Network Equipment Technologies
Fiscal 2006 Q2, Q3, Q4 Executive Bonus Plan

This Executive Bonus Plan is a subplan to the company-wide Fiscal 2006 Q2, Q3,
Q4 Bonus Plan.

Eligible participants:  All Executives in the Company who are not on a sales
quota or other commission-based compensation plan, and who are on active payroll
status at least 50% of the quarter in which payment is made.

Form and Timing of Payment:  Participant must be an active payroll employee of
net.com on the official date of payment in order to receive an award.  Payments
will be distributed quarterly in the month following the end of the fiscal
quarter.

Company objectives:  The bonus plan is based on three important Company
objectives:  total revenue, VoIP revenue, and profitability.

Base bonus amounts:  The plan establishes three levels of achievement for each
of the three key objectives:  “Gold,” “Silver,” and “Bronze.” Achievement of the
bonus for each objective is independent from achievement of the others.
Depending on the achievement level for each objective, participants will receive
a bonus payment as a percentage of quarterly salary. The bonus payment will be
adjusted by a factor, depending on position level. The factor for this Executive
Bonus Plan is 2.5.

Achievement Level

Percent of quarterly salary

Total possible base bonus

 

Total Rev.

VoIP Rev.

Profit

 

Gold

3%

3%

3%

9%

Silver

2%

2%

2%

 

Bronze

1%

1%

1%

 

Example:  If the Total Revenue objective is “Gold”, and the VoIP objective is
“Bronze” and the Profitability objective is “Silver”, then the base bonus would
be 6% (3 + 1 + 2) times the factor.

Bonus Targets:  The bonus levels for each of the objectives are determined by
the dollar amount that actual achievement for a quarter exceeds the base amounts
approved separately by the Board of Directors (it should be noted that Net
Income numbers are before bonus and are exclusive of restructure charges):

 

Q2

Q3

Q4

Gold

 

 

 

VOIP Revenue

+ 2,400

+ 3,550

+ 5,901

Total Revenue

+ 3,600

+ 5,725

+ 9,274

Net Income

+ 2,320

+ 3,322

+ 5,427

    

Silver

 

 

 

VOIP Revenue

+ 1,550

+ 2,250

+ 3,850

Total Revenue

+ 2,400

+ 3,400

+ 5,300

Net Income

+ 1,400

+ 2,100

+ 3,100

    

Bronze

 

 

 

VOIP Revenue

+ 750

+ 750

+ 750

Total Revenue

+ 1,200

+ 1,200

+ 1,200

Net Income

+ 716

+ 808

+ 854