exv10w34



 





Exhibit 10.34









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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