For commission compensation, there is one quota
containing Product, SES/SWIM, Engineering Services, Support, Professional
Services, IP Compliance Licensing, and other UNIX products (“UNIX business”).
There will also be one quota containing Me Inc. products and services, Shout,
Edgeclick and other new revenue opportunities (“New business”). The quota and
credit relief for both the UNIX business and New business will be based on
revenue recognition for all products and services. The Sales Compensation Plan
will be rolled out quarterly to the sales field to ensure that the objectives
and deliverables outlined for traction with new mobility products is being
FY 07 COMPENSATION
The sales compensation plan will be a quarterly
incentive based plan. The objectives of the 2007 compensation plan will be to
maintain the UNIX revenue stream and build and increase the New business and
mobility products revenue stream.
The philosophy of the quarterly incentive plan will be
to provide each participant with the opportunity to earn quarterly commissions
and quarterly performance accelerators.
The following discussion is intended for sales reps in
the Company’s UNIX business. A separate
addendum is provided sales reps not covered by the UNIX business. For those
territories in which mobility products are available for sale to customers,
each sales rep will be assigned a quarterly incentive plan that includes a UNIX
target and a New business target. For those territories in which mobility
products are not available for sale to customers, each sales rep will be
assigned a UNIX target. For quarter 1, 2007, earnings will be available for
attainment as follows:
For example, if a sales rep has an on-target earnings capability for Q1
2007 of $10,000, then $7,500 in commissions is eligible for UNIX and $2,500 in
commission is eligible for the New business.
For Q1 2007, in order to obtain the commissions for the New business,
sales reps will not have a quota, but will instead have a specific set of
objectives that are directed toward building the New business pipeline.
These objectives will be set by sales management and will be reviewed
and approved by sales management and finance.
Commissions for revenue generated against the UNIX quota will be paid
in a linear fashion (1:1) each quarter up to 100% once the sales rep achieves
at least 75% of the UNIX business quota. Attainment of less than the minimum
requirement will result in $0 commissions being earned.
For purposes of this plan, the following definitions apply:
Accelerators are defined as amounts paid by SCO for revenue that exceeds
established quotas. For the FY 2007
year, accelerators will be moved away from a ‘percentage of revenue’
accelerator to a ‘percentage of on-target earnings’ accelerator. The following table lists the accelerator
levels for each quarter:
% of OTE
illustrate an example of the above plan, assume a sales rep has a $500,000 UNIX
quota. His quarterly on-target earnings
are $10,000 (for Q1 2007 split at $7,500 for UNIX and $2,500 for New business)
and the sales rep has attainment of $600,000 (120% of quota) for UNIX and
attains his/her objectives for the New business at 100%, the sales rep’s Q1
2007 earnings would be $14,875 calculated as follows:
1) UNIX attainment of 120% results in 165% of
UNIX earnings ($7,500 * 165% = $12,375)
2) New business attainment of 100% of objectives
results in 100% of New business earnings ($2,500 * 100% = $2,500)
are not available on quotas that have been adjusted subsequent to the original
quarterly quota allocation set by the Sales VP at the beginning of the fiscal
quarter or appointment to the sales team.
All adjustments to quota must be approved by the Sales VP and the VP of
Finance. Exceptions to this are:
1. Companywide quota adjustments
2. Countrywide quota adjustments
3. Territory reallocations
For exceptions 1) — 3),
these must be approved by the CFO.
Sales Engineers (SEs) that are covered by this compensation plan will
be eligible for accelerators in a linear fashion (i.e. 110% of revenue will pay
110% of available on-target earnings) and SEs will also not be subject to the
minimum quota attainment.
Bookings are defined as amounts committed to SCO via a valid purchase
order, regardless of when the product is shipped or the service performed. An order is considered a booking when it has
been processed and approved by sales, credit, finance, legal, customer
delivery, and entered into QAD. Revenue
may or may not be recognized when an item is booked. For example, services contracts are pro-rated
over the period in which the services relate.
Bookings Bonus (New Mobile Business): SCO will pay a bookings bonus to the sales rep in addition to the
normal commission for any new mobile business transactions that meet the
following criteria: (All booking orders
must meet the standard purchase order requirements of SCO and have payment
terms of no greater than net 45 days).
professional services, subscription service, or support service that is greater
than $50,000 where revenue is not
recognized in the current quarter of booking will be eligible for a $5,000
orders may be combined to determine the quarterly bookings.
Collection of Customer Accounts. Quota
attainments are subject to collection of account. Sales which remain uncollected 90 days after
invoice due date may be debited against the salesperson’s attainment for the
quarter in which the sale was deemed to be un-collectible.
Margin. Revenue generated by non-SCO products, sales
of hardware, etc., will receive quota relief and will be eligible for
commission payments using the following formulas:
transactions where the gross revenue and the related cost of goods are recognized
at 100%, the gross margin on the sale will be eligible for quota relief; or
transactions where revenue is recognized net of cost of goods sold, then all of
the revenue will be eligible for quota relief.
discounted services agreements may be covered
under this rule, to the extent that they do not generate historical margins and
returns to the Company.
example, if a $100,000 order for hardware is received, and the related cost of
goods is $90,000, the gross margin is $10,000.
Under the first example of gross revenue and cost of goods, commission
would be eligible on the $10,000 of gross margin. Under the second example, the net revenue of
$10,000 ($100,000 revenue - $90,000 cost) would be eligible for quota relief
and commission payments.
Invoicing. Invoicing is the amount billed to a customer during the effective
period of this compensation plan, regardless of when the product or service is
Payment. Commissions earned under this plan are paid quarterly and are
calculated upon attainment of revenue against stated quota. Optional monthly advances (recoverable
draws) may be paid. Draws paid within a
quarter are deducted from actual commissions earned for that quarter. If the option to receive a draw is chosen,
payment will be as follows:
month one of the quarter, 6.25% of the annual incentive opportunity is
month three of the same quarter, 6.25% of the annual incentive opportunity is
commissions are computed after the end of month three when revenue has been
audited. Attainment is computed based
upon the individual’s sales results against their stated quota. Commission earned, less advances paid is paid
with the regular pay cycle closest to 45 days following the end of the quarter. Any advances made in excess of the quarter’s
actual earnings will be recovered in the following quarter.
the event that the sales rep has taken a draw that exceeds the target
incentive, the draw will be recoverable from the sales rep in the following
Club. SCO will reward the top selling individuals
with a “President’s Club” event or award.
In order to qualify for fiscal year 2007, all participants must achieve
each of their UNIX and New business quotas at a minimum of 100%. This minimum 100% will be calculated by
summing the actual attainment for each quarter of fiscal year 2007 and
comparing that against the total quota for fiscal year 2007. Independent Contractors will also qualify
when assigned a set quota which is achieved or exceeded. SE’s who attain 100% of the revenue target
will also be eligible to qualify for President’s Club.
or Services Returns. Product or services, which are returned for
invoice credit, will be debited against the sales rep’s performance against
quota in the quarter in which the return occurs.
Revenue. Revenue is defined as net amounts billed by SCO for products and
services and recognized by SCO on financial reports to its shareholders, plus
or minus any corporate financial adjustments, if any. Revenue is recognized typically for a product
when shipped to an end user and for services when performed. Recognition of revenue is subject to approval
by the SCO Corporate Controller / VP of Finance. Revenue generated by products sold at less
than the authorized selling price and products sold on unauthorized terms and
conditions may be excluded from revenue for compensation purposes.
Adjustments. Revenue adjustments between sales regions
will be included in the period in which the adjustment occurs.
Compensation Committee. The Sales Compensation Committee is
responsible for final interpretation, adjustments, and modifications to the
plan. The Sales Compensation Committee
consists of the CEO, CFO and Sales VPs.
In. Sales in is based on the sales of product /
support / SES, amortized revenue, and professional services by SCO to its
distribution partners and end user customers, net of corporate financial
adjustments, if any.
Out. Sales out is the sales out reported to SCO by
its distribution partners, net of corporate financial adjustments. Sales out is
equal to sales in plus or minus the change in inventories between the beginning
and end of a period. The total revenue used
to calculate commission payments cannot exceed the revenue recognized for the
period. Therefore, if the sales out
claimed cumulatively by all sales reps exceed the actual revenue recognized,
adjustments will be made based on quota assignments in order to bring the sales
out in line with revenue.
Letters, Customer Purchase Order Modification. Any
formal or informal communication (i.e. side letter or verbal commitment) to a
customer indicating a modification of an existing contract, agreement, or
purchase order, without approval from a Sales VP, and the VP of Finance is
prohibited. This includes modifications
to payment terms and conditions return privileges pricing and co-op. Under no
circumstances should a SCO employee modify the document. Any SCO employee(s)
participating in such actions is subject to immediate termination.
Initiatives: Strategic initiatives initiated by the
Company’s executive team or Board of Directors may be
eligible for quota relief and commission payments. Decisions on quota relief and commission
payments will be determined by the CFO.
plan participant is assigned a territory.
Employment Termination or Leave of Absence. Upon
status change such as transfer, employment termination or leave of absence, a
plan participant shall be entitled to all amounts earned as of the effective
date of the employee action. Final incentive compensation payments under this
plan will be made 90 days from the end of the month of the effective status
an employee transfers to a non-quota carrying position or terminates employment
with SCO prior to October 31, the total quarterly target quota must be exceeded
before the over quota earnings rate will be paid.
interpretation of the plan is the responsibility of the Sales Compensation
Committee. SCO shall have full recourse
from the employee for any and all amounts due resulting from a negative
incentive balance at time of termination.
Non Recoverable Guarantee: The Sales Compensation Committee may approve
a payment of a non-recoverable draw, typically for a period of three months in
certain ramp-up or new employee situations.
If a sales rep receives a non recoverable guarantee then brings in
revenue which exceeds his guarantee amount, then he/she will receive the larger
earnings. Future earnings will be based
on the originally stated quota and incentive.
If a sales rep does not exceed his/her guaranteed earnings, then the
future earnings will be based on the remaining quarter’s quota and
earnings. All guarantees need to be
approved by the Sales Compensation Committee.
I have read, understand and
accept the above Plan Definitions.
General. All definitions and
meanings described in the Sales Compensation Plan will apply to participants in
this plan. In order to be added to this
plan, approval from the CEO and CFO must be received. Sales reps will not be eligible for commission
and quota relief from both this plan and the standard UNIX plan.
sales rep participating in this program will receive a quarterly quota, which
is applicable to their sales responsibilities.
Sales reps participating in this program will not have a UNIX quota.
reps will be eligible for accelerator payments once they have achieved their
quarterly revenue target. Accelerators
for this program will be 5% of revenue recorded in excess of quota.