Exhibit 10.18
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Sales Commission Plan
FY 2008
Kevin Mosher
Senior Vice President, Worldwide Field Operations
ArcSight, Inc. Confidential

 

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OBJECTIVES
This Sales Commission Plan FY 2008 (this “Plan”) describes the terms of your
sales commission compensation at ArcSight, Inc. (the “Company”) for the Plan
Year, which is intended to achieve the following objectives:

  •   Increase sales of the Company’s products, services and maintenance.     •
  Reward consistent achievement and over plan performance.     •   Reward
contribution to the achievement of Company objectives.     •   Attract and
retain an effective sales team.

DEFINITIONS

  1.   Commission –Commissions are based on (a) the Company’s GAAP Revenue
derived from the license of the Company’s products, services and maintenance and
(b) the operating expense or the Contribution Margin, each as described in this
Plan.     2.   Term Sheet – Document that is not legally binding used to explain
a prospective customer sale among ArcSight employees, and optionally to propose
and negotiate with customers to achieve an agreement in principle. A Term Sheet
alone does not constitute a Sales Contract or Booking.     3.   Sales Contract –
Comprehensive set of legally binding documents and required approvals and
signatures associated with each Revenue transaction, generally a license
agreement signed by ArcSight and the customer or, in the case of shrinkwrap
agreements, agreed to by the customer. Sales Contracts typically include the
following items:

  a.   Product License Fees – Revenue associated with licensing of software
products and / or appliance products.     b.   Service Fees – Revenue associated
with sale of consulting and installation projects that are normally billed as
time and materials. Expenses incurred in the performance of Services are billed
to the customer. These expenses are not counted towards Revenue for the purpose
of calculating Commissions.     c.   Support Fees – Revenue associated with
ongoing maintenance and support.

  4.   Revenue – The amount recognized by the Company on its financial
statements for the period specified from the license of products, services and
maintenance, in accordance with U.S. Generally Accepted Accounting Principles
(“GAAP”).

    The Vice President, Finance and Chief Financial Officer have final authority
in determining whether a sales transaction constitutes Revenue.

  5.   Plan Year – FY 2008 (May 1, 2007 – April 30, 2008)     6.   Contribution
Margin – Represents the net amount resulting from the subtraction of operating
costs relating to the sales department from Revenue.

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COMMISSION PAYMENTS
The Senior Vice President, Worldwide Field Operations is eligible to earn
Commissions in addition to base salary. A portion of Commissions is earned upon
the recognition of Revenue in accordance with GAAP, and a secondary portion of
Commissions is earned upon achieving a pre-determined operating expense or
Contribution Margin level, each as described in this Plan.
SALES PROCESS
The required process for arriving at a Sales Contract is to develop a complete
Term Sheet, thoroughly discuss the terms among the ArcSight Team, and gain the
required written approvals in accordance with the ArcSight policies prior to
discussing terms with the customer. The Term Sheet documents can be presented to
the customer if helpful to the sales process, but this is not a required step.
The Term Sheet format is prescribed by the Senior Vice President, Worldwide
Field Operations, and will generally include the following items: customer
contacts (buyer, sponsor, invoicing, and legal), a detailed inventory of items
to be sold and related pricing drivers, a pricing model, a price discount
schedule, press release and public relations terms, conditional terms such as
customer acceptance criteria and performance milestones, a services statement of
work, and invoice and payment terms.
All prospective Sales Contracts must be presented to the Vice President, Finance
or Chief Financial Officer to gain approval of terms and customer’s credit
worthiness. The Sales Contract is the final, conclusive document, which must
thoroughly reflect all terms and commitments.
CALCULATION OF COMMISSIONS
The Senior Vice President, Worldwide Filed Operation’s Commissions are
calculated based on the achievement of both quarterly Revenue targets as well as
operating expense / Contribution Margin targets. The Revenue achievement target
represents 80% of the commission structure while the operating expense /
Contribution Margin achievement target represents 20% of the commission
structure.
Revenue Portion: Each quarter the Commission amount attributable to Revenue will
be determined by multiplying the quarterly Revenue by the Commission rate
documented below. The Commission rate will depend on the actual Revenue
achievement as a percentage of the quarterly Revenue target.
Operating Expense / Contribution Margin Portion: Each quarter the Commission
amount attributable to Contribution Margin will be determined by either
incurring actual sales operating expenses less than or equal to the sales
operating expense target or achieving actual sales Contribution Margins equal to
or greater than the sales Contribution Margin target.

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The quarterly Commission amount will vary depending on achievement of the
Revenue portion and Contribution Margin portion described above. For example in
Q1, if the Revenue achieved equaled 102% of the Revenue target and the actual
operating costs were less than target or the actual Contribution Margin was
greater than target, then the Commission amount for the operating expense /
Contribution Margin portion would be $11,250.

                                         
Annual Variable Compensation achieved upon obtaining Revenue and Contribution
Margin targets
  $ 150,000                                  
 
                                       
 
    Q1       Q2       Q3       Q4     FY 2007      
Variable Compensation based on Revenue target
  $ 30,000     $ 30,000     $ 30,000     $ 30,000     $ 120,000  
Variable Compensation based on operating expense or Contribution margin target
  $ 7,500     $ 7,500     $ 7,500     $ 7,500     $ 30,000  
 
                             
Total Variable Compensation
  $ 37,500     $ 37,500     $ 37,500     $ 37,500     $ 150,000  
 
                             
 
                                       
Commission rates for Revenue Portion:
                                       
0 – 100%
    0.16 %     0.13 %     0.12 %     0.11 %        
> 100 and ≤ 105%
    1.62 %     1.26 %     1.18 %     1.10 %        
> 105% and ≤ 110%
    2.43 %     1.90 %     1.78 %     1.65 %        
> 110%
    4.00 %     4.00 %     4.00 %     4.00 %        
 
                                       
Commission for Operating Expense or Contribution Margin Portion:
                                       
Base Rate
  $ 7,500     $ 7,500     $ 7,500     $ 7,500     $ 30,000  
> 100 and ≤ 105%
  $ 11,250     $ 11,250     $ 11,250     $ 11,250     $ 45,000  
> 105% and ≤ 110%
  $ 16,875     $ 16,875     $ 16,875     $ 16,875     $ 67,500  
> 110%
  $ 22,500     $ 22,500     $ 22,500     $ 22,500     $ 90,000  

ADDITIONAL TERMS

  A.   Payout. Commissions are payable at the end of the month following each
fiscal quarter. Upon termination of employment, a salesperson only will be paid
Commissions earned as of the date of termination. Commissions will not be
advanced.

  B.   Dispute Resolution. Disagreements or disputes between ArcSight and the
Senior Vice President, Worldwide Field Operations arising out of or relating to
interpretation of this Plan shall be submitted to the Chief Financial Officer or
CEO (or designate) for resolution. The Chief Financial Officer or CEO (or
designate) shall decide the issue in their sole discretion. Such decision will
be final and binding.

  C.   Extended Absences. To earn Commission, the Senior Vice President,
Worldwide Field Operations must be active in the sales process.

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D.   Modifications. The Company can modify this Plan upon 30 days written notice
to applicable sales team members. Modifications will apply only to future
business in that Sales Contracts that have completed or are substantially near
completion will not be impacted.   E.   Right to Recover. All advanced but
unearned Commission shall be subject to charge-back or recoupment by the Company
if the Company fails for any reason to receive payment in full on any Revenue
for sales of Company products, services or maintenance attributable to Sales
Contracts. Reasons for charge-back may include but are not limited to the
customer’s failure to pay, credit memos, refunds or allowances by the Company,
cancellation of a Sales Contract, retroactive reduction of the amount paid by
the customer, initiation of legal action to collect money owed under a Sales
Contract, or other default. A charge-back will reduce Commission and the Revenue
levels used to determine performance against target objectives by the amount
canceled, reduced, written off or owed. The Company also reserves the right to
deduct from a salesperson’s Commissions for the costs or Revenue lost due to
unauthorized changes in orders or specifications, and/or unauthorized discounts
attributable to that salesperson.       If this results in a negative Commission
balance, the negative balance will carry forward and offset against future
incentives until the negative balance is eliminated.       As a condition of
eligibility for Commissions, the employee agrees to reimburse the Company for
Commissions paid in excess of what the employee has earned under this Plan, and
hereby consents to payroll deduction for purposes of such reimbursement.   F.  
Ethical and Legal Standards.

  1.   No employee may pay, offer to pay or give any of their incentive
compensation or anything else of value to any reseller, agent, customer or
representative of the customer or any other person as an inducement or reward
for assistance in obtaining a sale or retaining a customer relationship.     2.
  Gifts and entertainment above a nominal amount shall not be given to
customers, agents or representatives except in accordance with current ArcSight
Travel, Entertainment and General Expense Policy.     3.   No ArcSight employee
shall enter into any understanding, agreement, plan or scheme, express or
implied, formal or informal, with any competitor in regard to prices, terms, or
conditions of sales, distribution, territories or customers, nor engage in any
other conduct which may violate any of the antitrust and/or trade regulation
and/or practices.     4.   Sales personnel are bound by and must comply at all
times with the ArcSight policies and procedures for entering into business
arrangements with customers, vendors, and other third parties.  ArcSight
contracts with customers and other parties through formal, written agreements. 
No ArcSight employee shall enter into a side agreement with any third parties,
including customers and vendors.

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  5.   Eligibility for Commissions is conditioned upon full adherence by
salespersons with the ArcSight policies and procedures regarding conflicts of
interest and ethical and legal standards. Any failure to comply with such
policies and laws will result in the denial or recovery of a Commission, and
will subject the salesperson to further disciplinary action, up to and including
termination.

G.   No Effect on Employment. This Plan is not intended to and does not in any
way alter the at-will nature of salespersons’ employment with ArcSight, nor does
it constitute a guarantee of employment for a specified period. Employment with
ArcSight is at will, which means that either the salesperson or ArcSight may
terminate the employment relationship at any time, with or without cause or
prior notice.   H.   Confidentiality. This Plan is deemed confidential to the
Company.   I.   Entire Agreement. This Plan constitutes the entire agreement
between ArcSight and the sales person identified herein with respect to the
subject matter hereof, and it supersedes all prior negotiations and agreements,
whether written or oral, relating to such subject matter.

Delivered and explained by:

     
/s/ Stewart Grierson
 
Stewart Grierson, Chief Financial Officer
   
 
   
 
Date
   

Received and agreed by:

     
/s/ Kevin Mosher
 
Kevin Mosher
   
 
   
 
Date
   

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