Document:

exv4w2

 

Exhibit 4.2

ARCSIGHT, INC.

AMENDED AND RESTATED INVESTORS’ RIGHTS AGREEMENT

October 24, 2002

 

 

AMENDED AND RESTATED INVESTORS’ RIGHTS AGREEMENT

     THIS AMENDED AND RESTATED INVESTORS’ RIGHTS AGREEMENT (the “Agreement”) is made as of
the 24th day of October, 2002, by and among ArcSight, Inc., a Delaware corporation (the
“Company”), the investors listed on
Schedule A hereto (each of which is herein referred to
as an “Investor”), Ted Schlein (“Schlein”) and Daly Alpha Limited Partnership
(“Daly”).

RECITALS

     WHEREAS, certain of the Investors (the “Existing Investors”) hold shares of the
Company’s Preferred Stock and/or shares of Common Stock issued upon conversion thereof (the
“Preferred Stock”) and possess registration rights, information rights, rights of first
offer and other rights pursuant to an Amended and Restated Investors’ Rights Agreement dated as of
October 3, 2002 by and among the Company, Schlein, Daly and such Existing Investors (the “Prior
Agreement”);

     WHEREAS,
the Company has authorized 8,000,000 shares of Series C
Preferred Stock (the “Series
C Shares”) and the parties hereto desire that the Common Stock issuable upon conversion of the
Series C Shares be included as “Registrable Securities” hereunder and the holders thereof included
as “Holders” hereunder;

     WHEREAS, the Prior Agreement may be amended, and any provision therein waived, with the
consent of (i) the Company, (ii) the Investors who hold 75% of the Registrable Securities and (iii)
the Major Investors who hold 75% of the Registrable Securities then
held by Major Investors (as all
such terms are defined in the Prior Agreement); and

     WHEREAS, the parties hereto hold sufficient Registrable Securities to amend and restate the
Prior Agreement and to accept the rights created pursuant hereto in lieu of the rights granted to
them under the Prior Agreement on behalf of all parties thereto;

     NOW, THEREFORE, in consideration of the mutual promises and covenants set forth herein, the
parties hereto hereby agree that the Prior Agreement shall be superseded and replaced in its
entirety by this Agreement, and the parties hereto further agree as follows:

1. Registration Rights. The Company covenants and agrees as follows:

     1.1 Definitions. For purposes of this Section 1:

          (a) The term “Act” means the Securities Act of 1933, as amended.

          (b) The term “Form S-3” means such form under the Act as in effect on the date hereof
or any registration form under the Act subsequently adopted by the SEC that permits inclusion or
incorporation of substantial information by reference to other documents filed by the Company with
the SEC.

          (c) The term “Holder” means any person owning or having the right to acquire
Registrable Securities or any assignee thereof in accordance with Section 1.11 hereof;

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provided, however, that Daly shall not be deemed a Holder for purposes of Sections 1.12 and
3.7 and shall only be deemed a Holder for purposes of Sections 1.2 and 1.4 if Silicon Valley
Internet Capital, LLC (“SVIC”) is an Initiating Holder under such Sections (but shall
remain a Holder at all times for all other purposes hereunder).

          (d) The term “Major Investor” shall mean an Investor (or valid assignee of an Investor
hereunder) that holds at least 6,000,000 shares of Registrable Securities (subject to appropriate
adjustment for stock splits, stock dividends, combinations and other recapitalizations). The term
“Major Investor” shall also, for purposes of Sections 2.1, 2.2 and 2.3 only, include
IN-Q-TEL, INC., a Delaware corporation (“IQT”), provided that IQT has become a party to
this Agreement pursuant to Section 3.8 hereof.

          (e) The term “Initial Offering” means the Company’s first firm commitment underwritten
public offering of its Common Stock under the Act.

          (f) The term “1934 Act” means the Securities Exchange Act of 1934, as amended.

          (g) The terms “register,” “registered,” and “registration” refer to a
registration effected by preparing and filing a registration statement or similar document in
compliance with the Act, and the declaration or ordering of effectiveness of such registration
statement or document.

          (h) The term “Preferred Stock” means the Company’s Series A Preferred Stock, Series B
Preferred Stock and Series C Preferred Stock, whether presently outstanding or hereinafter issued;

          (i) The term “Registrable Securities” means (i) the Common Stock issuable or issued
upon conversion of the Preferred Stock, (ii) the 5,200,000 shares of Common Stock issued to Schlein
pursuant to an option held by him, (iii) the Common Stock held by Daly, (iv) the Common Stock
issuable or issued upon conversion of the Preferred Stock issuable or issued upon exercise of the
Warrant (assuming for this purpose only as if the Warrant is fully vested) and (iv) any Common
Stock of the Company issued as (or issuable upon the conversion or exercise of any warrant, right
or other security that is issued as) a dividend or other distribution with respect to, or in
exchange for, or in replacement of, the shares referenced in (i), (ii), (iii) and (iv) above,
excluding in all cases, however, any Registrable Securities sold by a stockholder in a transaction
in which such stockholder’s rights under this Section 1 are not assigned.

          (j) The number of shares of “Registrable Securities” outstanding shall be determined
with respect to any provision herein by the number of shares of Common Stock outstanding that are,
and the number of shares of Common Stock issuable pursuant to then exercisable or convertible
securities that are, Registrable Securities for the purposes of such provision.

          (k) The
term “Rule 144” shall mean Rule 144 under the Act.

          (l) The
term “Rule 144(k)” shall mean subsection (k) of Rule 144 under the Act.

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          (m) The term “SEC” shall mean the U.S. Securities and Exchange Commission or any
successor thereto.

          (n) The term “Warrant” shall mean the Warrant issued by the Company to IQT on November
1, 2002.

     1.2 Request for Registration.

          (a) Subject to the conditions of this Section 1.2, if the Company shall receive at any time
after six (6) months after the effective date of the Initial Offering, a written request from the
Holders of thirty percent (30%) or more of the Registrable Securities then outstanding (for
purposes of this Section 1.2, the “Initiating Holders”) that the Company file a
registration statement under the Act covering the registration of Registrable Securities with an
anticipated aggregate offering price of at least $5,000,000, then the Company shall, within twenty
(20) days of the receipt thereof, give written notice of such request to all Holders, and subject
to the limitations of this Section 1.2, use its best efforts to effect, as soon as practicable, the
registration under the Act of all Registrable Securities that the Holders request to be registered
in a written request received by the Company within twenty (20) days of the mailing of the
Company’s notice pursuant to this Section 1.2(a).

          (b) If the Initiating Holders intend to distribute the Registrable Securities covered by their
request by means of an underwriting, they shall so advise the Company as a part of their request
made pursuant to this Section 1.2 and the Company shall include such information in the written
notice referred to in Section 1.2(a). In such event the right of any Holder to include its
Registrable Securities in such registration shall be conditioned upon such Holder’s participation
in such underwriting and the inclusion of such Holder’s Registrable Securities in the underwriting
(unless otherwise mutually agreed by a majority in interest of the Initiating Holders and such
Holder) to the extent provided herein. All Holders proposing to distribute their securities
through such underwriting shall enter into an underwriting agreement in customary form with the
underwriter or underwriters selected for such underwriting by a majority in interest of the
Initiating Holders (which underwriter or underwriters shall be of nationally recognized standing).
Notwithstanding any other provision of this Section 1.2, if the underwriter advises the Company
that marketing factors require a limitation of the number of securities underwritten (including
Registrable Securities), then the Company shall so advise all Holders of Registrable Securities
that would otherwise be underwritten pursuant hereto, and the number of shares that may be included
in the underwriting shall be allocated to the Holders of such Registrable Securities on a pro rata
basis based on the number of Registrable Securities held by all such Holders (including the
Initiating Holders). In no event shall any Registrable Securities be excluded from such
underwriting unless all other securities are first excluded. Any Registrable Securities excluded
or withdrawn from such underwriting shall be withdrawn from the registration.

          (c) The Company shall not be required to effect a registration pursuant to this Section 1.2:

               (i) in any particular jurisdiction in which the Company would be required to execute a general
consent to service of process in effecting such registration, unless

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the Company is already subject to service in such jurisdiction and except as may be required
under the Act; or

               (ii) after the Company has effected two (2) registrations pursuant to this Section 1.2, and
such registrations have been declared or ordered effective; or

               (iii) during the period starting with the date ninety (90) days prior to the Company’s good
faith estimate of the date of the filing of, and ending on a date ninety (90) days following the
effective date of, a Company-initiated registration subject to Section 1.3 below, provided that the
Company is actively employing in good faith all commercially reasonable efforts to cause such
registration statement to become effective; or

               (iv) if the Initiating Holders propose to dispose of Registrable Securities that may be
registered on Form S-3 pursuant to Section 1.4 hereof; or

               (v) if the Company shall furnish to Holders requesting a registration statement pursuant to
this Section 1.2, a certificate signed by the Company’s Chief Executive Officer or Chairman of the
Board stating that in the good faith judgment of the Board of Directors of the Company, it would be
seriously detrimental to the Company and its stockholders for such registration statement to be
effected at such time, in which event the Company shall have the right to defer such filing for a
period of not more than one hundred eighty (180) days after receipt of the request of the
Initiating Holders, provided that such right shall be exercised by the Company not more than once
in any twelve (12)-month period.

     1.3 Company Registration.

          (a) If (but without any obligation to do so) the Company proposes to register (including for
this purpose a registration effected by the Company for stockholders other than the Holders) any of
its stock or other securities under the Act in connection with the public offering of such
securities (other than a registration relating solely to the sale of securities of participants in
a Company stock plan, a registration relating to a corporate reorganization or transaction under
Rule 145 of the Act, or a registration in which the only Common Stock being registered is Common
Stock issuable upon conversion of debt securities that are also being registered), the Company
shall, at such time, promptly give each Holder written notice of such registration. Upon the
written request of each Holder given within twenty (20) days after mailing of such notice by the
Company in accordance with Section 3.5, the Company shall, subject to the provisions of Section
1.3(c), use all commercially reasonable efforts to cause to be registered under the Act all of the
Registrable Securities that each such Holder has requested to be registered.

          (b) Right to Terminate Registration. The Company shall have the right to terminate or
withdraw any registration initiated by it under this Section 1.3 prior to the effectiveness of such
registration whether or not any Holder has elected to include securities in such registration. The
expenses of such withdrawn registration shall be borne by the Company in accordance with Section
1.7 hereof.

          (c) Underwriting Requirements. In connection with any offering involving an
underwriting of shares of the Company’s capital stock, the Company shall not be required under

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this Section 1.3 to include any of the Holders’ securities in such underwriting unless they
accept the terms of the underwriting as agreed upon between the Company and the underwriters
selected by it (or by other persons entitled to select the underwriters) and enter into an
underwriting agreement in customary form with such underwriters, and then only in such quantity as
the underwriters determine in their sole discretion will not jeopardize the success of the offering
by the Company. If the total amount of securities, including Registrable Securities, requested by
stockholders to be included in such offering exceeds the amount of securities sold other than by
the Company that the underwriters determine in their sole discretion is compatible with the success
of the offering, then the Company shall be required to include in the offering only that number of
such securities, including Registrable Securities, that the underwriters determine in their sole
discretion will not jeopardize the success of the offering. In no event shall any Registrable
Securities be excluded from such offering unless all other stockholders’ securities are first
excluded. In the event that the underwriters determine that less than all of the Registrable
Securities requested to be registered can be included in such offering, then the Registrable
Securities that are included in such offering shall be apportioned pro rata among the selling
Holders based on the number of Registrable Securities held by all selling Holders or in such other
proportions as shall mutually be agreed to by all such selling Holders. Notwithstanding the
foregoing, in no event shall the amount of securities of the selling Holders included in the
offering be reduced below thirty percent (30%) of the total amount of securities included in such
offering, unless such offering is the initial public offering of the Company’s securities, in which
case the selling Holders may be excluded if the underwriters make the determination described above
and no other stockholder’s securities are included. For purposes of the preceding sentence
concerning apportionment, for any selling stockholder that is a Holder of Registrable Securities
and that is a venture capital fund, partnership, limited liability company (an “LLC”),
trust or corporation, the affiliated venture capital funds, partners, retired partners,
beneficiaries, members, retired members and stockholders of such Holder, or the estates and family
members of any such partners, retired partners, members, retired members, beneficiaries and
stockholders and any trusts for the benefit of any of the foregoing persons shall be deemed to be a
single “selling Holder,” and any pro rata reduction with respect to such “selling Holder” shall be
based upon the aggregate amount of Registrable Securities owned by all such related entities and
individuals.

     1.4 Form S-3 Registration. In case the Company shall receive from the Holders of at
least twenty percent (20%) of the Registrable Securities (for purposes of this Section 1.4, the
“Initiating Holders”) a written request or requests that the Company effect a registration
on Form S-3 and any related qualification or compliance with respect to all or a part of the
Registrable Securities owned by such Holder or Holders, the Company shall:

          (a) promptly give written notice of the proposed registration, and any related qualification
or compliance, to all other Holders; and

          (b) use all commercially reasonable efforts to effect, as soon as practicable, such
registration and all such qualifications and compliances as may be so requested and as would permit
or facilitate the sale and distribution of all or such portion of such Holders’ Registrable
Securities as are specified in such request, together with all or such portion of the Registrable
Securities of any other Holders joining in such request as are specified in a written request given
within fifteen (15) days after receipt of such written notice from the Company,

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provided, however, that the Company shall not be obligated to effect any such registration,
qualification or compliance, pursuant to this section 1.4:

               (i) if Form S-3 is not available for such offering by the Holders;

               (ii) if the Holders, together with the holders of any other securities of the Company entitled
to inclusion in such registration, propose to sell Registrable Securities and such other securities
(if any) at an aggregate price to the public (net of any underwriters’ discounts or commissions) of
less than $5,000,000;

               (iii) if the Company shall furnish to Holders requesting a registration statement pursuant to
this Section 1.4, a certificate signed by the Company’s Chief Executive Officer or Chairman of the
Board stating that in the good faith judgment of the Board of Directors of the Company, it would be
seriously detrimental to the Company and its stockholders for such registration statement to be
effected at such time, in which event the Company shall have the right to defer such filing for a
period of not more than one hundred eighty (180) days after receipt of the request of the
Initiating Holders, provided that such right shall be exercised by the Company not more than once
in any twelve (12)-month period;

               (iv) if the Company has, within the twelve (12) month period preceding the date of such
request, already effected one registration on Form S-3 for the Holders pursuant to this Section
1.4; or

               (v) in any particular jurisdiction in which the Company would be required to qualify to do
business or to execute a general consent to service of process in effecting such registration,
qualification or compliance.

          (c) If the Initiating Holders intend to distribute the Registrable Securities covered by their
request by means of an underwriting, they shall so advise the Company as a part of their request
made pursuant to this Section 1.4 and the Company shall include such information in the written
notice referred to in Section 1.4(a). The provisions of Section 1.2(b) shall be applicable to such
request (with the substitution of Section 1.4 for references to Section 1.2).

          (d) Subject to the foregoing, the Company shall file a registration statement covering the
Registrable Securities and other securities so requested to be registered as soon as practicable
after receipt of the request or requests of the Initiating Holders. Registrations effected pursuant
to this Section 1.4 shall not be counted as requests for registration effected pursuant to Section
1.2.

     1.5
Obligations of the Company. Whenever required under this
Section 1 to effect the
registration of any Registrable Securities, the Company shall, as expeditiously as reasonably
possible:

          (a) prepare and file with the SEC a registration statement with respect to such Registrable
Securities and use all commercially reasonable efforts to cause such registration statement to
become effective, and, upon the request of the Holders of a majority of the Registrable Securities
registered thereunder, keep such registration statement effective for a

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period of up to one hundred twenty (120) days or, if earlier, until the distribution
contemplated in the Registration Statement has been completed;

          (b) prepare and file with the SEC such amendments and supplements to such registration
statement and the prospectus used in connection with such registration statement as may be
necessary to comply with the provisions of the Act with respect to the disposition of all
securities covered by such registration statement;

          (c) furnish to the Holders such numbers of copies of a prospectus, including a preliminary
prospectus, in conformity with the requirements of the Act, and such other documents as they may
reasonably request in order to facilitate the disposition of Registrable Securities owned by them;

          (d) use all commercially reasonable efforts to register and qualify the securities covered by
such registration statement under such other securities or Blue Sky laws of such jurisdictions as
shall be reasonably requested by the Holders, provided that the Company shall not be required in
connection therewith or as a condition thereto to qualify to do business or to file a general
consent to service of process in any such states or jurisdictions;

          (e) in the event of any underwritten public offering, enter into and perform its obligations
under an underwriting agreement, in usual and customary form, with the managing underwriter of such
offering;

          (f) notify each Holder of Registrable Securities covered by such registration statement at any
time when a prospectus relating thereto is required to be delivered under the Act of the happening
of any event as a result of which the prospectus included in such registration statement, as then
in effect, includes an untrue statement of a material fact or omits to state a material fact
required to be stated therein or necessary to make the statements therein not misleading in the
light of the circumstances then existing;

          (g) cause all such Registrable Securities registered pursuant to this Section 1 to be listed
on a national exchange or trading system and on each securities exchange and trading system on
which similar securities issued by the Company are then listed; and

          (h) provide a transfer agent and registrar for all Registrable Securities registered pursuant
hereunder and a CUSIP number for all such Registrable Securities, in each case not later than the
effective date of such registration.

     Notwithstanding the provisions of this Section 1, the Company shall be entitled to postpone or
suspend, for a reasonable period of time, the filing, effectiveness or use of, or trading under,
any registration statement if the Company shall determine that any such filing or the sale of any
securities pursuant to such registration statement would:

               (i) in the good faith judgment of the Board of Directors of the Company, materially impede,
delay or interfere with any material pending or proposed financing, acquisition, corporate
reorganization or other similar transaction involving the Company for which the Board of Directors
of the Company has authorized negotiations;

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               (ii) in the good faith judgment of the Board of Directors of the Company, materially adversely
impair the consummation of any pending or proposed material offering or sale of any class of
securities by the Company; or

               (iii) in the good faith judgment of the Board of Directors of the Company, require disclosure
of material nonpublic information that, if disclosed at such time, would be materially harmful to
the interests of the Company and its stockholders; provided, however, that during
any such period all executive officers and directors of the Company are also prohibited from
selling securities of the Company (or any security of any of the Company’s subsidiaries or
affiliates).

     In the event of the suspension of effectiveness of any registration statement pursuant to this
Section 1.5, the applicable time period during which such registration statement is to remain
effective shall be extended by that number of days equal to the number of days during which the
effectiveness of such registration statement was suspended.

     1.6 Information from Holder. It shall be a condition precedent to the obligations of
the Company to take any action pursuant to this Section 1 with respect to the Registrable
Securities of any selling Holder that such Holder shall furnish to the Company such information
regarding itself, the Registrable Securities held by it, and the intended method of disposition of
such securities as shall be reasonably required to effect the registration of such Holder’s
Registrable Securities.

     1.7 Expenses of Registration. All expenses other than underwriting discounts and
commissions incurred in connection with registrations, filings or qualifications pursuant to
Sections 1.2, 1.3 and 1.4, including (without limitation) all registration, filing and
qualification fees, printers’ and accounting fees, fees and disbursements of counsel for the
Company and the reasonable fees and disbursements of one counsel for the selling Holders shall be
borne by the Company. Notwithstanding the foregoing, the Company shall not be required to pay for
any expenses of any registration proceeding begun pursuant to Section 1.2 or Section 1.4 if the
registration request is subsequently withdrawn at the request of the Holders of a majority of the
Registrable Securities to be registered (in which case all participating Holders shall bear such
expenses pro rata based upon the number of Registrable Securities that were to be included in the
withdrawn registration), unless, in the case of a registration requested under Section 1.2, the
Holders of a majority of the Registrable Securities agree to forfeit their right to one demand
registration pursuant to Section 1.2 and provided, however, that if at the time of such withdrawal,
the Holders have learned of a material adverse change in the condition, business, or prospects of
the Company from that known to the Holders at the time of their request and have withdrawn the
request with reasonable promptness following disclosure by the Company of such material adverse
change, then the Holders shall not be required to pay any of such expenses and shall retain their
rights pursuant to Section 1.2 or 1.4.

     1.8 Delay of Registration. No Holder shall have any right to obtain or seek an
injunction restraining or otherwise delaying any such registration as the result of any controversy
that might arise with respect to the interpretation or implementation of this Section 1.

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     1.9 Indemnification. In the event any Registrable Securities are included in a
registration statement under this Section 1:

          (a) To the extent permitted by law, the Company will indemnify and hold harmless each Holder,
the partners, members, trustees, officers, directors and stockholders of each Holder, legal counsel
and accountants for each Holder, any underwriter (as defined in the Act) for such Holder and each
person, if any, who controls such Holder or underwriter within the meaning of the Act or the 1934
Act, against any losses, claims, damages or liabilities (joint or several) to which they may become
subject under the Act, the 1934 Act, any state securities laws or any rule or regulation
promulgated under the Act, the 1934 Act or any state securities law, insofar as such losses,
claims, damages, or liabilities (or actions in respect thereof) arise out of or are based upon any
of the following statements, omissions or violations (collectively a “Violation”): (i) any
untrue statement or alleged untrue statement of a material fact contained in such registration
statement, including any preliminary prospectus or final prospectus contained therein or any
amendments or supplements thereto, (ii) the omission or alleged omission to state therein a
material fact required to be stated therein, or necessary to make the statements therein not
misleading, or (iii) any violation or alleged violation by the Company of the Act, the 1934 Act,
any state securities laws or any rule or regulation promulgated under the Act, the 1934 Act or any
state securities laws, and the Company will reimburse each such Holder, underwriter, controlling
person or other aforementioned person for any legal or other expenses reasonably incurred by them
in connection with investigating or defending any such loss, claim, damage, liability or action as
such expenses are incurred; provided, however, that the Company shall not be liable in any such
case for any such loss, claim, damage, liability or action to the extent that it arises out of or
is based upon a Violation that occurs in reliance upon and in conformity with written information
furnished expressly for use in connection with such registration by any such Holder, underwriter,
controlling person or other aforementioned person; provided further, however, that the foregoing
indemnity agreement with respect to any preliminary prospectus shall not inure to the benefit of
any Holder or underwriter or other aforementioned person, or any person controlling such Holder or
underwriter, from whom the person asserting any such losses, claims, damages or liabilities
purchased shares in the offering, if a copy of the most current prospectus was not sent or given by
or on behalf of such Holder or underwriter or other aforementioned person to such person, if
required by law so to have been delivered, at or prior to the written confirmation of the sale of
the shares to such person, and if the prospectus (as so amended or supplemented) would have cured
the defect giving rise to such loss, claim, damage or liability.

          (b) To the extent permitted by law, each selling Holder will indemnify and hold harmless the
Company, each of its directors, each of its officers, each person, if any, who controls the Company
within the meaning of the Act, legal counsel and accountants for the Company, any underwriter, any
other Holder selling securities in such registration statement and any controlling person of any
such underwriter or other Holder, against any losses, claims, damages or liabilities (joint or
several) to which any of the foregoing persons may become subject, under the Act, the 1934 Act, any
state securities laws or any rule or regulation promulgated under the Act, the 1934 Act or any
state securities laws, insofar as such losses, claims, damages or liabilities (or actions in
respect thereto) arise out of or are based upon any Violation, in each case to the extent (and only
to the extent) that such Violation occurs in reliance upon and in conformity with written
information furnished by such Holder expressly for

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use in connection with such registration; and each such Holder will reimburse any person
intended to be indemnified pursuant to this subsection 1.9(b) for any legal or other expenses
reasonably incurred by such person in connection with investigating or defending any such loss,
claim, damage, liability or action as such expenses are incurred.

          (c) Promptly after receipt by an indemnified party under this Section 1.9 of notice of the
commencement of any action (including any governmental action), such indemnified party will, if a
claim in respect thereof is to be made against any indemnifying party under this Section 1.9,
deliver to the indemnifying party a written notice of the commencement thereof and the indemnifying
party shall have the right to participate in and, to the extent the indemnifying party so desires,
jointly with any other indemnifying party similarly noticed, to assume the defense thereof with
counsel mutually satisfactory to the parties; provided, however, that an indemnified party
(together with all other indemnified parties that may be represented without conflict by one
counsel) shall have the right to retain one separate counsel, with the fees and expenses to be paid
by the indemnifying party, if representation of such indemnified party by the counsel retained by
the indemnifying party would be inappropriate due to actual or potential differing interests
between such indemnified party and any other party represented by such counsel in such proceeding.
The failure to deliver written notice to the indemnifying party within a reasonable time of the
commencement of any such action, if prejudicial to its ability to defend such action, shall relieve
such indemnifying party of liability to the indemnified party under this Section 1.9 to the extent
of such prejudice, but the omission so to deliver written notice to the indemnifying party will not
relieve it of any liability that it may have to any indemnified party otherwise than under this
Section 1.9.

          (d) If the indemnification provided for in this Section 1.9 is held by a court of competent
jurisdiction to be unavailable to an indemnified party with respect to any loss, liability, claim,
damage or expense referred to herein, then the indemnifying party, in lieu of indemnifying such
indemnified party hereunder, shall contribute to the amount paid or payable by such indemnified
party as a result of such loss, liability, claim, damage or expense in such proportion as is
appropriate to reflect the relative fault of the indemnifying party on the one hand and of the
indemnified party on the other in connection with the statements or omissions that resulted in such
loss, liability, claim, damage or expense, as well as any other relevant equitable considerations.
The relative fault of the indemnifying party and of the indemnified party shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement of a material fact
or the omission to state a material fact relates to information supplied by the indemnifying party
or by the indemnified party and the parties’ relative intent, knowledge, access to information, and
opportunity to correct or prevent such statement or omission.

          (e) Notwithstanding the foregoing, to the extent that the provisions on indemnification and
contribution contained in the underwriting agreement entered into in connection with the
underwritten public offering are in conflict with the foregoing provisions, the provisions in the
underwriting agreement shall control.

          (f) The obligations of the Company and Holders under this Section 1.9 shall survive the
completion of any offering of Registrable Securities in a registration statement under this Section
1, and otherwise.

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     1.10 Reports Under the 1934 Act. With a view to making available to the Holders the
benefits of Rule 144 and any other rule or regulation of the SEC that may at any time permit a
Holder to sell securities of the Company to the public without registration or pursuant to a
registration on Form S-3, the Company agrees to:

          (a) make and keep public information available, as those terms are understood and defined in
Rule 144, at all times after the effective date of the Initial Offering;

          (b) file with the SEC in a timely manner all reports and other documents required of the
Company under the Act and the 1934 Act; and

          (c) furnish to any Holder, so long as the Holder owns any Registrable Securities, forthwith
upon request (i) a written statement by the Company that it has complied with the reporting
requirements of Rule 144 (at any time after ninety (90) days after the effective date of the first
registration statement filed by the Company), the Act and the 1934 Act (at any time after it has
become subject to such reporting requirements), or that it qualifies as a registrant whose
securities may be resold pursuant to Form S-3 (at any time after it so qualifies), (ii) a copy of
the most recent annual or quarterly report of the Company and such other reports and documents so
filed by the Company, and (iii) such other information as may be reasonably requested in availing
any Holder of any rule or regulation of the SEC that permits the selling of any such securities
without registration or pursuant to such form.

     1.11 Assignment of Registration Rights. The rights to cause the Company to register
Registrable Securities pursuant to this Section 1 may be assigned (but only with all related
obligations) by a Holder to a transferee or assignee of such securities that (i) is a subsidiary,
parent, partner, limited partner, retired partner, member, retired member, stockholder or affiliate
(as such term is defined in Rule 12b-2 of the Securities Act of 1934) of a Holder, (ii) after such
assignment or transfer, holds at least 1,560,598 shares of Registrable Securities (subject to
appropriate adjustment for stock splits, stock dividends, combinations and other recapitalizations)
or (iii) in the case of the Registrable Securities held by Schlein, the transferee is Kleiner
Perkins Caufield & Byers (“KPCB”) or a permitted transferee of KPCB under this Section
1.11, provided: (a) the Company is, within a reasonable time after such transfer, furnished with
written notice of the name and address of such transferee or assignee and the securities with
respect to which such registration rights are being assigned; (b) such transferee or assignee
agrees in writing to be bound by and subject to the terms and conditions of this Agreement,
including, without limitation, the provisions of Section 1.13 below; (c) such assignment shall be
effective only if immediately following such transfer the further disposition of such securities by
the transferee or assignee is restricted under the Act; and (d) such transferee is not a competitor
of the Company (such determination to be made, if at all, in good faith by the Board of Directors
of the Company).

     1.12 Limitations on Subsequent Registration Rights. Except as provided in Section 3.8
herein pursuant to which purchasers of Series C Shares (or options, warrants or other rights to
acquire Series C Shares) may become party to this Agreement, from and after the date of this
Agreement, the Company shall not, without the prior written consent of the Holders of a majority of
the Registrable Securities, enter into any agreement with any holder or prospective holder of any
securities of the Company that would allow such holder or prospective holder (a) to include

11

 

such securities in any registration filed under Section 1.2, Section 1.3 or Section 1.4
hereof, unless under the terms of such agreement, such holder or prospective holder may include
such securities in any such registration only to the extent that the inclusion of such securities
will not reduce the amount of the Registrable Securities of the Holders that are included or (b) to
demand registration of their securities. If, after the date hereof, (1) a majority of the Board of
Directors approves the grant of registration rights substantially identical to the registration
rights contained in this Section 1 to a person (a “Future Party”) in connection with Common
Stock (or stock or other securities convertible into or exerciseable for, either directly or
indirectly, Common Stock) then held or issuable to such Future Party and (2) the Company receives
the written consent of the Holders of a majority of the Registrable Securities related to the grant
of registration rights to such Future Party, then such Future Party shall become a party hereto and
be included within the definition of “Holder” hereof and the Common Stock issued or issuable,
directly or indirectly, to such party shall, to the extent and amounts approved, be included within
the definition of “Registrable Securities” upon the execution of a counterpart signature page
hereto by such Future Party.

     1.13 “Market Stand-Off” Agreement. The Holders hereby agree that it will not, without
the prior written consent of the managing underwriter, during the period commencing on the date of
the final prospectus relating to the Company’s Initial Offering and ending on the date specified by
the Company and the managing underwriter (such period not to exceed one hundred eighty (180) days)
(i) lend, offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase
any option or contract to sell, grant any option, right or warrant to purchase, or otherwise
transfer or dispose of, directly or indirectly, any shares of Common Stock or any securities
convertible into or exercisable or exchangeable for Common Stock (whether such shares or any such
securities are then owned by the Holder or are thereafter acquired), or (ii) enter into any swap or
other arrangement that transfers to another, in whole or in part, any of the economic consequences
of ownership of the Common Stock, whether any such transaction described in clause (i) or (ii)
above is to be settled by delivery of Common Stock or such other securities, in cash or otherwise.
The foregoing provisions of this Section 1.13 shall apply only to the Company’s initial public
offering of equity securities and the first public offering of equity securities, if any, made
within one year of such initial public offering, shall not apply to the sale of any shares to an
underwriter pursuant to an underwriting agreement, to any shares purchased in the public offering
and to any shares purchased in the open market following the public offering and shall only be
applicable to the Holders if all officers and directors and greater than one percent (1%)
stockholders of the Company enter into similar agreements. The underwriters in connection with the
Company’s Initial Offering are intended third party beneficiaries of this Section 1.13 and shall
have the right, power and authority to enforce the provisions hereof as though they were a party
hereto. The Holders each further agree to execute such agreements as may be reasonably requested
by the underwriters in the Company’s Initial Offering that are consistent with this Section 1.13 or
that are necessary to give further effect thereto.

     In order to enforce the foregoing covenant, the Company may impose stop-transfer instructions
with respect to the Registrable Securities of each Holder (and the shares or securities of every
other person subject to the foregoing restriction) until the end of such period.

     1.14 Termination of Registration Rights. No Holder shall be entitled to exercise any
right provided for in this Section 1 (i) after five (5) years following the consummation of the

12

 

Initial Offering or (ii) as to any Holder, such earlier time after the Initial Offering at
which such Holder (A) can sell all shares held by it in compliance with Rule 144(k) or (B) holds
one percent (1%) or less of the Company’s outstanding Common Stock (including Common Stock issuable
upon conversion of any convertible security) and all Registrable Securities held by such Holder
(together with any affiliate of the Holder with whom such Holder must aggregate its sales under
Rule 144) can be sold in any three (3)-month period without registration in compliance with Rule
144.

2. Covenants of the Company.

     2.1 Delivery of Financial Statements. The Company shall deliver to each Major
Investor:

          (a) as soon as practicable, but in any event within ninety (90) days after the end of each
fiscal year of the Company, an income statement for such fiscal year, a balance sheet of the
Company and statement of stockholders’ equity as of the end of such year, and a statement of cash
flows for such year, such year-end financial reports to be in reasonable detail, prepared in
accordance with generally accepted accounting principles (“GAAP”), and audited and
certified by independent public accountants of nationally recognized standing selected by the
Company;

          (b) as soon as practicable, but in any event within forty-five (45) days after the end of each
of the first three (3) quarters of each fiscal year of the Company, an unaudited income statement,
statement of cash flows for such fiscal quarter and an unaudited balance sheet as of the end of
such fiscal quarter;

          (c) within thirty (30) days of the end of each month, an unaudited income statement and
statement of cash flows and balance sheet for and as of the end of such month, in reasonable
detail; and

          (d) as soon as practicable, but in any event at least thirty (30) days prior to the end of
each fiscal year, a budget for the next fiscal year, prepared on a monthly basis, including balance
sheets, income statements and statements of cash flows for such months and, as soon as prepared,
any other budgets or revised budgets prepared by the Company.

     2.2 Inspection. The Company shall permit each Major Investor, upon reasonable notice
from such Major Investor and at such Major Investor’s expense, to visit and inspect the Company’s
properties, to examine its books of account and records and to discuss the Company’s affairs,
finances and accounts with its officers, all at such reasonable times as may be requested by the
Major Investor; provided, however, that the Company shall not be obligated pursuant to this Section
2.2 to provide access to any information that it reasonably considers to be a trade secret or
similar confidential information.

     2.3 Termination of Information and Inspection Covenants. The covenants set forth in
Sections 2.1 and 2.2 shall terminate and be of no further force or effect when the sale of
securities pursuant to a registration statement filed by the Company under the Act in connection
with the firm commitment underwritten offering of its securities to the general public is
consummated or when the Company first becomes subject to the periodic reporting requirements of
Sections 12(g) or 15(d) of the 1934 Act, whichever event shall first occur.

13

 

     2.4 Right of First Offer. Subject to the terms and conditions specified in this
Section 2.4, the Company hereby grants to each Investor a right of first offer with respect to
future sales by the Company of its Shares (as hereinafter defined). Each time the Company proposes
to offer any shares of, or securities convertible into or exchangeable or exercisable for any
shares of, any class of its capital stock (“Shares”), the Company shall first make an
offering of such Shares to each Investor in accordance with the following provisions:

          (a) The Company shall
deliver a notice in accordance with Section 3.5
(“Notice”) to the
Investors stating (i) its bona fide intention to offer such Shares, (ii) the number of such Shares
to be offered, and (iii) the price and terms upon which it proposes to offer such Shares.

          (b) By written notification received by the Company within twenty (20) calendar days after
receipt of the Notice, each Investor may elect to purchase or obtain, at the price and on the terms
specified in the Notice, up to that portion of such Shares that equals the proportion that the
number of shares of Registrable Securities issued and held by such Investor bears to the total
number of shares of Common Stock of the Company then outstanding (assuming full conversion and
exercise of all convertible and exercisable securities then outstanding).

          (c) If all Shares that Investors are entitled to obtain pursuant to subsection 2.4(b) are not
elected to be obtained as provided in subsection 2.4(b) hereof, the Company may, during the ninety
(90) day period following the expiration of the period provided in subsection 2.4(b) hereof, offer
the remaining unsubscribed portion of such Shares to any person or persons at a price not less than
that, and upon terms no more favorable to the offeree than those, specified in the Notice. If the
Company does not enter into an agreement for the sale of the Shares within such period, or if such
agreement is not consummated within sixty (60) days of the execution thereof, the right provided
hereunder shall be deemed to be revived and such Shares shall not be offered unless first reoffered
to the Investors in accordance herewith.

          (d) The right of first offer in this Section 2.4 shall not be applicable to (i) the issuance
or sale of up to 21,280,299 shares of Common Stock (or options therefor) to employees, directors,
consultants and other service providers for the primary purpose of soliciting or retaining their
services pursuant to plans or agreements approved by the Company’s Board of Directors, such number
to be subject to increase upon approval by the Board of Directors, including the approval from at
least one Series A Director and at least one Series B Director (as such terms are defined in the
Company’s Restated Certificate of Incorporation (the “Restated Certificate”)); (ii) the
issuance of securities pursuant to a bona fide, firmly underwritten public offering of shares of
Common Stock, registered under the Act, (iii) the issuance of securities pursuant to the conversion
or exercise of convertible or exercisable securities, (iv) the issuance of securities in connection
with a bona fide business acquisition of or by the Company, whether by merger, consolidation, sale
of assets, sale or exchange of stock or otherwise, the terms of which are approved by the Board of
Directors of the Company, (v) the issuance and sale of Series B Preferred Stock pursuant to the
Series B Preferred Stock Purchase Agreement (the “Series B Agreement”), (vi) the issuance
of warrants to purchase shares of Series B Preferred Stock issued pursuant to Section 6.8 of the
Series B Agreement, (vii) the issuance of stock, warrants or other securities or rights to persons
or entities approved by the Company’s Board of

14

 

Directors, including the approval from at least one Series B Director and at least one Series
A Director, with which the Company has business relationships, provided such issuances are for
other than primarily equity financing purposes, (viii) the issuance of securities pursuant to that
certain Letter Agreement dated May 17, 2001 by and between the Company and SVIC, as amended, (ix)
the issuance of 3,142,454 shares of capital stock issued to Daly Alpha Limited Partnership, (x) the
issuance of a warrant to purchase up to 25,185 shares of capital stock and the shares of capital
stock issuable upon exercise of such warrant issued to Alexander Enterprise Holdings Corp, (xi) the
sale and issuance of Series C Preferred Stock pursuant to the Series C Preferred Stock Purchase
Agreement or (xii) the issuance of a warrant to IQT to purchase up to 4,941,894 shares of Series C
Preferred Stock and the shares of Series C Preferred Stock issuable upon exercise of such warrant.
In addition to the foregoing, the right of first offer in this Section 2.4 shall not be applicable
with respect to any Investor and any subsequent offering of Shares if (i) at the time of such
offering, the Investor is not an “accredited investor,” as that term is then defined in Rule 501(a)
of the Act and (ii) such offering of Shares is otherwise being offered only to accredited
investors.

          (e) The rights provided in this Section 2.4 may not be assigned or transferred by any
Investor; provided, however, that an Investor that is a venture capital fund may assign or transfer
such rights to an affiliated venture capital fund, an Investor that is a limited liability company
may assign or transfer such rights to its members or retired members, Schlein may assign or
transfer such rights to KPCB and SVIC may assign or transfer such rights to Alexander Enterprise
Holdings Corp. and/or SVIC Investors I, LLC.

          (f) The covenants set forth in this Section 2.4 shall terminate and be of no further force or
effect upon the consummation of the sale of securities pursuant to a bona fide, firmly underwritten
public offering of shares of common stock registered under the Act.

     2.5 Proprietary Information and Inventions Agreements. The Company shall require all
employees and consultants with access to confidential information to execute and deliver a
Proprietary Information and Inventions Agreement in substantially the form approved by the
Company’s Board of Directors.

     2.6 Employee Agreements. Unless approved by the Board of Directors of the Company,
including at least one designee of KPCB for so long as KPCB is entitled to at least one designee on
the Company’s Board of Directors, all employees of the Company receiving grants of options or other
securities of the Company following the date hereof shall be required to execute stock purchase or
option agreements with respect to such options or other securities providing for (i) vesting of
shares over a four-year period with the first 25% of such shares vesting following twelve (12)
months of continued employment or services, and the remaining shares vesting in equal monthly
installments over the following 36 months thereafter (without any provision for the acceleration of
such vesting, except for discretionary acceleration provisions provided for in the Company’s option
plans) and (ii) a 180-day lockup period in connection with the Company’s initial public offering.
The Company shall retain a right of first refusal on transfers until the Company’s initial public
offering and the right to repurchase unvested shares at cost.

15

 

     2.7 Termination of Certain Covenants. The covenants set forth in Sections 2.5 and 2.6
shall terminate and be of no further force or effect upon the consummation of the sale of
securities pursuant to a bona fide, firmly underwritten public offering of shares of common stock
registered under the Act.

3. Miscellaneous.

     3.1 Successors and Assigns. Except as otherwise provided herein, the terms and
conditions of this Agreement shall inure to the benefit of and be binding upon the respective
successors and assigns of the parties (including transferees of any shares of Registrable
Securities). Nothing in this Agreement, express or implied, is intended to confer upon any party
other than the parties hereto or their respective successors and assigns any rights, remedies,
obligations, or liabilities under or by reason of this Agreement, except as expressly provided in
this Agreement.

     3.2 Governing Law. This Agreement shall be governed by and construed under the laws
of the State of California as applied to agreements among California residents entered into and to
be performed entirely within California.

     3.3 Counterparts. This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute one and the same
instrument.

     3.4 Titles and Subtitles. The titles and subtitles used in this Agreement are used
for convenience only and are not to be considered in construing or interpreting this Agreement.

     3.5 Notices. All notices and other communications given or made pursuant hereto shall
be in writing and shall be deemed effectively given: (i) upon personal delivery to the party to be
notified, (ii) when sent by confirmed electronic mail or facsimile if sent during normal business
hours of the recipient; if not, then on the next business day, (iii) five (5) days after having
been sent by registered or certified mail, return receipt requested, postage prepaid, or (iv) one
(1) day after deposit with a nationally recognized overnight courier, specifying next day delivery,
with written verification of receipt. All communications shall be sent to the respective parties
at the addresses set forth on the signature pages attached hereto (or at such other addresses as
shall be specified by notice given in accordance with this Section 3.5).

     3.6 Expenses. If any action at law or in equity is necessary to enforce or interpret
the terms of this Agreement, the prevailing party shall be entitled to reasonable attorneys’ fees,
costs and necessary disbursements in addition to any other relief to which such party may be
entitled.

     3.7 Entire Agreement: Amendments and Waivers. This Agreement (including the Exhibits
hereto, if any) constitutes the full and entire understanding and agreement among the parties with
regard to the subjects hereof and thereof. Any term of this Agreement (other than Section 2.1,
Section 2.2 and Section 2.3) may be amended and the observance of any term of this Agreement may be
waived (either generally or in a particular instance and either retroactively or prospectively)
only with the written consent of the Company and the Holders of 75% of the Registrable Securities.
The provisions of Section 2.1, Section 2.2 and Section 2.3 may be amended or waived (either
generally or in a particular instance and either retroactively or

16

 

prospectively) only with the written consent of the Company and the Holders of 75% of the
Registrable Securities that are held by Major Investors. Any amendment or waiver effected in
accordance with this paragraph shall be binding upon each holder of any Registrable Securities,
each future holder of all such Registrable Securities and the Company. Notwithstanding anything
to the contrary in this Section 3.7, neither this Agreement nor any provision hereof shall be
amended or waived to the detriment of Daly vis-à-vis Silicon Valley Internet Capital, LLC
(“SVIC”) or an SVIC Affiliate, without the prior written consent of Daly (“SVIC
Affiliate” is herein defined as a person or entity controlled by, controlling or under common
control with, SVIC or a person or entity controlled by, controlling or under common control with,
such person or entity. For the avoidance of all doubt, Robert Shaw is not an SVIC Affiliate). For
the avoidance of all doubt, an amendment of this Agreement or any provision hereof that maintains
the registration rights as currently provided to SVIC and Daly shall not be considered to be to the
detriment of Daly vis-à-vis SVIC.

     3.8 Subsequent Investors. At such time as the Company shall duly and validly issue
Series C Shares (or options, warrants or other rights to acquire Series C Shares) to one or more
third parties approved by the Board of Directors of the Company (a “Series C Holder”), each
such Series C Holder may become a party to this Agreement without the need for any additional
consent, approval, signature or other action of any party hereto by executing a counterpart
signature page to this Agreement, in the form attached hereto as Exhibit A, indicating such
Series C Holder’s agreement to become bound by the provisions hereof and to accept the rights and
obligations hereunder (upon the Company’s receipt of such signature page, such person shall be a
“Subsequent Investor”). A Subsequent Investor shall
be deemed an “Investor” under this
Agreement for any and all purposes and shall be added to Schedule A hereto as such.

     3.9 Severability. If one or more provisions of this Agreement are held to be
unenforceable under applicable law, such provision(s) shall be excluded from this Agreement and the
balance of the Agreement shall be interpreted as if such provision(s) were so excluded and shall be
enforceable in accordance with its terms.

     3.10 Aggregation of Stock. All shares of Registrable Securities held or acquired by
affiliated entities (including, without limitation, affiliated venture capital funds) or persons
shall be aggregated together for the purpose of determining the availability of any rights under
this Agreement.

17

 

     IN WITNESS WHEREOF, the parties have executed this Investors’ Rights Agreement as of the date
first above written.

      

	 	 	 	 	 
	ARCSIGHT, INC.	 	 
	 
	 	 	 	 
	By:
	 	/s/ Robert Shaw 	 	 
	 

	 	 	 	 
	Name:

	 	Robert Shaw	 	 
	Title:

	 	President and Chief Executive Officer	 	 
	 
	 	 	 	 
	Address:

	 	 1309 South Mary Avenue	 	 
	 

	 	Sunnyvale, CA 94087	 	 
	Phone:

	 	(408) 328-5500	 	 
	Fax:

	 	(408) 749-8760
	 	 

 

 

	 	 	 	 	 	 	 
	 	 	TED SCHLEIN	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	/s/ Ted Schlein 	 	 
	 

	 	Name:	 	 

Ted Schlein
	 	 
	 
	 	 	 	 	 	 
	 

	 	Address:
	 	2750 Sand Hill Road	 	 
	 

	 	 	 	Menlo Park, CA 94025	 	 
	 

	 	Phone:
	 	(650) 233-2750	 	 
	 

	 	Fax:
	 	(650) 233-0300	 	 

 

 

	 	 	 	 	 	 	 
	 	 	INVESTOR	 	 
	 
	 	 	 	 	 	 
	 	 	KPCB HOLDINGS, INC., as nominee	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	/s/ Ted Schlein 	 	 
	 

	 	Title:	 	 

its Senior Vice President
	 	 
	 
	 	 	 	 	 	 
	 

	 	Address:
	 	2750 Sand Hill Road	 	 
	 

	 	 	 	Menlo Park, CA 94025	 	 
	 

	 	Phone:
	 	(650) 233-2750	 	 
	 

	 	Fax:
	 	(650) 233-0300	 	 

 

 

	 	 	 	 	 	 	 
	 	 	INVESTOR	 	 
	 
	 	 	 	 	 	 
	 	 	INTEGRAL CAPITAL PARTNERS V, L.P.	 	 
	 
	 	 	 	 	 	 
	 	 	By Integral Capital Management V, LLC

its General Partner	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	/s/ Pamela K. Hagenah 	 	 
	 

	 	Name:	 	 

Pamela K. Hagenah
	 	 
	 

	 	Title:	 	a Manager	 	 
	 
	 	 	 	 	 	 
	 	 	INTEGRAL CAPITAL PARTNERS V SIDE FUND, L.P.	 	 
	 
	 	 	 	 	 	 
	 	 	By ICP Management V, LLC its General Partner	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	/s/ Pamela K. Hagenah 	 	 
	 

	 	 	 	 	 	 
	 

	 	Name:	 	Pamela K. Hagenah	 	 
	 

	 	Title:	 	a Manager	 	 
	 
	 	 	 	 	 	 
	 	 	INTEGRAL CAPITAL PARTNERS V SIDE FUND SLP, LLC	 	 
	 
	 	 	 	 	 	 
	 	 	By ICP Management V, LLC its Manager	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	/s/ Pamela K. Hagenah 	 	 
	 

	 	 	 	 	 	 
	 

	 	Name:	 	Pamela K. Hagenah	 	 
	 

	 	Title:	 	a Manager	 	 
	 
	 	 	 	 	 	 
	 

	 	Address:
	 	2750 Sand Hill Road	 	 
	 

	 	 	 	Menlo Park, CA 94025	 	 
	 

	 	Phone:
	 	(650) 233-0360	 	 
	 

	 	Fax:
	 	(650) 233-0366	 	 

 

 

	 	 	 	 	 	 	 
	 	 	INVESTOR	 	 
	 
	 	 	 	 	 	 
	 	 	SILICON VALLEY INTERNET CAPITAL, LLC	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	/s/ Alexander F. Hern 	 	 
	 

	 	Name:	 	 

Alexander F. Hern
	 	 
	 

	 	Title:	 	Executive Vice President	 	 
	 
	 	 	 	 	 	 
	 

	 	Address:
	 	301 University Avenue	 	 
	 

	 	
	 	Palo Alto, CA 94301
	 	 
	 

	 	Phone:
	 	
(650) 289-5600	 	 
	 

	 	Fax:
	 	(650) 324-1999	 	 

 

 

	 	 	 	 	 	 	 
	 	 	INVESTOR	 	 
	 
	 	 	 	 	 	 
	 	 	INSTITUTIONAL VENTURE PARTNERS X, L.P.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	/s/ Norman A. Fogelsong 	 	 
	 

	 	Name:	 	 

Norman A. Fogelsong
	 	 
	 
	 	Title:	 	Managing Director 	 	 
	 
	 	 	 	 	 	 
	 

	 	Address:
	 	c/o Institutional Venture Partners	 	 
	 

	 	 	 	3000 Sand Hill Road	 	 
	 

	 	 	 	Building Two, Suite 290	 	 
	 

	 	 	 	Menlo Park, CA 94027	 	 
	 
	 	 	 	 	 	 
	 	 	INVESTOR	 	 
	 
	 	 	 	 	 	 
	 	 	INSTITUTIONAL VENTURE PARTNERS X, GmbH &
Co. Beteiligungs KG.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	/s/ Norman A. Fogelsong 	 	 
	 

	 	Name:	 	 

Norman A. Fogelsong
	 	 
	 

	 	Title:	 	Managing Director
	 	 
	 
	 	 	 	 	 	 
	 

	 	Address:
	 	c/o Institutional Venture Partners	 	 
	 

	 	 	 	3000 Sand Hill Road	 	 
	 

	 	 	 	Building Two, Suite 290	 	 
	 

	 	 	 	Menlo Park, CA 94027	 	 

 

 

	 	 	 	 	 	 	 
	 	 	INVESTOR	 	 
	 
	 	 	 	 	 	 
	 	 	PRESIDIO VENTURE PARTNERS LLC	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	/s/ Kazuyuki Inoue 	 	 
	 

	 	Name:	 	 

Kazuyuki Inoue
	 	 
	 

	 	Title:	 	President and Chief Executive Officer	 	 
	 
	 	 	 	 	 	 
	 

	 	Address:
	 	5150 El Camino Real, Suite C31	 	 
	 

	 	 	 	Los Altos, CA 94022	 	 
	 

	 	Phone:
	 	(650) 528-5172	 	 
	 

	 	Fax:
	 	(650) 938-5176	 	 

 

 

	 	 	 	 	 	 	 
	 	 	INVESTOR	 	 
	 
	 	 	 	 	 	 
	 	 	SUMITOMO CORPORATION	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	/s/ Yoshio Osawa 	 	 
	 

	 	Name:	 	 

Yoshio Osawa
	 	 
	 

	 	Title:	 	General Manager	 	 
	 

	 	 	 	Network Systems Department	 	 
	 
	 	 	 	 	 	 
	 

	 	Address:
	 	1-8-11 Harumi	 	 
	 

	 	 	 	Chuo-ku, Tokyo 104-8610	 	 
	 

	 	Phone:
	 	81-3-5166-4654	 	 
	 

	 	Fax:
	 	81-3-5166-6427	 	 

 

 

	 	 	 	 	 	 	 
	 	 	INVESTOR	 	 
	 
	 	 	 	 	 	 
	 	 	G&H PARTNERS	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	/s/ Scott F. Armienti	 	 
	 

	 	 	 	 

	 	 
	 
	 	 	 	 	 	 
	 

	 	Address:
	 	155 Constitution Drive	 	 
	 

	 	 	 	Menlo Park, CA 94025	 	 
	 

	 	Phone:
	 	(650) 321-2400	 	 
	 

	 	Fax:
	 	(650) 321-2800	 	 

 

 

SCHEDULE A

LIST OF INVESTORS

KPCB Holdings, Inc., as nominee

Integral Capital Partners V, L.P.

Integral Capital Partners V Side Fund, L.P.

Integral Capital Partners V Side Fund SLP, LLC

Silicon Valley Internet Capital, LLC

SVIC Investors I, LLC

Alexander Enterprise Holdings Corp.

Institutional Venture Partners X, L.P.

Institutional Venture Partners X, GmbH & Co. Beteiligungs KG

Presidio Venture Partners LLC

Sumitomo Corporation

G&H Partners

 

 

Exhibit A

Counterpart Signature Page

[See next page.]

 

 

     IN WITNESS WHEREOF, in connection with the undersigned’s purchase of shares of Series C
Preferred Stock of the Company (or options, warrants or other rights to acquire the same) the
undersigned has executed this counterpart signature page to the Amended and Restated Investors’
Rights Agreement of ArcSight, Inc. dated October 24, 2002 (the “Agreement”) pursuant to
Section 3.8 of the Agreement as of the date written below. The undersigned hereby acknowledges and
agrees to be bound by the provisions of the Agreement and to accept the rights and obligations
thereunder.

	 	 	 	 	 	 	 
	Dated: November 1, 2002	 	SUBSEQUENT INVESTOR	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	/s/ Gilman G. Louie	 	 
	 

	 	Name:	 	 

Gilman G. Louie for In-Q-Tel, Inc.
	 	 
	 

	 	Title:	 	Chief Executive Officer	 	 
	 
	 	 	 	 	 	 
	 

	 	Address:
	 	In-Q-Tel, Inc.	 	 
	 

	 	 	 	1000 Wilson Boulevard, Suite 2900	 	 
	 

	 	 	 	Arlington, VA 22209exv10w2

 

Exhibit 10.2

ARCSIGHT, INC.

2000 STOCK INCENTIVE PLAN

     The Plan was originally adopted by the Board and approved by the shareholders on May 25, 2000,
and is effective as of that date. This document is an amendment and restatement of that earlier
plan document and is generally effective with respect to all Options or Restricted Shares granted
on or after November 15, 2000. Capitalized terms are defined in Article 14.

     1. ESTABLISHMENT AND PURPOSE.

     The 2000 Stock Incentive Plan is established to attract, retain and reward persons providing
services to the Company and any successor corporation, to (a) encourage Participants to focus on
critical long-range objectives, (b) encourage the attraction and retention of Company employees,
and (c) link Participants directly to shareholder interests through increased stock ownership. The
Plan provides for awards of ISOs, NSOs and Restricted Shares to eligible individuals.

     2. ADMINISTRATION.

     The Board shall administer the Plan. The Board shall have all powers and discretion necessary
or appropriate to administer the Plan including, but not limited to the power to: (a) select the
Participants under the Plan; (b) determine the type, number, vesting requirements and other
features and conditions of Awards; (c) interpret the Plan; (d) resolve disputed issues of fact; and
(e) make all other decisions relating to the operation of the
Plan. The Board may adopt such rules
or guidelines, as it deems appropriate to implement the Plan. The Board’s determinations under the
Plan shall be final and binding on all persons. No member of the Board shall be liable for any
action or decision made in good faith in connection with the exercise of the Board’s duties under
the Plan. The Board, in its sole discretion and on such terms and conditions as it may provide,
may delegate all or any part of its authority and powers under the Plan to one or more Directors or
officers of the Company.

     3. AGREEMENTS.

     All Awards shall be evidenced by an Agreement signed by the Company and the Participant. Each
Agreement shall identify the type of Award and if an Award includes Options, shall designate the
Options as either ISOs or NSOs. Each Award shall be subject to the terms and conditions of the
Plan and to such other terms and conditions as may be established by the Board in the Agreements.
Determinations by the Board under the Plan, including, without limitation, determinations of
Participants, the form, amount and timing of Awards, the terms and provisions of Awards and the
Agreements, need not be uniform and may be made selectively among Participants who receive or are
eligible to receive Awards, whether or not such Participants are similarly situated.

     4. SHARES AVAILABLE FOR GRANTS.

          4.1 Basic Limitation. Shares issued pursuant to the Plan shall be authorized but unissued
shares or treasury shares. Subject to adjustment pursuant to Section 4.2, the

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aggregate number of Shares that may be issued under Awards shall be 11,200,000 Shares. If an
Option expires, is surrendered, or becomes unexercisable without
having been exercised in full, or
if any unissued Shares are retained by the Company upon exercise of an Option in order to satisfy
the exercise price for such Option or any withholding taxes due with respect to such exercise, the
unissued or retained Shares shall become available for future grant under the Plan. If Restricted
Shares are forfeited, such Shares shall also become available for
future grant under the Plan.
Prior to the adoption of the Plan, the Company had awarded Restricted Shares to certain
individuals. For purposes of calculating the number of Shares that may be issued under the Plan,
those Restricted Shares shall reduce the number of Shares that may be issued under the Plan, and
any of those Restricted Shares that are forfeited or terminated for any other reason before being
exercised shall again become available for awards under the Plan.

          4.2 Adjustments. In the event of a reorganization, recapitalization, stock split, stock
dividend, spin-off, combination of Shares, merger, consolidation, rights offering, or any other
increase or decrease in the number of Shares effected without the receipt of consideration by the
Company, the Board shall make such adjustment, if any, as it may deem appropriate in the number and
kind of Shares authorized by the Plan, in the number of Shares covered by Awards and the Exercise
Price of Options.

     5. ELIGIBILITY.

     Subject to the terms and provisions of the Plan, Awards may be granted to Employees,
Consultants, and Directors at any time as determined by the Board in its sole discretion. For
purposes of the foregoing sentence, Employees and Consultants shall include prospective employees
or consultants to whom Awards other than ISOs are granted in connection with written offers of
employment or engagement of services, respectively, with the Company; provided that no Award
granted to a prospective employee or consultant may be exercised prior to the commencement of
employment or services with the Company. The Board may grant ISOs, NSOs, Restricted Shares or any
combination of them. The Company does not represent or warrant that an option intended to be an
ISO qualifies as such. Eligible persons may receive more than one Award.

     6. TERMS OF OPTIONS.

     Options granted under the Plan shall be subject to the following terms
and conditions.

          6.1 Exercise Price. The Exercise Price for an Option shall equal or exceed the Fair Market
Value on the Grant Date. The Exercise Price of an Option granted to a Ten Percent Owner shall not
be less than 110 percent of the Fair Market Value on the Grant Date.

          6.2 Termination. Each Option shall terminate in accordance with this section.

               (a) Expiration. Unless terminated sooner in accordance with the remaining provisions of this
section, each Option shall expire either ten (10) years after the Grant Date or after a shorter
term as may be fixed by the Board.

               (b) Death
or Disability. If a Participant’s Service ends because the Participant dies or
becomes disabled while in Service with the Company, the Participant’s estate

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or representative shall have the right for a period of twelve (12) months after the date of
death or disability to exercise the Participant’s Options to the extent the Participant was
entitled to exercise the Options on that date, provided the date of exercise is in no event after
the expiration of the term of the Options. To the extent the Options are not exercised within this
period, they will terminate.

               (c) Resignation
or Termination For Reasons Other than Cause. If a Participant voluntarily
resigns from the Company or is terminated by the Company for reasons other than Cause, unvested
Options shall be forfeited on the termination date and the Participant shall have the right for a
period of thirty (30) days after the date of resignation or termination to exercise vested Options,
provided the date of exercise is in no event after the expiration of the term of the Options. To
the extent the Options are not exercised within this period, they will terminate.

               (d) Termination
for Cause. If lithe Company terminates a Participant’s Service for Cause,
vested and unvested Options, to the extent not previously exercised, shall immediately terminate
and no longer be exercisable as of the date of termination.

          6.3 Exercisability. In the Board’s discretion, Options may be exercisable immediately upon
grant or the right to exercise Options may accrue in installments based upon the passage of time or
the attainment of performance goals, which need not be equal, at a rate which shall be set forth in
the Agreement and shall provide for a right to exercise that is at least 20% per year over five
years from the Grant Date. In addition, the Board may, at any time, and from time to time,
determine that Options shall, notwithstanding any vesting period or deferral of the right to
exercise otherwise applicable, be immediately exercisable, effective on and after a date declared
by the Board to be an advanced exercise date.

          6.4 Payment. To the extent that Options are exercised, the aggregate Exercise Price shall be
paid in full upon exercise. An Agreement may provide for payment in the form of: (i) cash; (ii)
check; (iii) delivery of a promissory note with such recourse, interest, security, and redemption
provisions as the Board in its discretion determines as appropriate; (iv) surrender of Shares
having a Fair Market Value on the date of surrender not less than the aggregate Exercise Price of
the Shares being acquired; or (v) any combination of the foregoing methods of payment. Unless
otherwise provided by the Board, Options may not be exercised by surrender of Shares unless such
Shares either have been owned by the Participant for more than six (6) months or were not acquired,
directly or indirectly, from the Company.

          6.5 Exercise Procedure. An Option shall be deemed exercised when the Company receives: (i) a
signed written exercise notice (in accordance with the Agreement) from the person entitled to
exercise the Option, and (ii) full payment for the Shares with respect to which the Option is
exercised. Full payment may consist of any consideration and method of payment authorized by the
Administrator and permitted by the Agreement and the Plan. Shares issued upon exercise of an
Option shall be issued in the name of the Participant or, if requested by the Participant, in the
name of the Participant and his or her spouse. The Company shall issue (or cause to be issued)
such Shares promptly after the Option is exercised. No adjustment will be made for a dividend or
other right for which the record date is prior to the date the Shares are issued, except as
provided in Section 4 of the Plan.

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          6.6 Restrictions on Transfer of Shares and Minimum Vesting. Except as otherwise specified in
an Agreement, any Shares issued upon exercise of Options shall be subject to the Company’s right of
repurchase and right of first refusal and an agreement may provide that the Company’s right of
repurchase and right of first refusal shall lapse upon the occurrence of a Change of Control or an
IPO. If Options include a provision whereby the Participant may elect at any time while an
Employee, Director or Consultant to exercise the Options prior to their vesting, the Shares
acquired with respect to unvested Options shall be subject to a repurchase right in favor of the
Company, with the repurchase price per Share to be equal to the original Exercise Price,; provided,
however, that (i) the right to repurchase at the original Exercise Price shall lapse at a minimum
rate of 20 percent per year over five (5) years from the date the Options were granted, and (ii)
such right shall be exercisable only within (A) the ninety (90) day period following the
termination of Service, or (B) such longer period as may be agreed to by the Company and the
Participant (for example, for purposes of satisfying the requirements of Section 1202(c)(3) of the
Code (regarding “qualified small business stock”)), and (iii) such right shall be exercisable only
for cash or cancellation of purchase money indebtedness for the Shares. Shares issued upon
exercise of Options may be subject to such other special forfeiture conditions, rights of
repurchase, rights of first refusal and other transfer restrictions as the Board of Directors may
determine. Such restrictions shall be set forth in the applicable Agreement and shall apply in
addition to any restrictions that may apply to holders of Shares generally.

          6.7 Modification, Extension, and Renewal. The Board shall have the power to modify, extend,
or renew outstanding options and authorize the grant of new options in substitution therefor,
provided that any such action may not have the effect of altering or impairing any rights or
obligations of any option previously granted without the consent of the Participant.

          6.8 Cancellation and Rescission Provision. A Participant shall neither render services for
any organization or business that is or becomes competitive with the Company, nor engage directly
or indirectly in any organization or business which is or becomes otherwise prejudicial to or in
conflict with the interests of the Company, as determined by the Board. If a Participant fails to
comply with the previous sentence prior to or during a six-month period after any exercise of an
Option, the exercise shall be cancelled and rescinded. The Board shall notify the Participant in
writing of any such cancellation and rescission within two years after such exercise. Within ten
days after receiving such notice from the Board, the Participant shall pay to the Company the
amount of any gain realized or payment received as a result of the cancelled and rescinded exercise
of the Option.

          6.9
Transferability. Options granted under the Plan are not transferable and shall be
exercisable during a Participant’s lifetime only by the Participant; provided, however, that a NSO
may be transferred upon the approval of the Administrator (in its sole discretion) by appropriate
instrument to an inter vivos or testamentary trust in which the option is to be passed to the
Participant’s beneficiaries upon the Participant’s death or by gift to the Participant’s immediate
family (consisting of the Participant’s child, stepchild, grandchild, parent, stepparent,
grandparent, spouse, sibling, mother-in-law, father-in-law, son-in-law, daughter-in-law,
brother-in-law, or sister-in-law, and shall include adoptive relationships). No option or interest
therein may be otherwise transferred, assigned, pledged, or hypothecated by a Participant, whether
by operation of law or otherwise, or be made subject to execution, attachment, or similar process.

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Any such purported assignment, sale, transfer, delegation, or other disposition shall be null
and void.

          7. SPECIAL TERMS OF INCENTIVE STOCK OPTIONS. 

          Notwithstanding any other provision of the Plan,
the terms and conditions set forth in this Section 7 shall apply to all Options granted under the
Plan that are intended to be ISOs. Any Option the terms of which provide that it shall be treated
as an NSO shall not be subject to such terms and conditions.

               7.1 Employees. ISOs may only be granted to Employees. If an ISO is exercised more than three
(3) months after the date on which the Participant ceases to be an employee (other than by reason
of death or a permanent and total disability as defined in Code § 22(e)(3)), the Option will be
treated as an NSO, and not an ISO.

               7.2 Exercise Price. The Exercise Price of an ISO granted to a Ten Percent Owner shall not be
less than 110 percent of the Fair Market Value on the Grant Date. The Exercise Price of an ISO
granted to any other Employee shall not be less than the Fair Market Value on the Grant Date.

               7.3 Expiration for Ten Percent Owners. An ISO granted to a Ten Percent Owner shall expire
either five (5) years after the date on which it was granted or after a shorter term as may be
fixed by the Board.

               7.4 One Hundred Thousand Dollars ($100,000) Limitation. To the extent that the aggregate Fair
Market Value (determined in accordance with this paragraph) of the Shares subject to ISOs
(determined without regard to this paragraph) held by a Participant under all plans of the Company
or its Affiliates that become exercisable for the first time by a Participant during any calendar
year exceeds One Hundred Thousand Dollars ($100,000), the most recently granted Options shall be
treated as NSOs to the extent of the excess Shares. For purposes of this paragraph, all Options
shall be taken into account in the order in which they were granted, and the Fair Market Value of
the Shares subject to such Options shall be determined as of the Grant Date with respect to each
Option.

          8. RESTRICTED
SHARES. 

          The Board may grant Restricted Shares under the Plan, subject to such
restrictions, conditions and other terms and for such consideration as the Board may determine in
addition to those set forth in this Section.

               8.1
Restrictions. At the time a grant of Restricted Shares is made, the Board shall establish
the Restricted Period applicable to such Restricted Shares. Each grant of Restricted Shares may be
subject to a different Restricted Period. The Board may, in its sole discretion, at the time a
grant is made, prescribe restrictions in addition to or other than the expiration of the Restricted
Period, including the satisfaction of corporate or individual performance objectives, which shall
be applicable to all or any portion of the Restricted Shares. The Board may also, in its sole
discretion, shorten or terminate the Restricted Period or waive any other restrictions applicable
to all or a portion of such Restricted Shares. None of the Restricted Shares may be sold,
transferred, assigned, pledged or otherwise encumbered or disposed of prior to the date on which
such the Restricted Period expires and any other restrictions have lapsed or been satisfied.

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          8.2 Restricted Shares Certificates. As soon as practicable following an Award of Restricted
Shares, the Company shall issue, in the name of the Participant, a stock certificate with proper
legends representing the total number of Restricted Shares granted to the Participant. The
Secretary of the Company shall hold such certificates, properly endorsed for transfer, for the
Participant’s benefit until such time as the Restricted Shares are forfeited to the Company or
until the Restricted Shares vest. In lieu of the foregoing, Restricted Shares awarded to a
Participant may be held under the Participant’s name in a book entry account maintained by or on
behalf of the Company.

          8.3 Rights of Holders of Restricted Shares. Except as otherwise determined by the Board
either at the time Restricted Shares are awarded or at any time thereafter prior to the lapse of
the restrictions, holders of Restricted Shares shall have the right to vote such shares or the
right to receive any dividends with respect to such shares. All distributions, if any, received by
an employee or consultant with respect to Restricted Shares as a result of any stock split-up,
stock distribution, combination of shares, or other similar transaction shall be subject to the
restrictions of this Section.

          8.4 Termination of Service. Any Restricted Shares shall be forfeited if the Participant
terminates Service for reasons other than death or disability prior to the expiration or
termination of the Restricted Period and the satisfaction of any other conditions applicable to
such Restricted Shares. Upon such forfeiture, the Secretary of the Company shall either cancel or
retain in its treasury the Restricted Shares that are forfeited to the Company. Upon the death of
a Participant prior to his termination of Service, or upon a Participant’s termination of Service
as a result of disability, all Restricted Shares previously awarded to such Participant which have
not previously vested shall be forfeited unless the Board in its sole discretion shall determine
otherwise.

          8.5 Lapse of Restrictions. All restrictions imposed on the Restricted Shares shall lapse upon
the expiration of the Restriction Period, and satisfaction of other requirements, if any, specified
in the Agreement. The grantee shall then be entitled to have the legend removed from the
certificates.

          8.6 Delivery of Restricted Shares. Subject to the provisions of this Section, at such time as
the Participant shall become vested in his Restricted Shares, the restrictions applicable to the
Restricted Shares shall lapse and a stock certificate for the number of Restricted Shares with
respect to which the restrictions have lapsed shall be delivered, free of all such restrictions, to
the Participant or the Participant’s beneficiary or estate, as the case may be.

     9. CORPORATE
TRANSACTION. 

     An Agreement may provide that Options or Restricted Shares shall
become fully or partially vested and exercisable upon a Change Of
Control, IPO or other corporate
transaction, or an Agreement may provide for the assumption of Options or substitution of new
options by the successor entity and the substitution of new restricted shares following a Change Of
Control or corporate transaction.

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     10. TERM OF THE PLAN; AMENDMENT TERMINATION.

          10.1 Term of the Plan. The Plan was effective as of May 25, 2000, the date of its adoption by
the Board and approval by the shareholders. The Plan shall remain in effect until May 24, 2010,
unless terminated sooner in accordance with Section 10.2.

          10.2 Amendment or Termination. The Board may, at any time and for any reason, amend or
terminate the Plan. An amendment of the Plan shall be subject to the approval of the Company’s
shareholders only to the extent required by applicable laws, regulations or rules. No Awards shall
be granted under the Plan after the termination thereof. The termination of the Plan, or any
amendment thereof, shall not affect any Award previously granted under the Plan.

     11. REGULATORY APPROVAL, REGISTRATION, AND INVESTMENT PURPOSE.

          Shares shall not be issued
under the Plan unless the issuance and delivery of such Shares comply with (or are exempt from) all
applicable requirements of law, including (without limitation) the Securities Act of 1933, as
amended, the rules and regulations promulgated thereunder, state securities laws and regulations,
and the regulations of any stock exchange or other securities market on which the Company’s
securities may then be traded. Unless the Shares shall have been registered under the Securities
Act of 1933, Awards under the Plan shall be granted on the condition that the Participant: (1)
agree that purchases or grant of Shares thereunder shall be for investment and not with a view to
resale or distribution of such Shares; and (ii) give such other written representations as the
Board may require. As a condition to the issuance of Restricted Shares or Shares purchased upon
the exercise of any Options granted pursuant to the Plan which are not registered under such Act,
the Participant, his legal representative, executor, administrator, heir or legatee, as the case
may be, receiving such Shares shall deliver to the Company a writing, in form and substance
satisfactory to the Company and its counsel, implementing such agreement. The Plan is intended to
satisfy all requirements of Rule 701 under the Securities Act of 1933 and California Corporations
Code § 25102(o) with respect to offers and sales that would otherwise violate Federal and
California securities law (including the requirement that Optionees receive financial statements at
least annually), and any such requirement is hereby incorporated into the Plan to effect that
intent.

     12. CLAIMS; ARBITRATION.

          12.1 Claims. Any individual who makes a claim for benefits under the Plan shall file the
claim in writing with the Board. Written notice of the disposition of the claim shall be delivered
to the claimant within 30 days after filing. If the claim is denied, the reasons shall be set
forth in a statement delivered to the claimant. Thereafter the claimant may request arbitration in
accordance with subsection (b). The filing of a claim in accordance with this section shall be a
condition precedent to the prosecution of any dispute.

          12.2 Arbitration. Any dispute between the Company and an individual claiming a benefit under
the Plan which is not resolved between the Company and the claimant shall, if either party wishes
to further pursue resolution of the dispute, be submitted to arbitration in accordance with the
rules of Commercial Arbitration of the American Arbitration Association. Any such arbitration
shall take place in San Francisco. The arbitrator shall be a person

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experienced in employment and compensation of corporate business executives who is mutually
acceptable to the Company and the claimant. If an arbitrator cannot be agreed upon within 15 days
after a dispute is submitted to arbitration, the parties shall each select one representative who
is not and has never been associated with the Company and who is not related to the claimant, and
these two representatives shall choose a neutral arbitrator with the qualifications described
above. If the representatives cannot reach agreement, one arbitrator with the qualifications
described above shall be selected by the San Francisco office of the American Arbitration
Association. All actions and proceedings under this Section shall be kept confidential and neither
party shall divulge any part thereof to third parties without the prior written consent of the
other party. Each party to an arbitration under this section shall pay his or her own expenses,
including but not limited to, fees of counsel, and each of the parties shall bear one-half of the
fees and costs of the arbitrators.

     13. MISCELLANEOUS.

          13.1 Employment Rights. Neither the Plan nor any Award granted under the Plan shall be deemed
to give any individual a right to remain an Employee, Consultant or Director of the Company or an
Affiliate. The Company and its Affiliates reserve the right to terminate the service of any
Employee, Consultant or Director at any time, and for any reason, subject to applicable laws, the
Company’s bylaws and a written employment agreement (if any).

          13.2 Shareholders’ Rights. Except as otherwise provided in an Agreement, a Participant shall
have no dividend rights, voting rights or other rights as a shareholder with respect to any Shares
covered by Options prior to the issuance of such Shares.

          13.3 Withholding. To the extent required by applicable federal, state, local or foreign law,
a Participant or his or her successor should make arrangements satisfactory to the Company for the
satisfaction of any withholding tax obligations that arise in connection with the Plan. The
Company shall not be required to issue any Shares or make any cash payment under the Plan until
such obligations are satisfied. The Board may permit a Participant to satisfy all or part of his
or her withholding or income tax obligations by having the Company withhold all or a portion of any
Shares that otherwise would be issued to him or her or by surrendering all or a portion of any
Shares that he or she previously acquired. Such Shares shall be valued at their Fair Market Value
on the date when taxes otherwise would be withheld in cash. Any payment of taxes by assigning
Shares to the Company may be subject to restrictions, including any restrictions required by rules
of the Securities and Exchange Commission.

          13.4 Governing Law. The Plan and all Agreements shall be construed in accordance with and
governed by the laws of the State of California.

14. DEFINITIONS.

     “Affiliate” means any “parent corporation” or “subsidiary corporation,” as such terms are
defined in Code Sections 424(e) and 424(f).

     “Agreement” means the written agreement setting forth the terms and provisions applicable to
each Option granted under the Plan.

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     “Award” means, individually or collectively, a grant under this Plan, including any NSOs, ISOs
or Restricted Shares.

     “Board” means the Company’s Board of Directors.

     “Cause” means that the Participant is determined by the Board reasonably and in good faith to
have: (i) committed an act of embezzlement, fraud, dishonesty, or breach of fiduciary duty to the
Company; (ii) deliberately and repeatedly violated the rules of the Company or the valid
instructions of the Board or an authorized officer of the Company; (iii) made any unauthorized
disclosure of any of the secrets or confidential information of the Company; (iv) induced any
client or customer of the Company to break any contract with the Company; or (v) engaged in any
conduct that could reasonably be expected to result in loss, damage or injury to the Company.

     “Change of Control” means the occurrence of any of the following events: (i) the acquisition,
other than directly from the Company, by any person (deemed to have the same meaning as when used
in Section 13 of the Securities Exchange Act of 1934) of more than fifty percent (50%) of the
Company’s outstanding shares entitled to vote for Directors; (ii) a merger, consolidation or other
combination of the Company with one or more other corporations which results in more than fifty
percent (50%) of the voting stock of the merged, consolidated or combined corporation being held by
former shareholders of the corporations (other than the Company) which are parties to such merger,
consolidation or other combination; (iii) during any period of 24 months, individuals who, at the
beginning of such period constitute the Board cease to constitute the majority of the Board (unless
the election or nomination of the new members was approved by the majority of the Board of
Directors as constituted at the beginning of the 24 month period); or (iv) the liquidation of the
Company or a plan or agreement for the sale or other disposition of all or substantially all of the
Company’s assets.

     “Code” means
the Internal Revenue Code of 1986, as amended.

     “Company” means ArcSight, Inc., a
Delaware corporation.

     “Consultant” means an individual performing services for the Company or an Affiliate and who
is not an Employee or a Director.

     “Director” means a member of the Board.

     “Employee” means any key employee, including founders, of the Company or an Affiliate.

     “Exercise Price” means the amount for which one Share may be purchased upon exercise of such
Option, as specified in the applicable Agreement.

     “Fair Market Value” means the market price of one Share, determined by the Board in good faith
on such basis as it deems appropriate, in a manner consistent with California Code of Regulations,
Title 10 §260.140.50.

     “Grant Date” means, with respect to an Option, the date on which the Board makes the
determination to grant such Option, or such other date as is determined by the Board. Within a

9

 

reasonable time thereafter, the Company will execute and deliver an Agreement to the
Participant.

     “IPO” means a financial closing of an underwritten public offering of common or preferred
stock of the Company pursuant to an effective registration statement under the Securities Act of
1933, as amended.

     “ISO” means an incentive stock option described in Code Section 422.

     “NSO” means an employee
stock option not described in Code Section 422.

     “Option” means an ISO or NSO granted under the
Plan.

     “Participant” means an individual or estate that holds an Award. If a NSO is assigned
pursuant to Section 6.9, the term “Participant” shall mean the assignee when required by the
context.

     “Plan” means this ArcSight, Inc. 2000 Stock Incentive Plan, as it may be amended from time to
time.

     “Restricted Shares” means an Award granted to a Participant pursuant to Section 8.

     “Restriction Period” means the period during which the transfer of Restricted Shares is
limited in some way (based on the passage of time, the achievement of performance goals, or upon
the occurrence of other events as determined by the Board, in its discretion), and the Shares are
subject to a substantial risk of forfeiture.

     “Service” means the Participant’s employment or service with the Company or an Affiliate,
whether as an Employee, Director or Consultant. The Participant’s Service shall not be deemed to
have terminated merely because of a change in the capacity in which the Participant renders service
to the Company or an Affiliate as an Employee. Consultant or Director or a change in the entity
for which the Participant renders such service, provided that there is no interruption or
termination of the Participant’s Service. For example, a change in status from an Employee of the
Company to a Consultant of an Affiliate or a Director of the Company will not constitute an
interruption of Service. The Board or the chief executive officer of the Company, in that party’s
sole discretion, may determine whether Service shall be considered interrupted in the case of any
leave of absence approved by that party, including sick leave, military leave or any other personal
leave. Subject to the foregoing, the Company, in its sole discretion, shall determine whether a
Participant’s Service has terminated and the effective date of such termination.

     “Share” means one share of the common stock of the Company.

     “Ten Percent Owner” means any Employee who is, on the Grant Date of an Option, the owner of
Shares (determined with application of ownership attribution rules of Code Section 424(d))
possessing more than 10 percent of the total combined voting power of all classes of stock of the
Company or any of its Affiliates.

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