**Exhibit 10.3**

 

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

 

**IkanosCommunications, Inc.2006 Sales Compensation PlanFor Vice President Worldwide Sales**

 

Version 2.6

 

**1.****             Purpose**

 

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

 

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

 

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

 

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

 

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

 

1.2.1.       Exceedingquarterly revenue targets

 

1.2.2.       Exceedingquarterly margin targets

 

1.2.3.       Winningstrategic Telco tenders

 

1.2.4.       WinningOEM designs and launching new products

 

1.2.5.       Teamworkto meet above goals

 

1.3.          Payfor performance. The company believes in pay for performance and rewardssales performance with a no-cap revenue-based commission plan.

 

**2.****             Overview**

 

The Ikanos 2006 Sales Compensation Plan iscomposed of:

 

2.1.          Salary

 

2.2.          PerformancePay

 

2.2.1.       Commissionbased on meeting Quarterly Target Revenue and Target Margin Goals

 

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

 

2.2.3.       Incentivesto win OEM designs and launch new products

 

2.2.4.       Incentivesto win strategic Telco tenders

 

2.3.          StockOptions

 

2.4.          Benefits

 

2.5.          CarAllowance

 

**3.****             Definitions**

 

3.1.          PerformancePay – Variable compensation calculated based on performance to goals and typicallypaid 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 tasksor goals.

 

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

 

3.6.          TargetCustomers – OEM’s, Distributors or Contract Manufacturers that purchase productsor services from Ikanos.

 

3.7.          TargetOEM Design Wins – Ikanos chipsets that have fulfilled a system vendor’sspecifications and have been designed into a specific end product.

 

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

 

3.9.          QuarterlyTarget Revenue Goal – Quarterly revenue target toward which the effort of anemployee is directed.

 

3.10.        AnnualTarget Revenue Goal - Fiscal year revenue target toward which the effort of anemployee is directed.

 

3.11.        QuarterlyTarget Margin Quota - Quarterly margin target toward which the effort of anemployee is directed.

 

3.12.        AnnualTarget Margin Quota - Fiscal year margin target toward which the effort of anemployee is directed

 

3.13.        ActualRevenue – [***]

 

3.14.        ActualMargin – Gross margin that has been reported by the company following anynecessary review or audit by the Company’s independent CPA’s.

 

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

 

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

 

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

 

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

 

**4.****             Eligibility**

 

4.1.          Salesmanagers, sales directors, sales operations managers and sales vice presidentsare eligible for commissions and incentives under this Plan while employed bythe Company.

 

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

 

**5.****             Deadlines**

 

5.1.          Thefollowing Table 1 determines the deadlines involved in the calculation andpayment of your commissions and incentives.

 

5.2.          Adjustmentsto your Plan Summary for Shared Quotas, OEM Design Win Targets, and StrategicTelco Wins may be approved prior to the beginning of each quarter on the datesbelow by the CEO.

 

5.3.          Inthe event that OEM Design Win Claim Forms or Strategic Telco Win Claim Formsare not submitted by the Plan participant before the deadline then the OEMDesign Win and/or the Strategic Telco Win shall not be paid for the currentquarter.

 

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5.4.          Providedthat the Plan participants submit their Claim Forms, in the event of a delay indisbursement of payment, you will be eligible for a recoverable draw for the amountof 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.          TheCompany 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.          TargetRevenue. The Annual Operating Plan as published to the Ikanos Board ofDirectors sets your Target Quarterly Revenue and your Target Annual Revenue atthe time the 2006 Sales Plan is approved. In the event that the AnnualOperating Plan revenue is increased your Plan Summary revenue target shall notbe 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 VicePresident of Worldwide Sale and the CEO. The Plan Summary lists your TargetQuarterly Revenue and Target Annual Revenue. A copy of the Annual OperatingPlan is attached.

 

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

 

7.3.          Calculationof Quarterly Revenue Commission. Quarterly Revenue Commission shall be calculatedas follows unless otherwise limited in your Plan Summary:

 

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

 

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

 

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

 

7.5.          NoCap on Commissions. Quarterly and Annual Commission on Revenue shall not becapped.

 

**8.****             Commission on Margin**

 

8.1.          TargetMargin. The Annual Operating Plan as published to the Ikanos Board ofDirectors sets your Target Quarterly Margin and your Target Annual Margin atthe time the 2006 Sales Plan is approved. In the event that the AnnualOperating Plan revenue is increased your Plan Summary revenue target shall notbe 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 VicePresident of Worldwide Sales and the CEO. The Plan Summary lists your TargetQuarterly Margin and Target Annual Margin

 

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

 

8.3.          Calculationof Quarterly Margin Commission. Quarterly Margin Commission shall becalculated as follows:

 

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

 

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

 

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

 

8.5.          NoCap on Commissions. Quarterly and Annual Commission on Revenue shall not becapped.

 

**9.****             OEM Design Win Incentives**

 

9.1.          TargetOEM Design Wins. If you believe you have earned an OEM Design Win Incentivefrom 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 andEU and [***] CO ports for North America or a minimum of [***] CPE ports regardlessof which region. Shipments must occur before the date of your claim. Lastly anOEM Design Win Claim Form must be submitted prior to the dates specified inTable 1 above.

 

9.2.          TargetOEM Design Win Incentive Amount. Your Plan Summary lists the dollar amountof your OEM Design Win Incentive.

 

9.3.          QualifyingOEM Design Wins. To qualify for an OEM Design Win Incentive, the OEMcustomer and product must be listed on your Plan Summary before the beginningof each quarter. Each OEM Design Win shall be assigned a weighting factormeasured in points and listed in your Plan Summary. Points shall be assigned inreference to revenue and margin opportunity or by strategic significance.

 

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

 

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

 

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

 

9.6.          Calculationof OEM Design Win Incentive. OEM Design Win Incentives shall be calculatedas dollars per point times the Target OEM Design Win points. The dollars perpoint and points per Target OEM Customer are listed in your Plan Summary.

 

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

 

**10.****          Strategic Telco Win Incentive**

 

10.1.        TargetStrategic Telco Customers. Your Plan Summary lists your Target StrategicTelco Customers eligible for Strategic Telco Win Incentives. You may request tohave new Strategic Telco Win opportunities to be added to your list of targetsby submitting an amended Plan Summary to your immediate supervisor and the VPof Sales for signature approval. If you have not obtained the appropriate signatureson the amended Plan Summary by the end of the fiscal quarter for the followingquarter, your new Strategic Telco Win opportunities will not be included inyour compensation for the following quarter.

 

10.2.        StrategicTelco Win Incentive Amount. Your Plan Summary also states the dollar amountof your Strategic Telco Win Incentive.

 

10.3.        QualifyingStrategic Telco Wins. To qualify for this Incentive, the Telco customermust be listed on your Plan Summary before the beginning of each quarter. Youmay request to have new Target Strategic Telco Win opportunities to be added toyour list of targets for the following quarter by submitting an amended PlanSummary to your immediate supervisor and the VP of Worldwide Sales forsignature approval. If you have not obtained the required signatures on theamended Plan Summary by the dates set in the Table 1 above in the appropriatequarter, your requested new Target Strategic Telco Wins will NOT be included inyour compensation for the following quarter.

 

10.4.        ClaimingStrategic Telco Wins. If you believe you have earned a Strategic Telco Winfrom one of your Strategic Telcos (as listed in your Plan Summary) thencomplete and submit a Strategic Telco Win Claim Form to the VP of WW Salesalong with evidence which shall include, but is not limited to, any of thefollowing 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  |

 

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

 

10.5.        AwardingStrategic Telco Wins. Strategic Telco Win Incentives shall be awarded uponclaim forms signed by the Vice President of Human Resources and the CEO. EachStrategic Telco Win may only be claimed once.

 

11.           **Payment Process**

 

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

 

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

 

11.3.        Afterthe summary commission worksheet has been signed, HR will complete requisitepersonnel action notices (PANs) and attach originals of signed summaryworksheet. VP of HR will sign off on PANs and PANs and summaries will besubmitted to Finance for payment.

 

**12.****          Stock Options**

 

12.1.        AllFAE’s, sales managers, sales directors, sales operations managers, and salesvice presidents eligible under this Plan qualify for Stock Options at the dateof hire and also are eligible for consideration for additional stock optionsbased on their performance during the annual option grant process.

 

**13.****          Spot Bonus**

 

13.1.        AllFAE’s, sales managers, sales directors and sales vice presidents are eligiblefor spot bonuses in accordance with the Company’s bonus policy and practices.

 

**14.****          First quarter of employment guarantee**

 

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

 

**15.****          Other Duties**

 

15.1.        Fromtime 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, languagetranslation, and setting up trade show booths. Such duties are a normal part ofyour job for which the company pays you a salary. Other duties may be assignedby your supervisor.

 

**16.****          Employee Benefits**

 

16.1.        Youwill be eligible to participate in the company employee benefits programs - SeeHR.

 

**17.****          Termination of Employment**

 

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

 

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17.1.1.     (Daysworked in the quarter / Days in the quarter) * your Earned Quarterly RevenueCommission. (Days are calendar days)

 

17.1.2.     Nopayment for Annual Revenue Commission.

 

17.1.3.     OEMDesign Win Incentive Claim Forms and the evidence of the win must be submittedbefore your last day of employment for OEM design wins occurring between thefirst day of the quarter and the date your termination. The dollar amount shallbe calculated as specified in Section 8.5.

 

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

 

**18.****          Changes to the Compensation Plan**

 

18.1.        Thecompany may change, quotas, commissions, or any other part of this plan at anytime.

 

**19.****          With-Holding**

 

19.1.        Commissionspaid to employees will be subject to all of the standard with-holdingrequirements of the country from which they are paid.

 

**20.****          GeneralProvisions**

 

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

 

**21.****          Approvals**

 

 
|                                           |   |   |   |
|------------------------------------------------|--------|--------|--------|
| Chris Smith, Vice President of Human Resources |   | Date   |   |
|                                           |   |   |   |
|                                           |   |   |   |
| Rajesh Vashist, President and CEO              |   | Date   |   |

 

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