Document:

exv10w67

 

Exhibit 10.67

Amendment No. 1 to

OEM Supply and Purchase Agreement

     This is an Amendment to the OEM and Purchase Agreement for Purchase and Sale (the “OEM
Agreement”) made as of the date indicated below between Cardiac Science Inc. (“CSI”) and Nihon
Kohden Corporation (“NK”).

Date of the OEM Agreement (“Agreement”): March 1, 2002

     Effective Date of this Amendment No. 1: March 16, 2005.

     CSI and NK hereby agree as follows:

     1. Prices. Section 8.1 shall be replaced with the following:

     The prices for the Products shall be as set forth in Appendix 2 and unless expressly otherwise
agreed by the Parties CSI shall sell and NK shall purchase the Products at those prices.

     2. CSI Product Changes. Section 5.5 shall be replaced as follows:

     CSI shall inform about any material changes of specification or any other material changes to
the Products at least 180 days prior to their implementation. If any proposed modification might
affect the performance, quality or functioning of the critical component of Products or the
approvals, permissions, consents or licenses applicable to them, CSI shall not modify the Products
unless NK has given its consent to the modification in writing. If NK gives its consent to the
proposed modification, the modified Products shall replace the prior version of the Products and
the terms and conditions of this Agreement shall continue to apply. If the modified Products are
not acceptable to NK, CSI shall, if feasible, continue to deliver to NK unmodified Products.

     Concerning the Electrodes, if the modification relates to a change in the gel material, CSI
shall provide NK with the modification notice and biocompatibility data at least 180 days prior to
the proposed date of shipment of the modified Electrodes.

     3. Out of warranty service. Section 5.6 shall be replaced as follows:

     With respect to out-of-warranty product returns, CSI shall agree to repair the out of warranty
Product for a period of at least [*] from the date of delivery by CSI of the Product. NK shall
contact CSI and inform CSI of the relevant information and request a returned goods authorization
and upon approval by CSI, CSI shall give a return authorization number within two (2) days from
receiving request from NK. As promptly as possible, but not later than ten (10) working days after
CSI’s receipt of the defective Products, CSI shall to the extent possible, repair the defective
Product. CSI shall provide a report together with any product being returned. Each Party shall
bear own shipping costs. Title and risk of loss or damage to the product shall pass to the other
party upon delivery to the other party’s carrier. CSI shall apply it standard service rate to out
of warranty repairs, unless the cost of repair is estimated to exceed $200. In such cases,

 

[*] designates portions of this document that have been omitted pursuant to a request for
confidential treatment filed separately with the commission.

 

 

NK shall have the right to approve in advance the nature and the amount of the repair costs
and expenses associated with the out of warranty Product requiring repairs

     4. Spare Parts. The first sentence of Section 5.8 shall be replaced as follows:

     CSI will make best effort to make compatible spare parts available on reasonable commercial
terms for a period of at least [*] from the delivery by CSI of the Product in question.

     The balance of Section 5.8 of OEM Agreement remains the same.

     5. Forecast. Section 6.1 shall be replaced with the following:

     NK shall submit to CSI periodic forecasts of its anticipated requirement of the Products for
the subsequent five (5) month period on monthly basis. The purchase forecasts are not binding on
NK. The forecasts shall be provided in good faith. CSI shall notify NK of any inability as a
result of causes beyond CSI’s control (i.e. Force Majeure) to supply according to NK’s forecasts no
later than four (4) weeks prior to the forecast date of shipment and in such case shall inform NK
of the maximum amount it is able to supply and its shipment schedule.

     6. Acceptance upon shipment. This new section shall be added as Section 7.4 as
follows:

     All sales of Products to NK shall be deemed accepted upon shipment by CSI and title to the
Products shall pass to NK upon delivery to NK’s carrier.

     By adding a new section, the section from 7.4 to 7.6 shall be changed to Section 7.5 to 7.7.

     7. Non-conforming Products. The title of Section 7.4 shall be changed from

     Acceptance to Non-conforming Products, change Section number from 7.4 to 7.5 and shall be
replaced as follows:

     NK shall inspect Products, based on the criteria for incoming inspection which shall be
separately and mutually agreed to by CSI and NK, and promptly determine if any of the Products are
non-conforming. Upon reasonable request, CSI shall provide reasonable assistance to NK in order to
determine whether any of the Products are non-conforming. Non-conforming Products may be returned
freight prepaid to CSI after receipt of a return authorization number from CSI. CSI shall issue a
return authorization number within two (2) days from receiving information from NK. No returns
will be accepted without a return authorization number. As promptly as possible, but not later
than ten (10) working days after CSI’s receipt of non-conforming Products, CSI shall, at its option
and expense, either repair or replace non-conforming Products. CSI shall provide a
repair/replacement report together with any goods being returned. Title and risk of loss or damage
to the products shall pass to the other party upon delivery to the other party’s carrier. CSI will
prepay transportation charges back to NK and shall reimburse NK for any costs of transportation
incurred by NK in connection with the return to CSI of properly rejected goods. Other than as
permitted in this Section or under the terms of the warranty stated herein, goods may not be
returned to CSI.

 

[*] designates portions of this document that have been omitted pursuant to a request for
confidential treatment filed separately with the commission.

 

 

     8. Product and Battery Warranty. Section 9.1 (a) shall be replaced with the
following: CSI represents and warrants that any Products supplied by CSI shall be in accordance
with the specifications and quality requirements specified in this Agreement and shall be warranted
to be free from defects or faults in design, workmanship and materials for a period of [*] after
delivery by CSI of each Product to NK. With respect to batteries, they shall be supplied in
accordance with the specifications and quality requirements specified in this Agreement and shall
be warranted for a period of [*] after delivery by CSI to NK.

     9. Addition of AED models 9131, 9231 and substitute models for discontinuation
Products.

     A revised Appendix 2, as attached hereto, shall replace the Appendix 2 of the Agreement in its
entirety. This revised Appendix 2 includes AED model 9131, 9231 and substitute Products for
discontinued AED models 9200, 9100, 9100-D/9200-D and 9110-D/9210-D. NK has the option of ordering
any of the currently available models to include; 9100G, 9200G, 9131 and 9231.

 

[*] designates portions of this document that have been omitted pursuant to a request for
confidential treatment filed separately with the commission.

 

 

     All other provisions of the OEM Agreement remain the same.

     IN WITNESS WHEREOF, the parties have executed this Amendment as of the date set forth below:

	 	 	 	 	 	 	 
	Cardiac Science Inc.	 	Ninon Kohden Corporation
	 
	 	 	 	 	 	 
	Signature:

	 	/s/ Raymond W. Cohen
	 	Signature:
	 	/s/ Kohei Ono
	 	 	 	 	 	 	 
	Name:

	 	Raymond W. Cohen
	 	Name:
	 	Kohei Ono
	Title:

	 	Chairman & CEO
	 	Title
	 	Corporate Director
	 

	 	 	 	 	 	General Manager
	 

	 	 	 	 	 	Engineering Operations
	 
	 	 	 	 	 	 
	Date: 3/16/2005	 	Date: 3/16/2005

 

[*] designates portions of this document that have been omitted pursuant to a request for
confidential treatment filed separately with the commission.

 

 

APPENDIX 2

(Revised per Amendment No.1)

     Prices

     The price for the Products shall be as set forth herein and unless expressly otherwise agreed
by the Parties CSI shall sell and NK shall purchase the Products at those prices.

	 	 	 	 	 
	Nihon Kohden branded Product	 	Transfer Price
	AED model 9100G-299 (includes
display) G3 platform with
display with 5 years shelf
life battery
	 	 	[*]	 
	 
	 	 	 	 
	AED model 9200G (includes display) biphasic G3 platform with
display with 5 years shelf life battery
	 	 	[*]	 
	 
	 	 	 	 
	AED model 9131

	 	 	 	 
	
G3 standard version with 5 years shelf life battery
	 	 	[*]	 
	 
	 	 	 	 
	AED model 9231

	 	 	[*]	 
	G3 standard version biphasic with 5 years shelf life battery

	 	 	[*]	 
	 
	 	 	 	 
	NK branded AED Electrodes
	 	 	[*]	 
	 
	 	 	 	 
	USB to RS-232 Plug in Adaptor
	 	 	[*]	 
	All prices are in US Dollars (USD). Any quantity can be ordered
	 	 	[*]	 

AED Products package includes:

          One (1) defibrillator, one (1) extended life lithium battery, one (1) user manual, one (1)
serial cable and one (1) CD for Rescue Link. NK branded Electrodes will be purchased separately.

 

[*] designates portions of this document that have been omitted pursuant to a request for
confidential treatment filed separately with the commission.exv10w32

 

Exhibit 10.32

2007 Executive Sales Commission Plan

Worldwide Sales

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, 2007 through December 31, 2007; it
supercedes, cancels and replaces all other Company Executive Sales Commission Plans. In addition to
the Sales Commission, each participant receives a base salary.

II. Eligibility

The Plan applies to Worldwide employees in the following positions, including but not limited to:

	 	•	 	Senior Vice-President Sales
	 
	 	•	 	Vice President, Americas Sales
	 
	 	•	 	Vice President, EMEA Sales
	 
	 	•	 	Vice President, APAC Sales

Eligibility to participate in the 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 in its sole
discretion.

III. Account Assignments

The Company will assign each sales employee 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.

Page 1 of 9

 

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 executive’s employment documents.

	•	 	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 Executive 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 counted
towards commissions 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.

	•	 	Channel Partner sales Revenue Assignment: Product sold through channel
partners will have the revenue assigned to the “ship to” location as
identified in the partners Quarterly Point of Sales report. Regional
Sales Managers are responsible for obtaining the Quarterly Point of
Sales report from the partners in their region and delivering it to
Sales Operations on a quarterly basis.

Page 2 of 9

 

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 an 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:

	 	 	 	 	 
	% Quota Achieved	 	% of Eligible Commission Earned & Payable
	0-25%

	 	 	0	 
	26-50%

	 	 	50	%
	 

	 	(i.e. If 40%
of quota is
achieved then 20% of commission is
earned & payable or 40 x 50%)

	51+%

	 	 	100	%
	 

	 	(i.e. If 73%
of quota is
achieved then 73% of commission is
earned & payable or 73 x 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 2007 will be forfeited. Revenues and commission potential from 2007 will not be carried over into future years.

Page 3 of 9

 

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 and has been employed in a sales commission eligible role for
a minimum of six (6) months of the calendar year 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
	 	 	Commission Earned &
	% Quota Achieved	 	Payable
	101-125%
	 	125%
	126+%
	 	150%

Page 4 of 9

 

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

(qtrly commission target * 2 for 2 qtrs)
	 	=
	 	$	15,021	 

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.

Page 5 of 9

 

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 above 100%	 	 	 	accelerator from table	 	 	 	Accelerator commission 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

Page 6 of 9

 

VI. 2007 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 Executive 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.

Page 7 of 9

 

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 Chief
Executive Officer 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 Chief Executive Officer and the VP of Human Resources. A review
committee consisting of the Chief Executive Officer, 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 for large accounts, it may be necessary to assign Quotas for the same
account across two or more participants. This situation may arise when a large specified 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 will be
identified in advance. The only accounts currently eligible are Comcast, Time Warner, Cox and
Charter. All other accounts will receive single quota and revenue
assignment.

Management Discretion: Notwithstanding the Executive 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 Executive 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 an Executive Sales Compensation Plan for several consecutive years.

Page 8 of 9

 

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.

	 	 	 	 	 
	
 

Jerry Chase,

	 
 	2-12-07
 

Date
	 	
 

Page 9 of 9

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