Document:

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                                                                   EXHIBIT 10.13

                              PEGASUS SYSTEMS, INC.

                      SUPPLEMENTAL EMPLOYEE RETIREMENT PLAN

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                                TABLE OF CONTENTS
<TABLE>
<CAPTION>
ARTICLE I                  ESTABLISHMENT AND PURPOSE                       PAGE
<S>                     <C>                                                <C>
   1.1                  Establishment                                        1
   1.2                  Purpose                                              1

ARTICLE II                 DEFINITIONS AND CONSTRUCTION

   2.1                  Definitions                                          2
   2.2                  Construction                                         5

ARTICLE III                PARTICIPATION

   3.1                  Selection of Participants                            6

ARTICLE IV                 BENEFITS

   4.1                  Eligibility for Benefits                             7
   4.2                  Amount of Benefits                                   7
   4.3                  Form of Payment                                      8
   4.4                  Optional From of Payment                             8

ARTICLE V                  FUNDING AND OTHER MATTERS

   5.1                  Funding                                              9
   5.2                  Continued Employment                                 9
   5.3                  Restriction on Assignment                            9
   5.4                  Binding on Company, Participants and
                               Their Successors                              9
   5.5                  Governing Law                                        9
   5.6                  Severability                                         9

ARTICLE VI                 ADMINISTRATION

   6.1                  Administration                                       10
   6.2                  Finality of Determination                            10
   6.3                  Expenses                                             10
   6.4                  Indemnification and Exculpation                      10

ARTICLE VII                AMENDMENT AND TERMINATION
   7.1                  Amendment and Termination                            11
</TABLE>

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                              PEGASUS SYSTEMS, INC.

                      SUPPLEMENTAL EMPLOYEE RETIREMENT PLAN

                                    ARTICLE I

                            ESTABLISHMENT AND PURPOSE

         1.1 Establishment. Pegasus Systems, Inc. hereby establishes the PEGASUS
SYSTEMS, INC. SUPPLEMENTAL EMPLOYEE RETIREMENT PLAN, effective as of January 1,
2000.

         1.2 Purpose. The purpose of this Plan is to provide supplemental
retirement benefits to certain selected management employees of the Company on
the terms and conditions set forth herein.

                                       1
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                                   ARTICLE II

                          DEFINITIONS AND CONSTRUCTION

          2.1 Definitions. The following words and phrases shall have the
meaning set forth below unless a different meaning is plainly required by the
context:

               (a)  The term "ACCRUED BENEFIT" shall mean a Participant's
                    monthly retirement benefit equal to 3% of the Participant's
                    Final Average Compensation multiplied by the Participant's
                    Years of Service, not to exceed 60% of the Participant's
                    Final Average Compensation. However, the maximum benefit for
                    the Chief Executive Officer of the Company is 70% of Final
                    Average Compensation.

               (b)  The term "ACTUARIALLY EQUIVALENT" shall mean a benefit
                    differing in time, period, and/or manner of payment from a
                    specified benefit provided under this Plan, but having the
                    same value at the date of commencement of benefits when
                    computed using the 1994 GAM Static Male Table and an
                    interest rate of 8% compounded annually.

               (c)  The term "BENEFICIARY" shall mean the person or persons
                    designated by a Participant to receive payment of all or a
                    designated portion of the Participant's benefit payable
                    under this Plan in the event of the Participant's death. In
                    the event of the Participant's death, the Company shall make
                    benefit payments payable under this Plan to the
                    Participant's Beneficiary. Any payment made by the Company
                    to the Participant's Beneficiary in good faith shall fully
                    discharge the Company from its obligations with respect to
                    such payment, and the Company shall have no further
                    obligation to see to the application of any money so paid.

               (d)  The term "BENEFIT COMMENCEMENT DATE" shall mean the first
                    day a benefit is paid to a Participant under this Plan.

               (e)  The term "CAUSE " shall mean:

                    (i)  "cause" (or any corresponding term) as defined in the
                         employment agreement then in effect between the Company
                         and the Participant; or

                    (ii) If there is no employment agreement then in effect
                         between the Company and the Participant, a reason which
                         is based on the Participant's dishonest conduct, which
                         is materially injurious to the Company. For this
                         purpose, a determination of whether dishonest conduct
                         materially injurious to the Company has been committed
                         by the Participant shall be made by the Compensation
                         Committee in good faith only after a full investigation
                         of such alleged dishonest conduct and after an
                         opportunity has been given the Participant to present
                         the Participant's case to the

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                         Compensation Committee. The decision made by the
                         Compensation Committee shall be final and binding on
                         the Participant and other persons affected by such
                         decision.

               (f)  The term "COMPENSATION COMMITTEE" shall mean the
                    Compensation Committee of the board of directors of the
                    Company; provided, however, that during any period the
                    Compensation Committee is not constituted, the term shall
                    mean the board of directors of the Company.

               (g)  The term "CODE" shall mean the Internal Revenue Code of
                    1986, as amended.

               (h)  The term "COMPANY" shall mean Pegasus Systems, Inc., a
                    Delaware Corporation, its corporate successors, and the
                    surviving corporation resulting from any merger of Pegasus
                    Systems, Inc. with any other corporation or corporations.

               (i)  The term "COMPENSATION" shall mean the sum of a
                    Participant's base salary and bonus actually paid during a
                    calendar month.

               (j)  The term "DATE OF PARTICIPATION" shall mean the date the
                    Compensation Committee specifies as the first day an
                    Employee commences participation in the Plan.

               (k)  The term "DETERMINATION DATE" shall mean the date on which a
                    Participant ceases to be an Employee for any reason.

               (l)  The term "EARLY RETIREMENT " shall mean the termination of
                    the Participant's status as an Employee after the
                    Participant attains age fifty (50), provided such
                    termination is approved by the Compensation Committee as a
                    "retirement" for purposes of this Plan.

               (m)  The term "EFFECTIVE DATE" shall mean January 1, 2000.

               (n)  The term "EMPLOYEE" shall mean a common law employee of the
                    Company.

               (o)  The term "FINAL AVERAGE COMPENSATION" shall mean the highest
                    average monthly Compensation received by the Participant
                    from the Company during any period of thirty-six (36)
                    consecutive calendar months within the period of one hundred
                    and twenty (120) consecutive calendar months ending on the
                    Participant's Determination Date. If the Participant is an
                    Employee of the Company for less than thirty-six (36)
                    consecutive calendar months, the Participant's Final Average
                    Compensation shall be the average monthly Compensation
                    received by the Participant from the Company during the
                    Participant's period as an Employee ending on the
                    Participant's Determination Date.

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               (p)  The terms "NORMAL RETIREMENT" and "LATE RETIREMENT" shall
                    each mean the termination of the Participant's status as an
                    Employee after the Participant attains age sixty (60).

               (q)  The term "PARTICIPANT" shall mean an Employee who is
                    selected to participate in the Plan pursuant to Article III.

               (r)  The term "PLAN" shall mean the Pegasus Systems, Inc.
                    Supplemental Employee Retirement Plan as set forth herein,
                    as amended from time to time.

               (s)  The term "PLAN YEAR" shall mean the 12-month period
                    beginning on each January 1st and ending on the subsequent
                    December 31st.

               (t)  The term "TOTAL AND PERMANENT DISABILITY" shall mean:

                    (i)   The mental or physical disability, either occupational
                          or non-occupational in cause, which satisfies the
                          definition of "total and permanent disability" (or any
                          corresponding term) as set forth in the employment
                          agreement then in effect between the Company and the
                          Participant; or

                    (ii)  If there is no employment agreement then in effect
                          between the Company and the Participant or if the
                          employment agreement then in effect has no such
                          defined term or concept, the mental or physical
                          disability, either occupational or non-occupational in
                          cause, which satisfies the definition of "total and
                          permanent disability" (or any corresponding term) as
                          set forth in the principal long-term disability policy
                          or plan provided by the Company then covering the
                          Participant; or

                    (iii) If there is no such policy then covering the
                          Participant, the mental or physical disability which,
                          as determined by the Compensation Committee in good
                          faith upon receipt of and in reliance on sufficient
                          competent medical advice from one or more individuals
                          selected by the Compensation Committee who are
                          qualified to give professional medical advice, impairs
                          or is expected to impair the Participant's ability to
                          substantially perform the Participant's duties as an
                          Employee of the Company for a period of at least one
                          hundred eighty (180) consecutive days.

               (u)  The term "YEAR OF PARTICIPATION" shall mean the period of
                    time, computed to the nearest completed month, commencing on
                    the Participant's Date of Participation in the Plan and
                    ending on the Participant's Determination Date.

               (v)  The term "YEAR OF SERVICE" shall mean the period of time,
                    computed

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                    to the nearest completed month, commencing on the
                    Participant's date of hire as an Employee of the Company and
                    ending on the Participant's Determination Date.
                    Notwithstanding the preceding sentence, the Compensation
                    Committee may credit a Participant with additional full or
                    partial Years of Service for all or any period during which
                    the Participant rendered services for the Company in a
                    status other than as an Employee.

         2.2 Construction. Except when otherwise indicated by the context, the
masculine shall also include the feminine gender and the singular shall also
mean the plural.

                                       5
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                                   ARTICLE III

                                  PARTICIPATION

         3.1 Selection of Participants. Participation in the Plan shall be
limited to those select management Employees of the Company who are designated
as Participants by the Compensation Committee. No person shall have an automatic
right to be selected as a Participant.

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                                   ARTICLE IV

                                    BENEFITS

         4.1 Eligibility for Benefits. A Participant shall be eligible for a
benefit determined in accordance with the provisions of Section 4.2 if the
Participant's Determination Date occurs due to one of the following reasons:

               (a)  Normal Retirement or Late Retirement;

               (b)  Early Retirement;

               (c)  Death;

               (d)  Total and Permanent Disability; or

               (e)  If Paragraphs (a) through (d) do not apply, termination as
                    an Employee after the completion of (4) four Years of
                    Participation for any reason other than Cause.

         4.2 Amount of Benefits. The benefit payable to the Participant or the
Participant's Beneficiary under the Plan shall be determined as follows:

               (a)  Normal Retirement or Late Retirement. A monthly benefit
                    equal to the Participant's Accrued Benefit commencing on the
                    first day of the month following the Participant's
                    Determination Date.

               (b)  Early Retirement. A monthly benefit equal to the
                    Participant's Accrued Benefit commencing on the first day of
                    the month coinciding with or next following the
                    Participant's sixtieth (60th) birthday. Alternatively, the
                    Participant may, no later than six (6) months prior to the
                    Participant's Determination Date, elect to receive reduced
                    monthly payments commencing on the first (1st) day of any
                    month after the Participant's Determination Date. The
                    reduced benefit is equal to the Participant's Accrued
                    Benefit reduced by 4% for each year (pro-rated for partial
                    years) between the date of the Participant's first benefit
                    payment and the first month coinciding with or next
                    following the Participant's sixtieth (60th) birthday.

               (c)  Death. A single lump sum payment that is Actuarially
                    Equivalent to the Participant's Accrued Benefit.

               (d)  Total and Permanent Disability. A monthly benefit commencing
                    on the first (1st) day of the month coinciding with or next
                    following the

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                    Participant's sixtieth (60th) birthday. The amount of the
                    benefit is the Participant's Accrued Benefit determined
                    using the Years of Service the Participant would have at age
                    sixty (60) and the Participant's Final Average Compensation
                    at the time of the Participant's termination as an Employee
                    for Total and Permanent Disability. Such benefit shall be
                    reduced by any benefit the Participant receives from the
                    long term disability plan provided by the Company.

               (e)  Termination. A monthly benefit equal to the Participant's
                    Accrued Benefit commencing on the first (1st) day of the
                    month coinciding with or next following the Participant's
                    sixtieth (60th) birthday.

         4.3. Form of Payment. Except as otherwise specifically provided,
payment of benefits from this Plan, if any, shall be payable as a single life
annuity during the Participant's lifetime with the last payment to be made for
the month in which the Participant's death occurs.

         4.4 Optional Forms of Payment. In lieu of the form and amount of
benefit payable under Section 4.3, a Participant may, no later than six (6)
months prior to the date benefits commence, elect a benefit of Actuarially
Equivalent value to the payment specified in Section 4.3 in one of the following
forms:

               (a)  Monthly payments to the Participant during the Participant's
                    life and, if the Participant is survived by a Beneficiary,
                    continuing monthly payments in the amount of 50% or 100% of
                    the amount payable to the Participant to such Beneficiary
                    for the Beneficiary's lifetime.

               (b)  Monthly payments to the Participant during the Participant's
                    life and, if the Participant dies within one hundred twenty
                    (120) months of the date the Participant's benefits
                    commenced, continuing monthly payments of the same amount to
                    the Participant's Beneficiary for the balance of such one
                    hundred twenty (120) month period.

               (c)  Monthly payments to the Participant or the Participant's
                    Beneficiary for a period of one hundred twenty (120) months.

                                       8
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                                    ARTICLE V

                            FUNDING AND OTHER MATTERS

         5.1 Funding. All amounts paid under the Plan shall be paid in cash from
the general assets of the Company or in such form from such other funding
vehicle as the Board of Directors shall provide; provided, however, that all
assets paid into any funding vehicle hereunder shall at all times prior to
payment to the Participant or Beneficiary remain subject to the general
creditors of the Company. No participants shall have any right, title, or
interest whatever in or to, or any preferred claim in or to, any investment
reserves, accounts, or funds that the Company may purchase, establish, or
accumulate to aid in providing the payments described in the Plan. Nothing
contained in the Plan and no action taken pursuant to its provisions, shall
create or be construed to create a trust or a fiduciary relationship of any kind
between the Company and the Participant or any other person. Neither the
Participant nor a Beneficiary of the Participant shall acquire any interest
greater than that of an unsecured creditor in any assets of the Company or in
any investment reserves, accounts, or funds that the Company may purchase,
establish or accumulate for the purposes of paying benefits hereunder.

         5.2 Continued Employment. Nothing contained in the Plan shall be
construed as conferring upon the Participant the right to continue in the
employment of the Company in any capacity or as otherwise affecting the
employment relationship.

         5.3 Restriction on Assignment. The benefits provided hereunder are
intended for the personal security of persons entitled to payment under the Plan
and are not subject in any manner to the debts or other obligations of the
persons to whom they are payable. The interest of any Participant or his
Beneficiary may not be sold, transferred, assigned, or encumbered in any manner,
either voluntarily or involuntarily, and any attempt to so anticipate, alienate,
sell, transfer, assign, pledge, encumber, or charge the same shall be null and
void; neither shall the benefits hereunder be liable for or subject to the
debts, contracts, liabilities, engagements, or torts of any person to whom such
benefits or funds are payable, nor shall they be subject to garnishment,
attachment, or other legal equitable process nor shall they be an asset in
bankruptcy.

         5.4 Binding on Company, Participants and Their Successors. The Plan
shall be binding upon the parties hereto, the successors and assigns of the
Company and the heirs, executors and administrators of the Participants.

         5.5 Governing Law. The Plan shall be construed in accordance with and
governed by the laws of the State of Texas.

         5.6 Severability. In the event any provision of the Plan shall be held
invalid or illegal for any reason, any illegality or invalidity shall not affect
the remaining parts of the Plan, but the Plan shall be construed and enforced as
if the illegal or invalid provision had never been inserted.

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                                   ARTICLE VI

                                 ADMINISTRATION

         6.1 Administration. The Compensation Committee shall be responsible for
the general administration of the Plan. The Compensation Committee shall have
that authority to make rules to administrator and interpret the Plan, to decide
questions arising under the Plan, and to take such other action as may be
appropriate to carry out the purposes of the Plan.

         6.2 Finality of Determination. The determination of the Compensation
Committee as to any disputed questions arising under the Plan, including
questions of construction and interpretation shall be final, binding, and
conclusive upon all persons. The Compensation Committee's determinations as to
which Employees shall be Participants and the specific benefits which shall be
paid to or on behalf of each such Participant shall be final, binding, and
conclusive upon all persons.

         6.3 Expenses. The expenses of administering the Plan shall be borne by
the Company.

         6.4 Indemnification and Exculpation. The members of the Compensation
Committee, the board of directors, and the officers, directors, and employees of
the Company shall be indemnified and held harmless by the Company against and
from any and all loss, cost, liability, or expense that may be imposed upon or
reasonably incurred by them in connection with or resulting from any claim,
action, suit, or proceeding to which they may be a party or in which they may be
involved by reason of any action taken or failure to act under the Plan and
against and from any and all amounts paid by them in settlement (with the
Company's written approval) or paid by them in satisfaction of a judgment in any
such action, suit, or proceeding. The foregoing provision shall not be
applicable to any person if the loss, cost, liability, or expense is due to such
person's fraud or willful misconduct.

                                       10
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                                   ARTICLE VII

                            AMENDMENT AND TERMINATION

         7.1 Amendment and Termination. The board of directors of the Company
may at any time amend or terminate the Plan. However, if the Plan should be
amended or terminated, the Company shall be liable for any benefits accrued
under the Plan as of the date of such action for Participants who are or have
been employed by the Company, where such accrued benefits shall be the
actuarially determined benefits as of such date of amendment or discontinuance
which each Participant or Beneficiary is receiving under the Plan or, with
respect to Participants who are in the employment of the Company on such date,
which each such Participant would have received as of such date under the Plan
if the Participant's employment had terminated as of the date of amendment or
termination, unless such benefit is otherwise provided by the Company.

                                       11<PAGE>   1
                                                                   Exhibit 10.04

                           STOCK RESTRICTION AGREEMENT

         This Agreement is made this 29th day of November, 1999, between
ArrowPoint Communications, Inc., a Delaware corporation (the "Company"), and
Louis Volpe (the "Employee").

         In consideration of the mutual promises and covenants contained in this
Agreement and for other valuable consideration, receipt of which is hereby
acknowledged, the parties hereto agree as follows:

         1. PURCHASE OF SHARES. The Company shall issue and sell to the
Employee, and the Employee shall purchase from the Company, subject to the terms
and conditions set forth in this Agreement, 550,000 shares (the "Shares") of
common stock, $.001 par value, of the Company ("Common Stock"), at a purchase
price of $4.50 per share. The aggregate purchase price for the Shares shall be
paid by the Employee by check payable to the order of the Company or such other
method as may be acceptable to the Company. Upon receipt of payment by the
Company for the Shares, the Company shall issue to the Employee one or more
certificates in the name of the Employee for that number of Shares purchased by
the Employee. The shares are issued pursuant to the terms of the 1997 Stock
Incentive Plan of the Company and are subject to the terms thereof.

         2. PURCHASE OPTION.

            (a) In the event that the Employee ceases to be employed by the
Company for any reason prior to May 31, 2004, the Company shall have the right
and option (the "Purchase Option") to purchase from the Employee, for the sum of
$4.50 per share (the "Option Price"), up to the total number of Shares that have
not vested according to the vesting schedule in Section 3 (the "Vesting
Schedule").

            (b) For purposes of this Agreement, employment with the Company
shall include employment with a parent or subsidiary of the Company.

         3. VESTING.

            (a) The Shares shall vest in the amount of 25% of the total number
of Shares on May 29, 2000 and on the last day of each full month thereafter
(beginning with June 2000) in the amount of 1.5625% of the total number of
Shares.

            (b) In the event of as Acquisition (as defined below), then 50% of
the number of Shares which are not then vested shall become vested immediately
prior to the closing of the Acquisition.

            (c) For the purposes of this Agreement, "Acquisition" shall mean any
(i) merger or consolidation which results in the voting securities of the
Company outstanding immediately prior thereto representing immediately
thereafter (either by remaining outstanding or by being converted into voting
securities of the surviving or acquiring entity) less than a

<PAGE>   2

majority of the combined voting power of the voting securities of the
Company or such surviving or acquiring entity outstanding immediately after
such merger or consolidation, (ii) sale of all or substantially all the assets
of the Company or (iii) sale of shares of capital stock of the Company, in a
single transaction or series of related transactions, representing at least 80%
of the voting power of the voting securities of the Company.

            (d) The Company may in its discretion accelerate the Vesting
Schedule at any time.

         4. EXERCISE OF PURCHASE OPTION AND CLOSING.

            (a) The Company may exercise the Purchase Option by sending to the
Employee (or his estate), within 60 days after the termination of the employment
of the Employee with the Company, a written notice of exercise of the Purchase
Option. Such notice shall specify the number of Shares to be purchased. If and
to the extent the Purchase Option is not so exercised by the giving of such a
notice within such 60-day period, the Purchase Option shall automatically expire
and terminate effective upon the expiration of such 60-day period.

            (b) Within 10 days after his receipt of the Company's notice of the
exercise of the Purchase Option pursuant to subsection (a) above, the Employee
(or his estate) shall (in accordance with the provisions of the joint Escrow
Instructions attached hereto) tender to the Company at its principal offices the
certificate or certificates representing the Shares which the Company has
elected to purchase, duly endorsed in blank by the Employee or with duly
endorsed stock powers attached thereto, all in form suitable for the transfer of
such Shares to the Company. Upon its receipt of such certificate or
certificates, the Company shall deliver or mail to the Employee a check in the
amount of the aggregate Option Price therefor.

            (c) After the time at which any Shares are required to be delivered
to the Company for transfer to the Company pursuant to subsection (b) above, the
Company shall not pay any dividend to the Employee on account of such Shares or
permit the Employee to exercise any of the privileges or rights of a stockholder
with respect to such Shares, but shall, in so far as permitted by law, treat the
Company as the owner of such Shares.

            (d) The Option Price may be payable, at the option of the Company,
in cancellation of all or a portion of any outstanding indebtedness of the
Employee to the Company or in cash (by check) or both.

            (e) The Company shall not purchase any fraction of a Share upon
exercise of the Purchase Option, and any fraction of a Share resulting from a
computation made pursuant to Section 4 of this Agreement shall be rounded to the
nearest whole Share (with any one-half Share being rounded upward).

        5.  RESTRICTIONS ON TRANSFER.

            (a) Except as otherwise provided in subsection (b) below, the
Employee shall not, during the term of the Purchase Option, sell, assign,
transfer, pledge, hypothecate or otherwise dispose of, by operation of law or
otherwise (collectively "transfer"), any of

                                       2
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the Shares, or any interest therein, unless and until such Shares are no
longer subject to the Purchase Option.

            (b) Notwithstanding the foregoing, the Employee may transfer (i) any
or all of his Shares to his spouse or children or to a trust established for the
benefit of his spouse, children or himself or (ii) any or all of his Shares
under his will, PROVIDED that such Shares shall remain subject to this Agreement
(including without limitation the restrictions on transfer set forth in this
Section 5 and the Purchase Option) and such permitted transferee shall, as a
condition to such transfer, deliver to the Company a written instrument
confirming that such transferee shall be bound by all of the terms and
conditions of this Agreement.

        6. ESCROW. The Employee and the Company shall, upon the execution of
this Agreement, execute joint Escrow Instructions in the form appended hereto.
The joint Escrow Instructions shall be delivered to the Secretary of the
Company, as escrow agent thereunder. The Employee shall deliver to such escrow
agent the certificate(s) evidencing the Shares and a stock assignment duly
endorsed in blank. Such materials shall be held by such escrow agent pursuant to
the terms of such joint Escrow Instructions.

        7. EFFECT OF PROHIBITED TRANSFER. The Company shall not be required
(a) to transfer on its books any of the Shares which shall have been sold or
transferred in violation of any of the provisions set forth in this Agreement,
or (b) to treat as owner of such Shares or to pay dividends to any transferee to
whom any such Shares shall have been so sold or transferred.

        8. RESTRICTIVE LEGEND. All certificates representing the Shares
shall have affixed thereto the following legend, in addition to any other
legends that may be required under federal or state securities laws:

         "The shares of stock represented by this certificate are subject to
         restrictions on transfer and an option to purchase set forth in a
         certain Stock Restriction Agreement between the Corporation and the
         registered owner of these shares (or his predecessor in interest), and
         such Agreement is available for inspection without charge at the office
         of the Secretary of the Corporation."

        9.  INVESTMENT REPRESENTATIONS. The Employee represents, warrants and
covenants as follows:

            (a) The Employee is purchasing the Shares for his own account for
investment only, and not with a view to, or for sale in connection with, any
distribution of the Shares in violation of the Securities Act of 1933 (the
"Securities Act"), or any rule or regulation under the Securities Act.

            (b) The Employee has had such opportunity as he has deemed adequate
to obtain from representatives of the Company such information as is necessary
to permit him to evaluate the merits and risks of his investment in the Company.

                                       3
<PAGE>   4

            (c) The Employee has sufficient experience in business, financial
and investment matters to be able to evaluate the risks involved in the purchase
of the Shares and to make an informed investment decision with respect to such
purchase.

            (d) The Employee can afford a complete loss of the value of the
Shares and is able to bear the economic risk of holding such Shares for an
indefinite period.

            (e) The Employee understands that (i) the Shares have not been
registered under the Securities Act and are "restricted securities" within the
meaning of Rule 144 under the Securities Act, (ii) the Shares cannot be sold,
transferred or otherwise disposed of unless they are subsequently registered
under the Securities Act or an exemption from registration is then available;
(iii) in any event, the exemption from registration under Rule 144 will not be
available for at least one year and even then will not be available unless a
public market then exists for the Common Stock, adequate information concerning
the Company is then available to the public, and other terms and conditions of
Rule 144 are complied with; and (iv) there is now no registration statement on
file with the Securities and Exchange Commission with respect to any stock of
the Company and the Company has no obligation or current intention to register
the Shares under the Securities Act.

            (f) A legend substantially in the following form will be placed on
the certificate representing the Shares:

                  "The shares represented by this certificate have not been
                  registered under the Securities Act of 1933, as amended, and
                  may not be sold, transferred or otherwise disposed of in the
                  absence of an effective registration statement under such Act
                  or an opinion of counsel satisfactory to the corporation to
                  the effect that such registration is not required."

        10. ADJUSTMENTS FOR STOCK SPLITS, STOCK DIVIDENDS, ETC.

            (a) If from time to time during the term of the Purchase Option
there is any stock split-up, stock dividend, stock distribution or other
reclassification of the Common Stock of the Company, any and all new,
substituted or additional securities to which the Employee is entitled by reason
of his ownership of the Shares shall be immediately subject to the Purchase
Option, the restrictions on transfer and other provisions of this Agreement in
the same manner and to the same extent as the Shares, and the Option Price shall
be appropriately adjusted.

            (b) If the Shares are converted into or exchanged for, or
stockholders of the Company receive by reason of any distribution in total or
partial liquidation, securities of another corporation, or other property
(including cash), pursuant to an Acquisition, then the rights of the Company
under this Agreement shall inure to the benefit of the Company's successor and
this Agreement shall apply to the securities or other property received upon
such conversion, exchange or distribution in the same manner and to the same
extent as the Shares provided that (i) to account for the acceleration of
vesting under Section 3(b) above, on each vesting date subsequent to the
Acquisition, one-half of the amount of securities or other property that would
have otherwise vested in accordance with the original Vesting Schedule shall
become vested and

                                       4
<PAGE>   5

(ii) the Vesting Schedule shall be subject to further acceleration following
the Acquisition pursuant to Section 3(d).

        11. WITHHOLDING TAXES. If the Employee elects, in accordance with
Section 83(b) of the Internal Revenue Code of 1986, as amended, to recognize
ordinary income in the year of acquisition of the Shares, the Company will
require at the time of such election an additional payment for withholding tax
purposes based on the difference, if any, between the purchase price for such
Shares and the fair market value of such Shares as of the day immediately
preceding the date of the purchase of such Shares by the Employee.

        12. MISCELLANEOUS.

            (a) SEVERABILITY. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement, and each other provision of this
Agreement shall be severable and enforceable to the extent permitted by law.

            (b) WAIVER. Any provision contained in this Agreement may be waived,
either generally or in any particular instance, by the Board of Directors of the
Company; provided that the Company may not waive, or otherwise limit or reduce
its rights under, the Purchase Option or accelerate the Vesting Schedule without
the consent of the holders of a majority of the then outstanding shares of
Series A Convertible Preferred Stock of the Company (if any).

            (c) BINDING EFFECT. This Agreement shall be binding upon and inure
to the benefit of the Company and the Employee and their respective heirs,
executors, administrators, legal representatives, successors and assigns,
subject to the restrictions on transfer set forth in Section 5 of this
Agreement.

            (d) NO RIGHTS TO EMPLOYMENT. Nothing contained in this Agreement
shall be construed as giving the Employee any right to be retained, in any
position, as an employee of the Company.

            (e) NOTICE. All notices, requests, consents, and other
communications under this Agreement shall be in writing and shall be delivered
by hand, sent via a reputable nationwide overnight courier service or mailed by
first class certified or registered mail, return receipt requested, postage
prepaid, to the Company or the Employee at their addresses set forth on the
signature page hereto. Notices provided in accordance with this Section 12 shall
be deemed delivered upon personal delivery, one business day after being sent
via a reputable nationwide overnight courier service, or two business days after
deposit in the mail.

            (f) PRONOUNS. Whenever the context may require, any pronouns used in
this Agreement shall include the corresponding masculine, feminine or neuter
forms, and the singular form of nouns and pronouns shall include the plural, and
vice versa.

            (g) ENTIRE AGREEMENT. This Agreement constitutes the entire
agreement between the parties, and supersedes all prior agreements and
understandings, relating to the subject matter of this Agreement.

                                       5
<PAGE>   6

            (h) AMENDMENT. This Agreement may be amended or modified only by a
written instrument executed by both the Company and the Employee.

            (i) GOVERNING LAW. This Agreement shall be construed, interpreted
and enforced in accordance with the laws of the State of Delaware.

         IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.

         ArrowPoint Communications, Inc.

         By: /s/Chin-Chen Wu
             --------------------------------
             Chin-Cheng Wu
             President

         Address: 50 Nagog Park
                  Acton, MA  01720

         Louis Volpe

         /s/Louis Volpe
         ------------------------------------
         Address: 208 Chapman Street
                  Canton, MA  02021

                                       6

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