exv10w14



 





Exhibit 10.14




October 5, 2006



Tom Reilly




                                        




                                        



Dear Tom:




     This letter will serve as an offer of employment to you with ArcSight, Inc. as ArcSight’s
Chief Operating Officer. 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 $25,000 per month, earned and paid semi-monthly.
Additionally you will be eligible to receive up to 35% of annual base salary, at plan, in the form
of an annual bonus and up to a maximum of 100% in the event the Company exceeds certain milestones.
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. You may begin to participate in ArcSight’s
bonus plan beginning Fiscal Year 2007 (5/1/06 – 4/30/07) prorated from start date.




     In addition, subject
 to approval of the Company’s Board of Directors or its Compensation
Committee, you will be granted an incentive stock option, to the extent allowed under the Internal
Revenue Code, to acquire 3% (as of 10/5/06) of all issued and outstanding shares of the Company’s
Common Stock and Preferred Stock, on a fully exercised and as converted
basis, and all issued and outstanding securities convertible into,
exercisable for or providing the right to acquire the Company’s
Common Stock or Preferred Stock, at an exercise price equal to the fair
market value of the shares on the date the option is granted or your first date of employment,
whichever is later. The option will be immediately exercisable, but the unvested portion of the
purchased shares will be subject to repurchase by the Company at the exercise price in the event
that your service terminates for any reason (subject to the paragraph below regarding additional
vesting after an Involuntary Termination following a Change in Control) before you vest in the
shares. 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.




     In addition you will
 be granted an incentive stock option, to the extent allowed under the
Internal Revenue Code, to acquire 1% (as of 10/5/06) of all issued and outstanding shares of the
Company’s Common Stock and Preferred Stock, on a fully exercised
and as converted basis, and all issued and outstanding securities
convertible into, exercisable for or providing the right to acquire
the Company’s
Common Stock or Preferred Stock, at an exercise price equal to
the fair market value of the shares on the date the option is granted or your first date of
employment, whichever is later. The option will be immediately exercisable, but the unvested
portion of the purchased shares will be subject to repurchase by the Company at the exercise price
in the event that your service terminates for any reason (subject to the paragraph below regarding
additional vesting after an Involuntary Termination following a Change in Control) before you vest
in the shares. Subject to achieving certain performance milestones within the



 









 





Tom Reilly

October 5, 2006

Page 2



first twelve months of your employment with the Company 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. These performance milestones will be communicated to you shortly after you join
ArcSight.




     If the Company is subject to a Change in Control (as defined in the ArcSight, Inc. 2002 Stock
Plan) prior to the first anniversary of your employment start date before your service with the
Company terminates and you are subject to an Involuntary Termination (as defined in your Notice of
Stock Option Grant) within twelve 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. Should the Change
of Control occur on or after the first anniversary of your employment start date and you are
subject to an Involuntary Termination (as defined in your Notice of Stock Option Grant) within
twelve months after that Change in Control then you shall become vested in 100% of your options as
of your termination date. In addition, following the Involuntary Termination, the Company will pay
you severance pay for a period of twelve (12) months following the termination of your employment.
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, provided that
such severance pay will be paid in a manner to be exempted under, or compliant with, Section 409A
of the Internal Revenue Code. However, this paragraph will not apply unless you (i) sign a general
release of claims (in a form reasonably 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, Inc.’s standard plan. In addition, you will accrue three (3) weeks (15
business days) of vacation per year pursuant to ArcSight, Inc.’s vacation policy.



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



     While you render services to the Company, you agree that you will not engage in any other
employment, consulting or other business activity without the prior written consent of 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, Inc. is for no specified period of time.
It is an at-will employment relationship, and either you or ArcSight, Inc. 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



 









 





Tom Reilly

October 5, 2006

Page 3



may be terminated. It supersedes any prior agreement or representation. If any term of this
paragraph conflicts with any practice or policy of ArcSight, Inc., 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, Inc.




     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 background check, even if this information is not known until after
your employment commences



     This offer will expire at the end of business day on October 9, 2006, unless accepted by you
on the terms contained herein.



     Finally, this offer letter sets forth all the material terms of your employment. By signing
it, and thereby accepting employment at ArcSight, Inc., 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
Agreement and returning them to me.



     We look forward to having you on board!



Sincerely,




/s/
Robert
Shaw
Robert Shaw

Chairman & CEO

ArcSight, Inc.




     I, Tom Reilly, accept this offer:



	 	 	 	 	 	 	 
	 	 	/s/
Tom Reilly 	 	 
	 
	 	 	 	 	 	 
	 

	 	Dated:	 	 	 	 
	 

	 	 	 	 	 	 






 










 










ArcSight, Inc.

Amendment to Employment Offer Letter



October 23, 2007



Tom Reilly



 





 





Re:   Amendment to Employment Offer Letter



Dear Mr. Reilly:



Reference is made to the Employment Offer Letter between
ArcSight, Inc. (“ArcSight” or the
“Company”) and you, dated October 5, 2006, 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:
	 	November 9, 2007	 	/s/ Tom Reilly
	 
	 	 	 	 
	 
	 	 	 	Tom Reilly