Document:

exv10w15

 

Exhibit 10.15

Fiscal Year 2007 Management and Employee Bonus Plan

OBJECTIVE: To establish a bonus plan that motivates employees to focus on delivering corporate
objectives.  

STRUCTURE: There are two components to the plan:

1. Cash bonus

All employees who do not otherwise receive variable compensation will be eligible to participate in
the cash bonus plan, as described below. Each eligible employee’s actual participation level will
be determined by their individual performance.

2. Equity grants

Only Company executives will be eligible to participate in equity rewards on achievement of the
Revenue Target (as defined below). The Compensation Committee will determine the number of options
allocated to Mr. Shaw and then the Compensation Committee, with input from Mr. Shaw, will determine
the allocation among the rest of the executive team. Options will vest according to standard
vesting terms over four years.

TARGET: Fiscal 2007 revenue target is $60,516,936 (the “Revenue Target”).

CASH
BONUS PLAN: Cash bonus available will be based on a percentage of an
employee’s base salary as
follows:

     1. Executives:

	 	 	 
	Percentage of Base Salary	 	Revenue
	0%

	 	<90% of Revenue Target.
	 
	 	 
	26.25%

	 	≥90% of Revenue Target and <100% of Revenue Target
	 
	 	 
	35%

	 	≥100% of Revenue Target and <101% of Revenue Target
	 
	 	 
	36.75%

	 	≥101% of Revenue Target and <105% of Revenue Target
	 
	 	 
	38.75%

	 	≥105% of Revenue Target and <110% of Revenue Target
	 
	 	 
	42%

	 	≥110 % of Revenue Target and <120% of Revenue Target
	 
	 	 
	43.75%

	 	≥120% of Revenue Target

If the Company achieves at least 100% of the Revenue Target, an additional cash bonus pool equal to
17% of the Company’s operating margin for fiscal year 2007 will be paid to executives on a pro rata
basis based on their portion of total bonuses paid to executives, with a cap at 100% of base salary
for all payments under both the payments described in the table above and payments described in
this paragraph.

1

 

2. Director level employees:

	 	 	 
	Percentage of Base Salary	 	Revenue
	0%

	 	<90% of revenue target
	 
	 	 
	11.25%

	 	≥90% of revenue target and <100% of revenue target
	 
	 	 
	15%

	 	≥100% of revenue target

3. All other employees:

	 	 	 
	Percentage of Base Salary	 	Revenue
	0%

	 	<90% of revenue target
	 
	 	 
	7.5%

	 	≥90% of revenue target and <100% of revenue target
	 
	 	 
	10%

	 	≥100% of revenue target

EQUITY BONUS PLAN: A pool of 1,205,620 shares of common stock is available only to executives on
achievement of at least 100% of the Revenue Target, to be allocated as described above in
“Structure; Equity grants.”

2exv10w16

 

Exhibit 10.16

*****
CONFIDENTIAL TREATMENT REQUESTED

Sales Commission Plan

FY2007

Kevin Mosher

Senior Vice President, World Wide Field Operations

 

			
	*****	 	The omitted portions of this exhibit have been filed with the
Securities Exchange Commission pursuant to a request for confidential
treatment under Rule 406 promulgated under the Section Act of 1933.

 

 

OBJECTIVES

This ArcSight Sales Commission Plan FY 2007 (“agreement”) describes the terms of your sales
commission compensation at ArcSight (the “Company”) for the Plan Year, which is intended to achieve
the following objectives:

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

DEFINITIONS

	 	1.	 	Commission – Opportunity for compensation in addition to the base salary established in
a salesperson’s employment offer letter. A component of Commissions is based on GAAP
Revenue derived from the sale of the Company’s services and products and another component
is based on the operating costs or Contribution Margin of the Sales Organization.
	 
	 	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 purchase and license
agreement signed by ArcSight and the customer. Sales Contracts typically include the
following items:

	 	a.	 	Software License Fees – Revenue items associated with licensing of
software products.
	 
	 	b.	 	Service Fees – Revenue items 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 items associated with ongoing maintenance and
support.

	 	4.	 	Revenue – Represents the amount recognized by the Company on its financial statements
from the sale of products and services, in accordance with Generally Accepted Accounting
Principles (“GAAP”).

The Corporate Controller and Chief Financial Officer have final authority in determining whether
a sales transaction constitutes Revenue.

	 	5.	 	Plan Year – FY2007 (May 1, 2006 – April 30, 2007)

 

	 	6.	 	Cash Collection – Receipt of payment from a customer in a recognized form including a
bank draft, bank deposit, or approved promissory note.
	 
	 	7.	 	Contribution Margin – Represents the net amount resulting from the subtraction of Sales
operating costs from Revenue.

COMMISSION PAYMENTS

Sales Representatives are eligible to earn Commissions in addition to base salary. A Portion of
Commissions are deemed earned upon the recognition of revenue in accordance with GAAP. A secondary
portion of commissions are earned upon achieving a pre-determined operating expense or contribution
margin level.

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 approval by the Vice President of
Sales 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 Vice President of Sales, 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 Chief Financial Officer to gain approval
of terms and customer’s credit worthiness. The Sales Contract is the final, conclusive document,
which is required and must thoroughly reflect all terms and commitments.

CALCULATION OF COMMISSIONS

The Senior
Vice President, Worldwide Field Operation’s commissions are calculated based on the
achievement of both quarterly revenue targets as well as operating costs or contribution margin
targets. The revenue achievement target represents ***** of the
commission structure while a *****
component is based on operating costs or contribution margin.

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.

 

			
	*****	 	The omitted portions of this exhibit have been filed with the
Securities Exchange Commission pursuant to a request for confidential
treatment under Rule 406 promulgated under the Securities Act of 1933.

 

Operating expense/Contribution margin Portion: Each quarter the commission amount attributable to
operating expense/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. The quarterly
commission amount will vary depending on the level of revenue achieved relative to the quarterly
revenue target. 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 would be $11,250.

	 	 	 	 	 
	Annual Revenue Quota
	 		*****	 
	Annual Variable Compensation
	 		*****	 

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	Q1	 	 	Q2	 	 	Q3	 	 	Q4	 	 	FY 2007	 
	Variable Compensation based
on Revenue target
	 	$	*****	 	 	$	*****	 	 	$	*****	 	 	$	*****	 	 	$	*****	 
	Variable Compensation based
on operating expense or
Contribution margin target
	 	$	*****	 	 	$	*****	 	 	$	*****	 	 	$	*****	 	 	$	*****	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Total Variable Compensation
	 	$	*****	 	 	$	*****	 	 	$	*****	 	 	$	*****	 	 	$	*****	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Revenue target
	 	$	*****	 	 	$	*****	 	 	$	*****	 	 	$	*****	 	 	$	*****	 
	Operating expense target
	 	$	*****	 	 	$	*****	 	 	$	*****	 	 	$	*****	 	 	$	*****	 
	 
	Contribution margin target
	 	$	*****	 	 	$	*****	 	 	$	*****	 	 	$	*****	 	 	$	*****	 
	 
	Commission rates for
Revenue Portion:
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	0 - 100%
	 	 	0.21	%	 	 	0.20	%	 	 	0.17	%	 	 	0.16	%	 	 	 	 
	100% - 105%
	 	 	2.06	%	 	 	2.00	%	 	 	1.72	%	 	 	1.56	%	 	 	 	 
	105% - 110%
	 	 	3.12	%	 	 	3.00	%	 	 	2.59	%	 	 	2.34	%	 	 	 	 
	>110%
	 	 	4.00	%	 	 	4.00	%	 	 	4.00	%	 	 	4.00	%	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	Commission for Operating
expense/Contribution margin
Portion:
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	100%
	 	$	7,500	 	 	$	7,500	 	 	$	7,500	 	 	$	7,500	 	 	$	30,000	 
	100% - 105%
	 	$	11,250	 	 	$	11,250	 	 	$	11,250	 	 	$	11,250	 	 	$	45,000	 
	105% - 110%
	 	$	16,875	 	 	$	16,875	 	 	$	16,875	 	 	$	16,875	 	 	$	67,500	 
	> 110%
	 	$	22,500	 	 	$	22,500	 	 	$	22,500	 	 	$	22,500	 	 	$	90,000	 

 

			
	*****	 	The omitted portions of this exhibit have been filed with the
Securities Exchange Commission pursuant to a request for confidential
treatment under Rule 406 promulgated under the Securities Act of 1933.

 

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 any salesperson
arising out of or relating to interpretation of the Sales Commission 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 salesperson must be actively managing the
account. If the salesperson is out of the office, on extended vacation, on leave, e.g.,
for more than three or four weeks, excluding holidays, commission, at the discretion of the
Vice President of Sales, may be transitioned to a new salesperson who will be able to
support those accounts.
	 
	 	D.	 	Modifications. The Company can modify this agreement upon 30 days written notice to
applicable sales team members. Modifications will apply only to future business in that
sales transactions 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 or services attributable to an employee.
Reasons for charge-back may include but are not limited to the customer’s failure to pay,
credit memo’s, 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 quota 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 indirect 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 agreement, 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 any other money to any agent, customer or representative of the customer or any
other person as an inducement or reward for assistance in making a sale.

 

 

	 	2.	 	Gifts and entertainment above a nominal amount shall not be given to customers,
agents or representatives except in accordance with current ArcSight policies and
procedures.
	 
	 	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 in the opinion of ArcSight’s legal counsel violates
any of the anti-trust and/or trade regulation and/or practices.
	 
	 	4.	 	Any failure to adhere to ArcSight’s ethical and legal standards or of other
generally recognized ethical and legal business standards will subject an employee to
revocation of any Commission or other compensation as provided by this or any other
agreement to which the employee might otherwise be entitled. In addition, any such
infraction will subject the employee to disciplinary action, up to and including
termination.

	 	G.	 	No Effect On Employment. This agreement is not intended to, nor does it in any way,
detract from the at-will relationships of the parties.
	 
	 	H.	 	Confidentiality. This agreement is deemed confidential to the Company.

Delivered and explained by:

                                                             (ArcSight executive name, position, date)

                                                             (Signature)

Received and agreed by:

                                                            (ArcSight salesperson, position, date)

                                                            (Signature)

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