the Company’ Board of Directors in its sole discretion.
III. Account Assignments
The Company will assign each sales executive a territory &/or account base for
commission purposes. This assigned “Territory / Account Base” may consist of
(1) a specific geography, (2) a specific account or set of accounts, or (3) a
combination of geography and specific accounts. Account Base assignments are
subject to change by the Company at any time, depending upon sales resources,
business activities or other business factors where applicable law provides.

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IV. Definition of Terms
A participant in the Plan will be eligible to earn commission payments based on
revenue generated from his or her Territory / Account Base. Terms related to the
earning of commission payments are defined below:

•   Revenue Target (“Quota”): A quarterly revenue target is established for each
salesperson at the beginning of the plan. A revenue target may be allocated
among different product lines. Each salesperson’s revenue target is communicated
via the Individual Sales Compensation Agreement. The Individual Sales
Compensation Agreement will identify each salesperson’s Territory / Account
Base, their target incentive compensation, their revenue targets by product line
and other important plan provisions.   •   Total Target Compensation: Target
compensation is comprised of base pay and target incentive compensation. The mix
of base pay and target incentive is determined by the sales employee’s
responsibility as follows:

  •   Employees with direct selling responsibility*

Base pay = 60% of the total target compensation
Target Incentive = 40% of the total target compensation
*unless another target is stipulated in an official offer letter

  •   Employees with sales engineering responsibility

Base pay = 75% of the total target compensation
Target Incentive = 25% of the total target compensation

•   Base Pay: Base pay is a fixed compensation component which is paid in
accordance with the Company’s standard payroll procedures in the region where
the employee is paid. All employees with sales responsibility who are eligible
to receive incentive compensation under the Sales Compensation Plan shall be
classified as exempt employees if and to the extent such classification is
permissible under local laws.   •   Incentive Compensation (“Commissions”):
Target incentive compensation is a target % of total compensation as described
above. The actual earned incentive compensation which is payable is determined
based on the salesperson’s achievement against his or her quota. Any earned
incentive compensation is paid quarterly.   •   Revenue: For the purposes of
this Plan “revenue” shall be recognized when the product or service contract is
invoiced. The timing of when to invoice a customer is determined by the
Company’s Finance Department and by the terms of the Company’s Sales Order
Acceptance Policy. Sales personnel will earn commission on sales if and when the
product or service contract is invoiced to the customer. Invoices issued on
Non-Revenue Orders as defined by the Policy (i.e. trials, evaluations or
promotions) are not considered as revenue for sales incentive compensation or
bonus payments unless otherwise specified in a bonus plan.

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V. Calculating Commissions
Commissions and quotas for all employees will be identified near the beginning
of the plan year. Each Employee’s Individual Sales Compensation Agreement will
show the sales employee’s target quota and the incentive target associated with
it. Employee’s commissions are calculated by following a three step process.
Step 1: Determining % of quota achieved
The percent of quota achievement is determined by taking the employee’s year to
date (YTD) product revenues plus the YTD service revenues and dividing by the
employee’s YTD quota.
Step 2: Determining % of commission eligible
The percent of commission eligible is calculated by taking the % of quota
achieved (in step 1) multiplied by the YTD target commission
Step 3: Determining the % of commission earned
Once am employee is commission eligible the amount of commission that will be
paid is based on how high their quota achievement is. The table below defines
what amount of the eligible commission is earned and payable in that quarter.
Once the percent of YTD quota achieved is determined, that percent is matched to
the table below:

              % of Eligible % Quota   Commission Earned & Achieved   Payable
0-25%
    0  
26-50%
    50 %
51%
    100 %

Once the amount of earned commission is determined, any commissions already paid
in previous quarters is subtracted and the balance is due and payable in that
quarter subject to the payment terms of the plan.
Commissions will be paid quarterly based on the Employee’s percent of achieved
Quota and their percent of earned eligible commissions
Any commission not earned in calendar year 2006 will be forfeited. Revenues and
commission potential from 2006 will not be carried over into future years.

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Calculating Commissions Earned over 100% of Quota
If the actuals exceed the YTD Quota but do not exceed the annual quota
Anyone who exceeds their quota in any given quarter will be eligible to receive
commission on a percent for percent basis above the quota level. For example, if
an employee’s YTD quota achieved in Q2 is calculated at 109%, then the eligible
commission is the employees YTD target commission multiplied by 109%.
If the actuals exceed the YTD Quota and exceed the annual quota
Anyone who exceeds their annual quota will be eligible for accelerators at the
end of the year. Accelerators are determined using the % of quota achieved and
applying it to the table below. Employees are only eligible for accelerators
once they have exceeded their annual sales quota. All accelerators are
calculated and paid at year end only and will not, therefore, be payable to
anyone terminated prior to year end. Accelerators are applied only to the
commission dollars above 100% of target.

              % of Eligible % Quota   Commission Earned & Achieved   Payable
101-125%
    125 %
126+%
    150 %

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Sample Calculation:
Regional Account Manager

                                  Annual Target Commission =   $ 40,000    
Total Annual Quota =   $ 7,000,000  
Quarterly Commission Target =
  $ 10,000                          
 
                               
Quarterly Quota Targets:
    Q1 =     $ 1,800,000       Q3 =     $ 1,700,000  
 
    Q2 =     $ 2,100,000       Q4 =     $ 1,400,000  
 
                               
Actual Quarterly Revenues:
    Q1 =     $ 864,000       Q3 =     $ 2,398,000  
 
    Q2 =     $ 2,065,000       Q4 =     $ 2,462,000  

Q1 Calculation:
Step 1: Determining % of Quota Achieved Year to Date

                  Actual YTD revenues       YTD Quota       % quota achieved
$864,000
  /   $1,800,000   =   48.0%

Step 2: Determining % of Commissions eligible

                  % of quota achieved       YTD Commission target       %
commission eligible 48.0%   X   $10,000   =   $4,800

Step 3: Determining % of Commissions earned

                  % commission eligible       earned % from table      
commission earned $4,800   X   50.0%   =   $2,400

For Q1 $2,400 in commission is earned and due.
Q2 Calculation:
Step 1: Determining % of Quota Achieved Year to Date

                  Actual YTD revenues       YTD Quota       % quota achieved
$2,929,000   /   $3,900,000   =   75.1% (sum of Q1 & Q2)       (sum of Q1 & Q2)
       

Step 2: Determining % of Commissions eligible

                  % of quota achieved       YTD Commission target       %
commission eligible 75.1%   X   $20,000   =   $15,021         (qtrly commission
target * 2 for 2 qtrs)        

Step 3: Determining % of Commissions earned

                  % commission eligible       earned % from table      
commission earned $15,021   X   100.0%   =   $15,021

In Q2 the employee reached the next earning level. $15,021 of the commission is
earned, less the $2,400 paid in Q1
leaves $12,621 payable this quarter.

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Sample Calculation continued:
Regional Account Manager

                                  Annual Target Commission =   $ 40,000    
Total Annual Quota =   $ 7,000,000  
Quarterly Commission Target =
  $ 10,000                          
 
                               
Quarterly Quota Targets:
    Q1 =     $ 1,800,000       Q3 =     $ 1,700,000  
 
    Q2 =     $ 2,100,000       Q4 =     $ 1,400,000  
 
                               
Actual Quarterly Revenues:
    Q1 =     $ 864,000       Q3 =     $ 2,398,000  
 
    Q2 =     $ 2,065,000       Q4 =     $ 2,462,000  

Q3 Calculation:
Step 1: Determining % of Quota Achieved Year to Date

                  Actual YTD revenues       YTD Quota       % quota achieved
$5,327,000
  /   $5,600,000   =   95.1% (sum of Q1, Q2 & Q3)       (sum of Q1, Q2 & Q3)    
   

Step 2: Determining % of Commissions eligible

                  % of quota achieved       YTD Commission target       %
commission eligible 95.1%   X   $30,000   =   $28,538         (qtrly commission
target * 3 for 3 qtrs)        

Step 3: Determining % of Commissions earned

                  % commission eligible       earned % from table      
commission earned $28,538   X   100.0%   =   $28,538

In Q3 $28,538 in commissions is earned, less the $15,021 already paid in
previous quarters leaves a commission due of
$13,517 for this quarter.
Q4 Calculation:
Step 1: Determining % of Quota Achieved Year to Date

                  Actual YTD revenues       YTD Quota       % quota achieved
$7,789,000   /   $7,000,000   =   111.3% (sum of Q1, Q2, Q3 & Q4)       (sum of
Q1, Q2, Q3 & Q4)        

Step 2: Determining % of Commissions eligible

                  % of quota achieved       YTD Commission target       %
commission eligible 111.3%   X   $40,000   =   $44,509

full annual commission since is the last Qtr of the year
Step 3: Determining % of Commissions earned

                  % commission eligible       earned % from table      
commission earned $44,509   X   100.0%   =   $44,509

Year End Accelerator Calculation

                  commission earned               Accelerator commission above
100%       accelerator from table       added $4,509   X   25%   =   $   1,127  
        Total Commission earned     =   $45,636

In Q4 the employee exceeded the annual quota qualifying for accelerators $45,636
of commission is earned less the
$28,538 paid in previous quarters leaves a commission due of $17,098

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VI. 2006 Commission Payment Plan
Commissions will be calculated and paid quarterly within 60 days of the last day
of the quarter.
VII. General Plan Provisions
The Company reserves the right to modify, revoke, suspend, terminate or change
any aspect of the Plan, in whole or in part, at any time, with or without
notice. This Plan may only be modified, altered, or amended by means of a
written document signed by the CEO, the Country Director or their designees. Any
oral or other unsigned modifications shall be of no force or effect.
Employment Changes

  •   New Employees – The quota for new employees for the balance of the period
shall be set by the Chief Executive Officer with approval of the Chief Financial
Officer. Incentive Compensation may be prorated based on the number of months
the employee occupies an eligible role for the Plan.     •   Termination of
Employment — In the event of an employee’s termination or resignation for
whatever reason, the employee shall receive the base compensation through the
effective date of termination. In addition, the employee shall receive
commission on sales orders by customers of his or her Territory / Account Base
provided that (i) these orders are received by the Company as of the effective
date of termination and (ii) the orders are invoiced during the quarter in which
the employment effectively terminates. Payment of any earned commissions will be
made in accordance with the commission payment plan described above.     •  
Leaves of Absence: If an employee takes a Leave of Absence from the Company for
any reason during the quarter that is greater than 2 weeks in length, the CEO
and the VP of Human Resources will determine what prorating to use in the
Commissions calculation. Any prorating will be conducted in observance of
applicable local laws.

Status Changes

  •   Changes in Position– In the event an employee changes positions within the
Company such that they are no longer eligible for the Executive Sales
Compensation Plan, the employee would receive commissions, if any, on the
employee’s orders received and accepted by the Company as of the effective date
of the change provided the order is fulfilled, and invoiced in the quarter in
which the change occurs. Payment of any earned commissions will be made in
accordance with the commission payment plan described above.     •   Changes in
Territory, Account Base or Market Segment – The Company, at its sole discretion,
can change an employee’s territory, account base and/or market segment at any
time. In the event of a change in one of these areas, revenue targets may be
adjusted. Incentive compensation earned based on targets established prior to
the transfer would be paid according to the terms of this Sales Compensation
Plan for orders received and accepted prior to the effective date of the
transfer provided the order is fulfilled, and invoiced in the quarter in which
the change occurs.     •   Quota Reallocation — The Company, at its sole
discretion, can change an employee’s Quota at any time. Any quota changes will
be determined by business needs, which will be explained to the affected
employee as part of the reallocation process.

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Returns, Bad Debt and Corrections: All sales returns and adjustments of invoiced
amounts shall result in an appropriate adjustment, up or down, of incentive
compensation regardless of whether the incentive compensation has been paid. The
Chief Financial Officer shall have the final decision regarding commission
adjustments for returns, bad debt and corrections.
Commission Advances: Any and all Commissions advanced but not earned as of the
actual termination date are due and payable to the Company upon termination.
Plan Termination: The Company may terminate this Executive Sales Compensation
Plan or an Individual Sales Compensation Agreement or amend, modify, change or
discontinue any term thereof, including without limitation, employee’s
compensation rate or assigned quota or territory, at any time. While the Company
reserves the right to make changes without advance notice, the Company will
exercise its best efforts to advise the employee on a timely basis of any
changes affecting this Plan.
Plan Administration: Sales Operations will administer the Plan with direction
provided by the CEO and the Vice President, Human Resources. Each quarter, Sales
Operations will provide a Commission Calculation Schedule to the CEO, VP of
Human Resources, and Chief Financial Officer (or their designees) for commission
payment approval. All Commissions will be paid to the participants per the
payment plan described above.
Commission Disputes: To the extent permitted by applicable local laws, any
disputes concerning intent, interpretation, application or administration of any
aspect of the Plan must be submitted in writing concurrently to the CEO and the
VP of Human Resources. A review committee consisting of the CEO, Chief Financial
Officer and VP, Human Resources (or their designees) will address all disputes.
If and to the extent permitted by local law, their decision will be final and
binding.
Quota Allocation: At times, it may be necessary to assign Quotas for the same
account across two or more participants. This situation may arise when an
account in one employee’s Account Base has customer responsibilities and
coverage in another employee’s Account Base or territory. For example, Sales
Manager A has a Quota assigned for a major account. At the same time, that
customer has procurement and operations in Sales Manager B’s geographic
territory. In this event, any Quota related to that account would be assigned to
both parties and each employee’s commission would be calculated including the
product and service revenue for that transaction. Assignment of such quotas is
at the complete discretion of the CEO and the Compensation Committee of the
board of Directors.
Quotas for a Selling Sales Executives: A Sales Executive who both manages a
sales team and has an individual Account Base and Quota may have his or her
commissions based on team and individual Shipments.
Management Discretion: Notwithstanding the Sales Commission Plan described in
this document, management reserves the right to determine the incentive
compensation to be paid for any sales transaction. Management has the right to
make adjustments to the calculated commission amounts and to determine the
treatment of unique revenue circumstances for commission purposes.
Not an Employment Contract: This document is not an employment contract between
any Terayon entity and the sales employee. Nothing in the Plan shall be
construed to create or imply a contract of employment for any period of time
between the participant and any Terayon entity. If and to the extent permitted
by applicable local laws, employment with the local Terayon entity is “at will,”
which means that either the local Terayon entity or the employee may terminate
the employment relationship at any time and for any reason or no reason, except
where prohibited by foreign law. Nothing in this Sales Compensation Plan shall
be considered as a guarantee of base salary or minimum incentive compensation
earnings, even if the local Terayon entity offers participation in a Sales
Compensation Plan for several consecutive years.

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Confidentiality: The contents of this Executive Sales Commission Plan and any
other Terayon compensation plans or schedules are Company confidential, for
reference only by the intended recipient and authorized Company employees.
Distribution of this document to any other person(s) is prohibited.
Exceptions: Any exceptions and changes to this Executive Sales Compensation Plan
require written approval of a duly authorized officer of the local entity such
as the CEO, the CFO, or the Country Director.
Governing Law: This Executive Sales Compensation Plan shall be construed,
enforced and governed by the laws and regulations of the entity by which each
individual employee is employed.

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