Document:

exv10w18

Exhibit 10.18

Sales Commission Plan

FY 2008

Kevin Mosher

Senior Vice President, Worldwide Field Operations

ArcSight, Inc. Confidential 

 

 

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.

			
	 	 	 
	Page 1 of 5
	 	ArcSight, Inc. Confidential

 

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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	 	ArcSight, Inc. Confidential

 

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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	 	ArcSight, Inc. Confidential

 

	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.

			
	 	 	 
	Page 4 of 5
	 	ArcSight, Inc. Confidential

 

	 	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

	 	 

			
	 	 	 
	Page 5 of 5
	 	ArcSight, Inc. Confidentialexv10w19

Exhibit 10.19

	 	 	 
	

	 	5 Results Way
	 	Cupertino, CA 95014
	 	t 408.864.2600
	 	f 408.342.1613
	 	www.arcsight.com

May 6, 2007

Reed Henry

Dear Reed:

     This letter will serve as an offer of employment to you with ArcSight, Inc. (“ArcSight” or
“Company”) as ArcSight’s Senior Vice President, Marketing. You will work in this capacity on a
full-time basis, giving your best efforts to the performance of your duties.

     In this position, your salary will be $20,833 per month, earned and paid semi-monthly.
Additionally you will be eligible to receive up to 35% of annual base salary in the form of an
annual bonus (prorated from date of hire). This will be paid if both you and the Company achieve
certain milestones. These milestones will be communicated to you shortly after you join ArcSight.

     In addition, subject to approval of the Company’s Board of Directors or its Compensation
Committee you will be granted an option to acquire 603,938 shares of the Company’s Common Stock at
an exercise price equal to the fair market value of the shares on the date the option is granted.
You will vest in 25% of the option shares after 12 months of continuous service, and the balance
will vest in equal monthly installments over the next 36 months of continuous service, as described
in your Stock Option Agreement.

     If you are terminated without Cause (as defined in your Stock Option Agreement) within the
first year of employment then the Company will pay you severance pay equal to (1) six (6) months
base salary and (2) six (6) months of COBRA premium reimbursement should you elect COBRA. Your
severance pay will be at the rate of your base salary in effect at the time of the termination of
your employment and in accordance with the Company’s standard payroll procedures. However, this
paragraph 4 will not apply unless you (i) sign a general release of claims (in a form prescribed by
the Company,) and (ii) have returned all Company property.

     If the Company is subject to a Change in Control (as defined in the 2002 Stock Plan) before
your service with the Company terminates and you are subject to an Involuntary Termination (as
defined in your Stock Option Agreement) within twelve (12) months after that Change in Control,
then you shall become vested in an additional 50% of the unvested option shares as of your
termination date. Additionally the Company will also pay you severance pay equal to (1) three (3)
months base salary and (2) three (3) months of COBRA premium reimbursements should you elect COBRA.
However, this paragraph 5 will not apply unless you (i) sign a general release of claims (in a
form prescribed by the Company,) and (ii) have returned all Company property.

     As an employee, you will be eligible to participate in health and welfare benefits in
accordance with ArcSight’s standard plan. In addition, you will accrue up to three (3) weeks
(15 business days) of vacation per year pursuant to ArcSight’s vacation policy.

 

 

Mr. Reed Henry

Page 2

May 6, 2007

     You are required to follow ArcSight’s policies and practices. You will also have access to
certain of ArcSight’s trade secrets, staff, customers, and confidential and proprietary
information. Accordingly, we ask that you sign the attached Proprietary Information and Inventions
agreements.

     While you render services to the Company, you agree that you will not engage in, without the
prior written consent of the Company, any (1) other employment, or (2) consulting or other business
activity that (a) relates to the Business security software industry or any other industry that
competes with the Company’s products and services or (b) materially affects the performance of your
duties for the Company. While you render services to the Company, you also will not assist any
person or entity in competing with the Company, in preparing to compete with the Company or in
hiring any employees or consultants of the Company.

     Please understand that your employment at ArcSight is for no specified period of time. It is
an at-will employment relationship, and either you or ArcSight may terminate the relationship at
any time, for any reason, with or without cause. This paragraph is intended to be
the complete and exclusive statement regarding the circumstances under which your employment may be
terminated. It supersedes any prior agreement or representation. If any term of this paragraph
conflicts with any practice or policy of ArcSight, now or in the future, the terms of this
paragraph will control. The terms of this paragraph may not be changed except by written agreement
signed by you and the President of ArcSight.

     This offer is contingent upon your completion and execution of all employment documents, as
well as your ability to provide proof of identification and authorization to work in the United
States (within three business days of your start date) and upon the completion and acceptance of
all information related to your references and background check, even if this information is not
known until after your employment commences.

     Finally, this offer letter sets forth all the material terms of your employment. By signing
it, and thereby accepting employment at ArcSight, you acknowledge that you have not relied upon any
other written or oral statements concerning the terms of your employment.

     Please indicate your agreement with the terms of this letter by signing and dating one (1)
copy each of both the enclosed offer letter and the enclosed Proprietary Information and Inventions
Agreements and returning them to me.

     We look forward to having you on board!

	 	 	 	 	 
	 	Sincerely,

 	 
	 	/s/ Tom Reilly
 	 
	 	Tom Reilly 	 
	 	Chief Operating Officer

ArcSight, Inc. 	 
	 

I, Reed Henry, accept this offer:

/s/ Reed Henry                                        

Dated:  5/6/07

 

 

ArcSight, Inc.

Amendment to Employment Offer Letter

October 23, 2007

Reed Henry

ArcSight, Inc.

5 Results Way

Cupertino, CA 95014

Re: Amendment to Employment Offer Letter

Dear Mr. Henry:

Reference is made to the Employment Offer Letter between ArcSight, Inc. (“ArcSight” or the
“Company”) and you, dated May 6, 2007, including all agreements and acknowledgements attached
thereto (your “Offer Letter”). ArcSight and you desire to amend your Offer Letter to minimize
potential tax liabilities under Section 409A of the Internal Revenue Code of 1986, as amended (the
“Code”). Effective as of the date set forth above, ArcSight and you hereby amend your Offer Letter
as set forth in this letter of amendment (the “Amendment”). Terms not otherwise defined in this
Amendment shall have the meaning given to them in your Offer Letter.

The following provisions shall be added to your Offer Letter:

“In order to have a valid Involuntary Termination, you must (i) notify the Company
in writing not later than 90 days from the date of the initial event giving rise to
the Involuntary Termination and specify the specific basis for your belief that your
employment has been Involuntarily Terminated, (ii) provide the Company with at least
30 days to remedy such event constituting the Involuntary Termination and (iii)
terminate employment with the Company within 7 days following the Company’s failure
to cure.”

“To the extent (i) any payments to which you become entitled under this offer
letter, or any agreement or plan referenced herein, in connection with your
termination of employment with the Company constitute deferred compensation subject
to Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”) and
(ii) you are deemed at the time of such termination of employment to be a
“specified” employee under Section 409A of the Code, then such payment or payment
shall not be made or commence until the earliest of (i) the expiration of
the six (6)-month period measured from the date of your “separation from service”
(as such term is at the time defined in Treasury Regulations under Section 409A of
the Code) with the Company; (ii) the date you become “disabled” (as defined in
Section 409A of the Code); or (iii) the date of your death following such separation
from service; provided, however, that such deferral shall only be
effected to the extent required to avoid adverse tax treatment to you, including
(without limitation) the additional twenty percent (20%) tax for which you would
otherwise be liable under Section 409A(a)(1)(B) of the Code in the absence of such
deferral. Upon the expiration of the applicable deferral period, any payments which
would have otherwise been made during that period (whether in a single sum or in
installments) in the absence of

 

 

this paragraph (together with accrued interest
thereon) shall be paid to you or your beneficiary in one lump sum. Notwithstanding
the foregoing, in the event any amounts payable to you upon your separation from
service with the Company exceed the amounts set forth in Section
1.409A-1(b)(9)(iii)(A) and are not payable within the time set forth in Section
1.409A-1(b)(9)(iii)(B), then such amount shall be payable in a lump-sum payment not
later than the time period provided for in Section 1.409A-1(b)(4)(i).

Except as set forth above, your Offer Letter shall remain in full force and effect in all other
respects, and this Amendment does not supersede any of the other the terms of your Offer Letter.
This Amendment and your Offer Letter will be the entire agreement relating to your employment with
ArcSight.

	 	 	 	 	 
	 	Sincerely,

ArcSight, Inc.

 	 
	 	By:  	/s/ Trâm Phi
 	 
	 	 	Trâm Phi 	 
	 	 	Vice President, General Counsel 	 
	 

I accept the terms and conditions as set forth in this Amendment. I acknowledge and agree that
this Amendment amends my Offer Letter only to the extent as set forth herein and that my Offer
Letter in all other respects remains in full force and effect.

	 	 	 	 	 
	 	 	 
	Date: 11/13/07 	/s/ Reed Henry
 	 
	 	Reed Henry

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