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<TITLE>sv8</TITLE>
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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>
<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>As filed with the Securities and Exchange Commission on February&nbsp;14, 2008</B>
</DIV>


<DIV align="right" style="font-size: 10pt; margin-top: 3pt"><B>Registration No.&nbsp;333-</B>&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
</DIV>


<DIV style="width: 100%; border-bottom: 2pt solid black; font-size: 1pt; margin-top: 3pt">&nbsp;</DIV>
<DIV style="width: 100%; border-bottom: 1pt solid black; font-size: 1pt">&nbsp;</DIV>








<DIV align="center" style="font-size: 14pt; margin-top: 12pt"><B>UNITED STATES<BR>
SECURITIES AND EXCHANGE COMMISSION</B>
</DIV>

<DIV align="center" style="font-size: 12pt"><B>Washington, D.C. 20549</B>
</DIV>

<DIV align="center" style="font-size: 12pt"><B><DIV align="center"><DIV style="font-size: 3pt; margin-top: 16pt; width: 26%; border-top: 1px solid #000000">&nbsp;</DIV></DIV></B>
</DIV>

<DIV align="center" style="font-size: 18pt; margin-top: 12pt"><B>FORM S-8</B>
</DIV>

<DIV align="center" style="font-size: 12pt; margin-top: 12pt"><B>REGISTRATION STATEMENT<BR>
UNDER<BR>
THE SECURITIES ACT OF 1933</B></DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 12pt"><DIV align="center"><DIV style="font-size: 3pt; margin-top: 16pt; width: 26%; border-top: 1px solid #000000">&nbsp;</DIV></DIV></DIV>

<DIV align="center" style="font-size: 24pt; margin-top: 12pt"><B>ArcSight, Inc.</B>
</DIV>

<DIV align="center" style="font-size: 10pt">(Exact Name of Registrant as Specified in Its Charter)</DIV>


<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="47%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="47%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD align="center" valign="top"><B>Delaware</B>
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><B>52-2241535</B></TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top">(State or Other Jurisdiction
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">(I.R.S. Employer</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top">of Incorporation or Organization)
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">Identification No.)</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 12pt"><B>5 Results Way<BR>
Cupertino, California 95014</B><BR>
(Address of Principal Executive Offices) (Zip Code)</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 12pt"><B>2000 Stock Incentive Plan<BR>
2002 Stock Plan, as amended</B><BR>
(Full Title of the Plan)</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 12pt"><DIV align="center"><DIV style="font-size: 3pt; margin-top: 16pt; width: 26%; border-top: 1px solid #000000">&nbsp;</DIV></DIV></DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 12pt"><B>Robert W. Shaw<BR>
Chief Executive Officer and<BR>
Chairman of the Board<BR>
ArcSight, Inc.<BR>
5 Results Way<BR>
Cupertino, California 95104</B><BR>
(Name and Address of Agent For Service)</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 12pt"><B>(408)&nbsp;864-2600</B><BR>
(Telephone Number, including area code, of agent for service)</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 12pt"><DIV align="center"><DIV style="font-size: 3pt; margin-top: 16pt; width: 26%; border-top: 1px solid #000000">&nbsp;</DIV></DIV></DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 12pt"><B><I>Please send copies of all communications to:</I></B></DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
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<TR valign="bottom">
    <TD width="47%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="47%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD align="center" valign="top"><B>Tr&#226;m T. Phi, Esq.</B>
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><B>David A. Bell, Esq.</B></TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top"><B>Vice President and General Counsel</B>
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><B>Michael A. Brown, Esq.</B></TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top"><B>ArcSight, Inc.</B>
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><B>Fenwick &#038; West LLP</B></TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top"><B>5 Results Way</B>
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><B>801 California Street</B></TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top"><B>Cupertino, California 95014</B>
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top"><B>Mountain View, California 94041</B></TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer,
a non-accelerated filer, or a smaller reporting company. See the definitions of &#147;large accelerated filer,&#148; &#147;accelerated filer&#148; and &#147;smaller reporting company&#148; in
Rule&nbsp;12b-2 of the Exchange Act. (Check one):
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="23%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="23%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="23%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD>
    <TD width="23%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD align="center" valign="top">Large accelerated filer&nbsp;<FONT face="Wingdings">&#111;</FONT>
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">Accelerated filer&nbsp;<FONT face="Wingdings">&#111;</FONT>
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">Non-accelerated filer&nbsp;<FONT face="Wingdings">&#254;</FONT>
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">Smaller reporting company&nbsp;<FONT face="Wingdings">&#111;</FONT></TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top">&nbsp;
</TD>
    <TD>&nbsp;</TD>
    <TD colspan="5" align="center" valign="top">(Do not check if a smaller reporting company)</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>CALCULATION OF REGISTRATION FEE</B>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="1%">&nbsp;</TD>
    <TD width="54%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD><!-- VRule -->
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD><!-- VRule -->
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD><!-- VRule -->
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="2%">&nbsp;</TD><!-- VRule -->
    <TD width="2%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>

    <TD width="1%">&nbsp;</TD>
</TR><TR style="font-size: 1px" valign="bottom">
    <TD nowrap align="left" colspan="23" style="border-bottom: 3px double #000000">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">    <TD width="1%">&nbsp;</TD>

    <TD>&nbsp;</TD>
    <TD style="border-right: 2px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD style="border-right: 2px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Proposed Maximum</B></TD>
    <TD style="border-right: 2px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Proposed Maximum</B></TD>
    <TD style="border-right: 2px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">    <TD width="1%">&nbsp;</TD>

    <TD nowrap align="center"><B>Title of Each Class of Securities</B></TD>
    <TD style="border-right: 2px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Amount To Be</B></TD>
    <TD style="border-right: 2px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Offering Price</B></TD>
    <TD style="border-right: 2px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Aggregate Offering</B></TD>
    <TD style="border-right: 2px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Amount of</B></TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">    <TD width="1%">&nbsp;</TD>

    <TD nowrap align="center"><B>To Be Registered</B></TD>
    <TD style="border-right: 2px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Registered</B></TD>
    <TD style="border-right: 2px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Per Unit</B></TD>
    <TD style="border-right: 2px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Price</B></TD>
    <TD style="border-right: 2px solid #000000">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Registration Fee</B></TD>
    <TD width="1%">&nbsp;</TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD width="1%" style="border-top: 2px solid #000000">&nbsp;</TD>
                    <TD style="border-top: 2px solid #000000"><DIV style="margin-left:15px; text-indent:-15px">Common Stock, $0.00001 par value per share</DIV></TD>
    <TD style="border-right: 2px solid #000000; border-top: 2px solid #000000">&nbsp;</TD>
    <TD style="border-top: 2px solid #000000">&nbsp;</TD>
    <TD nowrap align="right" style="border-top: 2px solid #000000">&nbsp;</TD>
    <TD align="right" style="border-top: 2px solid #000000">1,268,750</TD>
    <TD nowrap style="border-top: 2px solid #000000">(1)</TD>
    <TD style="border-right: 2px solid #000000; border-top: 2px solid #000000">&nbsp;</TD>
    <TD style="border-top: 2px solid #000000">&nbsp;</TD>
    <TD nowrap align="right" style="border-top: 2px solid #000000">$</TD>
    <TD align="right" style="border-top: 2px solid #000000">9.00</TD>
    <TD nowrap style="border-top: 2px solid #000000">(2)</TD>
    <TD style="border-right: 2px solid #000000; border-top: 2px solid #000000">&nbsp;</TD>
    <TD style="border-top: 2px solid #000000">&nbsp;</TD>
    <TD nowrap align="right" style="border-top: 2px solid #000000">$</TD>
    <TD align="right" style="border-top: 2px solid #000000">11,418,750.00</TD>
    <TD nowrap style="border-top: 2px solid #000000">(2)</TD>
    <TD style="border-right: 2px solid #000000; border-top: 2px solid #000000">&nbsp;</TD>
    <TD style="border-top: 2px solid #000000">&nbsp;</TD>
    <TD align="right" style="border-top: 2px solid #000000">$</TD>
    <TD align="right" style="border-top: 2px solid #000000">448.76</TD>
    <TD style="border-top: 2px solid #000000">&nbsp;</TD>
    <TD width="1%" style="border-top: 2px solid #000000">&nbsp;</TD>
</TR>
<TR style="font-size: 1px" valign="bottom">
    <TD nowrap align="left" colspan="23" style="border-top: 3px double #000000">&nbsp;</TD>
</TR>

<!-- End Table Body -->
</TABLE>
</DIV>



<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96"></TD>
</TR>

<TR valign="top">
    <TD nowrap align="left">(1)</TD>
    <TD>&nbsp;</TD>
    <TD>Represents shares of the Registrant&#146;s Common Stock being registered for resale that have been
issued previously pursuant to the exercise of stock options granted under the 2000 Stock
Incentive Plan (the &#147;<B><I>2000 Plan</I></B>&#148;) and the 2002 Stock Plan, as amended (the &#147;<B><I>2002 Plan</I></B>&#148; and
together with the 2000 Plan, the &#147;<B><I>Plans</I></B>&#148;) to the stockholders named in this Registration
Statement.</TD>
</TR>

<TR style="font-size: 3pt"><TD>&nbsp;</TD></TR>

<TR valign="top">
    <TD nowrap align="left">(2)</TD>
    <TD>&nbsp;</TD>
    <TD>Estimated pursuant to Rule 457(c) of the Securities Act of 1933, as amended, based on the
initial public offering price of the Registrant&#146;s Common Stock as set forth in the
Registrant&#146;s prospectus filed with the Securities and Exchange Commission (the &#147;<B><I>SEC</I></B>&#148;)
on February&nbsp;14, 2008 pursuant to Rule 424(b) under the Securities Act.</TD>
</TR>

</TABLE>



<DIV style="width: 100%; border-bottom: 1pt solid black; margin-top: 10pt; font-size: 1pt">&nbsp;</DIV>
<DIV style="width: 100%; border-bottom: 2pt solid black; font-size: 1pt">&nbsp;</DIV>





<P align="center" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio -->
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">








<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>EXPLANATORY NOTE</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">Under cover of this Registration Statement on Form S-8 is a prospectus for Common Stock of
ArcSight, Inc. (&#147;<B><I>Common Stock</I></B>&#148;) prepared in accordance with Part&nbsp;I of Form S-3 under the Securities
Act. This prospectus has been prepared pursuant to General Instruction C of Form S-8, in
accordance with the requirements of Part&nbsp;I of Form S-3, and may be used for reoffers and resales on
a continuous or delayed basis in the future of up to an aggregate of 1,268,750 shares of Common
Stock that have been issued to certain current officers of ArcSight, Inc. prior to the filing of
this Form S-8 Registration Statement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">This Registration Statement on Form S-8 relates to the reoffer and resale of 1,268,750 shares of
Common Stock previously issued pursuant to the exercise of options under the Plans to the
stockholders named in the resale prospectus included in this Registration Statement on Form S-8 as
described above.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">The holders of all of the shares of Common Stock that are being registered in this Registration
Statement on Form S-8 are subject to lock-up agreements or market standoff provisions that prohibit
them from offering for sale, selling, granting any option for the sale of, transferring or
otherwise disposing of such shares for a period of at least 180&nbsp;days as described in &#147;Shares
Eligible for Future Sale&#151;Lock-Up Agreements&#148; in ArcSight, Inc.&#146;s prospectus filed on February&nbsp;14,
2008 with the SEC.
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio -->
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always">&nbsp;</H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left">
<!-- TOC -->
</DIV>
<DIV align="left">
<A name="tocpage"></A>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>TABLE OF CONTENTS</B>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="88%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
</TR>
<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#101">PART I</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#102">Item&nbsp;1. Plan Information</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">I-1</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#103">Item&nbsp;2. Registrant Information and Employee Plan Annual Information</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">I-1</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">REOFFER AND RESALE PROSPECTUS</DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">

<TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#105">Special
Note Regarding Forward-Looking Statements and Industry Data</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">I-3</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#106">The Company</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">I-4</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#107">Risk Factors</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">I-5</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#108">Use of Proceeds</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">I-21</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#109">Dilution</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">I-21</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#110">Selling Stockholders</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">I-22</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#111">Plan of Distribution</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">I-23</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#112">Experts</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">I-24</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">

<TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#113">Where
You Can Find Additional Information</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">I-24</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#114">Incorporation of Documents by Reference</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">I-24</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#115">PART II</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#116">Item&nbsp;3. Incorporation of Documents by Reference</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">II-1</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#117">Item&nbsp;4. Description of Securities</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">II-1</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#118">Item&nbsp;5. Interests of Named Experts and Counsel</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">II-1</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#119">Item&nbsp;6. Indemnification of Directors and Officers</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">II-1</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#120">Item&nbsp;7. Exemption from Registration Claimed</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">II-2</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#121">Item&nbsp;8. Exhibits</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">II-2</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:30px; text-indent:-15px"><A href="#122">Item&nbsp;9. Undertakings</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">II-3</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#123">SIGNATURES</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="right">II-4</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px"><A href="#124">EXHIBIT INDEX</A></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
<TR><TD colspan="9"><FONT size="2">&nbsp;<A HREF="f37959exv23w1.htm">EXHIBIT 23.1</A></FONT></TD></TR>
</TABLE>
</DIV>



<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;No dealer, salesperson or other person is authorized to give any information or to represent
anything not contained in this prospectus. You must not rely on any unauthorized information or
representations. This prospectus is an offer to sell only the shares offered hereby, and only under
circumstances and in jurisdictions where it is lawful to do so. The information contained in this
prospectus is accurate only as of its date, regardless of its time of delivery or any sale of
shares of our common stock. Our business, financial condition, results of operations and prospects
may have changed since that date.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Except where the context requires otherwise, in this prospectus &#147;Company,&#148; &#147;ArcSight,&#148;
&#147;Registrant,&#148; &#147;we,&#148; &#147;us&#148; and &#147;our&#148; refer to ArcSight, Inc., and where appropriate, its
subsidiaries.
</DIV>



<DIV align="left">
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</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio -->
</DIV>



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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left">
<A name="101"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>PART I</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>INFORMATION REQUIRED IN THE SECTION 10(a) PROSPECTUS</B>

</DIV>
<DIV align="left">
<A name="102"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Item&nbsp;1. Plan Information. </B>(1)
</DIV>

<DIV align="left">
<A name="103"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Item&nbsp;2. Registrant Information and Employee Plan Annual Information. </B>(1)

</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">(1)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Information required by Part&nbsp;I to be contained in the Section 10(a) prospectus for the Plans
is omitted from this Registration Statement in accordance with Rule&nbsp;428 under the Securities
Act and the Note to Part&nbsp;I of Form S-8.</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>A prospectus prepared pursuant to General Instruction C of Form S-8 in accordance with the
requirements of Part&nbsp;I of Form S-3, which covers reoffers and resales on a continuous delayed
basis of 1,268,750 shares of Common Stock previously issued to the stockholders named in this
Registration Statement pursuant to the exercise of option grants under the Plans is set forth
below.</TD>
</TR>

</TABLE>
</DIV>
<P align="center" style="font-size: 10pt"><!-- Folio -->I-1<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">



</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><U><B>PROSPECTUS</B></U>
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><IMG src="f37959f3795901.gif" alt="(ARCSIGHT LOGO)">
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>ArcSight, Inc.</B>

</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>1,268,750 SHARES<BR>
COMMON STOCK, PAR VALUE $0.00001</B>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This prospectus relates to 1,268,750 shares of common stock of ArcSight, Inc. (&#147;<B><I>ArcSight</I></B>&#148; or
the &#147;<B><I>Company</I></B>&#148;) that may be offered from time to time by certain stockholders named in this
prospectus (the &#147;<B><I>Stockholders</I></B>&#148;), by their pledges or donees or by other transferees who receive
these shares of common stock in transfers other than public sales, for their own accounts. Each of
the Stockholders acquired these shares of common stock pursuant to the exercise of option grants
previously issued under the ArcSight, Inc. 2000 Stock Incentive Plan and ArcSight, Inc. 2002 Stock
Plan, as amended.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Stockholders may sell the shares in the open market at prevailing market prices on The
NASDAQ Global Market, or in private transactions at negotiated prices. The Stockholders may sell
the shares directly, or may sell them through underwriters, brokers or dealers. ArcSight will
receive no part of the proceeds from sales made under this prospectus. ArcSight is paying the
expenses incurred in registering these shares, but all selling and other expenses incurred by each
of the Stockholders will be borne by that Stockholder.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Each Stockholder and any participating broker or dealer may be deemed to be an &#147;underwriter&#148;
within the meaning of the Securities Act of 1933, as amended (the &#147;<B><I>Securities Act</I></B>&#148;), in which event
any profit on the sale of shares by the Stockholder and any commissions or discounts received by
those brokers or dealers may be deemed to be underwriting compensation under the Securities Act.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;ArcSight&#146;s common stock is traded on The NASDAQ Global Market under the symbol &#147;ARST.&#148;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>See &#147;Risk Factors&#148; beginning on page I-5 to read about factors you should consider before
buying shares of the common stock.</I>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><DIV align="center"><DIV style="font-size: 3pt; margin-top: 16pt; width: 26%; border-top: 1px solid #000000">&nbsp;</DIV></DIV>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt"><B>Neither the Securities and Exchange Commission nor any other regulatory body has approved or
disapproved these securities or passed upon the accuracy or adequacy of this prospectus. Any
representation to the contrary is a criminal offense</B>.
</DIV>


<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><DIV align="center"><DIV style="font-size: 3pt; margin-top: 16pt; width: 26%; border-top: 1px solid #000000">&nbsp;</DIV></DIV>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt">The date of this prospectus is February&nbsp;14, 2008

</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left">
<A name="105"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS AND INDUSTRY DATA</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This prospectus includes forward-looking statements. All statements contained in this
prospectus other than statements of historical fact, including statements regarding our future
results of operations and financial position, our business strategy and plans and our objectives
for future operations, are forward-looking statements. The words &#147;believe,&#148; &#147;may,&#148; &#147;will,&#148;
&#147;estimate,&#148; &#147;continue,&#148; &#147;anticipate,&#148; &#147;intend&#148; and &#147;expect&#148; and similar expressions are intended to
identify forward-looking statements. We have based these forward-looking statements largely on our
current expectations and projections about future events and financial trends that we believe may
affect our financial condition, results of operations, business strategy, short-term and long-term
business operations and objectives, and financial needs. These forward-looking statements are
subject to a number of risks, uncertainties and assumptions, including those described in &#147;Risk
Factors.&#148; In light of these risks, uncertainties and assumptions, the future events and trends
discussed in this prospectus may not occur and actual results could differ materially and adversely
from those anticipated or implied in the forward-looking statements.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Although we believe that the expectations reflected in the forward-looking statements are
reasonable, we cannot guarantee future results, levels of activity, performance or achievements. We
are under no duty to update any of these forward-looking statements after the date of this
prospectus or to conform these statements to actual results or revised expectations.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;This prospectus also contains or incorporates by reference estimates and other information
concerning our industry, including market size and growth rates of the markets in which we
participate, that we obtained from industry publications, surveys and forecasts. The industry in
which we operate is subject to a high degree of uncertainty and risk due to a variety of factors
including those described in &#147;Risk Factors.&#148; These and other factors could cause results to differ
materially from those expressed in these publications, surveys and forecasts.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->I-3<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left">
<A name="106"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>THE COMPANY</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We are a leading provider of security and compliance management solutions that intelligently
mitigate business risk for enterprises and government agencies. Much like a &#147;mission control
center,&#148; our ArcSight ESM platform delivers a centralized, real-time view of disparate digital
alarms, alerts and status messages, which we refer to as events, across geographically dispersed
and heterogeneous business and technology infrastructures. Our software correlates massive numbers
of events from thousands of security point solutions, network and computing devices and
applications, enabling intelligent identification, prioritization and response to external threats,
insider threats and compliance and corporate policy violations. We also provide complementary
software that delivers pre-packaged analytics and reports tailored to specific security and
compliance initiatives, as well as appliances that streamline threat response, event log archiving
and network configuration.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have designed our platform to support the increasingly complex business and technology
infrastructure of our customers. As of October&nbsp;31, 2007, we had sold our products to more than 400
customers across a number of industries and government agencies in the United States and
internationally, including companies in the Fortune Top 5 of the aerospace and defense, energy and
utilities, financial services, food production and services, healthcare, high technology,
insurance, media and entertainment, retail and telecommunications industries, and more than 20
major U.S. government agencies.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As enterprises and government agencies increasingly utilize an interconnected information
technology and business infrastructure to enhance efficiency, exchange information and conduct
business with partners, customers and suppliers, these organizations expose their infrastructure
and data to heightened security risks and are subject to increasing compliance requirements. The
large number of heterogeneous devices and applications in a geographically distributed corporate
infrastructure generates a massive amount of event data that is challenging to monitor or analyze
at an enterprise-wide scale for security vulnerabilities and compliance violations. Vendor-specific
management consoles and traditional systems management tools are limited in scope or are not
equipped to handle a large volume of data. In addition, organizations have difficulty identifying
events that are threatening in nature because they are unable to distinguish threats from the
&#147;white noise&#148; of normal event activity, to recognize risks by correlating events reported by
disparate systems, to understand the context in which the events arise or to appropriately
prioritize responses according to risk level or corporate policy.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The need for a highly scalable, holistic and intelligent solution that can help organizations
address these challenges in real-time is growing. The market for security and compliance management
solutions today includes security information and event management, forensics and incident
investigation, policy and compliance management and network change and configuration management.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We were incorporated in Delaware on May&nbsp;3, 2000 as Wahoo Technologies, Inc. On March&nbsp;30, 2001,
we changed our name to ArcSight, Inc. Our principal executive offices are located at 5 Results Way,
Cupertino, California 95014, and our telephone number is (408)&nbsp;864-2600. Our website address is
www.arcsight.com. The information on, or that can be accessed through, our website is not part of
this prospectus.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&#147;ArcSight&#148; and the ArcSight logo are registered trademarks of ArcSight in the United States
and in some other countries. Where not registered, these marks and &#147;ArcSight Console,&#148; &#147;ArcSight
Manager,&#148; &#147;ArcSight Web,&#148; &#147;FlexConnector,&#148; &#147;Logger,&#148; &#147;NCM&#148; &#147;SmartConnector&#148; and &#147;TRM&#148; are
trademarks of ArcSight. Other service marks, trademarks and tradenames referred to in this
prospectus are the property of their respective owners.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->I-4<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left">
<A name="107"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>RISK FACTORS</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<I>Investing in our common stock involves a high degree of risk. You should consider carefully
the risks and uncertainties described below, together with all of the other information in this
prospectus, before deciding to purchase shares of our common stock. If any of the following risks
occurs, our business, financial condition, results of operations and future prospects could be
materially and adversely affected. In that event, the market price of our common stock could
decline and you could lose part or even all of your investment.</I>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Risk Related to Our Business and Industry</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>We have a limited operating history in an emerging market and a history of losses, and we are
unable to predict the extent of any future losses or when, if ever, we will achieve profitability
in the future.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We launched our ESM products in January&nbsp;2002, our TRM and NCM products in June&nbsp;2006 and our
Logger product in December&nbsp;2006. Because we have a limited operating history, and the market for
our products is rapidly evolving, it is difficult for us to predict our operating results and the
ultimate size of the market for our products. We have a history of losses from operations,
incurring losses from operations of $16.8&nbsp;million and $0.3&nbsp;million for the fiscal years ended April
30, 2006 and 2007, respectively. As of October&nbsp;31, 2007, our accumulated deficit was $48.0&nbsp;million.
We expect our operating expenses to increase over the next several years as we hire additional
sales and marketing personnel, expand our channel sales program and develop our technology and new
products. In addition, as a public company, we will incur significant legal, accounting and other
expenses that we did not incur as a private company. If our revenues do not increase to offset
these expected increases in operating expenses, we will continue to incur significant losses and
will not become profitable. Our historical revenue growth has been inconsistent, reflects
fluctuations not related to performance and should not be considered indicative of our future
performance. See &#147;Management&#146;s Discussion and Analysis of Financial Condition and Results of
Operations&#151;Sources of Revenue, Cost of Revenues and Operating
Expenses&#148; in our prospectus filed on February&nbsp;14, 2008 with
the Securities and Exchange Commission, or SEC. Further, in future
periods, our revenues could decline and, accordingly, we may not be able to achieve profitability
and our losses may increase. Even if we do achieve profitability, we may not be able to sustain or
increase profitability on a consistent basis, which may result in a decline in our common stock
price.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Our future operating results may fluctuate significantly and may not be a good indication of
our future performance.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our revenues and operating results could vary significantly from period to period as a result
of a variety of factors, many of which are outside of our control. As a result, comparing our
revenues and operating results on a period-to-period basis may not be meaningful, and you should
not rely on our past results as an indication of our future performance. For example, revenues in
fiscal 2006 and prior years excluded revenues related to multiple element sales transactions
consummated in that year that were deferred because we did not have vendor-specific objective
evidence of fair value, or VSOE, for some product elements that were not delivered in the fiscal
year of the transaction. In fiscal 2007, we either delivered these product elements, or we and our
customers amended the contractual terms of these sales transactions to remove the undelivered
product elements. Fiscal 2007 revenues included a substantial portion of the revenues so deferred
from fiscal 2006, as well as a small amount of revenues similarly deferred from prior years. See
&#147;Management&#146;s Discussion and Analysis of Financial Condition and Results of Operations&#151;Sources of
Revenues, Cost of Revenues and Operating Expenses&#148; in the
Prospectus. We expect that in future periods the comparison
of revenues period-to-period will not be favorably impacted to the same extent by similar
transactions consummated in fiscal 2007 and prior periods. We may not be able to accurately predict
our future revenues or results of operations. We base our current and future expense levels on our
operating plans and sales forecasts, and our operating costs are relatively fixed in the short
term. As a result, we may not be able to reduce our costs sufficiently to compensate for an
unexpected shortfall in revenues, and even a small shortfall in revenues could disproportionately
and adversely affect financial results for that quarter. In addition, we recognize revenues from
sales to some customers or resellers when cash is received, which may be delayed because of changes
or issues with those customers or resellers. If our revenues or operating results fall below the
expectations of investors or any securities analysts that may choose to cover our stock, the price
of our common stock could decline substantially.
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In addition to other risk factors listed in this section, factors that may affect our
operating results include:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the timing of our sales during the quarter, particularly since a substantial majority of
our sales occurs in the last few weeks of the quarter and loss or delay of a few large
contracts may have a significant adverse impact on our operating results;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>changes in the mix of revenues attributable to higher-margin revenues from ESM products
as opposed to lower-margin revenues from sales of our appliance products;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>changes in the renewal rate of maintenance agreements;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>our ability to estimate warranty claims accurately;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the timing of satisfying revenue recognition criteria, including establishing VSOE for
new products and maintaining VSOE for maintenance and services;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the budgeting, procurement and work cycles of our customers, including customers in the
public sector, which may cause seasonal variation as our business and the market for
security and compliance management software solutions matures; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>general economic conditions, both domestically and in our foreign markets, and economic
conditions specifically affecting industries in which our customers participate, such as
financial services.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Our sales cycle is long and unpredictable, and our sales efforts require considerable time and
expense. As a result, our revenues are difficult to predict and may vary substantially from quarter
to quarter, which may cause our operating results to fluctuate.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our operating results may fluctuate, in part, because of the intensive nature of our sales
efforts, the length and variability of the sales cycle of our ESM product and the short-term
difficulty in adjusting our operating expenses. Because decisions to purchase products such as our
ESM product involve significant capital commitments by customers, potential customers generally
have our software evaluated at multiple levels within an organization, each often having specific
and conflicting requirements. Enterprise customers make product purchasing decisions based in part
on factors not directly related to the features of the products, including but not limited to the
customers&#146; projections of business growth, capital budgets and anticipated cost savings from
implementation of the software. As a result of these factors, licensing our software products often
requires an extensive sales effort throughout a customer&#146;s organization. In addition, we have
limited experience with sales of our TRM, Logger and NCM products. In particular, sales of our TRM
and NCM products and to some extent our Logger product involve approvals from different functional
areas of an organization than our ESM product. As a result, the sales cycle for these products may
be lengthy or may vary significantly. Our sales efforts involve educating our customers, who are
often relatively unfamiliar with our products and the value of our products, including their
technical capabilities and potential cost savings to the organization. We spend substantial time,
effort and money in our sales efforts without any assurance that our efforts will produce any
sales.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The length of our sales cycle, from initial evaluation to delivery of software, tends to be
long and varies substantially from customer to customer. Our sales cycle is typically three to six
months but can extend to more than a year for some sales. We typically recognize a substantial
majority of our product revenues in the last few weeks of a quarter. It is difficult to predict
exactly when, or even if, we will actually make a sale with a potential customer. As a result,
large individual sales have, in some cases, occurred in quarters subsequent to those we
anticipated, or have not occurred at all. The loss or delay of one or more large product
transactions in a quarter could impact our operating results for that quarter and any future
quarters into which revenues from that transaction are delayed. As a result of these factors, it is
difficult for us to accurately forecast product revenues in any quarter. Because a substantial
portion of our expenses are relatively fixed in the short term, our operating results will suffer
if revenues fall below our expectations in a particular quarter, which could cause the price of our
common stock to decline significantly.
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>If we fail to further develop and manage our distribution channels, our revenues could decline
and our growth prospects could suffer.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We derive a portion of our revenues from sales of our products and related services through
channel partners, such as resellers and systems integrators. In particular, systems integrators are
an important source of sales leads for us in the U.S. public sector, as government agencies often
rely on them to meet information technology, or IT, needs. We also use resellers to augment our
internal resources in international markets and, to a lesser extent, domestically. We may be
required by our U.S. government customers to utilize particular resellers that may not meet our
criteria for creditworthiness, and revenues from those resellers may not be recognizable until
receipt of payment. We also anticipate that we will derive a substantial portion of our TRM, Logger
and NCM sales through channel partners, including parties with which we have not yet developed
relationships. We expect that channel
sales will represent a substantial portion of our U.S. government and international revenues
for the foreseeable future and, we believe, a growing portion of our U.S. commercial revenues. We
may be unable to recruit additional channel partners and successfully expand our channel sales
program. If we do not successfully execute our strategy to increase channel sales, particularly to
further penetrate the mid-market and sell our appliance products, our growth prospects may be
materially and adversely affected.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our agreements with our channel partners are generally non-exclusive and many of our channel
partners have more established relationships with our competitors. If our channel partners do not
effectively market and sell our products, if they choose to place greater emphasis on products of
their own or those offered by our competitors, or if they fail to meet the needs of our customers,
our ability to grow our business and sell our products may be adversely affected, particularly in
the public sector, the mid-market and internationally. Similarly, the loss of a substantial number
of our channel partners, which may cease marketing our products and services with limited or no
notice and with little or no penalty, and our possible inability to replace them, the failure to
recruit additional channel partners, or any reduction or delay in their sales of our products and
services or conflicts between channel sales and our direct sales and marketing activities could
materially and adversely affect our results of operations. In addition, changes in the proportion
of our revenues attributable to sales by channel partners, which are more likely than direct sales
to involve collectibility concerns at the time of contract execution and product delivery, may
cause our operating results to fluctuate from period to period.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>We have limited experience with sale, manufacture, delivery, service and support of our TRM,
Logger and NCM products, and we may be unable to successfully forecast demand or fulfill orders for
these appliance products.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We introduced our appliance-based products in fiscal 2007. Prior to that time, we offered only
software products and related services, and as a result have limited experience with sales of
appliance-based products. Fulfillment of sales of our appliance products involves hardware
manufacturing, inventory, import certification and return merchandise authorization processes with
which we have limited experience. For example, if we fail to accurately predict demand and maintain
insufficient hardware inventory or excess inventory, we may be unable to timely deliver ordered
products or may have substantial inventory expense. In addition, if our equipment vendor fails to
manufacture our appliance products or fulfill orders in required volumes, in a timely manner, at a
sufficient level of quality, or at all, we may be unable to fulfill customer orders and our
operating results may fluctuate from period to period. If we underestimate warranty claims for our
appliance products, our operating expenses may be higher than we anticipate, which in turn may
adversely affect our results of operations. In addition, if we change our hardware configuration or
manufacturer, some countries may require us to reinitiate their import certification process.
Because our appliance products are new, we have limited experience with warranty claims, resulting
in limited ability to forecast warranty expense. If we are unable to successfully perform these
functions or develop a relationship with a fulfillment partner that does so for us, our sales,
operating results and financial condition may be harmed.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Because we derive a substantial majority of our revenues from ArcSight ESM and related
products and services, any failure of this product to satisfy customer demands or to achieve
increased market acceptance will harm our business, operating results, financial condition and
growth prospects.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have derived substantially all of our product revenues from ArcSight ESM and related
products. We expect this to continue for the foreseeable future. For example, in fiscal 2007, sales
of such products represented 89% of product revenues, with the balance coming from transactions
that included both our ESM products and our appliance
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">products or included only appliance products.
Prior to fiscal 2007, all of our revenues related to our ESM products. As a result, although we
introduced our complementary appliance products in fiscal 2007 to more fully serve the enterprise
security and compliance management market, our revenues and operating results will continue to
depend substantially on the demand for our ArcSight ESM product. Demand for ArcSight ESM is
affected by a number of factors beyond our control, including the timing of development and release
of new products by us and our competitors, technological change, and lower-than-expected growth or
a contraction in the worldwide market for enterprise security and compliance management solutions
or other risks described in this prospectus. If we are unable to continue to meet customer demands
or to achieve more widespread market acceptance of ArcSight ESM, our business, operating results,
financial condition and growth prospects will be adversely affected.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>If we are unable to successfully market our recently introduced products, successfully develop
new products, make enhancements to our existing products or expand our offerings into new markets,
our business may not grow and our operating results may suffer.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We introduced our TRM, Logger and NCM products in fiscal 2007 and are currently developing new
versions of these products and our ESM platform, as well as new complementary products. Our growth
strategy and future financial performance will depend, in part, on our ability to market and sell
these products and to diversify our offerings by successfully developing, timely introducing and
gaining customer acceptance of new products.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The software in our products is especially complex because it must recognize, effectively
interact with and manage a wide variety of devices and applications, and effectively identify and
respond to new and increasingly sophisticated security threats and other risks, while not impeding
the high network performance demanded by our customers. The typical development cycle for a patch
to our ESM software is one to three months, a service pack is four to six months and a new version
or major sub-version is 12 to 18&nbsp;months. Customers and industry analysts expect speedy introduction
of software to respond to new threats and risks and to add new functionality, and we may be unable
to meet these expectations. Since developing new products or new versions of, or add-ons to,
existing products is complex, the timetable for their commercial release is difficult to predict
and may vary from our historical experience, which could result in delays in their introduction
from anticipated or announced release dates. We may not offer updates as rapidly as new threats
affect our customers. If we do not quickly respond to the rapidly changing and rigorous needs of
our customers by developing and introducing on a timely basis new and effective products, upgrades
and services that can respond adequately to new security threats, our competitive position,
business and growth prospects will be harmed.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Diversifying our product offerings and expanding into new markets will require significant
investment and planning, will bring us more directly into competition with software providers that
may be better established or have greater resources than we do, may complicate our relationships
with channel and strategic partners and will entail significant risk of failure. Sales of our
Logger product and other products that we may develop and market may reduce revenues of our
flagship ESM product and our overall margin by offering a subset of features or capabilities at a
reduced price with a lower gross margin. Moreover, increased emphasis on the sale of our appliance
products, add-on products or new product lines could distract us from sales of our core ArcSight
ESM offering, negatively affecting our overall sales. If we fail or delay in diversifying our
existing offerings or expanding into new markets, or we are unsuccessful competing in these new
markets, our business, operating results and prospects may suffer.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>If we are not able to maintain and enhance our brand, our business and operating results may
be harmed.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We believe that maintaining and enhancing our brand identity is critical to our relationships
with, and to our ability to attract, new customers and partners. The successful promotion of our
brand will depend largely upon our marketing and public relations efforts, our ability to continue
to offer high-quality products and services, and our ability to successfully differentiate our
products and services from those of our competitors, especially to the extent that our competitors
integrate or bundle competitive offerings with a broader array of products and services that they
may offer. Our brand promotion activities may not be successful or yield increased revenues. In
addition, extension of our brand to products and uses different from our traditional products and
services may dilute our brand, particularly if we fail to maintain the quality of our products and
services in these new areas. Moreover, it may be difficult to maintain and enhance our brand in
connection with sales through channel or strategic partners. The promotion of our brand will
require us to make substantial expenditures, and we anticipate that the expenditures will increase
as our market becomes more competitive and as we expand into new markets. To the extent that these
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">activities yield increased revenues, these revenues may not offset the expenses we incur. If we do
not successfully maintain and enhance our brand, our business may not grow, we may have reduced
pricing power relative to competitors with stronger brands, and we could lose customers and channel
partners, all of which would harm our business, operating results and financial condition.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In addition, independent industry analysts often provide reviews of our products and services,
as well as those of our competitors, and perception of our products in the marketplace may be
significantly influenced by these reviews. We have no control over what these industry analysts
report, and because industry analysts may influence current and potential customers, our brand
could be harmed if they do not provide a positive review of our products and services or view us as
a market leader.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>We face intense competition in our market, especially from larger, better-known companies, and
we may lack sufficient financial or other resources to maintain or improve our competitive
position.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The market for enterprise security and compliance management, log archiving and response
products is intensely competitive, and we expect competition to increase in the future. A
significant number of companies have developed, or are developing, products that currently, or in
the future are likely to, compete with some or all of our products. We may not compete successfully
against our current or potential competitors, especially those with significantly greater financial
resources or brand name recognition. Companies competing with us may introduce
products that are more competitively priced, have greater performance or functionality or
incorporate technological advances that we have not yet developed or implemented.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our competitors include large software companies, software or hardware network infrastructure
companies, smaller software companies offering more narrowly focused enterprise security and
compliance management, log archiving and response products and small and large companies offering
point solutions that compete with components of our platform or individual products offered by us.
Existing competitors for a security and compliance management software platform solution such as
our ESM platform primarily are specialized, privately-held companies, such as Intellitactics and
NetForensics, as well as larger companies such as CA and Symantec, and EMC, IBM and Novell, through
their acquisitions of Network Intelligence, Micromuse and Consul, and e-Security, respectively.
Competitors for sales of our TRM and NCM products include: privately-held companies that provide
network configuration management products, such as Alterpoint and Voyence; larger providers of IT
automation software products, such as Opsware, which was recently acquired by Hewlett-Packard; and
diversified IT security vendors. Current competitors for sales of our Logger product include
specialized, privately-held companies, such as LogLogic and Sensage. In addition to these current
competitors, we expect to face competition for our appliance products from existing large,
diversified software and hardware companies, from specialized, smaller companies and from new
companies that may seek to enter this market.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A greater source of competition is represented by the custom efforts undertaken by potential
customers to analyze and manage the information produced from their existing devices and
applications to identify and remediate threats. Many companies, in particular large corporate
enterprises, have developed internally software that is an alternative to our enterprise security
and compliance management, log archiving and response products. Wide adoption of our Common Event
Format, which we are promoting as a standard for event logs generated by security and other
products, may facilitate this internal development. It may also allow our competitors to offer
products with a degree of compatibility similar to ours or may facilitate new entrants into our
business. New competitors may emerge and rapidly acquire significant market share due to factors
such as greater brand name recognition, larger installed customer bases and significantly greater
financial, technical, marketing and other resources and experience. If these new competitors are
successful, we would lose market share and our revenues would likely decline.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Mergers or consolidations among these competitors, or acquisitions of our competitors by large
companies, present heightened competitive challenges to our business. For example, in recent years
IBM has acquired Internet Security Systems, Inc., Micromuse and Consul, Novell acquired e-Security,
EMC acquired Network Intelligence and Hewlett-Packard acquired Opsware. We believe that the trend
toward consolidation in our industry will continue. These acquisitions will make these combined
entities potentially more formidable competitors to us if their products and offerings are
effectively integrated. Continued industry consolidation may impact customers&#146; perceptions of the
viability of smaller or even medium-sized software firms and consequently customers&#146; willingness to
purchase from those firms.
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Many of our existing and potential competitors enjoy substantial competitive advantages, such
as:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>greater name recognition and longer operating histories;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>larger sales and marketing budgets and resources;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the capacity to leverage their sales efforts and marketing expenditures across a broader
portfolio of products;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>broader distribution and established relationships with distribution partners;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>access to larger customer bases;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>greater customer support;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>greater resources to make acquisitions;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>lower labor and development costs; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>substantially greater financial, technical and other resources.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">As a result, they may be able to adapt more quickly and effectively to new or emerging technologies
and changing opportunities, standards or customer requirements. In addition, these companies have
reduced, and could continue to reduce, the price of their enterprise security and compliance management, log archiving and
response products and managed security services, which intensifies pricing pressures within our
market.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Increased competition could result in fewer customer orders, price reductions, reduced
operating margins and loss of market share. Our larger competitors also may be able to provide
customers with different or greater capabilities or benefits than we can provide in areas such as
technical qualifications, geographic presence, the ability to provide a broader range of services
and products, and price. In addition, large competitors may have more extensive relationships
within large enterprises, the federal government or foreign governments, which may provide them
with an advantage in competing for business with those potential customers. Our ability to compete
will depend upon our ability to provide better performance than our competitors at a competitive
price. We may be required to make substantial additional investments in research, development,
marketing and sales in order to respond to competition, and we cannot assure you that we will be
able to compete successfully in the future.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>We may not be able to compete effectively with companies that integrate or bundle products
similar to ours with their other product offerings.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Many large, integrated software companies offer suites of products that include software
applications for security and compliance management. In addition, hardware vendors, including
diversified, global concerns, offer products that address the security and compliance needs of the
enterprises and government agencies that comprise our target market. Further, several companies
currently sell software products that our customers and potential customers have broadly adopted,
which may provide them a substantial advantage when they sell products that perform functions
substantially similar to some of our products. Competitors that offer a large array of security or
software products may be able to offer products or functionality similar to ours at a more
attractive price than we can by integrating or bundling them with their other product offerings.
The trend toward consolidation in our industry increases the likelihood of competition based on
integration or bundling. Customers may also increasingly seek to consolidate their enterprise-level
software purchases with a small number of larger companies that can purport to satisfy a broad
range of their requirements. If we are unable to sufficiently differentiate our products from the
integrated or bundled products of our competitors, such as by offering enhanced functionality,
performance or value, we may see a decrease in demand for those products, which would adversely
affect our business, operating results and financial condition. Similarly, if customers seek to
concentrate their software purchases in the product portfolios of a few large providers, we may be
at a competitive disadvantage.
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>We face risks related to customer outsourcing to managed security service providers.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Some of our customers have outsourced the management of their IT departments or the network
security operations function to large system integrators or managed security service providers, or
MSSPs. If this trend continues, our established customer relationships could be disrupted and our
products could be displaced by alternative system and network protection solutions offered by
system integrators or MSSPs. Significant product displacements could impact our revenues and have a
negative effect on our business. While to date we have developed a number of successful
relationships with MSSPs, they may develop or acquire their own technologies rather than purchasing
our products for use in provision of managed security services.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Our business depends, in part, on sales to the public sector, and significant changes in the
contracting or fiscal policies of the public sector could have a material adverse effect on our
business.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We derive a portion of our revenues from contracts with federal, state, local and foreign
governments and government agencies, and we believe that the success and growth of our business
will continue to depend on our successful procurement of government contracts. For example, we have
historically derived, and expect to continue to derive, a significant portion of our revenues from
sales to agencies of the U.S. federal government, either directly by us or through systems
integrators and other resellers. In fiscal 2006 and 2007, we derived 38% and 32% of our revenues,
respectively, from contracts with agencies of the U.S. federal government. Accordingly:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>changes in fiscal or contracting policies or decreases in available government funding;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>changes in government programs or applicable requirements;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the adoption of new laws or regulations or changes to existing laws or regulations;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>changes in political or social attitudes with respect to security issues;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>potential delays or changes in the government appropriations process; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>delays in the payment of our invoices by government payment offices</TD>
</TR>

</TABLE>
</DIV>
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">could cause governments and governmental agencies to delay or refrain from purchasing the products
and services that we offer in the future or otherwise have an adverse effect on our business,
financial condition and results of operations.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Failure to comply with laws or regulations applicable to our business could cause us to lose
U.S. government customers or our ability to contract with the U.S. government.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We must comply with laws and regulations relating to the formation, administration and
performance of U.S. government contracts, which affect how we and our channel partners do business
in connection with U.S. federal agencies. These laws and regulations may impose added costs on our
business, and failure to comply with these or other applicable regulations and requirements,
including non-compliance in the past, could lead to claims for damages from our channel partners,
penalties, termination of contracts and suspension or debarment from government contracting for a
period of time. Any such damages, penalties, disruption or limitation in our ability to do business
with the U.S. federal government could have a material adverse effect on our business, operating
results and financial condition.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Our government contracts may limit our ability to move development activities overseas, which
may impair our ability to optimize our software development costs and compete for non-government
contracts.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Increasingly, software development is being shifted to lower-cost countries, such as India.
However, some contracts with U.S. government agencies require that at least 50% of the components
of each of our products be of U.S. origin. Consequently, our ability to optimize our software
development by conducting it overseas may be hampered. Some of our competitors do not rely on
contracts with the U.S. government to the same degree as we do
</DIV>

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</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">and may develop software off-shore.
If we are unable to develop software as cost-effectively as our competitors, our ability to compete
for our non-government customers may be reduced and our customer sales may decline, resulting in
decreased revenues.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Real or perceived errors, failures or bugs in our products could adversely affect our
operating results and growth prospects.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Because we offer very complex products, undetected errors, failures or bugs may occur,
especially when products are first introduced or when new versions are released. Our products are
often installed and used in large-scale computing environments with different operating systems,
system management software and equipment and networking configurations, which may cause errors or
failures in our products or may expose undetected errors, failures or bugs in our products. Despite
testing by us, errors, failures or bugs may not be found in new products or releases until after
commencement of commercial shipments. In the past, we have discovered software errors, failures,
and bugs in some of our product offerings after their introduction.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In addition, our products could be perceived to be ineffective for a variety of reasons
outside of our control. Hackers could circumvent our customers&#146; security measures, and customers
may misuse our products resulting in a security breach or perceived product failure. We provide a
top-level enterprise security and compliance management solution that integrates a wide variety of
other elements in a customer&#146;s IT and security infrastructure, and we may receive blame for a
security breach that was the result of the failure of one of the other elements.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Real or perceived errors, failures or bugs in our products could result in negative publicity,
loss of or delay in market acceptance of our products, loss of competitive position, or claims by
customers for losses sustained by them. In such an event, we may be required, or may choose, for
customer relations or other reasons, to expend additional resources in order to help correct the
problem. Our product liability insurance may not be adequate. Further, provisions in our license
agreements with end users that limit our exposure to liabilities arising from such claims may not
be enforceable in some circumstances or may not fully protect us against such claims and related
liabilities and costs. Defending a lawsuit, regardless of its merit, could be costly and could
limit the amount of time that management has available for day-to-day execution and strategic
planning or other matters.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Many of our end-user customers use our products in applications that are critical to their
businesses and may have a greater sensitivity to defects in our products than to defects in other,
less critical, software products. In addition, if an actual or perceived breach of information
integrity or availability occurs in one of our end-user customer&#146;s
systems, regardless of whether the breach is attributable to our products, the market
perception of the effectiveness of our products could be harmed. Alleviating any of these problems
could require significant expenditures of our capital and other resources and could cause
interruptions, delays or cessation of our product licensing, which could cause us to lose existing
or potential customers and could adversely affect our operating results and growth prospects.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In addition, because we are a leading provider of enterprise security products and services,
&#147;hackers&#148; and others may try to access our data or compromise our systems. If we are the subject of
a successful attack, then our reputation in the industry and with current and potential customers
may be compromised and our sales and operating results could be adversely affected.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Incorrect or improper use of our complex products, our failure to properly train customers on
how to utilize our products or our failure to properly provide consulting and implementation
services could result in customer dissatisfaction and negatively affect our results of operations
and growth prospects.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our ESM, TRM and NCM products are complex and are deployed in a wide variety of network
environments. The proper use of our products, particularly our ESM platform, requires training of
the end user. If our software products are not used correctly or as intended, inadequate
performance may result. For example, among other things, deployment of our ESM platform requires
categorization of IT assets and assignment of business or criticality values for each, selection or
configuration of one of our pre-packaged rule sets, user interfaces and network utilization
parameters, and deployment of connectors for the various devices and applications from which event
data are to be collected. Our customers or our professional services personnel may incorrectly
implement or use our products. Our products may also be intentionally misused or abused by
customers or their employees or third parties who obtain
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">access and use of our products. For
example, a person obtaining inappropriate access to our TRM product could use it to shut down
network resources or open breaches in network security. Because our customers rely on our product,
services and maintenance offerings to manage a wide range of sensitive security, network and
compliance functions, the incorrect or improper use of our products, our failure to properly train
customers on how to efficiently and effectively use our products or our failure to properly provide
consulting and implementation services and maintenance to our customers may result in negative
publicity or legal claims against us.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In addition, if customer personnel are not well trained in the use of our products, customers
may defer the deployment of our products or may not deploy them at all. If there is substantial
turnover of the customer personnel responsible for implementation and use of our ESM products, our
product may go unused and our ability to make additional sales may be substantially limited.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>If we are unable to maintain effective relationships with our technology partners, we may not
be able to support the interoperability of our software with a wide variety of security and other
products and our business may be harmed.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A key feature of ArcSight ESM is that it provides out-of-the-box support for many third-party
devices and applications that the customer may use in its business and technology infrastructure.
To provide effective interoperability, we work with individual product vendors to develop our
SmartConnectors, which allow our ESM platform to interface with these products. In addition, we are
promoting the adoption of our Common Event Format as a standard way to format system log events.
Some of these technology partners are current or potential competitors of ours. If we are unable to
develop and maintain effective relationships with a wide variety of technology partners, if
companies adopt more restrictive policies with respect to, or impose unfavorable terms and
conditions on, access to their products, or if our Common Event Format is not widely adopted, we
may not be able to continue to provide our customers with a high degree of interoperability with
their existing IT and business infrastructure, which could reduce our sales and adversely affect
our business, operating results and financial condition.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Our international sales and operations subject us to additional risks that can adversely
affect our operating results.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In fiscal 2006 and 2007, we derived 21% and 23% of our revenues, respectively, from customers
outside the United States, and we are continuing to expand our international operations as part of
our growth strategy. We currently have sales personnel and sales and support operations in Canada,
China, Germany, Hong Kong, Japan, Singapore, South Korea and the United Kingdom. Our international
operations subject us to a variety of risks, including:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>increased management, travel, infrastructure and legal compliance costs associated with
having multiple international operations;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>longer payment cycles and difficulties in collecting accounts receivable, especially in
emerging markets, and the likelihood that revenues from international resellers and
customers may need to be recognized when cash is received, at least until satisfactory
payment history has been established;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the need to localize our products and licensing programs for international customers;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>differing regulatory and legal requirements and possible enactment of additional
regulations or restrictions on the use, import or export of encryption technologies and our
appliance-based products, which could delay or prevent the sale or use of our products in
some jurisdictions;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>reduced protection for intellectual property rights in some countries; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>overlapping of different tax regimes.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Any of these risks could harm our international operations and reduce our international sales,
adversely affecting our business, operating results and financial condition and growth prospects.
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Our business in countries with a history of corruption and transactions with foreign
governments increase the risks associated with our international activities.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As we operate and sell internationally, we are subject to the U.S. Foreign Corrupt Practices
Act, or the FCPA, and other laws that prohibit improper payments or offers of payments to foreign
governments and their officials and political parties by U.S. and other business entities for the
purpose of obtaining or retaining business. We have operations, deal with and make sales to
governmental customers in countries known to experience corruption, particularly certain emerging
countries in East Asia, Eastern Europe and the Middle East, and further expansion of our
international selling efforts may involve additional regions, including Africa and South America.
Our activities in these countries create the risk of unauthorized payments or offers of payments by
one of our employees, consultants, sales agents or channel partners that could be in violation of
various laws including the FCPA, even though these parties are not always subject to our control.
We have implemented safeguards to discourage these practices by our employees, consultants, sales
agents and channel partners. However, our existing safeguards and any future improvements may prove
to be less than effective, and our employees, consultants, sales agents or channel partners may
engage in conduct for which we might be held responsible. Violations of the FCPA may result in
severe criminal or civil sanctions, including suspension or debarment from U.S. government
contracting, and we may be subject to other liabilities, which could negatively affect our
business, operating results and financial condition.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Failure to protect our intellectual property rights could adversely affect our business.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our success depends, in part, on our ability to protect proprietary methods and technologies
that we develop under patent and other intellectual property laws of the United States, so that we
can prevent others from using our inventions and propriety information. If we fail to protect our
intellectual property rights adequately, our competitors might gain access to our technology, and
our business might be harmed. In addition, defending our intellectual property rights might entail
significant expenses. Any of our patents, copyrights, trademarks or other intellectual property
rights may be challenged by others or invalidated through administrative process or litigation. We
have two issued patents and 29 patent applications pending in the United States, and have four
international patent applications and 13 patent applications in foreign countries pending, based on
five U.S. patent applications. Our issued patents may not provide us with any competitive
advantages or may be challenged by third parties, and our patent applications may never issue at
all. Additionally, the process of obtaining patent protection is expensive and time-consuming, and
we may not be able to prosecute all necessary or desirable patent applications at a reasonable cost
or in a timely manner. Even if issued, there can be no assurance that these patents will adequately
protect our intellectual property, as the legal standards relating to the validity, enforceability
and scope of protection of patent and other intellectual property rights are uncertain.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Any patents that are issued may subsequently be invalidated or otherwise limited, enabling
other companies to better develop products that compete with ours, which could adversely affect our
competitive business position, business prospects and financial condition. In addition, issuance of
a patent does not guarantee that we have a right to practice the patented invention. Patent
applications in the U.S. are typically not published until 18&nbsp;months after
filing, or in some cases not at all, and publications of discoveries in industry-related
literature lag behind actual discoveries. We cannot be certain that we were the first to make the
inventions claimed in our issued patents or pending patent applications or otherwise used in our
products, that we were the first to file for protection in our patent applications, or that third
parties do not have blocking patents that could be used to prevent us from marketing or practicing
our patented products or technology. Effective patent, trademark, copyright and trade secret
protection may not be available to us in every country in which our products and services are
available. The laws of some foreign countries may not be as protective of intellectual property
rights as those in the United States, and mechanisms for enforcement of intellectual property
rights may be inadequate. Accordingly, despite our efforts, we may be unable to prevent third
parties from infringing upon or misappropriating our intellectual property.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We might be required to spend significant resources to monitor and protect our intellectual
property rights. We may initiate claims or litigation against third parties for infringement of our
proprietary rights or to establish the validity of our proprietary rights. Any litigation, whether
or not it is resolved in our favor, could result in significant expense to us and divert the
efforts of our technical and management personnel, which may adversely affect our business,
operating results and financial condition.
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Confidentiality agreements with employees and others may not adequately prevent disclosure of
trade secrets and other proprietary information.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In order to protect our proprietary technology, processes and methods, we rely in part on
confidentiality agreements with our corporate partners, employees, consultants, advisors and
others. These agreements may not effectively prevent disclosure of confidential information and may
not provide an adequate remedy in the event of unauthorized disclosure of confidential information.
In addition, others may independently discover trade secrets and proprietary information, and in
these cases we would not be able to assert any trade secret rights against those parties. Costly
and time-consuming litigation could be necessary to enforce and determine the scope of our
proprietary rights, and failure to obtain or maintain trade secret protection could adversely
affect our competitive business position.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>We may in the future be subject to intellectual property rights claims, which are extremely
costly to defend, could require us to pay significant damages and could limit our ability to use
certain technologies.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Companies in the software, networking and technology industries, including some of our current
and potential competitors, own large numbers of patents, copyrights, trademarks and trade secrets
and frequently enter into litigation based on allegations of infringement or other violations of
intellectual property rights. In addition, many of these companies have the capability to dedicate
substantially greater resources to enforce their intellectual property rights and to defend claims
that may be brought against them. The litigation may involve patent holding companies or other
adverse patent owners who have no relevant product revenues and against whom our potential patents
may provide little or no deterrence. We have received, and may in the future receive, notices that
claim we have misappropriated or misused other parties&#146; intellectual property rights, and, to the
extent we gain greater visibility, we face a higher risk of being the subject of intellectual
property infringement claims, which is not uncommon with respect to software technologies in
general and network security technology in particular. There may be third-party intellectual
property rights, including issued or pending patents, that cover significant aspects of our
technologies or business methods. Any intellectual property claims, with or without merit, could be
very time-consuming, could be expensive to settle or litigate and could divert our management&#146;s
attention and other resources. These claims could also subject us to significant liability for
damages, potentially including treble damages if we are found to have willfully infringed patents
or copyrights. These claims could also result in our having to stop using technology found to be in
violation of a third party&#146;s rights. We might be required to seek a license for the intellectual
property, which may not be available on reasonable terms or at all. Even if a license were
available, we could be required to pay significant royalties, which would increase our operating
expenses. As a result, we may be required to develop alternative non-infringing technology, which
could require significant effort and expense. If we cannot license or develop technology for any
infringing aspect of our business, we would be forced to limit or stop sales of one or more of our
products or product features and may be unable to compete effectively. Any of these results would
harm our business, operating results and financial condition.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>We rely on software licensed from other parties, the loss of which could increase our costs
and delay software shipments.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We utilize various types of software licensed from unaffiliated third parties in order to
provide certain elements of our product offering. For example, we license database software from
Oracle that we integrate with our ESM product. Our agreement with Oracle permits us to distribute
Oracle software in our products to our customers and
partners worldwide through May&nbsp;2009. See &#147;Business&#151;Intellectual Property&#151;Oracle License
Agreement&#148; in the Prospectus. Any errors or defects in this third-party software could result in errors that could
harm our business. In addition, licensed software may not continue to be available on commercially
reasonable terms, or at all. While we believe that there are currently adequate replacements for
third-party software, any loss of the right to use any of this software could result in delays in
producing or delivering our software until equivalent technology is identified and integrated,
which could harm our business. Our business would be disrupted if any of the software we license
from others or functional equivalents of this software were either no longer available to us or no
longer offered to us on commercially reasonable terms. In either case, we would be required to
either redesign our products to function with software available from other parties or to develop
these components ourselves, which would result in increased costs and could result in delays in our
product shipments and the release of new product offerings. Furthermore, we might be forced to
limit the features available in our current or future products. If we fail to maintain or
renegotiate
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">any of these software licenses, we could face significant delays and diversion of
resources in attempting to license and integrate a functional equivalent of the software.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Some of our products contain &#147;open source&#148; software, and any failure to comply with the terms
of one or more of these open source licenses could negatively affect our business.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Certain of our products are distributed with software licensed by its authors or other third
parties under &#147;open source&#148; licenses. Some of these licenses contain requirements that we make
available source code for modifications or derivative works we create based upon the open source
software, and that we license these modifications or derivative works under the terms of a
particular open source license or other license granting third parties certain rights of further
use. If we combine our proprietary software with open source software in a certain manner, we
could, under certain of the open source licenses, be required to release the source code of our
proprietary software. In addition to risks related to license requirements, usage of open source
software can lead to greater risks than use of third-party commercial software, as open source
licensors generally do not provide warranties or controls on origin of the software. We have
established processes to help alleviate these risks, including a review process for screening
requests from our development organization for the use of open source, and we plan to implement the
use of software tools to review our source code for potential inclusion of open source, but we
cannot be sure that all open source is submitted for approval prior to use in our products or that
such software tools will be effective. In addition, open source license terms may be ambiguous and
many of the risks associated with usage of open source cannot be eliminated, and could, if not
properly addressed, negatively affect our business. If we were found to have inappropriately used
open source software, we may be required to re-engineer our products, to release proprietary source
code, to discontinue the sale of our products in the event re-engineering could not be accomplished
on a timely basis or to take other remedial action that may divert resources away from our
development efforts, any of which could adversely affect our business, operating results and
financial condition.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Indemnity provisions in various agreements potentially expose us to substantial liability for
intellectual property infringement and other losses.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our agreements with customers and channel partners include indemnification provisions, under
which we agree to indemnify them for losses suffered or incurred as a result of claims of
intellectual property infringement and, in some cases, for damages caused by us to property or
persons. The term of these indemnity provisions is generally perpetual after execution of the
corresponding product sale agreement. Large indemnity payments could harm our business, operating
results and financial condition.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Changes or reforms in the law or regulatory landscape could diminish the demand for our
solutions, and could have a negative impact on our business.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;One factor that drives demand for our products and services is the legal and regulatory
framework in which our customers operate. Laws and regulations are subject to drastic changes, and
these could either help or hurt the demand for our products. Thus, some changes in the law and
regulatory landscape, such as legislative reforms that limit corporate compliance obligations,
could significantly harm our business.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>If we are unable to attract and retain personnel, our business would be harmed.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We depend on the continued contributions of our senior management and other key personnel, in
particular Robert Shaw and Hugh Njemanze, the loss of whom could harm our business. All of our
executive officers and key employees are at-will employees, which means they may terminate their
employment relationship with us at any time. We do not maintain a key-person life insurance policy
on any of our officers or other employees.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our future success also depends on our ability to identify, attract and retain highly skilled
technical, managerial, finance and other personnel, particularly in our sales and marketing,
research and development and professional service departments. We face intense competition for
qualified individuals from numerous security, software and other technology companies. In addition,
competition for qualified personnel is particularly intense in the San Francisco Bay Area, where
our headquarters are located. Often, significant amounts of time and resources are required to
train technical, sales and other personnel. Qualified individuals are in high demand. We may incur
significant costs to attract and retain them, and we may lose new employees to our competitors or
other technology
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->I-16<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">companies before we realize the benefit of our investment in recruiting and
training them. We may be unable to attract and retain suitably qualified individuals who are
capable of meeting our growing technical, operational and managerial requirements, on a timely
basis or at all, and we may be required to pay increased compensation in order to do so. If we are
unable to attract and retain the qualified personnel we need to succeed, our business would suffer.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Volatility or lack of performance in our stock price may also affect our ability to attract
and retain our key employees. Many of our senior management personnel and other key employees have
become, or will soon become, vested in a substantial amount of stock or stock options. Employees
may be more likely to leave us if the shares they own or the shares underlying their vested options
have significantly appreciated in value relative to the original purchase prices of the shares or
the exercise prices of the options, or if the exercise prices of the options that they hold are
significantly above the market price of our common stock. If we are unable to retain our employees,
our business, operating results and financial condition would be harmed.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>If we fail to manage future growth effectively, our business would be harmed.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We operate in an emerging market and have experienced, and may continue to experience,
significant expansion of our operations. In particular, we grew from 204 employees as of April&nbsp;30,
2006 to 308 employees as of October&nbsp;31, 2007. This growth has placed, and will continue to place, a
strain on our employees, management systems and other resources. Managing our growth will require
significant expenditures and allocation of valuable management resources. If we fail to achieve the
necessary level of efficiency in our organization as it grows, our business, operating results and
financial condition would be harmed.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Future acquisitions could disrupt our business and harm our financial condition and results of
operations.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We completed the acquisition of substantially all of the assets of Enira Technologies, LLC in
June&nbsp;2006, and may pursue additional acquisitions in the future, any of which could be material to
our business, operating results and financial condition. Our ability as an organization to
successfully acquire and integrate technologies or businesses on a larger scale is unproven.
Acquisitions involve many risks, including the following:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>an acquisition may negatively impact our results of operations because it may require us
to incur charges and substantial debt or liabilities, may cause adverse tax consequences,
substantial depreciation or deferred compensation charges, may result in acquired in-process
research and development expenses or in the future may require the amortization, write-down
or impairment of amounts related to deferred compensation, goodwill and other intangible
assets, or may not generate sufficient financial return to offset acquisition costs;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>we may encounter difficulties or unforeseen expenditures in integrating the business,
technologies, products, personnel or operations of any company that we acquire, particularly
if key personnel of the acquired company decide not to work for us;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>an acquisition may disrupt our ongoing business, divert resources, increase our expenses
and distract our management;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>an acquisition may result in a delay or reduction of customer purchases for both us and
the company acquired due to customer uncertainty about continuity and effectiveness of
service from either company; and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>an acquisition may involve the entry into geographic or business markets in which we have
little or no prior experience.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Establishing, maintaining and improving our financial controls and the requirements of being a
public company may strain our resources and divert management&#146;s attention, and if we fail to
establish and maintain proper internal controls, our ability to produce accurate financial
statements or comply with applicable regulations could be impaired.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As a public company, we will be subject to the reporting requirements of the Securities
Exchange Act of 1934, or the Exchange Act, the Sarbanes-Oxley Act of 2002, or the Sarbanes-Oxley
Act, and the rules and regulations of The NASDAQ Stock Market. The requirements of these rules and
regulations will increase our legal, accounting and
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->I-17<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">financial compliance costs, will make some
activities more difficult, time-consuming and costly and may also place undue strain on our
personnel, systems and resources.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Sarbanes-Oxley Act requires, among other things, that we maintain effective disclosure
controls and procedures and internal control over financial reporting. Given our history of
material weaknesses, achieving and maintaining effective controls may be particularly challenging
for us. See &#147;&#151;A material weakness in our internal control over financial reporting was identified
during the audit of our most recent annual financial statements that, if not remediated, could
affect our ability to prepare timely and accurate financial reports, which could cause investors to
lose confidence in our reported financial information and have a negative effect on the trading
price of our stock.&#148;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;While we are in the process of remediating the material weakness identified during the audit
of our fiscal 2007 financial statements, we cannot estimate how long it will take to reach a
determination that our internal control over financial reporting is effective. Further, we are in
the early stages of developing our disclosure controls and procedures &#151; the controls and other
procedures that are designed to ensure that information required to be disclosed by us in the
reports that we file with the Securities and Exchange Commission, or SEC, is recorded, processed,
summarized and reported within the time periods specified in SEC&#146;s rules and forms. Even if we
develop effective controls, these new controls and our currently effective controls may become
inadequate because of changes in conditions, and the degree of compliance with the policies or
procedures may deteriorate. Further, additional weaknesses in our internal controls may be
discovered in the future. Any failure to develop or maintain effective controls, or any
difficulties encountered in their implementation or improvement, could harm our operating results
or cause us to fail to meet our reporting obligations and may result in a restatement of our prior
period financial statements. Any failure to implement and maintain effective internal controls also
could adversely affect the results of periodic management evaluations and annual auditor
attestation reports regarding the effectiveness of our internal control over financial reporting
that we will be required to include in our periodic reports filed with the SEC beginning for our
fiscal year ending April&nbsp;30, 2009 under Section&nbsp;404 of the Sarbanes-Oxley Act. Ineffective
disclosure controls and procedures and internal control over financial reporting could also cause
investors to lose confidence in our reported financial and other information, which would likely
have a negative effect on the trading price of our common stock.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In order to maintain and improve the effectiveness of our disclosure controls and procedures
and internal control over financial reporting, we will need to expend significant resources and
provide significant management oversight. We have a substantial effort ahead of us to implement
appropriate processes, document our system of internal control over relevant processes, assess
their design, remediate any deficiencies identified and test their operation. As a result,
management&#146;s attention may be diverted from other business concerns, which could harm our business,
operating results and financial condition. These efforts will also involve substantial
accounting-related costs. In addition, if we are unable to continue to meet these requirements, we
may not be able to remain listed on The NASDAQ Global Market.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Implementing any appropriate changes to our internal controls may require specific compliance
training of our directors, officers and employees, entail substantial costs in order to modify our
existing accounting systems, and take a significant period of time to complete. These changes may
not, however, be effective in maintaining the adequacy of our internal controls, and any failure to
maintain that adequacy, or consequent inability to produce accurate financial statements on a
timely basis, could increase our operating costs and could materially impair our ability to operate
our business. In the event that we are not able to demonstrate compliance with Section&nbsp;404 of the
Sarbanes-Oxley Act in a timely manner, that our internal controls are perceived as inadequate or
that we are unable to produce timely or accurate financial statements, investors may lose
confidence in our operating results and our stock price could decline.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We also have not yet implemented a complete disaster recovery plan or business continuity plan
for our accounting and related information technology systems. Any disaster could therefore
materially impair our ability to maintain timely accounting and reporting.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Sarbanes-Oxley Act and the rules and regulations of The NASDAQ Stock Market will make it
more difficult and more expensive for us to maintain directors&#146; and officers&#146; liability insurance,
and we may be required to accept reduced coverage or incur substantially higher costs to maintain
or increase coverage. If we are unable to maintain adequate directors&#146; and officers&#146; insurance, our
ability to recruit and retain qualified directors, especially those
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->I-18<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">directors who may be considered
independent for purposes of The NASDAQ Stock Market rules, and officers may
be curtailed.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>A material weakness in our internal control over financial reporting was identified during the
audit of our most recent annual financial statements that, if not remediated, could affect our
ability to prepare timely and accurate financial reports, which could cause investors to lose
confidence in our reported financial information and have a negative effect on the trading price of
our stock.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Effective internal control over financial reporting is necessary for us to provide reliable
financial reports, to prevent fraud and to operate successfully as a public company. If we cannot
provide reliable financial reports or prevent fraud, our operating results may be misstated and our
reputation may be harmed.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;During the audit of our financial statements for fiscal 2004, 2005, 2006 and 2007, &#147;material
weaknesses&#148; in our internal control over financial reporting were identified, and, in the future,
we may identify additional material weaknesses or other areas of our internal control over
financial reporting that need improvement. The material weakness identified in connection with the
preparation of our financial statements for fiscal 2007 relates to internal review, primarily due
to failure of the review process of accounting computations and reconciliations prepared by third
parties as part of the preparation of our fiscal 2007 financial statements. This weakness led to
four adjustments to our financial statements. The largest such adjustment resulted from a failure
to detect an overstatement of stock-based compensation expense of $0.3&nbsp;million under Statement of
Financial Accounting Standards No.&nbsp;123(R), <I>Share Based Payment, </I>in calculations prepared by a
third-party service provider.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We are in the process of remediating the material weakness identified during the audit of our
fiscal 2007 financial statements, but have not yet been able to complete our remediation efforts.
See &#147;Management&#146;s Discussion and Analysis of Financial Condition and Results of
Operations&#151;Internal Control Over Financial Reporting&#148; in
the Prospectus. It will take additional time to design,
implement and test the controls and procedures required to enable our management to conclude that
our disclosure controls and our internal control over financial reporting are effective. We cannot
at this time estimate how long it will take to complete our remediation efforts. In addition, we
cannot assure you that additional material weaknesses in our internal control over financial
reporting will not be identified in the future. Any failure to remediate the material weakness that
has been identified or to implement and maintain effective disclosure controls and internal control
over financial reporting could cause us to fail to meet our reporting obligations or result in
material misstatements in our financial statements.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>We may not be able to utilize a significant portion of our net operating loss carry-forwards,
which could adversely affect our operating results.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Due to prior period losses, we have generated significant federal and state net operating loss
carry-forwards, which expire beginning in fiscal 2021 and fiscal 2013, respectively. U.S. federal
and state income tax laws limit the amount of these carry-forwards we can utilize upon a greater
than 50% cumulative shift of stock ownership over a three-year period, including shifts due to the
issuance of additional shares of our common stock, or securities convertible into our common stock.
We have previously experienced a greater than 50% shift in our stock ownership, which has limited
our ability to use a portion of our net operating loss carry-forwards, and we may experience
subsequent shifts in our stock ownership. Accordingly, there is a risk that our ability to use our
existing carry-forwards in the future could be further limited and that existing carry-forwards
would be unavailable to offset future income tax liabilities, which would adversely affect our
operating results.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B><I>Governmental export or import controls could subject us to liability or limit our ability to
compete in foreign markets.</I></B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Our products incorporate encryption technology and may be exported outside the U.S. only if we
obtain an export license or qualify for an export license exception. Compliance with applicable
regulatory requirements regarding the export of our products, including with respect to new
releases of our products, may create delays in the introduction of our products in international
markets, prevent our customers with international operations from deploying our products throughout
their global systems or, in some cases, prevent the export of our products to some countries
altogether. In addition, various countries regulate the import of our appliance-based products and
have enacted laws that could limit our ability to distribute products or could limit our customers&#146;
ability to implement our products in
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->I-19<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left" style="font-size: 10pt; margin-top: 6pt">those countries. Any new export or import restrictions, new
legislation or shifting approaches in the enforcement or scope of existing regulations, or in the
countries, persons or technologies targeted by such regulations, could result in decreased use of
our products by existing customers with international operations, declining adoption of our
products by new customers with international operations and decreased revenues. If we fail to
comply with export and import regulations, we may be denied export privileges, be subjected to
fines or other penalties and our products
may be denied entry into other countries.
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->I-20<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left">
<A name="108"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>USE OF PROCEEDS</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If shares are resold by the Stockholders, ArcSight will receive no proceeds from such sale.
The shares will be offered for the respective accounts of the Stockholders.
</DIV>
<DIV align="left">
<A name="109"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>DILUTION</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;If you invest in our common stock, your interest will be diluted to the extent of the
difference between the price that you pay for our common stock and the pro forma net tangible book
value of our common stock after our underwritten public offering. As of October&nbsp;31, 2007 and after
giving effect to the sale by us of the 6,000,000 shares of common stock offered by us in our
initial public offering at an initial public offering price of $9.00 per share and after
deducting the underwriting discounts and commissions and the estimated offering expenses, our pro
forma as adjusted net tangible book value was approximately
$44.5&nbsp;million, or $1.44 per share.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->I-21<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left">
<A name="110"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>SELLING STOCKHOLDERS</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The shares that may be offered from time to time by the Stockholders named below pursuant to
this prospectus have been acquired by the Stockholders upon exercise of options granted under the
Plans.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following table sets forth the name of each Stockholder, the amount of common stock
beneficially owned by him or her as of December&nbsp;31, 2007, the amount of common stock that he or
she may offer and the amount of common stock to be beneficially owned by him or her subsequent to
this offering. Since each Stockholder may sell all or some portion of the shares of common stock
beneficially owned, only an estimate (assuming that he or she sells all of the shares offered
hereby) can be given as to the number of shares of common stock that will be beneficially owned by
him or her after this offering. To our knowledge, none of the Stockholders is a broker-dealer or an
affiliate of a broker-dealer.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Beneficial ownership is determined in accordance with the rules of the SEC and thus represents
voting or investment power with respect to our securities. Unless otherwise indicated below, to our
knowledge, the persons named in the table have sole voting and sole investment power with respect
to all shares beneficially owned, subject to community property laws where applicable. Shares of
our common stock subject to options that are currently exercisable or exercisable within 60&nbsp;days of
December&nbsp;31, 2007 are deemed to be outstanding and to be beneficially owned by the person holding
the options for the purpose of computing the percentage ownership of that person but are not
treated as outstanding for the purpose of computing the percentage ownership of any other person.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Percentage ownership of our common stock before this offering is based on 24,980,715 shares
of our common stock outstanding as of December&nbsp;31, 2007, which includes 13,996,097 shares of
common stock resulting from the automatic conversion of all outstanding shares of our preferred
stock upon the completion of our initial public offering, as if this conversion had occurred as of
December&nbsp;31, 2007, and assumes our sale of 6,000,000 shares in our initial public offering and no
exercise of the underwriters&#146; option to purchase additional shares of our common stock in our
initial public offering.
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="40%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="5%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Number of</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>Shares Beneficially</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3"><B>Shares</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7"><B>Shares Beneficially</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000"><B>Owned Before Offering</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 0px solid #000000"><B>Registered</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="7" style="border-bottom: 1px solid #000000"><B>Owned After Offering</B></TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="left" style="border-bottom: 1px solid #000000"><B>Name of Beneficial Owners</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Number</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Percentage</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Number</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Number</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" colspan="3" style="border-bottom: 1px solid #000000"><B>Percentage</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Hugh S. Njemanze<SUP style="font-size: 85%; vertical-align: text-top">(1)</SUP></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1,135,391</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">3.6</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">725,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">410,391</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.3</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Kevin P. Mosher<SUP style="font-size: 85%; vertical-align: text-top">(2)</SUP></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">472,891</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">375,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">52,891</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">*</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom" style="background: #cceeff">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Stewart Grierson<SUP style="font-size: 85%; vertical-align: text-top">(3)</SUP></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">347,891</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">1.1</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">50,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">297,891</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">*</TD>
    <TD>&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD><DIV style="margin-left:15px; text-indent:-15px">Lawrence F. Lunetta<SUP style="font-size: 85%; vertical-align: text-top">(4)</SUP></DIV></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">176,406</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">*</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">118,750</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">60,656</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="right">*</TD>
    <TD>&nbsp;</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>



<DIV align="left">
<DIV style="font-size: 3pt; margin-top: 16pt; width: 18%; border-top: 1px solid #000000">&nbsp;</DIV>
</DIV>

<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">
<TR>
    <TD width="3%"></TD>
    <TD width="1%"></TD>
    <TD width="96"></TD>
</TR>

<TR valign="top">
    <TD nowrap align="left">*</TD>
    <TD>&nbsp;</TD>
    <TD>Less than 1%.</TD>
</TR>

</TABLE>



<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">(1)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Represents 412,500 shares held by Mr.&nbsp;Njemanze and 562,500 shares held by Mr.&nbsp;Njemanze and
Cherl M. Njemanze, his wife, together, and includes options exercisable for 160,391 shares of
common stock within 60&nbsp;days of December&nbsp;31, 2007 that are held by Mr.&nbsp;Njemanze, of which
39,063 shares would be subject to a right of repurchase in our favor upon exercise and Mr.
Njemanze&#146;s cessation of service prior to vesting.</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">(2)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Represents 375,000 shares held by Mr.&nbsp;Mosher, of which 7,813 shares are subject to a right of
repurchase in our favor upon Mr.&nbsp;Mosher&#146;s cessation of service prior to vesting, and includes
options exercisable for 97,981 shares of common stock within 60&nbsp;days of December&nbsp;31, 2007, of
which 27,345 shares would be subject to a right of repurchase in our favor upon exercise and
Mr.&nbsp;Mosher&#146;s cessation of service prior to vesting.</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">(3)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Represents 50,000 shares held by Mr.&nbsp;Grierson and Jennifer Murray, his wife, together, and
includes options exercisable for 297,891 shares of common stock within 60&nbsp;days of December&nbsp;31,
2007 that are held by Mr.&nbsp;Grierson, of which 49,220 shares would be subject to a right of
repurchase in our favor upon exercise and Mr.&nbsp;Grierson&#146;s cessation of service prior to
vesting.</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="1%" nowrap align="left">(4)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>Represents 118,750 shares held by Mr.&nbsp;Lunetta and Nancy Lunetta, his wife, together, and
includes options exercisable for 57,656 shares of common stock within 60&nbsp;days of December&nbsp;31,
2007 that are held by Mr.&nbsp;Lunetta of which 15,626 shares would be subject to a right of
repurchase in our favor upon exercise and Mr.&nbsp;Lunetta&#146;s cessation of service prior to vesting.</TD>
</TR>

</TABLE>
</DIV>
<P align="center" style="font-size: 10pt"><!-- Folio -->I-22<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">


<DIV style="margin-top: 6pt"><TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">



</TABLE>
</DIV>
<DIV align="left">
<A name="111"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>PLAN OF DISTRIBUTION</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Stockholders and their successors, including their transferees, pledgees or donees or
their successors, may sell the common stock offered under this prospectus directly to purchasers or
through underwriters, broker-dealers or agents, who may receive compensation in the form of
discounts, concessions or commissions from the selling stockholder or the purchasers. These
discounts, concessions or commissions as to any particular underwriter, broker-dealer or agent may
be in excess of those customary in the types of transactions involved. Neither ArcSight nor the
Stockholders can presently estimate the amount of this compensation.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The common stock offered under this prospectus may be sold in one or more transactions at
fixed prices, at prevailing market prices at the time of sale, at prices related to the prevailing
market prices, at varying prices determined at the time of sale, or at negotiated prices. These
sales may be effected in transactions, which may involve crosses or block transactions:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>on any national securities exchange or U.S. inter-dealer system of a registered national
securities association on which the common stock may be listed or quoted at the time of
sale;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>in the over-the-counter market;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>in transactions otherwise than on these exchanges or systems or in the over-the-counter
market; or</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="2%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>through the writing of options, whether the options are listed on an options exchange or
otherwise.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The aggregate proceeds to the Stockholder from the sale of the common stock offered by them
will be the purchase price of the common stock less discounts and commissions, if any. Each of the
Stockholders reserves the right to accept and, together with their agents from time to time, to
reject, in whole or in part, any proposed purchase of common stock to be made directly or through
agents. ArcSight will not receive any of the proceeds from this offering.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;ArcSight&#146;s common stock is listed for trading on The NASDAQ Global Market under the symbol
&#147;ARST.&#148;
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Stockholders and any underwriters, broker-dealers or agents that participate in the sale
of the common stock may be &#147;underwriters&#148; within the meaning of Section&nbsp;2(11) of the Securities
Act. Any discounts, commissions, concessions or profit they earn on any resale of the shares may be
underwriting discounts and commissions under the Securities Act. If the Stockholder is an
&#147;underwriter&#148; within the meaning of Section&nbsp;2(11) of the Securities Act, the Stockholder will be
subject to the prospectus delivery requirements of the Securities Act.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In addition, any securities covered by this prospectus which qualify for sale pursuant to Rule
144 of the Securities Act may be sold under Rule&nbsp;144 rather than pursuant to this prospectus. A
Selling Stockholder may not sell any common stock described in this prospectus and may not
transfer, devise or gift these securities by other means not described in this prospectus.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;To the extent required, the specific common stock to be sold, the names of the Stockholder,
the respective purchase prices and public offering prices, the names of any agent, dealer or
underwriter, and any applicable commissions or discounts with respect to a particular offer will be
set forth in an accompanying prospectus supplement or, if appropriate, a post-effective amendment
to the registration statement of which this prospectus is a part. This prospectus also may be used,
with ArcSight&#146;s consent, by donees or pledgees of the Stockholder, or by other persons acquiring
shares and who wish to offer and sell shares under circumstances requiring or making desirable its
use.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In order to comply with the securities laws of some states, if applicable, the common stock
may be sold in these jurisdictions only through registered or licensed brokers or dealers.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->I-23<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">
<DIV align="left">
<A name="112"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>EXPERTS</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Ernst &#038; Young LLP, independent registered public accounting firm, has audited our consolidated
financial statements at April&nbsp;30, 2007 and 2006, and for each of the three fiscal years in the
period ended April&nbsp;30, 2007, including in our Registration Statement on Form S-1, as set forth in
their report, which is incorporated by reference in this prospectus and elsewhere in the
registration statement. Our financial statements are incorporated by reference in reliance on Ernst
&#038; Young LLP&#146;s report, given on their authority as experts in accounting and auditing.
</DIV>
<DIV align="left">
<A name="113"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>WHERE YOU CAN FIND ADDITIONAL INFORMATION</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We have filed with the SEC a registration statement on Form S-8 under the Securities Act with
respect to the shares of common stock offered hereby. This prospectus, which constitutes a part of
the registration statement, does not contain all of the information set forth in the registration
statement or the exhibits filed therewith. For further information about us and the common stock
offered hereby, reference is made to the registration statement and the exhibits filed therewith.
Statements contained in this prospectus regarding the contents of any contract or any other
document that is filed as an exhibit to the registration statement are not necessarily complete,
and each such statement is qualified in all respects by reference to the full text of such contract
or other document filed as an exhibit to the registration statement. We currently do not file
periodic reports with the SEC. Upon completion of this offering, we will be required to file
periodic reports, proxy statements and other information with the SEC pursuant to the Exchange Act.
A copy of the registration statement and the exhibits filed therewith may be inspected without
charge at the public reference room maintained by the SEC, located at 100 F Street, N.E., Room
1580, Washington, D.C. 20549, and copies of all or any part of the registration statement may be
obtained from that office. Please call the SEC at 1-800-SEC-0330 for further information about the
public reference room. The SEC also maintains an Internet website that contains reports, proxy and
information statements and other information regarding registrants that file electronically with
the SEC. The address of the website is www.sec.gov.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;We are subject to the information and reporting requirements of the Exchange Act and, in
accordance with this law, file periodic reports, proxy statements and other information with the
SEC. These periodic reports, proxy statements and other information are available for inspection
and copying at the SEC&#146;s public reference facilities and the website of the SEC referred to above.
</DIV>
<DIV align="left">
<A name="114"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>INCORPORATION OF DOCUMENTS BY REFERENCE</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The following documents filed by us with the Commission pursuant to the Securities Act and the
Exchange Act, are incorporated herein by reference into this prospectus:
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(a)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The Registrant&#146;s prospectus filed on February&nbsp;14, 2008 pursuant to Rule 424(b)
under the Securities Act relating to the Registration Statement on Form S-1 (File No.
333-145974); and</TD>
</TR>

</TABLE>
</DIV>

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(b)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The description of the Registrant&#146;s common stock contained in the Registrant&#146;s
Registration Statement on Form 8-A (File No.&nbsp;001-33923) filed on January&nbsp;18, 2008 under
Section 12(b) of the Exchange Act which incorporates by reference the &#147;Description of
Capital Stock&#148; as set forth in Registrant&#146;s Registration Statement on Form S-1 (File
No.&nbsp;333-145974) as originally filed with the SEC on September&nbsp;11, 2007, and as
subsequently amended, and in the prospectus filed by the Registrant pursuant to Rule
424(b) under the Securities Act, including any amendment or report filed for the
purpose of updating such description.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;In addition, all documents which we file pursuant to Sections&nbsp;13(a), 13(c), 14 and 15(d) of
the Exchange Act after the date of this prospectus and prior to the termination of this offering,
shall be deemed to be incorporated by reference herein and to be a part of this prospectus from the
date of the filing of such documents. Any statement contained in a document incorporated or deemed
to be incorporated by reference herein shall be deemed to be modified or superseded for purposes of
this prospectus to the extent that a statement contained in this prospectus, or in any other
subsequently filed document which also is or is deemed to be incorporated by reference in this
prospectus, modifies or supersedes such statement. Any such statement so modified or superseded
shall not be deemed, except as so modified or superseded, to constitute a part of this prospectus.
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->I-24<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>1,268,750 SHARES<BR>
COMMON STOCK, PAR VALUE $0.00001</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><IMG src="f37959f3795901.gif" alt="(ARCSIGHT LOGO)">

</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>ArcSight, Inc.</B>

</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><DIV align="center"><DIV style="font-size: 3pt; margin-top: 16pt; width: 26%; border-top: 1px solid #000000">&nbsp;</DIV></DIV>

</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>Prospectus</B>

</DIV>

<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><DIV align="center"><DIV style="font-size: 3pt; margin-top: 16pt; width: 26%; border-top: 1px solid #000000">&nbsp;</DIV></DIV>

</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>February&nbsp;14, 2008</B>
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->&nbsp;<!-- /Folio -->
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left">
<A name="115"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>PART II</B>
</DIV>


<DIV align="Center" style="font-size: 10pt; margin-top: 6pt"><B>Information Required in the Registration Statement</B>

</DIV>
<DIV align="left">
<A name="116"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Item&nbsp;3. </B><U><B>Incorporation of Documents by Reference</B></U><B>.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;ArcSight, Inc. (the &#147;<B><I>Registrant</I></B>&#148;) hereby incorporates by reference into this Registration
Statement the following documents previously filed with the Commission:
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(a)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The Registrant&#146;s prospectus filed on February&nbsp;14, 2008 pursuant to Rule 424(b)
under the Securities Act relating to the Registration Statement on Form S-1 (File No.
333-145974) (the &#147;<B><I>Form&nbsp;S-1</I></B>&#148;); and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left">(b)</TD>
    <TD width="1%">&nbsp;</TD>
    <TD>The description of the Registrant&#146;s Common Stock contained in the Registrant&#146;s
Registration Statement on Form 8-A (File No.&nbsp;001-33923) filed with the Commission on
January&nbsp;22, 2008 under Section 12(b) of the Securities Exchange Act of 1934, as amended
(the &#147;<B><I>Exchange Act</I></B>&#148;), including any amendment or report filed for the purpose of
updating such description.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;All documents subsequently filed by the Registrant pursuant to Sections&nbsp;13(a), 13(c), 14 and
15(d) of the Exchange Act, prior to the filing of a post-effective amendment which indicates that
all securities offered by this Registration Statement have been sold or which deregisters all
securities then remaining unsold, shall be deemed to be incorporated by reference into this
Registration Statement and to be a part of this Registration Statement from the date of the filing
of such documents.
</DIV>

<DIV align="left">
<A name="117"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Item&nbsp;4. </B><U><B>Description of Securities</B></U><B>.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Not applicable.
</DIV>

<DIV align="left">
<A name="118"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Item&nbsp;5. </B><U><B>Interests of Named Experts and Counsel</B></U><B>.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Not applicable.
</DIV>

<DIV align="left">
<A name="119"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Item&nbsp;6. </B><U><B>Indemnification of Directors and Officers</B></U><B>.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section&nbsp;145 of the Delaware General Corporation Law authorizes a court to award, or a
corporation&#146;s board of directors to grant, indemnity to directors and officers under certain
circumstances and subject to certain limitations. The terms of Section&nbsp;145 of the Delaware General
Corporation Law are sufficiently broad to permit indemnification under certain circumstances for
liabilities, including reimbursement of expenses incurred, arising under the Securities Act.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As permitted by the Delaware General Corporation Law, the Registrant&#146;s restated certificate of
incorporation contains provisions that eliminate the personal liability of its directors for
monetary damages for any breach of fiduciary duties as a director, except liability for the
following:
</DIV>


<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>any breach of the director&#146;s duty of loyalty to the Registrant or its
stockholders;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>acts or omissions not in good faith or that involve intentional misconduct or a
knowing violation of law;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>under Section&nbsp;174 of the Delaware General Corporation Law (regarding unlawful
dividends and stock purchases); or</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>any transaction from which the director derived an improper personal benefit.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;As permitted by the Delaware General Corporation Law, the Registrant&#146;s restated bylaws, to be
effective upon the completion of this offering, provide that:
</DIV>

<P align="center" style="font-size: 10pt"><!-- Folio -->II-1<!-- /Folio -->
</DIV>

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<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV style="margin-top: 6pt">
<TABLE width="100%" border="0" cellpadding="0" cellspacing="0" style="font-size: 10pt">

<TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the Registrant is required to indemnify its directors and executive officers to
the fullest extent permitted by the Delaware General Corporation Law, subject to very
limited exceptions;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the Registrant may indemnify its other employees and agents as set forth in the
Delaware General Corporation Law;</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the Registrant is required to advance expenses, as incurred, to its directors
and executive officers in connection with a legal proceeding to the fullest extent
permitted by the Delaware General Corporation Law, subject to very limited exceptions;
and</TD>
</TR>

<TR>
    <TD style="font-size: 6pt">&nbsp;</TD>
</TR><TR valign="top" style="font-size: 10pt; color: #000000; background: transparent">
    <TD width="4%" style="background: transparent">&nbsp;</TD>
    <TD width="3%" nowrap align="left"><B>&#149;</B></TD>
    <TD width="1%">&nbsp;</TD>
    <TD>the rights conferred in the bylaws are not exclusive.</TD>
</TR>

</TABLE>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Registrant has entered into or will enter into indemnity agreements with its current
directors and executive officers to provide these directors and executive officers additional
contractual assurances regarding the scope of the indemnification set forth in the Registrant&#146;s
restated certificate of incorporation and restated bylaws and to provide additional procedural
protections. At present, there is no pending litigation or proceeding involving a director or
executive officer of the Registrant regarding which indemnification is sought. The indemnification
provisions in the Registrant&#146;s restated certificate of incorporation, restated bylaws and the
indemnification agreements entered into or to be entered into between the Registrant and its
directors and executive officers may be sufficiently broad to permit indemnification of the
Registrant&#146;s directors and executive officers for liabilities arising under the Securities Act.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The Registrant currently carries liability insurance for its directors and executive officers.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;One of Registrant&#146;s directors (Ted Schlein) is also indemnified by his employer with regard to
his service on the Registrant&#146;s board of directors.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;See also the undertakings set out in response to Item&nbsp;9 hereof.
</DIV>

<DIV align="left">
<A name="120"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Item&nbsp;7. </B><U><B>Exemption from Registration Claimed</B></U><B>.</B>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;The shares being reoffered and resold pursuant to the prospectus included herein were issued
pursuant to the Plans registered hereby and were deemed to be exempt from registration under the
Securities Act in reliance on Section&nbsp;4(2) of the Securities Act or Regulation&nbsp;D promulgated
thereunder, as transactions by an issuer not involving a public offering. Each of the Stockholders
in each such transaction represented their intention to acquire the securities for investment only
and not with a view to or for sale in connection with any distribution thereof and appropriate
legends were affixed to the share certificates and instruments issued in such transactions. All
recipients had adequate access, through their relationship with the Registrant, to information
about the Registrant.
</DIV>

<DIV align="left">
<A name="121"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>Item&nbsp;8. </B><U><B>Exhibits</B></U><B>.</B>
</DIV>
<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="92%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="center"><B>Exhibit</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="center" style="border-bottom: 1px solid #000000"><B>Number</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 1px solid #000000"><B>Exhibit Title</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom"><!-- Blank Space -->
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">4.1
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Form of Restated Certificate of Incorporation of the Registrant (incorporated herein by
reference to Exhibit&nbsp;3.2 of the Form&nbsp;S-1).</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">4.2
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Form&nbsp;Amended and Restated Bylaws of the Registrant (incorporated herein by reference to
Exhibit&nbsp;3.4 of the Form&nbsp;S-1).</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">4.3
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Form of Registrant&#146;s common stock certificate (incorporated herein by reference to Exhibit&nbsp;4.1
of the Form&nbsp;S-1).</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">4.4
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Amended and Restated Investors&#146; Rights Agreement, dated as of October&nbsp;24, 2002, between the
Registrant and certain security holders of the Registrant (incorporated herein by reference to
Exhibit&nbsp;4.2 of the Form&nbsp;S-1).</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->II-2<!-- /Folio -->
</DIV>

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<DIV style="font-family: 'Times New Roman',Times,serif">

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="7%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="92%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="center"><B>Exhibit</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="center" style="border-bottom: 1px solid #000000"><B>Number</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 1px solid #000000"><B>Exhibit Title</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom"><!-- Blank Space -->
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">4.5
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">2000 Stock Incentive Plan, as amended (incorporated herein by reference to Exhibit&nbsp;10.2 of the
Form&nbsp;S-1).</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">4.6
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">2002 Stock Plan, as amended (incorporated herein by reference to Exhibit&nbsp;10.4 of the Form&nbsp;S-1).</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">23.1
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Consent of Ernst &#038; Young LLP, Independent Registered Public Accounting Firm.</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">24.1
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Power of Attorney (see page II-4 of this Registration Statement).</TD>
</TR>
<!-- End Table Body -->
</TABLE>
</DIV>

<DIV align="left">
<A name="122"></A>
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 12pt"><B>Item&nbsp;9. </B><U><B>Undertakings</B></U><B>.</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;The undersigned Registrant hereby undertakes:
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1)&nbsp;To file, during any period in which offers or sales are being made, a post-effective
amendment to this Registration Statement: (i)&nbsp;to include any prospectus required by Section
10(a)(3) of the Securities Act; (ii)&nbsp;to reflect in the prospectus any facts or events arising after
the effective date of the Registration Statement (or the most recent post-effective amendment
thereof) which, individually or in the aggregate, represent a fundamental change in the information
set forth in this Registration Statement. Notwithstanding the foregoing, any increase or decrease
in volume of securities offered (if the total dollar value of securities offered would not exceed
that which was registered) and any deviation from the low or high end of the estimated maximum
offering range may be reflected in the form of prospectus filed with the Commission pursuant to
Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than a 20
percent change in the maximum aggregate offering price set forth in the &#147;Calculation of
Registration Fee&#148; table in the effective Registration Statement; and (iii)&nbsp;to include any material
information with respect to the plan of distribution not previously disclosed in the Registration
Statement or any material change to such information in the Registration Statement; <I>provided</I>,
<I>however</I>, that clauses (1)(i) and (1)(ii) above do not apply if the information required to be
included in a post-effective amendment by those clauses is contained in periodic reports filed with
or furnished to the Commission by the Registrant pursuant to Section&nbsp;13 or Section 15(d) of the
Exchange Act that are incorporated by reference in this Registration Statement.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(2)&nbsp;That, for the purpose of determining any liability under the Securities Act, each such
post-effective amendment shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that time shall be deemed to be
the initial <I>bona fide </I>offering thereof.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(3)&nbsp;To remove from registration by means of a post-effective amendment any of the securities
being registered that remain unsold at the termination of the offering.
</DIV>

<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;The undersigned Registrant hereby undertakes that, for purposes of determining any
liability under the Securities Act, each filing of the Registrant&#146;s annual report pursuant to
Section 13(a) or Section 15(d) of the Exchange Act (and, where applicable, each filing of an
employee benefit plan&#146;s annual report pursuant to Section 15(d) of the Exchange Act) that is
incorporated by reference into this Registration Statement shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial <I>bona fide </I>offering thereof.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;Insofar as indemnification for liabilities arising under the Securities Act may be
permitted to directors, officers and controlling persons of the Registrant pursuant to the
foregoing provisions, or otherwise, the Registrant has been advised that in the opinion of the
Commission such indemnification is against public policy as expressed in the Securities Act and is,
therefore, unenforceable. In the event that a claim for indemnification against such liabilities
(other than the payment by the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any action, suit or proceeding)
is asserted by such director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter has been settled
by controlling precedent, submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities Act and will be
governed by the final adjudication of such issue.
</DIV>


<P align="center" style="font-size: 10pt"><!-- Folio -->II-3<!-- /Folio -->
</DIV>

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<P><HR noshade><P>
<H5 align="left" style="page-break-before:always"><A HREF="#tocpage">Table of Contents</A></H5><P>

<DIV style="font-family: 'Times New Roman',Times,serif">



<DIV align="left">
<A name="123"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>SIGNATURES</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Pursuant to the requirements of the Securities Act of 1933, the Registrant certifies that it
has reasonable grounds to believe that it meets all of the requirements for filing on Form S-8 and
has duly caused this Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Cupertino, State of California, on February&nbsp;14, 2008.
</DIV>


<TABLE width="100%" border="0" cellspacing="0" cellpadding="0" style="font-size: 10pt">
<TR>
    <TD width="48%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="1%">&nbsp;</TD>
    <TD width="35%">&nbsp;</TD>
    <TD width="15%">&nbsp;</TD>
</TR>
<TR>
    <TD valign="top" align="left">&nbsp;</TD>
    <TD colspan="3" align="left"><B>ARCSIGHT, INC.</B><BR>
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD valign="top">By:&nbsp;&nbsp;</TD>
    <TD colspan="2" style="border-bottom: 1px solid #000000" align="left">/s/ <FONT style="font-variant: SMALL-CAPS">Robert W. Shaw</FONT>
&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left">Robert W. Shaw&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR><TR>
    <TD align="left">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD colspan="2" align="left">Chief Executive Officer and<BR>
Chairman of the Board of Directors&nbsp;</TD>
    <TD>&nbsp;</TD>
</TR>
<TR>
    <TD colspan="5">&nbsp;</TD>
</TR>
</TABLE>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>POWER OF ATTORNEY</B>
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;<B>KNOW ALL PERSONS BY THESE PRESENTS</B>, that each person whose signature appears below hereby
constitutes and appoints Robert W. Shaw and Stewart Grierson, and each of them acting individually,
as his or her true and lawful attorneys-in-fact and agents with full power of substitution, for him
or her in any and all capacities, to sign any amendments to this Registration Statement on Form
S-8, and to file the same, with exhibits thereto and other documents in connection therewith, with
the Securities and Exchange Commission, hereby ratifying and confirming all that each of said
attorneys-in-fact, or any substitute, may do or cause to be done by virtue hereof. This Power of
Attorney may be signed in any number of counterparts, each of which when so executed and delivered
shall be deemed an original, and such counterparts shall together constitute one and the same
instrument.
</DIV>


<DIV align="left" style="font-size: 10pt; margin-top: 6pt">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has
been signed by the following persons in the capacities and on the dates indicated.
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
<!-- Begin Table Head -->
<TR valign="bottom">
    <TD width="40%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="40%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="14%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="center" style="border-bottom: 1px solid #000000"><B>Signature</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 1px solid #000000"><B>Title</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 1px solid #000000"><B>Date</B></TD>
</TR>

<!-- End Table Head -->
<!-- Begin Table Body -->
<TR valign="bottom"><!-- Blank Space -->
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">/s/ <FONT style="font-variant: SMALL-CAPS">Robert W. Shaw</FONT>
<DIV style="font-size: 1pt; border-top: 1px solid #000000">&nbsp;</DIV>
Robert W. Shaw
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">Chief Executive Officer and
Chairman of the Board of
Directors
(Principal Executive Officer)
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">February&nbsp;14, 2008</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">/s/ <FONT style="font-variant: SMALL-CAPS">Stewart Grierson</FONT>
<DIV style="font-size: 1pt; border-top: 1px solid #000000">&nbsp;</DIV>
Stewart Grierson
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">Chief Financial Officer
(Principal Accounting
and Financial Officer)
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">February&nbsp;14, 2008</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">/s/ <FONT style="font-variant: SMALL-CAPS">Sandra Bergeron</FONT>
<DIV style="font-size: 1pt; border-top: 1px solid #000000">&nbsp;</DIV>
Sandra Bergeron
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">Director&nbsp;
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">February&nbsp;14, 2008</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">/s/ <FONT style="font-variant: SMALL-CAPS">William P. Crowell</FONT>
<DIV style="font-size: 1pt; border-top: 1px solid #000000">&nbsp;</DIV>
William P. Crowell
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">Director&nbsp;
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">February&nbsp;14, 2008</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">/s/ <FONT style="font-variant: SMALL-CAPS">E. Stanton McKee, Jr.</FONT>
<DIV style="font-size: 1pt; border-top: 1px solid #000000">&nbsp;</DIV>
E. Stanton McKee, Jr.
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">Director&nbsp;
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">February&nbsp;14, 2008</TD>
</TR>
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</DIV>


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<DIV style="font-family: 'Times New Roman',Times,serif">

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<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
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    <TD width="40%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="40%">&nbsp;</TD>
    <TD width="3%">&nbsp;</TD>
    <TD width="14%">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="center" style="border-bottom: 1px solid #000000"><B>Signature</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 1px solid #000000"><B>Title</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 1px solid #000000"><B>Date</B></TD>
</TR>

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    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>

<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">/s/ <FONT style="font-variant: SMALL-CAPS">Craig Ramsey</FONT>
<DIV style="font-size: 1pt; border-top: 1px solid #000000">&nbsp;</DIV>
Craig Ramsey
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">Director&nbsp;
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">February&nbsp;14, 2008</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">/s/ <FONT style="font-variant: SMALL-CAPS">Scott A. Ryles</FONT>
<DIV style="font-size: 1pt; border-top: 1px solid #000000">&nbsp;</DIV>
Scott A. Ryles
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">Director&nbsp;
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">February&nbsp;14, 2008</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">/s/ <FONT style="font-variant: SMALL-CAPS">Ted Schlein</FONT>
<DIV style="font-size: 1pt; border-top: 1px solid #000000">&nbsp;</DIV>
Ted Schlein
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">Director&nbsp;
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">February&nbsp;14, 2008</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">/s/ <FONT style="font-variant: SMALL-CAPS">Ernest von Simson</FONT>
<DIV style="font-size: 1pt; border-top: 1px solid #000000">&nbsp;</DIV>
Ernest von Simson
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">Director&nbsp;
</TD>
    <TD>&nbsp;</TD>
    <TD align="center" valign="top">February&nbsp;14, 2008</TD>
</TR>
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<A name="124"></A>
</DIV>

<DIV align="center" style="font-size: 10pt; margin-top: 18pt"><B>EXHIBIT INDEX</B>
</DIV>

<DIV align="center">
<TABLE style="font-size: 10pt" cellspacing="0" border="0" cellpadding="0" width="100%">
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    <TD width="6%">&nbsp;</TD>
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    <TD width="93%">&nbsp;</TD>
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<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="center"><B>Exhibit</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center">&nbsp;</TD>
</TR>
<TR style="font-size: 8pt" valign="bottom">
    <TD nowrap align="center" style="border-bottom: 1px solid #000000"><B>Number</B></TD>
    <TD>&nbsp;</TD>
    <TD nowrap align="center" style="border-bottom: 1px solid #000000"><B>Exhibit Title</B></TD>
</TR>

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    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">4.1
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Form of Restated Certificate of Incorporation of the Registrant (incorporated herein by
reference to Exhibit&nbsp;3.2 of the Form&nbsp;S-1).</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">4.2
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Form&nbsp;Amended and Restated Bylaws of the Registrant (incorporated herein by reference to
Exhibit&nbsp;3.4 of the Form&nbsp;S-1).</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">4.3
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Form of Registrant&#146;s common stock certificate (incorporated herein by reference to Exhibit&nbsp;4.1
of the Form&nbsp;S-1).</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">4.4
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Amended and Restated Investors&#146; Rights Agreement, dated as of October&nbsp;24, 2002, between the
Registrant and certain security holders of the Registrant (incorporated herein by reference to
Exhibit&nbsp;4.2 of the Form&nbsp;S-1).</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">4.5
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">2000 Stock Incentive Plan, as amended (incorporated herein by reference to Exhibit&nbsp;10.2 of the
Form&nbsp;S-1).</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">4.6
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">2002 Stock Plan, as amended (incorporated herein by reference to Exhibit&nbsp;10.4 of the Form&nbsp;S-1).</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">23.1
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Consent of Ernst &#038; Young LLP, Independent Registered Public Accounting Firm.</TD>
</TR>
<TR valign="bottom"><!-- Blank Space -->
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">&nbsp;</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">&nbsp;</TD>
</TR>
<TR valign="bottom">
    <TD align="center" valign="top"><DIV style="margin-left:0px; text-indent:-0px">24.1
</DIV></TD>
    <TD>&nbsp;</TD>
    <TD align="left" valign="top">Power of Attorney (see page II-4 of this Registration Statement).</TD>
</TR>
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</TABLE>
</DIV>



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sv8
Table of Contents
As filed with the Securities and Exchange Commission on February 14, 2008
Registration No. 333-
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-8
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
ArcSight, Inc.
(Exact Name of Registrant as Specified in Its Charter)
Delaware
52-2241535
(State or Other Jurisdiction
(I.R.S. Employer
of Incorporation or Organization)
Identification No.)
5 Results Way
Cupertino, California 95014
(Address of Principal Executive Offices) (Zip Code)
2000 Stock Incentive Plan
2002 Stock Plan, as amended
(Full Title of the Plan)
Robert W. Shaw
Chief Executive Officer and
Chairman of the Board
ArcSight, Inc.
5 Results Way
Cupertino, California 95104
(Name and Address of Agent For Service)
(408) 864-2600
(Telephone Number, including area code, of agent for service)
Please send copies of all communications to:
Trâm T. Phi, Esq.
David A. Bell, Esq.
Vice President and General Counsel
Michael A. Brown, Esq.
ArcSight, Inc.
Fenwick & West LLP
5 Results Way
801 California Street
Cupertino, California 95014
Mountain View, California 94041
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer,
a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in
Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer
o
Accelerated filer
o
Non-accelerated filer
þ
Smaller reporting company
o
(Do not check if a smaller reporting company)
CALCULATION OF REGISTRATION FEE
Proposed Maximum
Proposed Maximum
Title of Each Class of Securities
Amount To Be
Offering Price
Aggregate Offering
Amount of
To Be Registered
Registered
Per Unit
Price
Registration Fee
Common Stock, $0.00001 par value per share
1,268,750
(1)
$
9.00
(2)
$
11,418,750.00
(2)
$
448.76
(1)
Represents shares of the Registrant's Common Stock being registered for resale that have been
issued previously pursuant to the exercise of stock options granted under the 2000 Stock
Incentive Plan (the "
2000 Plan
") and the 2002 Stock Plan, as amended (the "
2002 Plan
" and
together with the 2000 Plan, the "
Plans
") to the stockholders named in this Registration
Statement.
(2)
Estimated pursuant to Rule 457(c) of the Securities Act of 1933, as amended, based on the
initial public offering price of the Registrant's Common Stock as set forth in the
Registrant's prospectus filed with the Securities and Exchange Commission (the "
SEC
")
on February 14, 2008 pursuant to Rule 424(b) under the Securities Act.
Table of Contents
EXPLANATORY NOTE
Under cover of this Registration Statement on Form S-8 is a prospectus for Common Stock of
ArcSight, Inc. ("
Common Stock
") prepared in accordance with Part I of Form S-3 under the Securities
Act. This prospectus has been prepared pursuant to General Instruction C of Form S-8, in
accordance with the requirements of Part I of Form S-3, and may be used for reoffers and resales on
a continuous or delayed basis in the future of up to an aggregate of 1,268,750 shares of Common
Stock that have been issued to certain current officers of ArcSight, Inc. prior to the filing of
this Form S-8 Registration Statement.
This Registration Statement on Form S-8 relates to the reoffer and resale of 1,268,750 shares of
Common Stock previously issued pursuant to the exercise of options under the Plans to the
stockholders named in the resale prospectus included in this Registration Statement on Form S-8 as
described above.
The holders of all of the shares of Common Stock that are being registered in this Registration
Statement on Form S-8 are subject to lock-up agreements or market standoff provisions that prohibit
them from offering for sale, selling, granting any option for the sale of, transferring or
otherwise disposing of such shares for a period of at least 180 days as described in "Shares
Eligible for Future Sale—Lock-Up Agreements" in ArcSight, Inc.'s prospectus filed on February 14,
2008 with the SEC.
TABLE OF CONTENTS
PART I
Item 1. Plan Information
I-1
Item 2. Registrant Information and Employee Plan Annual Information
I-1
REOFFER AND RESALE PROSPECTUS
Special
Note Regarding Forward-Looking Statements and Industry Data
I-3
The Company
I-4
Risk Factors
I-5
Use of Proceeds
I-21
Dilution
I-21
Selling Stockholders
I-22
Plan of Distribution
I-23
Experts
I-24
Where
You Can Find Additional Information
I-24
Incorporation of Documents by Reference
I-24
PART II
Item 3. Incorporation of Documents by Reference
II-1
Item 4. Description of Securities
II-1
Item 5. Interests of Named Experts and Counsel
II-1
Item 6. Indemnification of Directors and Officers
II-1
Item 7. Exemption from Registration Claimed
II-2
Item 8. Exhibits
II-2
Item 9. Undertakings
II-3
SIGNATURES
II-4
EXHIBIT INDEX
EXHIBIT 23.1
No dealer, salesperson or other person is authorized to give any information or to represent
anything not contained in this prospectus. You must not rely on any unauthorized information or
representations. This prospectus is an offer to sell only the shares offered hereby, and only under
circumstances and in jurisdictions where it is lawful to do so. The information contained in this
prospectus is accurate only as of its date, regardless of its time of delivery or any sale of
shares of our common stock. Our business, financial condition, results of operations and prospects
may have changed since that date.
Except where the context requires otherwise, in this prospectus "Company," "ArcSight,"
"Registrant," "we," "us" and "our" refer to ArcSight, Inc., and where appropriate, its
subsidiaries.
Table of Contents
PART I
INFORMATION REQUIRED IN THE SECTION 10(a) PROSPECTUS
Item 1. Plan Information.
(1)
Item 2. Registrant Information and Employee Plan Annual Information.
(1)
(1)
Information required by Part I to be contained in the Section 10(a) prospectus for the Plans
is omitted from this Registration Statement in accordance with Rule 428 under the Securities
Act and the Note to Part I of Form S-8.
A prospectus prepared pursuant to General Instruction C of Form S-8 in accordance with the
requirements of Part I of Form S-3, which covers reoffers and resales on a continuous delayed
basis of 1,268,750 shares of Common Stock previously issued to the stockholders named in this
Registration Statement pursuant to the exercise of option grants under the Plans is set forth
below.
I-1
Table of Contents
PROSPECTUS
ArcSight, Inc.
1,268,750 SHARES
COMMON STOCK, PAR VALUE $0.00001
This prospectus relates to 1,268,750 shares of common stock of ArcSight, Inc. ("
ArcSight
" or
the "
Company
") that may be offered from time to time by certain stockholders named in this
prospectus (the "
Stockholders
"), by their pledges or donees or by other transferees who receive
these shares of common stock in transfers other than public sales, for their own accounts. Each of
the Stockholders acquired these shares of common stock pursuant to the exercise of option grants
previously issued under the ArcSight, Inc. 2000 Stock Incentive Plan and ArcSight, Inc. 2002 Stock
Plan, as amended.
The Stockholders may sell the shares in the open market at prevailing market prices on The
NASDAQ Global Market, or in private transactions at negotiated prices. The Stockholders may sell
the shares directly, or may sell them through underwriters, brokers or dealers. ArcSight will
receive no part of the proceeds from sales made under this prospectus. ArcSight is paying the
expenses incurred in registering these shares, but all selling and other expenses incurred by each
of the Stockholders will be borne by that Stockholder.
Each Stockholder and any participating broker or dealer may be deemed to be an "underwriter"
within the meaning of the Securities Act of 1933, as amended (the "
Securities Act
"), in which event
any profit on the sale of shares by the Stockholder and any commissions or discounts received by
those brokers or dealers may be deemed to be underwriting compensation under the Securities Act.
ArcSight's common stock is traded on The NASDAQ Global Market under the symbol "ARST."
See "Risk Factors" beginning on page I-5 to read about factors you should consider before
buying shares of the common stock.
Neither the Securities and Exchange Commission nor any other regulatory body has approved or
disapproved these securities or passed upon the accuracy or adequacy of this prospectus. Any
representation to the contrary is a criminal offense
.
The date of this prospectus is February 14, 2008
I-2
Table of Contents
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS AND INDUSTRY DATA
This prospectus includes forward-looking statements. All statements contained in this
prospectus other than statements of historical fact, including statements regarding our future
results of operations and financial position, our business strategy and plans and our objectives
for future operations, are forward-looking statements. The words "believe," "may," "will,"
"estimate," "continue," "anticipate," "intend" and "expect" and similar expressions are intended to
identify forward-looking statements. We have based these forward-looking statements largely on our
current expectations and projections about future events and financial trends that we believe may
affect our financial condition, results of operations, business strategy, short-term and long-term
business operations and objectives, and financial needs. These forward-looking statements are
subject to a number of risks, uncertainties and assumptions, including those described in "Risk
Factors." In light of these risks, uncertainties and assumptions, the future events and trends
discussed in this prospectus may not occur and actual results could differ materially and adversely
from those anticipated or implied in the forward-looking statements.
Although we believe that the expectations reflected in the forward-looking statements are
reasonable, we cannot guarantee future results, levels of activity, performance or achievements. We
are under no duty to update any of these forward-looking statements after the date of this
prospectus or to conform these statements to actual results or revised expectations.
This prospectus also contains or incorporates by reference estimates and other information
concerning our industry, including market size and growth rates of the markets in which we
participate, that we obtained from industry publications, surveys and forecasts. The industry in
which we operate is subject to a high degree of uncertainty and risk due to a variety of factors
including those described in "Risk Factors." These and other factors could cause results to differ
materially from those expressed in these publications, surveys and forecasts.
I-3
Table of Contents
THE COMPANY
We are a leading provider of security and compliance management solutions that intelligently
mitigate business risk for enterprises and government agencies. Much like a "mission control
center," our ArcSight ESM platform delivers a centralized, real-time view of disparate digital
alarms, alerts and status messages, which we refer to as events, across geographically dispersed
and heterogeneous business and technology infrastructures. Our software correlates massive numbers
of events from thousands of security point solutions, network and computing devices and
applications, enabling intelligent identification, prioritization and response to external threats,
insider threats and compliance and corporate policy violations. We also provide complementary
software that delivers pre-packaged analytics and reports tailored to specific security and
compliance initiatives, as well as appliances that streamline threat response, event log archiving
and network configuration.
We have designed our platform to support the increasingly complex business and technology
infrastructure of our customers. As of October 31, 2007, we had sold our products to more than 400
customers across a number of industries and government agencies in the United States and
internationally, including companies in the Fortune Top 5 of the aerospace and defense, energy and
utilities, financial services, food production and services, healthcare, high technology,
insurance, media and entertainment, retail and telecommunications industries, and more than 20
major U.S. government agencies.
As enterprises and government agencies increasingly utilize an interconnected information
technology and business infrastructure to enhance efficiency, exchange information and conduct
business with partners, customers and suppliers, these organizations expose their infrastructure
and data to heightened security risks and are subject to increasing compliance requirements. The
large number of heterogeneous devices and applications in a geographically distributed corporate
infrastructure generates a massive amount of event data that is challenging to monitor or analyze
at an enterprise-wide scale for security vulnerabilities and compliance violations. Vendor-specific
management consoles and traditional systems management tools are limited in scope or are not
equipped to handle a large volume of data. In addition, organizations have difficulty identifying
events that are threatening in nature because they are unable to distinguish threats from the
"white noise" of normal event activity, to recognize risks by correlating events reported by
disparate systems, to understand the context in which the events arise or to appropriately
prioritize responses according to risk level or corporate policy.
The need for a highly scalable, holistic and intelligent solution that can help organizations
address these challenges in real-time is growing. The market for security and compliance management
solutions today includes security information and event management, forensics and incident
investigation, policy and compliance management and network change and configuration management.
We were incorporated in Delaware on May 3, 2000 as Wahoo Technologies, Inc. On March 30, 2001,
we changed our name to ArcSight, Inc. Our principal executive offices are located at 5 Results Way,
Cupertino, California 95014, and our telephone number is (408) 864-2600. Our website address is
www.arcsight.com. The information on, or that can be accessed through, our website is not part of
this prospectus.
"ArcSight" and the ArcSight logo are registered trademarks of ArcSight in the United States
and in some other countries. Where not registered, these marks and "ArcSight Console," "ArcSight
Manager," "ArcSight Web," "FlexConnector," "Logger," "NCM" "SmartConnector" and "TRM" are
trademarks of ArcSight. Other service marks, trademarks and tradenames referred to in this
prospectus are the property of their respective owners.
I-4
Table of Contents
RISK FACTORS
Investing in our common stock involves a high degree of risk. You should consider carefully
the risks and uncertainties described below, together with all of the other information in this
prospectus, before deciding to purchase shares of our common stock. If any of the following risks
occurs, our business, financial condition, results of operations and future prospects could be
materially and adversely affected. In that event, the market price of our common stock could
decline and you could lose part or even all of your investment.
Risk Related to Our Business and Industry
We have a limited operating history in an emerging market and a history of losses, and we are
unable to predict the extent of any future losses or when, if ever, we will achieve profitability
in the future.
We launched our ESM products in January 2002, our TRM and NCM products in June 2006 and our
Logger product in December 2006. Because we have a limited operating history, and the market for
our products is rapidly evolving, it is difficult for us to predict our operating results and the
ultimate size of the market for our products. We have a history of losses from operations,
incurring losses from operations of $16.8 million and $0.3 million for the fiscal years ended April
30, 2006 and 2007, respectively. As of October 31, 2007, our accumulated deficit was $48.0 million.
We expect our operating expenses to increase over the next several years as we hire additional
sales and marketing personnel, expand our channel sales program and develop our technology and new
products. In addition, as a public company, we will incur significant legal, accounting and other
expenses that we did not incur as a private company. If our revenues do not increase to offset
these expected increases in operating expenses, we will continue to incur significant losses and
will not become profitable. Our historical revenue growth has been inconsistent, reflects
fluctuations not related to performance and should not be considered indicative of our future
performance. See "Management's Discussion and Analysis of Financial Condition and Results of
Operations—Sources of Revenue, Cost of Revenues and Operating
Expenses" in our prospectus filed on February 14, 2008 with
the Securities and Exchange Commission, or SEC. Further, in future
periods, our revenues could decline and, accordingly, we may not be able to achieve profitability
and our losses may increase. Even if we do achieve profitability, we may not be able to sustain or
increase profitability on a consistent basis, which may result in a decline in our common stock
price.
Our future operating results may fluctuate significantly and may not be a good indication of
our future performance.
Our revenues and operating results could vary significantly from period to period as a result
of a variety of factors, many of which are outside of our control. As a result, comparing our
revenues and operating results on a period-to-period basis may not be meaningful, and you should
not rely on our past results as an indication of our future performance. For example, revenues in
fiscal 2006 and prior years excluded revenues related to multiple element sales transactions
consummated in that year that were deferred because we did not have vendor-specific objective
evidence of fair value, or VSOE, for some product elements that were not delivered in the fiscal
year of the transaction. In fiscal 2007, we either delivered these product elements, or we and our
customers amended the contractual terms of these sales transactions to remove the undelivered
product elements. Fiscal 2007 revenues included a substantial portion of the revenues so deferred
from fiscal 2006, as well as a small amount of revenues similarly deferred from prior years. See
"Management's Discussion and Analysis of Financial Condition and Results of Operations—Sources of
Revenues, Cost of Revenues and Operating Expenses" in the
Prospectus. We expect that in future periods the comparison
of revenues period-to-period will not be favorably impacted to the same extent by similar
transactions consummated in fiscal 2007 and prior periods. We may not be able to accurately predict
our future revenues or results of operations. We base our current and future expense levels on our
operating plans and sales forecasts, and our operating costs are relatively fixed in the short
term. As a result, we may not be able to reduce our costs sufficiently to compensate for an
unexpected shortfall in revenues, and even a small shortfall in revenues could disproportionately
and adversely affect financial results for that quarter. In addition, we recognize revenues from
sales to some customers or resellers when cash is received, which may be delayed because of changes
or issues with those customers or resellers. If our revenues or operating results fall below the
expectations of investors or any securities analysts that may choose to cover our stock, the price
of our common stock could decline substantially.
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In addition to other risk factors listed in this section, factors that may affect our
operating results include:
•
the timing of our sales during the quarter, particularly since a substantial majority of
our sales occurs in the last few weeks of the quarter and loss or delay of a few large
contracts may have a significant adverse impact on our operating results;
•
changes in the mix of revenues attributable to higher-margin revenues from ESM products
as opposed to lower-margin revenues from sales of our appliance products;
•
changes in the renewal rate of maintenance agreements;
•
our ability to estimate warranty claims accurately;
•
the timing of satisfying revenue recognition criteria, including establishing VSOE for
new products and maintaining VSOE for maintenance and services;
•
the budgeting, procurement and work cycles of our customers, including customers in the
public sector, which may cause seasonal variation as our business and the market for
security and compliance management software solutions matures; and
•
general economic conditions, both domestically and in our foreign markets, and economic
conditions specifically affecting industries in which our customers participate, such as
financial services.
Our sales cycle is long and unpredictable, and our sales efforts require considerable time and
expense. As a result, our revenues are difficult to predict and may vary substantially from quarter
to quarter, which may cause our operating results to fluctuate.
Our operating results may fluctuate, in part, because of the intensive nature of our sales
efforts, the length and variability of the sales cycle of our ESM product and the short-term
difficulty in adjusting our operating expenses. Because decisions to purchase products such as our
ESM product involve significant capital commitments by customers, potential customers generally
have our software evaluated at multiple levels within an organization, each often having specific
and conflicting requirements. Enterprise customers make product purchasing decisions based in part
on factors not directly related to the features of the products, including but not limited to the
customers' projections of business growth, capital budgets and anticipated cost savings from
implementation of the software. As a result of these factors, licensing our software products often
requires an extensive sales effort throughout a customer's organization. In addition, we have
limited experience with sales of our TRM, Logger and NCM products. In particular, sales of our TRM
and NCM products and to some extent our Logger product involve approvals from different functional
areas of an organization than our ESM product. As a result, the sales cycle for these products may
be lengthy or may vary significantly. Our sales efforts involve educating our customers, who are
often relatively unfamiliar with our products and the value of our products, including their
technical capabilities and potential cost savings to the organization. We spend substantial time,
effort and money in our sales efforts without any assurance that our efforts will produce any
sales.
The length of our sales cycle, from initial evaluation to delivery of software, tends to be
long and varies substantially from customer to customer. Our sales cycle is typically three to six
months but can extend to more than a year for some sales. We typically recognize a substantial
majority of our product revenues in the last few weeks of a quarter. It is difficult to predict
exactly when, or even if, we will actually make a sale with a potential customer. As a result,
large individual sales have, in some cases, occurred in quarters subsequent to those we
anticipated, or have not occurred at all. The loss or delay of one or more large product
transactions in a quarter could impact our operating results for that quarter and any future
quarters into which revenues from that transaction are delayed. As a result of these factors, it is
difficult for us to accurately forecast product revenues in any quarter. Because a substantial
portion of our expenses are relatively fixed in the short term, our operating results will suffer
if revenues fall below our expectations in a particular quarter, which could cause the price of our
common stock to decline significantly.
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If we fail to further develop and manage our distribution channels, our revenues could decline
and our growth prospects could suffer.
We derive a portion of our revenues from sales of our products and related services through
channel partners, such as resellers and systems integrators. In particular, systems integrators are
an important source of sales leads for us in the U.S. public sector, as government agencies often
rely on them to meet information technology, or IT, needs. We also use resellers to augment our
internal resources in international markets and, to a lesser extent, domestically. We may be
required by our U.S. government customers to utilize particular resellers that may not meet our
criteria for creditworthiness, and revenues from those resellers may not be recognizable until
receipt of payment. We also anticipate that we will derive a substantial portion of our TRM, Logger
and NCM sales through channel partners, including parties with which we have not yet developed
relationships. We expect that channel
sales will represent a substantial portion of our U.S. government and international revenues
for the foreseeable future and, we believe, a growing portion of our U.S. commercial revenues. We
may be unable to recruit additional channel partners and successfully expand our channel sales
program. If we do not successfully execute our strategy to increase channel sales, particularly to
further penetrate the mid-market and sell our appliance products, our growth prospects may be
materially and adversely affected.
Our agreements with our channel partners are generally non-exclusive and many of our channel
partners have more established relationships with our competitors. If our channel partners do not
effectively market and sell our products, if they choose to place greater emphasis on products of
their own or those offered by our competitors, or if they fail to meet the needs of our customers,
our ability to grow our business and sell our products may be adversely affected, particularly in
the public sector, the mid-market and internationally. Similarly, the loss of a substantial number
of our channel partners, which may cease marketing our products and services with limited or no
notice and with little or no penalty, and our possible inability to replace them, the failure to
recruit additional channel partners, or any reduction or delay in their sales of our products and
services or conflicts between channel sales and our direct sales and marketing activities could
materially and adversely affect our results of operations. In addition, changes in the proportion
of our revenues attributable to sales by channel partners, which are more likely than direct sales
to involve collectibility concerns at the time of contract execution and product delivery, may
cause our operating results to fluctuate from period to period.
We have limited experience with sale, manufacture, delivery, service and support of our TRM,
Logger and NCM products, and we may be unable to successfully forecast demand or fulfill orders for
these appliance products.
We introduced our appliance-based products in fiscal 2007. Prior to that time, we offered only
software products and related services, and as a result have limited experience with sales of
appliance-based products. Fulfillment of sales of our appliance products involves hardware
manufacturing, inventory, import certification and return merchandise authorization processes with
which we have limited experience. For example, if we fail to accurately predict demand and maintain
insufficient hardware inventory or excess inventory, we may be unable to timely deliver ordered
products or may have substantial inventory expense. In addition, if our equipment vendor fails to
manufacture our appliance products or fulfill orders in required volumes, in a timely manner, at a
sufficient level of quality, or at all, we may be unable to fulfill customer orders and our
operating results may fluctuate from period to period. If we underestimate warranty claims for our
appliance products, our operating expenses may be higher than we anticipate, which in turn may
adversely affect our results of operations. In addition, if we change our hardware configuration or
manufacturer, some countries may require us to reinitiate their import certification process.
Because our appliance products are new, we have limited experience with warranty claims, resulting
in limited ability to forecast warranty expense. If we are unable to successfully perform these
functions or develop a relationship with a fulfillment partner that does so for us, our sales,
operating results and financial condition may be harmed.
Because we derive a substantial majority of our revenues from ArcSight ESM and related
products and services, any failure of this product to satisfy customer demands or to achieve
increased market acceptance will harm our business, operating results, financial condition and
growth prospects.
We have derived substantially all of our product revenues from ArcSight ESM and related
products. We expect this to continue for the foreseeable future. For example, in fiscal 2007, sales
of such products represented 89% of product revenues, with the balance coming from transactions
that included both our ESM products and our appliance
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products or included only appliance products.
Prior to fiscal 2007, all of our revenues related to our ESM products. As a result, although we
introduced our complementary appliance products in fiscal 2007 to more fully serve the enterprise
security and compliance management market, our revenues and operating results will continue to
depend substantially on the demand for our ArcSight ESM product. Demand for ArcSight ESM is
affected by a number of factors beyond our control, including the timing of development and release
of new products by us and our competitors, technological change, and lower-than-expected growth or
a contraction in the worldwide market for enterprise security and compliance management solutions
or other risks described in this prospectus. If we are unable to continue to meet customer demands
or to achieve more widespread market acceptance of ArcSight ESM, our business, operating results,
financial condition and growth prospects will be adversely affected.
If we are unable to successfully market our recently introduced products, successfully develop
new products, make enhancements to our existing products or expand our offerings into new markets,
our business may not grow and our operating results may suffer.
We introduced our TRM, Logger and NCM products in fiscal 2007 and are currently developing new
versions of these products and our ESM platform, as well as new complementary products. Our growth
strategy and future financial performance will depend, in part, on our ability to market and sell
these products and to diversify our offerings by successfully developing, timely introducing and
gaining customer acceptance of new products.
The software in our products is especially complex because it must recognize, effectively
interact with and manage a wide variety of devices and applications, and effectively identify and
respond to new and increasingly sophisticated security threats and other risks, while not impeding
the high network performance demanded by our customers. The typical development cycle for a patch
to our ESM software is one to three months, a service pack is four to six months and a new version
or major sub-version is 12 to 18 months. Customers and industry analysts expect speedy introduction
of software to respond to new threats and risks and to add new functionality, and we may be unable
to meet these expectations. Since developing new products or new versions of, or add-ons to,
existing products is complex, the timetable for their commercial release is difficult to predict
and may vary from our historical experience, which could result in delays in their introduction
from anticipated or announced release dates. We may not offer updates as rapidly as new threats
affect our customers. If we do not quickly respond to the rapidly changing and rigorous needs of
our customers by developing and introducing on a timely basis new and effective products, upgrades
and services that can respond adequately to new security threats, our competitive position,
business and growth prospects will be harmed.
Diversifying our product offerings and expanding into new markets will require significant
investment and planning, will bring us more directly into competition with software providers that
may be better established or have greater resources than we do, may complicate our relationships
with channel and strategic partners and will entail significant risk of failure. Sales of our
Logger product and other products that we may develop and market may reduce revenues of our
flagship ESM product and our overall margin by offering a subset of features or capabilities at a
reduced price with a lower gross margin. Moreover, increased emphasis on the sale of our appliance
products, add-on products or new product lines could distract us from sales of our core ArcSight
ESM offering, negatively affecting our overall sales. If we fail or delay in diversifying our
existing offerings or expanding into new markets, or we are unsuccessful competing in these new
markets, our business, operating results and prospects may suffer.
If we are not able to maintain and enhance our brand, our business and operating results may
be harmed.
We believe that maintaining and enhancing our brand identity is critical to our relationships
with, and to our ability to attract, new customers and partners. The successful promotion of our
brand will depend largely upon our marketing and public relations efforts, our ability to continue
to offer high-quality products and services, and our ability to successfully differentiate our
products and services from those of our competitors, especially to the extent that our competitors
integrate or bundle competitive offerings with a broader array of products and services that they
may offer. Our brand promotion activities may not be successful or yield increased revenues. In
addition, extension of our brand to products and uses different from our traditional products and
services may dilute our brand, particularly if we fail to maintain the quality of our products and
services in these new areas. Moreover, it may be difficult to maintain and enhance our brand in
connection with sales through channel or strategic partners. The promotion of our brand will
require us to make substantial expenditures, and we anticipate that the expenditures will increase
as our market becomes more competitive and as we expand into new markets. To the extent that these
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activities yield increased revenues, these revenues may not offset the expenses we incur. If we do
not successfully maintain and enhance our brand, our business may not grow, we may have reduced
pricing power relative to competitors with stronger brands, and we could lose customers and channel
partners, all of which would harm our business, operating results and financial condition.
In addition, independent industry analysts often provide reviews of our products and services,
as well as those of our competitors, and perception of our products in the marketplace may be
significantly influenced by these reviews. We have no control over what these industry analysts
report, and because industry analysts may influence current and potential customers, our brand
could be harmed if they do not provide a positive review of our products and services or view us as
a market leader.
We face intense competition in our market, especially from larger, better-known companies, and
we may lack sufficient financial or other resources to maintain or improve our competitive
position.
The market for enterprise security and compliance management, log archiving and response
products is intensely competitive, and we expect competition to increase in the future. A
significant number of companies have developed, or are developing, products that currently, or in
the future are likely to, compete with some or all of our products. We may not compete successfully
against our current or potential competitors, especially those with significantly greater financial
resources or brand name recognition. Companies competing with us may introduce
products that are more competitively priced, have greater performance or functionality or
incorporate technological advances that we have not yet developed or implemented.
Our competitors include large software companies, software or hardware network infrastructure
companies, smaller software companies offering more narrowly focused enterprise security and
compliance management, log archiving and response products and small and large companies offering
point solutions that compete with components of our platform or individual products offered by us.
Existing competitors for a security and compliance management software platform solution such as
our ESM platform primarily are specialized, privately-held companies, such as Intellitactics and
NetForensics, as well as larger companies such as CA and Symantec, and EMC, IBM and Novell, through
their acquisitions of Network Intelligence, Micromuse and Consul, and e-Security, respectively.
Competitors for sales of our TRM and NCM products include: privately-held companies that provide
network configuration management products, such as Alterpoint and Voyence; larger providers of IT
automation software products, such as Opsware, which was recently acquired by Hewlett-Packard; and
diversified IT security vendors. Current competitors for sales of our Logger product include
specialized, privately-held companies, such as LogLogic and Sensage. In addition to these current
competitors, we expect to face competition for our appliance products from existing large,
diversified software and hardware companies, from specialized, smaller companies and from new
companies that may seek to enter this market.
A greater source of competition is represented by the custom efforts undertaken by potential
customers to analyze and manage the information produced from their existing devices and
applications to identify and remediate threats. Many companies, in particular large corporate
enterprises, have developed internally software that is an alternative to our enterprise security
and compliance management, log archiving and response products. Wide adoption of our Common Event
Format, which we are promoting as a standard for event logs generated by security and other
products, may facilitate this internal development. It may also allow our competitors to offer
products with a degree of compatibility similar to ours or may facilitate new entrants into our
business. New competitors may emerge and rapidly acquire significant market share due to factors
such as greater brand name recognition, larger installed customer bases and significantly greater
financial, technical, marketing and other resources and experience. If these new competitors are
successful, we would lose market share and our revenues would likely decline.
Mergers or consolidations among these competitors, or acquisitions of our competitors by large
companies, present heightened competitive challenges to our business. For example, in recent years
IBM has acquired Internet Security Systems, Inc., Micromuse and Consul, Novell acquired e-Security,
EMC acquired Network Intelligence and Hewlett-Packard acquired Opsware. We believe that the trend
toward consolidation in our industry will continue. These acquisitions will make these combined
entities potentially more formidable competitors to us if their products and offerings are
effectively integrated. Continued industry consolidation may impact customers' perceptions of the
viability of smaller or even medium-sized software firms and consequently customers' willingness to
purchase from those firms.
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Many of our existing and potential competitors enjoy substantial competitive advantages, such
as:
•
greater name recognition and longer operating histories;
•
larger sales and marketing budgets and resources;
•
the capacity to leverage their sales efforts and marketing expenditures across a broader
portfolio of products;
•
broader distribution and established relationships with distribution partners;
•
access to larger customer bases;
•
greater customer support;
•
greater resources to make acquisitions;
•
lower labor and development costs; and
•
substantially greater financial, technical and other resources.
As a result, they may be able to adapt more quickly and effectively to new or emerging technologies
and changing opportunities, standards or customer requirements. In addition, these companies have
reduced, and could continue to reduce, the price of their enterprise security and compliance management, log archiving and
response products and managed security services, which intensifies pricing pressures within our
market.
Increased competition could result in fewer customer orders, price reductions, reduced
operating margins and loss of market share. Our larger competitors also may be able to provide
customers with different or greater capabilities or benefits than we can provide in areas such as
technical qualifications, geographic presence, the ability to provide a broader range of services
and products, and price. In addition, large competitors may have more extensive relationships
within large enterprises, the federal government or foreign governments, which may provide them
with an advantage in competing for business with those potential customers. Our ability to compete
will depend upon our ability to provide better performance than our competitors at a competitive
price. We may be required to make substantial additional investments in research, development,
marketing and sales in order to respond to competition, and we cannot assure you that we will be
able to compete successfully in the future.
We may not be able to compete effectively with companies that integrate or bundle products
similar to ours with their other product offerings.
Many large, integrated software companies offer suites of products that include software
applications for security and compliance management. In addition, hardware vendors, including
diversified, global concerns, offer products that address the security and compliance needs of the
enterprises and government agencies that comprise our target market. Further, several companies
currently sell software products that our customers and potential customers have broadly adopted,
which may provide them a substantial advantage when they sell products that perform functions
substantially similar to some of our products. Competitors that offer a large array of security or
software products may be able to offer products or functionality similar to ours at a more
attractive price than we can by integrating or bundling them with their other product offerings.
The trend toward consolidation in our industry increases the likelihood of competition based on
integration or bundling. Customers may also increasingly seek to consolidate their enterprise-level
software purchases with a small number of larger companies that can purport to satisfy a broad
range of their requirements. If we are unable to sufficiently differentiate our products from the
integrated or bundled products of our competitors, such as by offering enhanced functionality,
performance or value, we may see a decrease in demand for those products, which would adversely
affect our business, operating results and financial condition. Similarly, if customers seek to
concentrate their software purchases in the product portfolios of a few large providers, we may be
at a competitive disadvantage.
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We face risks related to customer outsourcing to managed security service providers.
Some of our customers have outsourced the management of their IT departments or the network
security operations function to large system integrators or managed security service providers, or
MSSPs. If this trend continues, our established customer relationships could be disrupted and our
products could be displaced by alternative system and network protection solutions offered by
system integrators or MSSPs. Significant product displacements could impact our revenues and have a
negative effect on our business. While to date we have developed a number of successful
relationships with MSSPs, they may develop or acquire their own technologies rather than purchasing
our products for use in provision of managed security services.
Our business depends, in part, on sales to the public sector, and significant changes in the
contracting or fiscal policies of the public sector could have a material adverse effect on our
business.
We derive a portion of our revenues from contracts with federal, state, local and foreign
governments and government agencies, and we believe that the success and growth of our business
will continue to depend on our successful procurement of government contracts. For example, we have
historically derived, and expect to continue to derive, a significant portion of our revenues from
sales to agencies of the U.S. federal government, either directly by us or through systems
integrators and other resellers. In fiscal 2006 and 2007, we derived 38% and 32% of our revenues,
respectively, from contracts with agencies of the U.S. federal government. Accordingly:
•
changes in fiscal or contracting policies or decreases in available government funding;
•
changes in government programs or applicable requirements;
•
the adoption of new laws or regulations or changes to existing laws or regulations;
•
changes in political or social attitudes with respect to security issues;
•
potential delays or changes in the government appropriations process; and
•
delays in the payment of our invoices by government payment offices
could cause governments and governmental agencies to delay or refrain from purchasing the products
and services that we offer in the future or otherwise have an adverse effect on our business,
financial condition and results of operations.
Failure to comply with laws or regulations applicable to our business could cause us to lose
U.S. government customers or our ability to contract with the U.S. government.
We must comply with laws and regulations relating to the formation, administration and
performance of U.S. government contracts, which affect how we and our channel partners do business
in connection with U.S. federal agencies. These laws and regulations may impose added costs on our
business, and failure to comply with these or other applicable regulations and requirements,
including non-compliance in the past, could lead to claims for damages from our channel partners,
penalties, termination of contracts and suspension or debarment from government contracting for a
period of time. Any such damages, penalties, disruption or limitation in our ability to do business
with the U.S. federal government could have a material adverse effect on our business, operating
results and financial condition.
Our government contracts may limit our ability to move development activities overseas, which
may impair our ability to optimize our software development costs and compete for non-government
contracts.
Increasingly, software development is being shifted to lower-cost countries, such as India.
However, some contracts with U.S. government agencies require that at least 50% of the components
of each of our products be of U.S. origin. Consequently, our ability to optimize our software
development by conducting it overseas may be hampered. Some of our competitors do not rely on
contracts with the U.S. government to the same degree as we do
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and may develop software off-shore.
If we are unable to develop software as cost-effectively as our competitors, our ability to compete
for our non-government customers may be reduced and our customer sales may decline, resulting in
decreased revenues.
Real or perceived errors, failures or bugs in our products could adversely affect our
operating results and growth prospects.
Because we offer very complex products, undetected errors, failures or bugs may occur,
especially when products are first introduced or when new versions are released. Our products are
often installed and used in large-scale computing environments with different operating systems,
system management software and equipment and networking configurations, which may cause errors or
failures in our products or may expose undetected errors, failures or bugs in our products. Despite
testing by us, errors, failures or bugs may not be found in new products or releases until after
commencement of commercial shipments. In the past, we have discovered software errors, failures,
and bugs in some of our product offerings after their introduction.
In addition, our products could be perceived to be ineffective for a variety of reasons
outside of our control. Hackers could circumvent our customers' security measures, and customers
may misuse our products resulting in a security breach or perceived product failure. We provide a
top-level enterprise security and compliance management solution that integrates a wide variety of
other elements in a customer's IT and security infrastructure, and we may receive blame for a
security breach that was the result of the failure of one of the other elements.
Real or perceived errors, failures or bugs in our products could result in negative publicity,
loss of or delay in market acceptance of our products, loss of competitive position, or claims by
customers for losses sustained by them. In such an event, we may be required, or may choose, for
customer relations or other reasons, to expend additional resources in order to help correct the
problem. Our product liability insurance may not be adequate. Further, provisions in our license
agreements with end users that limit our exposure to liabilities arising from such claims may not
be enforceable in some circumstances or may not fully protect us against such claims and related
liabilities and costs. Defending a lawsuit, regardless of its merit, could be costly and could
limit the amount of time that management has available for day-to-day execution and strategic
planning or other matters.
Many of our end-user customers use our products in applications that are critical to their
businesses and may have a greater sensitivity to defects in our products than to defects in other,
less critical, software products. In addition, if an actual or perceived breach of information
integrity or availability occurs in one of our end-user customer's
systems, regardless of whether the breach is attributable to our products, the market
perception of the effectiveness of our products could be harmed. Alleviating any of these problems
could require significant expenditures of our capital and other resources and could cause
interruptions, delays or cessation of our product licensing, which could cause us to lose existing
or potential customers and could adversely affect our operating results and growth prospects.
In addition, because we are a leading provider of enterprise security products and services,
"hackers" and others may try to access our data or compromise our systems. If we are the subject of
a successful attack, then our reputation in the industry and with current and potential customers
may be compromised and our sales and operating results could be adversely affected.
Incorrect or improper use of our complex products, our failure to properly train customers on
how to utilize our products or our failure to properly provide consulting and implementation
services could result in customer dissatisfaction and negatively affect our results of operations
and growth prospects.
Our ESM, TRM and NCM products are complex and are deployed in a wide variety of network
environments. The proper use of our products, particularly our ESM platform, requires training of
the end user. If our software products are not used correctly or as intended, inadequate
performance may result. For example, among other things, deployment of our ESM platform requires
categorization of IT assets and assignment of business or criticality values for each, selection or
configuration of one of our pre-packaged rule sets, user interfaces and network utilization
parameters, and deployment of connectors for the various devices and applications from which event
data are to be collected. Our customers or our professional services personnel may incorrectly
implement or use our products. Our products may also be intentionally misused or abused by
customers or their employees or third parties who obtain
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access and use of our products. For
example, a person obtaining inappropriate access to our TRM product could use it to shut down
network resources or open breaches in network security. Because our customers rely on our product,
services and maintenance offerings to manage a wide range of sensitive security, network and
compliance functions, the incorrect or improper use of our products, our failure to properly train
customers on how to efficiently and effectively use our products or our failure to properly provide
consulting and implementation services and maintenance to our customers may result in negative
publicity or legal claims against us.
In addition, if customer personnel are not well trained in the use of our products, customers
may defer the deployment of our products or may not deploy them at all. If there is substantial
turnover of the customer personnel responsible for implementation and use of our ESM products, our
product may go unused and our ability to make additional sales may be substantially limited.
If we are unable to maintain effective relationships with our technology partners, we may not
be able to support the interoperability of our software with a wide variety of security and other
products and our business may be harmed.
A key feature of ArcSight ESM is that it provides out-of-the-box support for many third-party
devices and applications that the customer may use in its business and technology infrastructure.
To provide effective interoperability, we work with individual product vendors to develop our
SmartConnectors, which allow our ESM platform to interface with these products. In addition, we are
promoting the adoption of our Common Event Format as a standard way to format system log events.
Some of these technology partners are current or potential competitors of ours. If we are unable to
develop and maintain effective relationships with a wide variety of technology partners, if
companies adopt more restrictive policies with respect to, or impose unfavorable terms and
conditions on, access to their products, or if our Common Event Format is not widely adopted, we
may not be able to continue to provide our customers with a high degree of interoperability with
their existing IT and business infrastructure, which could reduce our sales and adversely affect
our business, operating results and financial condition.
Our international sales and operations subject us to additional risks that can adversely
affect our operating results.
In fiscal 2006 and 2007, we derived 21% and 23% of our revenues, respectively, from customers
outside the United States, and we are continuing to expand our international operations as part of
our growth strategy. We currently have sales personnel and sales and support operations in Canada,
China, Germany, Hong Kong, Japan, Singapore, South Korea and the United Kingdom. Our international
operations subject us to a variety of risks, including:
•
increased management, travel, infrastructure and legal compliance costs associated with
having multiple international operations;
•
longer payment cycles and difficulties in collecting accounts receivable, especially in
emerging markets, and the likelihood that revenues from international resellers and
customers may need to be recognized when cash is received, at least until satisfactory
payment history has been established;
•
the need to localize our products and licensing programs for international customers;
•
differing regulatory and legal requirements and possible enactment of additional
regulations or restrictions on the use, import or export of encryption technologies and our
appliance-based products, which could delay or prevent the sale or use of our products in
some jurisdictions;
•
reduced protection for intellectual property rights in some countries; and
•
overlapping of different tax regimes.
Any of these risks could harm our international operations and reduce our international sales,
adversely affecting our business, operating results and financial condition and growth prospects.
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Our business in countries with a history of corruption and transactions with foreign
governments increase the risks associated with our international activities.
As we operate and sell internationally, we are subject to the U.S. Foreign Corrupt Practices
Act, or the FCPA, and other laws that prohibit improper payments or offers of payments to foreign
governments and their officials and political parties by U.S. and other business entities for the
purpose of obtaining or retaining business. We have operations, deal with and make sales to
governmental customers in countries known to experience corruption, particularly certain emerging
countries in East Asia, Eastern Europe and the Middle East, and further expansion of our
international selling efforts may involve additional regions, including Africa and South America.
Our activities in these countries create the risk of unauthorized payments or offers of payments by
one of our employees, consultants, sales agents or channel partners that could be in violation of
various laws including the FCPA, even though these parties are not always subject to our control.
We have implemented safeguards to discourage these practices by our employees, consultants, sales
agents and channel partners. However, our existing safeguards and any future improvements may prove
to be less than effective, and our employees, consultants, sales agents or channel partners may
engage in conduct for which we might be held responsible. Violations of the FCPA may result in
severe criminal or civil sanctions, including suspension or debarment from U.S. government
contracting, and we may be subject to other liabilities, which could negatively affect our
business, operating results and financial condition.
Failure to protect our intellectual property rights could adversely affect our business.
Our success depends, in part, on our ability to protect proprietary methods and technologies
that we develop under patent and other intellectual property laws of the United States, so that we
can prevent others from using our inventions and propriety information. If we fail to protect our
intellectual property rights adequately, our competitors might gain access to our technology, and
our business might be harmed. In addition, defending our intellectual property rights might entail
significant expenses. Any of our patents, copyrights, trademarks or other intellectual property
rights may be challenged by others or invalidated through administrative process or litigation. We
have two issued patents and 29 patent applications pending in the United States, and have four
international patent applications and 13 patent applications in foreign countries pending, based on
five U.S. patent applications. Our issued patents may not provide us with any competitive
advantages or may be challenged by third parties, and our patent applications may never issue at
all. Additionally, the process of obtaining patent protection is expensive and time-consuming, and
we may not be able to prosecute all necessary or desirable patent applications at a reasonable cost
or in a timely manner. Even if issued, there can be no assurance that these patents will adequately
protect our intellectual property, as the legal standards relating to the validity, enforceability
and scope of protection of patent and other intellectual property rights are uncertain.
Any patents that are issued may subsequently be invalidated or otherwise limited, enabling
other companies to better develop products that compete with ours, which could adversely affect our
competitive business position, business prospects and financial condition. In addition, issuance of
a patent does not guarantee that we have a right to practice the patented invention. Patent
applications in the U.S. are typically not published until 18 months after
filing, or in some cases not at all, and publications of discoveries in industry-related
literature lag behind actual discoveries. We cannot be certain that we were the first to make the
inventions claimed in our issued patents or pending patent applications or otherwise used in our
products, that we were the first to file for protection in our patent applications, or that third
parties do not have blocking patents that could be used to prevent us from marketing or practicing
our patented products or technology. Effective patent, trademark, copyright and trade secret
protection may not be available to us in every country in which our products and services are
available. The laws of some foreign countries may not be as protective of intellectual property
rights as those in the United States, and mechanisms for enforcement of intellectual property
rights may be inadequate. Accordingly, despite our efforts, we may be unable to prevent third
parties from infringing upon or misappropriating our intellectual property.
We might be required to spend significant resources to monitor and protect our intellectual
property rights. We may initiate claims or litigation against third parties for infringement of our
proprietary rights or to establish the validity of our proprietary rights. Any litigation, whether
or not it is resolved in our favor, could result in significant expense to us and divert the
efforts of our technical and management personnel, which may adversely affect our business,
operating results and financial condition.
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Confidentiality agreements with employees and others may not adequately prevent disclosure of
trade secrets and other proprietary information.
In order to protect our proprietary technology, processes and methods, we rely in part on
confidentiality agreements with our corporate partners, employees, consultants, advisors and
others. These agreements may not effectively prevent disclosure of confidential information and may
not provide an adequate remedy in the event of unauthorized disclosure of confidential information.
In addition, others may independently discover trade secrets and proprietary information, and in
these cases we would not be able to assert any trade secret rights against those parties. Costly
and time-consuming litigation could be necessary to enforce and determine the scope of our
proprietary rights, and failure to obtain or maintain trade secret protection could adversely
affect our competitive business position.
We may in the future be subject to intellectual property rights claims, which are extremely
costly to defend, could require us to pay significant damages and could limit our ability to use
certain technologies.
Companies in the software, networking and technology industries, including some of our current
and potential competitors, own large numbers of patents, copyrights, trademarks and trade secrets
and frequently enter into litigation based on allegations of infringement or other violations of
intellectual property rights. In addition, many of these companies have the capability to dedicate
substantially greater resources to enforce their intellectual property rights and to defend claims
that may be brought against them. The litigation may involve patent holding companies or other
adverse patent owners who have no relevant product revenues and against whom our potential patents
may provide little or no deterrence. We have received, and may in the future receive, notices that
claim we have misappropriated or misused other parties' intellectual property rights, and, to the
extent we gain greater visibility, we face a higher risk of being the subject of intellectual
property infringement claims, which is not uncommon with respect to software technologies in
general and network security technology in particular. There may be third-party intellectual
property rights, including issued or pending patents, that cover significant aspects of our
technologies or business methods. Any intellectual property claims, with or without merit, could be
very time-consuming, could be expensive to settle or litigate and could divert our management's
attention and other resources. These claims could also subject us to significant liability for
damages, potentially including treble damages if we are found to have willfully infringed patents
or copyrights. These claims could also result in our having to stop using technology found to be in
violation of a third party's rights. We might be required to seek a license for the intellectual
property, which may not be available on reasonable terms or at all. Even if a license were
available, we could be required to pay significant royalties, which would increase our operating
expenses. As a result, we may be required to develop alternative non-infringing technology, which
could require significant effort and expense. If we cannot license or develop technology for any
infringing aspect of our business, we would be forced to limit or stop sales of one or more of our
products or product features and may be unable to compete effectively. Any of these results would
harm our business, operating results and financial condition.
We rely on software licensed from other parties, the loss of which could increase our costs
and delay software shipments.
We utilize various types of software licensed from unaffiliated third parties in order to
provide certain elements of our product offering. For example, we license database software from
Oracle that we integrate with our ESM product. Our agreement with Oracle permits us to distribute
Oracle software in our products to our customers and
partners worldwide through May 2009. See "Business—Intellectual Property—Oracle License
Agreement" in the Prospectus. Any errors or defects in this third-party software could result in errors that could
harm our business. In addition, licensed software may not continue to be available on commercially
reasonable terms, or at all. While we believe that there are currently adequate replacements for
third-party software, any loss of the right to use any of this software could result in delays in
producing or delivering our software until equivalent technology is identified and integrated,
which could harm our business. Our business would be disrupted if any of the software we license
from others or functional equivalents of this software were either no longer available to us or no
longer offered to us on commercially reasonable terms. In either case, we would be required to
either redesign our products to function with software available from other parties or to develop
these components ourselves, which would result in increased costs and could result in delays in our
product shipments and the release of new product offerings. Furthermore, we might be forced to
limit the features available in our current or future products. If we fail to maintain or
renegotiate
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any of these software licenses, we could face significant delays and diversion of
resources in attempting to license and integrate a functional equivalent of the software.
Some of our products contain "open source" software, and any failure to comply with the terms
of one or more of these open source licenses could negatively affect our business.
Certain of our products are distributed with software licensed by its authors or other third
parties under "open source" licenses. Some of these licenses contain requirements that we make
available source code for modifications or derivative works we create based upon the open source
software, and that we license these modifications or derivative works under the terms of a
particular open source license or other license granting third parties certain rights of further
use. If we combine our proprietary software with open source software in a certain manner, we
could, under certain of the open source licenses, be required to release the source code of our
proprietary software. In addition to risks related to license requirements, usage of open source
software can lead to greater risks than use of third-party commercial software, as open source
licensors generally do not provide warranties or controls on origin of the software. We have
established processes to help alleviate these risks, including a review process for screening
requests from our development organization for the use of open source, and we plan to implement the
use of software tools to review our source code for potential inclusion of open source, but we
cannot be sure that all open source is submitted for approval prior to use in our products or that
such software tools will be effective. In addition, open source license terms may be ambiguous and
many of the risks associated with usage of open source cannot be eliminated, and could, if not
properly addressed, negatively affect our business. If we were found to have inappropriately used
open source software, we may be required to re-engineer our products, to release proprietary source
code, to discontinue the sale of our products in the event re-engineering could not be accomplished
on a timely basis or to take other remedial action that may divert resources away from our
development efforts, any of which could adversely affect our business, operating results and
financial condition.
Indemnity provisions in various agreements potentially expose us to substantial liability for
intellectual property infringement and other losses.
Our agreements with customers and channel partners include indemnification provisions, under
which we agree to indemnify them for losses suffered or incurred as a result of claims of
intellectual property infringement and, in some cases, for damages caused by us to property or
persons. The term of these indemnity provisions is generally perpetual after execution of the
corresponding product sale agreement. Large indemnity payments could harm our business, operating
results and financial condition.
Changes or reforms in the law or regulatory landscape could diminish the demand for our
solutions, and could have a negative impact on our business.
One factor that drives demand for our products and services is the legal and regulatory
framework in which our customers operate. Laws and regulations are subject to drastic changes, and
these could either help or hurt the demand for our products. Thus, some changes in the law and
regulatory landscape, such as legislative reforms that limit corporate compliance obligations,
could significantly harm our business.
If we are unable to attract and retain personnel, our business would be harmed.
We depend on the continued contributions of our senior management and other key personnel, in
particular Robert Shaw and Hugh Njemanze, the loss of whom could harm our business. All of our
executive officers and key employees are at-will employees, which means they may terminate their
employment relationship with us at any time. We do not maintain a key-person life insurance policy
on any of our officers or other employees.
Our future success also depends on our ability to identify, attract and retain highly skilled
technical, managerial, finance and other personnel, particularly in our sales and marketing,
research and development and professional service departments. We face intense competition for
qualified individuals from numerous security, software and other technology companies. In addition,
competition for qualified personnel is particularly intense in the San Francisco Bay Area, where
our headquarters are located. Often, significant amounts of time and resources are required to
train technical, sales and other personnel. Qualified individuals are in high demand. We may incur
significant costs to attract and retain them, and we may lose new employees to our competitors or
other technology
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companies before we realize the benefit of our investment in recruiting and
training them. We may be unable to attract and retain suitably qualified individuals who are
capable of meeting our growing technical, operational and managerial requirements, on a timely
basis or at all, and we may be required to pay increased compensation in order to do so. If we are
unable to attract and retain the qualified personnel we need to succeed, our business would suffer.
Volatility or lack of performance in our stock price may also affect our ability to attract
and retain our key employees. Many of our senior management personnel and other key employees have
become, or will soon become, vested in a substantial amount of stock or stock options. Employees
may be more likely to leave us if the shares they own or the shares underlying their vested options
have significantly appreciated in value relative to the original purchase prices of the shares or
the exercise prices of the options, or if the exercise prices of the options that they hold are
significantly above the market price of our common stock. If we are unable to retain our employees,
our business, operating results and financial condition would be harmed.
If we fail to manage future growth effectively, our business would be harmed.
We operate in an emerging market and have experienced, and may continue to experience,
significant expansion of our operations. In particular, we grew from 204 employees as of April 30,
2006 to 308 employees as of October 31, 2007. This growth has placed, and will continue to place, a
strain on our employees, management systems and other resources. Managing our growth will require
significant expenditures and allocation of valuable management resources. If we fail to achieve the
necessary level of efficiency in our organization as it grows, our business, operating results and
financial condition would be harmed.
Future acquisitions could disrupt our business and harm our financial condition and results of
operations.
We completed the acquisition of substantially all of the assets of Enira Technologies, LLC in
June 2006, and may pursue additional acquisitions in the future, any of which could be material to
our business, operating results and financial condition. Our ability as an organization to
successfully acquire and integrate technologies or businesses on a larger scale is unproven.
Acquisitions involve many risks, including the following:
•
an acquisition may negatively impact our results of operations because it may require us
to incur charges and substantial debt or liabilities, may cause adverse tax consequences,
substantial depreciation or deferred compensation charges, may result in acquired in-process
research and development expenses or in the future may require the amortization, write-down
or impairment of amounts related to deferred compensation, goodwill and other intangible
assets, or may not generate sufficient financial return to offset acquisition costs;
•
we may encounter difficulties or unforeseen expenditures in integrating the business,
technologies, products, personnel or operations of any company that we acquire, particularly
if key personnel of the acquired company decide not to work for us;
•
an acquisition may disrupt our ongoing business, divert resources, increase our expenses
and distract our management;
•
an acquisition may result in a delay or reduction of customer purchases for both us and
the company acquired due to customer uncertainty about continuity and effectiveness of
service from either company; and
•
an acquisition may involve the entry into geographic or business markets in which we have
little or no prior experience.
Establishing, maintaining and improving our financial controls and the requirements of being a
public company may strain our resources and divert management's attention, and if we fail to
establish and maintain proper internal controls, our ability to produce accurate financial
statements or comply with applicable regulations could be impaired.
As a public company, we will be subject to the reporting requirements of the Securities
Exchange Act of 1934, or the Exchange Act, the Sarbanes-Oxley Act of 2002, or the Sarbanes-Oxley
Act, and the rules and regulations of The NASDAQ Stock Market. The requirements of these rules and
regulations will increase our legal, accounting and
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financial compliance costs, will make some
activities more difficult, time-consuming and costly and may also place undue strain on our
personnel, systems and resources.
The Sarbanes-Oxley Act requires, among other things, that we maintain effective disclosure
controls and procedures and internal control over financial reporting. Given our history of
material weaknesses, achieving and maintaining effective controls may be particularly challenging
for us. See "—A material weakness in our internal control over financial reporting was identified
during the audit of our most recent annual financial statements that, if not remediated, could
affect our ability to prepare timely and accurate financial reports, which could cause investors to
lose confidence in our reported financial information and have a negative effect on the trading
price of our stock."
While we are in the process of remediating the material weakness identified during the audit
of our fiscal 2007 financial statements, we cannot estimate how long it will take to reach a
determination that our internal control over financial reporting is effective. Further, we are in
the early stages of developing our disclosure controls and procedures — the controls and other
procedures that are designed to ensure that information required to be disclosed by us in the
reports that we file with the Securities and Exchange Commission, or SEC, is recorded, processed,
summarized and reported within the time periods specified in SEC's rules and forms. Even if we
develop effective controls, these new controls and our currently effective controls may become
inadequate because of changes in conditions, and the degree of compliance with the policies or
procedures may deteriorate. Further, additional weaknesses in our internal controls may be
discovered in the future. Any failure to develop or maintain effective controls, or any
difficulties encountered in their implementation or improvement, could harm our operating results
or cause us to fail to meet our reporting obligations and may result in a restatement of our prior
period financial statements. Any failure to implement and maintain effective internal controls also
could adversely affect the results of periodic management evaluations and annual auditor
attestation reports regarding the effectiveness of our internal control over financial reporting
that we will be required to include in our periodic reports filed with the SEC beginning for our
fiscal year ending April 30, 2009 under Section 404 of the Sarbanes-Oxley Act. Ineffective
disclosure controls and procedures and internal control over financial reporting could also cause
investors to lose confidence in our reported financial and other information, which would likely
have a negative effect on the trading price of our common stock.
In order to maintain and improve the effectiveness of our disclosure controls and procedures
and internal control over financial reporting, we will need to expend significant resources and
provide significant management oversight. We have a substantial effort ahead of us to implement
appropriate processes, document our system of internal control over relevant processes, assess
their design, remediate any deficiencies identified and test their operation. As a result,
management's attention may be diverted from other business concerns, which could harm our business,
operating results and financial condition. These efforts will also involve substantial
accounting-related costs. In addition, if we are unable to continue to meet these requirements, we
may not be able to remain listed on The NASDAQ Global Market.
Implementing any appropriate changes to our internal controls may require specific compliance
training of our directors, officers and employees, entail substantial costs in order to modify our
existing accounting systems, and take a significant period of time to complete. These changes may
not, however, be effective in maintaining the adequacy of our internal controls, and any failure to
maintain that adequacy, or consequent inability to produce accurate financial statements on a
timely basis, could increase our operating costs and could materially impair our ability to operate
our business. In the event that we are not able to demonstrate compliance with Section 404 of the
Sarbanes-Oxley Act in a timely manner, that our internal controls are perceived as inadequate or
that we are unable to produce timely or accurate financial statements, investors may lose
confidence in our operating results and our stock price could decline.
We also have not yet implemented a complete disaster recovery plan or business continuity plan
for our accounting and related information technology systems. Any disaster could therefore
materially impair our ability to maintain timely accounting and reporting.
The Sarbanes-Oxley Act and the rules and regulations of The NASDAQ Stock Market will make it
more difficult and more expensive for us to maintain directors' and officers' liability insurance,
and we may be required to accept reduced coverage or incur substantially higher costs to maintain
or increase coverage. If we are unable to maintain adequate directors' and officers' insurance, our
ability to recruit and retain qualified directors, especially those
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directors who may be considered
independent for purposes of The NASDAQ Stock Market rules, and officers may
be curtailed.
A material weakness in our internal control over financial reporting was identified during the
audit of our most recent annual financial statements that, if not remediated, could affect our
ability to prepare timely and accurate financial reports, which could cause investors to lose
confidence in our reported financial information and have a negative effect on the trading price of
our stock.
Effective internal control over financial reporting is necessary for us to provide reliable
financial reports, to prevent fraud and to operate successfully as a public company. If we cannot
provide reliable financial reports or prevent fraud, our operating results may be misstated and our
reputation may be harmed.
During the audit of our financial statements for fiscal 2004, 2005, 2006 and 2007, "material
weaknesses" in our internal control over financial reporting were identified, and, in the future,
we may identify additional material weaknesses or other areas of our internal control over
financial reporting that need improvement. The material weakness identified in connection with the
preparation of our financial statements for fiscal 2007 relates to internal review, primarily due
to failure of the review process of accounting computations and reconciliations prepared by third
parties as part of the preparation of our fiscal 2007 financial statements. This weakness led to
four adjustments to our financial statements. The largest such adjustment resulted from a failure
to detect an overstatement of stock-based compensation expense of $0.3 million under Statement of
Financial Accounting Standards No. 123(R),
Share Based Payment,
in calculations prepared by a
third-party service provider.
We are in the process of remediating the material weakness identified during the audit of our
fiscal 2007 financial statements, but have not yet been able to complete our remediation efforts.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations—Internal Control Over Financial Reporting" in
the Prospectus. It will take additional time to design,
implement and test the controls and procedures required to enable our management to conclude that
our disclosure controls and our internal control over financial reporting are effective. We cannot
at this time estimate how long it will take to complete our remediation efforts. In addition, we
cannot assure you that additional material weaknesses in our internal control over financial
reporting will not be identified in the future. Any failure to remediate the material weakness that
has been identified or to implement and maintain effective disclosure controls and internal control
over financial reporting could cause us to fail to meet our reporting obligations or result in
material misstatements in our financial statements.
We may not be able to utilize a significant portion of our net operating loss carry-forwards,
which could adversely affect our operating results.
Due to prior period losses, we have generated significant federal and state net operating loss
carry-forwards, which expire beginning in fiscal 2021 and fiscal 2013, respectively. U.S. federal
and state income tax laws limit the amount of these carry-forwards we can utilize upon a greater
than 50% cumulative shift of stock ownership over a three-year period, including shifts due to the
issuance of additional shares of our common stock, or securities convertible into our common stock.
We have previously experienced a greater than 50% shift in our stock ownership, which has limited
our ability to use a portion of our net operating loss carry-forwards, and we may experience
subsequent shifts in our stock ownership. Accordingly, there is a risk that our ability to use our
existing carry-forwards in the future could be further limited and that existing carry-forwards
would be unavailable to offset future income tax liabilities, which would adversely affect our
operating results.
Governmental export or import controls could subject us to liability or limit our ability to
compete in foreign markets.
Our products incorporate encryption technology and may be exported outside the U.S. only if we
obtain an export license or qualify for an export license exception. Compliance with applicable
regulatory requirements regarding the export of our products, including with respect to new
releases of our products, may create delays in the introduction of our products in international
markets, prevent our customers with international operations from deploying our products throughout
their global systems or, in some cases, prevent the export of our products to some countries
altogether. In addition, various countries regulate the import of our appliance-based products and
have enacted laws that could limit our ability to distribute products or could limit our customers'
ability to implement our products in
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those countries. Any new export or import restrictions, new
legislation or shifting approaches in the enforcement or scope of existing regulations, or in the
countries, persons or technologies targeted by such regulations, could result in decreased use of
our products by existing customers with international operations, declining adoption of our
products by new customers with international operations and decreased revenues. If we fail to
comply with export and import regulations, we may be denied export privileges, be subjected to
fines or other penalties and our products
may be denied entry into other countries.
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USE OF PROCEEDS
If shares are resold by the Stockholders, ArcSight will receive no proceeds from such sale.
The shares will be offered for the respective accounts of the Stockholders.
DILUTION
If you invest in our common stock, your interest will be diluted to the extent of the
difference between the price that you pay for our common stock and the pro forma net tangible book
value of our common stock after our underwritten public offering. As of October 31, 2007 and after
giving effect to the sale by us of the 6,000,000 shares of common stock offered by us in our
initial public offering at an initial public offering price of $9.00 per share and after
deducting the underwriting discounts and commissions and the estimated offering expenses, our pro
forma as adjusted net tangible book value was approximately
$44.5 million, or $1.44 per share.
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SELLING STOCKHOLDERS
The shares that may be offered from time to time by the Stockholders named below pursuant to
this prospectus have been acquired by the Stockholders upon exercise of options granted under the
Plans.
The following table sets forth the name of each Stockholder, the amount of common stock
beneficially owned by him or her as of December 31, 2007, the amount of common stock that he or
she may offer and the amount of common stock to be beneficially owned by him or her subsequent to
this offering. Since each Stockholder may sell all or some portion of the shares of common stock
beneficially owned, only an estimate (assuming that he or she sells all of the shares offered
hereby) can be given as to the number of shares of common stock that will be beneficially owned by
him or her after this offering. To our knowledge, none of the Stockholders is a broker-dealer or an
affiliate of a broker-dealer.
Beneficial ownership is determined in accordance with the rules of the SEC and thus represents
voting or investment power with respect to our securities. Unless otherwise indicated below, to our
knowledge, the persons named in the table have sole voting and sole investment power with respect
to all shares beneficially owned, subject to community property laws where applicable. Shares of
our common stock subject to options that are currently exercisable or exercisable within 60 days of
December 31, 2007 are deemed to be outstanding and to be beneficially owned by the person holding
the options for the purpose of computing the percentage ownership of that person but are not
treated as outstanding for the purpose of computing the percentage ownership of any other person.
Percentage ownership of our common stock before this offering is based on 24,980,715 shares
of our common stock outstanding as of December 31, 2007, which includes 13,996,097 shares of
common stock resulting from the automatic conversion of all outstanding shares of our preferred
stock upon the completion of our initial public offering, as if this conversion had occurred as of
December 31, 2007, and assumes our sale of 6,000,000 shares in our initial public offering and no
exercise of the underwriters' option to purchase additional shares of our common stock in our
initial public offering.
Number of
Shares Beneficially
Shares
Shares Beneficially
Owned Before Offering
Registered
Owned After Offering
Name of Beneficial Owners
Number
Percentage
Number
Number
Percentage
Hugh S. Njemanze
(1)
1,135,391
3.6
725,000
410,391
1.3
Kevin P. Mosher
(2)
472,891
1.5
375,000
52,891
*
Stewart Grierson
(3)
347,891
1.1
50,000
297,891
*
Lawrence F. Lunetta
(4)
176,406
*
118,750
60,656
*
*
Less than 1%.
(1)
Represents 412,500 shares held by Mr. Njemanze and 562,500 shares held by Mr. Njemanze and
Cherl M. Njemanze, his wife, together, and includes options exercisable for 160,391 shares of
common stock within 60 days of December 31, 2007 that are held by Mr. Njemanze, of which
39,063 shares would be subject to a right of repurchase in our favor upon exercise and Mr.
Njemanze's cessation of service prior to vesting.
(2)
Represents 375,000 shares held by Mr. Mosher, of which 7,813 shares are subject to a right of
repurchase in our favor upon Mr. Mosher's cessation of service prior to vesting, and includes
options exercisable for 97,981 shares of common stock within 60 days of December 31, 2007, of
which 27,345 shares would be subject to a right of repurchase in our favor upon exercise and
Mr. Mosher's cessation of service prior to vesting.
(3)
Represents 50,000 shares held by Mr. Grierson and Jennifer Murray, his wife, together, and
includes options exercisable for 297,891 shares of common stock within 60 days of December 31,
2007 that are held by Mr. Grierson, of which 49,220 shares would be subject to a right of
repurchase in our favor upon exercise and Mr. Grierson's cessation of service prior to
vesting.
(4)
Represents 118,750 shares held by Mr. Lunetta and Nancy Lunetta, his wife, together, and
includes options exercisable for 57,656 shares of common stock within 60 days of December 31,
2007 that are held by Mr. Lunetta of which 15,626 shares would be subject to a right of
repurchase in our favor upon exercise and Mr. Lunetta's cessation of service prior to vesting.
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PLAN OF DISTRIBUTION
The Stockholders and their successors, including their transferees, pledgees or donees or
their successors, may sell the common stock offered under this prospectus directly to purchasers or
through underwriters, broker-dealers or agents, who may receive compensation in the form of
discounts, concessions or commissions from the selling stockholder or the purchasers. These
discounts, concessions or commissions as to any particular underwriter, broker-dealer or agent may
be in excess of those customary in the types of transactions involved. Neither ArcSight nor the
Stockholders can presently estimate the amount of this compensation.
The common stock offered under this prospectus may be sold in one or more transactions at
fixed prices, at prevailing market prices at the time of sale, at prices related to the prevailing
market prices, at varying prices determined at the time of sale, or at negotiated prices. These
sales may be effected in transactions, which may involve crosses or block transactions:
•
on any national securities exchange or U.S. inter-dealer system of a registered national
securities association on which the common stock may be listed or quoted at the time of
sale;
•
in the over-the-counter market;
•
in transactions otherwise than on these exchanges or systems or in the over-the-counter
market; or
•
through the writing of options, whether the options are listed on an options exchange or
otherwise.
The aggregate proceeds to the Stockholder from the sale of the common stock offered by them
will be the purchase price of the common stock less discounts and commissions, if any. Each of the
Stockholders reserves the right to accept and, together with their agents from time to time, to
reject, in whole or in part, any proposed purchase of common stock to be made directly or through
agents. ArcSight will not receive any of the proceeds from this offering.
ArcSight's common stock is listed for trading on The NASDAQ Global Market under the symbol
"ARST."
The Stockholders and any underwriters, broker-dealers or agents that participate in the sale
of the common stock may be "underwriters" within the meaning of Section 2(11) of the Securities
Act. Any discounts, commissions, concessions or profit they earn on any resale of the shares may be
underwriting discounts and commissions under the Securities Act. If the Stockholder is an
"underwriter" within the meaning of Section 2(11) of the Securities Act, the Stockholder will be
subject to the prospectus delivery requirements of the Securities Act.
In addition, any securities covered by this prospectus which qualify for sale pursuant to Rule
144 of the Securities Act may be sold under Rule 144 rather than pursuant to this prospectus. A
Selling Stockholder may not sell any common stock described in this prospectus and may not
transfer, devise or gift these securities by other means not described in this prospectus.
To the extent required, the specific common stock to be sold, the names of the Stockholder,
the respective purchase prices and public offering prices, the names of any agent, dealer or
underwriter, and any applicable commissions or discounts with respect to a particular offer will be
set forth in an accompanying prospectus supplement or, if appropriate, a post-effective amendment
to the registration statement of which this prospectus is a part. This prospectus also may be used,
with ArcSight's consent, by donees or pledgees of the Stockholder, or by other persons acquiring
shares and who wish to offer and sell shares under circumstances requiring or making desirable its
use.
In order to comply with the securities laws of some states, if applicable, the common stock
may be sold in these jurisdictions only through registered or licensed brokers or dealers.
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Table of Contents
EXPERTS
Ernst & Young LLP, independent registered public accounting firm, has audited our consolidated
financial statements at April 30, 2007 and 2006, and for each of the three fiscal years in the
period ended April 30, 2007, including in our Registration Statement on Form S-1, as set forth in
their report, which is incorporated by reference in this prospectus and elsewhere in the
registration statement. Our financial statements are incorporated by reference in reliance on Ernst
& Young LLP's report, given on their authority as experts in accounting and auditing.
WHERE YOU CAN FIND ADDITIONAL INFORMATION
We have filed with the SEC a registration statement on Form S-8 under the Securities Act with
respect to the shares of common stock offered hereby. This prospectus, which constitutes a part of
the registration statement, does not contain all of the information set forth in the registration
statement or the exhibits filed therewith. For further information about us and the common stock
offered hereby, reference is made to the registration statement and the exhibits filed therewith.
Statements contained in this prospectus regarding the contents of any contract or any other
document that is filed as an exhibit to the registration statement are not necessarily complete,
and each such statement is qualified in all respects by reference to the full text of such contract
or other document filed as an exhibit to the registration statement. We currently do not file
periodic reports with the SEC. Upon completion of this offering, we will be required to file
periodic reports, proxy statements and other information with the SEC pursuant to the Exchange Act.
A copy of the registration statement and the exhibits filed therewith may be inspected without
charge at the public reference room maintained by the SEC, located at 100 F Street, N.E., Room
1580, Washington, D.C. 20549, and copies of all or any part of the registration statement may be
obtained from that office. Please call the SEC at 1-800-SEC-0330 for further information about the
public reference room. The SEC also maintains an Internet website that contains reports, proxy and
information statements and other information regarding registrants that file electronically with
the SEC. The address of the website is www.sec.gov.
We are subject to the information and reporting requirements of the Exchange Act and, in
accordance with this law, file periodic reports, proxy statements and other information with the
SEC. These periodic reports, proxy statements and other information are available for inspection
and copying at the SEC's public reference facilities and the website of the SEC referred to above.
INCORPORATION OF DOCUMENTS BY REFERENCE
The following documents filed by us with the Commission pursuant to the Securities Act and the
Exchange Act, are incorporated herein by reference into this prospectus:
(a)
The Registrant's prospectus filed on February 14, 2008 pursuant to Rule 424(b)
under the Securities Act relating to the Registration Statement on Form S-1 (File No.
333-145974); and
(b)
The description of the Registrant's common stock contained in the Registrant's
Registration Statement on Form 8-A (File No. 001-33923) filed on January 18, 2008 under
Section 12(b) of the Exchange Act which incorporates by reference the "Description of
Capital Stock" as set forth in Registrant's Registration Statement on Form S-1 (File
No. 333-145974) as originally filed with the SEC on September 11, 2007, and as
subsequently amended, and in the prospectus filed by the Registrant pursuant to Rule
424(b) under the Securities Act, including any amendment or report filed for the
purpose of updating such description.
In addition, all documents which we file pursuant to Sections 13(a), 13(c), 14 and 15(d) of
the Exchange Act after the date of this prospectus and prior to the termination of this offering,
shall be deemed to be incorporated by reference herein and to be a part of this prospectus from the
date of the filing of such documents. Any statement contained in a document incorporated or deemed
to be incorporated by reference herein shall be deemed to be modified or superseded for purposes of
this prospectus to the extent that a statement contained in this prospectus, or in any other
subsequently filed document which also is or is deemed to be incorporated by reference in this
prospectus, modifies or supersedes such statement. Any such statement so modified or superseded
shall not be deemed, except as so modified or superseded, to constitute a part of this prospectus.
I-24
Table of Contents
1,268,750 SHARES
COMMON STOCK, PAR VALUE $0.00001
ArcSight, Inc.
Prospectus
February 14, 2008
Table of Contents
PART II
Information Required in the Registration Statement
Item 3.
Incorporation of Documents by Reference
.
ArcSight, Inc. (the "
Registrant
") hereby incorporates by reference into this Registration
Statement the following documents previously filed with the Commission:
(a)
The Registrant's prospectus filed on February 14, 2008 pursuant to Rule 424(b)
under the Securities Act relating to the Registration Statement on Form S-1 (File No.
333-145974) (the "
Form S-1
"); and
(b)
The description of the Registrant's Common Stock contained in the Registrant's
Registration Statement on Form 8-A (File No. 001-33923) filed with the Commission on
January 22, 2008 under Section 12(b) of the Securities Exchange Act of 1934, as amended
(the "
Exchange Act
"), including any amendment or report filed for the purpose of
updating such description.
All documents subsequently filed by the Registrant pursuant to Sections 13(a), 13(c), 14 and
15(d) of the Exchange Act, prior to the filing of a post-effective amendment which indicates that
all securities offered by this Registration Statement have been sold or which deregisters all
securities then remaining unsold, shall be deemed to be incorporated by reference into this
Registration Statement and to be a part of this Registration Statement from the date of the filing
of such documents.
Item 4.
Description of Securities
.
Not applicable.
Item 5.
Interests of Named Experts and Counsel
.
Not applicable.
Item 6.
Indemnification of Directors and Officers
.
Section 145 of the Delaware General Corporation Law authorizes a court to award, or a
corporation's board of directors to grant, indemnity to directors and officers under certain
circumstances and subject to certain limitations. The terms of Section 145 of the Delaware General
Corporation Law are sufficiently broad to permit indemnification under certain circumstances for
liabilities, including reimbursement of expenses incurred, arising under the Securities Act.
As permitted by the Delaware General Corporation Law, the Registrant's restated certificate of
incorporation contains provisions that eliminate the personal liability of its directors for
monetary damages for any breach of fiduciary duties as a director, except liability for the
following:
•
any breach of the director's duty of loyalty to the Registrant or its
stockholders;
•
acts or omissions not in good faith or that involve intentional misconduct or a
knowing violation of law;
•
under Section 174 of the Delaware General Corporation Law (regarding unlawful
dividends and stock purchases); or
•
any transaction from which the director derived an improper personal benefit.
As permitted by the Delaware General Corporation Law, the Registrant's restated bylaws, to be
effective upon the completion of this offering, provide that:
II-1
Table of Contents
•
the Registrant is required to indemnify its directors and executive officers to
the fullest extent permitted by the Delaware General Corporation Law, subject to very
limited exceptions;
•
the Registrant may indemnify its other employees and agents as set forth in the
Delaware General Corporation Law;
•
the Registrant is required to advance expenses, as incurred, to its directors
and executive officers in connection with a legal proceeding to the fullest extent
permitted by the Delaware General Corporation Law, subject to very limited exceptions;
and
•
the rights conferred in the bylaws are not exclusive.
The Registrant has entered into or will enter into indemnity agreements with its current
directors and executive officers to provide these directors and executive officers additional
contractual assurances regarding the scope of the indemnification set forth in the Registrant's
restated certificate of incorporation and restated bylaws and to provide additional procedural
protections. At present, there is no pending litigation or proceeding involving a director or
executive officer of the Registrant regarding which indemnification is sought. The indemnification
provisions in the Registrant's restated certificate of incorporation, restated bylaws and the
indemnification agreements entered into or to be entered into between the Registrant and its
directors and executive officers may be sufficiently broad to permit indemnification of the
Registrant's directors and executive officers for liabilities arising under the Securities Act.
The Registrant currently carries liability insurance for its directors and executive officers.
One of Registrant's directors (Ted Schlein) is also indemnified by his employer with regard to
his service on the Registrant's board of directors.
See also the undertakings set out in response to Item 9 hereof.
Item 7.
Exemption from Registration Claimed
.
The shares being reoffered and resold pursuant to the prospectus included herein were issued
pursuant to the Plans registered hereby and were deemed to be exempt from registration under the
Securities Act in reliance on Section 4(2) of the Securities Act or Regulation D promulgated
thereunder, as transactions by an issuer not involving a public offering. Each of the Stockholders
in each such transaction represented their intention to acquire the securities for investment only
and not with a view to or for sale in connection with any distribution thereof and appropriate
legends were affixed to the share certificates and instruments issued in such transactions. All
recipients had adequate access, through their relationship with the Registrant, to information
about the Registrant.
Item 8.
Exhibits
.
Exhibit
Number
Exhibit Title
4.1
Form of Restated Certificate of Incorporation of the Registrant (incorporated herein by
reference to Exhibit 3.2 of the Form S-1).
4.2
Form Amended and Restated Bylaws of the Registrant (incorporated herein by reference to
Exhibit 3.4 of the Form S-1).
4.3
Form of Registrant's common stock certificate (incorporated herein by reference to Exhibit 4.1
of the Form S-1).
4.4
Amended and Restated Investors' Rights Agreement, dated as of October 24, 2002, between the
Registrant and certain security holders of the Registrant (incorporated herein by reference to
Exhibit 4.2 of the Form S-1).
II-2
Table of Contents
Exhibit
Number
Exhibit Title
4.5
2000 Stock Incentive Plan, as amended (incorporated herein by reference to Exhibit 10.2 of the
Form S-1).
4.6
2002 Stock Plan, as amended (incorporated herein by reference to Exhibit 10.4 of the Form S-1).
23.1
Consent of Ernst & Young LLP, Independent Registered Public Accounting Firm.
24.1
Power of Attorney (see page II-4 of this Registration Statement).
Item 9.
Undertakings
.
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a post-effective
amendment to this Registration Statement: (i) to include any prospectus required by Section
10(a)(3) of the Securities Act; (ii) to reflect in the prospectus any facts or events arising after
the effective date of the Registration Statement (or the most recent post-effective amendment
thereof) which, individually or in the aggregate, represent a fundamental change in the information
set forth in this Registration Statement. Notwithstanding the foregoing, any increase or decrease
in volume of securities offered (if the total dollar value of securities offered would not exceed
that which was registered) and any deviation from the low or high end of the estimated maximum
offering range may be reflected in the form of prospectus filed with the Commission pursuant to
Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than a 20
percent change in the maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective Registration Statement; and (iii) to include any material
information with respect to the plan of distribution not previously disclosed in the Registration
Statement or any material change to such information in the Registration Statement;
provided
,
however
, that clauses (1)(i) and (1)(ii) above do not apply if the information required to be
included in a post-effective amendment by those clauses is contained in periodic reports filed with
or furnished to the Commission by the Registrant pursuant to Section 13 or Section 15(d) of the
Exchange Act that are incorporated by reference in this Registration Statement.
(2) That, for the purpose of determining any liability under the Securities Act, each such
post-effective amendment shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that time shall be deemed to be
the initial
bona fide
offering thereof.
(3) To remove from registration by means of a post-effective amendment any of the securities
being registered that remain unsold at the termination of the offering.
(b) The undersigned Registrant hereby undertakes that, for purposes of determining any
liability under the Securities Act, each filing of the Registrant's annual report pursuant to
Section 13(a) or Section 15(d) of the Exchange Act (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to Section 15(d) of the Exchange Act) that is
incorporated by reference into this Registration Statement shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial
bona fide
offering thereof.
(c) Insofar as indemnification for liabilities arising under the Securities Act may be
permitted to directors, officers and controlling persons of the Registrant pursuant to the
foregoing provisions, or otherwise, the Registrant has been advised that in the opinion of the
Commission such indemnification is against public policy as expressed in the Securities Act and is,
therefore, unenforceable. In the event that a claim for indemnification against such liabilities
(other than the payment by the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any action, suit or proceeding)
is asserted by such director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter has been settled
by controlling precedent, submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities Act and will be
governed by the final adjudication of such issue.
II-3
Table of Contents
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant certifies that it
has reasonable grounds to believe that it meets all of the requirements for filing on Form S-8 and
has duly caused this Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Cupertino, State of California, on February 14, 2008.
ARCSIGHT, INC.
By:
/s/
Robert W. Shaw
Robert W. Shaw
Chief Executive Officer and
Chairman of the Board of Directors
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS
, that each person whose signature appears below hereby
constitutes and appoints Robert W. Shaw and Stewart Grierson, and each of them acting individually,
as his or her true and lawful attorneys-in-fact and agents with full power of substitution, for him
or her in any and all capacities, to sign any amendments to this Registration Statement on Form
S-8, and to file the same, with exhibits thereto and other documents in connection therewith, with
the Securities and Exchange Commission, hereby ratifying and confirming all that each of said
attorneys-in-fact, or any substitute, may do or cause to be done by virtue hereof. This Power of
Attorney may be signed in any number of counterparts, each of which when so executed and delivered
shall be deemed an original, and such counterparts shall together constitute one and the same
instrument.
Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has
been signed by the following persons in the capacities and on the dates indicated.
Signature
Title
Date
/s/
Robert W. Shaw
Robert W. Shaw
Chief Executive Officer and
Chairman of the Board of
Directors
(Principal Executive Officer)
February 14, 2008
/s/
Stewart Grierson
Stewart Grierson
Chief Financial Officer
(Principal Accounting
and Financial Officer)
February 14, 2008
/s/
Sandra Bergeron
Sandra Bergeron
Director
February 14, 2008
/s/
William P. Crowell
William P. Crowell
Director
February 14, 2008
/s/
E. Stanton McKee, Jr.
E. Stanton McKee, Jr.
Director
February 14, 2008
II-4
Table of Contents
Signature
Title
Date
/s/
Craig Ramsey
Craig Ramsey
Director
February 14, 2008
/s/
Scott A. Ryles
Scott A. Ryles
Director
February 14, 2008
/s/
Ted Schlein
Ted Schlein
Director
February 14, 2008
/s/
Ernest von Simson
Ernest von Simson
Director
February 14, 2008
II-5
Table of Contents
EXHIBIT INDEX
Exhibit
Number
Exhibit Title
4.1
Form of Restated Certificate of Incorporation of the Registrant (incorporated herein by
reference to Exhibit 3.2 of the Form S-1).
4.2
Form Amended and Restated Bylaws of the Registrant (incorporated herein by reference to
Exhibit 3.4 of the Form S-1).
4.3
Form of Registrant's common stock certificate (incorporated herein by reference to Exhibit 4.1
of the Form S-1).
4.4
Amended and Restated Investors' Rights Agreement, dated as of October 24, 2002, between the
Registrant and certain security holders of the Registrant (incorporated herein by reference to
Exhibit 4.2 of the Form S-1).
4.5
2000 Stock Incentive Plan, as amended (incorporated herein by reference to Exhibit 10.2 of the
Form S-1).
4.6
2002 Stock Plan, as amended (incorporated herein by reference to Exhibit 10.4 of the Form S-1).
23.1
Consent of Ernst & Young LLP, Independent Registered Public Accounting Firm.
24.1
Power of Attorney (see page II-4 of this Registration Statement).