Document:

exv10w5

 

Exhibit 10.5

ArcSight, Inc. 2002 Stock Plan

Notice of Stock Option Grant

          You have been granted the following option to purchase shares of the Common Stock of
ArcSight, Inc. (the “Company”):

	 	 	 	 	 
	 

	 	Name of Optionee:	 	 
	 
	 	 	 	 
	 

	 	Total Number of Shares:	 	 
	 
	 	 	 	 
	 

	 	Type of Option:	 	 
	 
	 	 	 	 
	 

	 	Exercise Price Per Share:
	 	$
	 
	 	 	 	 
	 

	 	Date of Grant:	 	 
	 
	 	 	 	 
	 

	 	Date Exercisable:
	 	This option may not be exercised with respect to any portion until
such shares have vested in accordance with the Vesting Schedule.
	 
	 	 	 	 
	 

	 	Vesting Commencement Date:	 	 
	 
	 	 	 	 
	 

	 	Vesting Schedule:
	 	 
	 
	 	 	 	 
	 

	 	Expiration Date:
	 	                    . This option expires earlier if the Optionee’s Service terminates
earlier, as provided in Section 6 of the Stock Option Agreement.

By your signature and the signature of the Company’s representative below, you and the Company
agree that this option is granted under and governed by the terms and conditions of the 2002 Stock
Plan and the Stock Option Agreement, both of which are attached to and made a part of this
document.

	 	 	 	 	 	 	 
	Optionee:	 	 	 	ArcSight, Inc.
	 
	 	 	 	 	 	 
	 

	 	 	 	By:	 	 
	 

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	 	 	Title:	 	 
	 

	 	 	 	 	 	 

 

 

THE OPTION GRANTED PURSUANT TO THIS AGREEMENT AND THE SHARES ISSUABLE UPON THE EXERCISE
THEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, AND MAY NOT BE SOLD, PLEDGED, OR OTHERWISE TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION THEREOF UNDER SUCH ACT OR AN
OPINION OF COUNSEL, SATISFACTORY TO THE COMPANY AND ITS COUNSEL, THAT SUCH REGISTRATION IS NOT
REQUIRED.

ArcSight, Inc. 2002 Stock Plan:

Stock Option Agreement

SECTION 1. GRANT OF OPTION.

     (a) Option. On the terms and conditions set forth in the Notice of Stock
Option Grant and this Agreement, the Company grants to the Optionee on the Date of Grant the option
to purchase at the Exercise Price the number of Shares set forth in the Notice of Stock Option
Grant. The Exercise Price is agreed to be at least 100% of the Fair Market Value per Share on the
Date of Grant (110% of Fair Market Value if Section 3(b) of the Plan applies). This option is
intended to be an ISO or an NSO, as provided in the Notice of Stock Option Grant.

     (b) $100,000 Limitation. Even if this option is designated as an ISO in the Notice of Stock
Option Grant, it shall be deemed to be an NSO to the extent (and only to the extent) required by
the $100,000 annual limitation under Section 422(d) of the Code.

     (c) Stock Plan and Defined Terms. This option is granted pursuant to the Plan, a copy of
which the Optionee acknowledges having received. The provisions of the Plan are incorporated into
this Agreement by this reference. Capitalized terms are defined in Section 13 of this Agreement.

SECTION 2. RIGHT TO EXERCISE.

     (a) Exercisability. Subject to Subsection (b) below and the other conditions set forth in
this Agreement, this option may be exercised prior to its expiration in accordance with the Vesting
Schedule set forth in the Notice of Stock Option Grant.

     (b) Stockholder Approval. Any other provision of this Agreement notwithstanding, no portion
of this option shall be exercisable at any time prior to the approval of the Plan by the Company’s
stockholders.

SECTION 3. NO TRANSFER OR ASSIGNMENT OF OPTION.

          Except as otherwise provided in this Agreement, this option and the rights and privileges
conferred hereby shall not be sold, pledged or otherwise transferred (whether by operation of law
or otherwise) and shall not be subject to sale under execution, attachment, levy or similar
process.

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SECTION 4. EXERCISE PROCEDURES.

     (a) Notice of Exercise. The Optionee or the Optionee’s representative may exercise this
option by giving written notice to the Company pursuant to Section 12(c). The notice shall specify
the election to exercise this option, the number of Shares for which it is being exercised and the
form of payment. The person exercising this option shall sign the notice. In the event that this
option is being exercised by the representative of the Optionee, the notice shall be accompanied by
proof (satisfactory to the Company) of the representative’s right to exercise this option. The
Optionee or the Optionee’s representative shall deliver to the Company, at the time of giving the
notice, payment in a form permissible under Section 5 for the full amount of the Purchase Price.
In the event of a partial exercise of this option, Shares shall be deemed to have been purchased in
the order in which they vest in accordance with the Notice of Stock Option Grant.

     (b) Issuance of Shares. After receiving a proper notice of exercise, the Company shall cause
to be issued one or more certificates evidencing the Shares for which this option has been
exercised. Such Shares shall be registered (i) in the name of the person exercising this option,
(ii) in the names of such person and his or her spouse as community property or as joint tenants
with the right of survivorship or (iii) with the Company’s consent, in the name of a revocable
trust. The Company shall cause such certificates to be delivered to or upon the order of the
person exercising this option.

     (c) Withholding Taxes. In the event that the Company determines that it is required to
withhold any tax as a result of the exercise of this option, the Optionee, as a condition to the
exercise of this option, shall make arrangements satisfactory to the Company to enable it to
satisfy all withholding requirements. The Optionee shall also make arrangements satisfactory to
the Company to enable it to satisfy any withholding requirements that may arise in connection with
the vesting or disposition of Shares purchased by exercising this option.

SECTION 5. PAYMENT FOR STOCK.

     (a) Cash. All or part of the Purchase Price may be paid in cash or cash equivalents.

     (b) Surrender of Stock. All or any part of the Purchase Price may be paid by surrendering
Shares that are already owned by the Optionee for at least six (6) months. Such Shares shall be
surrendered to the Company in good form for transfer and shall be valued at their Fair Market Value
on the date when this option is exercised. The Optionee shall not surrender Shares in payment of
the Purchase Price if such action would cause the Company to recognize compensation expense (or
additional compensation expense) with respect to this option for financial reporting purposes.

     (c) Exercise/Sale. If Stock is publicly traded, all or part of the Purchase Price and any
withholding taxes may be paid by the delivery (on a form prescribed by the Company) of an
irrevocable direction to a securities broker approved by the Company to sell Shares and to deliver
all or part of the sales proceeds to the Company.

     (d) Exercise/Pledge. If Stock is publicly traded, all or part of the Purchase Price and any
withholding taxes may be paid by the delivery (on a form prescribed by the Company) of an

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irrevocable direction to pledge Shares to a securities broker or lender approved by the
Company, as security for a loan, and to deliver all or part of the loan proceeds to the Company.

SECTION 6. TERM AND EXPIRATION.

     (a) Basic Term. This option shall in any event expire on the expiration date set forth in the
Notice of Stock Option Grant, which date is 10 years after the Date of Grant (five years after the
Date of Grant if this option is designated as an ISO in the Notice of Stock Option Grant and
Section 3(b) of the Plan applies).

     (b) Termination of Service (Except by Death). If the Optionee’s Service terminates for any
reason other than death, then this option shall expire on the earliest of the following occasions:

     (i) The expiration date determined pursuant to Subsection (a) above;

     (ii) The date 30 days after the termination of the Optionee’s Service for any
reason other than Cause, retirement at or after age 65, or Disability;

     (iii) The date of the termination of the Optionee’s Service for Cause;

     (iv) The date 12 months after the Optionee’s retirement at or after age 65; or

     (v) The date 12 months after the termination of the Optionee’s Service by
reason of Disability.

The Optionee may exercise all or part of this option at any time before its expiration under the
preceding sentence, but only to the extent that this option is exercisable for vested Shares on or
before the date when the Optionee’s Service terminates. When the Optionee’s Service terminates,
this option shall expire immediately with respect to the number of Shares for which this option is
not yet vested and exercisable. In the event that the Optionee dies after termination of Service
but before the expiration of this option, all or part of this option may be exercised (prior to
expiration) by the executors or administrators of the Optionee’s estate or by any person who has
acquired this option directly from the Optionee by beneficiary designation, bequest or inheritance,
but only to the extent that this option was exercisable for vested Shares on or before the date
when the Optionee’s Service terminated.

     (c) Death of the Optionee. If the Optionee dies while in Service, then this option shall
expire on the earlier of the following dates:

     (i) The expiration date determined pursuant to Subsection (a) above; or

     (ii) The date 12 months after the Optionee’s death.

All or part of this option may be exercised at any time before its expiration under the preceding
sentence by the executors or administrators of the Optionee’s estate or by any person who has

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acquired this option directly from the Optionee by beneficiary designation, bequest or inheritance,
but only to the extent that this option is exercisable for vested Shares on or before the
Optionee’s death. When the Optionee dies, this option shall expire immediately with respect to the
number of Shares for which this option is not yet vested and exercisable.

     (d) Leaves of Absence. For any purpose under this Agreement, Service shall be deemed to
continue while the Optionee is on a bona fide leave of absence, if such leave was approved by the
Company in writing and if continued crediting of Service for such purpose is expressly required by
the terms of such leave or by applicable law (as determined by the Company).

     (e) Notice Concerning ISO Treatment. Even if this option is designated as an ISO in the
Notice of Stock Option Grant, it ceases to qualify for favorable tax treatment as an ISO to the
extent that it is exercised:

     (i) More than three months after the date when the Optionee ceases to be an
Employee for any reason other than death or permanent and total disability (as
defined in Section 22(e)(3) of the Code);

     (ii) More than 12 months after the date when the Optionee ceases to be an
Employee by reason of permanent and total disability (as defined in Section 22(e)(3)
of the Code); or

     (iii) More than three months after the date when the Optionee has been on a
leave of absence for 90 days, unless the Optionee’s reemployment rights following
such leave were guaranteed by statute or by contract.

SECTION 7. RIGHT OF FIRST REFUSAL.

     (a) Right of First Refusal. In the event that the Optionee proposes to sell, pledge or
otherwise transfer to a third party any Shares acquired under this Agreement, or any interest in
such Shares, the Company shall have the Right of First Refusal with respect to all (and not less
than all) of such Shares. If the Optionee desires to transfer Shares acquired under this
Agreement, the Optionee shall give a written Transfer Notice to the Company describing fully the
proposed transfer, including the number of Shares proposed to be transferred, the proposed transfer
price, the name and address of the proposed Transferee and proof satisfactory to the Company that
the proposed sale or transfer will not violate any applicable federal or state securities laws.
The Transfer Notice shall be signed both by the Optionee and by the proposed Transferee and must
constitute a binding commitment of both parties to the transfer of the Shares. The Company shall
have the right to purchase all, and not less than all, of the Shares on the terms of the proposal
described in the Transfer Notice (subject, however, to any change in such terms permitted under
Subsection (b) below) by delivery of a notice of exercise of the Right of First Refusal within 30
days after the date when the Transfer Notice was received by the Company.

     (b) Transfer of Shares. If the Company fails to exercise its Right of First Refusal within 30
days after the date when it received the Transfer Notice, the Optionee may, not later than 90 days
following receipt of the Transfer Notice by the Company, conclude a transfer of the

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Shares subject to the Transfer Notice on the terms and conditions described in the Transfer
Notice, provided that any such sale is made in compliance with applicable federal and state
securities laws and not in violation of any other contractual restrictions to which the Optionee is
bound. Any proposed transfer on terms and conditions different from those described in the
Transfer Notice, as well as any subsequent proposed transfer by the Optionee, shall again be
subject to the Right of First Refusal and shall require compliance with the procedure described in
Subsection (a) above. If the Company exercises its Right of First Refusal, the parties shall
consummate the sale of the Shares on the terms set forth in the Transfer Notice within 60 days
after the date when the Company received the Transfer Notice (or within such longer period as may
have been specified in the Transfer Notice); provided, however, that in the event the Transfer
Notice provided that payment for the Shares was to be made in a form other than cash or cash
equivalents paid at the time of transfer, the Company shall have the option of paying for the
Shares with cash or cash equivalents equal to the present value of the consideration described in
the Transfer Notice.

     (c) Additional or Exchanged Securities and Property. In the event of a merger or
consolidation of the Company with or into another entity, any other corporate reorganization, a
stock split, the declaration of a stock dividend, the declaration of an extraordinary dividend
payable in a form other than stock, a spin-off, an adjustment in conversion ratio, a
recapitalization or a similar transaction affecting the Company’s outstanding securities, any
securities or other property (including cash or cash equivalents) that are by reason of such
transaction exchanged for, or distributed with respect to, any Shares subject to this Section 7
shall immediately be subject to the Right of First Refusal. Appropriate adjustments to reflect the
exchange or distribution of such securities or property shall be made to the number and/or class of
the Shares subject to this Section 7.

     (d) Termination of Right of First Refusal. Any other provision of this Section 7
notwithstanding, in the event that the Stock is readily tradable on an established securities
market when the Optionee desires to transfer Shares, the Company shall have no Right of First
Refusal, and the Optionee shall have no obligation to comply with the procedures prescribed by
Subsections (a) and (b) above.

     (e) Permitted Transfers. This Section 7 shall not apply to (i) a transfer by beneficiary
designation, will or intestate succession or (ii) a transfer to one or more members of the
Optionee’s Immediate Family or to a trust established by the Optionee for the benefit of the
Optionee and/or one or more members of the Optionee’s Immediate Family, provided in either case
that the Transferee agrees in writing on a form prescribed by the Company to be bound by all
provisions of this Agreement. If the Optionee transfers any Shares acquired under this Agreement,
either under this Subsection (e) or after the Company has failed to exercise the Right of First
Refusal, then this Agreement shall apply to the Transferee to the same extent as to the Optionee.

     (f) Termination of Rights as Stockholder. If the Company makes available, at the time and
place and in the amount and form provided in this Agreement, the consideration for the Shares to be
purchased in accordance with this Section 7, then after such time the person from whom such Shares
are to be purchased shall no longer have any rights as a holder of such Shares (other than the
right to receive payment of such consideration in accordance with this

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Agreement). Such Shares shall be deemed to have been purchased in accordance with the
applicable provisions hereof, whether or not the certificate(s) therefor have been delivered as
required by this Agreement.

     (g) Assignment of Right of First Refusal. The Board of Directors may freely assign the
Company’s Right of First Refusal, in whole or in part. Any person who accepts an assignment of the
Right of First Refusal from the Company shall assume all of the Company’s rights and obligations
under this Section 7.

SECTION 8. LEGALITY OF INITIAL ISSUANCE.

     No Shares shall be issued upon the exercise of this option unless and until the Company has
determined that:

     (a) It and the Optionee have taken any actions required to register the Shares
under the Securities Act or to perfect an exemption from the registration
requirements thereof;

     (b) Any applicable listing requirement of any stock exchange or other
securities market on which Stock is listed has been satisfied; and

     (c) Any other applicable provision of federal, state or foreign law has been
satisfied.

SECTION 9. NO REGISTRATION RIGHTS.

     The Company may, but shall not be obligated to, register or qualify the sale of Shares under
the Securities Act or any other applicable law. The Company shall not be obligated to take any
affirmative action in order to cause the sale of Shares under this Agreement to comply with any
law.

SECTION 10. RESTRICTIONS ON TRANSFER.

     (a) Securities Law Restrictions. Regardless of whether the offering and sale of Shares under
the Plan have been registered under the Securities Act or have been registered or qualified under
the securities laws of any state, the Company at its discretion may impose restrictions upon the
sale, pledge or other transfer of such Shares (including the placement of appropriate legends on
stock certificates or the imposition of stop-transfer instructions) if, in the judgment of the
Company, such restrictions are necessary or desirable in order to achieve compliance with the
Securities Act, the securities laws of any state or any other law.

     (b) Market Stand-Off. In connection with any underwritten public offering by the Company of
its equity securities pursuant to an effective registration statement filed under the Securities
Act, including the Company’s initial public offering, the Optionee or a Transferee shall not
directly or indirectly sell, make any short sale of, loan, hypothecate, pledge, offer, grant or
sell any option or other contract for the purchase of, purchase any option or other contract for
the sale of, or otherwise dispose of or transfer, or agree to engage in any of the foregoing
transactions with respect to, any Shares acquired under this Agreement without the prior written

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consent of the Company or its underwriters. Such restriction (the “Market Stand-Off”) shall
be in effect for such period of time following the date of the final prospectus for the offering as
may be requested by the Company or such underwriters. In no event, however, shall such period
exceed 180 days. The Market Stand-Off shall in any event terminate two years after the date of the
Company’s initial public offering. In the event of the declaration of a stock dividend, a
spin-off, a stock split, an adjustment in conversion ratio, a recapitalization or a similar
transaction affecting the Company’s outstanding securities without receipt of consideration, any
new, substituted or additional securities which are by reason of such transaction distributed with
respect to any Shares subject to the Market Stand-Off, or into which such Shares thereby become
convertible, shall immediately be subject to the Market Stand-Off. In order to enforce the Market
Stand-Off, the Company may impose stop-transfer instructions with respect to the Shares acquired
under this Agreement until the end of the applicable stand-off period. The Company’s underwriters
shall be beneficiaries of the agreement set forth in this Subsection (b). This Subsection (b)
shall not apply to Shares registered in the public offering under the Securities Act, and the
Optionee or a Transferee shall be subject to this Subsection (b) only if the directors and officers
of the Company are subject to similar arrangements.

     (c) Investment Intent at Grant. The Optionee represents and agrees that the Shares to be
acquired upon exercising this option will be acquired for investment, and not with a view to the
sale or distribution thereof.

     (d) Investment Intent at Exercise. In the event that the sale of Shares under the Plan is not
registered under the Securities Act but an exemption is available which requires an investment
representation or other representation, the Optionee shall represent and agree at the time of
exercise that the Shares being acquired upon exercising this option are being acquired for
investment, and not with a view to the sale or distribution thereof, and shall make such other
representations as are deemed necessary or appropriate by the Company and its counsel.

     (e) Legends. All certificates evidencing Shares purchased under this Agreement shall bear the
following legend:

“THE SHARES REPRESENTED HEREBY MAY NOT BE SOLD, ASSIGNED, TRANSFERRED, ENCUMBERED OR
IN ANY MANNER DISPOSED OF, EXCEPT IN COMPLIANCE WITH THE TERMS OF A WRITTEN
AGREEMENT BETWEEN THE COMPANY AND THE REGISTERED HOLDER OF THE SHARES (OR THE
PREDECESSOR IN INTEREST TO THE SHARES). SUCH AGREEMENT GRANTS TO THE COMPANY
CERTAIN RIGHTS OF FIRST REFUSAL UPON AN ATTEMPTED TRANSFER OF THE SHARES. THE
SECRETARY OF THE COMPANY WILL UPON WRITTEN REQUEST FURNISH A COPY OF SUCH AGREEMENT
TO THE HOLDER HEREOF WITHOUT CHARGE.”

All certificates evidencing Shares purchased under this Agreement in an unregistered transaction
shall bear the following legend (and such other restrictive legends as are required or deemed
advisable under the provisions of any applicable law):

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“THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, AND MAY NOT BE SOLD, PLEDGED, OR OTHERWISE TRANSFERRED WITHOUT AN
EFFECTIVE REGISTRATION THEREOF UNDER SUCH ACT OR AN OPINION OF COUNSEL, SATISFACTORY
TO THE COMPANY AND ITS COUNSEL, THAT SUCH REGISTRATION IS NOT REQUIRED.”

     (f) Removal of Legends. If, in the opinion of the Company and its counsel, any legend placed
on a stock certificate representing Shares sold under this Agreement is no longer required, the
holder of such certificate shall be entitled to exchange such certificate for a certificate
representing the same number of Shares but without such legend.

     (g) Administration. Any determination by the Company and its counsel in connection with any
of the matters set forth in this Section 10 shall be conclusive and binding on the Optionee and all
other persons.

SECTION 11. ADJUSTMENT OF SHARES.

          In the event of any transaction described in Section 8(a) of the Plan, the terms of this
option (including, without limitation, the number and kind of Shares subject to this option and the
Exercise Price) shall be adjusted as set forth in Section 8(a) of the Plan. In the event that the
Company is a party to a merger or consolidation, this option shall be subject to the agreement of
merger or consolidation, as provided in Section 8(b) of the Plan.

SECTION 12. MISCELLANEOUS PROVISIONS.

     (a) Rights as a Stockholder. Neither the Optionee nor the Optionee’s representative shall
have any rights as a stockholder with respect to any Shares subject to this option until the
Optionee or the Optionee’s representative becomes entitled to receive such Shares by filing a
notice of exercise and paying the Purchase Price pursuant to Sections 4 and 5.

     (b) No Retention Rights. Nothing in this option or in the Plan shall confer upon the Optionee
any right to continue in Service for any period of specific duration or interfere with or otherwise
restrict in any way the rights of the Company (or any Parent or Subsidiary employing or retaining
the Optionee) or of the Optionee, which rights are hereby expressly reserved by each, to terminate
his or her Service at any time and for any reason, with or without cause.

     (c) Notice. Any notice required by the terms of this Agreement shall be given in writing. It
shall be deemed effective upon (i) personal delivery, (ii) deposit with the United States Postal
Service, by registered or certified mail, with postage and fees prepaid or (iii) deposit with
Federal Express Corporation, with shipping charges prepaid. Notice shall be addressed to the
Company at its principal executive office and to the Optionee at the address that he or she most
recently provided to the Company in accordance with this Subsection (c).

     (d) Entire Agreement. The Notice of Stock Option Grant, this Agreement and the Plan
constitute the entire contract between the parties hereto with regard to the subject matter hereof.
They supersede any other agreements, representations or understandings (whether oral or written
and whether express or implied) which relate to the subject matter hereof.

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     (e) Choice of Law. This Agreement shall be governed by, and construed in accordance with, the
laws of the State of Delaware, as such laws are applied to contracts entered into and performed in
such State.

SECTION 13. DEFINITIONS.

     (a) “Agreement” shall mean this Stock Option Agreement.

     (b) “Board of Directors” shall mean the Board of Directors of the Company, as constituted from
time to time or, if a Committee has been appointed, such Committee.

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

     (d) “Code” shall mean the Internal Revenue Code of 1986, as amended.

     (e) “Committee” shall mean a committee of the Board of Directors, as described in Section 2 of
the Plan.

     (f) “Company” shall mean ArcSight, Inc., a Delaware corporation.

     (g) “Consultant” shall mean a person who performs bona fide services for the Company, a Parent
or a Subsidiary as a consultant or advisor, excluding Employees and Outside Directors.

     (h) “Date of Grant” shall mean the date specified in the Notice of Stock Option Grant, which
date shall be the later of (i) the date on which the Board of Directors resolved to grant this
option or (ii) the first day of the Optionee’s Service.

     (i) “Disability” shall mean that the Optionee is unable to engage in any substantial gainful
activity by reason of any medically determinable physical or mental impairment.

     (j) “Employee” shall mean any individual who is a common-law employee of the Company, a Parent
or a Subsidiary.

     (k) “Exercise Price” shall mean the amount for which one Share may be purchased upon exercise
of this option, as specified in the Notice of Stock Option Grant.

     (l) “Fair Market Value” shall mean the fair market value of a Share, as determined by the
Board of Directors in good faith. Such determination shall be conclusive and binding on all
persons.

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     (m) “Immediate Family” shall mean any child, stepchild, grandchild, parent, stepparent,
grandparent, spouse, sibling, mother-in-law, father-in-law, son-in-law, daughter-in-law,
brother-in-law or sister-in-law and shall include adoptive relationships.

     (n) “Involuntary Termination” means that (a) the Optionee’s Service is terminated by the
Company without Cause, (b) the Optionee resigns within 30 days after the scope of his or her job
responsibilities or authority was materially reduced without his or her written consent or (c) the
Optionee resigns within 30 days after receipt of notice that his or her principal workplace will be
relocated 100 miles or more from its location at the time of notice.

     (o) “ISO” shall mean an employee incentive stock option described in Section 422(b) of the
Code.

     (p) “Notice of Stock Option Grant” shall mean the document so entitled to which this Agreement
is attached.

     (q) “NSO” shall mean a stock option not described in Sections 422(b) or 423(b) of the Code.

     (r) “Optionee” shall mean the person named in the Notice of Stock Option Grant.

     (s) “Outside Director” shall mean a member of the Board of Directors who is not an Employee.

     (t) “Parent” shall mean any corporation (other than the Company) in an unbroken chain of
corporations ending with the Company, if each of the corporations other than the Company owns stock
possessing 50% or more of the total combined voting power of all classes of stock in one of the
other corporations in such chain.

     (u) “Plan” shall mean the ArcSight, Inc. 2002 Stock Plan, as in effect on the Date of Grant.

     (v) “Purchase Price” shall mean the Exercise Price multiplied by the number of Shares with
respect to which this option is being exercised.

     (w) “Right of First Refusal” shall mean the Company’s right of first refusal described in
Section 7.

     (x) “Securities Act” shall mean the Securities Act of 1933, as amended.

     (y) “Service” shall mean service as an Employee, Outside Director or Consultant.

     (z) “Share” shall mean one share of Stock, as adjusted in accordance with Section 8 of the
Plan (if applicable).

     (aa) “Stock” shall mean the Common Stock of the Company, with a par value of $0.00001 per
Share.

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     (bb) “Subsidiary” shall mean any corporation (other than the Company) in an unbroken chain of
corporations beginning with the Company, if each of the corporations other than the last
corporation in the unbroken chain owns stock possessing 50% or more of the total combined voting
power of all classes of stock in one of the other corporations in such chain.

     (cc) “Transferee” shall mean any person to whom the Optionee has directly or indirectly
transferred any Share acquired under this Agreement.

     (dd) “Transfer Notice” shall mean the notice of a proposed transfer of Shares described in
Section 7.

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ArcSight, Inc. 2002 Stock Plan

Notice of Stock Option Grant

          You have been granted the following option to purchase shares of the Common Stock of
ArcSight, Inc. (the “Company”):

	 	 	 	 	 
	 

	 	Name of Optionee:	 	 
	 
	 	 	 	 
	 

	 	Total Number of Shares:	 	 
	 
	 	 	 	 
	 

	 	Type of Option:	 	 
	 
	 	 	 	 
	 

	 	Exercise Price Per Share:
	 	$
	 
	 	 	 	 
	 

	 	Date of Grant:	 	 
	 
	 	 	 	 
	 

	 	Date Exercisable:
	 	This option may be exercised at any time after the Date of Grant
for all or any part of the Shares subject to this option.
	 
	 	 	 	 
	 

	 	Vesting Commencement Date:	 	 
	 
	 	 	 	 
	 

	 	Vesting Schedule:
	 	 
	 
	 	 	 	 
	 

	 	Expiration Date:
	 	                    . This option expires earlier if the Optionee’s Service terminates
earlier, as provided in Section 6 of the Stock Option Agreement.

By your signature and the signature of the Company’s representative below, you and the Company
agree that this option is granted under and governed by the terms and conditions of the 2002 Stock
Plan and the Stock Option Agreement, both of which are attached to and made a part of this
document.

	 	 	 	 	 	 	 
	Optionee:	 	 	 	ArcSight, Inc.
	 
	 	 	 	 	 	 
	 

	 	 	 	By:	 	 
	 

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	 	 	Title:	 	 
	 

	 	 	 	 	 	 

 

 

THE OPTION GRANTED PURSUANT TO THIS AGREEMENT AND THE SHARES ISSUABLE UPON THE EXERCISE
THEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, PLEDGED, OR OTHERWISE
TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION THEREOF UNDER SUCH ACT OR AN OPINION OF COUNSEL,
SATISFACTORY TO THE COMPANY AND ITS COUNSEL, THAT SUCH REGISTRATION IS NOT REQUIRED.

ArcSight, Inc. 2002 Stock Plan:

Stock Option Agreement

SECTION 1. GRANT OF OPTION.

     (a) Option. On the terms and conditions set forth in the Notice of Stock
Option Grant and this Agreement, the Company grants to the Optionee on the Date of Grant the option
to purchase at the Exercise Price the number of Shares set forth in the Notice of Stock Option
Grant. The Exercise Price is agreed to be at least 100% of the Fair Market Value per Share on the
Date of Grant (110% of Fair Market Value if Section 3(b) of the Plan applies). This option is
intended to be an ISO or an NSO, as provided in the Notice of Stock Option Grant.

     (b) $100,000 Limitation. Even if this option is designated as an ISO in the Notice of Stock
Option Grant, it shall be deemed to be an NSO to the extent (and only to the extent) required by
the $100,000 annual limitation under Section 422(d) of the Code.

     (c) Stock Plan and Defined Terms. This option is granted pursuant to the Plan, a copy of
which the Optionee acknowledges having received. The provisions of the Plan are incorporated into
this Agreement by this reference. Capitalized terms are defined in Section 14 of this Agreement.

SECTION 2. RIGHT TO EXERCISE.

     (a) Exercisability. Subject to Subsection (b) below and the other conditions set forth in
this Agreement, all or part of this option may be exercised prior to its expiration at the time or
times set forth in the Notice of Stock Option Grant. Shares purchased by exercising this option
may be subject to the Right of Repurchase under Section 7.

     (b) Stockholder Approval. Any other provision of this Agreement notwithstanding, no portion
of this option shall be exercisable at any time prior to the approval of the Plan by the Company’s
stockholders.

SECTION 3. NO TRANSFER OR ASSIGNMENT OF OPTION.

     Except as otherwise provided in this Agreement, this option and the rights and privileges
conferred hereby shall not be sold, pledged or otherwise transferred (whether by operation of law
or otherwise) and shall not be subject to sale under execution, attachment, levy or similar
process.

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SECTION 4. EXERCISE PROCEDURES.

     (a) Notice of Exercise. The Optionee or the Optionee’s representative may exercise this
option by giving written notice to the Company pursuant to Section 13(c). The notice shall specify
the election to exercise this option, the number of Shares for which it is being exercised and the
form of payment. The person exercising this option shall sign the notice. In the event that this
option is being exercised by the representative of the Optionee, the notice shall be accompanied by
proof (satisfactory to the Company) of the representative’s right to exercise this option. The
Optionee or the Optionee’s representative shall deliver to the Company, at the time of giving the
notice, payment in a form permissible under Section 5 for the full amount of the Purchase Price.
In the event of a partial exercise of this option, Shares shall be deemed to have been purchased in
the order in which they vest in accordance with the Notice of Stock Option Grant.

     (b) Issuance of Shares. After receiving a proper notice of exercise, the Company shall cause
to be issued one or more certificates evidencing the Shares for which this option has been
exercised. Such Shares shall be registered (i) in the name of the person exercising this option,
(ii) in the names of such person and his or her spouse as community property or as joint tenants
with the right of survivorship or (iii) with the Company’s consent, in the name of a revocable
trust. In the case of Restricted Shares, the Company shall cause such certificates to be deposited
in escrow under Section 7(c). In the case of other Shares, the Company shall cause such
certificates to be delivered to or upon the order of the person exercising this option.

     (c) Withholding Taxes. In the event that the Company determines that it is required to
withhold any tax as a result of the exercise of this option, the Optionee, as a condition to the
exercise of this option, shall make arrangements satisfactory to the Company to enable it to
satisfy all withholding requirements. The Optionee shall also make arrangements satisfactory to
the Company to enable it to satisfy any withholding requirements that may arise in connection with
the vesting or disposition of Shares purchased by exercising this option.

SECTION 5. PAYMENT FOR STOCK.

     (a) Cash. All or part of the Purchase Price may be paid in cash or cash equivalents.

     (b) Surrender of Stock. All or any part of the Purchase Price may be paid by surrendering
Shares that are already owned by the Optionee for at least six (6) months. Such Shares shall be
surrendered to the Company in good form for transfer and shall be valued at their Fair Market Value
on the date when this option is exercised. The Optionee shall not surrender Shares in payment of
the Purchase Price if such action would cause the Company to recognize compensation expense (or
additional compensation expense) with respect to this option for financial reporting purposes.

     (c) Exercise/Sale. If Stock is publicly traded, all or part of the Purchase Price and any
withholding taxes may be paid by the delivery (on a form prescribed by the Company) of an
irrevocable direction to a securities broker approved by the Company to sell Shares and to deliver
all or part of the sales proceeds to the Company.

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     (d) Exercise/Pledge. If Stock is publicly traded, all or part of the Purchase Price and any
withholding taxes may be paid by the delivery (on a form prescribed by the Company) of an
irrevocable direction to pledge Shares to a securities broker or lender approved by the Company, as
security for a loan, and to deliver all or part of the loan proceeds to the Company.

SECTION 6. TERM AND EXPIRATION.

     (a) Basic Term. This option shall in any event expire on the expiration date set forth in the
Notice of Stock Option Grant, which date is 10 years after the Date of Grant (five years after the
Date of Grant if this option is designated as an ISO in the Notice of Stock Option Grant and
Section 3(b) of the Plan applies).

     (b) Termination of Service (Except by Death). If the Optionee’s Service terminates for any
reason other than death, then this option shall expire on the earliest of the following occasions:

     (i) The expiration date determined pursuant to Subsection (a) above;

     (ii) The date 30 days after the termination of the Optionee’s Service for any
reason other than Cause, retirement at or after age 65, or Disability;

     (iii) The date of the termination of the Optionee’s Service for Cause;

     (iv) The date 12 months after the Optionee’s retirement at or after age 65; or

     (v) The date 12 months after the termination of the Optionee’s Service by
reason of Disability.

The Optionee may exercise all or part of this option at any time before its expiration under the
preceding sentence, but only to the extent that this option is exercisable for vested Shares on or
before the date when the Optionee’s Service terminates. When the Optionee’s Service terminates,
this option shall expire immediately with respect to the number of Shares for which this option is
not yet exercisable and with respect to any Restricted Shares. In the event that the Optionee dies
after termination of Service but before the expiration of this option, all or part of this option
may be exercised (prior to expiration) by the executors or administrators of the Optionee’s estate
or by any person who has acquired this option directly from the Optionee by beneficiary
designation, bequest or inheritance, but only to the extent that this option was exercisable for
vested Shares on or before the date when the Optionee’s Service terminated.

     (c) Death of the Optionee. If the Optionee dies while in Service, then this option shall
expire on the earlier of the following dates:

     (i) The expiration date determined pursuant to Subsection (a) above; or

     (ii) The date 12 months after the Optionee’s death.

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All or part of this option may be exercised at any time before its expiration under the preceding
sentence by the executors or administrators of the Optionee’s estate or by any person who has
acquired this option directly from the Optionee by beneficiary designation, bequest or inheritance,
but only to the extent that this option is exercisable for vested Shares on or before the
Optionee’s death. When the Optionee dies, this option shall expire immediately with respect to the
number of Shares for which this option is not yet exercisable and with respect to any Restricted
Shares.

     (d) Leaves of Absence. For any purpose under this Agreement, Service shall be deemed to
continue while the Optionee is on a bona fide leave of absence, if such leave was approved by the
Company in writing and if continued crediting of Service for such purpose is expressly required by
the terms of such leave or by applicable law (as determined by the Company).

     (e) Notice Concerning ISO Treatment. Even if this option is designated as an ISO in the
Notice of Stock Option Grant, it ceases to qualify for favorable tax treatment as an ISO to the
extent that it is exercised:

     (i) More than three months after the date when the Optionee ceases to be an
Employee for any reason other than death or permanent and total disability (as
defined in Section 22(e)(3) of the Code);

     (ii) More than 12 months after the date when the Optionee ceases to be an
Employee by reason of permanent and total disability (as defined in Section 22(e)(3)
of the Code); or

     (iii) More than three months after the date when the Optionee has been on a
leave of absence for 90 days, unless the Optionee’s reemployment rights following
such leave were guaranteed by statute or by contract.

SECTION 7. RIGHT OF REPURCHASE.

          (a) Scope of Repurchase Right. Until they vest in accordance with the Notice of Stock Option
Grant and Subsection (b) below, the Shares acquired under this Agreement shall be Restricted Shares
and shall be subject to the Company’s Right of Repurchase. The Company, however, may decline to
exercise its Right of Repurchase or may exercise its Right of Repurchase only with respect to a
portion of the Restricted Shares. The Company may exercise its Right of Repurchase only during the
Repurchase Period following the termination of the Optionee’s Service. The Right of Repurchase may
be exercised automatically under Subsection (d) below. If the Right of Repurchase is exercised,
the Company shall pay the Optionee an amount equal to the Exercise Price for each of the Restricted
Shares being repurchased.

          (b) Lapse of Repurchase Right. The Right of Repurchase shall lapse with respect to the
Restricted Shares in accordance with the vesting schedule set forth in the Notice of Stock Option
Grant.

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          (c) Escrow. Upon issuance, the certificate(s) for Restricted Shares shall be deposited in
escrow with the Company to be held in accordance with the provisions of this Agreement. Any
additional or exchanged securities or other property described in Subsection (f) below shall
immediately be delivered to the Company to be held in escrow. All ordinary cash dividends on
Restricted Shares (or on other securities held in escrow) shall be paid directly to the Optionee
and shall not be held in escrow. Restricted Shares, together with any other assets held in escrow
under this Agreement, shall be (i) surrendered to the Company for repurchase upon exercise of the
Right of Repurchase or the Right of First Refusal or (ii) released to the Optionee upon his or her
request to the extent that the Shares have ceased to be Restricted Shares (but not more frequently
than once every six months). In any event, all Shares that have ceased to be Restricted Shares,
together with any other vested assets held in escrow under this Agreement, shall be released within
90 days after the earlier of (i) the termination of the Optionee’s Service or (ii) the lapse of the
Right of First Refusal.

          (d) Exercise of Repurchase Right. The Company shall be deemed to have exercised its Right of
Repurchase automatically for all Restricted Shares as of the commencement of the Repurchase Period,
unless the Company during the Repurchase Period notifies the holder of the Restricted Shares
pursuant to Section 13(c) that it will not exercise its Right of Repurchase for some or all of the
Restricted Shares. During the Repurchase Period, the Company shall pay to the holder of the
Restricted Shares the purchase price determined under Subsection (a) above for the Restricted
Shares being repurchased. Payment shall be made in cash or cash equivalents and/or by canceling
indebtedness to the Company incurred by the Optionee in the purchase of the Restricted Shares. The
certificate(s) representing the Restricted Shares being repurchased shall be delivered to the
Company properly endorsed for transfer.

          (e) Termination of Rights as Stockholder. If the Right of Repurchase is exercised in
accordance with this Section 7 and the Company makes available the consideration for the Restricted
Shares being repurchased, then the person from whom the Restricted Shares are repurchased shall no
longer have any rights as a holder of the Restricted Shares (other than the right to receive
payment of such consideration). Such Restricted Shares shall be deemed to have been repurchased
pursuant to this Section 7, whether or not the certificate(s) for such Restricted Shares have been
delivered to the Company or the consideration for such Restricted Shares has been accepted.

          (f) Additional or Exchanged Securities and Property. In the event of a merger or
consolidation of the Company with or into another entity, any other corporate reorganization, a
stock split, the declaration of a stock dividend, the declaration of an extraordinary dividend
payable in a form other than stock, a spin-off, an adjustment in conversion ratio, a
recapitalization or a similar transaction affecting the Company’s outstanding securities, any
securities or other property (including cash or cash equivalents) that are by reason of such
transaction exchanged for, or distributed with respect to, any Restricted Shares shall immediately
be subject to the Right of Repurchase. Appropriate adjustments to reflect the exchange or
distribution of such securities or property shall be made to the number and/or class of the
Restricted Shares. Appropriate adjustments shall also be made to the price per share to be paid
upon the exercise of the Right of Repurchase, provided that the aggregate purchase price payable
for the Restricted Shares shall remain the same. In the event of a merger or

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consolidation of the Company with or into another entity or any other corporate
reorganization, the Right of Repurchase may be exercised by the Company’s successor.

          (g) Transfer of Restricted Shares. The Optionee shall not transfer, assign, encumber or
otherwise dispose of any Restricted Shares without the Company’s written consent, except as
provided in the following sentence. The Optionee may transfer Restricted Shares to one or more
members of the Optionee’s Immediate Family or to a trust established by the Optionee for the
benefit of the Optionee and/or one or more members of the Optionee’s Immediate Family, provided in
either case that the Transferee agrees in writing on a form prescribed by the Company to be bound
by all provisions of this Agreement. If the Optionee transfers any Restricted Shares, then this
Agreement shall apply to the Transferee to the same extent as to the Optionee.

          (h) Assignment of Repurchase Right. The Board of Directors may freely assign the Company’s
Right of Repurchase, in whole or in part. Any person who accepts an assignment of the Right of
Repurchase from the Company shall assume all of the Company’s rights and obligations under this
Section 7.

SECTION 8. RIGHT OF FIRST REFUSAL.

     (a) Right of First Refusal. In the event that the Optionee proposes to sell, pledge or
otherwise transfer to a third party any Shares acquired under this Agreement, or any interest in
such Shares, the Company shall have the Right of First Refusal with respect to all (and not less
than all) of such Shares. If the Optionee desires to transfer Shares acquired under this
Agreement, the Optionee shall give a written Transfer Notice to the Company describing fully the
proposed transfer, including the number of Shares proposed to be transferred, the proposed transfer
price, the name and address of the proposed Transferee and proof satisfactory to the Company that
the proposed sale or transfer will not violate any applicable federal or state securities laws.
The Transfer Notice shall be signed both by the Optionee and by the proposed Transferee and must
constitute a binding commitment of both parties to the transfer of the Shares. The Company shall
have the right to purchase all, and not less than all, of the Shares on the terms of the proposal
described in the Transfer Notice (subject, however, to any change in such terms permitted under
Subsection (b) below) by delivery of a notice of exercise of the Right of First Refusal within 30
days after the date when the Transfer Notice was received by the Company.

     (b) Transfer of Shares. If the Company fails to exercise its Right of First Refusal within 30
days after the date when it received the Transfer Notice, the Optionee may, not later than 90 days
following receipt of the Transfer Notice by the Company, conclude a transfer of the Shares subject
to the Transfer Notice on the terms and conditions described in the Transfer Notice, provided that
any such sale is made in compliance with applicable federal and state securities laws and not in
violation of any other contractual restrictions to which the Optionee is bound. Any proposed
transfer on terms and conditions different from those described in the Transfer Notice, as well as
any subsequent proposed transfer by the Optionee, shall again be subject to the Right of First
Refusal and shall require compliance with the procedure described in Subsection (a) above. If the
Company exercises its Right of First Refusal, the parties shall consummate the sale of the Shares
on the terms set forth in the Transfer Notice within 60 days

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after the date when the Company received the Transfer Notice (or within such longer period as
may have been specified in the Transfer Notice); provided, however, that in the event the Transfer
Notice provided that payment for the Shares was to be made in a form other than cash or cash
equivalents paid at the time of transfer, the Company shall have the option of paying for the
Shares with cash or cash equivalents equal to the present value of the consideration described in
the Transfer Notice.

     (c) Additional or Exchanged Securities and Property. In the event of a merger or
consolidation of the Company with or into another entity, any other corporate reorganization, a
stock split, the declaration of a stock dividend, the declaration of an extraordinary dividend
payable in a form other than stock, a spin-off, an adjustment in conversion ratio, a
recapitalization or a similar transaction affecting the Company’s outstanding securities, any
securities or other property (including cash or cash equivalents) that are by reason of such
transaction exchanged for, or distributed with respect to, any Shares subject to this Section 8
shall immediately be subject to the Right of First Refusal. Appropriate adjustments to reflect the
exchange or distribution of such securities or property shall be made to the number and/or class of
the Shares subject to this Section 8.

     (d) Termination of Right of First Refusal. Any other provision of this Section 8
notwithstanding, in the event that the Stock is readily tradable on an established securities
market when the Optionee desires to transfer Shares, the Company shall have no Right of First
Refusal, and the Optionee shall have no obligation to comply with the procedures prescribed by
Subsections (a) and (b) above.

     (e) Permitted Transfers. This Section 8 shall not apply to (i) a transfer by beneficiary
designation, will or intestate succession or (ii) a transfer to one or more members of the
Optionee’s Immediate Family or to a trust established by the Optionee for the benefit of the
Optionee and/or one or more members of the Optionee’s Immediate Family, provided in either case
that the Transferee agrees in writing on a form prescribed by the Company to be bound by all
provisions of this Agreement. If the Optionee transfers any Shares acquired under this Agreement,
either under this Subsection (e) or after the Company has failed to exercise the Right of First
Refusal, then this Agreement shall apply to the Transferee to the same extent as to the Optionee.

     (f) Termination of Rights as Stockholder. If the Company makes available, at the time and
place and in the amount and form provided in this Agreement, the consideration for the Shares to be
purchased in accordance with this Section 8, then after such time the person from whom such Shares
are to be purchased shall no longer have any rights as a holder of such Shares (other than the
right to receive payment of such consideration in accordance with this Agreement). Such Shares
shall be deemed to have been purchased in accordance with the applicable provisions hereof, whether
or not the certificate(s) therefor have been delivered as required by this Agreement.

     (g) Assignment of Right of First Refusal. The Board of Directors may freely assign the
Company’s Right of First Refusal, in whole or in part. Any person who accepts an assignment of the
Right of First Refusal from the Company shall assume all of the Company’s rights and obligations
under this Section 8.

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SECTION 9. LEGALITY OF INITIAL ISSUANCE.

          No Shares shall be issued upon the exercise of this option unless and until the Company has
determined that:

          (a) It and the Optionee have taken any actions required to register the Shares
under the Securities Act or to perfect an exemption from the registration
requirements thereof;

          (b) Any applicable listing requirement of any stock exchange or other
securities market on which Stock is listed has been satisfied; and

          (c) Any other applicable provision of federal, state or foreign law has been
satisfied.

SECTION 10. NO REGISTRATION RIGHTS.

     The Company may, but shall not be obligated to, register or qualify the sale of Shares under
the Securities Act or any other applicable law. The Company shall not be obligated to take any
affirmative action in order to cause the sale of Shares under this Agreement to comply with any
law.

SECTION 11. RESTRICTIONS ON TRANSFER.

     (a) Securities Law Restrictions. Regardless of whether the offering and sale of Shares under
the Plan have been registered under the Securities Act or have been registered or qualified under
the securities laws of any state, the Company at its discretion may impose restrictions upon the
sale, pledge or other transfer of such Shares (including the placement of appropriate legends on
stock certificates or the imposition of stop-transfer instructions) if, in the judgment of the
Company, such restrictions are necessary or desirable in order to achieve compliance with the
Securities Act, the securities laws of any state or any other law.

     (b) Market Stand-Off. In connection with any underwritten public offering by the Company of
its equity securities pursuant to an effective registration statement filed under the Securities
Act, including the Company’s initial public offering, the Optionee or a Transferee shall not
directly or indirectly sell, make any short sale of, loan, hypothecate, pledge, offer, grant or
sell any option or other contract for the purchase of, purchase any option or other contract for
the sale of, or otherwise dispose of or transfer, or agree to engage in any of the foregoing
transactions with respect to, any Shares acquired under this Agreement without the prior written
consent of the Company or its underwriters. Such restriction (the “Market Stand-Off”) shall be in
effect for such period of time following the date of the final prospectus for the offering as may
be requested by the Company or such underwriters. In no event, however, shall such period exceed
180 days. The Market Stand-Off shall in any event terminate two years after the date of the
Company’s initial public offering. In the event of the declaration of a stock dividend, a
spin-off, a stock split, an adjustment in conversion ratio, a recapitalization or a similar
transaction affecting the Company’s outstanding securities without receipt of consideration, any
new, substituted or additional securities which are by reason of such transaction distributed with
respect to any Shares subject to the Market Stand-Off, or into which such Shares thereby become

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convertible, shall immediately be subject to the Market Stand-Off. In order to enforce the
Market Stand-Off, the Company may impose stop-transfer instructions with respect to the Shares
acquired under this Agreement until the end of the applicable stand-off period. The Company’s
underwriters shall be beneficiaries of the agreement set forth in this Subsection (b). This
Subsection (b) shall not apply to Shares registered in the public offering under the Securities
Act, and the Optionee or a Transferee shall be subject to this Subsection (b) only if the directors
and officers of the Company are subject to similar arrangements.

     (c) Investment Intent at Grant. The Optionee represents and agrees that the Shares to be
acquired upon exercising this option will be acquired for investment, and not with a view to the
sale or distribution thereof.

     (d) Investment Intent at Exercise. In the event that the sale of Shares under the Plan is not
registered under the Securities Act but an exemption is available which requires an investment
representation or other representation, the Optionee shall represent and agree at the time of
exercise that the Shares being acquired upon exercising this option are being acquired for
investment, and not with a view to the sale or distribution thereof, and shall make such other
representations as are deemed necessary or appropriate by the Company and its counsel.

     (e) Legends. All certificates evidencing Shares purchased under this Agreement shall bear the
following legend:

“THE SHARES REPRESENTED HEREBY MAY NOT BE SOLD, ASSIGNED, TRANSFERRED, ENCUMBERED OR
IN ANY MANNER DISPOSED OF, EXCEPT IN COMPLIANCE WITH THE TERMS OF A WRITTEN
AGREEMENT BETWEEN THE COMPANY AND THE REGISTERED HOLDER OF THE SHARES (OR THE
PREDECESSOR IN INTEREST TO THE SHARES). SUCH AGREEMENT GRANTS TO THE COMPANY
CERTAIN RIGHTS OF FIRST REFUSAL UPON AN ATTEMPTED TRANSFER OF THE SHARES AND CERTAIN
REPURCHASE RIGHTS UPON TERMINATION OF SERVICE WITH THE COMPANY. THE SECRETARY OF
THE COMPANY WILL UPON WRITTEN REQUEST FURNISH A COPY OF SUCH AGREEMENT TO THE HOLDER
HEREOF WITHOUT CHARGE.”

All certificates evidencing Shares purchased under this Agreement in an unregistered transaction
shall bear the following legend (and such other restrictive legends as are required or deemed
advisable under the provisions of any applicable law):

“THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, AND MAY NOT BE SOLD, PLEDGED, OR OTHERWISE TRANSFERRED WITHOUT AN
EFFECTIVE REGISTRATION THEREOF UNDER SUCH ACT OR AN OPINION OF COUNSEL, SATISFACTORY
TO THE COMPANY AND ITS COUNSEL, THAT SUCH REGISTRATION IS NOT REQUIRED.”

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     (f) Removal of Legends. If, in the opinion of the Company and its counsel, any legend placed
on a stock certificate representing Shares sold under this Agreement is no longer required, the
holder of such certificate shall be entitled to exchange such certificate for a certificate
representing the same number of Shares but without such legend.

     (g) Administration. Any determination by the Company and its counsel in connection with any
of the matters set forth in this Section 11 shall be conclusive and binding on the Optionee and all
other persons.

SECTION 12. ADJUSTMENT OF SHARES.

     In the event of any transaction described in Section 8(a) of the Plan, the terms of this
option (including, without limitation, the number and kind of Shares subject to this option and the
Exercise Price) shall be adjusted as set forth in Section 8(a) of the Plan. In the event that the
Company is a party to a merger or consolidation, this option shall be subject to the agreement of
merger or consolidation, as provided in Section 8(b) of the Plan.

SECTION 13. MISCELLANEOUS PROVISIONS.

     (a) Rights as a Stockholder. Neither the Optionee nor the Optionee’s representative shall
have any rights as a stockholder with respect to any Shares subject to this option until the
Optionee or the Optionee’s representative becomes entitled to receive such Shares by filing a
notice of exercise and paying the Purchase Price pursuant to Sections 4 and 5.

     (b) No Retention Rights. Nothing in this option or in the Plan shall confer upon the Optionee
any right to continue in Service for any period of specific duration or interfere with or otherwise
restrict in any way the rights of the Company (or any Parent or Subsidiary employing or retaining
the Optionee) or of the Optionee, which rights are hereby expressly reserved by each, to terminate
his or her Service at any time and for any reason, with or without cause.

     (c) Notice. Any notice required by the terms of this Agreement shall be given in writing. It
shall be deemed effective upon (i) personal delivery, (ii) deposit with the United States Postal
Service, by registered or certified mail, with postage and fees prepaid or (iii) deposit with
Federal Express Corporation, with shipping charges prepaid. Notice shall be addressed to the
Company at its principal executive office and to the Optionee at the address that he or she most
recently provided to the Company in accordance with this Subsection (c).

     (d) Entire Agreement. The Notice of Stock Option Grant, this Agreement and the Plan
constitute the entire contract between the parties hereto with regard to the subject matter hereof.
They supersede any other agreements, representations or understandings (whether oral or written
and whether express or implied) which relate to the subject matter hereof.

     (e) Choice of Law. This Agreement shall be governed by, and construed in accordance with, the
laws of the State of Delaware, as such laws are applied to contracts entered into and performed in
such State.

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SECTION 14. DEFINITIONS.

     (a) “Agreement” shall mean this Stock Option Agreement.

     (b) “Board of Directors” shall mean the Board of Directors of the Company, as constituted from
time to time or, if a Committee has been appointed, such Committee.

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

     (d) “Code” shall mean the Internal Revenue Code of 1986, as amended.

     (e) “Committee” shall mean a committee of the Board of Directors, as described in Section 2 of
the Plan.

     (f) “Company” shall mean ArcSight, Inc., a Delaware corporation.

     (g) “Consultant” shall mean a person who performs bona fide services for the Company, a Parent
or a Subsidiary as a consultant or advisor, excluding Employees and Outside Directors.

     (h) “Date of Grant” shall mean the date specified in the Notice of Stock Option Grant, which
date shall be the later of (i) the date on which the Board of Directors resolved to grant this
option or (ii) the first day of the Optionee’s Service.

     (i) “Disability” shall mean that the Optionee is unable to engage in any substantial gainful
activity by reason of any medically determinable physical or mental impairment.

     (j) “Employee” shall mean any individual who is a common-law employee of the Company, a Parent
or a Subsidiary.

     (k) “Exercise Price” shall mean the amount for which one Share may be purchased upon exercise
of this option, as specified in the Notice of Stock Option Grant.

     (l) “Fair Market Value” shall mean the fair market value of a Share, as determined by the
Board of Directors in good faith. Such determination shall be conclusive and binding on all
persons.

     (m) “Immediate Family” shall mean any child, stepchild, grandchild, parent, stepparent,
grandparent, spouse, sibling, mother-in-law, father-in-law, son-in-law, daughter-in-law,
brother-in-law or sister-in-law and shall include adoptive relationships.

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     (n) “Involuntary Termination” means that (a) the Optionee’s Service is terminated by the
Company without Cause, (b) the Optionee resigns within 30 days after the scope of his or her job
responsibilities or authority was materially reduced without his or her written consent or (c) the
Optionee resigns within 30 days after receipt of notice that his or her principal workplace will be
relocated 100 miles or more from its location at the time of notice.

     (o) “ISO” shall mean an employee incentive stock option described in Section 422(b) of the
Code.

     (p) “Notice of Stock Option Grant” shall mean the document so entitled to which this Agreement
is attached.

     (q) “NSO” shall mean a stock option not described in Sections 422(b) or 423(b) of the Code.

     (r) “Optionee” shall mean the person named in the Notice of Stock Option Grant.

     (s) “Outside Director” shall mean a member of the Board of Directors who is not an Employee.

     (t) “Parent” shall mean any corporation (other than the Company) in an unbroken chain of
corporations ending with the Company, if each of the corporations other than the Company owns stock
possessing 50% or more of the total combined voting power of all classes of stock in one of the
other corporations in such chain.

     (u) “Plan” shall mean the ArcSight, Inc. 2002 Stock Plan, as in effect on the Date of Grant.

     (v) “Purchase Price” shall mean the Exercise Price multiplied by the number of Shares with
respect to which this option is being exercised.

     (w) “Repurchase Period” shall mean a period of 90 consecutive days commencing on the date when
the Optionee’s Service terminates for any reason, including (without limitation) death or
disability.

     (x) “Restricted Share” shall mean a Share that is subject to the Right of Repurchase.

     (y) “Right of First Refusal” shall mean the Company’s right of first refusal described in
Section 8.

     (z) “Right of Repurchase” shall mean the Company’s right of repurchase described in Section 7.

     (aa) “Securities Act” shall mean the Securities Act of 1933, as amended.

     (bb) “Service” shall mean service as an Employee, Outside Director or Consultant.

13

 

     (cc) “Share” shall mean one share of Stock, as adjusted in accordance with Section 8 of the
Plan (if applicable).

     (dd) “Stock” shall mean the Common Stock of the Company, with a par value of $0.00001 per
Share.

     (ee) “Subsidiary” shall mean any corporation (other than the Company) in an unbroken chain of
corporations beginning with the Company, if each of the corporations other than the last
corporation in the unbroken chain owns stock possessing 50% or more of the total combined voting
power of all classes of stock in one of the other corporations in such chain.

     (ff) “Transferee” shall mean any person to whom the Optionee has directly or indirectly
transferred any Share acquired under this Agreement.

     (gg) “Transfer Notice” shall mean the notice of a proposed transfer of Shares described in
Section 8.

14

 

ArcSight, Inc. 2002 Stock Plan

Notice of Stock Option Grant

          You have been granted the following option to purchase shares of the Common Stock of
ArcSight, Inc. (the “Company”):

	 	 	 	 	 
	 

	 	Name of Optionee:	 	 
	 
	 	 	 	 
	 

	 	Total Number of Shares:	 	 
	 
	 	 	 	 
	 

	 	Type of Option:	 	 
	 
	 	 	 	 
	 

	 	Exercise Price Per Share:
	 	$
	 
	 	 	 	 
	 

	 	Date of Grant:	 	 
	 
	 	 	 	 
	 

	 	Date Exercisable:
	 	This option may be exercised at any time after the Date of Grant
for all or any part of the Shares subject to this option.
	 
	 	 	 	 
	 

	 	Vesting Commencement Date:	 	 
	 
	 	 	 	 
	 

	 	Vesting Schedule:
	 	 
	 
	 	 	 	 
	 

	 	Expiration Date:
	 	                    . This option expires earlier if the Optionee’s Service terminates
earlier, as provided in Section 6 of the Stock Option Agreement.

By your signature and the signature of the Company’s representative below, you and the Company
agree that this option is granted under and governed by the terms and conditions of the 2002 Stock
Plan and the Stock Option Agreement, both of which are attached to and made a part of this
document.

	 	 	 	 	 	 	 
	Optionee:	 	 	 	ArcSight, Inc.
	 
	 	 	 	 	 	 
	 

	 	 	 	By:	 	 
	 

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	 	 	Title:	 	 
	 

	 	 	 	 	 	 

 

 

THE OPTION GRANTED PURSUANT TO THIS AGREEMENT AND THE SHARES ISSUABLE UPON THE EXERCISE
THEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, PLEDGED, OR OTHERWISE
TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION THEREOF UNDER SUCH ACT OR AN OPINION OF COUNSEL,
SATISFACTORY TO THE COMPANY AND ITS COUNSEL, THAT SUCH REGISTRATION IS NOT REQUIRED.

ArcSight, Inc. 2002 Stock Plan:

Stock Option Agreement

SECTION 1. GRANT OF OPTION.

     (a) Option. On the terms and conditions set forth in the Notice of Stock
Option Grant and this Agreement, the Company grants to the Optionee on the Date of Grant the option
to purchase at the Exercise Price the number of Shares set forth in the Notice of Stock Option
Grant. The Exercise Price is agreed to be at least 100% of the Fair Market Value per Share on the
Date of Grant (110% of Fair Market Value if Section 3(b) of the Plan applies). This option is
intended to be an ISO or an NSO, as provided in the Notice of Stock Option Grant.

     (b) $100,000 Limitation. Even if this option is designated as an ISO in the Notice of Stock
Option Grant, it shall be deemed to be an NSO to the extent (and only to the extent) required by
the $100,000 annual limitation under Section 422(d) of the Code.

     (c) Stock Plan and Defined Terms. This option is granted pursuant to the Plan, a copy of
which the Optionee acknowledges having received. The provisions of the Plan are incorporated into
this Agreement by this reference. Capitalized terms are defined in Section 14 of this Agreement.

SECTION 2. RIGHT TO EXERCISE.

     (a) Exercisability. Subject to Subsection (b) below and the other conditions set forth in
this Agreement, all or part of this option may be exercised prior to its expiration at the time or
times set forth in the Notice of Stock Option Grant. Shares purchased by exercising this option
may be subject to the Right of Repurchase under Section 7.

     (b) Stockholder Approval. Any other provision of this Agreement notwithstanding, no portion
of this option shall be exercisable at any time prior to the approval of the Plan by the Company’s
stockholders.

SECTION 3. NO TRANSFER OR ASSIGNMENT OF OPTION.

          Except as otherwise provided in this Agreement, this option and the rights and privileges
conferred hereby shall not be sold, pledged or otherwise transferred (whether by operation of law
or otherwise) and shall not be subject to sale under execution, attachment, levy or similar
process.

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SECTION 4. EXERCISE PROCEDURES.

     (a) Notice of Exercise. The Optionee or the Optionee’s representative may exercise this
option by giving written notice to the Company pursuant to Section 13(c). The notice shall specify
the election to exercise this option, the number of Shares for which it is being exercised and the
form of payment. The person exercising this option shall sign the notice. In the event that this
option is being exercised by the representative of the Optionee, the notice shall be accompanied by
proof (satisfactory to the Company) of the representative’s right to exercise this option. The
Optionee or the Optionee’s representative shall deliver to the Company, at the time of giving the
notice, payment in a form permissible under Section 5 for the full amount of the Purchase Price.
In the event of a partial exercise of this option, Shares shall be deemed to have been purchased in
the order in which they vest in accordance with the Notice of Stock Option Grant.

     (b) Issuance of Shares. After receiving a proper notice of exercise, the Company shall cause
to be issued one or more certificates evidencing the Shares for which this option has been
exercised. Such Shares shall be registered (i) in the name of the person exercising this option,
(ii) in the names of such person and his or her spouse as community property or as joint tenants
with the right of survivorship or (iii) with the Company’s consent, in the name of a revocable
trust. In the case of Restricted Shares, the Company shall cause such certificates to be deposited
in escrow under Section 7(c). In the case of other Shares, the Company shall cause such
certificates to be delivered to or upon the order of the person exercising this option.

     (c) Withholding Taxes. In the event that the Company determines that it is required to
withhold any tax as a result of the exercise of this option, the Optionee, as a condition to the
exercise of this option, shall make arrangements satisfactory to the Company to enable it to
satisfy all withholding requirements. The Optionee shall also make arrangements satisfactory to
the Company to enable it to satisfy any withholding requirements that may arise in connection with
the vesting or disposition of Shares purchased by exercising this option.

SECTION 5. PAYMENT FOR STOCK.

     (a) Cash. All or part of the Purchase Price may be paid in cash or cash equivalents.

     (b) Surrender of Stock. All or any part of the Purchase Price may be paid by surrendering
Shares that are already owned by the Optionee for at least six (6) months. Such Shares shall be
surrendered to the Company in good form for transfer and shall be valued at their Fair Market Value
on the date when this option is exercised. The Optionee shall not surrender Shares in payment of
the Purchase Price if such action would cause the Company to recognize compensation expense (or
additional compensation expense) with respect to this option for financial reporting purposes.

     (c) Exercise/Sale. If Stock is publicly traded, all or part of the Purchase Price and any
withholding taxes may be paid by the delivery (on a form prescribed by the Company) of an
irrevocable direction to a securities broker approved by the Company to sell Shares and to deliver
all or part of the sales proceeds to the Company.

3

 

     (d) Exercise/Pledge. If Stock is publicly traded, all or part of the Purchase Price and any
withholding taxes may be paid by the delivery (on a form prescribed by the Company) of an
irrevocable direction to pledge Shares to a securities broker or lender approved by the Company, as
security for a loan, and to deliver all or part of the loan proceeds to the Company.

SECTION 6. TERM AND EXPIRATION.

     (a) Basic Term. This option shall in any event expire on the expiration date set forth in the
Notice of Stock Option Grant, which date is 10 years after the Date of Grant (five years after the
Date of Grant if this option is designated as an ISO in the Notice of Stock Option Grant and
Section 3(b) of the Plan applies).

     (b) Termination of Service (Except by Death). If the Optionee’s Service terminates for any
reason other than death, then this option shall expire on the earliest of the following occasions:

     (i) The expiration date determined pursuant to Subsection (a) above;

     (ii) The date 30 days after the termination of the Optionee’s Service for any
reason other than Cause, retirement at or after age 65, or Disability;

     (iii) The date of the termination of the Optionee’s Service for Cause;

     (iv) The date 12 months after the Optionee’s retirement at or after age 65; or

     (v) The date 12 months after the termination of the Optionee’s Service by
reason of Disability.

The Optionee may exercise all or part of this option at any time before its expiration under the
preceding sentence, but only to the extent that this option is exercisable for vested Shares on or
before the date when the Optionee’s Service terminates. When the Optionee’s Service terminates,
this option shall expire immediately with respect to the number of Shares for which this option is
not yet exercisable and with respect to any Restricted Shares. In the event that the Optionee dies
after termination of Service but before the expiration of this option, all or part of this option
may be exercised (prior to expiration) by the executors or administrators of the Optionee’s estate
or by any person who has acquired this option directly from the Optionee by beneficiary
designation, bequest or inheritance, but only to the extent that this option was exercisable for
vested Shares on or before the date when the Optionee’s Service terminated.

     (c) Death of the Optionee. If the Optionee dies while in Service, then this option shall
expire on the earlier of the following dates:

     (i) The expiration date determined pursuant to Subsection (a) above; or

     (ii) The date 12 months after the Optionee’s death.

4

 

All or part of this option may be exercised at any time before its expiration under the preceding
sentence by the executors or administrators of the Optionee’s estate or by any person who has
acquired this option directly from the Optionee by beneficiary designation, bequest or inheritance,
but only to the extent that this option is exercisable for vested Shares on or before the
Optionee’s death. When the Optionee dies, this option shall expire immediately with respect to the
number of Shares for which this option is not yet exercisable and with respect to any Restricted
Shares.

     (d) Leaves of Absence. For any purpose under this Agreement, Service shall be deemed to
continue while the Optionee is on a bona fide leave of absence, if such leave was approved by the
Company in writing and if continued crediting of Service for such purpose is expressly required by
the terms of such leave or by applicable law (as determined by the Company).

     (e) Notice Concerning ISO Treatment. Even if this option is designated as an ISO in the
Notice of Stock Option Grant, it ceases to qualify for favorable tax treatment as an ISO to the
extent that it is exercised:

     (i) More than three months after the date when the Optionee ceases to be an
Employee for any reason other than death or permanent and total disability (as
defined in Section 22(e)(3) of the Code);

     (ii) More than 12 months after the date when the Optionee ceases to be an
Employee by reason of permanent and total disability (as defined in Section 22(e)(3)
of the Code); or

     (iii) More than three months after the date when the Optionee has been on a
leave of absence for 90 days, unless the Optionee’s reemployment rights following
such leave were guaranteed by statute or by contract.

SECTION 7. RIGHT OF REPURCHASE.

          (a) Scope of Repurchase Right. Until they vest in accordance with the Notice of Stock Option
Grant and Subsection (b) below, the Shares acquired under this Agreement shall be Restricted Shares
and shall be subject to the Company’s Right of Repurchase. The Company, however, may decline to
exercise its Right of Repurchase or may exercise its Right of Repurchase only with respect to a
portion of the Restricted Shares. The Company may exercise its Right of Repurchase only during the
Repurchase Period following the termination of the Optionee’s Service. The Right of Repurchase may
be exercised automatically under Subsection (d) below. If the Right of Repurchase is exercised,
the Company shall pay the Optionee an amount equal to the Exercise Price for each of the Restricted
Shares being repurchased.

          (b) Lapse of Repurchase Right. The Right of Repurchase shall lapse with respect to the
Restricted Shares in accordance with the vesting schedule set forth in the Notice of Stock Option
Grant. In addition, the Right of Repurchase shall lapse with respect to 100% of the remaining
Restricted Shares if the Company is subject to a Change in Control before the Optionee’s Service
terminates.

5

 

          (c) Escrow. Upon issuance, the certificate(s) for Restricted Shares shall be deposited in
escrow with the Company to be held in accordance with the provisions of this Agreement. Any
additional or exchanged securities or other property described in Subsection (f) below shall
immediately be delivered to the Company to be held in escrow. All ordinary cash dividends on
Restricted Shares (or on other securities held in escrow) shall be paid directly to the Optionee
and shall not be held in escrow. Restricted Shares, together with any other assets held in escrow
under this Agreement, shall be (i) surrendered to the Company for repurchase upon exercise of the
Right of Repurchase or the Right of First Refusal or (ii) released to the Optionee upon his or her
request to the extent that the Shares have ceased to be Restricted Shares (but not more frequently
than once every six months). In any event, all Shares that have ceased to be Restricted Shares,
together with any other vested assets held in escrow under this Agreement, shall be released within
90 days after the earlier of (i) the termination of the Optionee’s Service or (ii) the lapse of the
Right of First Refusal.

          (d) Exercise of Repurchase Right. The Company shall be deemed to have exercised its Right of
Repurchase automatically for all Restricted Shares as of the commencement of the Repurchase Period,
unless the Company during the Repurchase Period notifies the holder of the Restricted Shares
pursuant to Section 13(c) that it will not exercise its Right of Repurchase for some or all of the
Restricted Shares. During the Repurchase Period, the Company shall pay to the holder of the
Restricted Shares the purchase price determined under Subsection (a) above for the Restricted
Shares being repurchased. Payment shall be made in cash or cash equivalents and/or by canceling
indebtedness to the Company incurred by the Optionee in the purchase of the Restricted Shares. The
certificate(s) representing the Restricted Shares being repurchased shall be delivered to the
Company properly endorsed for transfer.

          (e) Termination of Rights as Stockholder. If the Right of Repurchase is exercised in
accordance with this Section 7 and the Company makes available the consideration for the Restricted
Shares being repurchased, then the person from whom the Restricted Shares are repurchased shall no
longer have any rights as a holder of the Restricted Shares (other than the right to receive
payment of such consideration). Such Restricted Shares shall be deemed to have been repurchased
pursuant to this Section 7, whether or not the certificate(s) for such Restricted Shares have been
delivered to the Company or the consideration for such Restricted Shares has been accepted.

          (f) Additional or Exchanged Securities and Property. In the event of a merger or
consolidation of the Company with or into another entity, any other corporate reorganization, a
stock split, the declaration of a stock dividend, the declaration of an extraordinary dividend
payable in a form other than stock, a spin-off, an adjustment in conversion ratio, a
recapitalization or a similar transaction affecting the Company’s outstanding securities, any
securities or other property (including cash or cash equivalents) that are by reason of such
transaction exchanged for, or distributed with respect to, any Restricted Shares shall immediately
be subject to the Right of Repurchase. Appropriate adjustments to reflect the exchange or
distribution of such securities or property shall be made to the number and/or class of the
Restricted Shares. Appropriate adjustments shall also be made to the price per share to be paid
upon the exercise of the Right of Repurchase, provided that the aggregate purchase price payable
for the Restricted Shares shall remain the same. In the event of a merger or

6

 

consolidation of the Company with or into another entity or any other corporate
reorganization, the Right of Repurchase may be exercised by the Company’s successor.

          (g) Transfer of Restricted Shares. The Optionee shall not transfer, assign, encumber or
otherwise dispose of any Restricted Shares without the Company’s written consent, except as
provided in the following sentence. The Optionee may transfer Restricted Shares to one or more
members of the Optionee’s Immediate Family or to a trust established by the Optionee for the
benefit of the Optionee and/or one or more members of the Optionee’s Immediate Family, provided in
either case that the Transferee agrees in writing on a form prescribed by the Company to be bound
by all provisions of this Agreement. If the Optionee transfers any Restricted Shares, then this
Agreement shall apply to the Transferee to the same extent as to the Optionee.

          (h) Assignment of Repurchase Right. The Board of Directors may freely assign the Company’s
Right of Repurchase, in whole or in part. Any person who accepts an assignment of the Right of
Repurchase from the Company shall assume all of the Company’s rights and obligations under this
Section 7.

SECTION 8. RIGHT OF FIRST REFUSAL.

     (a) Right of First Refusal. In the event that the Optionee proposes to sell, pledge or
otherwise transfer to a third party any Shares acquired under this Agreement, or any interest in
such Shares, the Company shall have the Right of First Refusal with respect to all (and not less
than all) of such Shares. If the Optionee desires to transfer Shares acquired under this
Agreement, the Optionee shall give a written Transfer Notice to the Company describing fully the
proposed transfer, including the number of Shares proposed to be transferred, the proposed transfer
price, the name and address of the proposed Transferee and proof satisfactory to the Company that
the proposed sale or transfer will not violate any applicable federal or state securities laws.
The Transfer Notice shall be signed both by the Optionee and by the proposed Transferee and must
constitute a binding commitment of both parties to the transfer of the Shares. The Company shall
have the right to purchase all, and not less than all, of the Shares on the terms of the proposal
described in the Transfer Notice (subject, however, to any change in such terms permitted under
Subsection (b) below) by delivery of a notice of exercise of the Right of First Refusal within 30
days after the date when the Transfer Notice was received by the Company.

     (b) Transfer of Shares. If the Company fails to exercise its Right of First Refusal within 30
days after the date when it received the Transfer Notice, the Optionee may, not later than 90 days
following receipt of the Transfer Notice by the Company, conclude a transfer of the Shares subject
to the Transfer Notice on the terms and conditions described in the Transfer Notice, provided that
any such sale is made in compliance with applicable federal and state securities laws and not in
violation of any other contractual restrictions to which the Optionee is bound. Any proposed
transfer on terms and conditions different from those described in the Transfer Notice, as well as
any subsequent proposed transfer by the Optionee, shall again be subject to the Right of First
Refusal and shall require compliance with the procedure described in Subsection (a) above. If the
Company exercises its Right of First Refusal, the parties shall consummate the sale of the Shares
on the terms set forth in the Transfer Notice within 60 days

7

 

after the date when the Company received the Transfer Notice (or within such longer period as
may have been specified in the Transfer Notice); provided, however, that in the event the Transfer
Notice provided that payment for the Shares was to be made in a form other than cash or cash
equivalents paid at the time of transfer, the Company shall have the option of paying for the
Shares with cash or cash equivalents equal to the present value of the consideration described in
the Transfer Notice.

     (c) Additional or Exchanged Securities and Property. In the event of a merger or
consolidation of the Company with or into another entity, any other corporate reorganization, a
stock split, the declaration of a stock dividend, the declaration of an extraordinary dividend
payable in a form other than stock, a spin-off, an adjustment in conversion ratio, a
recapitalization or a similar transaction affecting the Company’s outstanding securities, any
securities or other property (including cash or cash equivalents) that are by reason of such
transaction exchanged for, or distributed with respect to, any Shares subject to this Section 8
shall immediately be subject to the Right of First Refusal. Appropriate adjustments to reflect the
exchange or distribution of such securities or property shall be made to the number and/or class of
the Shares subject to this Section 8.

     (d) Termination of Right of First Refusal. Any other provision of this Section 8
notwithstanding, in the event that the Stock is readily tradable on an established securities
market when the Optionee desires to transfer Shares, the Company shall have no Right of First
Refusal, and the Optionee shall have no obligation to comply with the procedures prescribed by
Subsections (a) and (b) above.

     (e) Permitted Transfers. This Section 8 shall not apply to (i) a transfer by beneficiary
designation, will or intestate succession or (ii) a transfer to one or more members of the
Optionee’s Immediate Family or to a trust established by the Optionee for the benefit of the
Optionee and/or one or more members of the Optionee’s Immediate Family, provided in either case
that the Transferee agrees in writing on a form prescribed by the Company to be bound by all
provisions of this Agreement. If the Optionee transfers any Shares acquired under this Agreement,
either under this Subsection (e) or after the Company has failed to exercise the Right of First
Refusal, then this Agreement shall apply to the Transferee to the same extent as to the Optionee.

     (f) Termination of Rights as Stockholder. If the Company makes available, at the time and
place and in the amount and form provided in this Agreement, the consideration for the Shares to be
purchased in accordance with this Section 8, then after such time the person from whom such Shares
are to be purchased shall no longer have any rights as a holder of such Shares (other than the
right to receive payment of such consideration in accordance with this Agreement). Such Shares
shall be deemed to have been purchased in accordance with the applicable provisions hereof, whether
or not the certificate(s) therefor have been delivered as required by this Agreement.

     (g) Assignment of Right of First Refusal. The Board of Directors may freely assign the
Company’s Right of First Refusal, in whole or in part. Any person who accepts an assignment of the
Right of First Refusal from the Company shall assume all of the Company’s rights and obligations
under this Section 8.

8

 

SECTION 9. LEGALITY OF INITIAL ISSUANCE.

          No Shares shall be issued upon the exercise of this option unless and until the Company has
determined that:

     (a) It and the Optionee have taken any actions required to register the Shares
under the Securities Act or to perfect an exemption from the registration
requirements thereof;

     (b) Any applicable listing requirement of any stock exchange or other
securities market on which Stock is listed has been satisfied; and

     (c) Any other applicable provision of federal, state or foreign law has been
satisfied.

SECTION 10. NO REGISTRATION RIGHTS.

     The Company may, but shall not be obligated to, register or qualify the sale of Shares under
the Securities Act or any other applicable law. The Company shall not be obligated to take any
affirmative action in order to cause the sale of Shares under this Agreement to comply with any
law.

SECTION 11. RESTRICTIONS ON TRANSFER.

     (a) Securities Law Restrictions. Regardless of whether the offering and sale of Shares under
the Plan have been registered under the Securities Act or have been registered or qualified under
the securities laws of any state, the Company at its discretion may impose restrictions upon the
sale, pledge or other transfer of such Shares (including the placement of appropriate legends on
stock certificates or the imposition of stop-transfer instructions) if, in the judgment of the
Company, such restrictions are necessary or desirable in order to achieve compliance with the
Securities Act, the securities laws of any state or any other law.

     (b) Market Stand-Off. In connection with any underwritten public offering by the Company of
its equity securities pursuant to an effective registration statement filed under the Securities
Act, including the Company’s initial public offering, the Optionee or a Transferee shall not
directly or indirectly sell, make any short sale of, loan, hypothecate, pledge, offer, grant or
sell any option or other contract for the purchase of, purchase any option or other contract for
the sale of, or otherwise dispose of or transfer, or agree to engage in any of the foregoing
transactions with respect to, any Shares acquired under this Agreement without the prior written
consent of the Company or its underwriters. Such restriction (the “Market Stand-Off”) shall be in
effect for such period of time following the date of the final prospectus for the offering as may
be requested by the Company or such underwriters. In no event, however, shall such period exceed
180 days. The Market Stand-Off shall in any event terminate two years after the date of the
Company’s initial public offering. In the event of the declaration of a stock dividend, a
spin-off, a stock split, an adjustment in conversion ratio, a recapitalization or a similar
transaction affecting the Company’s outstanding securities without receipt of consideration, any
new, substituted or additional securities which are by reason of such transaction distributed with
respect to any Shares subject to the Market Stand-Off, or into which such Shares thereby become

9

 

convertible, shall immediately be subject to the Market Stand-Off. In order to enforce the
Market Stand-Off, the Company may impose stop-transfer instructions with respect to the Shares
acquired under this Agreement until the end of the applicable stand-off period. The Company’s
underwriters shall be beneficiaries of the agreement set forth in this Subsection (b). This
Subsection (b) shall not apply to Shares registered in the public offering under the Securities
Act, and the Optionee or a Transferee shall be subject to this Subsection (b) only if the directors
and officers of the Company are subject to similar arrangements.

     (c) Investment Intent at Grant. The Optionee represents and agrees that the Shares to be
acquired upon exercising this option will be acquired for investment, and not with a view to the
sale or distribution thereof.

     (d) Investment Intent at Exercise. In the event that the sale of Shares under the Plan is not
registered under the Securities Act but an exemption is available which requires an investment
representation or other representation, the Optionee shall represent and agree at the time of
exercise that the Shares being acquired upon exercising this option are being acquired for
investment, and not with a view to the sale or distribution thereof, and shall make such other
representations as are deemed necessary or appropriate by the Company and its counsel.

     (e) Legends. All certificates evidencing Shares purchased under this Agreement shall bear the
following legend:

“THE SHARES REPRESENTED HEREBY MAY NOT BE SOLD, ASSIGNED, TRANSFERRED, ENCUMBERED OR
IN ANY MANNER DISPOSED OF, EXCEPT IN COMPLIANCE WITH THE TERMS OF A WRITTEN
AGREEMENT BETWEEN THE COMPANY AND THE REGISTERED HOLDER OF THE SHARES (OR THE
PREDECESSOR IN INTEREST TO THE SHARES). SUCH AGREEMENT GRANTS TO THE COMPANY
CERTAIN RIGHTS OF FIRST REFUSAL UPON AN ATTEMPTED TRANSFER OF THE SHARES AND CERTAIN
REPURCHASE RIGHTS UPON TERMINATION OF SERVICE WITH THE COMPANY. THE SECRETARY OF
THE COMPANY WILL UPON WRITTEN REQUEST FURNISH A COPY OF SUCH AGREEMENT TO THE HOLDER
HEREOF WITHOUT CHARGE.”

All certificates evidencing Shares purchased under this Agreement in an unregistered transaction
shall bear the following legend (and such other restrictive legends as are required or deemed
advisable under the provisions of any applicable law):

“THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, AND MAY NOT BE SOLD, PLEDGED, OR OTHERWISE TRANSFERRED WITHOUT AN
EFFECTIVE REGISTRATION THEREOF UNDER SUCH ACT OR AN OPINION OF COUNSEL, SATISFACTORY
TO THE COMPANY AND ITS COUNSEL, THAT SUCH REGISTRATION IS NOT REQUIRED.”

10

 

     (f) Removal of Legends. If, in the opinion of the Company and its counsel, any legend placed
on a stock certificate representing Shares sold under this Agreement is no longer required, the
holder of such certificate shall be entitled to exchange such certificate for a certificate
representing the same number of Shares but without such legend.

     (g) Administration. Any determination by the Company and its counsel in connection with any
of the matters set forth in this Section 11 shall be conclusive and binding on the Optionee and all
other persons.

SECTION 12. ADJUSTMENT OF SHARES.

          In the event of any transaction described in Section 8(a) of the Plan, the terms of this
option (including, without limitation, the number and kind of Shares subject to this option and the
Exercise Price) shall be adjusted as set forth in Section 8(a) of the Plan. In the event that the
Company is a party to a merger or consolidation, this option shall be subject to the agreement of
merger or consolidation, as provided in Section 8(b) of the Plan.

SECTION 13. MISCELLANEOUS PROVISIONS.

     (a) Rights as a Stockholder. Neither the Optionee nor the Optionee’s representative shall
have any rights as a stockholder with respect to any Shares subject to this option until the
Optionee or the Optionee’s representative becomes entitled to receive such Shares by filing a
notice of exercise and paying the Purchase Price pursuant to Sections 4 and 5.

     (b) No Retention Rights. Nothing in this option or in the Plan shall confer upon the Optionee
any right to continue in Service for any period of specific duration or interfere with or otherwise
restrict in any way the rights of the Company (or any Parent or Subsidiary employing or retaining
the Optionee) or of the Optionee, which rights are hereby expressly reserved by each, to terminate
his or her Service at any time and for any reason, with or without cause.

     (c) Notice. Any notice required by the terms of this Agreement shall be given in writing. It
shall be deemed effective upon (i) personal delivery, (ii) deposit with the United States Postal
Service, by registered or certified mail, with postage and fees prepaid or (iii) deposit with
Federal Express Corporation, with shipping charges prepaid. Notice shall be addressed to the
Company at its principal executive office and to the Optionee at the address that he or she most
recently provided to the Company in accordance with this Subsection (c).

     (d) Entire Agreement. The Notice of Stock Option Grant, this Agreement and the Plan
constitute the entire contract between the parties hereto with regard to the subject matter hereof.
They supersede any other agreements, representations or understandings (whether oral or written
and whether express or implied) which relate to the subject matter hereof.

     (e) Choice of Law. This Agreement shall be governed by, and construed in accordance with, the
laws of the State of Delaware, as such laws are applied to contracts entered into and performed in
such State.

11

 

SECTION 14. DEFINITIONS.

     (a) “Agreement” shall mean this Stock Option Agreement.

     (b) “Board of Directors” shall mean the Board of Directors of the Company, as constituted from
time to time or, if a Committee has been appointed, such Committee.

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

     (d) “Code” shall mean the Internal Revenue Code of 1986, as amended.

     (e) “Committee” shall mean a committee of the Board of Directors, as described in Section 2 of
the Plan.

     (f) “Company” shall mean ArcSight, Inc., a Delaware corporation.

     (g) “Consultant” shall mean a person who performs bona fide services for the Company, a Parent
or a Subsidiary as a consultant or advisor, excluding Employees and Outside Directors.

     (h) “Date of Grant” shall mean the date specified in the Notice of Stock Option Grant, which
date shall be the later of (i) the date on which the Board of Directors resolved to grant this
option or (ii) the first day of the Optionee’s Service.

     (i) “Disability” shall mean that the Optionee is unable to engage in any substantial gainful
activity by reason of any medically determinable physical or mental impairment.

     (j) “Employee” shall mean any individual who is a common-law employee of the Company, a Parent
or a Subsidiary.

     (k) “Exercise Price” shall mean the amount for which one Share may be purchased upon exercise
of this option, as specified in the Notice of Stock Option Grant.

     (l) “Fair Market Value” shall mean the fair market value of a Share, as determined by the
Board of Directors in good faith. Such determination shall be conclusive and binding on all
persons.

     (m) “Immediate Family” shall mean any child, stepchild, grandchild, parent, stepparent,
grandparent, spouse, sibling, mother-in-law, father-in-law, son-in-law, daughter-in-law,
brother-in-law or sister-in-law and shall include adoptive relationships.

12

 

     (n) “Involuntary Termination” means that (a) the Optionee’s Service is terminated by the
Company without Cause, (b) the Optionee resigns within 30 days after the scope of his or her job
responsibilities or authority was materially reduced without his or her written consent or (c) the
Optionee resigns within 30 days after receipt of notice that his or her principal workplace will be
relocated 100 miles or more from its location at the time of notice.

     (o) “ISO” shall mean an employee incentive stock option described in Section 422(b) of the
Code.

     (p) “Notice of Stock Option Grant” shall mean the document so entitled to which this Agreement
is attached.

     (q) “NSO” shall mean a stock option not described in Sections 422(b) or 423(b) of the Code.

     (r) “Optionee” shall mean the person named in the Notice of Stock Option Grant.

     (s) “Outside Director” shall mean a member of the Board of Directors who is not an Employee.

     (t) “Parent” shall mean any corporation (other than the Company) in an unbroken chain of
corporations ending with the Company, if each of the corporations other than the Company owns stock
possessing 50% or more of the total combined voting power of all classes of stock in one of the
other corporations in such chain.

     (u) “Plan” shall mean the ArcSight, Inc. 2002 Stock Plan, as in effect on the Date of Grant.

     (v) “Purchase Price” shall mean the Exercise Price multiplied by the number of Shares with
respect to which this option is being exercised.

     (w) “Repurchase Period” shall mean a period of 90 consecutive days commencing on the date when
the Optionee’s Service terminates for any reason, including (without limitation) death or
disability.

     (x) “Restricted Share” shall mean a Share that is subject to the Right of Repurchase.

     (y) “Right of First Refusal” shall mean the Company’s right of first refusal described in
Section 8.

     (z) “Right of Repurchase” shall mean the Company’s right of repurchase described in Section 7.

     (aa) “Securities Act” shall mean the Securities Act of 1933, as amended.

     (bb) “Service” shall mean service as an Employee, Outside Director or Consultant.

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     (cc) “Share” shall mean one share of Stock, as adjusted in accordance with Section 8 of the
Plan (if applicable).

     (dd) “Stock” shall mean the Common Stock of the Company, with a par value of $0.00001 per
Share.

     (ee) “Subsidiary” shall mean any corporation (other than the Company) in an unbroken chain of
corporations beginning with the Company, if each of the corporations other than the last
corporation in the unbroken chain owns stock possessing 50% or more of the total combined voting
power of all classes of stock in one of the other corporations in such chain.

     (ff) “Transferee” shall mean any person to whom the Optionee has directly or indirectly
transferred any Share acquired under this Agreement.

     (gg) “Transfer Notice” shall mean the notice of a proposed transfer of Shares described in
Section 8.

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Arcsight, Inc. 2002 Stock Plan

Notice of Stock Option Grant

     You have been granted the following option to purchase shares of the Common Stock of
ArcSight, Inc. (the “Company”):

	 	 	 
	Name of Optionee:
	 	 
	 
	 	 
	Total Number of Shares:
	 	 
	 
	 	 
	Type of Option:
	 	 
	 
	 	 
	Exercise Price Per Share:
	 	 
	 
	 	 
	Date of Grant:
	 	 
	 
	 	 
	Date Exercisable:

	 	This option may be exercised at
any time after the Date of Grant
for all or any part of the Shares
subject to this option.
	 
	 	 
	Vesting Commencement Date:
	 	 
	 
	 	 
	Vesting Schedule:
	 	 
	 
	 	 
	Expiration Date:
	 	                .
This option expires earlier if the Optionee’s Service terminates
earlier, as provided in Section 6 of the Stock Option Agreement.

By your signature and the signature of the Company’s representative below, you and the Company
agree that this option is granted under and governed by the terms and conditions of the 2002 Stock
Plan and the Stock Option Agreement, both of which are attached to and made a part of this
document.

	 	 	 	 	 	 	 
	OPTIONEE:	 	 	 	ARCSIGHT, INC.
	 
	 	 	 	 	 	 
	 

	 	 	 	By:	 	 
	 

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	 	 	Title:	 	 
	 

	 	 	 	 	 	 

 

 

THE OPTION GRANTED PURSUANT TO THIS AGREEMENT AND THE SHARES ISSUABLE UPON THE EXERCISE THEREOF
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD,
PLEDGED, OR OTHERWISE TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION THEREOF UNDER SUCH ACT OR AN
OPINION OF COUNSEL, SATISFACTORY TO THE COMPANY AND ITS COUNSEL, THAT SUCH REGISTRATION IS NOT
REQUIRED.

Arcsight, Inc. 2002 Stock Plan:

Stock Option Agreement

SECTION 1. GRANT OF OPTION.

     (a) Option. On the terms and conditions set forth in the Notice of Stock Option Grant and this
Agreement, the Company grants to the Optionee on the Date of Grant the option to purchase at the
Exercise Price the number of Shares set forth in the Notice of Stock Option Grant. The Exercise
Price is agreed to be at least 100% of the Fair Market Value per Share on the Date of Grant (110%
of Fair Market Value if Section 3(b) of the Plan applies). This option is intended to be an ISO or
an NSO, as provided in the Notice of Stock Option Grant.

     (b) $100,000 Limitation. Even if this option is designated as an ISO in the Notice of Stock
Option Grant, it shall be deemed to be an NSO to the extent (and only to the extent) required by
the $100,000 annual limitation under Section 422(d) of the Code.

     (c) Stock Plan and Defined Terms. This option is granted pursuant to the Plan, a copy of which
the Optionee acknowledges having received. The provisions of the Plan are incorporated into this
Agreement by this reference. Capitalized terms are defined in Section 14 of this Agreement.

SECTION 2. RIGHT TO EXERCISE.

     (a) Exercisability. Subject to Subsection (b) below and the other conditions set forth in this
Agreement, all or part of this option may be exercised prior to its expiration at the time or times
set forth in the Notice of Stock Option Grant. Shares purchased by exercising this option may be
subject to the Right of Repurchase under Section 7.

     (b) Stockholder Approval. Any other provision of this Agreement notwithstanding, no portion of
this option shall be exercisable at any time prior to the approval of the Plan by the Company’s
stockholders.

SECTION 3. NO TRANSFER OR ASSIGNMENT OF OPTION.

     Except as otherwise provided in this Agreement, this option and the rights and privileges
conferred hereby shall not be sold, pledged or otherwise transferred (whether by operation of law
or otherwise) and shall not be subject to sale under execution, attachment, levy or similar
process.

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SECTION 4. EXERCISE PROCEDURES.

     (a) Notice of Exercise. The Optionee or the Optionee’s representative may exercise this option
by giving written notice to the Company pursuant to Section 13(c). The notice shall specify the
election to exercise this option, the number of Shares for which it is being exercised and the form
of payment. The person exercising this option shall sign the notice. In the event that this option
is being exercised by the representative of the Optionee, the notice shall be accompanied by proof
(satisfactory to the Company) of the representative’s right to exercise this option. The Optionee
or the Optionee’s representative shall deliver to the Company, at the time of giving the notice,
payment in a form permissible under Section 5 for the full amount of the Purchase Price. In the
event of a partial exercise of this option, Shares shall be deemed to have been purchased in the
order in which they vest in accordance with the Notice of Stock Option Grant.

     (b) Issuance of Shares. After receiving a proper notice of exercise, the Company shall cause
to be issued one or more certificates evidencing the Shares for which this option has been
exercised. Such Shares shall be registered (i) in the name of the person exercising this option,
(ii) in the names of such person and his or her spouse as community property or as joint tenants
with the right of survivorship or (iii) with the Company’s consent, in the name of a revocable
trust. In the case of Restricted Shares, the Company shall cause such certificates to be deposited
in escrow under Section 7(c). In the case of other Shares, the Company shall cause such
certificates to be delivered to or upon the order of the person exercising this option.

     (c) Withholding Taxes. In the event that the Company determines that it is required to
withhold any tax as a result of the exercise of this option, the Optionee, as a condition to the
exercise of this option, shall make arrangements satisfactory to the Company to enable it to
satisfy all withholding requirements. The Optionee shall also make arrangements satisfactory to the
Company to enable it to satisfy any withholding requirements that may arise in connection with the
vesting or disposition of Shares purchased by exercising this option.

SECTION 5. PAYMENT FOR STOCK.

     (a) Cash. All or part of the Purchase Price may be paid in cash or cash equivalents.

     (b) Surrender of Stock. All or any part of the Purchase Price may be paid by surrendering, or
attesting to the ownership of, Shares that are already owned by the Optionee. Such Shares shall be
surrendered to the Company in good form for transfer and shall be valued at their Fair Market Value
on the date when this option is exercised. The Optionee shall not surrender, or attest to the
ownership of, Shares in payment of the Purchase Price if such action would cause the Company to
recognize compensation expense (or additional compensation expense) with respect to this option for
financial reporting purposes.

     (c) Promissory Note. All or part of the Purchase Price may be paid with a full-recourse
promissory note. However, the par value of the Shares, if newly issued, shall be paid in cash or
cash equivalents. The Shares shall be pledged as security for payment of the principal amount of
the promissory note and interest thereon. The interest rate payable under the terms of the
promissory note shall not be less than the minimum rate, if any, required to avoid (i) the

3

 

imputation of additional interest under the Code and (ii) variable accounting under the
applicable guidelines issued by the Financial Accounting Standards Board. Subject to the foregoing,
the Board of Directors (at its sole discretion) shall specify the term, interest rate, amortization
requirements, if any, and other provisions of such note.

     (d) Exercise/Sale. If Stock is publicly traded, all or part of the Purchase Price and any
withholding taxes may be paid by the delivery (on a form prescribed by the Company) of an
irrevocable direction to a securities broker approved by the Company to sell Shares and to deliver
all or part of the sales proceeds to the Company.

     (e) Exercise/Pledge. If Stock is publicly traded, all or part of the Purchase Price and any
withholding taxes may be paid by the delivery (on a form prescribed by the Company) of an
irrevocable direction to pledge Shares to a securities broker or lender approved by the Company, as
security for a loan, and to deliver all or part of the loan proceeds to the Company.

SECTION 6. TERM AND EXPIRATION.

     (a) Basic Term. This option shall in any event expire on the expiration date set forth in the
Notice of Stock Option Grant, which date is 10 years after the Date of Grant (five years after the
Date of Grant if this option is designated as an ISO in the Notice of Stock Option Grant and
Section 3(b) of the Plan applies).

     (b) Termination of Service (Except by Death). If the Optionee’s Service terminates for any
reason other than death, then this option shall expire on the earliest of the following occasions:

     (i) The expiration date determined pursuant to Subsection (a) above;

     (ii) The date 30 days after the termination of the Optionee’s Service for any reason
other than Cause, retirement at or after age 65, or Disability;

     (iii) The date of the termination of the Optionee’s Service for Cause;

     (iv) The date 12 months after the Optionee’s retirement at or after age 65; or

     (v) The date 12 months after the termination of the Optionee’s Service by reason of
Disability.

The Optionee may exercise all or part of this option at any time before its expiration under the
preceding sentence, but only to the extent that this option is exercisable for vested Shares on or
before the date when the Optionee’s Service terminates. When the Optionee’s Service terminates,
this option shall expire immediately with respect to the number of Shares for which this option is
not yet exercisable and with respect to any Restricted Shares. In the event that the Optionee dies
after termination of Service but before the expiration of this option, all or part of this option
may be exercised (prior to expiration) by the executors or administrators of the Optionee’s estate
or by any person who has acquired this option directly from the Optionee by beneficiary
designation, bequest or inheritance, but only to the extent that this option was exercisable for
vested Shares on or before the date when the Optionee’s Service terminated.

4

 

     (c) Death of the Optionee. If the Optionee dies while in Service, then this option shall
expire on the earlier of the following dates:

     (i) The expiration date determined pursuant to Subsection (a) above; or

     (ii) The date 12 months after the Optionee’s death.

All or part of this option may be exercised at any time before its expiration under the preceding
sentence by the executors or administrators of the Optionee’s estate or by any person who has
acquired this option directly from the Optionee by beneficiary designation, bequest or inheritance,
but only to the extent that this option is exercisable for vested Shares on or before the
Optionee’s death. When the Optionee dies, this option shall expire immediately with respect to the
number of Shares for which this option is not yet exercisable and with respect to any Restricted
Shares.

     (d) Leaves of Absence. For any purpose under this Agreement, Service shall be deemed to
continue while the Optionee is on a bona fide leave of absence, if such leave was approved by the
Company in writing and if continued crediting of Service for such purpose is expressly required by
the terms of such leave or by applicable law (as determined by the Company).

     (e) Notice Concerning ISO Treatment. Even if this option is designated as an ISO in the Notice
of Stock Option Grant, it ceases to qualify for favorable tax treatment as an ISO to the extent
that it is exercised:

     (i) More than three months after the date when the Optionee ceases to be an Employee
for any reason other than death or permanent and total disability (as defined in Section
22(e)(3) of the Code);

     (ii) More than 12 months after the date when the Optionee ceases to be an Employee by
reason of permanent and total disability (as defined in Section 22(e)(3) of the Code); or

     (iii) More than three months after the date when the Optionee has been on a leave of
absence for 90 days, unless the Optionee’s reemployment rights following such leave were
guaranteed by statute or by contract.

SECTION 7. RIGHT OF REPURCHASE.

     (a) Scope of Repurchase Right. Until they vest in accordance with the Notice of Stock Option
Grant and Subsection (b) below, the Shares acquired under this Agreement shall be Restricted Shares
and shall be subject to the Company’s Right of Repurchase. The Company, however, may decline to
exercise its Right of Repurchase or may exercise its Right of Repurchase only with respect to a
portion of the Restricted Shares. The Company may exercise its Right of Repurchase only during the
Repurchase Period following the termination of the Optionee’s Service. The Right of Repurchase may
be exercised automatically under Subsection (d) below. If the Right of Repurchase is exercised, the
Company shall pay the Optionee an amount equal to the Exercise Price for each of the Restricted
Shares being repurchased.

5

 

     (b) Lapse of Repurchase Right. The Right of Repurchase shall lapse with respect to the
Restricted Shares in accordance with the vesting schedule set forth in the Notice of Stock Option
Grant.

     (c) Escrow. Upon issuance, the certificate(s) for Restricted Shares shall be deposited in
escrow with the Company to be held in accordance with the provisions of this Agreement. Any
additional or exchanged securities or other property described in Subsection (f) below shall
immediately be delivered to the Company to be held in escrow. All ordinary cash dividends on
Restricted Shares (or on other securities held in escrow) shall be paid directly to the Optionee
and shall not be held in escrow. Restricted Shares, together with any other assets held in escrow
under this Agreement, shall be (i) surrendered to the Company for repurchase upon exercise of the
Right of Repurchase or the Right of First Refusal or (ii) released to the Optionee upon his or her
request to the extent that the Shares have ceased to be Restricted Shares (but not more frequently
than once every six months). In any event, all Shares that have ceased to be Restricted Shares,
together with any other vested assets held in escrow under this Agreement, shall be released within
90 days after the earlier of (i) the termination of the Optionee’s Service or (ii) the lapse of the
Right of First Refusal.

     (d) Exercise of Repurchase Right. The Company shall be deemed to have exercised its Right of
Repurchase automatically for all Restricted Shares as of the commencement of the Repurchase Period,
unless the Company during the Repurchase Period notifies the holder of the Restricted Shares
pursuant to Section 13(c) that it will not exercise its Right of Repurchase for some or all of the
Restricted Shares. During the Repurchase Period, the Company shall pay to the holder of the
Restricted Shares the purchase price determined under Subsection (a) above for the Restricted
Shares being repurchased. Payment shall be made in cash or cash equivalents and/or by canceling
indebtedness to the Company incurred by the Optionee in the purchase of the Restricted Shares. The
certificate(s) representing the Restricted Shares being repurchased shall be delivered to the
Company properly endorsed for transfer.

     (e) Termination of Rights as Stockholder. If the Right of Repurchase is exercised in
accordance with this Section 7 and the Company makes available the consideration for the Restricted
Shares being repurchased, then the person from whom the Restricted Shares are repurchased shall no
longer have any rights as a holder of the Restricted Shares (other than the right to receive
payment of such consideration). Such Restricted Shares shall be deemed to have been repurchased
pursuant to this Section 7, whether or not the certificate(s) for such Restricted Shares have been
delivered to the Company or the consideration for such Restricted Shares has been accepted.

     (f) Additional or Exchanged Securities and Property. In the event of a merger or consolidation
of the Company with or into another entity, any other corporate reorganization, a stock split, the
declaration of a stock dividend, the declaration of an extraordinary dividend payable in a form
other than stock, a spin-off, an adjustment in conversion ratio, a recapitalization or a similar
transaction affecting the Company’s outstanding securities, any securities or other property
(including cash or cash equivalents) that are by reason of such transaction exchanged for, or
distributed with respect to, any Restricted Shares shall immediately be subject to the Right of
Repurchase. Appropriate adjustments to reflect the exchange or distribution of such securities or
property shall be made to the number and/or class of the

6

 

Restricted Shares. Appropriate adjustments shall also be made to the price per share to be
paid upon the exercise of the Right of Repurchase, provided that the aggregate purchase price
payable for the Restricted Shares shall remain the same. In the event of a merger or consolidation
of the Company with or into another entity or any other corporate reorganization, the Right of
Repurchase may be exercised by the Company’s successor.

     (g) Transfer of Restricted Shares. The Optionee shall not transfer, assign, encumber or
otherwise dispose of any Restricted Shares without the Company’s written consent, except as
provided in the following sentence. The Optionee may transfer Restricted Shares to one or more
members of the Optionee’s Immediate Family or to a trust established by the Optionee for the
benefit of the Optionee and/or one or more members of the Optionee’s Immediate Family, provided in
either case that the Transferee agrees in writing on a form prescribed by the Company to be bound
by all provisions of this Agreement. If the Optionee transfers any Restricted Shares, then this
Agreement shall apply to the Transferee to the same extent as to the Optionee.

     (h) Assignment of Repurchase Right. The Board of Directors may freely assign the Company’s
Right of Repurchase, in whole or in part. Any person who accepts an assignment of the Right of
Repurchase from the Company shall assume all of the Company’s rights and obligations under this
Section 7.

SECTION 8. RIGHT OF FIRST REFUSAL.

     (a) Right of First Refusal. In the event that the Optionee proposes to sell, pledge or
otherwise transfer to a third party any Shares acquired under this Agreement, or any interest in
such Shares, the Company shall have the Right of First Refusal with respect to all (and not less
than all) of such Shares. If the Optionee desires to transfer Shares acquired under this Agreement,
the Optionee shall give a written Transfer Notice to the Company describing fully the proposed
transfer, including the number of Shares proposed to be transferred, the proposed transfer price,
the name and address of the proposed Transferee and proof satisfactory to the Company that the
proposed sale or transfer will not violate any applicable federal or state securities laws. The
Transfer Notice shall be signed both by the Optionee and by the proposed Transferee and must
constitute a binding commitment of both parties to the transfer of the Shares. The Company shall
have the right to purchase all, and not less than all, of the Shares on the terms of the proposal
described in the Transfer Notice (subject, however, to any change in such terms permitted under
Subsection (b) below) by delivery of a notice of exercise of the Right of First Refusal within 30
days after the date when the Transfer Notice was received by the Company.

     (b) Transfer of Shares. If the Company fails to exercise its Right of First Refusal within 30
days after the date when it received the Transfer Notice, the Optionee may, not later than 90 days
following receipt of the Transfer Notice by the Company, conclude a transfer of the Shares subject
to the Transfer Notice on the terms and conditions described in the Transfer Notice, provided that
any such sale is made in compliance with applicable federal and state securities laws and not in
violation of any other contractual restrictions to which the Optionee is bound. Any proposed
transfer on terms and conditions different from those described in the Transfer Notice, as well as
any subsequent proposed transfer by the Optionee, shall again be

7

 

subject to the Right of First Refusal and shall require compliance with the procedure
described in Subsection (a) above. If the Company exercises its Right of First Refusal, the parties
shall consummate the sale of the Shares on the terms set forth in the Transfer Notice within 60
days after the date when the Company received the Transfer Notice (or within such longer period as
may have been specified in the Transfer Notice); provided, however, that in the event the Transfer
Notice provided that payment for the Shares was to be made in a form other than cash or cash
equivalents paid at the time of transfer, the Company shall have the option of paying for the
Shares with cash or cash equivalents equal to the present value of the consideration described in
the Transfer Notice.

     (c) Additional or Exchanged Securities and Property. In the event of a merger or consolidation
of the Company with or into another entity, any other corporate reorganization, a stock split, the
declaration of a stock dividend, the declaration of an extraordinary dividend payable in a form
other than stock, a spin-off, an adjustment in conversion ratio, a recapitalization or a similar
transaction affecting the Company’s outstanding securities, any securities or other property
(including cash or cash equivalents) that are by reason of such transaction exchanged for, or
distributed with respect to, any Shares subject to this Section 8 shall immediately be subject to
the Right of First Refusal. Appropriate adjustments to reflect the exchange or distribution of such
securities or property shall be made to the number and/or class of the Shares subject to this
Section 8.

     (d) Termination of Right of First Refusal. Any other provision of this Section 8
notwithstanding, in the event that the Stock is readily tradable on an established securities
market when the Optionee desires to transfer Shares, the Company shall have no Right of First
Refusal, and the Optionee shall have no obligation to comply with the procedures prescribed by
Subsections (a) and (b) above.

     (e) Permitted Transfers. This Section 8 shall not apply to (i) a transfer by beneficiary
designation, will or intestate succession or (ii) a transfer to one or more members of the
Optionee’s Immediate Family or to a trust established by the Optionee for the benefit of the
Optionee and/or one or more members of the Optionee’s Immediate Family, provided in either case
that the Transferee agrees in writing on a form prescribed by the Company to be bound by all
provisions of this Agreement. If the Optionee transfers any Shares acquired under this Agreement,
either under this Subsection (e) or after the Company has failed to exercise the Right of First
Refusal, then this Agreement shall apply to the Transferee to the same extent as to the Optionee.

     (f) Termination of Rights as Stockholder. If the Company makes available, at the time and
place and in the amount and form provided in this Agreement, the consideration for the Shares to be
purchased in accordance with this Section 8, then after such time the person from whom such Shares
are to be purchased shall no longer have any rights as a holder of such Shares (other than the
right to receive payment of such consideration in accordance with this Agreement). Such Shares
shall be deemed to have been purchased in accordance with the applicable provisions hereof, whether
or not the certificate(s) therefor have been delivered as required by this Agreement.

8

 

     (g) Assignment of Right of First Refusal. The Board of Directors may freely assign the
Company’s Right of First Refusal, in whole or in part. Any person who accepts an assignment of the
Right of First Refusal from the Company shall assume all of the Company’s rights and obligations
under this Section 8.

SECTION 9. LEGALITY OF INITIAL ISSUANCE.

     No Shares shall be issued upon the exercise of this option unless and until the Company has
determined that:

     (a) It and the Optionee have taken any actions required to register the Shares under the
Securities Act or to perfect an exemption from the registration requirements thereof;

     (b) Any applicable listing requirement of any stock exchange or other securities market on
which Stock is listed has been satisfied; and

     (c) Any other applicable provision of federal, state or foreign law has been satisfied.

SECTION 10. NO REGISTRATION RIGHTS.

     The Company may, but shall not be obligated to, register or qualify the sale of Shares under
the Securities Act or any other applicable law. The Company shall not be obligated to take any
affirmative action in order to cause the sale of Shares under this Agreement to comply with any
law.

SECTION 11. RESTRICTIONS ON TRANSFER.

     (a) Securities Law Restrictions. Regardless of whether the offering and sale of Shares under
the Plan have been registered under the Securities Act or have been registered or qualified under
the securities laws of any state, the Company at its discretion may impose restrictions upon the
sale, pledge or other transfer of such Shares (including the placement of appropriate legends on
stock certificates or the imposition of stop-transfer instructions) if, in the judgment of the
Company, such restrictions are necessary or desirable in order to achieve compliance with the
Securities Act, the securities laws of any state or any other law.

     (b) Market Stand-Off. In connection with any underwritten public offering by the Company of
its equity securities pursuant to an effective registration statement filed under the Securities
Act, including the Company’s initial public offering, the Optionee or a Transferee shall not
directly or indirectly sell, make any short sale of, loan, hypothecate, pledge, offer, grant or
sell any option or other contract for the purchase of, purchase any option or other contract for
the sale of, or otherwise dispose of or transfer, or agree to engage in any of the foregoing
transactions with respect to, any Shares acquired under this Agreement without the prior written
consent of the Company or its underwriters. Such restriction (the
“Market Stand-Off”) shall be in
effect for such period of time following the date of the final prospectus for the offering as may
be requested by the Company or such underwriters. In no event, however, shall such period exceed
180 days. The Market Stand-Off shall in any event terminate two years after the date of the
Company’s initial public offering. In the event of the declaration of a stock dividend, a spin-off,
a stock split, an adjustment in conversion ratio, a recapitalization or a similar transaction

9

 

affecting the Company’s outstanding securities without receipt of consideration, any new,
substituted or additional securities which are by reason of such transaction distributed with
respect to any Shares subject to the Market Stand-Off, or into which such Shares thereby become
convertible, shall immediately be subject to the Market Stand-Off. In order to enforce the Market
Stand-Off, the Company may impose stop-transfer instructions with respect to the Shares acquired
under this Agreement until the end of the applicable stand-off period. The Company’s underwriters
shall be beneficiaries of the agreement set forth in this Subsection (b). This Subsection (b) shall
not apply to Shares registered in the public offering under the Securities Act, and the Optionee or
a Transferee shall be subject to this Subsection (b) only if the directors and officers of the
Company are subject to similar arrangements.

     (c) Investment Intent at Grant. The Optionee represents and agrees that the Shares to be
acquired upon exercising this option will be acquired for investment, and not with a view to the
sale or distribution thereof.

     (d) Investment Intent at Exercise. In the event that the sale of Shares under the Plan is not
registered under the Securities Act but an exemption is available which requires an investment
representation or other representation, the Optionee shall represent and agree at the time of
exercise that the Shares being acquired upon exercising this option are being acquired for
investment, and not with a view to the sale or distribution thereof, and shall make such other
representations as are deemed necessary or appropriate by the Company and its counsel.

     (e) Legends. All certificates evidencing Shares purchased under this Agreement shall bear the
following legend:

	 	 	 	“THE SHARES REPRESENTED HEREBY MAY NOT BE SOLD, ASSIGNED,
TRANSFERRED, ENCUMBERED OR IN ANY MANNER DISPOSED OF, EXCEPT IN
COMPLIANCE WITH THE TERMS OF A WRITTEN AGREEMENT BETWEEN THE COMPANY
AND THE REGISTERED HOLDER OF THE SHARES (OR THE PREDECESSOR IN
INTEREST TO THE SHARES). SUCH AGREEMENT GRANTS TO THE COMPANY
CERTAIN RIGHTS OF FIRST REFUSAL UPON AN ATTEMPTED TRANSFER OF THE
SHARES AND CERTAIN REPURCHASE RIGHTS UPON TERMINATION OF SERVICE
WITH THE COMPANY. THE SECRETARY OF THE COMPANY WILL UPON WRITTEN
REQUEST FURNISH A COPY OF SUCH AGREEMENT TO THE HOLDER HEREOF
WITHOUT CHARGE.”

     All certificates evidencing Shares purchased under this Agreement in an unregistered
transaction shall bear the following legend (and such other restrictive legends as are required or
deemed advisable under the provisions of any applicable law):

	 	 	 	“THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, PLEDGED, OR

10

 

	 	 	 	OTHERWISE TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION THEREOF
UNDER SUCH ACT OR AN OPINION OF COUNSEL, SATISFACTORY TO THE COMPANY
AND ITS COUNSEL, THAT SUCH REGISTRATION IS NOT REQUIRED.”

     (f) Removal of Legends. If, in the opinion of the Company and its counsel, any legend placed
on a stock certificate representing Shares sold under this Agreement is no longer required, the
holder of such certificate shall be entitled to exchange such certificate for a certificate
representing the same number of Shares but without such legend.

     (g) Administration. Any determination by the Company and its counsel in connection with any of
the matters set forth in this Section 11 shall be conclusive and binding on the Optionee and all
other persons.

SECTION 12. ADJUSTMENT OF SHARES.

     In the event of any transaction described in Section 8(a) of the Plan, the terms of this
option (including, without limitation, the number and kind of Shares subject to this option and the
Exercise Price) shall be adjusted as set forth in Section 8(a) of the Plan. In the event that the
Company is a party to a merger or consolidation, this option shall be subject to the agreement of
merger or consolidation, as provided in Section 8(b) of the Plan.

SECTION 13. MISCELLANEOUS PROVISIONS.

     (a) Rights as a Stockholder. Neither the Optionee nor the Optionee’s representative shall have
any rights as a stockholder with respect to any Shares subject to this option until the Optionee or
the Optionee’s representative becomes entitled to receive such Shares by filing a notice of
exercise and paying the Purchase Price pursuant to Sections 4 and 5.

     (b) No Retention Rights. Nothing in this option or in the Plan shall confer upon the Optionee
any right to continue in Service for any period of specific duration or interfere with or otherwise
restrict in any way the rights of the Company (or any Parent or Subsidiary employing or retaining
the Optionee) or of the Optionee, which rights are hereby expressly reserved by each, to terminate
his or her Service at any time and for any reason, with or without cause.

     (c) Notice. Any notice required by the terms of this Agreement shall be given in writing. It
shall be deemed effective upon (i) personal delivery, (ii) deposit with the United States Postal
Service, by registered or certified mail, with postage and fees prepaid or (iii) deposit with
Federal Express Corporation, with shipping charges prepaid. Notice shall be addressed to the
Company at its principal executive office and to the Optionee at the address that he or she most
recently provided to the Company in accordance with this Subsection (c).

     (d) Entire Agreement. The Notice of Stock Option Grant, this Agreement and the Plan constitute
the entire contract between the parties hereto with regard to the subject matter hereof. They
supersede any other agreements, representations or understandings (whether oral or written and
whether express or implied) which relate to the subject matter hereof.

11

 

     (e) Choice of Law. This Agreement shall be governed by, and construed in accordance with, the
laws of the State of Delaware, as such laws are applied to contracts entered into and performed in
such State.

SECTION 14. DEFINITIONS.

     (a) “Agreement” shall mean this Stock Option Agreement.

     (b) “Board of Directors” shall mean the Board of Directors of the Company, as constituted from
time to time or, if a Committee has been appointed, such Committee.

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

     (d) “Code” shall mean the Internal Revenue Code of 1986, as amended.

     (e) “Committee” shall mean a committee of the Board of Directors, as described in Section 2 of
the Plan.

     (f) “Company” shall mean ArcSight, Inc., a Delaware corporation.

     (g) “Consultant” shall mean a person who performs bona fide services for the Company, a Parent
or a Subsidiary as a consultant or advisor, excluding Employees and Outside Directors.

     (h) “Date of Grant” shall mean the date specified in the Notice of Stock Option Grant, which
date shall be the later of (i) the date on which the Board of Directors resolved to grant this
option or (ii) the first day of the Optionee’s Service.

     (i) “Disability” shall mean that the Optionee is unable to engage in any substantial gainful
activity by reason of any medically determinable physical or mental impairment.

     (j) “Employee” shall mean any individual who is a common-law employee of the Company, a Parent
or a Subsidiary.

     (k) “Exercise Price” shall mean the amount for which one Share may be purchased upon exercise
of this option, as specified in the Notice of Stock Option Grant.

     (l) “Fair Market Value” shall mean the fair market value of a Share, as determined by the
Board of Directors in good faith. Such determination shall be conclusive and binding on all
persons.

12

 

     (m) “Immediate Family” shall mean any child, stepchild, grandchild, parent, stepparent,
grandparent, spouse, sibling, mother-in-law, father-in-law, son-in-law, daughter-in-law,
brother-in-law or sister-in-law and shall include adoptive relationships.

     (n) “ISO” shall mean an employee incentive stock option described in Section 422(b) of the
Code.

     (o) “Notice of Stock Option Grant” shall mean the document so entitled to which this Agreement
is attached.

     (p) “NSO” shall mean a stock option not described in Sections 422(b) or 423(b) of the Code.

     (q) “Optionee” shall mean the person named in the Notice of Stock Option Grant.

     (r) “Outside Director” shall mean a member of the Board of Directors who is not an Employee.

     (s) “Parent” shall mean any corporation (other than the Company) in an unbroken chain of
corporations ending with the Company, if each of the corporations other than the Company owns stock
possessing 50% or more of the total combined voting power of all classes of stock in one of the
other corporations in such chain.

     (t) “Plan” shall mean the ArcSight, Inc. 2002 Stock Plan, as in effect on the Date of Grant.

     (u) “Purchase Price” shall mean the Exercise Price multiplied by the number of Shares with
respect to which this option is being exercised.

     (v) “Repurchase Period” shall mean a period of 90 consecutive days commencing on the date when
the Optionee’s Service terminates for any reason, including (without limitation) death or
disability.

     (w) “Restricted Share” shall mean a Share that is subject to the Right of Repurchase.

     (x) “Right of First Refusal” shall mean the Company’s right of first refusal described in
Section 8.

     (y) “Right of Repurchase” shall mean the Company’s right of repurchase described in Section 7.

     (z) “Securities Act” shall mean the Securities Act of 1933, as amended.

     (aa) “Service” shall mean service as an Employee, Outside Director or Consultant.

     (bb) “Share” shall mean one share of Stock, as adjusted in accordance with Section 8 of the
Plan (if applicable).

13

 

     (cc) “Stock” shall mean the Common Stock of the Company, with a par value of $0.00001 per
Share.

     (dd) “Subsidiary” shall mean any corporation (other than the Company) in an unbroken chain of
corporations beginning with the Company, if each of the corporations other than the last
corporation in the unbroken chain owns stock possessing 50% or more of the total combined voting
power of all classes of stock in one of the other corporations in such chain.

     (ee) “Transferee” shall mean any person to whom the Optionee has directly or indirectly
transferred any Share acquired under this Agreement.

     (ff) “Transfer Notice” shall mean the notice of a proposed transfer of Shares described in
Section 8.

14

 

Arcsight, Inc. 2002 Stock Plan

Notice Of Stock Option Grant

     You have been granted the following option to purchase shares of the Common Stock of ArcSight,
Inc. (the “Company”):

	 	 	 
	Name of Optionee:
	 	 
	 
	Total Number of Shares:
	 	 
	 
	Type of Option:
	 	 
	 
	Exercise Price Per Share:
	 	 
	 
	Date of Grant:
	 	 
	 
	Date Exercisable:

	 	This option may be exercised at any time after
the Date of Grant for all or any part of the
Shares subject to this option.
	 
	Vesting Commencement Date:
	 	 
	 
	Vesting Schedule:
	 	 
	 
	Expiration Date:
	 	             .
This option expires earlier if the Optionee’s Service terminates
earlier, as provided in Section 6 of the Stock Option Agreement.

By your signature and the signature of the Company’s representative below, you and the Company
agree that this option is granted under and governed by the terms and conditions of the 2002 Stock
Plan and the Stock Option Agreement, both of which are attached to and made a part of this
document.

	 	 	 	 	 	 	 	 	 
	OPTIONEE:	 	 	 	ARCSIGHT, INC.
	 
	 	 	 	 	 	 	 	 
	 

	 	 	 	By:	 	 	 	 
	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	 	 	Title:	 	 	 	 
	 

	 	 	 	 	 	 	 	 

 

 

THE OPTION GRANTED PURSUANT TO THIS AGREEMENT AND THE SHARES ISSUABLE UPON THE EXERCISE THEREOF
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD,
PLEDGED, OR OTHERWISE TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION THEREOF UNDER SUCH ACT OR AN
OPINION OF COUNSEL, SATISFACTORY TO THE COMPANY AND ITS COUNSEL, THAT SUCH REGISTRATION IS NOT
REQUIRED.

Arcsight, Inc. 2002 Stock Plan:

Stock Option Agreement

SECTION 1. GRANT OF OPTION.

     (a) Option. On the terms and conditions set forth in the Notice of Stock Option Grant and this
Agreement, the Company grants to the Optionee on the Date of Grant the option to purchase at the
Exercise Price the number of Shares set forth in the Notice of Stock Option Grant. The Exercise
Price is agreed to be at least 100% of the Fair Market Value per Share on the Date of Grant (110%
of Fair Market Value if Section 3(b) of the Plan applies). This option is intended to be an ISO or
an NSO, as provided in the Notice of Stock Option Grant.

     (b) $100,000 Limitation. Even if this option is designated as an ISO in the Notice of Stock
Option Grant, it shall be deemed to be an NSO to the extent (and only to the extent) required by
the $100,000 annual limitation under Section 422(d) of the Code.

     (c) Stock Plan and Defined Terms. This option is granted pursuant to the Plan, a copy of which
the Optionee acknowledges having received. The provisions of the Plan are incorporated into this
Agreement by this reference. Capitalized terms are defined in Section 14 of this Agreement.

SECTION 2. RIGHT TO EXERCISE.

     (a) Exercisability. Subject to Subsection (b) below and the other conditions set forth in this
Agreement, all or part of this option may be exercised prior to its expiration at the time or times
set forth in the Notice of Stock Option Grant. Shares purchased by exercising this option may be
subject to the Right of Repurchase under Section 7.

     (b) Stockholder Approval. Any other provision of this Agreement notwithstanding, no portion of
this option shall be exercisable at any time prior to the approval of the Plan by the Company’s
stockholders.

SECTION 3. NO TRANSFER OR ASSIGNMENT OF OPTION.

     Except as otherwise provided in this Agreement, this option and the rights and privileges
conferred hereby shall not be sold, pledged or otherwise transferred (whether by operation of law
or otherwise) and shall not be subject to sale under execution, attachment, levy or similar
process.

2

 

SECTION 4. EXERCISE PROCEDURES.

     (a) Notice of Exercise. The Optionee or the Optionee’s representative may exercise this option
by giving written notice to the Company pursuant to Section 13(c). The notice shall specify the
election to exercise this option, the number of Shares for which it is being exercised and the form
of payment. The person exercising this option shall sign the notice. In the event that this option
is being exercised by the representative of the Optionee, the notice shall be accompanied by proof
(satisfactory to the Company) of the representative’s right to exercise this option. The Optionee
or the Optionee’s representative shall deliver to the Company, at the time of giving the notice,
payment in a form permissible under Section 5 for the full amount of the Purchase Price. In the
event of a partial exercise of this option, Shares shall be deemed to have been purchased in the
order in which they vest in accordance with the Notice of Stock Option Grant.

     (b) Issuance of Shares. After receiving a proper notice of exercise, the Company shall cause
to be issued one or more certificates evidencing the Shares for which this option has been
exercised. Such Shares shall be registered (i) in the name of the person exercising this option,
(ii) in the names of such person and his or her spouse as community property or as joint tenants
with the right of survivorship or (iii) with the Company’s consent, in the name of a revocable
trust. In the case of Restricted Shares, the Company shall cause such certificates to be deposited
in escrow under Section 7(c). In the case of other Shares, the Company shall cause such
certificates to be delivered to or upon the order of the person exercising this option.

     (c) Withholding Taxes. In the event that the Company determines that it is required to
withhold any tax as a result of the exercise of this option, the Optionee, as a condition to the
exercise of this option, shall make arrangements satisfactory to the Company to enable it to
satisfy all withholding requirements. The Optionee shall also make arrangements satisfactory to the
Company to enable it to satisfy any withholding requirements that may arise in connection with the
vesting or disposition of Shares purchased by exercising this option.

SECTION 5. PAYMENT FOR STOCK.

     (a) Cash. All or part of the Purchase Price may be paid in cash or cash equivalents.

     (b) Surrender of Stock. All or any part of the Purchase Price may be paid by surrendering, or
attesting to the ownership of, Shares that are already owned by the Optionee. Such Shares shall be
surrendered to the Company in good form for transfer and shall be valued at their Fair Market Value
on the date when this option is exercised. The Optionee shall not surrender, or attest to the
ownership of, Shares in payment of the Purchase Price if such action would cause the Company to
recognize compensation expense (or additional compensation expense) with respect to this option for
financial reporting purposes.

     (c) Promissory Note. All or part of the Purchase Price may be paid with a full-recourse
promissory note. However, the par value of the Shares, if newly issued, shall be paid in cash or
cash equivalents. The Shares shall be pledged as security for payment of the principal amount of
the promissory note and interest thereon. The interest rate payable under the terms of the
promissory note shall not be less than the minimum rate, if any, required to avoid (i) the

3

 

imputation of additional interest under the Code and (ii) variable accounting under the
applicable guidelines issued by the Financial Accounting Standards Board. Subject to the foregoing,
the Board of Directors (at its sole discretion) shall specify the term, interest rate, amortization
requirements, if any, and other provisions of such note.

     (d) Exercise/Sale. If Stock is publicly traded, all or part of the Purchase Price and any
withholding taxes may be paid by the delivery (on a form prescribed by the Company) of an
irrevocable direction to a securities broker approved by the Company to sell Shares and to deliver
all or part of the sales proceeds to the Company.

     (e) Exercise/Pledge. If Stock is publicly traded, all or part of the Purchase Price and any
withholding taxes may be paid by the delivery (on a form prescribed by the Company) of an
irrevocable direction to pledge Shares to a securities broker or lender approved by the Company, as
security for a loan, and to deliver all or part of the loan proceeds to the Company.

SECTION 6. TERM AND EXPIRATION.

     (a) Basic Term. This option shall in any event expire on the expiration date set forth in the
Notice of Stock Option Grant, which date is 10 years after the Date of Grant (five years after the
Date of Grant if this option is designated as an ISO in the Notice of Stock Option Grant and
Section 3(b) of the Plan applies).

     (b) Termination of Service (Except by Death). If the Optionee’s Service terminates for any
reason other than death, then this option shall expire on the earliest of the following occasions:

     (i) The expiration date determined pursuant to Subsection (a) above;

     (ii) The date 30 days after the termination of the Optionee’s Service for any reason
other than Cause, retirement at or after age 65, or Disability;

     (iii) The date of the termination of the Optionee’s Service for Cause;

     (iv) The date 12 months after the Optionee’s retirement at or after age 65; or

     (v) The date 12 months after the termination of the Optionee’s Service by reason of
Disability.

     The Optionee may exercise all or part of this option at any time before its expiration under
the preceding sentence, but only to the extent that this option is exercisable for vested Shares on
or before the date when the Optionee’s Service terminates. When the Optionee’s Service terminates,
this option shall expire immediately with respect to the number of Shares for which this option is
not yet exercisable and with respect to any Restricted Shares. In the event that the Optionee dies
after termination of Service but before the expiration of this option, all or part of this option
may be exercised (prior to expiration) by the executors or administrators of the Optionee’s estate
or by any person who has acquired this option directly from the Optionee by beneficiary
designation, bequest or inheritance, but only to the extent that this option was exercisable for
vested Shares on or before the date when the Optionee’s Service terminated.

4

 

     (c) Death of the Optionee. If the Optionee dies while in Service, then this option shall
expire on the earlier of the following dates:

     (i) The expiration date determined pursuant to Subsection (a) above; or

     (ii) The date 12 months after the Optionee’s death.

All or part of this option may be exercised at any time before its expiration under the preceding
sentence by the executors or administrators of the Optionee’s estate or by any person who has
acquired this option directly from the Optionee by beneficiary designation, bequest or inheritance,
but only to the extent that this option is exercisable for vested Shares on or before the
Optionee’s death. When the Optionee dies, this option shall expire immediately with respect to the
number of Shares for which this option is not yet exercisable and with respect to any Restricted
Shares.

     (d) Leaves of Absence. For any purpose under this Agreement, Service shall be deemed to
continue while the Optionee is on a bona fide leave of absence, if such leave was approved by the
Company in writing and if continued crediting of Service for such purpose is expressly required by
the terms of such leave or by applicable law (as determined by the Company).

     (e) Notice Concerning ISO Treatment. Even if this option is designated as an ISO in the Notice
of Stock Option Grant, it ceases to qualify for favorable tax treatment as an ISO to the extent
that it is exercised:

     (i) More than three months after the date when the Optionee ceases to be an Employee
for any reason other than death or permanent and total disability (as defined in Section
22(e)(3) of the Code);

     (ii) More than 12 months after the date when the Optionee ceases to be an Employee by
reason of permanent and total disability (as defined in Section 22(e)(3) of the Code); or

     (iii) More than three months after the date when the Optionee has been on a leave of
absence for 90 days, unless the Optionee’s reemployment rights following such leave were
guaranteed by statute or by contract.

SECTION 7. RIGHT OF REPURCHASE.

     (a) Scope of Repurchase Right. Until they vest in accordance with the Notice of Stock Option
Grant and Subsection (b) below, the Shares acquired under this Agreement shall be Restricted Shares
and shall be subject to the Company’s Right of Repurchase. The Company, however, may decline to
exercise its Right of Repurchase or may exercise its Right of Repurchase only with respect to a
portion of the Restricted Shares. The Company may exercise its Right of Repurchase only during the
Repurchase Period following the termination of the Optionee’s Service. The Right of Repurchase may
be exercised automatically under Subsection (d) below. If the Right of Repurchase is exercised, the
Company shall pay the Optionee an amount equal to the Exercise Price for each of the Restricted
Shares being repurchased.

5

 

     (b) Lapse of Repurchase Right. The Right of Repurchase shall lapse with respect to the
Restricted Shares in accordance with the vesting schedule set forth in the Notice of Stock Option
Grant. In addition, the vested portion of the Shares acquired under this Agreement shall be
determined by adding 12 months to the Optionee’s actual Service if the Company is subject to a
Change in Control before the Optionee’s Service terminates and the Optionee, within 12 months after
the Change in Control, is either:

     (i) Discharged by the Company (or the Parent or Subsidiary employing him or her) for
reasons other than Cause; or

     (ii) Required to relocate outside the San Francisco Bay Area (in the case of an
Optionee whose principal place of employment is at the Company’s headquarters) or required
to relocate more than 60 miles (in the case of an Optionee whose principal place of
employment is not at the Company’s headquarters). This Paragraph (ii) shall apply whether or
not the Optionee’s Service terminates.

     (c) Escrow. Upon issuance, the certificate(s) for Restricted Shares shall be deposited in
escrow with the Company to be held in accordance with the provisions of this Agreement. Any
additional or exchanged securities or other property described in Subsection (f) below shall
immediately be delivered to the Company to be held in escrow. All ordinary cash dividends on
Restricted Shares (or on other securities held in escrow) shall be paid directly to the Optionee
and shall not be held in escrow. Restricted Shares, together with any other assets held in escrow
under this Agreement, shall be (i) surrendered to the Company for repurchase upon exercise of the
Right of Repurchase or the Right of First Refusal or (ii) released to the Optionee upon his or her
request to the extent that the Shares have ceased to be Restricted Shares (but not more frequently
than once every six months). In any event, all Shares that have ceased to be Restricted Shares,
together with any other vested assets held in escrow under this Agreement, shall be released within
90 days after the earlier of (i) the termination of the Optionee’s Service or (ii) the lapse of the
Right of First Refusal.

     (d) Exercise of Repurchase Right. The Company shall be deemed to have exercised its Right of
Repurchase automatically for all Restricted Shares as of the commencement of the Repurchase Period,
unless the Company during the Repurchase Period notifies the holder of the Restricted Shares
pursuant to Section 13(c) that it will not exercise its Right of Repurchase for some or all of the
Restricted Shares. During the Repurchase Period, the Company shall pay to the holder of the
Restricted Shares the purchase price determined under Subsection (a) above for the Restricted
Shares being repurchased. Payment shall be made in cash or cash equivalents and/or by canceling
indebtedness to the Company incurred by the Optionee in the purchase of the Restricted Shares. The
certificate(s) representing the Restricted Shares being repurchased shall be delivered to the
Company properly endorsed for transfer.

     (e) Termination of Rights as Stockholder. If the Right of Repurchase is exercised in
accordance with this Section 7 and the Company makes available the consideration for the Restricted
Shares being repurchased, then the person from whom the Restricted Shares are repurchased shall no
longer have any rights as a holder of the Restricted Shares (other than the right to receive
payment of such consideration). Such Restricted Shares shall be deemed to have been repurchased
pursuant to this Section 7, whether or not the certificate(s) for such Restricted

6

 

Shares have been delivered to the Company or the consideration for such Restricted Shares has
been accepted.

     (f) Additional or Exchanged Securities and Property. In the event of a merger or consolidation
of the Company with or into another entity, any other corporate reorganization, a stock split, the
declaration of a stock dividend, the declaration of an extraordinary dividend payable in a form
other than stock, a spin-off, an adjustment in conversion ratio, a recapitalization or a similar
transaction affecting the Company’s outstanding securities, any securities or other property
(including cash or cash equivalents) that are by reason of such transaction exchanged for, or
distributed with respect to, any Restricted Shares shall immediately be subject to the Right of
Repurchase. Appropriate adjustments to reflect the exchange or distribution of such securities or
property shall be made to the number and/or class of the Restricted Shares. Appropriate adjustments
shall also be made to the price per share to be paid upon the exercise of the Right of Repurchase,
provided that the aggregate purchase price payable for the Restricted Shares shall remain the same.
In the event of a merger or consolidation of the Company with or into another entity or any other
corporate reorganization, the Right of Repurchase may be exercised by the Company’s successor.

     (g) Transfer of Restricted Shares. The Optionee shall not transfer, assign, encumber or
otherwise dispose of any Restricted Shares without the Company’s written consent, except as
provided in the following sentence. The Optionee may transfer Restricted Shares to one or more
members of the Optionee’s Immediate Family or to a trust established by the Optionee for the
benefit of the Optionee and/or one or more members of the Optionee’s Immediate Family, provided in
either case that the Transferee agrees in writing on a form prescribed by the Company to be bound
by all provisions of this Agreement. If the Optionee transfers any Restricted Shares, then this
Agreement shall apply to the Transferee to the same extent as to the Optionee.

     (h) Assignment of Repurchase Right. The Board of Directors may freely assign the Company’s
Right of Repurchase, in whole or in part. Any person who accepts an assignment of the Right of
Repurchase from the Company shall assume all of the Company’s rights and obligations under this
Section 7.

SECTION 8. RIGHT OF FIRST REFUSAL.

     (a) Right of First Refusal. In the event that the Optionee proposes to sell, pledge or
otherwise transfer to a third party any Shares acquired under this Agreement, or any interest in
such Shares, the Company shall have the Right of First Refusal with respect to all (and not less
than all) of such Shares. If the Optionee desires to transfer Shares acquired under this Agreement,
the Optionee shall give a written Transfer Notice to the Company describing fully the proposed
transfer, including the number of Shares proposed to be transferred, the proposed transfer price,
the name and address of the proposed Transferee and proof satisfactory to the Company that the
proposed sale or transfer will not violate any applicable federal or state securities laws. The
Transfer Notice shall be signed both by the Optionee and by the proposed Transferee and must
constitute a binding commitment of both parties to the transfer of the Shares. The Company shall
have the right to purchase all, and not less than all, of the Shares on the terms of the proposal
described in the Transfer Notice (subject, however, to any change in

7

 

such terms permitted under Subsection (b) below) by delivery of a notice of exercise of the
Right of First Refusal within 30 days after the date when the Transfer Notice was received by the
Company.

     (b) Transfer of Shares. If the Company fails to exercise its Right of First Refusal within 30
days after the date when it received the Transfer Notice, the Optionee may, not later than 90 days
following receipt of the Transfer Notice by the Company, conclude a transfer of the Shares subject
to the Transfer Notice on the terms and conditions described in the Transfer Notice, provided that
any such sale is made in compliance with applicable federal and state securities laws and not in
violation of any other contractual restrictions to which the Optionee is bound. Any proposed
transfer on terms and conditions different from those described in the Transfer Notice, as well as
any subsequent proposed transfer by the Optionee, shall again be subject to the Right of First
Refusal and shall require compliance with the procedure described in Subsection (a) above. If the
Company exercises its Right of First Refusal, the parties shall consummate the sale of the Shares
on the terms set forth in the Transfer Notice within 60 days after the date when the Company
received the Transfer Notice (or within such longer period as may have been specified in the
Transfer Notice); provided, however, that in the event the Transfer Notice provided that payment
for the Shares was to be made in a form other than cash or cash equivalents paid at the time of
transfer, the Company shall have the option of paying for the Shares with cash or cash equivalents
equal to the present value of the consideration described in the Transfer Notice.

     (c) Additional or Exchanged Securities and Property. In the event of a merger or consolidation
of the Company with or into another entity, any other corporate reorganization, a stock split, the
declaration of a stock dividend, the declaration of an extraordinary dividend payable in a form
other than stock, a spin-off, an adjustment in conversion ratio, a recapitalization or a similar
transaction affecting the Company’s outstanding securities, any securities or other property
(including cash or cash equivalents) that are by reason of such transaction exchanged for, or
distributed with respect to, any Shares subject to this Section 8 shall immediately be subject to
the Right of First Refusal. Appropriate adjustments to reflect the exchange or distribution of such
securities or property shall be made to the number and/or class of the Shares subject to this
Section 8.

     (d) Termination of Right of First Refusal. Any other provision of this Section 8
notwithstanding, in the event that the Stock is readily tradable on an established securities
market when the Optionee desires to transfer Shares, the Company shall have no Right of First
Refusal, and the Optionee shall have no obligation to comply with the procedures prescribed by
Subsections (a) and (b) above.

     (e) Permitted Transfers. This Section 8 shall not apply to (i) a transfer by beneficiary
designation, will or intestate succession or (ii) a transfer to one or more members of the
Optionee’s Immediate Family or to a trust established by the Optionee for the benefit of the
Optionee and/or one or more members of the Optionee’s Immediate Family, provided in either case
that the Transferee agrees in writing on a form prescribed by the Company to be bound by all
provisions of this Agreement. If the Optionee transfers any Shares acquired under this Agreement,
either under this Subsection (e) or after the Company has failed to exercise the Right

8

 

of First Refusal, then this Agreement shall apply to the Transferee to the same extent as to
the Optionee.

     (f) Termination of Rights as Stockholder. If the Company makes available, at the time and
place and in the amount and form provided in this Agreement, the consideration for the Shares to be
purchased in accordance with this Section 8, then after such time the person from whom such Shares
are to be purchased shall no longer have any rights as a holder of such Shares (other than the
right to receive payment of such consideration in accordance with this Agreement). Such Shares
shall be deemed to have been purchased in accordance with the applicable provisions hereof, whether
or not the certificate(s) therefor have been delivered as required by this Agreement.

     (g) Assignment of Right of First Refusal. The Board of Directors may freely assign the
Company’s Right of First Refusal, in whole or in part. Any person who accepts an assignment of the
Right of First Refusal from the Company shall assume all of the Company’s rights and obligations
under this Section 8.

SECTION 9. LEGALITY OF INITIAL ISSUANCE.

     No Shares shall be issued upon the exercise of this option unless and until the Company has
determined that:

     (a) It and the Optionee have taken any actions required to register the Shares under the
Securities Act or to perfect an exemption from the registration requirements thereof;

     (b) Any applicable listing requirement of any stock exchange or other securities market on
which Stock is listed has been satisfied; and

     (c) Any other applicable provision of federal, state or foreign law has been satisfied.

SECTION 10. NO REGISTRATION RIGHTS.

     The Company may, but shall not be obligated to, register or qualify the sale of Shares under
the Securities Act or any other applicable law. The Company shall not be obligated to take any
affirmative action in order to cause the sale of Shares under this Agreement to comply with any
law.

SECTION 11. RESTRICTIONS ON TRANSFER.

     (a) Securities Law Restrictions. Regardless of whether the offering and sale of Shares under
the Plan have been registered under the Securities Act or have been registered or qualified under
the securities laws of any state, the Company at its discretion may impose restrictions upon the
sale, pledge or other transfer of such Shares (including the placement of appropriate legends on
stock certificates or the imposition of stop-transfer instructions) if, in the judgment of the
Company, such restrictions are necessary or desirable in order to achieve compliance with the
Securities Act, the securities laws of any state or any other law.

9

 

     (b) Market Stand-Off. In connection with any underwritten public offering by the Company of
its equity securities pursuant to an effective registration statement filed under the Securities
Act, including the Company’s initial public offering, the Optionee or a Transferee shall not
directly or indirectly sell, make any short sale of, loan, hypothecate, pledge, offer, grant or
sell any option or other contract for the purchase of, purchase any option or other contract for
the sale of, or otherwise dispose of or transfer, or agree to engage in any of the foregoing
transactions with respect to, any Shares acquired under this Agreement without the prior written
consent of the Company or its underwriters. Such restriction (the “Market Stand-Off”) shall be in
effect for such period of time following the date of the final prospectus for the offering as may
be requested by the Company or such underwriters. In no event, however, shall such period exceed
180 days. The Market Stand-Off shall in any event terminate two years after the date of the
Company’s initial public offering. In the event of the declaration of a stock dividend, a spin-off,
a stock split, an adjustment in conversion ratio, a recapitalization or a similar transaction
affecting the Company’s outstanding securities without receipt of consideration, any new,
substituted or additional securities which are by reason of such transaction distributed with
respect to any Shares subject to the Market Stand-Off, or into which such Shares thereby become
convertible, shall immediately be subject to the Market Stand-Off. In order to enforce the Market
Stand-Off, the Company may impose stop-transfer instructions with respect to the Shares acquired
under this Agreement until the end of the applicable stand-off period. The Company’s underwriters
shall be beneficiaries of the agreement set forth in this Subsection (b). This Subsection (b) shall
not apply to Shares registered in the public offering under the Securities Act, and the Optionee or
a Transferee shall be subject to this Subsection (b) only if the directors and officers of the
Company are subject to similar arrangements.

     (c) Investment Intent at Grant. The Optionee represents and agrees that the Shares to be
acquired upon exercising this option will be acquired for investment, and not with a view to the
sale or distribution thereof.

     (d) Investment Intent at Exercise. In the event that the sale of Shares under the Plan is not
registered under the Securities Act but an exemption is available which requires an investment
representation or other representation, the Optionee shall represent and agree at the time of
exercise that the Shares being acquired upon exercising this option are being acquired for
investment, and not with a view to the sale or distribution thereof, and shall make such other
representations as are deemed necessary or appropriate by the Company and its counsel.

     (e) Legends. All certificates evidencing Shares purchased under this Agreement shall bear the
following legend:

“THE SHARES REPRESENTED HEREBY MAY NOT BE SOLD, ASSIGNED,
TRANSFERRED, ENCUMBERED OR IN ANY MANNER DISPOSED OF, EXCEPT IN
COMPLIANCE WITH THE TERMS OF A WRITTEN AGREEMENT BETWEEN THE COMPANY
AND THE REGISTERED HOLDER OF THE SHARES (OR THE PREDECESSOR IN
INTEREST TO THE SHARES). SUCH AGREEMENT GRANTS TO THE COMPANY
CERTAIN RIGHTS OF FIRST REFUSAL UPON AN ATTEMPTED TRANSFER OF THE
SHARES AND

10

 

CERTAIN REPURCHASE RIGHTS UPON TERMINATION OF SERVICE WITH THE
COMPANY. THE SECRETARY OF THE COMPANY WILL UPON WRITTEN REQUEST
FURNISH A COPY OF SUCH AGREEMENT TO THE HOLDER HEREOF WITHOUT
CHARGE.”

All certificates evidencing Shares purchased under this Agreement in an unregistered transaction
shall bear the following legend (and such other restrictive legends as are required or deemed
advisable under the provisions of any applicable law):

“THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, AND MAY NOT BE SOLD, PLEDGED, OR OTHERWISE TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION
THEREOF UNDER SUCH ACT OR AN OPINION OF COUNSEL, SATISFACTORY TO THE COMPANY AND ITS COUNSEL, THAT
SUCH REGISTRATION IS NOT REQUIRED.”

     (f) Removal of Legends. If, in the opinion of the Company and its counsel, any legend placed
on a stock certificate representing Shares sold under this Agreement is no longer required, the
holder of such certificate shall be entitled to exchange such certificate for a certificate
representing the same number of Shares but without such legend.

     (g) Administration. Any determination by the Company and its counsel in connection with any of
the matters set forth in this Section 11 shall be conclusive and binding on the Optionee and all
other persons.

SECTION 12. ADJUSTMENT OF SHARES.

     In the event of any transaction described in Section 8(a) of the Plan, the terms of this
option (including, without limitation, the number and kind of Shares subject to this option and the
Exercise Price) shall be adjusted as set forth in Section 8(a) of the Plan. In the event that the
Company is a party to a merger or consolidation, this option shall be subject to the agreement of
merger or consolidation, as provided in Section 8(b) of the Plan.

SECTION 13. MISCELLANEOUS PROVISIONS.

     (a) Rights as a Stockholder. Neither the Optionee nor the Optionee’s representative shall have
any rights as a stockholder with respect to any Shares subject to this option until the Optionee or
the Optionee’s representative becomes entitled to receive such Shares by filing a notice of
exercise and paying the Purchase Price pursuant to Sections 4 and 5.

     (b) No Retention Rights. Nothing in this option or in the Plan shall confer upon the Optionee
any right to continue in Service for any period of specific duration or interfere with or otherwise
restrict in any way the rights of the Company (or any Parent or Subsidiary employing or retaining
the Optionee) or of the Optionee, which rights are hereby expressly reserved by each, to terminate
his or her Service at any time and for any reason, with or without cause.

     (c) Notice. Any notice required by the terms of this Agreement shall be given in writing. It
shall be deemed effective upon (i) personal delivery, (ii) deposit with the United

11

 

States Postal Service, by registered or certified mail, with postage and fees prepaid or (iii)
deposit with Federal Express Corporation, with shipping charges prepaid. Notice shall be addressed
to the Company at its principal executive office and to the Optionee at the address that he or she
most recently provided to the Company in accordance with this Subsection (c).

     (d) Entire Agreement. The Notice of Stock Option Grant, this Agreement and the Plan constitute
the entire contract between the parties hereto with regard to the subject matter hereof. They
supersede any other agreements, representations or understandings (whether oral or written and
whether express or implied) which relate to the subject matter hereof.

     (e) Choice of Law. This Agreement shall be governed by, and construed in accordance with, the
laws of the State of Delaware, as such laws are applied to contracts entered into and performed in
such State.

SECTION 14. DEFINITIONS.

     (a) “Agreement” shall mean this Stock Option Agreement.

     (b) “Board of Directors” shall mean the Board of Directors of the Company, as constituted from
time to time or, if a Committee has been appointed, such Committee.

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

     (d) “Change in Control” shall mean:

     (i) The consummation of a merger or consolidation of the Company with or into another
entity or any other corporate reorganization, if persons who were not stockholders of the
Company immediately prior to such merger, consolidation or other reorganization own
immediately after such merger, consolidation or other reorganization 50% or more of the
voting power of the outstanding securities of each of (A) the continuing or surviving entity
and (B) any direct or indirect parent corporation of such continuing or surviving entity; or

     (ii) The sale, transfer or other disposition of all or substantially all of the
Company’s assets.

A transaction shall not constitute a Change in Control if its sole purpose is to change the state
of the Company’s incorporation or to create a holding company that will be owned in substantially
the same proportions by the persons who held the Company’s securities immediately before such
transaction.

12

 

     (e) “Code” shall mean the Internal Revenue Code of 1986, as amended.

     (f) “Committee” shall mean a committee of the Board of Directors, as described in Section 2 of
the Plan.

     (g) “Company” shall mean ArcSight, Inc., a Delaware corporation.

     (h) “Consultant” shall mean a person who performs bona fide services for the Company, a Parent
or a Subsidiary as a consultant or advisor, excluding Employees and Outside Directors.

     (i) “Date of Grant” shall mean the date specified in the Notice of Stock Option Grant, which
date shall be the later of (i) the date on which the Board of Directors resolved to grant this
option or (ii) the first day of the Optionee’s Service.

     (j) “Disability” shall mean that the Optionee is unable to engage in any substantial gainful
activity by reason of any medically determinable physical or mental impairment.

     (k) “Employee” shall mean any individual who is a common-law employee of the Company, a Parent
or a Subsidiary.

     (l) “Exercise Price” shall mean the amount for which one Share may be purchased upon exercise
of this option, as specified in the Notice of Stock Option Grant.

     (m) “Fair Market Value” shall mean the fair market value of a Share, as determined by the
Board of Directors in good faith. Such determination shall be conclusive and binding on all
persons.

     (n) “Immediate Family” shall mean any child, stepchild, grandchild, parent, stepparent,
grandparent, spouse, sibling, mother-in-law, father-in-law, son-in-law, daughter-in-law,
brother-in-law or sister-in-law and shall include adoptive relationships.

     (o) “ISO” shall mean an employee incentive stock option described in Section 422(b) of the
Code.

     (p) “Notice of Stock Option Grant” shall mean the document so entitled to which this Agreement
is attached.

     (q) “NSO” shall mean a stock option not described in Sections 422(b) or 423(b) of the Code.

     (r) “Optionee” shall mean the person named in the Notice of Stock Option Grant.

     (s) “Outside Director” shall mean a member of the Board of Directors who is not an Employee.

     (t) “Parent” shall mean any corporation (other than the Company) in an unbroken chain of
corporations ending with the Company, if each of the corporations other than the

13

 

Company owns stock possessing 50% or more of the total combined voting power of all classes of
stock in one of the other corporations in such chain.

     (u) “Plan” shall mean the ArcSight, Inc. 2002 Stock Plan, as in effect on the Date of Grant.

     (v) “Purchase Price” shall mean the Exercise Price multiplied by the number of Shares with
respect to which this option is being exercised.

     (w) “Repurchase Period” shall mean a period of 90 consecutive days commencing on the date when
the Optionee’s Service terminates for any reason, including (without limitation) death or
disability.

     (x) “Restricted Share” shall mean a Share that is subject to the Right of Repurchase.

     (y) “Right of First Refusal” shall mean the Company’s right of first refusal described in
Section 8.

     (z) “Right of Repurchase” shall mean the Company’s right of repurchase described in Section 7.

     (aa) “Securities Act” shall mean the Securities Act of 1933, as amended.

     (bb) “Service” shall mean service as an Employee, Outside Director or Consultant.

     (cc) “Share” shall mean one share of Stock, as adjusted in accordance with Section 8 of the
Plan (if applicable).

     (dd) “Stock” shall mean the Common Stock of the Company, with a par value of $0.00001 per
Share.

     (ee) “Subsidiary” shall mean any corporation (other than the Company) in an unbroken chain of
corporations beginning with the Company, if each of the corporations other than the last
corporation in the unbroken chain owns stock possessing 50% or more of the total combined voting
power of all classes of stock in one of the other corporations in such chain.

     (ff) “Transferee” shall mean any person to whom the Optionee has directly or indirectly
transferred any Share acquired under this Agreement.

     (gg) “Transfer Notice” shall mean the notice of a proposed transfer of Shares described in
Section 8.

14

 

ArcSight, Inc. 2002 Stock Plan

Notice of Stock Option Grant

     You have been granted the following option to purchase shares of the Common Stock of
ArcSight, Inc. (the “Company”):

	 	 	 
	Name of Optionee:

	 	 
	 
	 	 
	Total Number of Shares:

	 	 
	 
	 	 
	Type of Option:

	 	 
	 
	 	 
	Exercise Price Per Share:

	 	 
	 
	 	 
	Date of Grant:

	 	 
	 
	 	 
	Date Exercisable:

	 	This option may be exercised at any time after the Date of Grant for all or any
part of the Shares subject to this option.
	 
	 	 
	Vesting Commencement Date:

	 	 
	 
	 	 
	Vesting Schedule:

	 	Provided that the Optionee shall have achieved the performance objectives that
are set forth in Attachment A attached hereto (the “Performance Objectives”) by
November 30, 2007 when the Optionee completes twelve months of continuous
Service after the Vesting Commencement Date, the Right of Repurchase shall lapse
with respect to the first 25% of the Shares subject to this option, and
thereafter, the Right of Repurchase shall lapse with respect to an additional
1/48th (2.0833%) of the Shares subject to this option when the Optionee
completes each month of continuous Service. For avoidance of doubt, the Right
of Repurchase shall not lapse with respect to any of the Shares subject to this
option if the Performance Objectives and twelve months of continuous Service
after the Vesting Commencement Date are not fulfilled by the Optionee, other
than as provided in Section 7(b) of the Stock Option Agreement.
	 
	 	 
	Expiration Date:

	 	                              . This option expires earlier if the Optionee’s Service
terminates earlier, as provided in Section 6 of the Stock Option Agreement.

By your signature and the signature of the Company’s representative below, you and the Company
agree that this option is granted under and governed by the terms and conditions of the 2002 Stock
Plan and the Stock Option Agreement, both of which are attached to and made a part of this
document.

	 	 	 	 	 	 	 	 	 
	Optionee:	 	 	 	ArcSight, Inc.
	 
	 	 	 	 	 	 	 	 
	 

	 	 	 	By:	 	 	 	 
	 	 	 	 	 	 	 	 	 
	 

	 	 	 	Title:	 	 	 	 
	 

	 	 	 	 	 	 	 	 

 

 

THE OPTION GRANTED PURSUANT TO THIS AGREEMENT AND THE SHARES ISSUABLE UPON THE EXERCISE
THEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD,
PLEDGED, OR OTHERWISE TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION THEREOF UNDER SUCH ACT OR AN
OPINION OF COUNSEL, SATISFACTORY TO THE COMPANY AND ITS COUNSEL, THAT SUCH REGISTRATION IS NOT
REQUIRED.

ArcSight, Inc. 2002 Stock Plan:

Stock Option Agreement

SECTION 1. GRANT OF OPTION.

     (a) Option. On the terms and conditions set forth in the Notice of Stock
Option Grant and this Agreement, the Company grants to the Optionee on the Date of Grant the option
to purchase at the Exercise Price the number of Shares set forth in the Notice of Stock Option
Grant. The Exercise Price is agreed to be at least 100% of the Fair Market Value per Share on the
Date of Grant (110% of Fair Market Value if Section 3(b) of the Plan applies). This option is
intended to be an ISO or an NSO, as provided in the Notice of Stock Option Grant.

     (b) $100,000 Limitation. Even if this option is designated as an ISO in the Notice of Stock
Option Grant, it shall be deemed to be an NSO to the extent (and only to the extent) required by
the $100,000 annual limitation under Section 422(d) of the Code.

     (c) Stock Plan and Defined Terms. This option is granted pursuant to the Plan, a copy of
which the Optionee acknowledges having received. The provisions of the Plan are incorporated into
this Agreement by this reference. Capitalized terms are defined in Section 14 of this Agreement.

SECTION 2. RIGHT TO EXERCISE.

     (a) Exercisability. Subject to Subsection (b) below and the other conditions set forth in
this Agreement, all or part of this option may be exercised prior to its expiration at the time or
times set forth in the Notice of Stock Option Grant. Shares purchased by exercising this option
may be subject to the Right of Repurchase under Section 7.

     (b) Stockholder Approval. Any other provision of this Agreement notwithstanding, no portion
of this option shall be exercisable at any time prior to the approval of the Plan by the Company’s
stockholders.

2

 

SECTION 3. NO TRANSFER OR ASSIGNMENT OF OPTION.

          Except as otherwise provided in this Agreement, this option and the rights and privileges
conferred hereby shall not be sold, pledged or otherwise transferred (whether by operation of law
or otherwise) and shall not be subject to sale under execution, attachment, levy or similar
process.

SECTION 4. EXERCISE PROCEDURES.

     (a) Notice of Exercise. The Optionee or the Optionee’s representative may exercise this
option by giving written notice to the Company pursuant to Section 13(c). The notice shall specify
the election to exercise this option, the number of Shares for which it is being exercised and the
form of payment. The person exercising this option shall sign the notice. In the event that this
option is being exercised by the representative of the Optionee, the notice shall be accompanied by
proof (satisfactory to the Company) of the representative’s right to exercise this option. The
Optionee or the Optionee’s representative shall deliver to the Company, at the time of giving the
notice, payment in a form permissible under Section 5 for the full amount of the Purchase Price.
In the event of a partial exercise of this option, Shares shall be deemed to have been purchased in
the order in which they vest in accordance with the Notice of Stock Option Grant.

     (b) Issuance of Shares. After receiving a proper notice of exercise, the Company shall cause
to be issued one or more certificates evidencing the Shares for which this option has been
exercised. Such Shares shall be registered (i) in the name of the person exercising this option,
(ii) in the names of such person and his or her spouse as community property or as joint tenants
with the right of survivorship or (iii) with the Company’s consent, in the name of a revocable
trust. In the case of Restricted Shares, the Company shall cause such certificates to be deposited
in escrow under Section 7(c). In the case of other Shares, the Company shall cause such
certificates to be delivered to or upon the order of the person exercising this option.

     (c) Withholding Taxes. In the event that the Company determines that it is required to
withhold any tax as a result of the exercise of this option, the Optionee, as a condition to the
exercise of this option, shall make arrangements satisfactory to the Company to enable it to
satisfy all withholding requirements. The Optionee shall also make arrangements satisfactory to
the Company to enable it to satisfy any withholding requirements that may arise in connection with
the vesting or disposition of Shares purchased by exercising this option.

SECTION 5. PAYMENT FOR STOCK.

     (a) Cash. All or part of the Purchase Price may be paid in cash or cash equivalents.

     (b) Surrender of Stock. All or any part of the Purchase Price may be paid by surrendering
Shares that are already owned by the Optionee for at least six (6) months. Such Shares shall be
surrendered to the Company in good form for transfer and shall be valued at their Fair Market Value
on the date when this option is exercised. The Optionee shall not surrender Shares in payment of
the Purchase Price if such action would cause the Company to recognize

3

 

compensation expense (or additional compensation expense) with respect to this option for
financial reporting purposes.

     (c) Exercise/Sale. If Stock is publicly traded, all or part of the Purchase Price and any
withholding taxes may be paid by the delivery (on a form prescribed by the Company) of an
irrevocable direction to a securities broker approved by the Company to sell Shares and to deliver
all or part of the sales proceeds to the Company.

     (d) Exercise/Pledge. If Stock is publicly traded, all or part of the Purchase Price and any
withholding taxes may be paid by the delivery (on a form prescribed by the Company) of an
irrevocable direction to pledge Shares to a securities broker or lender approved by the Company, as
security for a loan, and to deliver all or part of the loan proceeds to the Company.

SECTION 6. TERM AND EXPIRATION.

     (a) Basic Term. This option shall in any event expire on the expiration date set forth in the
Notice of Stock Option Grant, which date is 10 years after the Date of Grant (five years after the
Date of Grant if this option is designated as an ISO in the Notice of Stock Option Grant and
Section 3(b) of the Plan applies).

     (b) Termination of Service (Except by Death). If the Optionee’s Service terminates for any
reason other than death, then this option shall expire on the earliest of the following occasions:

     (i) The expiration date determined pursuant to Subsection (a) above;

     (ii) The date 30 days after the termination of the Optionee’s Service for any
reason other than Cause, retirement at or after age 65, or Disability;

     (iii) The date of the termination of the Optionee’s Service for Cause;

     (iv) The date 12 months after the Optionee’s retirement at or after age 65; or

     (v) The date 12 months after the termination of the Optionee’s Service by
reason of Disability.

The Optionee may exercise all or part of this option at any time before its expiration under the
preceding sentence, but only to the extent that this option is exercisable for vested Shares on or
before the date when the Optionee’s Service terminates. When the Optionee’s Service terminates,
this option shall expire immediately with respect to the number of Shares for which this option is
not yet exercisable and with respect to any Restricted Shares. In the event that the Optionee dies
after termination of Service but before the expiration of this option, all or part of this option
may be exercised (prior to expiration) by the executors or administrators of the Optionee’s estate
or by any person who has acquired this option directly from the Optionee by beneficiary
designation, bequest or inheritance, but only to the extent that this option was exercisable for
vested Shares on or before the date when the Optionee’s Service terminated.

4

 

     (c) Death of the Optionee. If the Optionee dies while in Service, then this option shall
expire on the earlier of the following dates:

     (i) The expiration date determined pursuant to Subsection (a) above; or

     (ii) The date 12 months after the Optionee’s death.

All or part of this option may be exercised at any time before its expiration under the preceding
sentence by the executors or administrators of the Optionee’s estate or by any person who has
acquired this option directly from the Optionee by beneficiary designation, bequest or inheritance,
but only to the extent that this option is exercisable for vested Shares on or before the
Optionee’s death. When the Optionee dies, this option shall expire immediately with respect to the
number of Shares for which this option is not yet exercisable and with respect to any Restricted
Shares.

     (d) Leaves of Absence. For any purpose under this Agreement, Service shall be deemed to
continue while the Optionee is on a bona fide leave of absence, if such leave was approved by the
Company in writing and if continued crediting of Service for such purpose is expressly required by
the terms of such leave or by applicable law (as determined by the Company).

     (e) Notice Concerning ISO Treatment. Even if this option is designated as an ISO in the
Notice of Stock Option Grant, it ceases to qualify for favorable tax treatment as an ISO to the
extent that it is exercised:

     (i) More than three months after the date when the Optionee ceases to be an
Employee for any reason other than death or permanent and total disability (as
defined in Section 22(e)(3) of the Code);

     (ii) More than 12 months after the date when the Optionee ceases to be an
Employee by reason of permanent and total disability (as defined in Section 22(e)(3)
of the Code); or

     (iii) More than three months after the date when the Optionee has been on a
leave of absence for 90 days, unless the Optionee’s reemployment rights following
such leave were guaranteed by statute or by contract.

SECTION 7. RIGHT OF REPURCHASE.

          (a) Scope of Repurchase Right. Until they vest in accordance with the Notice of Stock Option
Grant and Subsection (b) below, the Shares acquired under this Agreement shall be Restricted Shares
and shall be subject to the Company’s Right of Repurchase. The Company, however, may decline to
exercise its Right of Repurchase or may exercise its Right of Repurchase only with respect to a
portion of the Restricted Shares. The Company may exercise its Right of Repurchase only during the
Repurchase Period following the termination of the Optionee’s Service. The Right of Repurchase may
be exercised automatically

5

 

under Subsection (d) below. If the Right of Repurchase is exercised, the Company shall pay
the Optionee an amount equal to the Exercise Price for each of the Restricted Shares being
repurchased.

          (b) Lapse of Repurchase Right. The Right of Repurchase shall lapse with respect to the
Restricted Shares in accordance with the vesting schedule set forth in the Notice of Stock Option
Grant. In addition, the Right of Repurchase shall lapse with respect to an additional 50% of the
remaining Restricted Shares if the Company is subject to a Change in Control (as defined in the
Plan) before the first anniversary of the Vesting Commencement Date and the Optionee is subject to
an Involuntary Termination within twelve months after such Change in Control irrespective of
whether the Performance Objectives have been or are achieved. Subject to achievement of the
Performance Objectives by the date set forth in Attachment A attached hereto, in the event
that the Company is subject to a Change in Control (as defined in the Plan) on or after the first
anniversary of the Vesting Commencement Date and the Optionee is subject to an Involuntary
Termination within twelve months after such Change in Control, then the Right of Repurchase shall
lapse with respect to 100% of the Restricted Shares.

          (c) Escrow. Upon issuance, the certificate(s) for Restricted Shares shall be deposited in
escrow with the Company to be held in accordance with the provisions of this Agreement. Any
additional or exchanged securities or other property described in Subsection (f) below shall
immediately be delivered to the Company to be held in escrow. All ordinary cash dividends on
Restricted Shares (or on other securities held in escrow) shall be paid directly to the Optionee
and shall not be held in escrow. Restricted Shares, together with any other assets held in escrow
under this Agreement, shall be (i) surrendered to the Company for repurchase upon exercise of the
Right of Repurchase or the Right of First Refusal or (ii) released to the Optionee upon his or her
request to the extent that the Shares have ceased to be Restricted Shares (but not more frequently
than once every six months). In any event, all Shares that have ceased to be Restricted Shares,
together with any other vested assets held in escrow under this Agreement, shall be released within
90 days after the earlier of (i) the termination of the Optionee’s Service or (ii) the lapse of the
Right of First Refusal.

          (d) Exercise of Repurchase Right. The Company shall be deemed to have exercised its Right of
Repurchase automatically for all Restricted Shares as of the commencement of the Repurchase Period,
unless the Company during the Repurchase Period notifies the holder of the Restricted Shares
pursuant to Section 13(c) that it will not exercise its Right of Repurchase for some or all of the
Restricted Shares. During the Repurchase Period, the Company shall pay to the holder of the
Restricted Shares the purchase price determined under Subsection (a) above for the Restricted
Shares being repurchased. Payment shall be made in cash or cash equivalents and/or by canceling
indebtedness to the Company incurred by the Optionee in the purchase of the Restricted Shares. The
certificate(s) representing the Restricted Shares being repurchased shall be delivered to the
Company properly endorsed for transfer.

          (e) Termination of Rights as Stockholder. If the Right of Repurchase is exercised in
accordance with this Section 7 and the Company makes available the consideration for the Restricted
Shares being repurchased, then the person from whom the Restricted Shares are repurchased shall no
longer have any rights as a holder of the Restricted Shares (other than the right to receive
payment of such consideration). Such Restricted Shares shall be deemed to

6

 

have been repurchased pursuant to this Section 7, whether or not the certificate(s) for such
Restricted Shares have been delivered to the Company or the consideration for such Restricted
Shares has been accepted.

     (f) Additional or Exchanged Securities and Property. In the event of a merger or
consolidation of the Company with or into another entity, any other corporate reorganization, a
stock split, the declaration of a stock dividend, the declaration of an extraordinary dividend
payable in a form other than stock, a spin-off, an adjustment in conversion ratio, a
recapitalization or a similar transaction affecting the Company’s outstanding securities, any
securities or other property (including cash or cash equivalents) that are by reason of such
transaction exchanged for, or distributed with respect to, any Restricted Shares shall immediately
be subject to the Right of Repurchase. Appropriate adjustments to reflect the exchange or
distribution of such securities or property shall be made to the number and/or class of the
Restricted Shares. Appropriate adjustments shall also be made to the price per share to be paid
upon the exercise of the Right of Repurchase, provided that the aggregate purchase price payable
for the Restricted Shares shall remain the same. In the event of a merger or consolidation of the
Company with or into another entity or any other corporate reorganization, the Right of Repurchase
may be exercised by the Company’s successor.

     (g) Transfer of Restricted Shares. The Optionee shall not transfer, assign, encumber or
otherwise dispose of any Restricted Shares without the Company’s written consent, except as
provided in the following sentence. The Optionee may transfer Restricted Shares to one or more
members of the Optionee’s Immediate Family or to a trust established by the Optionee for the
benefit of the Optionee and/or one or more members of the Optionee’s Immediate Family, provided in
either case that the Transferee agrees in writing on a form prescribed by the Company to be bound
by all provisions of this Agreement. If the Optionee transfers any Restricted Shares, then this
Agreement shall apply to the Transferee to the same extent as to the Optionee.

     (h) Assignment of Repurchase Right. The Board of Directors may freely assign the Company’s
Right of Repurchase, in whole or in part. Any person who accepts an assignment of the Right of
Repurchase from the Company shall assume all of the Company’s rights and obligations under this
Section 7.

SECTION 8. RIGHT OF FIRST REFUSAL.

     (a) Right of First Refusal. In the event that the Optionee proposes to sell, pledge or
otherwise transfer to a third party any Shares acquired under this Agreement, or any interest in
such Shares, the Company shall have the Right of First Refusal with respect to all (and not less
than all) of such Shares. If the Optionee desires to transfer Shares acquired under this
Agreement, the Optionee shall give a written Transfer Notice to the Company describing fully the
proposed transfer, including the number of Shares proposed to be transferred, the proposed transfer
price, the name and address of the proposed Transferee and proof satisfactory to the Company that
the proposed sale or transfer will not violate any applicable federal or state securities laws.
The Transfer Notice shall be signed both by the Optionee and by the proposed Transferee and must
constitute a binding commitment of both parties to the transfer of the Shares. The Company shall
have the right to purchase all, and not less than all, of the Shares on

7

 

the terms of the proposal described in the Transfer Notice (subject, however, to any change in
such terms permitted under Subsection (b) below) by delivery of a notice of exercise of the Right
of First Refusal within 30 days after the date when the Transfer Notice was received by the
Company.

     (b) Transfer of Shares. If the Company fails to exercise its Right of First Refusal within 30
days after the date when it received the Transfer Notice, the Optionee may, not later than 90 days
following receipt of the Transfer Notice by the Company, conclude a transfer of the Shares subject
to the Transfer Notice on the terms and conditions described in the Transfer Notice, provided that
any such sale is made in compliance with applicable federal and state securities laws and not in
violation of any other contractual restrictions to which the Optionee is bound. Any proposed
transfer on terms and conditions different from those described in the Transfer Notice, as well as
any subsequent proposed transfer by the Optionee, shall again be subject to the Right of First
Refusal and shall require compliance with the procedure described in Subsection (a) above. If the
Company exercises its Right of First Refusal, the parties shall consummate the sale of the Shares
on the terms set forth in the Transfer Notice within 60 days after the date when the Company
received the Transfer Notice (or within such longer period as may have been specified in the
Transfer Notice); provided, however, that in the event the Transfer Notice provided that payment
for the Shares was to be made in a form other than cash or cash equivalents paid at the time of
transfer, the Company shall have the option of paying for the Shares with cash or cash equivalents
equal to the present value of the consideration described in the Transfer Notice.

     (c) Additional or Exchanged Securities and Property. In the event of a merger or
consolidation of the Company with or into another entity, any other corporate reorganization, a
stock split, the declaration of a stock dividend, the declaration of an extraordinary dividend
payable in a form other than stock, a spin-off, an adjustment in conversion ratio, a
recapitalization or a similar transaction affecting the Company’s outstanding securities, any
securities or other property (including cash or cash equivalents) that are by reason of such
transaction exchanged for, or distributed with respect to, any Shares subject to this Section 8
shall immediately be subject to the Right of First Refusal. Appropriate adjustments to reflect the
exchange or distribution of such securities or property shall be made to the number and/or class of
the Shares subject to this Section 8.

     (d) Termination of Right of First Refusal. Any other provision of this Section 8
notwithstanding, in the event that the Stock is readily tradable on an established securities
market when the Optionee desires to transfer Shares, the Company shall have no Right of First
Refusal, and the Optionee shall have no obligation to comply with the procedures prescribed by
Subsections (a) and (b) above.

     (e) Permitted Transfers. This Section 8 shall not apply to (i) a transfer by beneficiary
designation, will or intestate succession or (ii) a transfer to one or more members of the
Optionee’s Immediate Family or to a trust established by the Optionee for the benefit of the
Optionee and/or one or more members of the Optionee’s Immediate Family, provided in either case
that the Transferee agrees in writing on a form prescribed by the Company to be bound by all
provisions of this Agreement. If the Optionee transfers any Shares acquired under this Agreement,
either under this Subsection (e) or after the Company has failed to exercise the Right

8

 

of First Refusal, then this Agreement shall apply to the Transferee to the same extent as to
the Optionee.

     (f) Termination of Rights as Stockholder. If the Company makes available, at the time and
place and in the amount and form provided in this Agreement, the consideration for the Shares to be
purchased in accordance with this Section 8, then after such time the person from whom such Shares
are to be purchased shall no longer have any rights as a holder of such Shares (other than the
right to receive payment of such consideration in accordance with this Agreement). Such Shares
shall be deemed to have been purchased in accordance with the applicable provisions hereof, whether
or not the certificate(s) therefor have been delivered as required by this Agreement.

     (g) Assignment of Right of First Refusal. The Board of Directors may freely assign the
Company’s Right of First Refusal, in whole or in part. Any person who accepts an assignment of the
Right of First Refusal from the Company shall assume all of the Company’s rights and obligations
under this Section 8.

SECTION 9. LEGALITY OF INITIAL ISSUANCE.

          No Shares shall be issued upon the exercise of this option unless and until the Company has
determined that:

          (a) It and the Optionee have taken any actions required to register the Shares
under the Securities Act or to perfect an exemption from the registration
requirements thereof;

          (b) Any applicable listing requirement of any stock exchange or other
securities market on which Stock is listed has been satisfied; and

          (c) Any other applicable provision of federal, state or foreign law has been
satisfied.

SECTION 10. NO REGISTRATION RIGHTS.

          The Company may, but shall not be obligated to, register or qualify the sale of Shares under
the Securities Act or any other applicable law. The Company shall not be obligated to take any
affirmative action in order to cause the sale of Shares under this Agreement to comply with any
law.

SECTION 11. RESTRICTIONS ON TRANSFER.

     (a) Securities Law Restrictions. Regardless of whether the offering and sale of Shares under
the Plan have been registered under the Securities Act or have been registered or qualified under
the securities laws of any state, the Company at its discretion may impose restrictions upon the
sale, pledge or other transfer of such Shares (including the placement of appropriate legends on
stock certificates or the imposition of stop-transfer instructions) if, in the judgment of the
Company, such restrictions are necessary or desirable in order to achieve compliance with the
Securities Act, the securities laws of any state or any other law.

9

 

     (b) Market Stand-Off. In connection with any underwritten public offering by the Company of
its equity securities pursuant to an effective registration statement filed under the Securities
Act, including the Company’s initial public offering, the Optionee or a Transferee shall not
directly or indirectly sell, make any short sale of, loan, hypothecate, pledge, offer, grant or
sell any option or other contract for the purchase of, purchase any option or other contract for
the sale of, or otherwise dispose of or transfer, or agree to engage in any of the foregoing
transactions with respect to, any Shares acquired under this Agreement without the prior written
consent of the Company or its underwriters. Such restriction (the “Market Stand-Off”) shall be in
effect for such period of time following the date of the final prospectus for the offering as may
be requested by the Company or such underwriters. In no event, however, shall such period exceed
180 days. The Market Stand-Off shall in any event terminate two years after the date of the
Company’s initial public offering. In the event of the declaration of a stock dividend, a
spin-off, a stock split, an adjustment in conversion ratio, a recapitalization or a similar
transaction affecting the Company’s outstanding securities without receipt of consideration, any
new, substituted or additional securities which are by reason of such transaction distributed with
respect to any Shares subject to the Market Stand-Off, or into which such Shares thereby become
convertible, shall immediately be subject to the Market Stand-Off. In order to enforce the Market
Stand-Off, the Company may impose stop-transfer instructions with respect to the Shares acquired
under this Agreement until the end of the applicable stand-off period. The Company’s underwriters
shall be beneficiaries of the agreement set forth in this Subsection (b). This Subsection (b)
shall not apply to Shares registered in the public offering under the Securities Act, and the
Optionee or a Transferee shall be subject to this Subsection (b) only if the directors and officers
of the Company are subject to similar arrangements.

     (c) Investment Intent at Grant. The Optionee represents and agrees that the Shares to be
acquired upon exercising this option will be acquired for investment, and not with a view to the
sale or distribution thereof.

     (d) Investment Intent at Exercise. In the event that the sale of Shares under the Plan is not
registered under the Securities Act but an exemption is available which requires an investment
representation or other representation, the Optionee shall represent and agree at the time of
exercise that the Shares being acquired upon exercising this option are being acquired for
investment, and not with a view to the sale or distribution thereof, and shall make such other
representations as are deemed necessary or appropriate by the Company and its counsel.

     (e) Legends. All certificates evidencing Shares purchased under this Agreement shall bear the
following legend:

“THE SHARES REPRESENTED HEREBY MAY NOT BE SOLD, ASSIGNED, TRANSFERRED, ENCUMBERED OR
IN ANY MANNER DISPOSED OF, EXCEPT IN COMPLIANCE WITH THE TERMS OF A WRITTEN
AGREEMENT BETWEEN THE COMPANY AND THE REGISTERED HOLDER OF THE SHARES (OR THE
PREDECESSOR IN INTEREST TO THE SHARES). SUCH AGREEMENT GRANTS TO THE COMPANY
CERTAIN RIGHTS OF FIRST REFUSAL UPON AN ATTEMPTED TRANSFER OF THE SHARES AND CERTAIN
REPURCHASE RIGHTS UPON TERMINATION OF SERVICE WITH THE COMPANY. THE

10

 

SECRETARY OF THE COMPANY WILL UPON WRITTEN REQUEST FURNISH A COPY OF SUCH AGREEMENT
TO THE HOLDER HEREOF WITHOUT CHARGE.”

All certificates evidencing Shares purchased under this Agreement in an unregistered transaction
shall bear the following legend (and such other restrictive legends as are required or deemed
advisable under the provisions of any applicable law):

“THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, AND MAY NOT BE SOLD, PLEDGED, OR OTHERWISE TRANSFERRED WITHOUT AN
EFFECTIVE REGISTRATION THEREOF UNDER SUCH ACT OR AN OPINION OF COUNSEL, SATISFACTORY
TO THE COMPANY AND ITS COUNSEL, THAT SUCH REGISTRATION IS NOT REQUIRED.”

     (f) Removal of Legends. If, in the opinion of the Company and its counsel, any legend placed
on a stock certificate representing Shares sold under this Agreement is no longer required, the
holder of such certificate shall be entitled to exchange such certificate for a certificate
representing the same number of Shares but without such legend.

     (g) Administration. Any determination by the Company and its counsel in connection with any
of the matters set forth in this Section 11 shall be conclusive and binding on the Optionee and all
other persons.

SECTION 12. ADJUSTMENT OF SHARES.

          In the event of any transaction described in Section 8(a) of the Plan, the terms of this
option (including, without limitation, the number and kind of Shares subject to this option and the
Exercise Price) shall be adjusted as set forth in Section 8(a) of the Plan. In the event that the
Company is a party to a merger or consolidation, this option shall be subject to the agreement of
merger or consolidation, as provided in Section 8(b) of the Plan.

SECTION 13. MISCELLANEOUS PROVISIONS.

     (a) Rights as a Stockholder. Neither the Optionee nor the Optionee’s representative shall
have any rights as a stockholder with respect to any Shares subject to this option until the
Optionee or the Optionee’s representative becomes entitled to receive such Shares by filing a
notice of exercise and paying the Purchase Price pursuant to Sections 4 and 5.

     (b) No Retention Rights. Nothing in this option or in the Plan shall confer upon the Optionee
any right to continue in Service for any period of specific duration or interfere with or otherwise
restrict in any way the rights of the Company (or any Parent or Subsidiary employing or retaining
the Optionee) or of the Optionee, which rights are hereby expressly reserved by each, to terminate
his or her Service at any time and for any reason, with or without Cause.

     (c) Notice. Any notice required by the terms of this Agreement shall be given in writing. It
shall be deemed effective upon (i) personal delivery, (ii) deposit with the United

11

 

States Postal Service, by registered or certified mail, with postage and fees prepaid or (iii)
deposit with Federal Express Corporation, with shipping charges prepaid. Notice shall be addressed
to the Company at its principal executive office and to the Optionee at the address that he or she
most recently provided to the Company in accordance with this Subsection (c).

     (d) Entire Agreement. The Notice of Stock Option Grant, this Agreement and the Plan
constitute the entire contract between the parties hereto with regard to the subject matter hereof.
They supersede any other agreements, representations or understandings (whether oral or written
and whether express or implied) which relate to the subject matter hereof.

     (e) Choice of Law. This Agreement shall be governed by, and construed in accordance with, the
laws of the State of Delaware, as such laws are applied to contracts entered into and performed in
such State.

SECTION 14. DEFINITIONS.

     (a) “Agreement” shall mean this Stock Option Agreement.

     (b) “Board of Directors” shall mean the Board of Directors of the Company, as constituted from
time to time or, if a Committee has been appointed, such Committee.

     (c) “Cause” shall mean (i) willful failure by the Optionee to substantially perform his duties
under the revised Offer Letter between Optionee and the Company, dated as of October 5, 2006, as
amended from time to time (“Optionee’s Offer Letter”), after receipt of a written warning from the
Board of Directors, (ii) a willful act by the Optionee which is injurious to the Company, (iii) a
willful breach by the Optionee of a material provision of Optionee’s Offer Letter, or (iv) a
material violation of a federal or state law or regulation applicable to the business of the
Company.

     (d) “Code” shall mean the Internal Revenue Code of 1986, as amended.

     (e) “Committee” shall mean a committee of the Board of Directors, as described in Section 2 of
the Plan.

     (f) “Company” shall mean ArcSight, Inc., a Delaware corporation.

     (g) “Consultant” shall mean a person who performs bona fide services for the Company, a Parent
or a Subsidiary as a consultant or advisor, excluding Employees and Outside Directors.

     (h) “Date of Grant” shall mean the date specified in the Notice of Stock Option Grant, which
date shall be the later of (i) the date on which the Board of Directors resolved to grant this
option or (ii) the first day of the Optionee’s Service.

     (i) “Disability” shall mean that the Optionee is unable to engage in any substantial gainful
activity by reason of any medically determinable physical or mental impairment.

12

 

     (j) “Employee” shall mean any individual who is a common-law employee of the Company, a Parent
or a Subsidiary.

     (k) “Exercise Price” shall mean the amount for which one Share may be purchased upon exercise
of this option, as specified in the Notice of Stock Option Grant.

     (l) “Fair Market Value” shall mean the fair market value of a Share, as determined by the
Board of Directors in good faith. Such determination shall be conclusive and binding on all
persons.

     (m) “Immediate Family” shall mean any child, stepchild, grandchild, parent, stepparent,
grandparent, spouse, sibling, mother-in-law, father-in-law, son-in-law, daughter-in-law,
brother-in-law or sister-in-law and shall include adoptive relationships.

     (n) “Involuntary Termination” means that (a) the Optionee’s Service is terminated by the
Company without Cause, (b) the Optionee resigns within 30 days after the scope of his or her job
responsibilities or authority was materially reduced without his or her written consent or (c) the
Optionee resigns within 30 days after receipt of notice that his or her principal workplace will be
relocated 100 miles or more from its location at the time of notice.

     (o) “ISO” shall mean an employee incentive stock option described in Section 422(b) of the
Code.

     (p) “Notice of Stock Option Grant” shall mean the document so entitled to which this Agreement
is attached.

     (q) “NSO” shall mean a stock option not described in Sections 422(b) or 423(b) of the Code.

     (r) “Optionee” shall mean the person named in the Notice of Stock Option Grant.

     (s) “Outside Director” shall mean a member of the Board of Directors who is not an Employee.

     (t) “Parent” shall mean any corporation (other than the Company) in an unbroken chain of
corporations ending with the Company, if each of the corporations other than the Company owns stock
possessing 50% or more of the total combined voting power of all classes of stock in one of the
other corporations in such chain.

     (u) “Plan” shall mean the ArcSight, Inc. 2002 Stock Plan, as in effect on the Date of Grant.

     (v) “Purchase Price” shall mean the Exercise Price multiplied by the number of Shares with
respect to which this option is being exercised.

     (w) “Repurchase Period” shall mean a period of 90 consecutive days commencing on the date when
the Optionee’s Service terminates for any reason, including (without limitation) death or
disability.

13

 

     (x) “Restricted Share” shall mean a Share that is subject to the Right of Repurchase.

     (y) “Right of First Refusal” shall mean the Company’s right of first refusal described in
Section 8.

     (z) “Right of Repurchase” shall mean the Company’s right of repurchase described in Section 7.

     (aa) “Securities Act” shall mean the Securities Act of 1933, as amended.

     (bb) “Service” shall mean service as an Employee, Outside Director or Consultant.

     (cc) “Share” shall mean one share of Stock, as adjusted in accordance with Section 8 of the
Plan (if applicable).

     (dd) “Stock” shall mean the Common Stock of the Company, with a par value of $0.00001 per
Share.

     (ee) “Subsidiary” shall mean any corporation (other than the Company) in an unbroken chain of
corporations beginning with the Company, if each of the corporations other than the last
corporation in the unbroken chain owns stock possessing 50% or more of the total combined voting
power of all classes of stock in one of the other corporations in such chain.

     (ff) “Transferee” shall mean any person to whom the Optionee has directly or indirectly
transferred any Share acquired under this Agreement.

     (gg) “Transfer Notice” shall mean the notice of a proposed transfer of Shares described in
Section 8.

14

 

Arcsight,
Inc. 2002 Stock Plan

Notice of Stock Option Grant for Hong Kong Based 

Employees

          You have been granted the following option to purchase shares of the Common Stock of
ArcSight, Inc. (the “Company”). For the purposes of this Agreement “Company” includes ArcSight,
Inc., a Hong Kong business or group company of ArcSight, Inc. operating in Hong Kong:

	 	 	 
	Name of Optionee:
	 	 
	 
	 	 
	Total Number of Shares:
	 	 
	 
	 	 
	Exercise Price Per Share:
	 	 
	 
	 	 
	Date of Grant:
	 	 
	 
	 	 
	Date Exercisable:
	 	 
	 
	 	 
	Vesting Commencement Date:
	 	 
	 
	 	 
	Vesting Schedule:
	 	 
	 
	 	 
	Expiration
Date:
	 	                    .
This option expires earlier if the Optionee’s Service terminates
earlier, as provided in Section 6 of the Stock Option Agreement.

By your signature and the signature of the Company’s representative below, you and the Company
agree that this option is granted under and governed by the terms and conditions of the ArcSight,
Inc. 2002 Stock Plan, as amended from time to time, and the Stock Option Agreement, both of which
are attached to and made a part of this document.

	 	 	 	 	 	 	 	 	 
	Optionee:	 	 	 	ArcSight, Inc.	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	 	 	By:	 	 	 	 
	 

	 	 	 	 	 	 

	 	 
	 

	 	 	 	Title:	 	 	 	 
	 

	 	 	 	 	 	 

	 	 

 

 

Arcsight, Inc. 2002 Stock Plan

Notice of Stock Option Grant for UK Based 

Employees

          You have been granted the following option to purchase shares of the Common Stock of
ArcSight, Inc. (the “Company”). For the purposes of this Agreement “Company” includes ArcSight,
Inc., a UK business or group company of ArcSight, Inc. operating in the UK:

	 	 	 
	Name of Optionee:
	 	 
	 
	 	 
	Total Number of Shares:
	 	 
	 
	 	 
	Exercise Price Per Share:
	 	 
	 
	 	 
	Date of Grant:
	 	 
	 
	 	 
	Date Exercisable:
	 	 
	 
	 	 
	Conditions of Grant:

	 	Within thirty (30) days of the date of receipt of the Grant Notice of
Board approval of the grant, which ever is later, the Optionee must sign and return the
joint Election transferring the Employers Secondary National Insurance to the Employee
(attached hereto as Appendix I), and an executed joint Restricted Stock Purchase
Election (attached hereto as Appendix II). Failure to sign and return the Elections
will result in the grant being invalid.
	 
	 	 
	Vesting Commencement Date:
	 	 
	 
	 	 
	Vesting Schedule:
	 	 
	 
	 	 
	Expiration Date:

	 	                                        . This option expires earlier if the Optionee’s Service
terminates earlier, as provided in Section 6 of the Stock Option Agreement.

 

 

By your signature and the signature of the Company’s representative below, you and the Company
agree that this option is granted under and governed by the terms and conditions of the ArcSight,
Inc. 2002 Stock Plan, as amended from time to time, and the Stock Option Agreement, both of which
are attached to and made a part of this document.

	 	 	 	 	 	 	 	 	 
	Optionee:	 	 	 	ArcSight, Inc.	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	 	 	By:	 	 	 	 
	 

	 	 	 	 	 	 

	 	 
	 

	 	 	 	Title:	 	 	 	 
	 

	 	 	 	 	 	 

	 	 

2

 

APPENDIX I

Joint Election Transferring the Liability for Secondary National Insurance

Contributions on Share Option Gains from ArcSight (UK) Limited to the

Employee (“the Election”)

Parties to the Election:

	(1)	 	«OptioneeName» (“the Employee”)
	 
	(2)	 	ArcSight (UK) Limited (“the Employer”)
	 
	1.	 	Introduction

	 	1.	 	This Election refers to all Options Granted under any Option Number to the
above Employee on or after 12 October 2004 in the ArcSight, Inc 2002 Stock Plan, as
amended (“the Options”).
	 
	 	2.	 	The grant of the Options was made by virtue of the employment of the Employee
in ArcSight (UK) Limited, a company registered in the UK.
	 
	 	3.	 	ArcSight (UK) Limited is a wholly owned subsidiary of ArcSight, Inc.

	2.	 	The Election

	 	1.	 	The parties to the Election certify that on the exercise, assignment, release
or upon the employee being offered cash by the Employer to cancel all or part of the
Options any gain arising (individually or collectively termed “the Gain”) shall be
treated as remuneration under section 4 (4) (a) of the Social Security Contributions
and Benefits Act 1992.
	 
	 	 	 	The effect of this section is to treat as earnings any amount of any gain on which
the employee is chargeable already to Income Tax under S479 of ITEPA 2003 in respect
of which an amount counts as employment income under S476 of that act, reduced by
any amounts deducted under section 480 (1-6) of that act in arriving at the amount
counting as employment income.
	 
	 	2.	 	Accordingly, a charge to secondary Class I National Insurance Contributions
(NIC) may arise from the Gain which is payable by the Employer.
	 
	 	3.	 	The purpose of this Election is to transfer the liability for the secondary NIC
arising in paragraph 2(2) above from the Employer to become that of the Employee.
	 
	 	4.	 	The Election relates to the transfer of the whole of the charge to secondary
NIC payable (i.e. 100%) on the Gain.
	 
	 	5.	 	The Employee undertakes to notify the Employer through the delivery of a

3

 

	 	 	 	properly executed notice either to the Employer, to ArcSight, Inc, or to the Scheme
Administrator in accordance with the ArcSight, Inc 2002 Stock Plan, as amended,
Rules that a liability to secondary NIC is to arise. No shares or proceeds shall be
released by the Scheme Administrator until such time that such notice is confirmed
received by the Employer.
	 
	 	6.	 	The Employee by signing this Election recognises that the Gain in respect of
all or part of the Options may result in a charge for secondary NIC which is payable by
the Employee irrespective of whether the Employee remains a resident and employee in
the UK or relocates outside the UK to reside and work.
	 
	 	7.	 	The Employer (or the parent company of the Employer) agrees to notify the
Employee of such liability due on the Gain from the Options granted under this Election
within five (5) UK working days from the date of the Gain arising.

	 	a.	 	Where the cash proceeds, or the share issue arising, from the
Gain is due from the Employer to the Employee then the Employee in signing this
joint Election authorises the Employer (or the parent company of the Employer)
and the Administrator of the ArcSight, Inc 2002 Stock Plan, as amended, to
effect a withholding of such part of the cash proceeds from the Gain, or for
the Administrator to act as the agent of the Employee and sell sufficient
shares required, and deliver to the Employer such proceeds to settle the
liability for secondary NIC;

	 	 	 	and/or

	 	b.	 	Where the cash proceeds from the Gain is payable by a third
party to the Employee then the Employee authorises the third party to effect a
withholding of such part of the proceeds on the Gain and deliver to the
Employer such proceeds required to settle the liability for secondary NIC
within five (5) US working days of the Gain arising.

	 	8.	 	The Employer certifies he will ensure that the secondary NIC collected in
accordance with paragraph 2(7) above will be paid to the Collector of Taxes within 14
days of the end of the income tax month in which the gain is made, and that such
payments will be recorded on the monthly payslip of the Employee.
	 
	 	9.	 	This Election shall cease to be effective at the earlier of -

	 	-	 	the date of signing by both parties subject to another
or subsequent Election revoking the contents and statements of this
Election;
	 
	 	-	 	the Employer choosing to terminate the Election;
	 
	 	-	 	at such a date as determined under the termination
clause of the ArcSight, Inc 2002 Stock Plan, as amended;
	 
	 	-	 	the Inland Revenue withdrawal of approval of the
Election;
	 
	 	-	 	ten years after the termination of the ArcSight, Inc
2002 Stock Plan, as amended, under which the Options were granted.

4

 

The Employee hereby certifies that he agrees to be bound by the terms of this Election:

	 	 	 	 	 	 	 	 	 
	«OptioneeName»

	 	 	 	 	 	Dated	 	 
	 

	 	 
	 	 	 	 	 	 

In the presence of:

	 	 	 	 	 
	Witness:
	 	 	 	 
	Address:

	 	 

	 	 

The Employer hereby certifies that he agrees to be bound by the terms of this Election:

	 	 	 	 	 	 	 	 	 
	ArcSight, Inc.

	 	 	 	 	 	Dated	 	 
	 

	 	 
	 	 	 	 	 	 
	Director — ArcSight (UK) Limited	 	 	 	 	 	 

In the presence of:

Witness:

Address:

	 	 	 
	«OptioneeName»

	 	ArcSight (UK) Limited
	 

	 	c/o Nair & Co
	 

	 	Whitefriars
	 

	 	Lewins Mead
	 

	 	Bristol BSI 2NT

5

 

APPENDIX II

Joint Election under s431 ITEPA 2003 for full or partial disapplication of

Chapter 2 Income Tax (Earnings and Pensions) Act 2003

One Part Election

1. Between

	 	 	 	 	 	 	 
	the Employee
	 	«OptioneeName»	 	 	 	 
	 
	 	 	 	 	 	 
	whose National Insurance Number is
	 	 	 	 	 	 
	 
	 	 	 	 	 
	 
	 	 	 	 	 	 
	and
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	the Company (who is the Employee’s employer)
	 	ArcSight (UK) Limited	 	 	 	 
	 
	 	 	 	 	 	 
	of Company Registration Number
	 	05054440	 	 	 	 

2. Purpose of Election

This joint election is made pursuant to section 431(1) or 431(2) Income Tax (Earnings and Pensions)
Act 2003 (ITEPA) and applies where employment-related securities, which are restricted securities
by reason of section 423 ITEPA, are acquired.

The effect of an election under section 431(1) is that, for the relevant Income Tax and NIC
purposes, the employment-related securities and their market value will be treated as if they were
not restricted securities and that sections 425 to 430 ITEPA do not apply. An election under
section 431(2) will ignore one or more of the restrictions in computing the charge on acquisition.
Additional Income Tax will be payable (with PAYE and NIC where the securities are Readily
Convertible Assets).

Should the value of the securities fall following the acquisition, it is
possible that Income Tax/NIC that would have arisen because of any future
chargeable event (in the absence of an election) would have been less than the
Income Tax/NIC due by reason of this election. Should this be the case, there
is no Income Tax/NIC relief available under Part 7 of ITEPA 2003; nor is it
available if the securities acquired are subsequently transferred, forfeited or
revert to the original owner.

3. Application

This joint election is made not later than 14 days after the date of acquisition of the securities
by the employee and applies to:

	 	 	 	 	 	 	 
	Number of securities
	 	«Shares»	 	 	 	 
	 
	 	 	 	 	 	 
	Description of securities
	 	Stock options	 	 	 	 

 

 

	 	 	 	 	 	 	 
	Name of issuer of securities
	 	ArcSight, Inc.	 	 	 	 

To be acquired by the Employee after 12 October 2004 under the terms of the ArcSight, Inc. 2002
Stock Plan, as amended.

4. Extent of Application

This election disapplies S.431(1) ITEPA: All restrictions attaching to the securities.

5. Declaration

This election will become irrevocable upon the later of its signing or the acquisition (and each
subsequent acquisition) of employment-related securities to which this election applies.

In signing this joint election, we agree to be bound by its terms as stated above.

	 	 	 	 	 	 	 
	 
	 

	 	 	 	 	 	 
	Signature (Employee)

	 	 	 	Date	 	 
	 
	 	 	 	 	 	 
	 

	 	 	 	 	 	 
	ArcSight, Inc.

	 	 	 	Date
	 	 
	Director — ArcSight (UK) Limited
	 	 	 	 	 	 

Note: Where the election is in respect of multiple acquisitions, prior to the date of any
subsequent acquisition of a security it may be revoked by agreement between the employee and
employer in respect of that and any later acquisition.

 

 

ArcSight, Inc. 2002 Stock Plan

Notice of Stock Option Exercise

You must sign this Notice on Page 3 before submitting it to the Company.

	 	 	 	 	 	 	 	 	 
	Optionee Information:	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	Name:

	 	 
	 	 	 	Social Security Number:	 	 

	 

	 	 
	 	 	 	 	 	 
	Address:
	 	 	 	 	 	 	 	 
	 

	 	 
	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	Option Information:	 	 	 	 	 	 
	 
	Date of Grant:
                     
    , 200  
	 	 	 	          Type of Stock Option:
	 
	 	 	 	 	 	 	 	 
	Exercise Price Per Share:
$                                         	 	 	 	          o      Nonstatutory (NSO)
	 
	 	 	 	 	 	 	 	 
	Total number of shares of Common
Stock of ArcSight, 

Inc. (the
“Company”) covered by option:                                                        	 	 	 	          o      Incentive (ISO)
	 
	 	 	 	 	 	 	 	 
	Exercise Information:	 	 	 	 	 	 

Number of shares of Common Stock of the Company for which option is being exercised
now:                     . (These shares are referred to below as the “Purchased
Shares.”)

Form of payment enclosed [check all that apply]:

	o	 	Check for $                    , payable to “ArcSight, Inc.”
	 
	o	 	Certificate(s) for                      shares of Common Stock of the Company
that I have owned for at least six months. (These shares will be valued as of the
date this notice is received by the Company.)

Name(s) in which the Purchased Shares should be registered [check one box]:

	o	 	In my name only
	 
	o	 	In the names of my spouse and myself as                    
                    
                    
      My spouse’s name (if applicable): 

community property      
          
          
          
          
          
          
                                                                                
          

 

 

	 	 	 	 	 
	o

	 	In the names of my spouse
and myself as community property
with the right of survivorship	 	 
	 
	 	 	 	 
	o

	 	In the names of my spouse
and myself as joint tenants with the
right of survivorship	 	 
	 
	 	 	 	 
	o

	 	In the name of an eligible
revocable trust [requires Stock
Transfer Agreement]
	 	Full legal name of revocable trust:
	 
	 	 	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	 

	 	 	 	 

	 	 	 
	The certificate for the Purchased
Shares should be sent to the
following address:
	 	 
	 

	 	 
	 
	 	 
	 

	 	 
	 
	 	 
	 

	 	 
	 
	 	 
	 

	 	 

Representations and Acknowledgments of the Optionee:

	1.	 	I represent and warrant to the Company that I am acquiring and will hold the Purchased Shares
for investment for my account only, and not with a view to, or for resale in connection with,
any “distribution” of the Purchased Shares within the meaning of the Securities Act of 1933,
as amended (the “Securities Act”). I have no present intention of selling or otherwise
disposing of all or any portion of the Purchased Shares.

	2.	 	I understand that the Purchased Shares have not been registered under the Securities Act by
reason of a specific exemption therefrom and that the Purchased Shares must be held
indefinitely, unless they are subsequently registered under the Securities Act or I obtain an
opinion of counsel (in form and substance satisfactory to the Company and its counsel) that
registration is not required.

	3.	 	I acknowledge that the Company is under no obligation to register the Purchased Shares.

	4.	 	I am aware of the adoption of Rule 144 by the Securities and Exchange Commission under the
Securities Act, which permits limited public resales of securities acquired in a non-public
offering, subject to the satisfaction of certain conditions. These conditions include
(without limitation) that certain current public information about the issuer is available,
that the resale occurs only after the holding period required by Rule 144 has been satisfied,
that the sale occurs through an unsolicited “broker’s transaction” and that the amount of
securities being sold during any three-month period does not exceed specified limitations. I
understand that the conditions for resale set forth in Rule 144 have not been satisfied and
that the Company has no plans to satisfy these conditions in the foreseeable future.

 

 

	5.	 	I will not sell, transfer or otherwise dispose of the Purchased Shares in violation of the
Securities Act, the Securities Exchange Act of 1934, or the rules
promulgated thereunder, including
Rule 144 under the Securities Act.
	 
	6.	 	I acknowledge that I have received and had access to such information as I consider necessary
or appropriate for deciding whether to invest in the Purchased Shares and that I had an
opportunity to ask questions and receive answers from the Company regarding the terms and
conditions of the issuance of the Purchased Shares. At no time was I presented with or
solicited by any publicly issued or circulated newspaper, mail, radio, television or other
form of general advertising or solicitation in connection with the offer, sale and purchase of
the Purchased Shares.
	 
	7.	 	I am aware that my investment in the Company is a speculative investment that has limited
liquidity and is subject to the risk of complete loss. I am able, without impairing my
financial condition, to hold the Purchased Shares for an indefinite period and to suffer a
complete loss of my investment in the Purchased Shares.
	 
	8.	 	I acknowledge that the Purchased Shares remain subject to the Company’s right of first
refusal and the market stand-off (sometimes referred to as the “lock-up”), all in accordance
with the applicable Notice of Stock Option Grant and Stock Option Agreement.
	 
	9.	 	I acknowledge that I am acquiring the Purchased Shares subject to all other terms of the
ArcSight, Inc. 2002 Stock Plan, the Notice of Stock Option Grant and Stock Option Agreement,
and this Notice of Stock Option Exercise. I acknowledge that there may be adverse tax
consequences upon exercise of the option or disposition of the Purchased Shares, and that I
should consult a tax adviser prior to such exercise or disposition.
	 
	10.	 	I acknowledge that the Company has encouraged me to consult my own adviser to determine the
form of ownership that is appropriate for me. In the event that I choose to transfer my
Purchased Shares to a trust, I agree to sign a Stock Transfer Agreement. In the event that I
choose to transfer my Purchased Shares to a trust that is not an eligible revocable trust, I
also acknowledge that the transfer may be treated as a “disposition” for tax purposes. As a
result, the favorable ISO tax treatment will be unavailable and other unfavorable tax
consequences may occur.
	 
	11.	 	THE ARCSIGHT, INC. 2002 STOCK PLAN, THE NOTICE OF STOCK OPTION GRANT AND STOCK OPTION
AGREEMENT, AND THIS NOTICE OF STOCK OPTION EXERCISE ARE INTENDED TO COMPLY WITH SECTION
25102(o) OF THE CALIFORNIA CORPORATIONS CODE AND ANY RULES (INCLUDING COMMISSIONER
RULES, IF APPLICABLE) OR REGULATIONS PROMULGATED THEREUNDER BY THE CALIFORNIA DEPARTMENT OF
CORPORATIONS (THE “REGULATIONS”). ANY PROVISION OF THIS NOTICE OF STOCK OPTION EXERCISE THAT
IS INCONSISTENT WITH SECTION 25102(o) SHALL, WITHOUT FURTHER ACT OR AMENDMENT BY THE COMPANY
OR THE BOARD, BE REFORMED TO COMPLY WITH THE REQUIREMENTS OF SECTION 25102(o). THE SALE OF THE
SECURITIES THAT

 

 

	 	 	ARE THE SUBJECT OF THIS NOTICE OF STOCK OPTION EXERCISE, IF NOT YET QUALIFIED WITH THE
CALIFORNIA COMMISSIONER OF CORPORATIONS AND NOT EXEMPT FROM SUCH QUALIFICATION, IS SUBJECT
TO SUCH QUALIFICATION, AND THE ISSUANCE OF SUCH SECURITIES, AND THE RECEIPT OF ANY PART OF
THE CONSIDERATION THEREFOR PRIOR TO SUCH QUALIFICATION IS UNLAWFUL UNLESS THE SALE IS
EXEMPT. THE RIGHTS OF THE PARTIES TO THIS NOTICE OF STOCK OPTION EXERCISE ARE EXPRESSLY
CONDITIONED UPON SUCH QUALIFICATION BEING OBTAINED OR AN EXEMPTION BEING AVAILABLE.
	 
	12.	 	I agree to seek the consent of my spouse to the extent
required by the Company to enforce the
foregoing.

	 	 	 	 	 
	Signature:

	 	Date:	 	 
	 
	 	 	 	 
	 

	 	 	 	 

The company will not check to determine whether the form of ownership that you elect in
your Notice of Stock Option Exercise is appropriate. You should consult your own advisers on this
subject. If an inappropriate election is made, the form of ownership may not withstand legal
scrutiny or may have adverse tax consequences.

 

 

ArcSight, Inc. 2002 Stock Plan

Notice of Stock Option Exercise (Note Available) 

You must sign this Notice on Page 3 before submitting it to the Company.

Optionee Information:

	 	 	 	 	 	 	 	 	 
	Name:

	 	 	 	 	 	Social Security Number:	 	 
	 

	 	 
	 	 	 	 	 	 
	Address:

	 	 	 	 	 	Employee Number:	 	 
	 

	 	 
	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 

Option Information:

	 	 	 
	Date of Grant:                                         , 200___

	 	Type of Stock Option:
	 
	 	 
	Exercise Price per Share: $                                         

	 	o      Nonstatutory (NSO)
	 
	 	 
	Total number of shares of Common Stock of ArcSight,
Inc. (the “Company”) covered by option:                                        

	 	o      Incentive (ISO)

Exercise Information:

Number of
shares of Common Stock of the Company for which option is being
exercised now: .                                         . (These
shares are referred to below as the “Purchased Shares.”)

Total Exercise Price for the Purchased Shares: $                                        

Form of payment enclosed [check all that apply]:

o
Check for $                                         , payable to “ArcSight, Inc.”

o
Full-recourse promissory note for $                                         , payable to “ArcSight, Inc.,”
plus check for the par value of the Purchased Shares.

o
Certificate(s) for                                         shares of Common Stock of the Company that I have
owned for at least six months. (These shares will be valued as of the
date this notice is received by the Company.)

o
Attestation Form covering                                         shares of Common Stock of the Company.
(These shares will be valued as of the date this notice is received by
the Company.)

Name(s) in which the Purchased Shares should be registered [please review the attached explanation
of the available forms of ownership, and then check one box]:

 1 

 

 

	 	 	 	 	 
	o

	 	In my name only	 	 
	 
	 	 	 	 
	o

	 	In the names of my spouse and myself as
community property
	 	My spouse’s name (if applicable):
	 
	 	 	 	 
	o

	 	In the names of my
spouse and myself as
joint tenants with the
right of survivorship
	 	 
	 
	 	 	 	 
	o

	 	In the name of an eligible revocable
trust [requires Stock
Transfer Agreement]
	 	Full legal name of revocable trust:
	 
	 

	 	 	 	 
	 
	 	 	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	The certificate for the Purchased
Shares should be sent to the following
address:	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	 

	 	 	 	 
	 
	 	 	 	 
	 

	 	 	 	 

Representations and Acknowledgments of the Optionee:

	1.	 	I represent and warrant to the Company that I am acquiring and will hold the Purchased Shares
for investment for my account only, and not with a view to, or for resale in connection with,
any “distribution” of the Purchased Shares within the meaning of the Securities Act of 1933,
as amended (the “Securities Act”).
	 
	2.	 	I understand that the Purchased Shares have not been registered under the Securities Act by
reason of a specific exemption therefrom and that the Purchased Shares must be held
indefinitely, unless they are subsequently registered under the Securities Act or I obtain an
opinion of counsel (in form and substance satisfactory to the Company and its counsel) that
registration is not required.
	 
	3.	 	I acknowledge that the Company is under no obligation to register the Purchased Shares.
	 
	4.	 	I am aware of the adoption of Rule 144 by the Securities and Exchange Commission under the
Securities Act, which permits limited public resales of securities acquired in a non-public
offering, subject to the satisfaction of certain conditions. These conditions include
(without limitation) that certain current public information about the issuer is available,
that the resale occurs only after the holding period required by Rule 144 has been satisfied,
that the sale occurs through an unsolicited “broker’s transaction” and that the amount of
securities being sold during any three-month period does not exceed specified limitations. I
understand that the conditions for resale set forth in Rule 144 have not been satisfied and
that the Company has no plans to satisfy these conditions in the foreseeable future. I
recognize that the holding period required by Rule 144 generally will not start until I have
paid for the Purchased Shares (including full payment of any promissory note that I signed at
the time of exercise).

 2 

 

 

	5.	 	I will not sell, transfer or otherwise dispose of the Purchased Shares in violation of the
Securities Act, the Securities Exchange Act of 1934, or the rules promulgated thereunder,
including Rule 144 under the Securities Act.
	 
	6.	 	I acknowledge that I have received and had access to such information as I consider necessary
or appropriate for deciding whether to invest in the Purchased Shares and that I had an
opportunity to ask questions and receive answers from the Company regarding the terms and
conditions of the issuance of the Purchased Shares.
	 
	7.	 	I am aware that my investment in the Company is a speculative investment that has limited
liquidity and is subject to the risk of complete loss. I am able, without impairing my
financial condition, to hold the Purchased Shares for an indefinite period and to suffer a
complete loss of my investment in the Purchased Shares.
	 
	8.	 	I acknowledge that the Purchased Shares remain subject to the Company’s right of first
refusal and the market stand-off (sometimes referred to as the “lock-up”) and may remain
subject to the Company’s right of repurchase at the exercise price, all in accordance with the
applicable Notice of Stock Option Grant and Stock Option Agreement.
	 
	9.	 	I acknowledge that I am acquiring the Purchased Shares subject to all other terms of the
Notice of Stock Option Grant and Stock Option Agreement.
	 
	10.	 	I acknowledge that I have received a copy of the Company’s explanation of the forms of
ownership available for my Purchased Shares. I acknowledge that the Company has encouraged me
to consult my own adviser to determine the form of ownership that is appropriate for me. In
the event that I choose to transfer my Purchased Shares to a trust, I agree to sign a Stock
Transfer Agreement. In the event that I choose to transfer my Purchased Shares to a trust that
does not satisfy the requirements described in the attached explanation (i.e. a trust that is
not an eligible revocable trust), I also acknowledge that the transfer will be treated as a
“disposition” for tax purposes. As a result, the favorable ISO tax treatment will be
unavailable and other unfavorable tax consequences may occur.
	 
	11.	 	I acknowledge that I have received a copy of the Company’s explanation of the federal income
tax consequences of an option exercise and the tax election under section 83(b) of the
Internal Revenue Code. In the event that I choose to make a section 83(b) election, I
acknowledge that it is my responsibility—and not the Company’s responsibility—to file the
election in a timely manner, even if I ask the Company or its agents to make the filing on my
behalf. I acknowledge that the Company has encouraged me to consult my own adviser to
determine the tax consequences of acquiring the Purchased Shares at this time.
	 
	12.	 	I agree to seek the consent of my spouse to the extent required by the Company to enforce the
foregoing.

	 	 	 	 	 
	SIGNATURE:

	 	DATE:	 	 
	 
	 	 	 	 
	 

	 	 	 	 

 3 

 

 

Explanation of Forms of Stock Ownership

Purpose of This Explanation

The purpose of this explanation is to provide you with a brief summary of the forms of legal
ownership available for the shares that you are purchasing (the “Purchased Shares”). For a number
of reasons, this explanation is no substitute for personal legal advice:

	•	 	To make the explanation short and readable, only the highlights are covered. Some legal rules are not addressed, even
though they may be important in particular cases.

	•	 	While the summary attempts to deal with the most common situations, your own situation may well be different from the
norm.

	•	 	The law may change, and the Company is not responsible for updating this summary.

For these reasons, the Company strongly encourages you to consult your own adviser before
exercising your option and before making a decision about the form of ownership for your
shares.

Overview

The Notice of Stock Option Exercise offers four forms of taking title to the Purchased Shares:

	•	 	In your name only,

	•	 	In your name and the name of your spouse as community property,

	•	 	In your name and the name of your spouse as joint tenants with the right of
survivorship, or

	•	 	In the name of an eligible revocable trust.

Title in the Purchased Shares depends upon (a) your marital status, (b) the marital property laws
of your state of residence and (c) any agreement with your spouse altering the existing marital
property laws of your state of residence. If you are not married, you generally will take title in
your name alone. If you are married, title depends upon the marital property laws of your state of
residence. In general, states are classified either as “community property” states or as
“common-law property” states. (But individual state law may vary within these classifications.)

Community Property and Joint Tenancy

Community property states include California, Texas, Washington, Arizona, Nevada, New Mexico,
Idaho, Louisiana and Wisconsin. In a community property state, property acquired during marriage
by either spouse is deemed to be one-half owned by each spouse. All other property is classified
as the separate property of the spouse who acquires the property. While either spouse has equal
management and control over the community property and may sell, spend or encumber all community
property, neither spouse may gift community property or

 4 

 

 

partition his/her one-half interest without the consent of the other spouse. Upon divorce, all
community property is divided equally among the spouses and each spouse is entitled to retain all
of his/her separate property. Upon the death of a spouse, one-half of the community property (and
all of the decedent spouse’s separate property) will pass to the decedent spouse’s heirs. The
other one-half of the community property remains the property of the surviving spouse.

Other states are common-law property states. In a common-law property state, each spouse is
generally deemed to own whatever he/she earns or acquires.

A married couple may elect to alter the marital property rules by mutually agreeing to take title
to property in other forms. For example, a couple residing in a community property state may enter
into an agreement and transform what otherwise would be community property into the separate
property of the spouse who earns or acquires the property.

In addition, many community property and common-law property states allow married couples to take
joint title in property acquired during marriage. For example, California allows a married couple
to take title in a joint tenancy with the right of survivorship. In a joint tenancy, each spouse
owns a one-half interest in the property as separate property. This means that each spouse may
transfer or sell his/her one-half interest in the property. However, unlike traditional separate
property, a spouse cannot transfer his/her one-half interest to heirs at death. Instead, the
surviving spouse automatically receives the decedent spouse’s one-half interest and becomes the
full owner of the property. (This is called the “right of survivorship.”) Both spouses must
consent to taking property in a joint tenancy in lieu of having the community property laws apply.

If you have the Purchased Shares issued in a form other than those described above, then the
transfer will be treated as a “disposition” for tax purposes. This means that the effect, for tax
purposes, will be the same as selling the Purchased Shares. Please refer to the attached tax
summary for additional information.

Trusts

A transfer to a trust generally should not be treated as a “disposition” of the Purchased Shares
for tax purposes if the trust satisfies each of the following conditions:

	•	 	You are the sole grantor of the trust,
	 
	•	 	You are the sole trustee, or you and your spouse are the sole co-trustees,
	 
	•	 	The trustee or trustees are not required to distribute the income of the trust to any person other than you and/or your
spouse while you are alive, and
	 
	•	 	The trust permits you to revoke all or part of the trust and to have the trust’s assets returned to you, without the
consent of any other person (including your spouse).

If you have the Purchased Shares issued to a trust that does not meet these requirements, then the
transfer will be treated as a “disposition” for tax purposes. This means that the effect, for tax
purposes, will be the same as selling the Purchased Shares. Please refer to the attached tax

 5 

 

 

summary for additional information.

If you have the Purchased Shares issued to any trust, you will be required to sign a Stock Transfer
Agreement in your capacity as trustee. Under the Stock Transfer Agreement, the Purchased Shares
remain subject to the Company’s right of first refusal and may remain subject to the Company’s
right of repurchase at the exercise price, all in accordance with the applicable Notice of Stock
Option Grant and Stock Option Agreement.

The Company will not check to determine whether the form of ownership that you elect in your
Notice of Stock Option Exercise is appropriate. You should consult your own advisers on this
subject. If an inappropriate election is made, the form of ownership may not withstand legal
scrutiny or may have adverse tax consequences.

 6 

 

 

Explanation of Federal Income Tax Consequences and

Section 83(b) Election

(Current as of February 2002)

Purpose of this Explanation

The purpose of this explanation is to provide you with a brief summary of the tax consequences of
exercising your option. For a number of reasons, this explanation is no substitute for personal tax
advice:

	•	 	To make the explanation short and readable, only the highlights
are covered. Some tax rules are not addressed, even though they
may be important in particular cases.
	 
	•	 	While the summary attempts to deal with the most common
situations, your own tax situation may well be different from the
norm.
	 
	•	 	State and foreign income taxes are not addressed at all, even
though they could have a significant impact on your tax planning.
Likewise, federal gift and estate taxes and state inheritance
taxes are not discussed.
	 
	•	 	Tax planning involving incentive stock options is exceedingly
complex, in part because of the possible application of the
alternative minimum tax.
	 
	•	 	The explanation assumes that you are paying the exercise price of
your option in cash (or in the form of a full-recourse promissory
note with an interest rate that meets IRS requirements). If you
are paying the exercise price in the form of stock, you become
subject to special rules that are not addressed here.
	 
	•	 	The tax rules change often, and the Company is not responsible for
updating this summary.

For these reasons, the Company strongly encourages you to consult your own tax adviser before
exercising your option and before making a decision about filing or not filing a section 83(b)
election.

Limit on ISO Treatment

The Notice of Stock Option Grant indicates whether your option is a nonstatutory stock option (NSO)
or an incentive stock option (ISO). The favorable tax treatment for ISOs is limited, regardless of
what the Notice of Stock Option Grant indicates. Of the options that become exercisable in any
calendar year, only options covering the first $100,000 of stock are eligible for ISO treatment.
The excess over $100,000 automatically receives NSO treatment. For this purpose, stock is valued
at the time of grant. This means that the value is generally equal to the exercise price.

 7 

 

 

For example, assume that you hold an option to buy 50,000 shares for $4 per share. Assume further
that the entire option is exercisable immediately after the date of grant. (It is irrelevant when
the underlying stock vests.) Only the first 25,000 shares qualify for ISO treatment. (25,000 times
$4 equals $100,000.) The remaining 25,000 shares will be treated as if they had been acquired by
exercising an NSO. This is true regardless of when the option is
actually exercised; what matters
is when it first could have been exercised.

Exercise of Nonstatutory Stock Option to Purchase Vested Shares

The Notice of Stock Option Grant indicates whether your Purchased Shares are already vested.
Vested shares are no longer subject to the Company’s right to repurchase them at the exercise
price, although they are still subject to the Company’s right of first refusal. If you know that
your Purchased Shares are already vested, there is no need to file a section 83(b) election.

If you are exercising an NSO to purchase vested shares, you will be taxed now. You will recognize
ordinary income in an amount equal to the difference between (a) the fair market value of the
Purchased Shares on the date of exercise and (b) the exercise price you are paying. If you are an
employee or former employee of the Company, this amount is subject to withholding for income and
payroll taxes. Your tax basis in the Purchased Shares (to calculate capital gain when you sell the
shares) is equal to their fair market value on the date of exercise.

Exercise of NSO to Purchase Non-Vested Shares

If you are exercising an NSO to purchase non-vested shares, and if you do not file a timely
election under section 83(b) of the Internal Revenue Code, then you will not be taxed now.
Instead, you will be taxed whenever an increment of Purchased Shares vests — in other words, when
the Company no longer has the right to repurchase those shares at the exercise price. The Notice
of Stock Option Grant indicates when this occurs, generally over a period of several years.
Whenever an increment of Purchased Shares vests, you will recognize ordinary income in an amount
equal to the difference between (a) the fair market value of those Purchased Shares on the date of
vesting and (b) the exercise price you are paying for those Purchased Shares. If you are an
employee or former employee of the Company, this amount will be subject to withholding for income
and payroll taxes. Your tax basis in the Purchased Shares (to calculate capital gain when you sell
the shares) will be equal to their fair market value on the date of vesting.

If you are exercising an NSO to purchase non-vested shares, and if you file a timely election under
section 83(b) of the Internal Revenue Code, then you will be taxed now. You will recognize
ordinary income in an amount equal to the difference between (a) the fair market value of the
Purchased Shares on the date of exercise and (b) the exercise price you are paying. If you are an
employee or former employee of the Company, this amount is subject to withholding for income and
payroll taxes. Your tax basis in the Purchased Shares (to calculate capital gain when you sell the
shares) is equal to their fair market value on the date of exercise. Even if the fair market value
of the Purchased Shares on the date of exercise equals the exercise price (and thus no tax is
payable), the section 83(b) election must be made in order to avoid having any subsequent
appreciation taxed as ordinary income at the time of vesting.

 8 

 

 

You must file a section 83(b) election with the Internal Revenue Service within 30 days after
the Notice of Stock Option Exercise is signed. The 30-day filing period cannot be extended.
If you miss the deadline, you will be taxed as the Purchased Shares vest, based on the value of the
shares at that time. (See above.) The form for making the 83(b) election is attached. Additional
copies of the form must be filed with the Company and with your tax return for the year in which
you make the election.

Exercise of ISO and ISO Holding Periods

If you are
exercising an ISO, you will not be taxed under the regular tax rules until you dispose
of the Purchased Shares.1 (The alternative minimum tax rules are described below.) The
tax treatment at the time of disposition depends on how long you hold the shares. You will satisfy
the ISO holding periods if you hold the Purchased Shares until the
later of the following dates:

	•	 	The date two years after the ISO was granted, and
	 
	•	 	The date one year after the ISO is exercised.

Disposition of ISO Shares

If you
dispose of the Purchased Shares after satisfying both of the ISO holding periods, then you
will recognize only a long-term capital gain at the time of disposition. The amount of the capital
gain is equal to the difference between (a) the sales proceeds and (b) the exercise price. In
general, the maximum marginal federal income tax rate on long-term capital gains is 20%.

If you dispose of the Purchased Shares before either or both of the ISO holding periods are met,
then you will recognize ordinary income at the time of disposition. The calculation of the
ordinary income amount depends on whether the shares are vested at the time of exercise.

	•	 	Shares Vested. If the shares are vested at the time of exercise,
the amount of ordinary income will be equal to the difference
between (a) the fair market value of the Purchased Shares on the
date of exercise and (b) the exercise price. But if the
disposition is an arm’s length sale to an unrelated party, the
amount of ordinary income will not exceed the total gain from the
sale. Under current IRS rules, the ordinary income amount will
not be subject to withholding for income or payroll taxes. Your
tax basis in the Purchased Shares will be equal to their fair
market value on the date of exercise. Any gain in excess of your
basis will be taxed as a capital gain — either long-term or
short-term, depending on how long you hold the Purchased Shares
after the date of exercise.
	 
	•	 	Shares Not Vested—No 83(b) Election Filed. If the Purchased
Shares are not vested at the time of exercise, and if you do not
file a timely election under section 83(b) of the Internal Revenue
Code, then the amount of ordinary income will be equal to the
difference between

 

			
	1	 	Generally, a “disposition” of
shares purchased under an ISO encompasses any transfer of legal title, such as
a transfer by sale, exchange or gift. It generally does not include a transfer
to your spouse, a transfer into joint ownership with right of survivorship (if
you remain one of the joint owners), a pledge, a transfer by bequest or
inheritance, or certain tax-free exchanges permitted under the Internal Revenue
Code. A transfer to a trust is a “disposition” unless the trust is
an eligible revocable trust, as described in the attached explanation.

 9 

 

 

(a) the fair market value of the Purchased Shares on the date of vesting and (b) the exercise
price. But if the disposition is an arm’s length sale to an unrelated party, the amount of
ordinary income will not exceed the total gain from the sale. Under current IRS rules, the
ordinary income amount will not be subject to withholding for income or payroll taxes. Your tax
basis in the Purchased Shares will be equal to their fair market value on the date of vesting.
Any gain in excess of your basis will be taxed as a capital gain — either long-term or
short-term, depending on how long you hold the Purchased Shares after the date of vesting.

	•	 	Shares Not Vested—Timely 83(b) Election Filed. If the shares are not vested at the time of
exercise, and if you file a timely election under section 83(b) of the Internal Revenue Code,
then the amount of ordinary income should be equal to the difference between (a) the fair
market value of the Purchased Shares on the date of exercise and (b) the exercise price. In
other words, the 83(b) election should cause the ordinary income to
be calculated as if the shares were vested at the time of exercise. All other rules described above for the purchase
of vested shares by exercising an ISO apply here as well.
You must file an 83(b) election
with the Internal Revenue Service within 30 days after the Notice of Stock Option Exercise is
signed. The 30-day filing period cannot be extended. Note that, in the case of an ISO,
the 83(b) election does not trigger an immediate tax; it merely affects how the ordinary
income should be calculated when you dispose of the Purchased Shares. If you miss the filing
deadline, the amount of your ordinary income will be based on the value of the Purchased
Shares at the time they vest. (See above.) The form for making the 83(b) election is
attached. Additional copies of the form must be filed with the Company and with your tax
return for the year in which you make the election.

You may not know at this time whether you will dispose of your Purchased Shares before meeting the
two holding periods. You should nevertheless consider filing an 83(b) election. If you meet the
holding periods, the election will be moot for purposes of the
regular tax system, since you will
have no ordinary income. (The effect of the election under the alternative minimum tax system is
discussed below.) If you do not satisfy the holding periods, then the election should take effect
and should limit your ordinary income to the gain that existed at the time of exercise.

It is not certain that an 83(b) election is effective in conjunction with an ISO. The
Internal Revenue Service may take the position that the 83(b) election — even if filed on time —
must be disregarded for purposes of the regular tax system. The Company strongly encourages you to
consult your own tax adviser before exercising an ISO and before making a decision about filing or
not filing a section 83(b) election in conjunction with an ISO.

Summary of Alternative Minimum Tax

The alternative minimum tax (AMT) must be paid if it exceeds your regular income tax. The AMT is
equal to 26% of your alternative minimum tax base up to $175,000 and 28% of the excess over
$175,000. (In the case of married individuals filing separately, the breakpoint is $87,500 rather
than $175,000.) Your alternative minimum tax base is equal to your alternative

 10 

 

 

minimum taxable income (AMTI) minus your exemption amount.

	•	 	Alternative Minimum Taxable Income. Your AMTI is equal to your regular taxable income, subject to
certain adjustments and increased by items of tax preference. Among the many adjustments made in
computing AMTI are the following:

	 	•	 	State and local income and property taxes are not allowed as a deduction.
	 
	 	•	 	Miscellaneous itemized deductions are not allowed.
	 
	 	•	 	Medical expenses are not allowed as a deduction until they exceed 10% of
adjusted gross income (as opposed to the 7.5% floor that applies to regular income taxes).
	 
	 	•	 	Certain interest deductions are not allowed.
	 
	 	•	 	The standard deduction and personal exemptions are not allowed.
	 
	 	•	 	When an ISO is exercised, the spread is treated as if the option were an NSO.
(See discussion below.)

	•	 	Exemption Amount. Before AMT is calculated, AMTI is reduced by the exemption amount. The
exemption amount is as follows:

	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 
	 	 	Joint Returns:	 	Single Returns:	 	Separate Returns:
	Through 2004
	 	$	49,000	 	 	$	36,750	 	 	$	24,500	 
	 	 	 	 
	After 2004
	 	$	45,000	 	 	$	33,750	 	 	$	22,500	 
	 	 	 	 

The exemption amount is phased out by 25 cents for each $1 by which AMTI exceeds the following
levels:

	 	 	 	 	 
	Joint Returns: $150,000

	 	Single Returns: $112,500
	Separate Returns: $75,000

This means, for example, that the entire $45,000 exemption amount disappears for married
individuals filing joint returns when AMTI reaches $330,000.

Application of AMT when ISO is Exercised

As noted above, when an ISO is exercised, the spread is treated for AMT purposes as if the option
were an NSO. In other words, the spread is included in AMTI at the time of exercise, unless the
Purchased Shares are not yet vested at the time of exercise. If the Purchased Shares are not yet
vested, the value of the shares minus the exercise price is included in AMTI when the shares vest.
If you make an election under section 83(b) within 30 days after exercise, then the spread is
included in AMTI at the time of exercise.
You must file an 83(b) election with the Internal
Revenue Service within 30 days after the Notice of Stock Option Exercise is signed. The 30-day
filing period cannot be extended.

 11 

 

 

A special rule applies if you dispose of the Purchased Shares in the same year in which you
exercised the ISO. If the amount you realize on the sale is less than the value of the stock at the
time of exercise, then the amount includible in AMTI on account of the ISO exercise is limited to
the gain realized on the sale.2

To the extent that your AMT is attributable to the spread on exercising an ISO (and certain other
items), the AMT paid may be applied as a credit against your
regular income tax liability in future
years. But this tax credit cannot reduce your regular income tax liability in any future tax year
below your AMT for that year. The AMT credit may be carried forward indefinitely, but it may not
be carried back. (In practice, many optionees who paid AMT upon exercising an ISO find that they
cannot fully use this tax credit for many years, if at all.)

When Purchased Shares are sold, your basis for purposes of computing the capital gain or loss under
the AMT system is increased by the option spread that exists at the time of exercise. Again, an
ISO is treated under the AMT system much like an NSO is treated under the regular tax system. But
your basis in the ISO shares for purposes of computing gain or loss under the regular tax system is
equal to the exercise price; it does not reflect any AMT that you pay on the spread at exercise.
Therefore, if you pay AMT in the year of the ISO exercise and regular income tax in the year of
selling the Purchased Shares, you could pay tax twice on the same gain (except to the extent that
you can use the AMT credit described above).

 

			
	2	 	This is similar to the rule that applies
under the regular tax system in the event of a disqualifying disposition of ISO
stock. The amount of ordinary income that must be recognized in that case
generally does not exceed the amount of the gain realized in the disposition.

 12 

 

 

Section 83(b) Election

This statement is made under Sections 55 and 83(b) of the Internal Revenue Code of 1986, as
amended, pursuant to Treasury Regulations Section 1.83-2.

	 	A.	 	The taxpayer who performed the services is:
	 
	 	 	 	Name:                                                                 
	 
	 	 	 	Address:                                                             
	 
	 	 	 	
                                                                            
	 
	 	 	 	Social Security No.:                                            
	 
	 	B.	 	The property with respect to which the election is made is                     shares of the common
stock of ArcSight, Inc.
	 
	 	C.	 	The property was transferred on     
            
            
                                  ,      
               .
	 
	 	D.	 	The taxable year for which the election is made is the calendar year                     .
	 
	 	E.	 	The property is subject to a repurchase right pursuant to which the issuer has
the right to acquire the property at the original purchase price if for any reason
taxpayer’s service with the issuer terminates. The issuer’s repurchase right lapses in
a series of installments over a        
              -year period ending on                                         ,    
                 .
	 
	 	F.	 	The fair market value of such property at the time of transfer (determined
without regard to any restriction other than a restriction which by its terms will
never lapse) is $                     per share.
	 
	 	G.	 	The amount paid for such property is $                     per share.
	 
	 	H.	 	A copy of this statement was furnished to ArcSight, Inc., for whom taxpayer
rendered the services underlying the transfer of such property.
	 
	 	I.	 	This statement is executed on                                                               ,               
       .

	 	 	 
	 

	 	 
	Signature of Spouse (if any)

	 	Signature of Taxpayer

Within 30 days after the date of exercise, this election must be filed with the Internal Revenue
Service Center where the Optionee files his or her federal income tax returns. The filing should
be made by registered or certified mail, return receipt requested. The Optionee must (a) file a
copy of the completed form with his or her federal tax return for the current tax year and (b)
deliver an additional copy to the Company.

 13exv10w17

 

Exhibit 10.17

LEASE AGREEMENT

between

ECI TWO RESULTS LLC,

as “Landlord”

and

ARCSIGHT, INC.

as “Tenant”

 

 

TABLE OF CONTENTS

i

 

TABLE OF CONTENTS

	 	 	 	 	 	 	 
	SECTION	 	 	 	PAGE	 
	1.	 	PREMISES, PROJECT, CAMPUS AND COMMON AREAS
	 	 	5	 
	2.	 	TERM
	 	 	5	 
	3.	 	RENT
	 	 	6	 
	4.	 	SECURITY DEPOSIT
	 	 	11	 
	5.	 	USE AND COMPLIANCE WITH LAWS
	 	 	11	 
	6.	 	TENANT IMPROVEMENTS & ALTERATIONS
	 	 	14	 
	7.	 	MAINTENANCE AND REPAIRS
	 	 	16	 
	8.	 	TENANT’S TAXES
	 	 	18	 
	9.	 	UTILITIES AND SERVICES
	 	 	18	 
	10.	 	EXCULPATION AND INDEMNIFICATION
	 	 	20	 
	11.	 	INSURANCE
	 	 	21	 
	12.	 	DAMAGE OR DESTRUCTION
	 	 	23	 
	13.	 	CONDEMNATION
	 	 	25	 
	14.	 	ASSIGNMENT AND SUBLETTING
	 	 	26	 
	15.	 	DEFAULT AND REMEDIES
	 	 	29	 
	16.	 	LATE CHARGE AND INTEREST
	 	 	31	 
	17.	 	WAIVER
	 	 	32	 
	18.	 	ENTRY, INSPECTION AND CLOSURE
	 	 	32	 
	19.	 	SURRENDER AND HOLDING OVER
	 	 	33	 
	20.	 	ENCUMBRANCES
	 	 	34	 
	21.	 	ESTOPPEL CERTIFICATES AND FINANCIAL STATEMENTS
	 	 	35	 
	22.	 	NOTICES
	 	 	35	 
	23.	 	ATTORNEYS’ FEES
	 	 	35	 
	24.	 	QUIET POSSESSION
	 	 	36	 
	25.	 	SECURITY MEASURES
	 	 	36	 
	26.	 	FORCE MAJEURE
	 	 	36	 
	27.	 	RULES AND REGULATIONS
	 	 	37	 
	28.	 	LANDLORD’S LIABILITY
	 	 	37	 
	29.	 	CONSENTS AND APPROVALS
	 	 	37	 
	30.	 	WAIVER OF RIGHT TO JURY TRIAL
	 	 	37	 
	31.	 	BROKERS
	 	 	38	 
	32.	 	RELOCATION OF PREMISES
	 	 	38	 
	33.	 	MISCELLANEOUS
	 	 	38	 
	34.	 	AUTHORITY
	 	 	38	 
	35.	 	HAZARDOUS SUBSTANCE DISCLOSURE
	 	 	39	 
	36.	 	ENTIRE AGREEMENT
	 	 	39	 

-i-

 

INDEX OF DEFINED TERMS

	 	 	 	 	 
	 
	 	 	 	 
	Additional Rent
	 	 	9	 
	Affiliate
	 	 	30	 
	Alterations
	 	 	15	 
	Annual Expenses
	 	 	10	 
	Award
	 	 	25	 
	Broker
	 	 	39	 
	Building
	 	 	5	 
	Building Rules
	 	 	38	 
	Building Systems
	 	 	12	 
	Campus
	 	 	5	 
	Claims
	 	 	21	 
	Common Areas
	 	 	5	 
	Condemnation
	 	 	25	 
	Condemnor
	 	 	25	 
	Construction Rider
	 	 	15	 
	Control
	 	 	30	 
	Controls
	 	 	18	 
	Date of Condemnation
	 	 	26	 
	Encumbrance
	 	 	35	 
	Environmental Losses
	 	 	13	 
	Environmental Requirements
	 	 	13	 
	Event of Default
	 	 	30	 
	Existing Premises
	 	 	5	 
	Existing Premises Commencement Date
	 	 	6	 
	Expansion Premises
	 	 	5	 
	Expansion Premises Commencement Date
	 	 	6	 
	Expiration Date
	 	 	6	 
	Fees
	 	 	36	 
	Handled by Tenant
	 	 	13	 
	Handling by Tenant
	 	 	13	 
	Hazardous Materials
	 	 	12	 
	HVAC
	 	 	12	 
	Interest Rate
	 	 	33	 
	Land
	 	 	5	 
	Landlord
	 	 	5	 
	Landlord Parties
	 	 	14	 
	Late Charge
	 	 	32	 
	Laws
	 	 	7	 
	Main Utility Lines
	 	 	5	 
	Minor Changes
	 	 	15	 
	Mortgagee
	 	 	35	 
	Newly Enacted Laws
	 	 	7	 
	Operating Costs
	 	 	6	 
	Parking Facility
	 	 	5	 
	Past Due Notice
	 	 	32	 
	Permitted Hazardous Materials
	 	 	13	 
	Permitted Transfer
	 	 	30	 
	Permitted Transferee
	 	 	30	 
	Premises
	 	 	5	 
	Premises Utilities
	 	 	19	 
	Project
	 	 	5	 
	Property Manager
	 	 	22	 
	Proposed Transferee
	 	 	27	 
	Rent
	 	 	11	 
	Rental Tax
	 	 	18	 
	Representatives
	 	 	13	 
	Security Deposit
	 	 	11	 
	Service Failure
	 	 	19	 
	Structural Elements
	 	 	17	 
	Taxes
	 	 	8	 
	Telecommunication Provider
	 	 	21	 
	Tenant
	 	 	5	 
	Tenant Improvements
	 	 	15	 
	Tenant’s Inspection
	 	 	10	 
	Tenant’s Inspection Notice
	 	 	10	 
	Tenant’s Share of the Building
	 	 	8	 
	Tenant’s Taxes
	 	 	18	 
	Term
	 	 	6	 
	Trade Fixtures
	 	 	16	 
	Transfer
	 	 	27	 
	Transfer Consideration
	 	 	28	 
	Transferee
	 	 	27	 
	Visitors
	 	 	13	 

ii

 

BASIC LEASE INFORMATION

	 	 	 
	Lease Date:

	 	For identification purposes only, the date of this Lease is
April 24, 2007
	 
	 	 
	Landlord:

	 	ECI TWO RESULTS LLC, a California limited liability company
	 
	 	 
	Tenant:

	 	ARCSIGHT, INC., a Delaware corporation
	 
	 	 
	Project:

	 	Site One at Results Way Corporate Park, consisting of four (4)
buildings containing a total of approximately 146,237 rentable
square feet, located at Two, Three, Four and Five Results Way,
Cupertino, CA 95014, and the land parcel(s) of approximately 8
acres on which such buildings and their associated parking
areas are situated, including “Common Areas” serving the
Project, which Common Areas consist of: driveways, sidewalks,
landscaping, parking and other common exterior areas available
for use by occupants.
	 
	 	 
	Campus:

	 	The Results Way Corporate Park, including the Project, and
approximately 12 acres adjacent to the Project, as more
particularly defined in Article 1 of the Lease
	 
	 	 
	Premises:

	 	The Premises consists of two (2) spaces, (a) one of which is
the Existing Premises, and (b) the other of which is the
Expansion Premises, both as defined below.
	 
	 	 
	 

	 	The Premises contains a total of approximately 79,629 rentable square
feet

	 	 	 
	Building Address of

Existing Premises:

	 	Five Results Way
	 
	 	 
	Existing Premises:

	 	The entire Building located at Five Results Way, and
containing approximately 44,320 rentable square feet
	 
	 	 
	Building
Address of 

Expansion Premises:

	 	Four Results Way
	 
	 	 
	Expansion Premises:

	 	The entire Building located at Four Results Way and
containing approximately 35,309 rentable square feet
	 
	 	 
	Existing Premises 

Commencement Date:

	 	May 1, 2007

1

 

	 	 	 
	Expansion Premises 

Commencement Date:

	 	October 1, 2007
	 
	 	 
	Term:

	 	Seventy-eight (78) full calendar months following the
Existing Premises Commencement Date
	 
	 	 
	Expiration Date:

	 	October 31, 2013
	 
	 	 
	Base Rent:
	 	 

	 	 	 	 	 
	 

	 	05/01/07 — day

immediately before the

Expansion Premises

Commencement Date:
	 	$81,992.00 per month
	 
	 	 	 	 
	 

	 	Expansion Premises

Commencement

Date — 04/30/08:
	 	$147,313.65 per month
	 
	 	 	 	 
	 

	 	05/01/08 — 04/30/09:
	 	$153,206.20 per month
	 

	 	05/01/09 — 04/30/10:
	 	$159,334.44 per month
	 

	 	05/01/10 — 04/30/11:
	 	$165,707.82 per month
	 

	 	05/01/11— 04/30/12:
	 	$172,336.13 per month
	 

	 	05/01/12 — 04/30/13:
	 	$179,229.58 per month
	 

	 	05/01/13 — 10/31/13:
	 	$186,398.76 per month

	 	 	 
	Maintenance,
Operating 

Costs and Taxes:

	 	This is a “triple net lease” where Tenant is
responsible for maintenance of specific portions of
the Premises, and reimbursing Landlord for
operating costs and taxes, all as more specifically
contained in the applicable provisions of the
Lease.
	 
	 	 
	Tenant’s Share of

each of the Buildings:

	 	100%
	 
	 	 
	Security Deposit:

	 	$200,000.00 cash, subject to reduction in steps to
$100,000.00 in accordance with the provisions
contained in Article 40 of Exhibit D attached
hereto, plus:
	 
	 	 
	 

	 	As additional security for Tenant’s obligations under this Lease, on
execution of this Lease Tenant shall deliver to Landlord a $800,000
letter of credit in accordance with the provisions of Article 4 of
this Lease, as more particularly described in Section 40 of Exhibit D
attached hereto.

2

 

	 	 	 
	Landlord’s Address

for Payment of Rent:

	 	ECI TWO RESULTS LLC

One Results Way

P.O. Box 301104

Los Angeles, CA 90030-1104
	 
	 	 
	Landlord’s Address 

for Notices:

	 	ECI TWO RESULTS LLC

c/o Embarcadero Capital Partners, LLC

1301 Shoreway Road, Suite 250

Belmont, CA 94002

Attn: John Hamilton
	 
	 	 
	 

	 	with a copy to:
	 
	 	 
	 

	 	Ed Cherry, Esq.

Cox Castle & Nicholson LLP

555 Montgomery Street, Suite 1500

San Francisco, CA 94111
	 
	 	 
	Tenant’s Address 

for Notices:

	 	ArcSight, Inc.

Five Results Way

Cupertino, CA 95014

Attn: Stewart Grierson, Chief Financial Officer
	 
	 	 
	Broker(s):

	 	Colliers International Services Group
	 
	 	 
	Property Manager:

	 	CB Richard Ellis
	 
	 	 

	 	 	 	 	 	 	 
	Additional Provisions:

	 	 	37.	 	 	Parking
	 

	 	 	38.	 	 	Right of First Offer
	 

	 	 	39.	 	 	Extension Option
	 

	 	 	40.	 	 	Letter of Credit and Security Deposit
	 

	 	 	41.	 	 	Satellite Dish or Dishes
	 

	 	 	42.	 	 	Signs

3

 

	 	 	 
	Exhibits:
	 	 
	Exhibit A-1:

	 	The Existing Premises
	Exhibit A-2:

	 	The Expansion Premises
	Exhibit A-3:

	 	The Campus
	Exhibit B:

	 	Construction Rider
	Exhibit B-2:

	 	Preliminary Space Plan
	Exhibit C:

	 	Building Rules
	Exhibit D:

	 	Additional Provisions
	Exhibit E:

	 	Form of Letter of Credit

     The Basic Lease Information set forth above is part of the Lease. In the event of any
conflict between any provision in the Basic Lease Information and the Lease, the Lease shall
control.

4

 

     THIS LEASE is made as of the Lease Date set forth in the Basic Lease Information, by and
between the Landlord identified in the Basic Lease Information (“Landlord”), and the Tenant
identified in the Basic Lease Information (“Tenant”). Landlord and Tenant hereby agree as follows:

     1. PREMISES, PROJECT, CAMPUS AND COMMON AREAS.

          1.1 Leasing of the Premises. Landlord hereby leases to Tenant, and Tenant hereby
leases from Landlord, upon the terms and subject to the conditions of this Lease, the space
identified in the Basic Lease Information as the Existing Premises (the “Existing Premises”), and
the Expansion Premises (the “Expansion Premises”) in the buildings located at the addresses
specified in the Basic Lease Information (individually and together, the “Building”). The Existing
Premises and the Expansion Premises together constitute the Premises (the “Premises”). The
approximate configuration and location of the Existing Premises is shown on Exhibit A-1.
The approximate configuration and location of the Expansion Premises is shown on Exhibit
A-2. Landlord and Tenant agree that the rentable area of the Existing Premises, the Expansion
Premises and each Building for all purposes under this Lease shall be the Rentable Areas specified
in the Basic Lease Information.

          1.2 The Project, Campus and Common Areas. Each Building is part of the Project
identified in the Basic Lease Information (the “Project”), which includes the parcel(s) of land on
which the Project is situated (the “Land”). Tenant shall have the non-exclusive right to use in
common with other tenants in the Project, subject to the rules and regulations contained in Exhibit
C, those portions of the Project, including the parking facilities serving the Project (the
“Parking Facility”), which are provided, from time-to-time, for use in common by Landlord, Tenant
and any other tenants in the Project (such areas are referred to herein as the “Common Areas”).
The Project is part of the Results Way Corporate Park (the “Campus”), which also includes several
buildings on approximately 12 acres of land adjacent to the Project. Certain of the Common Areas
serve the Campus as a whole in addition to the Project or the Building. The Common Areas include
the “Main Utility Lines”, consisting of the pipes, conduits, lines, trails and/or systems for
electricity, telephone, water, storm drain, gas and sewer services serving all or a part of the
Campus and located under or on portions of the Campus. A site plan showing the approximate
configuration of the Project and Campus is contained on Exhibit A-3.

          1.3 Use of Common Areas. The manner in which the Common Areas are maintained and
operated shall be at the sole discretion of Landlord and the use thereof shall be subject to any
easements, to any covenants, conditions and restrictions of record, and to such rules, regulations
and restrictions as Landlord may make from time to time. Landlord reserves the right to close
temporarily, make alterations or additions to, or change the location of elements of the Project
and the Common Areas provided that Tenant’s use of and access to the Premises and the Parking
Facility are not materially diminished, except for any temporary closing of the Common Areas or
Parking Facilities which materially limit Tenant’s access to the Premises for not more than three
(3) consecutive Business Days.

     2. TERM. Tenant has been occupying the Existing Premises pursuant to a sublease which expires
on April 30, 2007. The term of this Lease (the “Term”) shall commence on May 1, 2007 (the
“Existing Premises Commencement Date” and, unless sooner terminated,

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shall expire on the Expiration Date set forth in the Basic Lease Information (the “Expiration
Date”).

     The “Expansion Premises Commencement Date” shall be October 1, 2007. Notwithstanding the
foregoing, if Tenant occupies the Expansion Premises prior to October 1, 2007, Tenant shall not be
obligated to pay Base Rent for the Expansion Premises until October 1, 2007. Landlord shall not be
liable for any claims, damages or liabilities if the Expansion Premises are not ready for occupancy
by the Expansion Premises Commencement Date.

     3. RENT.

          3.1 Base Rent. Tenant agrees to pay to Landlord the Base Rent set forth in the Basic
Lease Information, without prior notice or demand, on the first day of each and every calendar
month during the Term, except that Base Rent for the first full calendar month in which Base Rent
is payable shall be paid upon Tenant’s execution of this Lease and Base Rent for any partial month
at the beginning of the Term shall be paid on the Commencement Date. Base Rent for any partial
month at the beginning or end of the Term shall be prorated based on the actual number of days in
the month.

     Tenant’s obligations to pay Base Rent and Additional Rent (as defined below) for the Existing
Premises shall commence on the Existing Premises Commencement Date. Tenant’s obligations to pay
Base Rent and Additional Rent for the Expansion Premises shall commence on the Expansion Premises
Commencement Date.

     If the Basic Lease Information provides for any change in Base Rent by reference to years or
months (without specifying particular dates), the change will take effect on the applicable annual
or monthly anniversary of the Commencement Date (which might not be the first day of a calendar
month).

     This Lease is intended to be a “net” lease, and the Base Rent shall be paid to Landlord
absolutely net of all costs and expenses, except to the extent expressly provided to the contrary
in this Lease. The provisions for payment of Operating Costs and Taxes are intended to pass on to
Tenant and to reimburse Landlord for all costs and expenses incurred in connection with the
ownership and operation of the Project and the Common Areas, except to the extent expressly
provided to the contrary in this Lease.

          3.2 Additional Rent: Operating Costs and Taxes.

               (a) Definitions.

                    (1) “Operating Costs” means all costs, expenditures, fees and charges of managing, operating,
maintaining and repairing the Building, including, for: (A) operation, maintenance and repairs
(including maintenance, repair and replacement of glass, the roof covering or membrane, and
landscaping); (B) utilities and services (including telecommunications facilities and equipment,
recycling programs and trash removal), and associated supplies and materials; (C) compensation
(including employment taxes and fringe benefits for persons at or below the level of property
manager or building engineer who perform duties in connection with such operation, management,
maintenance and repair, such

6

 

compensation to be appropriately allocated for persons who also perform unrelated duties; (D)
property (including coverage for earthquake and flood if carried by Landlord), liability, rental
income and other insurance relating to the Building, and expenditures for commercially reasonable
deductible amounts under such insurance; (E) licenses, permits and inspections; (F) complying with
the requirements of any law, statute, ordinance or governmental rule or regulation or any orders
pursuant thereto (collectively “Laws”) either (i) not in effect as of the Commencement Date or (ii)
as any Laws in effect as of the Commencement Date may be amended, changed, added to, interpreted or
re-interpreted by applicable governmental authority or court decision, or administrative ruling
subsequent to the Commencement Date (such [i] and [ii] being herein called “Newly Enacted Laws” ”;
(G) amortization, over such useful life as Landlord reasonably determines, with interest on the
unamortized balance at ten percent (10%) per annum, of the cost of capital improvements made or
required to comply with Laws, or to reduce Operating Costs or improve the utility, efficiency or
capacity of any Building System, or otherwise for the safety, comfort and convenience of tenants,
or which are required to comply with conservation programs, except as provided in Section 7.2 of
this Lease; (H) property management fees equal to three percent (3%) of gross revenue receivable by
Landlord (and not payable by tenants to third parties); (I) accounting, legal, engineering and
other professional services; (J) a reasonable allowance for depreciation on machinery and equipment
used for operation and maintenance, and other personal property owned by Landlord in the Building
(including window coverings and carpeting in common areas); (K) any cost incurred at the Project or
Campus level that is exclusively for the benefit of the Building or any other building; and (L) any
other cost, expenditure, fee or charge, whether or not hereinbefore described, which in accordance
with generally accepted property management practices would be considered an expense of managing,
operating, maintaining and repairing the Building. Operating Costs shall also include (but without
duplication) those costs, expenditures, fees and charges of the same type and nature as items (A)
through (L) in the foregoing sentence that are incurred at the Project level or Campus level to the
extent the same are equitably allocated to the Building, including by way of example, (M) the cost
to maintain an office for the management of the Project or Campus, including expenses of furnishing
and equipping such office and the rental value of any space occupied for such purposes; (N)
accounting, legal and other professional fees incurred in connection with the operation of the
Project or Campus; (O) a reasonable allowance for depreciation of machinery and equipment used to
maintain the Project or Campus; (P) any shared Project or Campus costs or Common Area maintenance
costs and expenses (including costs and expenses of operating, managing, owning and maintaining the
Main Utility Lines, the Common Areas, and non-building specific costs, and the Parking Facility of
the Project and Campus); and (Q) the cost of maintaining and operating any associations created
under any covenants, conditions and restrictions governing the Building, Project or Campus.

     Operating Costs for the Building for any calendar year during which average occupancy of the
Building is less than one hundred percent (100%) shall be calculated based upon the Operating Costs
that would have been incurred if the Building had an average occupancy of one hundred percent
(100%) during the entire calendar year.

     Operating Costs for the Project or Campus for any calendar year during which average occupancy
of the Project or Campus is less than one hundred percent (100%) shall be calculated based upon the
Operating Costs that would have been incurred if the Project had an average occupancy of one
hundred percent (100%) during the entire calendar year.

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     Operating Costs shall not include (i) capital improvements (except as specifically enumerated
above); (ii) costs of special services rendered to individual tenants (including Tenant) for which
separate, direct reimbursement is made; (iii) costs of electricity and other services sold or
provided to individual tenants (including Tenant) and for which Landlord is reimbursed by such
tenants as a separate additional charge or rental over and above the basic rent or escalation
payment payable under the Lease with such tenant; (iv) ground rent, and interest and principal
payments on loans or indebtedness secured by any part of the Campus; (v) costs of tenant
improvements for Tenant or other tenants of the Campus; (vi) costs of services or other benefits of
a type which are not available to Tenant but which are available to other tenants or occupants
without special, separate charge; (vii) leasing commissions, attorneys’ fees and other expenses
incurred in connection with leasing space in the Campus or enforcing such leases; (viii)
depreciation or amortization, other than as specifically enumerated above; and (ix) fines or
penalties incurred due to Landlord’s violation of any Law.

                    (2) “Taxes” means that portion of the following taxes on the Project which are allocable to
the Building in Landlord’s reasonable judgment: all real property taxes and general, special or
district assessments or other governmental impositions, of whatever kind, nature or origin, imposed
on or by reason of the ownership or use of the Project; governmental charges, fees or assessments
for transit or traffic mitigation (including area-wide traffic improvement assessments and
transportation system management fees), housing, police, fire or other governmental service or
purported benefits to the Project; personal property taxes assessed on the personal property of
Landlord used in the operation of the Project; service payments in lieu of taxes and taxes and
assessments of every kind and nature whatsoever levied or assessed in addition to, in lieu of or in
substitution for existing or additional real or personal property taxes on the Project or the
personal property described above; any increases in the foregoing caused by changes in assessed
valuation, tax rate or other factors or circumstances (in which case Taxes will be as finally
determined after any appeals); and the reasonable cost of contesting by appropriate proceedings the
amount or validity of any taxes, assessments or charges described above. To the extent paid by
Tenant or other tenants as “Tenant’s Taxes” (as defined in Section 8 — Tenant’s Taxes), “Tenant’s
Taxes” shall be excluded from Taxes.

                    (3) “Tenant’s Share of the Building” means the Rentable Area of the Premises divided by the
total Rentable Area of the Building, as set forth in the Basic Lease Information. If the Rentable
Area of the Premises is changed by Tenant’s leasing of additional space hereunder or for any other
reason, Tenant’s Share shall be adjusted accordingly.

               (b) Additional Rent.

                    (1) Tenant shall pay Landlord as “Additional Rent” for each calendar year or portion thereof
during the Term Tenant’s Share of the sum of (x) the amount of Operating Costs, and (y) the amount
of Taxes.

                    (2) Prior to the Existing Premises Commencement Date and each calendar year thereafter,
Landlord shall notify Tenant of Landlord’s estimate of Operating Costs, Taxes and Tenant’s
Additional Rent for the following calendar year (or first partial year following the Commencement
Date). If Landlord later estimates that Operating Costs or Taxes for such year will vary from
Landlord’s prior estimate, Landlord may, by notice to Tenant, revise

8

 

the estimate for such year (and Additional Rent shall thereafter be payable based on the
revised estimate).

                    Commencing on (a) the Existing Premises Commencement Date with respect to the Existing
Premises, and (b) the Expansion Premises Commencement Date with respect to the Expansion Premises,
and continuing on the first day of every month thereafter in such year, Tenant shall pay to
Landlord one-twelfth (1/12th) of the Additional Rent, as reasonably estimated by Landlord for such
full calendar year.

                    In calendar years following the initial partial year, commencing on the first day of January
of each calendar year and continuing on the first day of every month thereafter in such year,
Tenant shall pay to Landlord one-twelfth (1/12th) of the Additional Rent, as reasonably estimated
by Landlord for such full calendar year.

                    (3) As soon as reasonably practicable after the end of each calendar year, Landlord shall
furnish Tenant a statement with respect to such year, showing Operating Costs, Taxes and Additional
Rent for the year, and the total payments made by Tenant with respect thereto. Unless Tenant
raises any objections to Landlord’s statement within ninety (90) days after receipt of the same,
such statement shall conclusively be deemed correct and Tenant shall have no right thereafter to
dispute such statement or any item therein or the computation of Additional Rent based thereon. If
Tenant does object to such statement, then Landlord shall provide Tenant with reasonable
verification of the figures shown on the statement and the parties shall negotiate in good faith to
resolve any disputes. Any objection of Tenant to Landlord’s statement and resolution of any
dispute shall not postpone the time for payment of any amounts due Tenant or Landlord based on
Landlord’s statement, nor shall any failure of Landlord to deliver Landlord’s statement in a timely
manner relieve Tenant of Tenant’s obligation to pay any amounts due Landlord based on Landlord’s
statement.

                    (4) If Tenant’s Additional Rent as finally determined for any calendar year exceeds the total
payments made by Tenant on account thereof, Tenant shall pay Landlord the deficiency within ten
(10) days of Tenant’s receipt of Landlord’s statement. If the total payments made by Tenant on
account thereof exceed Tenant’s Additional Rent as finally determined for such year, Tenant’s
excess payment shall be credited toward the rent next due from Tenant under this Lease. For any
partial calendar year at the beginning or end of the Term, Additional Rent shall be prorated on the
basis of a 360-day year by computing Tenant’s Share of Operating Costs and Taxes for the entire
year and then prorating such amount for the number of days during such year included in the Term.
The obligations of Landlord to refund any overpayment of Additional Rent and of Tenant to pay any
Additional Rent not previously paid shall survive the expiration or termination of this Lease.
Landlord shall pay to Tenant or Tenant shall pay to Landlord, as the case may be, within ten (10)
days after Tenant’s receipt of Landlord’s final statement for the calendar year in which this Lease
terminates, the difference between Tenant’s Additional Rent for that year, as finally determined by
Landlord, and the total amount previously paid by Tenant on account thereof.

               If for any reason Taxes for any year during the Term are reduced, refunded or otherwise
changed, Tenant’s Additional Rent shall be adjusted accordingly. If Taxes are temporarily reduced
as a result of space in the Project being leased to a tenant that is entitled

9

 

to an exemption from property taxes or other taxes, then for purposes of determining
Additional Rent for each year in which Taxes are reduced by any such exemption, Taxes for such year
shall be calculated on the basis of the amount the Taxes for the year would have been in the
absence of the exemption. The obligations of Landlord to refund any overpayment of Additional Rent
and of Tenant to pay any Additional Rent not previously paid shall survive the expiration of the
Term.

               (c) For a period of sixty (60) days after receipt of a statement of Operating Costs, Taxes and
Additional Rent (“Annual Expenses”), Tenant shall be entitled, upon not less than ten (10) days’
prior written notice to Landlord (“Tenant’s Inspection Notice”) to inspect and examine Landlord’s
books and records relating to the determination of Annual Expenses for the immediately preceding
year (“Tenant’s Inspection”), subject to the following terms and conditions: (a) Tenant shall not
conduct Tenant’s Inspection at any time that Tenant is in default of any of the terms of this
Lease; (b) Tenant’s Inspection shall be done during normal business hours, at the office of the
property manager for the Building, (c) Tenant shall not conduct Tenant’s Inspection more than one
(1) time for any calendar year, and (d) Tenant’s Inspection Notice shall specify in detail which
items of expense Tenant, in good faith, believes have been misstated. Tenant acknowledges that
Tenant’s right to conduct Tenant’s Inspection for the preceding calendar year is for the exclusive
purpose of determining whether Landlord has complied with the terms of the Lease with respect to
Annual Expenses. Within fifteen (15) business days after receipt of Tenant’s Inspection Notice,
Landlord will provide copies of or give Tenant reasonable access to those documents and date as
Landlord reasonably believes relate to the expense items specified in Tenant’s Inspection Notice.
If Landlord affords access to such documents and data, Tenant shall not remove such materials from
the location where the same have been made available, but Tenant shall have the right to make
copies of the same at Tenant’s expense. Tenant shall have thirty (30) days after Landlord shall
have provided copies of or access to the relevant documents and data as aforesaid to complete
Tenant’s Inspection. Tenant shall deliver to Landlord a copy of the results of Tenant’s Inspection
within thirty (30) days conducting Tenant’s Inspection. Failure of Tenant to request an inspection
within the above sixty (60)-day period shall render the statement of Annual Expenses conclusive and
binding on Tenant for all purposes. If, after conducting Tenant’s Inspection, Tenant disputes the
amount of Annual Expenses charged by Landlord, Tenant may, by written notice to Landlord, request
an independent audit of such books and records. The independent audit of the books and records
shall be conducted by a certified public accountant (“CPA”) reasonably acceptable to both Landlord
and Tenant. If, within thirty (30) days after Landlord’s receipt of Tenant’s notice requesting an
audit, Landlord and Tenant are unable to agree on the CPA to conduct such audit, then Landlord may
designate a “Big Five” accounting firm not then employed by Landlord or Tenant to conduct the
audit. The audit shall be limited to the determination of the amount of Annual Expenses for the
subject year. If the audit discloses that the amount of Annual Expenses billed to Tenant was
incorrect, the appropriate party shall pay to the other party the deficiency or overpayment, as
applicable. All costs and expenses of the audit shall be paid by Tenant unless the audit shows
that Landlord overstated Annual Expenses for the subject year by more than five percent (5%), in
which case Landlord shall pay all costs and expenses of the audit. Tenant and the CPA shall keep
the information gained from any audit confidential and shall not disclose it to any other party.
Tenant’s Inspection and any exercise by Tenant of the audit rights hereunder shall not relieve
Tenant of its obligation to

10

 

timely pay all sums due under this Lease, including, without limitation, the disputed Excess
Expenses.

          3.3 Payment of Rent. All amounts payable or reimbursable by Tenant under this Lease,
including late charges and interest (collectively, “Rent”), shall constitute rent and shall be
payable and recoverable as rent in the manner provided in this Lease. All sums payable to Landlord
on demand under the terms of this Lease shall be payable within ten (10) days after Landlord
invoices Tenant therefor or otherwise makes demand of the amounts due. All rent shall be paid
without offset or deduction in lawful money of the United States of America to Landlord at
Landlord’s Address for Payment of Rent as set forth in the Basic Lease Information, or to such
other person or at such other place as Landlord may from time to time designate.

     4. SECURITY DEPOSIT. On execution of this Lease, Tenant shall deposit with Landlord the
amount specified in the Basic Lease Information and the letter of credit identified in Section 40
below as the Security Deposit (collectively, the “Security Deposit”), as security for the
performance of Tenant’s obligations under this Lease. Landlord may (but shall have no obligation
to) use the Security Deposit or any portion thereof to cure any breach or default by Tenant under
this Lease, to fulfill any of Tenant’s obligations under the Lease, or to compensate Landlord for
any damage it incurs as a result of Tenant’s failure to perform any of Tenant’s obligations
hereunder. In such event, Tenant shall pay to Landlord on demand an amount sufficient to replenish
the Security Deposit to the full amount of the cash specified in the Basic Lease Information and
the applicable Face Amount (defined in Section 40 below) of the letter of credit. If at the
expiration or termination of this Lease, Tenant is not in default, has otherwise fully performed
all of Tenant’s obligations under this Lease, and there are no outstanding Claims (defined in
Section 10.1 below, and including all existing and potential Claims) for which Tenant is
responsible, Landlord shall return to Tenant the Security Deposit or the balance thereof then held
by Landlord and not applied as provided above. Landlord may commingle the Security Deposit with
Landlord’s general and other funds. Landlord shall not be required to pay interest on the Security
Deposit to Tenant. Tenant acknowledges that Landlord has agreed to accept a letter of credit in
lieu of an additional cash deposit as an accommodation to Tenant. Tenant waives the provisions of
Section 1950.7 of the California Civil Code, and all other provisions of Law now in force or that
become in force after the date of this Lease, which provide that Landlord may claim from a security
deposit only those sums reasonably necessary to remedy defaults in the payment of Rent, to repair
damage caused by Tenant, or to clean the Premises. Landlord and Tenant agree that Landlord may, in
addition, claim and use those sums necessary to compensate Landlord for any foreseeable or
unforeseeable loss or damage caused by the act or omission by Tenant, including, without
limitation, any post default damages and such remedies to which Landlord is entitled under the
provisions of Section 15.2 of this Lease.

     5. USE AND COMPLIANCE WITH LAWS.

          5.1 Use. The Premises shall be used and occupied for the purposes of (a) general
business office, (b) computer programming and related development, (c) customer training and
support, and (d) sales and marketing, and for no other use or purpose. Tenant shall comply with
all present and future Laws relating to Tenant’s use or occupancy of the Premises and make any
repairs, alterations or improvements as required to comply with all such Laws to the extent that
such Laws relate to or are triggered by (a) Tenant’s particular use of the Premises

11

 

(as opposed to general office use), or (b) any Alterations. Tenant shall observe the
“Building Rules” (as defined in Section 27 — Rules and Regulations). Tenant shall not do, bring,
keep or sell anything in or about the Premises that is prohibited by, or that will cause a
cancellation of or an increase in the existing premium for, any insurance policy covering the
Building or any part thereof. Tenant shall not permit the Premises to be occupied or used in any
manner that will constitute waste or a nuisance, or disturb the quiet enjoyment of or otherwise
annoy other tenants in the Building. Without limiting the foregoing, the Premises shall not be
used for educational activities, practice of medicine or any of the healing arts, providing social
services, for any governmental use (including embassy or consulate use), or for personnel agency,
customer service office, studios for radio, television or other media, travel agency or reservation
center operations or uses. Tenant shall not, without the prior consent of Landlord, (i) bring into
the Building or the Premises anything that may cause substantial noise, odor or vibration, overload
the floors in the Premises or the Building or any of the heating, ventilating and air-conditioning
(“HVAC”), mechanical, elevator, plumbing, electrical, fire protection, life safety, security or
other systems in the Building (“Building Systems”), or jeopardize the structural integrity of the
Building or any part thereof; (ii) connect to the utility systems of the Building any apparatus,
machinery or other equipment other than typical low power task lighting or office equipment; or
(iii) connect to any electrical circuit in the Premises any equipment or other load with aggregate
electrical power requirements in excess of 80% of the rated connected load capacity of the circuit.
Tenant’s use of electricity shall never exceed the safe capacity of the feeders to the Building or
the risers or wiring installation of the Building.

          5.2 Hazardous Materials.

               (a) Definitions.

                    (1) “Hazardous Materials” shall mean any substance: (A) that now or in the future is regulated
or governed by, requires investigation or remediation under, or is defined as a hazardous waste,
hazardous substance, pollutant or contaminant under any governmental statute, code, ordinance,
regulation, rule or order, and any amendment thereto, including the Comprehensive Environmental
Response Compensation and Liability Act, 42 U.S.C. §9601 et seq., and the Resource Conservation and
Recovery Act, 42 U.S.C. §6901 et seq., or (B) that is toxic, explosive, corrosive, flammable,
radioactive, carcinogenic, dangerous or otherwise hazardous, including gasoline, diesel fuel,
petroleum hydrocarbons, polychlorinated biphenyls (PCBs), asbestos, radon and urea formaldehyde
foam insulation.

                    (2) “Environmental Requirements” shall mean all present and future Laws, orders, permits,
licenses, approvals, authorizations and other requirements of any kind applicable to Hazardous
Materials.

                    (3) “Handled by Tenant” and “Handling by Tenant” shall mean and refer to any installation,
handling, generation, storage, use, disposal, discharge, release, abatement, removal,
transportation, or any other activity of any type by Tenant or its agents, employees, contractors,
licensees, assignees, sublessees, transferees or representatives (collectively, “Representatives”)
or its guests, customers, invitees, or visitors (collectively, “Visitors”), at or about the
Premises in connection with or involving Hazardous Materials.

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                    (4) “Environmental Losses” shall mean all costs and expenses of any kind, damages, including
foreseeable and unforeseeable consequential damages, fines and penalties incurred in connection
with any violation of and compliance with Environmental Requirements and all losses of any kind
attributable to the diminution of value, loss of use or adverse effects on marketability or use of
any portion of the Premises or Project.

               (b) Tenant’s Covenants. No Hazardous Materials shall be Handled by Tenant at or about
the Premises or Project without Landlord’s prior written consent, which consent may be granted,
denied, or conditioned upon compliance with Landlord’s requirements, all in Landlord’s absolute
discretion. Notwithstanding the foregoing, normal quantities and use of those Hazardous Materials
customarily used in the conduct of general office activities, such as copier fluids and cleaning
supplies (“Permitted Hazardous Materials”), may be used and stored at the Premises without
Landlord’s prior written consent, provided that Tenant’s activities at or about the Premises and
Project and the Handling by Tenant of all Hazardous Materials shall comply at all times with all
Environmental Requirements. At the expiration or termination of the Lease, Tenant shall promptly
remove from the Premises and Project all Hazardous Materials Handled by Tenant at the Premises or
the Project. Tenant shall keep Landlord fully and promptly informed of all Handling by Tenant of
Hazardous Materials other than Permitted Hazardous Materials. Tenant shall be responsible and
liable for the compliance with all of the provisions of this Section by all of Tenant’s
Representatives and Visitors, and all of Tenant’s obligations under this Section (including its
indemnification obligations under paragraph (e) below) shall survive the expiration or termination
of this Lease.

               (c) Compliance. Tenant shall at Tenant’s expense promptly take all actions required
by any governmental agency or entity in connection with or as a result of the Handling by Tenant of
Hazardous Materials at or about the Premises or Project, including inspection and testing,
performing all cleanup, removal and remediation work required with respect to those Hazardous
Materials, complying with all closure requirements and post-closure monitoring, and filing all
required reports or plans. All of the foregoing work and all Handling by Tenant of all Hazardous
Materials shall be performed in a good, safe and workmanlike manner by consultants qualified and
licensed to undertake such work and in a manner that will not interfere with any other tenant’s
quiet enjoyment of the Project or Landlord’s use, operation, leasing and sale of the Project.
Tenant shall deliver to Landlord prior to delivery to any governmental agency, or promptly after
receipt from any such agency, copies of all permits, manifests, closure or remedial action plans,
notices, and all other documents relating to the Handling by Tenant of Hazardous Materials at or
about the Premises or Project. If any lien attaches to the Premises or the Project in connection
with or as a result of the Handling by Tenant of Hazardous Materials, and Tenant does not cause the
same to be released, by payment, bonding or otherwise, within ten (10) days after the attachment
thereof, Landlord shall have the right but not the obligation to cause the same to be released and
any sums expended by Landlord (plus Landlord’s administrative costs) in connection therewith shall
be payable by Tenant on demand.

               (d) Landlord’s Rights. Landlord shall have the right, but not the obligation, to
enter the Premises at any reasonable time (i) to confirm Tenant’s compliance with the provisions of
this Section 5.2, and (ii) to perform Tenant’s obligations under this Section if Tenant has failed
to do so after reasonable notice to Tenant. Landlord shall also have the right to

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engage qualified Hazardous Materials consultants to inspect the Premises and review the
Handling by Tenant of Hazardous Materials, including review of all permits, reports, plans, and
other documents regarding same. If the reports of such consultants show that Tenant was in
violation of Tenant’s obligations under this Section 5.2 at the time of the consultants’
inspection, then Tenant shall pay to Landlord on demand the costs of Landlord’s consultants’ fees
and all reasonable actual, out-of-pocket costs incurred by Landlord in performing Tenant’s
obligations under this Section. Landlord shall use reasonable efforts to minimize any interference
with Tenant’s business caused by Landlord’s entry into the Premises, but Landlord shall not be
responsible for any interference caused thereby.

               (e) Tenant’s Indemnification. The term Landlord Parties (“Landlord Parties”) refers
singularly and collectively to Landlord and the shareholders, partners, venturers, and members of
Landlord, and the respective officers, directors, employees, managers, owners and any affiliates or
agents of such entities and persons. Tenant agrees to indemnify, defend, protect and hold harmless
the Landlord Parties from all Environmental Losses and all other claims, actions, losses, damages,
liabilities, costs and expenses of every kind, including reasonable attorneys’, experts’ and
consultants’ fees and costs, incurred at any time and arising from or in connection with the
Handling by Tenant of Hazardous Materials at or about the Project or Tenant’s failure to comply in
full with all Environmental Requirements with respect to the Premises.

               (f) Landlord’s Responsibility. If the presence of Hazardous Materials on the Project
in violation of Environmental Requirements is caused by Landlord or Landlord’s Representatives and
results in contamination of the Project such that Tenant’s ability to use and occupy the Premises
as provided in Section 5.1 is materially impaired, then Landlord shall promptly take those legally
required actions to investigate, remediate or contain such contamination to the extent necessary to
restore Tenant’s ability to use and occupy the Premises without material impairment. In such event
Tenant shall be entitled to an equitable abatement of rent to the extent and for so long as
Tenant’s use and occupancy of the Premises has been so materially impaired.

     6. TENANT IMPROVEMENTS & ALTERATIONS.

          6.1 Landlord and Tenant shall perform their respective obligations with respect to design and
construction of any improvements to be constructed and installed in the Premises (the “Tenant
Improvements”), as provided in the Construction Rider attached as Exhibit B (the
“Construction Rider”). Except for any Tenant Improvements to be constructed by Tenant as provided
in the Construction Rider, Tenant shall not make any alterations, improvements or changes to the
Premises, including installation of any security system or telephone or data communication wiring,
(“Alterations”), without Landlord’s prior written consent. Notwithstanding any other provision
contained herein, Tenant shall not be required to obtain Landlord’s prior consent for minor,
non-structural Alterations that (a) do not affect any of the Building Systems, (b) are not visible
from the exterior of the Premises, (c) do not affect the water tight character of the Building or
its roof, (d) do not require a building permit, (e) do not move any interior walls or otherwise
change the layout of the Premises, and (f) cost less than Twenty-Five Thousand Dollars ($25,000),
(collectively, “Minor Changes”) so long as Tenant gives Landlord notice of the proposed Minor
Change at least ten (10) days prior to commencing

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the Minor Change and complies with all of the following provisions (except that Tenant shall
not be required to obtain Landlord’s approval of any plans or specifications therefor). All
Alterations shall be completed by Tenant at Tenant’s sole cost and expense: (i) with due diligence,
in a good and workmanlike manner, using new materials; (ii) in compliance with plans and
specifications approved by Landlord; (iii) in compliance with the construction rules and
regulations promulgated by Landlord from time to time; (iv) in accordance with all applicable Laws
(including all work, whether structural or non-structural, inside or outside the Premises, required
to comply fully with all applicable Laws and necessitated by Tenant’s work); and (v) subject to all
conditions which Landlord may in Landlord’s discretion impose. Such conditions may include
requirements for Tenant to: (i) provide payment or performance bonds or additional insurance (from
Tenant or Tenant’s contractors, subcontractors or design professionals); (ii) use contractors or
subcontractors approved by Landlord, which approval shall not be unreasonably withheld, except that
Landlord shall have the right to designate contractors and subcontractors for Alterations affecting
either the structure of the Building, or the Building Systems; and (iii) remove all or part of the
Alterations prior to or upon expiration or termination of the Term, as designated by Landlord. At
the time Landlord consents to any Alterations, Landlord shall indicate which of Tenant’s
Alterations Tenant must remove at Tenant’s sole cost and expense at the end of the Term. If any
work outside the Premises, or any work on or adjustment to any of the Building Systems, is required
in connection with or as a result of Tenant’s work, such work shall be performed at Tenant’s
expense by contractors designated by Landlord. Landlord’s right to review and approve (or withhold
approval of) Tenant’s plans, drawings, specifications, contractor(s) and other aspects of
construction work proposed by Tenant is intended solely to protect Landlord, the Building and
Landlord’s interests. No approval or consent by Landlord shall be deemed or construed to be a
representation or warranty by Landlord as to the adequacy, sufficiency, fitness or suitability
thereof or compliance thereof with applicable Laws or other requirements. Except as otherwise
provided in Landlord’s consent, all Alterations shall upon installation become part of the realty
and be the property of Landlord.

          6.2 Before making any Alterations which require Landlord’s consent, Tenant shall submit to
Landlord for Landlord’s prior approval reasonably detailed final plans and specifications prepared
by a licensed architect or engineer, a copy of the construction contract, including the name of the
contractor and all subcontractors proposed by Tenant to make the Alterations and a copy of the
contractor’s license. Tenant shall reimburse Landlord upon demand for any out-of-pocket expenses
incurred by Landlord in connection with any Alterations made by Tenant, including reasonable fees
charged by Landlord’s contractors or consultants to review plans and specifications prepared by
Tenant and to update the existing as-built plans and specifications of the Building to reflect the
Alterations. Before commencement of any Alterations Tenant shall (i) obtain all applicable
permits, authorizations and governmental approvals and deliver copies of the same to Landlord, and
(ii) give Landlord at least ten (10) days prior written notice and shall cooperate with Landlord in
posting and maintaining notices of non-responsibility in connection with the Alterations. Within
thirty (30) days following the completion of any Alterations Tenant shall deliver to Landlord “as
built” plans showing the completed Alterations. The “as built” plans shall be “hard copy” on paper
and in digital form (if done on CAD), and show the Alterations in reasonable detail, including (a)
the location of walls, partitions and doors, including fire exits and ADA paths of travel, (b)
electrical, plumbing and

15

 

life safety fixtures, and (c) a reflected ceiling plan showing the location of heating,
ventilating and air conditioning registers, lighting and life safety systems.

          6.3 In connection with all Alterations requiring Landlord’s approval, or cost more than
Twenty-Five Thousand Dollars ($25,000), Landlord shall be entitled to a construction coordination
fee equal to four percent (4%) of the first one hundred thousand dollars ($100,000) of construction
costs, three percent (3%) of the next four hundred thousand dollars ($400,000) of construction
costs, and two percent (2%) of any additional construction costs. The construction coordination
fee shall be limited to one thousand dollars ($1,000.00) per week, commencing when Tenant first
contacts Landlord concerning any specific Alterations, and continuing until the specific
Alterations are completed.

          6.4 Tenant shall keep the Premises and the Project free and clear of all liens arising out of
any work performed, materials furnished or obligations incurred by Tenant. If any such lien
attaches to the Premises or the Project, and Tenant does not cause the same to be released by
payment, bonding or otherwise within ten (10) days after the attachment thereof, Landlord shall
have the right but not the obligation to cause the same to be released, and any sums expended by
Landlord (plus Landlord’s administrative costs) in connection therewith shall be payable by Tenant
on demand with interest thereon from the date of expenditure by Landlord at the Interest Rate (as
defined in Section 16.2 — Interest).

          6.5 Subject to the provisions of Section 5 — Use and Compliance with Laws and the other
provisions of this Section 6, Tenant may install and maintain furnishings, equipment, movable
partitions, business equipment and other trade fixtures (“Trade Fixtures”) in the Premises,
provided that the Trade Fixtures do not become an integral part of the Premises or the Building.
Tenant shall promptly repair any damage to the Premises or the Building caused by any installation
or removal of such Trade Fixtures.

     7. MAINTENANCE AND REPAIRS.

          7.1 By taking possession of the Existing Premises on the Existing Premises Commencement Date,
Tenant agrees that the Existing Premises are then in a good and tenantable condition. By taking
possession of the Expansion Premises Tenant agrees that the Expansion Premises are then in a good
and tenantable condition except for any latent defects. Except for maintenance and repairs
undertaken by Landlord as provided in Section 7.2 below, Tenant, at Tenant’s sole cost and expense,
shall maintain and repair the Premises (including the interior walls, floor coverings, ceiling
(ceiling tiles and grid), Tenant Improvements and Alterations, corridors, restrooms and fire
extinguishers), that portion of the Building Systems exclusively serving the Premises, and the
interior public and common areas of the Building, keeping the same in good and serviceable
condition and in compliance with all Laws and Environmental Regulations; provided, however,
Tenant’s maintenance and repair obligations shall not include work in the nature of capital
repairs, capital replacements or capital improvements under generally accepted accounting
principles as reasonably determined by Landlord. Landlord shall undertake the capital repairs,
replacements and improvements when necessary as determined in Landlord’s good faith discretion,
subject to reimbursement in Operating Costs in accordance with Section 3.2 of this Lease, or
otherwise as provided in this Lease. Upon request by Landlord, Tenant agrees to provide to
Landlord (a) reasonable access to the Premises for

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inspections, and (b) appropriate evidence that Tenant is fulfilling its maintenance and repair
obligations in this Section 7.1 and any other applicable provisions of the Lease. The evidence
that Tenant is fulfilling its maintenance and repair obligations includes maintenance contracts,
logs, inspection and test reports, and similar documentation. If Tenant fails to perform Tenant’s
maintenance and repair obligations, then Landlord shall have the right to perform Tenant’s
maintenance and repairs commencing thirty (30) days after Landlord has given Tenant written notice
thereof (or after a shorter notice period as is reasonable under the circumstances if Tenant’s
failure constitutes a violation of any Laws or Environmental Requirements, jeopardize the
structural or watertight integrity of the Building, or otherwise might materially adversely affect
the Building, Building Systems or Project). Tenant shall pay the cost of repairs for any damage
occasioned by Tenant’s use of the Premises or the Project or any act or omission of Tenant or
Tenant’s Representatives or Visitors, to the extent not covered by the proceeds of Landlord’s
property insurance, except for normal wear and tear caused by ordinary use of the Premises.

          7.2 Landlord shall maintain or cause to be maintained in a condition and repair comparable to
similar quality buildings in the Cupertino market, the structural portions of the roof,
foundations, floors and exterior walls of the Buildings (collectively, the “Structural Elements”)
and Common Areas; provided, however, that Tenant shall pay the cost of repairs for any damage
occasioned by Tenant’s use of the Premises or the Buildings or any act or omission of Tenant or
Tenant’s Representatives or Visitors, to the extent not covered by the proceeds of Landlord’s
property insurance. Landlord shall be under no obligation to inspect the Premises. The cost to
maintain and repair Structural Elements shall not be included in Operating Costs. Tenant shall
promptly report in writing to Landlord any defective condition known to Tenant which Landlord is
required to repair. As a material part of the consideration for this Lease, Tenant hereby waives
any benefits of any applicable existing or future Law, including the provisions of California Civil
Code Sections 1932(1), 1941 and 1942, that allows a tenant to make repairs at its landlord’s
expense.

          7.3 Landlord hereby reserves the right, at any time and from time to time, without liability
to Tenant, and without constituting an eviction, constructive or otherwise, or entitling Tenant to
any abatement of rent or to terminate this Lease or otherwise releasing Tenant from any of Tenant’s
obligations under this Lease:

               (a) To make alterations, additions, repairs, improvements to or in or to decrease the size of
area of, all or any part of the Building, the fixtures and equipment therein, and the Building
Systems ; provided, however, Landlord shall not have any right under this provision to materially
reduce the size of a Building, or to permanently, materially and adversely affect Tenant’s access
to and use of the Premises, except only as may be required to comply with Laws or as a result of
any fire or other casualty or Condemnation;

               (b) To change the name or street address of the Building, the Project or the Campus;

               (c) To install and maintain any and all signs on the exterior and interior of the Building,
Project or Campus;

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               (d) To reduce, increase, enclose or otherwise change at any time and from time to time the
size, number, location, lay-out and nature of the Common Areas (including the Parking Facility) and
other tenancies and premises in the Project and the Campus, and to create additional rentable areas
through use or enclosure of common areas; and

               (e) If any governmental authority promulgates or revises any Law or imposes mandatory or
voluntary controls or guidelines on Landlord or the Project relating to the use or conservation of
energy or utilities or the reduction of automobile or other emissions or reduction or management of
traffic or parking on the Project (collectively “Controls”), to comply with such Controls, whether
mandatory or voluntary, or make any alterations to the Project related thereto.

     8. TENANT’S TAXES. “Tenant’s Taxes” shall mean (a) all taxes, assessments, license fees and
other governmental charges or impositions levied or assessed against or with respect to Tenant’s
personal property or Trade Fixtures in the Premises, whether any such imposition is levied directly
against Tenant or levied against Landlord or the Project, (b) all rental, excise, sales or
transaction privilege taxes arising out of this Lease (excluding, however, state and federal
personal or corporate income taxes measured by the income of Landlord from all sources) imposed by
any taxing authority upon Landlord or upon Landlord’s receipt of any rent payable by Tenant
pursuant to the terms of this Lease (“Rental Tax”), and (c) any increase in Taxes attributable to
inclusion of a value placed on Tenant’s personal property, Trade Fixtures or Alterations. Tenant
shall pay any Rental Tax to Landlord in addition to and at the same time as Base Rent is payable
under this Lease, and shall pay all other Tenant’s Taxes before delinquency (and, at Landlord’s
request, shall furnish Landlord satisfactory evidence thereof). If Landlord pays Tenant’s Taxes or
any portion thereof, Tenant shall reimburse Landlord upon demand for the amount of such payment,
together with interest at the Interest Rate from the date of Landlord’s payment to the date of
Tenant’s reimbursement.

     9. UTILITIES AND SERVICES.

          9.1 Description of Services. During the Term Landlord shall furnish to the Premises
for ordinary office use and occupancy reasonable amounts of electricity for building standard
lighting and use of office equipment.

          9.2 Payment for Utilities and Services.

               (a) Tenant shall be responsible to pay for the costs of all utilities for the Premises (the
“Premises Utilities”), including the costs of (i) gas for the Premises, (ii) electricity, (iii)
water and sewer, and (iv) telephone and data systems. Tenant shall provide janitorial services and
waste removal for the Premises. The cost of Premises Utilities paid by Tenant for the Premises
shall not be included in Operating Costs. Electricity and gas for the Premises shall be either
separately metered, or submetered; provided, however, if electricity or gas for the Premises is not
metered or submetered, then Landlord shall equitably estimate the cost of electricity and gas for
the Premises. If either the electricity or gas is separately metered, Tenant shall pay the costs
of such utility for the Premises directly to the public utility company. If the electricity or gas
is submetered, Tenant shall pay the costs of the applicable utility to the Landlord within ten (10)
days after Landlord invoices Tenant therefor, based upon the metered

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readings. If electricity or gas for the Premises is not metered or submetered, then Tenant
shall pay Landlord the cost of electricity and gas estimated by Landlord for the Premises, within
ten (10) days after Landlord invoices Tenant therefor.

               (b) If
the temperature otherwise maintained in any portion of the Premises by the HVAC systems
of the Building is affected as a result of (i) any lights, machines or equipment used by Tenant in
the Premises, or (ii) the occupancy of the Premises by more than one person per 200 square feet of
rentable area, then Landlord shall have the right to install any machinery or equipment reasonably
necessary to restore the temperature, including modifications to the standard air-conditioning
equipment. The cost of any such equipment and modifications, including the cost of installation
and any additional cost of operation and maintenance of the same, shall be paid by Tenant to
Landlord upon demand.

               (c) Tenant will be responsible for any additional costs at the Project or Campus level
attributable to Tenant’s activities, such as unusually long hours of operation, the carelessness of
Tenant, or unusual Alterations, and Landlord may impose a reasonable charge for the costs of such
activities.

          9.3 Interruption of Services. In the event of an interruption in, or failure or
inability to provide any of the services or utilities described in Section 9.1 — “Description of
Services” (a “Service Failure”), such Service Failure shall not, regardless of its duration,
constitute an eviction of Tenant, constructive or otherwise, or impose upon Landlord any liability
whatsoever, including, but not limited to, liability for consequential damages or loss of business
by Tenant or, except as provided below in this Section 9.3, entitle Tenant to an abatement of rent
or to terminate this Lease.

               (a) If any Service Failure not caused by Tenant or its Representatives prevents Tenant from
reasonably using a material portion of the Premises and Tenant in fact ceases to use such portion
of the Premises, Tenant shall be entitled to an abatement of Base Rent and Additional Rent with
respect to the portion of the Premises that Tenant is prevented from using by reason of such
Service Failure in the following circumstances: (i) if Landlord fails to commence reasonable
efforts to remedy the Service Failure within five (5) Business Days following the occurrence of the
Service Failure, and such failure has persisted and continuously prevented Tenant from using a
material portion of the Premises during that period, the abatement of rent shall commence on the
sixth (6th) Business Day following the Service Failure and continue until Tenant is no longer so
prevented from using such portion of the Premises; and (ii) if the Service Failure in all events is
not remedied within thirty (30) days following the occurrence of the Service Failure and Tenant in
fact does not use such portion of the Premises for an uninterrupted period of thirty (30) days or
more by reason of such Service Failure, the abatement of rent shall commence no later than the
thirty-first (31st) day following the occurrence of the Service Failure and continue until Tenant
is no longer so prevented from using such portion of the Premises.

               (b) If a Service Failure is caused by Tenant or its Representatives, Landlord shall
nonetheless remedy the Service Failure, at the expense of Tenant, pursuant to Landlord’s
maintenance and repair obligations under Section 7 — “Maintenance and Repair” or

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Section 12.1 — “Landlord’s Duty to Repair,” as the case may be, but Tenant shall not be
entitled to an abatement of rent or to terminate this Lease as a result of any such Service
Failure.

               (c) Notwithstanding Tenant’s entitlement to rent abatement under the preceding provisions,
Tenant shall continue to pay Tenant’s then current rent until such time as Landlord and Tenant
agree on the amount of the rent abatement. If Landlord and Tenant are unable to agree on the
amount of such abatement within ten (10) Business Days of the date they commence negotiations
regarding the abatement, then either party may submit the matter to binding arbitration pursuant to
Sections 1280 et seq. of the California Code of Civil Procedure.

               (d) If any Service Failure is caused by fire or other casualty then the provisions of Section
12 — “Damage or Destruction” shall control.

               (e) Where the cause of a Service Failure is within the control of a public utility or other
public or quasi-public entity outside Landlord’s control, notification to such utility or entity of
the Service Failure and request to remedy the failure shall constitute “reasonable efforts” by
Landlord to remedy the Service Failure.

               (f) Tenant hereby waives the provisions of California Civil Code Section 1932(1) or any other
applicable existing or future law, ordinance or governmental regulation permitting the termination
of this Lease due to such interruption, failure or inability.

          9.4 Sole Electrical Representative. Landlord shall maintain exclusive control over
and be the sole representative with respect to reception, utilization and distribution of electric
power, regardless of point or means of origin, use or generation. Tenant shall not have the right
to contract directly with any provider of electrical power or services.

          9.5 Telecommunications. Tenant shall have the right to contract directly with
telecommunications and media service providers (each a “Telecommunications Provider”) of Tenant’s
choice, subject to the provisions of this Section 9.5 and other provisions of this Lease. Upon
request from Tenant Landlord agrees to deliver to Tenant a list of Telecommunication Providers then
serving the Project. If Tenant desires to (a) obtain service from or enter into a contract with
any Telecommunication Provider which at the time of Tenant’s request does not serve the Project, or
(b) obtain services which will require installation of new equipment by a Telecommunication
Provider then serving the Project, then prior to providing service, any such Telecommunication
Provider must enter into a written agreement with Landlord, acceptable to Landlord in Landlord’s
sole discretion, setting forth the terms and conditions of the access to be granted to any such
Telecommunication Provider. Landlord shall not be obligated to incur any expense, liability or
costs in connection with any Telecommunication Provider proposed by Tenant. All installations made
by Telecommunication Providers shall be subject to Landlord’s prior written approval and shall be
made in accordance with the provisions of Section 6 of this Lease.

     10. EXCULPATION AND INDEMNIFICATION.

          10.1 Landlord’s Indemnification of Tenant. Landlord shall indemnify, protect, defend
and hold Tenant harmless from and against any claims, actions, liabilities, damages, costs or
expenses, including reasonable consultants’, expert witnesses’ and attorneys’ fees and costs

20

 

incurred in defending against the same (“Claims”) asserted by any third party against Tenant
for loss, injury or damage, to the extent such loss, injury or damage is caused by the willful
misconduct or negligent acts or omissions of Landlord or its authorized representatives in
connection with the ownership, operation or management of the Building, Project or Campus.

          10.2 Tenant’s Indemnification of Landlord. Tenant shall indemnify, protect, defend
and hold the Landlord Parties harmless from and against Claims arising from (a) the acts or
omissions of Tenant or Tenant’s Representatives or Visitors in or about the Project or Campus, or
(b) any construction or other work or maintenance undertaken by Tenant on the Premises or elsewhere
in the Project or Campus (including any design defects), or (c) any breach or default under this
Lease by Tenant, or (d) any loss, injury or damage, howsoever and by whomsoever caused, to any
person or property, arising out of or relating to Tenant’s occupancy or operation and occurring in
or about the Premises or elsewhere in the Project or Campus, excepting only Claims described in
this clause (d) to the extent they are caused by the willful misconduct or negligent acts or
omissions of Landlord or its authorized representatives.

          10.3 Damage to Tenant and Tenant’s Property. The Landlord Parties shall not be liable
to Tenant for any loss, injury or other damage to Tenant or to Tenant’s property in or about the
Premises or the Campus from any cause (including defects in the Property or in any equipment in the
Property; fire, explosion or other casualty; bursting, rupture, leakage or overflow of any plumbing
or other pipes or lines, sprinklers, tanks, drains, drinking fountains or washstands in, above, or
about the Premises or the Property; or acts of other tenants in the Property), unless caused by the
intentional act or willful misconduct of Landlord or its authorized representative or agents.
Tenant hereby waives all claims against Landlord Parties for any such loss, injury or damage and
the cost and expense of defending against claims relating thereto, including any loss, injury or
damage caused by Landlord’s negligence (active or passive), unless caused by the intentional act or
willful misconduct of Landlord or its authorized representative or agents. Notwithstanding any
other provision of this Lease to the contrary, in no event shall Landlord be liable to Tenant for
any punitive or consequential damages or damages for loss of business by Tenant.

          10.4 Survival. The obligations of the parties under this Section 10 shall survive the
expiration or termination of this Lease.

     11. INSURANCE.

          11.1 Tenant’s Insurance.

               (a) Liability Insurance. Tenant shall at all times following complete execution of
this Lease maintain in full force, commercial general liability insurance providing coverage on an
occurrence form basis with limits of not less than Ten Million Dollars ($10,000,000.00) each
occurrence for bodily injury and property damage combined, Ten Million Dollars ($10,000,000.00)
annual general aggregate. Tenant shall also at all times following complete execution of this
Lease maintain in full force and effect, products and completed operations insurance providing
coverage on a claims made basis with limits of not less than Three Million Dollars ($3,000,000.00)
annual aggregate. Tenant’s liability insurance policy or policies shall: (i) include premises and
operations liability coverage, products and completed

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operations liability coverage, broad form property damage coverage including completed
operations, blanket contractual liability coverage including, to the maximum extent possible,
coverage for the indemnification obligations of Tenant under this Lease, and personal and
advertising injury coverage; (ii) provide that the insurance company has the duty to defend all
named and additional insureds under the policy; (iii) [intentionally deleted]; (iv) cover
liabilities arising out of or incurred in connection with Tenant’s use or occupancy of the Premises
or the Project; (v) extend coverage to cover liability for the actions of Tenant’s Representatives
and Visitors; and (vi) provide a per location aggregate of not less than Ten Million Dollars
($10,000,000.00) if such policy or policies are written on a “blanket” basis covering more than one
location. Each policy of liability insurance required by this Section shall: (i) contain a
separation of insureds clause or otherwise provide cross-liability
coverage; (ii) provide that any
waiver of subrogation rights or release prior to a loss does not void coverage; (iii) provide that
it is primary insurance; (iv) name as additional insureds the Landlord Parties, the Property
Manager identified in the Basic Lease Information (the “Property Manager”), all Mortgagees (as
defined in Section 20.2 of this Lease) and such other parties in interest as Landlord may
reasonably designate to Tenant in writing; and (v) provide that any failure to comply with the
reporting provisions under the policies shall not affect coverage provided such additional
insureds. Such additional insureds shall be provided at least the same extent of coverage as is
provided to Tenant under such policies. All endorsements effecting such additional insured status
shall be at least as broad as additional insured endorsement form number CG 20 11 01 96 promulgated
by the Insurance Services Office.

               (b) Property Insurance. Tenant shall at all times (including any construction or
installation periods, whether or not included in the Term) maintain in effect with respect to any
Alterations and Tenant’s Trade Fixtures and personal property, commercial property insurance
providing coverage, on an “all risk” or “special form” basis, in an amount equal to at least 90% of
the full replacement cost of the covered property. Tenant may carry such insurance under a blanket
policy, provided that such policy provides coverage equivalent to a separate policy. During the
Term, the proceeds from any such policies of insurance shall be used for the repair or replacement
of the Alterations, Trade Fixtures and personal property so insured. The Landlord Parties shall be
provided coverage under such insurance to the extent of their insurable interest and, if requested
by Landlord, both Landlord and Tenant shall sign all documents reasonably necessary or proper in
connection with the settlement of any claim or loss under such insurance. Landlord will have no
obligation to carry insurance on any Alterations or on Tenant’s Trade Fixtures or personal
property.

               (c) Requirements For All Policies. Each policy of insurance required under this
Section 11.1 shall: (i) be in a form, and written by an insurer, reasonably acceptable to Landlord,
(ii) be maintained at Tenant’s sole cost and expense, and (iii) require at least thirty (30) days’
written notice to Landlord prior to any cancellation, nonrenewal or modification of insurance
coverage. Insurance companies issuing such policies shall have rating classifications of “A” or
better and financial size category ratings of “VIII” or better according to the latest edition of
the A.M. Best Key Rating Guide. All insurance companies issuing such policies shall be admitted
carriers licensed to do business in the state where the Project is located. Any deductible amount
under such insurance shall not exceed $5,000. Tenant shall provide to Landlord, upon request,
evidence that the insurance required to be carried by Tenant pursuant to

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this Section, including any endorsement effecting the additional insured status, is in full
force and effect and that premiums therefor have been paid.

               (d) Updating Coverage. Tenant shall increase the amounts of insurance as required by
any Mortgagee, and, not more frequently than once every three (3) years, as recommended by
Landlord’s insurance broker, if, in the opinion of either of them, the amount of insurance then
required under this Lease is not adequate. Any limits set forth in this Lease on the amount or
type of coverage required by Tenant’s insurance shall not limit the liability of Tenant under this
Lease.

               (e) Certificates of Insurance. Prior to any entry into or occupancy of the Premises
by Tenant, and not less than ten (10) days prior to expiration of any policy thereafter, Tenant
shall furnish to Landlord a certificate of insurance reflecting that the insurance required by this
Section is in force, accompanied by an endorsement showing the required additional insureds
satisfactory to Landlord in substance and form. Notwithstanding the requirements of this
paragraph, Tenant shall at Landlord’s request provide to Landlord a certified copy of each
insurance policy required to be in force at any time pursuant to the requirements of this Lease or
its Exhibits.

          11.2 Landlord’s Insurance. During the Term, to the extent such coverages are
available at a commercially reasonable cost, Landlord shall maintain in effect insurance on the
Building with responsible insurers, on an “all risk” or “special form” basis, insuring the Building
and Tenant Improvements in an amount equal to at least 90% of the replacement cost thereof,
excluding land, foundations, footings and underground installations. Landlord may, but shall not
be obligated to, carry insurance against additional perils and/or in greater amounts.

          11.3 Mutual Waiver of Right of Recovery & Waiver of Subrogation. Landlord and Tenant
each hereby waive any right of recovery against each other and their respective partners, managers,
members, shareholders, officers, directors and authorized representatives for any loss or damage
that is covered by any policy of property insurance maintained by either party (or required by this
Lease to be maintained) with respect to the Premises or the Building or any operation therein,
regardless of cause, including negligence (active or passive) of the party benefiting from the
waiver. If any such policy of insurance relating to this Lease or to the Premises or the Building
does not permit the foregoing waiver or if the coverage under any such policy would be invalidated
as a result of such waiver, the party maintaining such policy shall obtain from the insurer under
such policy a waiver of all right of recovery by way of subrogation against either party in
connection with any claim, loss or damage covered by such policy.

     12. DAMAGE OR DESTRUCTION.

          12.1 Landlord’s Duty to Repair.

               (a) If all or a substantial part of the Premises are rendered untenantable or inaccessible by
damage to all or any part of the Building from fire or other casualty during the Term, then, unless
either party is entitled to and elects to terminate this Lease pursuant to Sections 12.2 -
Landlord’s Right to Terminate and 12.3 — Tenant’s Right to Terminate, Landlord shall, at its
expense, use reasonable efforts to repair and restore the

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Premises and/or the Building, as the case may be, to substantially their former condition to
the extent permitted by then applicable Laws; provided, however, that in no event shall Landlord
have any obligation for repair or restoration beyond the extent of insurance proceeds received by
Landlord for such repair or restoration, or for any of Tenant’s personal property, Trade Fixtures
or Alterations.

               (b) If Landlord is required or elects to repair damage to the Premises and/or the Building,
this Lease shall continue in effect, but Tenant’s Base Rent and Additional Rent shall be abated
with regard to any portion of the Premises that Tenant is prevented from using by reason of such
damage or its repair from the date of the casualty until substantial completion of Landlord’s
repair of the affected portion of the Premises as required under this Lease. In no event shall
Landlord be liable to Tenant by reason of any injury to or interference with Tenant’s business or
property arising from fire or other casualty or by reason of any repairs to any part of the
Building necessitated by such casualty.

          12.2 Landlord’s Right to Terminate. Landlord may elect to terminate this Lease
following damage by fire or other casualty under the following circumstances:

               (a) If, in the reasonable judgment of Landlord, the Premises and the Building cannot be
substantially repaired and restored under applicable Laws within nine (9) months from the date of
the casualty;

               (b) If, in the reasonable judgment of Landlord, adequate proceeds are not, for any reason,
made available to Landlord from Landlord’s insurance policies (and/or from Landlord’s funds made
available for such purpose, at Landlord’s sole option) to make the required repairs;

               (c) If the Building is damaged or destroyed to the extent that, in the reasonable judgment of
Landlord, the cost to repair and restore the Building would exceed twenty percent (20%) of the full
replacement cost of the Building, whether or not the Premises are at all damaged or destroyed; or

               (d) If the fire or other casualty occurs during the last year of the Term or if upon
completion of repair and restoration there would be less than one (1) year remaining in the Term.

If any of the circumstances described in subparagraphs (a), (b), (c) or (d) of this Section 12.2
occur or arise, Landlord shall give Tenant notice within one hundred and twenty (120) days after
the date of the casualty, specifying whether Landlord elects to terminate this Lease as provided
above and, if not, Landlord’s estimate of the time required to complete Landlord’s repair
obligations under this Lease.

          12.3 Tenant’s Right to Terminate. If all or a substantial part of the Premises are
rendered untenantable or inaccessible by damage to all or any part of the Building from fire or
other casualty, and Landlord does not elect to terminate as provided above, then Tenant may elect
to terminate this Lease if Landlord’s estimate of the time required to complete Landlord’s repair
obligations under this Lease is greater than nine (9) months, in which event Tenant may elect to
terminate this Lease by giving Landlord notice of such election to terminate within thirty

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(30) days after Landlord’s notice to Tenant pursuant to Section 12.2 — Landlord’s Right to
Terminate.

          12.4 Waiver. Landlord and Tenant each hereby waive the provisions of California Civil
Code Sections 1932(2), 1933(4) and any other applicable existing or future Law permitting the
termination of a lease agreement in the event of damage or destruction under any circumstances
other than as provided in Sections 12.2 — Landlord’s Right to Terminate and 12.3 — Tenant’s Right
to Terminate.

     13. CONDEMNATION.

          13.1 Definitions.

               (a) “Award” shall mean all compensation, sums, or anything of value awarded, paid or received
on a total or partial Condemnation.

               (b) “Condemnation” shall mean (i) a permanent taking (or a temporary taking for a period
extending beyond the end of the Term) pursuant to the exercise of the power of condemnation or
eminent domain by any public or quasi-public authority, private corporation or individual having
such power (“Condemnor”), whether by legal proceedings or otherwise, or (ii) a voluntary sale or
transfer by Landlord to any such authority, either under threat of condemnation or while legal
proceedings for condemnation are pending.

               (c) “Date of Condemnation” shall mean the earlier of the date that title to the property taken
is vested in the Condemnor or the date the Condemnor has the right to possession of the property
being condemned.

          13.2 Effect on Lease.

               (a) If the Premises are totally taken by Condemnation, this Lease shall terminate as of the
Date of Condemnation. If a portion but not all of the Premises is taken by Condemnation, this
Lease shall remain in effect; provided, however, that if the portion of the Premises remaining
after the Condemnation will be unsuitable for Tenant’s continued use, then upon notice to Landlord
within thirty (30) days after Landlord notifies Tenant of the Condemnation, Tenant may terminate
this Lease effective as of the Date of Condemnation.

               (b) If fifteen percent (15%) or more of the Project or of the parcel(s) of land on which the
Building is situated or of the Parking Facility or of the floor area in the Building is taken by
Condemnation, or if as a result of any Condemnation the Building is no longer reasonably suitable
for use as an office building, whether or not any portion of the Premises is taken, Landlord may
elect to terminate this Lease, effective as of the Date of Condemnation, by notice to Tenant within
thirty (30) days after the Date of Condemnation.

               (c) If all or a portion of the Premises is temporarily taken by a Condemnor for a period
greater than six (6) consecutive months, then Tenant shall have the right to terminate this Lease
by written notice to Landlord within twenty (20) days following the expiration of such six (6)
consecutive month period; and for any other temporary taking, not extending beyond the end of the
Term, this Lease shall remain in full force and effect.

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          13.3
Restoration. If this Lease is not terminated as provided in Section 13.2 -
Effect on Lease, Landlord, at its expense, shall diligently proceed to repair and restore the
Premises to substantially its former condition (to the extent permitted by then applicable Laws)
and/or repair and restore the Building to an architecturally complete office building; provided,
however, that Landlord’s obligations to so repair and restore shall be limited to the amount of any
Award received by Landlord and not required to be paid to any Mortgagee (as defined in Section 20.2
below). In no event shall Landlord have any obligation to repair or replace any improvements in
the Premises beyond the amount of any Award received by Landlord for such repair or to repair or
replace any of Tenant’s personal property, Trade Fixtures, or Alterations.

          13.4 Abatement and Reduction of Rent. If any portion of the Premises is taken in a
Condemnation or is rendered permanently untenantable by repairs necessitated by the Condemnation,
and this Lease is not terminated, the Base Rent and Additional Rent payable under this Lease shall
be proportionally reduced as of the Date of Condemnation based upon the percentage of rentable
square feet in the Premises so taken or rendered permanently untenantable. In addition, if this
Lease remains in effect following a Condemnation and Landlord proceeds to repair and restore the
Premises, the Base Rent and Additional Rent payable under this Lease shall be abated during the
period of such repair or restoration to the extent such repairs prevent Tenant’s use of the
Premises.

          13.5 Awards. Any Award made shall be paid to Landlord, and Tenant hereby assigns to
Landlord, and waives all interest in or claim to, any such Award, including any claim for the value
of the unexpired Term; provided, however, that Tenant shall be entitled to receive, or to prosecute
a separate claim for, an Award for a temporary taking of the Premises or a portion thereof by a
Condemnor where this Lease is not terminated (to the extent such Award relates to the unexpired
Term), or an Award or portion thereof separately designated for relocation expenses or the
interruption of or damage to Tenant’s business or as compensation for Tenant’s personal property,
Trade Fixtures or Alterations, provided that in no event will any Award to Tenant reduce any Award
to which Landlord would otherwise be entitled.

          13.6 Waiver. Landlord and Tenant each hereby waive the provisions of California Code
of Civil Procedure Section 1265.130 and any other applicable existing or future Law allowing either
party to petition for a termination of this Lease upon a partial taking of the Premises and/or the
Building or the Project.

     14. ASSIGNMENT AND SUBLETTING.

          14.1 Landlord’s Consent Required. Tenant shall not assign this Lease or any interest
therein, or sublet or license or permit the use or occupancy of the Premises or any part thereof by
or for the benefit of anyone other than Tenant, or in any other manner transfer all or any part of
Tenant’s interest under this Lease (each and all a “Transfer”), without the prior written consent
of Landlord, which consent (subject to the other provisions of this Section 14) shall not be
unreasonably withheld. If Tenant is a business entity, any direct or indirect transfer of fifty
percent (50%) or more of the ownership interest of the entity (whether in a single transaction or
in the aggregate through more than one transaction, except for ordinary trading, of publicly
tradable equity interests on a public securities exchange), including a merger or consolidation,
shall be deemed a Transfer. Notwithstanding any provision in this Lease to the

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contrary, Tenant shall not mortgage, pledge, hypothecate or otherwise encumber this Lease or
all or any part of Tenant’s interest under this Lease. Any assignee, subtenant, user or other
transferee under any proposed Transfer is herein called a “Proposed Transferee”. Any assignee,
subtenant, user or other transferee is herein called a “Transferee”.

          14.2 Reasonable Consent.

               (a) At least twenty (20) days prior to any proposed Transfer, Tenant shall submit in writing
to Landlord (i) the name and legal composition of the Proposed Transferee, (ii) the nature of the
business proposed to be carried on in the Premises; (iii) a current balance sheet, and income and
cash flow statements for the last two years and such other reasonable financial and other
information concerning the Proposed Transferee as Landlord may request; and (iv) a copy of the
proposed assignment, sublease or other agreement governing the proposed Transfer. Within ten (10)
Business Days after Landlord receives all such information it shall notify Tenant whether it
approves or disapproves such Transfer or if it elects to proceed under Section 14.7 — Landlord’s
Right to Space.

               (b) Tenant acknowledges and agrees that, among other circumstances for which Landlord could
reasonably withhold consent to a proposed Transfer, it shall be reasonable for Landlord to withhold
consent where (i) the Proposed Transferee does not intend itself to occupy the entire portion of
the Premises assigned or sublet, (ii) Landlord reasonably disapproves of the Proposed Transferee’s
business operating ability or history, reputation or creditworthiness or the character of the
business to be conducted by the Proposed Transferee at the Premises, (iii) the Proposed Transferee
is a governmental agency or unit, (iv) the proposed Transfer would violate any “exclusive” rights
of any tenants in the Project, (v) Landlord or Landlord’s agent has shown space in the Project to
the Proposed Transferee or responded to any inquiries from the Proposed Transferee or the Proposed
Transferee’s agent concerning availability of space in the Project, at any time within the
preceding three (3)+ months, (vi) a proposed Transfer would violate any Encumbrance, (vii) any
Mortgagee objects to the proposed Transfer, or (viii) Landlord otherwise determines that the
proposed Transfer would have the effect of decreasing the value of the Project or increasing the
expenses associated with operating, maintaining and repairing the Project. In no event may Tenant
publicly offer or advertise all or any portion of the Premises for assignment or sublease at a
rental less than eighty percent (80%) of that then sought by Landlord for a direct lease
(non-sublease) of comparable space in the Project.

          14.3 Excess Consideration. If Landlord consents to a Transfer, Tenant shall pay to
Landlord, as Additional Rent, within ten (10) days after receipt by Tenant, fifty percent (50%) of
all “Transfer Consideration”, which shall mean any consideration paid or payable by the Transferee
for the Transfer. In the case of a sublease, Transfer Consideration includes any “key money” or
other non-rent consideration payable in connection with the sublease, plus the excess of the rent
payable by the subtenant over the amount of Base Rent and Additional Rent payable hereunder
applicable to the subleased space, less the direct, out-of-pocket expenses and costs for necessary
Alterations, legal fees and brokerage commission costs paid by Tenant to procure the subtenant.
Any such costs for Alterations and brokerage commissions shall be amortized on a straight basis
over the term of the sublease. In the case of an assignment (including any Transfer resulting from
a change in ownership, merger or consolidation), Transfer

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Consideration includes the value of the Lease (whether or not expressly allocated or otherwise
provided for in such transaction) and any other consideration paid or payable by the Transferee for
the assignment of the Lease.

          14.4 No Release Of Tenant. No consent by Landlord to any Transfer shall relieve
Tenant of any obligation to be performed by Tenant under this Lease, whether occurring before or
after such consent, assignment, subletting or other Transfer. Each Transferee shall be jointly and
severally liable with Tenant (and Tenant shall be jointly and severally liable with each
Transferee) for the payment of rent (or, in the case of a sublease, rent in the amount set forth in
the sublease) and for the performance of all other terms and provisions of this Lease. The consent
by Landlord to any Transfer shall not relieve Tenant or any such Transferee from the obligation to
obtain Landlord’s express prior written consent to any subsequent Transfer by Tenant or any
Transferee. The acceptance of rent by Landlord from any other person (whether or not such person
is an occupant of the Premises) shall not be deemed to be a waiver by Landlord of any provision of
this Lease or to be a consent to any Transfer.

          14.5 Expenses and Attorneys’ Fees. Tenant shall pay to Landlord on demand all costs
and expenses (including reasonable attorneys’ fees) incurred by Landlord in connection with
reviewing or consenting to any proposed Transfer (including any request for consent to, or any
waiver of Landlord’s rights in connection with, any security interest in any of Tenant’s property
at the Premises), not to exceed Two Thousand Five Hundred Dollars ($2,500.00) per request for
Landlord’s consent to a proposed Transfer.

          14.6 Effectiveness of Transfer. Prior to the date on which any Transfer (whether or
not requiring Landlord’s consent) becomes effective, Tenant shall deliver to Landlord a counterpart
of the fully executed Transfer document and Landlord’s standard form of Consent to Assignment or
Consent to Sublease executed by Tenant and the Transferee in which each of Tenant and the
Transferee confirms its obligations pursuant to this Lease. Failure or refusal of a Transferee to
execute any such instrument shall not release or discharge the Transferee from liability as
provided herein. The voluntary, involuntary or other surrender of this Lease by Tenant, or a
mutual cancellation by Landlord and Tenant, shall not work a merger, and any such surrender or
cancellation shall, at the option of Landlord, either terminate all or any existing subleases or
operate as an assignment to Landlord of any or all of such subleases.

          14.7 Landlord’s Right to Space. Notwithstanding any of the above provisions of this
Section to the contrary, if Tenant notifies Landlord that it desires to enter into a Transfer other
than a Permitted Transfer, Landlord, in lieu of consenting to such Transfer, may elect (a) in the
case of an assignment or a sublease of the entire Premises, to terminate this Lease, or (b) or in
the case of a sublease of more than fifty percent (50%) of the entire Premises for a period ending
within six (6) months prior to the Expiration Date, to terminate this Lease as it relates to the
space proposed to be subleased by Tenant. In such event, this Lease will terminate (or the space
proposed to be subleased will be removed from the Premises subject to this Lease and the Base Rent
and Tenant’s Share under this Lease shall be proportionately reduced) on the earlier of (x) sixty
(60) days after the date of Landlord’s notice to Tenant making the election set forth in this
Section 14.7, or (y) the date the Transfer was proposed to be effective, if such date is specified
in Tenant’s notice to Landlord regarding the proposed Transfer, and Landlord may lease such space
to any party, including the prospective Transferee identified by Tenant.

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          14.8 Assignment of Sublease Rents. Tenant hereby absolutely and irrevocably assigns
to Landlord any and all rights to receive rent and other consideration from any sublease and agrees
that Landlord, as assignee or as attorney-in-fact for Tenant for purposes hereof, or a receiver for
Tenant appointed on Landlord’s application may (but shall not be obligated to) collect such rents
and other consideration and apply the same toward Tenant’s obligations to Landlord under this
Lease; provided, however, that Landlord grants to Tenant at all times prior to occurrence of any
breach or default by Tenant a revocable license to collect such rents (which license shall
automatically and without notice be and be deemed to have been revoked and terminated immediately
upon any Event of Default).

          14.9 Permitted Transfers. Notwithstanding any provision contained in the Section 14
to the contrary, Tenant shall have the right, without the consent of Landlord, upon ten (10) days
prior written notice to Landlord, to engage in any of the following transactions (each a “Permitted
Transfer”) and to Transfer the Lease to any of the following entities (each, a “Permitted
Transferee”), so long as the Permitted Transferee has a tangible net worth sufficient to fulfill
the obligations of the original Tenant under this Lease being assumed by the Permitted Transferee
and no less than the tangible net worth of Tenant immediately prior to such Transfer: (i) a
successor corporation related to Tenant by merger, consolidation, or non-bankruptcy reorganization,
(ii) a purchaser of at least ninety percent (90%) of Tenant’s assets as an ongoing concern, or
(iii) an “Affiliate” of Tenant. The provisions of Sections 14.2, 14.3 and 14.7 shall not apply
with respect to a Permitted Transfer, but any transfer pursuant to the provisions of this Section
14.9 shall be subject to all other terms and conditions of this Lease, including the provisions of
this Section 14.9. Tenant shall remain liable under this Lease after any such transfer. For the
purposes of this Article 14, the term “Affiliate” of Tenant shall mean and refer to any entity
controlling, controlled by or under common control with Tenant or Tenant’s parent or subsidiary, as
the case may be. “Control” ” as used herein shall mean the possession, direct or indirect, of the
power to direct or cause the direction of the management and policies of such controlled entity;
and the ownership, or possession of the right to vote, in the ordinary direction of its affairs, of
at least fifty percent (50%) of the voting interest in any entity. Notwithstanding Tenant’s right
to make a Permitted Transfer pursuant to the provisions of this Section 14.9, Tenant may not,
through use of its rights under this Article 14 in two or more transactions (whether separate
transactions or steps or phases of a single transaction), at one time or over time, whether by
first assigning this Lease to a subsidiary and then merging the subsidiary into another entity or
selling the stock of the subsidiary or by other means, assign or sublease the Premises, or transfer
control of Tenant, to any person or entity which is not a subsidiary, affiliate or controlling
corporation of the original Tenant, as then constituted, existing prior to the commencement of such
transactions, without first obtaining Landlord’s prior written consent and complying with all other
applicable provisions of this Article 14.

     15. DEFAULT AND REMEDIES.

          15.1 Events of Default. The occurrence of any of the following shall constitute an
“Event of Default” by Tenant:

               (a) Tenant fails to make any payment of Rent when due, or any amount required to replenish the
Security Deposit as provided in Section 4 above, if payment in full is not received by Landlord
within three (3) days after written notice that it is due. If

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Landlord accepts any past due Rent, such acceptance shall not be a waiver of any other prior
breach by Tenant under this Lease, other than the failure of Tenant to pay the particular past due
Rent which Landlord has accepted.

               (b) Tenant abandons the Premises, as defined in California Civil Code § 1951.3.

               (c) Tenant fails timely to deliver any subordination document, estoppel certificate or
financial statement requested by Landlord within the applicable time period specified in Sections
20 — Encumbrances — and 21 — Estoppel Certificates and Financial Statements - below.

               (d) Tenant violates the restrictions on Transfer set forth in Section 14 — Assignment and
Subletting.

               (e) Tenant ceases doing business as a going concern; makes an assignment for the benefit of
creditors; is adjudicated an insolvent, files a petition (or files an answer admitting the material
allegations of a petition) seeking relief under any state or federal bankruptcy or other statute,
law or regulation affecting creditors’ rights; all or substantially all of Tenant’s assets are
subject to judicial seizure or attachment and are not released within 30 days, or Tenant consents
to or acquiesces in the appointment of a trustee, receiver or liquidator for Tenant or for all or
any substantial part of Tenant’s assets.

               (f) Tenant fails, within ninety (90) days after the commencement of any proceedings against
Tenant seeking relief under any state or federal bankruptcy or other statute, law or regulation
affecting creditors’ rights, to have such proceedings dismissed, or Tenant fails, within ninety
(90) days after an appointment, without Tenant’s consent or acquiescence, of any trustee, receiver
or liquidator for Tenant or for all or any substantial part of Tenant’s assets, to have such
appointment vacated.

               (g) Tenant fails to perform or comply with any provision of this Lease other than those
described in (a) through (f) above, and does not fully cure such failure within fifteen (15) days
after notice to Tenant or, if such failure cannot be cured within such fifteen (15)-day period,
Tenant fails within such fifteen (15)-day period to commence, and thereafter diligently proceed
with, all actions necessary to cure such failure as soon as reasonably possible but in all events
within ninety (90) days of such notice; provided, however, that if Landlord in Landlord’s
reasonable judgment determines that such failure cannot or will not be cured by Tenant within such
ninety (90) days, then such failure shall constitute an Event of Default immediately upon such
notice to Tenant.

          15.2 Remedies. Upon the occurrence of an Event of Default, Landlord shall have the
following remedies, which shall not be exclusive but shall be cumulative and shall be in addition
to any other remedies now or hereafter allowed by law:

               (a) Landlord may terminate Tenant’s right to possession of the Premises at any time by written
notice to Tenant. Tenant expressly acknowledges that in the absence of such written notice from
Landlord, no other act of Landlord, including re-entry into the Premises, efforts to relet the
Premises, reletting of the Premises for Tenant’s account, storage

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of Tenant’s personal property and Trade Fixtures, acceptance of keys to the Premises from
Tenant or exercise of any other rights and remedies under this Section, shall constitute an
acceptance of Tenant’s surrender of the Premises or constitute a termination of this Lease or of
Tenant’s right to possession of the Premises. Upon such termination in writing of Tenant’s right
to possession of the Premises, as herein provided, this Lease shall terminate and Landlord shall be
entitled to recover damages from Tenant as provided in California Civil Code Section 1951.2 and any
other applicable existing or future Law providing for recovery of damages for such breach,
including the worth at the time of award of the amount by which the rent which would be payable by
Tenant hereunder for the remainder of the Term after the date of the award of damages, including
Additional Rent as reasonably estimated by Landlord, exceeds the amount of such rental loss as
Tenant proves could have been reasonably avoided, discounted at the discount rate published by the
Federal Reserve Bank of San Francisco for member banks at the time of the award plus one percent
(1%).

               (b) Landlord shall have the remedy described in California Civil Code Section 1951.4 (Landlord
may continue this Lease in effect after Tenant’s breach and abandonment and recover rent as it
becomes due, if Tenant has the right to sublet or assign, subject only to reasonable limitations).

               (c) Landlord may cure the Event of Default at Tenant’s expense. If Landlord pays any sum or
incurs any expense in curing the Event of Default, Tenant shall reimburse Landlord upon demand for
the amount of such payment or expense with interest at the Interest Rate from the date the sum is
paid or the expense is incurred until Landlord is reimbursed by Tenant.

               (d) Landlord may remove all Tenant’s property from the Premises, and such property may be
stored by Landlord in a public warehouse or elsewhere at the sole cost and for the account of
Tenant. If Landlord does not elect to store any or all of Tenant’s property left in the Premises,
Landlord may consider such property to be abandoned by Tenant, and Landlord may thereupon dispose
of such property in any manner deemed appropriate by Landlord. Any proceeds realized by Landlord
on the disposal of any such property shall be applied first to offset all expenses of storage and
sale, then credited against Tenant’s outstanding obligations to Landlord under this Lease, and any
balance remaining after satisfaction of all obligations of Tenant under this Lease shall be
delivered to Tenant.

     16. LATE CHARGE AND INTEREST.

          16.1 Late Charge. If any payment of rent is not received by Landlord when due, Tenant
shall pay to Landlord on demand as a late charge (“Late Charge”) an additional amount equal to four
percent (4%) of the overdue payment. Notwithstanding the foregoing, Tenant shall not be obligated
to pay a Late Charge on the first payment of rent not received by Landlord when due unless Tenant
does not pay such rent within five (5) days after written notice from Landlord (the “Past Due
Notice”) that such payment of rent is past due. Commencing with the second (2nd) past due payment
of rent in any twelve (12) month period, and continuing with each past due payment thereafter in
such twelve (12) month period, Tenant shall pay the Late Charge to Landlord on demand. Each late
payment of rent shall begin a new twelve (12) month period during which Tenant shall not be
entitled to notice for any subsequent payment of past

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due rent. A Late Charge shall not be imposed more than once on any particular installment not
paid when due, but imposition of a Late Charge on any payment not made when due does not eliminate
or supersede late charges imposed on other (prior) payments not made when due or preclude
imposition of a late charge on other installments or payments not made when due.

          16.2 Interest. In addition to the late charges referred to above, which are intended
to defray Landlord’s costs resulting from late payments, any payment from Tenant to Landlord not
paid when due shall at Landlord’s option bear interest from the date due until paid to Landlord by
Tenant at the rate of fifteen percent (15%) per annum or the maximum lawful rate that Landlord may
charge to Tenant under applicable laws, whichever is less (the “Interest Rate”). Acceptance of any
late charge and/or interest shall not constitute a waiver of Tenant’s default with respect to the
overdue sum or prevent Landlord from exercising any of its other rights and remedies under this
Lease.

     17. WAIVER. No provisions of this Lease shall be deemed waived by Landlord unless such waiver
is in a writing signed by Landlord. The waiver by Landlord of any breach of any provision of this
Lease shall not be deemed a waiver of such provision or of any subsequent breach of the same or any
other provision of this Lease. No delay or omission in the exercise of any right or remedy of
Landlord upon any default by Tenant shall impair such right or remedy or be construed as a waiver.
Landlord’s acceptance of any payments of rent due under this Lease shall not be deemed a waiver of
any default by Tenant under this Lease (including Tenant’s recurrent failure to timely pay rent)
other than Tenant’s nonpayment of the accepted sums, and no endorsement or statement on any check
or payment or in any letter or document accompanying any check or payment shall be deemed an accord
and satisfaction. Landlord’s consent to or approval of any act by Tenant requiring Landlord’s
consent or approval shall not be deemed to waive or render unnecessary Landlord’s consent to or
approval of any subsequent act by Tenant.

     18. ENTRY, INSPECTION AND CLOSURE. Upon reasonable oral or written notice to Tenant (and
without notice in emergencies), Landlord and its authorized representatives may enter the Premises
at all reasonable times to: (a) determine whether the Premises are in good condition, (b) determine
whether Tenant is complying with its obligations under this Lease, (c) perform any maintenance or
repair of the Premises or the Building that Landlord has the right or obligation to perform, (d)
install or repair improvements for other tenants where access to the Premises is required for such
installation or repair, (e) serve, post or keep posted any notices required or allowed under the
provisions of this Lease, (f) show the Premises to prospective brokers, agents, buyers, transferees
or Mortgagees, or (g) do any other act or thing necessary for the safety or preservation of the
Premises or the Building; provided, however, Landlord shall show the Premises to prospective
tenants only upon prior notice to Tenant during the last nine (9) months of the Term. When
reasonably necessary Landlord may temporarily close entrances, doors, corridors, elevators or other
facilities in the Building without liability to Tenant by reason of such closure. Landlord shall
use commercially reasonable efforts to conduct its activities under this Section in a manner that
will minimize inconvenience to Tenant without incurring additional expense to Landlord. In no
event shall Tenant be entitled to an abatement of rent on account of any entry by Landlord, and
Landlord shall not be liable in any manner for any inconvenience, loss of business or other damage
to Tenant or other persons arising out of Landlord’s entry on the Premises in accordance with this
Section. No action by Landlord

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pursuant to this paragraph shall constitute an eviction of Tenant, constructive or otherwise,
entitle Tenant to an abatement of rent or to terminate this Lease or otherwise release Tenant from
any of Tenant’s obligations under this Lease.

     19. SURRENDER AND HOLDING OVER.

          19.1 Surrender. Upon the expiration or termination of this Lease, Tenant shall
surrender the Premises and all Tenant Improvements and Alterations to Landlord broom-clean and in
their original condition, except for reasonable wear and tear, damage from casualty or condemnation
and any changes resulting from approved Alterations; provided, however, that prior to the
expiration or termination of this Lease Tenant shall, at Landlord’s request, remove all telephone
and other cabling installed in the Building by Tenant and remove from the Premises all Tenant’s
personal property and any Trade Fixtures and all Alterations that Landlord has elected to require
Tenant to remove as provided in Section 6.1 — Tenant Improvements & Alterations, and repair any
damage caused by such removal. If such removal is not completed before the expiration or
termination of the Term, Landlord shall have the right (but no obligation) to remove the same, and
Tenant shall pay Landlord on demand for all costs of removal and storage thereof and for the rental
value of the Premises for the period from the end of the Term through the end of the time
reasonably required for such removal. Landlord shall also have the right to retain or dispose of
all or any portion of such property if Tenant does not pay all such costs and retrieve the property
within ten (10) days after notice from Landlord (in which event title to all such property
described in Landlord’s notice shall be transferred to and vest in Landlord). Tenant waives all
Claims against Landlord for any damage or loss to Tenant resulting from Landlord’s removal,
storage, retention, or disposition of any such property. Upon expiration or termination of this
Lease or of Tenant’s possession, whichever is earliest, Tenant shall surrender all keys to the
Premises or any other part of the Building and shall deliver to Landlord all keys for or make known
to Landlord the combination of locks on all safes, cabinets and vaults that may be located in the
Premises. Tenant’s obligations under this Section shall survive the expiration or termination of
this Lease.

          19.2 Holding Over. If Tenant (directly or through any Transferee or other
successor-in-interest of Tenant) remains in possession of the Premises after the expiration or
termination of this Lease, Tenant’s continued possession shall be on the basis of a tenancy at the
sufferance of Landlord. No act or omission by Landlord, other than its specific written consent,
shall constitute permission for Tenant to continue in possession of the Premises, and if such
consent is given or declared to have been given by a court judgment, Landlord may terminate
Tenant’s holdover tenancy at any time upon seven (7) days written notice. In such event, Tenant
shall continue to comply with or perform all the terms and obligations of Tenant under this Lease,
except that the monthly Base Rent (a) during the first two (2) months of Tenant’s holding over
shall be one hundred fifty percent (150%) of the Base Rent payable in the last full month prior to
the expiration or termination hereof, (b) following the first two (2) months after the expiration
or termination of this Lease shall be two hundred percent (200%) of the Base Rent payable in the
last full month prior to the expiration or termination hereof. Acceptance by Landlord of rent
after such termination shall not constitute a renewal or extension of this Lease; and nothing
contained in this provision shall be deemed to waive Landlord’s right of re-entry or any other
right hereunder or at law. Tenant shall indemnify, defend and hold Landlord harmless from and
against all Claims arising or resulting directly or indirectly from Tenant’s failure to

33

 

timely surrender the Premises, including (i) any rent payable by or any loss, cost, or damages
claimed by any prospective tenant of the Premises, and (ii) Landlord’s damages as a result of such
prospective tenant rescinding or refusing to enter into the prospective lease of the Premises by
reason of such failure to timely surrender the Premises.

     20. ENCUMBRANCES.

          20.1 Subordination. This Lease is expressly made subject and subordinate to any
mortgage, deed of trust, ground lease, underlying lease or like encumbrance affecting any part of
the Project or any interest of Landlord therein which is now existing or hereafter executed or
recorded (“Encumbrance”); provided, however, that such subordination shall only be effective, as to
future Encumbrances, if the holder of the Encumbrance agrees in writing that this Lease shall
survive the termination of the Encumbrance by lapse of time, foreclosure or otherwise so long as
Tenant is not in default under this Lease. Provided the conditions of the preceding sentence are
satisfied, Tenant shall execute and deliver to Landlord, within ten (10) days after written request
therefor by Landlord and in a form reasonably requested by Landlord, and the holder of any
Encumbrance, any additional documents evidencing the subordination of this Lease with respect to
any such Encumbrance and the nondisturbance agreement of the holder of any such Encumbrance, which
documents may include customary commercially reasonable terms, such as the agreement of Tenant to
provide such holder notice and opportunity to cure any Landlord default under the Lease (including
the opportunity to take possession of the Project as provided in the
Encumbrance). If the interest
of Landlord in the Project is transferred pursuant to or in lieu of proceedings for enforcement of
any Encumbrance (including, without limitation, any judicial foreclosure or foreclosure by a power
of sale in a deed of trust), Tenant shall, at the request of the new owner, immediately attorn to,
and become the tenant of, the new owner, and this Lease shall continue in full force and effect as
a direct lease between the transferee and Tenant on the terms and conditions set forth in this
Lease and, at such new owner’s request, shall execute a new lease confirming the lease terms of
this Lease. In furtherance of the foregoing, any such successor to the Landlord shall not be
liable for any offsets, defenses, claims, counterclaims, liabilities or obligations of the
“landlord” under the Lease accruing prior to the date that such new owner exercises its rights
pursuant to the preceding sentence.

          20.2 Mortgagee Protection. Tenant agrees to give any holder of any Encumbrance
covering any part of the Project (“Mortgagee”), by registered mail, a copy of any notice of default
served upon Landlord, provided that prior to such notice Tenant has been notified in writing (by
way of notice of assignment of rents and leases, or otherwise) of the address of such Mortgagee.
If Landlord shall have failed to cure such default within thirty (30) days from the effective date
of such notice of default, then the Mortgagee shall have an additional thirty (30) days within
which to cure such default or if such default cannot be cured within that time, then such
additional time as may be necessary to cure such default (including the time necessary to foreclose
or otherwise terminate its Encumbrance, if necessary to effect such cure), and this Lease shall not
be terminated so long as such remedies are being diligently pursued.

34

 

     21. ESTOPPEL CERTIFICATES AND FINANCIAL STATEMENTS.

          21.1 Estoppel Certificates. Within ten (10) Business Days after written request
therefor, Tenant shall execute and deliver to Landlord, in a form provided by or satisfactory to
Landlord, a certificate stating that this Lease is in full force and effect, describing this Lease
and any amendments or modifications hereto, acknowledging that this Lease is subordinate or prior,
as the case may be, to any Encumbrance and stating any other information Landlord may reasonably
request, including the commencement and expiration dates of the Term, the monthly Base Rent, the
date to which Rent has been paid, the amount of any security deposit or prepaid rent, whether
either party hereto is in default under the terms of the Lease, whether Landlord has completed its
construction obligations hereunder (if any), and whether Tenant has accepted the Premises. Tenant
irrevocably constitutes, appoints and authorizes Landlord as Tenant’s special attorney-in-fact for
such purpose to complete, execute and deliver such certificate if Tenant fails timely to execute
and deliver such certificate as provided above. Any person or entity purchasing, acquiring an
interest in or extending financing with respect to the Project shall be entitled to rely upon any
such certificate. If Tenant fails to deliver such certificate within ten (10) days after
Landlord’s second written request therefor, Tenant shall be liable to Landlord for any damages
incurred by Landlord as a result, directly or indirectly, of Tenant’s failure or refusal to timely
execute or deliver such estoppel certificate.

          21.2 Financial Statements. Within ten (10) Business Days after written request
therefor, but not more than once a year, Tenant shall deliver to Landlord a copy of the financial
statements (including at least a year end balance sheet, a statement of profit and loss, and a
statement of cash flows) of Tenant (and of each guarantor of Tenant’s obligations under this Lease)
for each of the three most recently completed years, prepared in accordance with generally accepted
accounting principles (and, if such is Tenant’s normal practice, audited by an independent
certified public accountant), all then available subsequent interim statements, and such other
financial information as may reasonably be requested by Landlord or required by any Mortgagee.

     22. NOTICES. Any notice, demand, request, consent or approval that either party desires or is
required to give to the other party under this Lease shall be in writing and shall be served
personally, delivered by messenger or courier service, or sent by U.S. certified mail, return
receipt requested, postage prepaid, addressed to the other party at the party’s address for notices
set forth in the Basic Lease Information. Any notice required pursuant to any Laws may be
incorporated into, given concurrently with or given separately from any notice required under this
Lease. Notices shall be deemed to have been given and be effective on the earlier of (a) receipt
(or refusal of delivery or receipt); or (b) one (1) day after acceptance by the independent service
for delivery, if sent by independent messenger or courier service, or three (3) days after mailing
if sent by mail in accordance with this Section. Either party may change its address for notices
hereunder, effective fifteen (15) days after notice to the other party complying with this Section.
If Tenant sublets the Premises, notices from Landlord shall be effective on the subtenant when
given to Tenant pursuant to this Section.

     23. ATTORNEYS’ FEES. In the event of any dispute between Landlord and Tenant in any way
related to this Lease, and whether involving contract and/or tort claims, the non-prevailing party
shall pay to the prevailing party all reasonable attorneys’ fees and costs and

35

 

expenses of any type, without restriction by statute, court rule or otherwise, incurred by the
prevailing party in connection with any action or proceeding (including any appeal and the
enforcement of any judgment or award), whether or not the dispute is litigated or prosecuted to
final judgment (collectively, “Fees”). The “prevailing party” shall be determined based upon an
assessment of which party’s major arguments or positions taken in the action or proceeding could
fairly be said to have prevailed (whether by compromise, settlement, abandonment by the other party
of its claim or defense, final decision, after any appeals, or otherwise) over the other party’s
major arguments or positions on major disputed issues. Any Fees incurred in enforcing a judgment
shall be recoverable separately from any other amount included in the judgment and shall survive
and not be merged in the judgment. The Fees shall be deemed an “actual pecuniary loss” within the
meaning of Bankruptcy Code Section 365(b)(1)(B), and notwithstanding the foregoing, all Fees
incurred by either party in any bankruptcy case filed by or against the other party, from and after
the order for relief until this Lease is rejected or assumed in such bankruptcy case, will be
“obligations of the debtor” as that phrase is used in Bankruptcy Code Section 365(d)(3).

     24. QUIET POSSESSION. Subject to Tenant’s full and timely performance of all of Tenant’s
obligations under this Lease and subject to the terms of this Lease, including Section 20 -
Encumbrances, Tenant shall have the quiet possession of the Premises throughout the Term as against
any persons or entities lawfully claiming by, through or under Landlord.

     25. SECURITY MEASURES. Landlord may, but shall be under no obligation to, implement security
measures for the Project, such as the registration or search of all persons entering or leaving the
Building, requiring identification for access to the Building, evacuation of the Building for
cause, suspected cause, or for drill purposes, the issuance of magnetic pass cards or keys for
Building or elevator access and other actions that Landlord deems necessary or appropriate to
prevent any threat of property loss or damage, bodily injury or business interruption; provided,
however, that such measures shall be implemented in a way as not to materially inconvenience
tenants of the Building unreasonably. If Landlord uses an access card system, Landlord may require
Tenant to pay Landlord a deposit for each after-hours Building access card issued to Tenant.
Tenant shall be responsible for any loss, theft or breakage of any such cards, which must be
returned by Tenant to Landlord upon expiration or earlier termination of the Lease. Landlord may
retain the deposit for any card not so returned. Landlord shall at all times have the right to
change, alter or reduce any such security services or measures. Tenant shall cooperate and comply
with, and cause Tenant’s Representatives and Visitors to cooperate and comply with, such security
measures. Landlord, its agents and employees shall have no liability to Tenant or its
Representatives or Visitors for the implementation or exercise of, or the failure to implement or
exercise, any such security measures or for any resulting disturbance of Tenant’s use or enjoyment
of the Premises.

     26. FORCE MAJEURE. If Landlord is delayed, interrupted or prevented from performing any of
its obligations under this Lease, including its obligations under the Construction Rider (if any),
and such delay, interruption or prevention is due to fire, act of God, governmental act or failure
to act, terrorist act, labor dispute, unavailability of labor or materials or any other cause
outside the reasonable control of Landlord, then the time for performance of the affected
obligations of Landlord shall be extended for a period equivalent to the period of such delay,
interruption or prevention.

36

 

     27. RULES AND REGULATIONS. Tenant shall be bound by and shall comply with the rules and
regulations attached to and made a part of this Lease as Exhibit C to the extent those
rules and regulations are not in conflict with the terms of this Lease, as well as any reasonable
rules and regulations hereafter adopted by Landlord for all tenants of the Building, upon notice to
Tenant thereof (collectively, the “Building Rules”). Landlord shall not be responsible to Tenant
or to any other person for any violation of, or failure to observe, the Building Rules by any other
tenant or other person.

     28. LANDLORD’S LIABILITY. The term “Landlord,” as used in this Lease, shall mean only the
owner or owners of the Building at the time in question. In the event of any conveyance of title
to the Building, then from and after the date of such conveyance, the transferor Landlord shall be
relieved of all liability with respect to Landlord’s obligations to be performed under this Lease
after the date of such conveyance. Notwithstanding any other term or provision of this Lease, the
liability of Landlord for its obligations under this Lease is limited solely to the equity interest
Landlord would have in the Building if the Building were encumbered only by third party debt in an
amount equal to seventy-five percent (75%) of the value of the Building; and except as provided to
the contrary in the preceding no personal liability shall at any time be asserted or enforceable
against any other assets of Landlord or against Landlord’s partners or members or its or their
respective partners, shareholders, members, directors, officers or managers on account of any of
Landlord’s obligations or actions under this Lease.

     29. CONSENTS AND APPROVALS.

          29.1 Determination in Good Faith. Wherever the consent, approval, judgment or
determination of Landlord is required or permitted under this Lease, Landlord may exercise its good
faith business judgment in granting or withholding such consent or approval or in making such
judgment or determination without reference to any extrinsic standard of reasonableness, unless the
specific provision contained in this Lease providing for such consent, approval, judgment or
determination specifies that Landlord’s consent or approval is not to be unreasonably withheld, or
that such judgment or determination is to be reasonable, or otherwise specifies the standards under
which Landlord may withhold its consent. If it is determined that Landlord failed to give its
consent where it was required to do so under this Lease, Tenant shall be entitled to injunctive
relief but shall not to be entitled to monetary damages or to terminate this Lease for such
failure.

          29.2 No Liability Imposed on Landlord. The review and/or approval by Landlord of any
item or matter to be reviewed or approved by Landlord under the terms of this Lease or any Exhibits
or Addenda hereto shall not impose upon Landlord any liability for the accuracy or sufficiency of
any such item or matter or the quality or suitability of such item for its intended use. Any such
review or approval is for the sole purpose of protecting Landlord’s interest in the Building, and
no third parties, including Tenant or the Representatives and Visitors of Tenant or any person or
entity claiming by, through or under Tenant, shall have any rights as a consequence thereof.

     30. WAIVER OF RIGHT TO JURY TRIAL. To the extent permitted by Law, Landlord and Tenant waive
their respective rights to trial by jury of any contract or tort claim,

37

 

counterclaim, cross-complaint, or cause of action in any action, proceeding, or hearing
brought by either party against the other on any matter arising out of or in any way connected with
this Lease, the relationship of Landlord and Tenant, or Tenant’s use or occupancy of the Premises,
including any claim of injury or damage or the enforcement of any remedy under any current or
future law, statute, regulation, code, or ordinance.

     31. BROKERS. Landlord shall pay the fee or commission of the broker or brokers identified in
the Basic Lease Information (the “Broker”) in accordance with Landlord’s separate written agreement
with the Broker, if any. Tenant warrants and represents to Landlord that in the negotiating or
making of this Lease neither Tenant nor anyone acting on Tenant’s behalf has dealt with any broker
or finder who might be entitled to a fee or commission for this Lease other than the Broker.
Tenant shall indemnify and hold Landlord harmless from any claim or claims, including costs,
expenses and attorney’s fees incurred by Landlord asserted by any other broker or finder for a fee
or commission based upon any dealings with or statements made by Tenant or Tenant’s
Representatives.

     32. RELOCATION OF PREMISES. [Intentionally deleted].

     33. MISCELLANEOUS. This Lease may not be amended or modified except by a writing signed by
Landlord and Tenant. Subject to Section 14 — Assignment and Subletting and Section 28 — Landlord’s
Liability, this Lease shall be binding on and shall inure to the benefit of the parties and their
respective successors, assigns and legal representatives. The determination that any provisions
hereof may be void, invalid, illegal or unenforceable shall not impair any other provisions hereof
and all such other provisions of this Lease shall remain in full force and effect. The
unenforceability, invalidity or illegality of any provision of this Lease under particular
circumstances shall not render unenforceable, invalid or illegal other provisions of this Lease, or
the same provisions under other circumstances. This Lease shall be construed and interpreted in
accordance with the laws (excluding conflict of laws principles) of the State in which the Building
is located. The provisions of this Lease shall be construed in accordance with the fair meaning of
the language used and shall not be strictly construed against either party, even if such party
drafted the provision in question. When required by the context of this Lease, the singular
includes the plural. Wherever the term “including” is used in this Lease, it shall be interpreted
as meaning “including, but not limited to” the matter or matters thereafter enumerated. The
captions contained in this Lease are for purposes of convenience only and are not to be used to
interpret or construe this Lease. If more than one person or entity is identified as Tenant
hereunder, the obligations of each and all of them under this Lease shall be joint and several.
Time is of the essence with respect to this Lease, except as to the conditions relating to the
delivery of possession of the Premises to Tenant. Neither Landlord nor Tenant shall record this
Lease.

     34. AUTHORITY. If Tenant is a corporation, partnership, limited liability company or other
form of business entity, each of the persons executing this Lease on behalf of Tenant warrants and
represents that Tenant is a duly organized and validly existing entity, that Tenant has full right
and authority to enter into this Lease and that the persons signing on behalf of Tenant are
authorized to do so and have the power to bind Tenant to this Lease. Tenant shall provide Landlord
upon request with evidence reasonably satisfactory to Landlord confirming the foregoing
representations.

38

 

     35. HAZARDOUS SUBSTANCE DISCLOSURE. California law requires landlords to disclose to tenants
the existence of certain hazardous substances. Accordingly, the existence of gasoline and other
automotive fluids, maintenance fluids, copying fluids and other office supplies and equipment,
certain construction and finish materials, tobacco smoke, cosmetics and other personal items, and
asbestos-containing materials (“ACM”) must be disclosed. Landlord has made no special
investigation of the Premises with respect to any hazardous substances.

     However, gasoline and other automotive fluids are found in the garage and outdoor parking
areas of the Building. Cleaning, lubricating and hydraulic fluids used in the operation and
maintenance of the Building are found in the utility areas of the Building not generally accessible
to Building occupants or the public. Many Building occupants use copy machines and printers with
associated fluids and toners, and pens, markers, inks, and computers and other office equipment
that may contain hazardous substances. Certain adhesives, paints, carpeting and other construction
materials and finishes used in portions of the Building may contain hazardous substances. Building
occupants and other persons entering the Building from time-to-time may use or carry prescription
and non-prescription drugs, perfumes, cosmetics and other toiletries, and foods and beverages, some
of which may contain hazardous substances.

     Although smoking is prohibited inside the Building, indoor areas may, from time to time, be
exposed to tobacco smoke. Smoking is generally permitted outside the Building, and so tobacco
smoke may be present from time-to-time in the outdoor portion of the Building site.

     36. ENTIRE AGREEMENT. This Lease, including the Exhibits and any Addenda attached hereto, and
the documents referred to herein, if any, constitute the entire agreement between Landlord and
Tenant with respect to the leasing of space by Tenant in the Building, and supersede all prior or
contemporaneous agreements, understandings, proposals and other representations by or between
Landlord and Tenant, whether written or oral, all of which are merged herein. Neither Landlord nor
Landlord’s agents have made any representations or warranties with respect to the Premises, the
Building, the Project or this Lease except as expressly set forth herein, and no rights, easements
or licenses shall be acquired by Tenant by implication or otherwise unless expressly set forth
herein. The submission of this Lease for examination does not constitute an option for the
Premises and this Lease shall become effective as a binding agreement only upon execution and
delivery thereof by Landlord to Tenant.

39

 

     IN WITNESS WHEREOF, Landlord and Tenant have entered into this Lease as of the date first
above written.

	 	 	 	 	 	 	 	 	 	 	 
	TENANT:	 	 	 	LANDLORD:
	 
	 	 	 	 	 	 	 	 	 	 
	ARCHSIGHT, INC.,	 	 	 	ECI TWO RESULTS LLC,
	a Delaware corporation	 	 	 	a California limited liability company
	 
	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	by:	 	Embarcadero Capital Investors Two, L.P,

a Delaware limited partnership,
 sole member
	By:
	 	/s/ Robert W. Shaw 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	 	 	 
	Name:
	 	Robert W. Shaw 	 	 	 	by:	 	Embarcadero Capital Partners LLC,
	 

	 	 	 	 	 	 	 	 	 	 
	Title:
	 	Chairman & CEO 	 	 	 	 	 	a Delaware limited liability company,
	 

	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	sole general partner
	By:
	 	/s/ Stewart Grierson 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	 	 	 
	Name:

	 	Stewart Grierson 	 	 	 	 	 	by:
	 	Hamilton Partners, LP
	 

	 	 	 	 	 	 	 	 	 	 
	Title:
	 	CFO 	 	 	 	 	 	 	 	Manager 
	 

	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	by:
	 	Hamilton Ventures, Inc.,

general partners
	 
	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	by:	 	/s/
John Hamilton 
	 

	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	 	 	John Hamilton, President

(For corporate entities, signature by TWO corporate officers is required: one by (x) the chairman
of the board, the president, or any vice president; and the other by (y) the secretary, any
assistant secretary, the chief financial officer, or any assistant treasurer.)

40

 

EXHIBIT A-1

ATTACHED TO AND FORMING A PART OF

LEASE AGREEMENT

DATED AS OF APRIL 24, 2007

BETWEEN

ECI TWO RESULTS LLC, AS LANDLORD,

AND

ARCSIGHT, INC., AS TENANT (“LEASE”)

THE EXISTING PREMISES

Exhibit A-1,
Page 1

[Plans Omitted]

	 	 	 	 
	 
	INITIALS:	 
	 
	Landlord  
	JH

	 
	Tenant
	SG

 

EXHIBIT A-2

ATTACHED TO AND FORMING A PART OF

LEASE AGREEMENT

DATED AS OF APRIL 24, 2007

BETWEEN

ECI TWO RESULTS LLC, AS LANDLORD,

AND

ARCSIGHT, INC., AS TENANT (“LEASE”)

THE EXPANSION PREMISES

Exhibit A-2,
Page 1

[Plans Omitted]

	 	 	 	 
	 
	INITIALS:	 
	 
	Landlord  
	JH

	 
	Tenant
	SG

 

EXHIBIT A-3

ATTACHED TO AND FORMING A PART OF

LEASE AGREEMENT

DATED AS OF APRIL 24, 2007

BETWEEN

ECI TWO RESULTS LLC, AS LANDLORD,

AND

ARCSIGHT, INC., AS TENANT (“LEASE”)

THE CAMPUS

Exhibit A-3,
Page 1

[Plans Omitted]

	 	 	 	 
	 
	INITIALS:	 
	 
	Landlord  
	JH

	 
	Tenant
	SG

 

EXHIBIT B

ATTACHED TO AND FORMING A PART OF

LEASE AGREEMENT

DATED AS OF APRIL 24, 2007

BETWEEN

ECI TWO RESULTS LLC, AS LANDLORD,

AND

ARCSIGHT, INC., AS TENANT (“LEASE”)

CONSTRUCTION RIDER

     1. (a) Existing Premises. Tenant has been occupying the Existing Premises pursuant to
a sublease. Tenant shall take the Existing Premises in their existing “AS IS” condition.

         (b) Tenant Improvements in the Expansion Premises. Tenant shall through a Contractor
(as defined below) construct and install in the Expansion Premises the improvements and fixtures
provided for in this Construction Rider (“Tenant Improvements”). Tenant shall take the Expansion
Premises in their existing “AS IS” condition, subject to the Contractor constructing the Tenant
Improvements.

     Upon request by Landlord, Tenant shall designate in writing an individual authorized to act as
Tenant’s Representative with respect to all approvals, directions and authorizations pursuant to
this Construction Rider.

     Tenant shall submit the Construction Documents (as defined below) to (a) OPI Commercial
Builders, and (b) Venture Builders (together, the “Bidding Contractors”) for bids to construct the
Tenant Improvements. Tenant shall request the Bidding Contractors to competitively bid all
subcontracts for major components of the Tenant Improvements. Landlord shall have the right to
approve (x) all major subcontractors whose work costs more than $25,000.00, and (y) all
subcontractors who will perform work on the structure or the Building Systems. Tenant shall
deliver copies of all of the bids to Landlord. Landlord and Tenant shall then mutually and jointly
review the bids in order to determine which of the two Bidding Contractors is best able to complete
the work in accordance with the schedule and within a budget approved by Landlord and Tenant.
Tenant acknowledges that the lowest bid may not necessarily be the contractor to be selected.
However, it is the intention of the parties to select the lowest cost contractor from between the
Bidding Contractors who is approved by both Landlord and Tenant, absent circumstances that are
reasonably acceptable to Tenant. The contractor selected by Landlord and Tenant from the Bidding
Contractors is called the “Contractor.”

Exhibit B,
Page 1

 

          1.1. Plans for the Expansion Premises. Korth Sunseri Hagey Architects (the “Space
Planner”) shall prepare conceptual space plans (“Space Plans”) and Construction Documents (as
defined below) for the Expansion Premises. The Tenant Improvements in the Expansion Premises shall
be constructed substantially as shown on the “Preliminary Space Plan” consisting of two (2) sheets,
and identified as “Tenant Requested Plan Revisions Building 3” dated April 20, 2007”, attached
hereto as Exhibit B-2 (“Preliminary Space Plan”), which has been prepared by the Space Planner.
Landlord and Tenant shall review additional Space Plans which may be prepared after the Preliminary
Space Plan, and which shall be consistent with the Preliminary Space Plan. Landlord and Tenant
shall promptly approve a final Space Plan (the “Approved Space Plan”). The Approved Space Plan
shall be consistent with the Preliminary Space Plan.

     Tenant shall retain the Space Planner for preparation of additional Space Plans and
Construction Documents for the Expansion Premises. Tenant shall pay those fees and costs of the
Space Planner incurred from and after the date of this Lease. Landlord shall be responsible for
those fees and costs of the Space Planner incurred prior to the date of this Lease.

     As soon as is reasonably practicable after Landlord and Tenant approve the Approved Space
Plan, the Space Planner will prepare and deliver to Landlord and Tenant detailed plans and
specifications consistent with the Approved Space Plan, and sufficient to permit the construction
of the Tenant Improvements by the Contractor (“Construction Documents”). The Construction
Documents shall be subject to approval by Landlord and Tenant. Tenant will request the Bidding
Contractors to provide Landlord and Tenant with a cost estimate for the work shown in the
Construction Documents. Tenant shall respond to the Construction Documents and cost estimates
within three (3) Business Days after receipt thereof, specifying any changes or modifications
Tenant desires in the Construction Documents required because the Construction Documents are
inconsistent with the Approved Space Plan or because Tenant finds the cost estimates exceed
Tenant’s expectations. Any disapproval by Tenant shall also specify in detail the reasons for
Tenant’s disapproval, together with a detailed listing of those changes or modifications to the
Construction Documents which would cause Tenant to approve the Construction Documents (“Tenant’s
Plans Changes”). Tenant’s Plans Changes shall be subject to Landlord’s approval, which approval
shall not be unreasonably withheld. Within five (5) Business Days after receipt of Tenant’s Plan
Changes the Space Planner shall revise the Construction Documents to include Tenant’s Plans
Changes, as such may be reasonably approved by Landlord. The revised Construction Documents and
cost estimate, as approved by Tenant and Landlord, are hereinafter referred to as the “Final
Construction Documents” and “Final Cost Estimate,” respectively.

          1.2. Construction. Following approval of the Final Cost Estimate and selection of the
Contractor, Tenant shall enter into a contract with the Contractor to construct the Tenant
Improvements in accordance with the Final Construction Documents, the Final Cost Estimate (subject
to increases or decreases based upon “Changes”), and any building permit, and to use commercially
reasonable efforts to Substantially Complete such construction in accordance with a construction
schedule proposed by the Contractor, and agreed upon by Landlord and Tenant.

     The Tenant Improvements shall be deemed to be “Substantially Complete” when they have been
completed in accordance with the Final Construction Documents except for finishing

Exhibit B,
Page 2

 

details, minor omissions, decorations and mechanical adjustments of the type normally found on
an architectural “punch list”. (The definition of Substantially Complete shall also define the
terms “Substantial Completion” and “Substantially Completed.”)

     Within thirty (30) days following the completion of any punch list items (after Substantial
Completion of the Tenant Improvements), Tenant shall, at Tenant’s cost and expense, deliver to
Landlord “as built” plans showing the completed Tenant Improvements. The “as built” plans shall be
“hard copy” on paper and in digital form (on CAD), and show the Tenant Improvements in reasonable
detail, including (a) the location of walls, partitions and doors, including fire exits and ADA
paths of travel, (b) electrical, plumbing and life safety fixtures, and (c) a reflected ceiling
plan showing the location of heating, ventilating and air conditioning registers, lighting and life
safety systems (collectively, the “Completion Drawings”).

          1.3. Cost of Tenant Improvements.

          1.3.1. Improvement Allowance. Landlord shall contribute up to Seven Hundred Seven
Thousand Five Hundred Eighty-Eight and 00/100 Dollars ($707,588.00) (the “Improvement Allowance”)
towards the costs of (a) design (including preparation of space plans and Construction Documents),
construction and installation of the Tenant Improvements in the Expansion Premises, and (b) of any
improvements desired by Tenant to the Existing Premises. Tenant is responsible for all costs of
the Tenant Improvements in excess of the Improvement Allowance.

          1.3.2. Disbursement of Improvement Allowance. Landlord shall disburse the Improvement
Allowance to Tenant as the construction of the Tenant Improvements progresses as follows: On or
before the tenth (10th) day of each month, Tenant shall deliver to Landlord an application for
reimbursement, accompanied by documentary evidence as reasonably required by Landlord (including,
at a minimum, copies of the paid invoices and unconditional mechanics’ lien waivers reasonably
required by Landlord and signed by the applicable party) of the costs incurred by Tenant for the
design and construction of the Tenant Improvements since the last application for reimbursement.
Within thirty (30) days after Landlord’s receipt of such an application for reimbursement, Landlord
shall pay to Tenant a pro rata share of such application determined by multiplying the amount of
such application by a fraction, the numerator of which is the Improvement Allowance and the
denominator of which is the total costs of the Tenant Improvements, including Changes, the amount
of the all professional fees and services, and all licensing and permit fees; provided, however
that after making the foregoing calculation Landlord shall retain an amount equal to ten percent
(10%) of Landlord’s pro rata share of each application (the “Landlord Retention”), which Landlord
Retention shall be released pursuant to the provisions of Section 1.3.3 below.

          1.3.3. Evidence of Completion. Within thirty (30) days following Substantial
Completion of the Tenant Improvements (which shall mean completion of the Tenant Improvements and
receipt of permit sign-offs sufficient to permit legal occupancy of the Premises, subject only to
correction of punch-list items that do not affect safe occupancy of the Premises), Tenant shall
submit to Landlord:

Exhibit B,
Page 3

 

               (a) A statement of Tenant’s final construction costs, together with receipted evidence showing
payment thereof, reasonably satisfactory to Landlord, and, to the extent not previously delivered,
fully executed and notarized unconditional lien releases in the form prescribed by law from
Tenant’s contractors, copies of all detailed, final invoices from Tenant’s contractors related to
the Tenant Improvements.

               (b) All Permits and other documents issued by any governmental authority in connection with
the approval and completion of the Tenant Improvements, and all evidence reasonably available
showing compliance with all applicable Laws of any and all governmental authorities having
jurisdiction over the Premises, including, without limitation, a certificate of occupancy or its
equivalent such as duly signed-off job cards, building permit sign-offs, and/or other appropriate
authorization for physical occupancy of the Premises.

               (c) A valid certificate of substantial completion executed by the Space Planner confirming
that the Tenant Improvements have been substantially completed in accordance with the Final
Construction Documents, subject to punch-list items to be completed by the Contractor after
commencement of the Lease.

               (d) A written certificate, subscribed and sworn before a Notary Public, from the Contractor as
follows: “There are no known mechanics’ or materialmen’s liens outstanding, all due and payable
bills with respect to the Tenant Improvements have been paid, and there is no known basis for the
filing of any mechanics’ or materialmen’s liens against the Premises, the Building or the Property,
and, to the best of our knowledge, waivers from all subcontractors and materialmen are valid and
constitute an effective waiver of lien under applicable law.”

               (e) Copies of all of Tenant’s contractors’ warranties.

               (f) The Completion Drawings.

               (g) A Notice of Completion recorded in the office of the Recorder of the County of Santa Clara
in accordance with Section 3093 of the Civil Code of the State of California or any successor
statute.

               (h) Any other items reasonably requested by Landlord.

Within thirty (30) days after receipt of all of the above, Landlord shall make its disbursement of
the final ten percent (10%) of the Improvement Allowance (or so much of the Improvement Allowance
that has not yet been paid by Landlord, but in no event to exceed, in the aggregate, the actual
cost of the design and construction of the Tenant Improvements) to Tenant or Tenant’s contractors,
as applicable, as required above.

Any portion of the Improvement Allowance not used in the design, construction and installation of
the Tenant Improvements shall be retained by Landlord, and Tenant shall have no right to receive or
apply toward Tenant’s rental obligations any portion of the Improvement Allowance not actually
used.

Exhibit B,
Page 4

 

          1.4. Changes. If Tenant desires any change, addition or alteration in or to any Final
Construction Documents (whether one or more, hereinafter called “Changes”), Tenant shall request
the Space Planner to prepare additional proposed Construction Documents containing such Changes.
Tenant shall be responsible for the costs and fees charged by the Space Planner for the Space
Planner making any proposed Changes to the Final Construction Documents (even if such Changes are
not used in the construction of Tenant Improvements). As soon as practicable after the completion
of such additional proposed Construction Documents showing the Changes requested by Tenant,
Landlord shall request the Contractor to notify Tenant of the estimated cost of the Changes.
Within three (3) working days after receipt of such cost estimate, Tenant shall notify Landlord in
writing whether Tenant approves the Changes. If Tenant approves the Changes, such approved changes
shall be incorporated into the Final Construction Documents, the Contractor shall proceed with the
Changes. If Tenant fails to approve the Changes within such three (3) day period, construction of
the Tenant Improvements shall proceed as provided in accordance with the Final Construction
Documents (as such Final Construction Documents may have been previously amended through Changes
approved pursuant to the procedures contained in this Paragraph) prior to the applicable requested
Changes.

     2. Delivery of Expansion Premises. The Expansion Premises are leased to, and occupied
by, a tenant (the “Existing Tenant”) under a lease which expires June 30, 2007. Landlord shall
deliver possession of the Expansion Premises to Tenant promptly after the Existing Tenant has
vacated the Expansion Premises. If Landlord does not deliver the Expansion Premises to Tenant on
or before July 10, 2007, then the Commencement Date shall be extended day-for-day for each day
after July 10, 2007 until Landlord delivers possession of the Expansion Premises to Tenant.

     3. Access to Expansion Premises. Landlord shall allow Tenant and Tenant’s
Representatives to enter the Expansion Premises prior to the Expansion Premises Commencement Date
to permit Tenant to make the Expansion Premises ready for its use and occupancy; provided, however,
that prior to such entry of the Expansion Premises, Tenant shall provide evidence reasonably
satisfactory to Landlord that Tenant’s insurance, as described in Section 11.1 — Tenant’s Insurance
of the Lease, shall be in effect as of the time of such entry. Such permission may be revoked at
any time upon twenty-four (24) hours’ notice, and Tenant and its Representatives shall not
interfere with Landlord or the Contractor in completing the Tenant Improvements.

     Tenant agrees that Landlord shall not be liable in any way for any injury, loss or damage
which may occur to any of Tenant’s property placed upon or installed in the Expansion Premises
prior to the Expansion Premises Commencement Date, the same being at Tenant’s sole risk, and Tenant
shall be liable for all injury, loss or damage to persons or property arising as a result of such
entry into the Expansion Premises by Tenant or its Representatives.

     4. Ownership of Tenant Improvements. All Tenant Improvements, whether installed by
Landlord or Tenant, shall become a part of the Premises, shall be the property of Landlord and,
subject to the provisions of the Lease, shall be surrendered by Tenant with the Premises, without
any compensation to Tenant, at the expiration or termination of the Lease in accordance with the
provisions of the Lease.

Exhibit B,
Page 5

	 	 	 	 
	 
	INITIALS:	 
	 
	Landlord  
	JH

	 
	Tenant
	SG

 

EXHIBIT B-2

ATTACHED TO AND FORMING A PART OF

LEASE AGREEMENT

DATED AS OF APRIL 24, 2007

BETWEEN

ECI TWO RESULTS LLC, AS LANDLORD,

AND

ARCSIGHT, INC., AS TENANT (“LEASE”)

THE PRELIMINARY SPACE PLAN

Exhibit B-2,
Page 1

[Plans Omitted]

	 	 	 	 
	 
	INITIALS:	 
	 
	Landlord  
	JH

	 
	Tenant
	SG

 

EXHIBIT C

ATTACHED TO AND FORMING A PART OF

LEASE AGREEMENT

DATED AS OF APRIL 24, 2007

BETWEEN

ECI TWO RESULTS LLC, AS LANDLORD,

AND

ARCSIGHT, INC., AS TENANT (“LEASE”)

BUILDING RULES

The following Building Rules are additional provisions of the foregoing Lease to which they are
attached. The capitalized terms used herein have the same meanings as these terms are given in the
Lease.

     1. Use of Common Areas. Tenant will not obstruct the Common Areas, and Tenant will
not use the Common Areas for any purpose other than ingress and egress to and from the Premises.
The Common Areas are not open to the general public and Landlord reserves the right to control and
prevent access to the Common Areas of any person whose presence, in Landlord’s opinion, would be
prejudicial to the safety, reputation and interests of the Campus and its tenants.

     2. No Access to Roof. Except to the extent provided in Article 41 of Exhibit D,
Tenant has no right of access to the roof of the Building and will not install, repair or replace
any antenna, aerial, aerial wires, fan, air-conditioner or other device on the roof of the
Building, without the prior written consent of Landlord. Any such device installed without such
written consent is subject to removal at Tenant’s expense without notice at any time. In any event
Tenant will be liable for any damages or repairs incurred or required as a result of its
installation, use, repair, maintenance or removal of such devices on the roof and agrees to
indemnify and hold harmless Landlord from any liability, loss, damage, cost or expense, including
reasonable attorneys’ fees, arising from any activities of Tenant or of Tenant’s Representatives on
the roof of the Building.

     3. Signage. No sign, placard, picture, name, advertisement or notice visible from the
exterior of the Building will be inscribed, painted, affixed or otherwise displayed by Tenant on or
in any part of the Building without the prior written consent of Landlord, or the City of
Cupertino, California. Landlord reserves the right to adopt and furnish Tenant with general
guidelines relating to signs in or on the Building. All approved signage will be inscribed,
painted or affixed at Tenant’s expense by a person approved by Landlord, which approval will not be
unreasonably withheld. At the expiration or termination of this Lease Tenant shall remove all
signs, repair and damage resulting from the installation or removal, and restore the area where the
signs were removed to a condition consistent with the area surrounding the removed signs.

     4. Prohibited Uses. The Premises will not be used for manufacturing, for the storage
of merchandise held for sale to the general public, for lodging or for the sale of goods to the
general public. Tenant will not permit any food preparation on the Premises except that Tenant

Exhibit C,
Page 1

 

may use Underwriters’ Laboratory approved equipment for brewing coffee, tea, hot chocolate and
similar beverages so long as such use is in accordance with all applicable federal, state and city
laws, codes, ordinances, rules and regulations and provided that such activity does not generate
odors outside of the Premises.

     5. Clean. Tenant shall be responsible for keeping the Premises clean and in good
order. Tenant shall not cause any unnecessary labor by reason of Tenant’s carelessness or
indifference in the preservation of good order and cleanliness.

     6. Keys and Locks. Upon request, each tenant shall provide keys, key cards and access
codes to Landlord so that Landlord can have access to such tenant’s premises in the event of any
emergency. Each tenant, upon the termination of its tenancy, shall deliver to Landlord all keys,
key cards and/or access codes to doors in its premises. As to secure areas, in an emergency,
Landlord may use any means to enter and Tenant shall indemnify Landlord against all Claims arising
out of such entry.

     7. Heavy Objects. Prior to installing heavy objects, furniture or equipment in the
Premises, Tenant shall confirm the capacity of the Premises to bear such loads and Tenant shall not
exceed such capacity at any time. Installation of such heavy objects shall be subject to
Landlord’s prior written approval. Upon expiration or termination of this Lease Tenant shall
repair any damage to the Premises caused by any such heavy objects.

     8. Nuisances and Dangerous Substances. Tenant will not conduct itself or permit
Tenant’s Representatives or Visitors to conduct themselves, in the Premises or anywhere on or in
the Campus in a manner which is offensive or unduly annoying to any other tenant in the Campus or
Landlord’s property managers. Tenant will not install or operate any phonograph, radio receiver,
musical instrument, or television or other similar device in any part of the Common Areas and shall
not operate any such device installed in the Premises in such manner as to disturb or annoy other
tenants of the Campus. Tenant will not use or keep in the Premises, Project or Campus any
kerosene, gasoline or other combustible fluid or material other than limited quantities thereof
reasonably necessary for the maintenance of office equipment, or, without Landlord’s prior written
approval, use any method of heating or air conditioning other than that supplied by Landlord.
Tenant will not use or keep any foul or noxious gas or substance in the Premises. Tenant will not
bring or keep any animals in or about the Premises or the Campus.

     9. Building Name and Address. Without Landlord’s prior written consent, Tenant will
not use the name of the Building in connection with or in promoting or advertising Tenant’s
business except as Tenant’s address.

     10. Building Directory. [Intentionally Deleted].

     11. Window Coverings. No curtains, draperies, blinds, shutters, shades, awnings,
screens or other coverings, window ventilators, hangings, decorations or similar equipment shall be
attached to, hung or placed in, or used in or with any window of the Building without the prior
written consent of Landlord.

Exhibit C,
Page 2

 

     12. Floor Coverings. Tenant will not lay or otherwise affix linoleum, tile, carpet or
any other floor covering to the floor of the Premises in any manner except as approved in writing
by Landlord. Tenant will be liable for the cost of repair of any damage resulting from the
violation of this rule or the removal of any floor covering by Tenant or its contractors, employees
or invitees.

     13. Wiring and Cabling Installations. No boring or cutting for wires or cables will
be allowed without the prior written consent of Landlord. The location of burglar alarms, smoke
detectors, telephones, call boxes and other office equipment affixed to the Premises shall be
subject to the written approval of Landlord.

     14. Plumbing Facilities. The toilet rooms, toilets, urinals, wash bowls and other
apparatus shall not be used for any purpose other than that for which they were constructed and no
foreign substance of any kind whatsoever shall be disposed of therein. Tenant will be liable for
any breakage, stoppage or damage resulting from the violation of this rule by Tenant, its employees
or invitees.

     15. Doors. Tenant shall ensure that the doors of the Premises are closed and locked,
and that all water faucets, water apparatus and utilities are shut off before Tenant or Tenant’s
employees leave the Premises.

     16. Refuse. Tenant shall store all of Tenant’s trash and garbage within the Premises
or in other facilities designated by Landlord for such purpose. Tenant shall not place in any
trash box or receptacle any material which cannot be disposed of in the ordinary and customary
manner of removing and disposing of trash and garbage in the city in which the Building is located
without being in violation of any law or ordinance governing such disposal. Tenant shall comply
with the requirements of any recycling program adopted by Landlord for the Building.

     17. Activities. Canvassing, peddling, soliciting and distribution of handbills or
other written materials in the Common Areas are prohibited.

     18. Bicycles. Tenant’s employees may bring bicycles into Tenant’s own Premises;
however, bicycles shall be ridden only on roads and bike paths and not on sidewalks or other
portions of the Common Areas. The use of skateboards, skates, rollerblades and scooters is
prohibited at all times in the Common Areas.

     19. Events. Tenant shall not use the Common Areas for events, activities or parties
(for example, employee parties) without Landlord’s prior written consent. Tenant shall submit a
written request for Landlord’s consent to use the Common Areas for such events, activities or
parties at least ten (10) days prior thereto. Such use of the Common Areas by Tenant shall be
subject to such conditions and restrictions as Landlord may specify, in Landlord’s sole and
absolute discretion. Alcohol beverages shall not be served or consumed in the Common Areas at any
time.

     20. Parking. Tenant will use, and cause Tenant’s Representatives and Visitors to use,
any parking spaces to which Tenant is entitled under the Lease in a manner consistent with
Landlord’s directional signs and markings in the Parking Facility. Specifically, but without
limitation, Tenant will not park, or permit Tenant’s Representatives or Visitors to park, in a

Exhibit C, Page 3

 

manner that impedes access to and from the Building or the Parking Facility or that violates
space reservations for handicapped drivers registered as such with the California Department of
Motor Vehicles. Landlord may use such reasonable means as may be necessary to enforce the
directional signs and markings in the Parking Facility, including but not limited to towing
services, and Landlord will not be liable for any damage to vehicles towed as a result of
non-compliance with such parking regulations.

     21. Fire, Security and Safety Regulations. Tenant will comply with all safety,
security, fire protection and evacuation measures and procedures established by Landlord or any
governmental agency.

     22. Responsibility for Theft. Tenant assumes any and all responsibility for
protecting the Premises from theft, robbery and pilferage, which includes keeping doors locked, and
windows and other means of entry to the Premises closed. Roof access hatches must remain shut and
locked at all times.

     23. Sales and Auctions. Tenant will not conduct or permit to be conducted any sale by
auction in, upon or from the Premises or elsewhere on the Campus, whether said auction be
voluntary, involuntary, pursuant to any assignment for the payment of creditors or pursuant to any
bankruptcy or other insolvency proceeding.

     24. Waiver of Rules. Landlord may waive any one or more of these Building Rules for
the benefit of any particular tenant or tenants, but no such waiver by Landlord will be construed
as a waiver of such Building Rules in favor of any other tenant or tenants nor prevent Landlord
from thereafter enforcing these Building Rules against any or all of the tenants of the Campus.

     25. Effect on Lease. These Building Rules are in addition to, and shall not be
construed to in any way modify or amend, in whole or in part, the terms, covenants, agreements and
conditions of the Lease. Violation of these Building Rules constitutes a failure to fully perform
the provisions of the Lease, as referred to in Section 15.1 — “Events of Default”.

     26. Non-Discriminatory Enforcement. Subject to the provisions of the Lease (and the
provisions of other leases with respect to other tenants), Landlord shall use reasonable efforts to
enforce these Building Rules in a non-discriminatory manner, but in no event shall Landlord have
any liability for any failure or refusal to do so (and Tenant’s sole and exclusive remedy for any
such failure or refusal shall be injunctive relief preventing Landlord from enforcing any of the
Building Rules against Tenant in a manner that discriminates against Tenant).

     27. Additional and Amended Rules. Landlord reserves the right to rescind or amend
these Building Rules and/or adopt any other and reasonable rules and regulations as in its judgment
may from time to time be needed for the safety, care and cleanliness of the Campus and for the
preservation of good order therein.

Exhibit C,
Page 4

	 	 	 	 
	 
	INITIALS:	 
	 
	Landlord  
	JH

	 
	Tenant
	SG

 

EXHIBIT D

ATTACHED TO AND FORMING A PART OF

LEASE AGREEMENT

DATED AS OF APRIL 24, 2007

BETWEEN

ECI TWO RESULTS LLC, AS LANDLORD,

AND

ARCSIGHT, INC., AS TENANT (“LEASE”)

ADDITIONAL PROVISIONS RIDER

37. PARKING.

     (a) Tenant’s Parking Rights. On the Existing Premises Commencement Date Landlord
shall provide Tenant, one hundred fifty (150) parking spaces, and on the Expansion Premises
Commencement Date Landlord shall provide Tenant, an additional one hundred sixteen (116) parking
spaces in the Parking Facility. All such parking spaces shall be on an unreserved, unassigned and
non-exclusive basis, for use by Tenant and Tenant’s Representatives and Visitors, at the users’
sole risk, in the Parking Facility. The parking spaces to be made available to Tenant hereunder
may contain a reasonable mix of spaces for compact cars and up to ten percent (10%) of the
unassigned spaces may also be designated by Landlord as Building visitors’ parking.

     (b) Availability of Parking Spaces. Landlord shall take reasonable actions to ensure
the availability of the parking spaces leased by Tenant, but Landlord does not guarantee the
availability of those spaces at all times against the actions of other tenants of the Building and
users of the Parking Facility. Access to the Parking Facility may, at Landlord’s option, be
regulated by card, pass, bumper sticker, decal or other appropriate identification issued by
Landlord. Landlord retains the right to revoke the parking privileges of any user of the Parking
Facility who violates the rules and regulations governing use of the Parking Facility (and Tenant
shall be responsible for causing any employee of Tenant or other person using parking spaces
allocated to Tenant to comply with all parking rules and regulations).

     (c) Assignment and Subletting. Notwithstanding any other provision of the Lease to
the contrary, Tenant shall not assign its rights to the parking spaces or any interest therein, or
sublease or otherwise allow the use of all or any part of the parking spaces to or by any other
person, except (i) with Landlord’s prior written consent, which may be granted or withheld by
Landlord in its sole discretion, (ii) in connection with an assignment of this Lease, or (iii) in
the event of any sublease, Tenant may assign the number of parking spaces determined by multiplying
the total number of parking spaces contained in Section 38 (a) above times a fraction, the
numerator of which shall be the rentable area of the subleased space, and the denominator of which
shall be the rentable area in the Premises. In the event of any separate assignment or sublease of
parking space rights that is approved by Landlord, Landlord shall be entitled to receive, as
additional Rent hereunder, one hundred percent (100%) of any profit received by Tenant in
connection with such assignment or sublease.

Exhibit D, Page 1

 

     (d) Condemnation, Damage or Destruction. In the event the Parking Facility is the
subject of a Condemnation, or is damaged or destroyed, and this Lease is not terminated, and if in
such event the available number of parking spaces in the Parking Facility is permanently reduced,
then Tenant’s rights to use parking spaces hereunder may, at the election of Landlord, thereafter
be reduced in proportion to the reduction of the total number of parking spaces in the Parking
Facility. In such event, Landlord reserves the right to reduce the number of parking spaces to
which Tenant is entitled or to relocate some or all of the parking spaces to which Tenant is
entitled to other areas in the Parking Facility.

38. RIGHT OF FIRST OFFER.

     (a) Provided that ArcSight, Inc. has not assigned this Lease or sublet any or all of the
Premises other than to a Permitted Transferee (it being intended that all rights pursuant to this
provision are and shall be personal to the original Tenant under this Lease and shall not be
transferable or exercisable for the benefit of any Transferee other than a Permitted Transferee), “
and provided Tenant is not in default under this Lease at the time of the exercise of any such
right or at any time thereafter until delivery of possession of the space to Tenant, subject to any
and all rights granted by Landlord with respect to such space existing as of the date of this Lease
(including renewal and extension rights and rights of first offer, first negotiation, first refusal
or other expansion rights), and subject to Landlord’s right to extend or renew any then existing
lease of the space or otherwise to lease the space to any tenant, subtenant or other occupant of
the space, Tenant shall have a one-time right of first offer to lease the following spaces in the
Campus (each, as offered, a “ROFO Space”): Up to 100,000 rentable square feet in the Campus, other
than in Buildings 1 and 2 shown on the Site Plan.

     (b) Such right of first offer (i) may only be exercised with respect to a particular ROFO
Space which has been previously leased and becomes available during the Term upon expiration or
other termination of the previous lease, and (ii) may only be exercised with respect to all of the
ROFO Space being offered by Landlord. If ROFO Space qualifying for such right of first offer
becomes available, Landlord shall offer to lease such ROFO Space to Tenant at the same rent and on
the same terms that Landlord intends to offer to other prospective tenants, with a security deposit
based upon the amount of security deposit Landlord would obtain from at a prospective tenant having
credit comparable to Tenant’s credit. Tenant shall have ten (10) Business Days following receipt
of Landlord’s offer with respect to any ROFO Space within which to notify Landlord in writing of
its intention to lease such ROFO Space, and such notice, if given by Tenant, shall constitute an
acceptance of Landlord’s terms for the lease of such ROFO Space. If Tenant exercises such right of
first offer, Tenant shall lease the ROFO Space on the same terms and conditions as are contained in
this Lease except for the economic and other terms specifically set forth in Landlord’s notice, and
the parties shall execute an amendment to this Lease to include such ROFO Space in the Premises and
otherwise to provide for the leasing of such ROFO Space on such terms. If Tenant fails so to
exercise Tenant’s right of first offer within such ten (10) Business Day period, Landlord may
thereafter lease such ROFO Space to other prospective tenants.

     (c) If Tenant does not lease a particular ROFO Space from Landlord when it is first offered to
Tenant by Landlord then this right of first offer shall terminate with respect to such

Exhibit D, Page 2

 

particular ROFO Space, and Tenant shall have no further rights to lease any of the particular
ROFO Space which Landlord has offered.

39. EXTENSION OPTION.

     Provided that ArcSight, Inc. has not assigned this Lease or sublet any or all of the Premises
other than to a Permitted Transferee (it being intended that all rights pursuant to this provision
are and shall be personal to the original Tenant under this Lease and shall not be transferable or
exercisable for the benefit of any Transferee other than a Permitted Transferee), and provided
Tenant is not in default under this Lease at the time of exercise or at any time thereafter until
the beginning of such extension of the Term, Tenant shall have the option (the “Extension Option”)
to extend the Term for one (1) additional consecutive period of five (5) years (the “Extension
Period”), by giving written notice to Landlord of the exercise of such Extension Option at least
twelve (12) months, but not more than fifteen (15) months, prior to the expiration of the initial
Term. The exercise of the Extension Option by Tenant shall be irrevocable and shall cover the
entire Premises leased by Tenant pursuant to this Lease. Upon such exercise, the term of the Lease
shall automatically be extended for the Extension Period without the execution of any further
instrument by the parties; provided that Landlord and Tenant shall, if requested by either party,
execute and acknowledge an instrument confirming the exercise of the Extension Option. The
Extension Option shall terminate if not exercised precisely in the manner provided herein. Any
extension of the Term shall be upon all the terms and conditions set forth in this Lease and all
Exhibits thereto, except that: (i) Tenant shall have no further option to extend the Term of the
Lease; (ii) Landlord shall not be obligated to contribute funds toward the cost of any remodeling,
renovation, alteration or improvement work in the Premises; and (iii) Base Rent for the Extension
Period shall be the then Fair Market Base Rental (as defined below) for the Premises for the space
and term involved, which shall be determined as set forth below.

     (a) “Fair Market Base Rental” shall mean the “fair market” Base Rent at the time or times in
question for the Building, based on the prevailing rentals then being charged to tenants in other
buildings in Cupertino of comparable location and quality as the Building, for leases with terms
approximately equal to the term for which Fair Market Base Rental is being determined, taking into
account: the desirability, location in the building, size and quality of the space, including
interior finishes and other tenant improvements; included services and related operating expenses
and tax and expense stops or other escalation clauses; and any other special rights of Tenant under
this Lease in comparison to typical market leases (e.g. for parking, signage, and extension or
expansion options). Fair Market Base Rental shall also reflect the then prevailing rental
structure for comparable office buildings in Cupertino, so that if, for example, at the time Fair
Market Base Rental is being determined the prevailing rental structure includes periodic rental
adjustments or escalations, Fair Market Base Rental shall reflect such rental structure.

     (b) Landlord and Tenant shall endeavor to agree upon the Fair Market Base Rental. If they are
unable to so agree within thirty (30) days after receipt by Landlord of Tenant’s notice of exercise
of the Extension Option, Landlord and Tenant shall mutually select a licensed real estate broker
who is active in the leasing of office space in the Cupertino. Landlord shall submit Landlord’s
determination of Fair Market Base Rental and Tenant shall submit Tenant’s

Exhibit D, Page 3

 

determination of Fair Market Base Rental to such broker, at such time or times and in such
manner as Landlord and Tenant shall agree (or as directed by the broker if Landlord and Tenant do
not promptly agree). The broker shall select either Landlord’s or Tenant’s determination as the
Fair Market Base Rental, and such determination shall be binding on Landlord and Tenant. If
Tenant’s determination is selected as the Fair Market Base Rental, then Landlord shall bear all of
the broker’s cost and fees. If Landlord’s determination is selected as the Fair Market Base
Rental, then Tenant shall bear all of the broker’s cost and fees.

     (c) In the event the Fair Market Base Rental for the Extension Period has not been determined
at such time as Tenant is obligated to pay Base Rent for the Extension Period, Tenant shall pay as
Base Rent pending such determination, the Base Rent in effect for such space immediately prior to
the Extension Period; provided, that upon the determination of the applicable Fair Market Base
Rental, any shortage of Base Rent paid, together with interest at the rate specified in the Lease,
shall be paid to Landlord by Tenant.

     (d) In no event shall the Base Rent during the Extension Period be less than the Base Rent in
effect immediately prior to such Extension Period.

     (e) The term of this Lease, whether consisting of the Initial Term alone or the Initial Term
as extended by the Extension Period (if the Extension Option is exercised), is referred to in this
Lease as the “Term.”

40. LETTER OF CREDIT AND SECURITY DEPOSIT.

     A. Letter of Credit:

     (a) Upon execution of this Lease, Tenant shall deliver to Landlord an unconditional,
irrevocable, transferable and negotiable standby letter of credit (the “L/C”) in an amount equal to
$800,000.00 (“Face Amount”), issued by a bank or trust company (“Issuer”) and in form and content
acceptable to Landlord, in its sole and absolute discretion, as additional security for the
performance of Tenant’s obligations under this Lease. An L/C in the form attached hereto as
Exhibit E is hereby approved by Landlord. The L/C shall name Landlord as beneficiary
thereunder and provide that draws, including partial draws, at Landlord’s election, will be honored
upon the delivery to the Issuer of a certificate signed by Landlord, or its authorized agent, that
Tenant has failed to perform its obligations under the Lease. The L/C shall also provide that it
will be automatically extended upon each renewal date unless the Issuer thereof delivers to
Landlord, no later than forty-five (45) days prior to the stated expiration date of the L/C,
written notice of Issuer’s intent not to extend or renew the L/C. During any period that Tenant is
required to maintain the L/C, Tenant shall, at least thirty (30) days prior to any expiration or
termination of the L/C, provide Landlord either with written confirmation that the existing L/C
will be automatically extended and renewed or with a new L/C that satisfies all of the requirements
for the L/C in this Section 40. In addition, upon a proposed sale or other transfer of any
interest in the Building, the Project, this Lease or Landlord (including consolidations, mergers,
or other entity changes), Tenant, at its sole cost and expense and upon ten (10) Business Days’
notice, shall, concurrent with Landlord’s delivery to Tenant of the then outstanding L/C, deliver
to any such transferees, successors, or assigns a replacement L/C on identical terms (except for
the stated beneficiary) from the same Issuer or another bank or trust

Exhibit D, Page 4

 

company acceptable to Landlord, in Landlord’s sole discretion, naming the new landlord as the
beneficiary thereof. Tenant’s failure to perform or observe any of the covenants set forth in this
Section 40 for any reason shall entitle Landlord to draw on the full amount of the L/C and shall
constitute an Event of Default under this Lease without the requirement of any notice from
Landlord. Any amount(s) drawn under the L/C shall be held or used by Landlord in accordance with
the terms of Section 4 of the Lease.

     (b) On the first (1st), second (2nd), third (3rd) and fourth (4th) anniversary of the
Expansion Premises Commencement Date, if: (i) within the prior twelve (12) month period no prior or
current Event of Default has occurred, and no event or condition exists or has occurred which with
the passage of time or delivery of notice by Landlord, or both, would constitute an Event of
Default, and (ii) Tenant has delivered to Landlord, on or before such anniversary date, financial
statements prepared in accordance with generally accepted accounting principles consistently
applied, and certified by Tenant’s president, chief financial officer or controller as being
complete and accurate, which confirm that for at least three (3) out of the previous four (4)
consecutive calendar quarters immediately preceding the applicable anniversary date, (A) Tenant has
a tangible net worth of no less than $5,000,000 at the end of three (3) out of four (4) such
calendar quarters, (B) Tenant has positive pre-tax earnings of no less than $900,000 aggregate
during the four quarters immediately preceding the applicable anniversary date, and (C) Tenant has
cash and marketable securities of no less than $1,000,000 at the end of three (3) out of such four
(4) immediately preceding previous calendar quarters, then the Face Amount of the L/C may be
immediately reduced by One Hundred Fifty Thousand Dollars ($150,000.00) (the “L/C Burnoff”). In no
event shall the Face Amount of the L/C be less than Two Hundred Thousand Dollars ($200,000.00).

     (c) Notwithstanding any other provisions of this Article 40 to the contrary, if Tenant has a
market capitalization of $750 million or more after (i) any public offering and Tenant is traded on
a public exchange, or (ii) any purchase by another entity meeting the standards in (b) (ii) above
and which assumes and becomes liable under the Lease, then immediately the Face Amount of the L/C
shall be reduced to zero, and Landlord shall retain the Security Deposit as security for Tenant’s
obligations under this Lease.

     B. Security Deposit:

     On the first (1st), second (2nd), third (3rd) and fourth (4th) anniversary of the Expansion
Premises Commencement Date, if: (i) within the prior twelve (12) month period no prior or current
Event of Default has occurred, and no event or condition exists or has occurred which with the
passage of time or delivery of notice by Landlord, or both, would constitute an Event of Default,
and (ii) Tenant has delivered to Landlord, on or before such anniversary date, financial statements
prepared in accordance with generally accepted accounting principles consistently applied, and
certified by Tenant’s president, chief financial officer or controller as being complete and
accurate, which confirm that for at least three (3) out of the previous four (4) consecutive
calendar quarters immediately preceding the applicable anniversary date, (A) Tenant has a tangible
net worth of no less than $5,000,000 at the end of three (3) out of four (4) such calendar
quarters, (B) Tenant has positive pre-tax earnings of no less than $900,000 aggregate during the
four quarters immediately preceding the applicable anniversary date, and (C) Tenant has cash and
marketable securities of no less than $1,000,000 at the end of three

Exhibit D, Page 5

 

(3) out of such four (4) immediately preceding previous calendar quarters, then the amount of
the Security Deposit shall be immediately reduced by Twenty-Five Thousand Dollars ($25,000.00) (the
“Security Deposit Burnoff”). In no event, as a result of any Security Deposit Burnoff shall the
cash amount of the Security Deposit be less than One Hundred Thousand Dollars ($100,000.00).

41. SATELLITE DISH OR DISHES.

     (a) Grant of License for Satellite Dish or Dishes. Provided that ArcSight, Inc. has
not assigned this Lease or sublet any or all of the Premises other than to a Permitted Transferee
(it being intended that all rights pursuant to this provision are and shall be personal to the
original Tenant under this Lease and shall not be transferable or exercisable for the benefit of
any Transferee other than a Permitted Transferee), Tenant shall have the non-exclusive license, in
accordance with the terms and conditions of this Section 41, and subject to the provisions of this
Lease, to install on the roof of each Building and use during the Term use in conjunction with the
conduct of Tenant’s usual business in the Premises, up to one (1) antenna, or three (3) satellite
dishes (in each instance a “Satellite Dish” and together, “Satellite Dishes”). The size of any
Satellite Dish shall not exceed thirty (30) inches in diameter. The Satellite Dish or Dishes shall
be designed, made, operated, maintained, repaired, replaced as necessary, and removed by Tenant at
Tenant’s sole cost and expense and at no cost or expense to Landlord. The license granted herein
shall be for no additional rent or other charge (other than reimbursement of any out-of-pocket
expenditures incurred in good faith by Landlord in connection therewith and payment of other costs
as provided below).

     (b) Location of Satellite Dishes. All Satellite Dishes shall be located on the main
roof of each Building (and not the elevator penthouse or any parapet) in a location designated by
Landlord (the “Licensed Area”). Each Satellite Dish shall not be higher than any parapet wall and
shall not be visible from street level. Tenant shall not install any equipment on the roof of the
Building other than the Satellite Dishes and related wiring and supports. If Tenant desires to
locate any Satellite Dish outside the Licensed Area, then Landlord may designate the location or
locations of such the Equipment in its sole discretion, and the designated location for such
Satellite Dish shall be included in the definition of Licensed Area. The Licensed Area shall be
included within the term Premises for all purposes under the Lease.

     (c) Request by Tenant, Approval by Landlord and Permits. At least thirty (30) days
prior to starting to install any Satellite Dish, Tenant shall submit detailed plans and
specifications, describing all aspects of Tenant’s proposed installation, including detailed
specifications and plans concerning the Satellite Dish(es), all associated equipment, the means of
placing the Satellite Dish(es) on the roof of the Building, the connections between the Satellite
Dish(es) and the equipment in the Premises, power requirements, cable specifications, equipment and
equipment cabinet dimensions and weights, and such other particulars and details as Landlord may
request in order to have sufficient information to understand the installation proposed by Tenant
(collectively, the “Plans”), for review and approval by Landlord and Landlord’s consultants,
including Landlord’s structural engineer. All aspects of the Plans (including the location of any
Satellite Dish and any associated equipment) shall be subject to Landlord’s prior written approval,
and any approval from all applicable governmental agencies, including ordinances, regulations and
any approval from the City of Cupertino, California.

Exhibit D,
Page 6

 

Tenant shall be responsible, at Tenant’s sole cost and expense, to obtain from the City of
Cupertino, California all building permits and all permits from any applicable governmental agency
necessary to install and operate all Satellite Dishes. Landlord shall have the right to require
reasonable modifications and impose reasonable conditions on Tenant’s Plans. To the extent any
installation or construction shown on the Plans affects the structural integrity of the Building
Landlord shall have the absolute right, in its sole discretion, to require any changes or impose
any conditions on the Plans (including without limitation the right to designate contractors).
Tenant shall pay all of Landlord’s actual costs incurred in the review and supervision of Tenant’s
efforts, including any fees charged by Landlord’s structural engineer in connection with such
engineer’s review and recommendations with respect to the installation of the Equipment.

     (d) Installation and Maintenance of Equipment. The Licensed Area will be delivered to
Tenant in its AS IS and WHERE IS condition and Landlord shall have no obligation to modify or
install any improvements in the Licensed Area. There shall be no roof penetration in connection
with the Satellite Dishes, except for cabling connecting the Satellite Dish or Dishes to the
Premises. If the installation of any Satellite Dish adversely affects the structural integrity of
the roof, causes any leaks or voids any roof warranty, Tenant shall be responsible for the costs of
repairing the roof. Tenant shall coordinate the installation of the Equipment with Landlord’s
roofing contractor, at Tenant’s sole cost and expense. All equipment installed in connection with
any Satellite Dish shall be located within the Premises. The Satellite Dishes shall be properly
counterweighted. The installation and use of the Satellite Dishes and Equipment shall not affect
any of the Building Systems. Prior to installing any Satellite Dish in the Licensed Area or any
Equipment, Tenant shall establish to Landlord’s satisfaction that the requirements of Article 11
(Insurance) of the Lease have been satisfied. Tenant shall be required, at its own cost, to
construct or install any improvements to the Building or the Property required by applicable Laws
as a result of Tenant’s installation of any Satellite Dish or improvements or the use or operation
thereof. The installation of all Satellite Dishes and construction of all related or required
improvements shall be at Tenant’s sole cost, in full compliance with the Plans approved by Landlord
and the requirements of Article 6 (Alterations) of the Lease. Tenant shall (i) label each cable
placed in or on the Building, as well as the Satellite Dishes, with information as to where the
cables originate and where the cables terminate, (ii) prominently label any related equipment with
appropriate safety warnings when human exposure to radio frequency radiation may exceed the safety
standards of any applicable governmental authority, and (iii) at Tenant’s sole cost, maintain the
Satellite Dishes, all cabling and the Licensed Area in a good, orderly, sanitary and safe condition
and repair. Tenant shall have access to the Licensed Area and other portions of the Property at
all reasonable times and as necessary for Tenant’s installation, operation, use, maintenance,
repair, replacement and removal of the Equipment and other improvements installed by Tenant.

     (e) Use; Compliance with Laws. The Licensed Area may be used by Tenant only for the
installation, operation, use, maintenance, repair, replacement and removal of the Satellite
Dish(es), all at Tenant’s sole risk and expense and in full compliance with all applicable Laws.
Tenant’s right to use the Licensed Area is personal to Tenant and may not be separately assigned or
sublet other than to a Permitted Transferee.

Exhibit D,
Page 7

 

     (f) Interference. The Satellite Dish or Dishes and Tenant’s use of the Licensed Area
and related equipment shall not interfere in any manner with Landlord’s activities in the
applicable Building and shall not damage or interfere with any facilities or equipment of any type
installed by Landlord or any other person or entity, including without limitation, the Building
Systems and any satellite dishes, antenna, computer or other devices or systems installed at the
Project at any time. Tenant agrees, warrants and represents that should any such interference
occur, it shall take whatever steps are required to correct such interference within two (2)
Business Days after receiving written notice thereof from Landlord, and that should there occur any
interference with the ability of Landlord or any tenants, occupants or licensees of the Project to
communicate in any manner (whether by radio, television, electrical, telephone, computer, microwave
or otherwise) that Tenant shall take whatever steps are required to stop such interference within
seventy-two (72) hours after receiving written notice thereof from Landlord. If despite Tenant’s
steps to stop such interference, the interference continues, then Tenant shall discontinue using
the Satellite Dish(es) and related equipment. Tenant’s failure to promptly correct any such
interference, as set forth herein, shall constitute an Event of Default and shall entitle Landlord
to correct the cause of the interference, and to charge Tenant with all costs so incurred. Tenant
agrees that Landlord shall not be responsible for preventing or correcting any interference that
may be caused to Tenant’s Satellite Dish(es) and related equipment or its use and that Tenant shall
be fully responsible for coordinating and cooperating with other tenants, occupants or licensees
who have communications devices at the Project in order to minimize or prevent any interference by
or with Tenant’s Equipment and its use (except as Landlord may otherwise expressly agree to the
contrary at the time Landlord approves Tenant’s Plans; for example, based on a particular proposed
location for Tenant’s Satellite Dishes, Landlord may agree not to locate anything that would
interfere with Tenant’s Satellite Dish between Tenant’s Satellite Dish and the edge of the roof).

     (g) Title to Equipment and Removal. Tenant shall at all times remain the owner of the
Satellite Dishes the related equipment, which shall not be deemed fixtures, notwithstanding their
method of installation or attachment to the Building, and shall pay all Tenant’s Taxes with respect
to the Satellite Dish(es) and related equipment constructed or installed by Tenant. On or before
the Expiration Date or earlier termination date of the Lease, Tenant shall (i) remove all Satellite
Dishes and related equipment installed or constructed by Tenant, (ii) restore the Licensed Area and
Building to the condition they were in upon installation of any Satellite Dish and related
equipment, reasonable wear and tear excepted, and (iii) return the Licensed Area in broom-clean
condition. Notwithstanding the foregoing Landlord shall have the right to approve Tenant’s
contractor and all of Tenant’s plans for the removal of the Satellite Dish(es) and related
equipment and the restoration of the Building. If any of the improvements installed or constructed
by Tenant at the Building penetrated the roof membrane or otherwise in any way affect the
watertight integrity of the Building’s roof, then upon removal of such improvements, Tenant shall
provide Landlord with a written warranty, in a form and from a contractor reasonably acceptable to
Landlord, warranting the watertight integrity of the roof for a period of ten (10) years after
removal of such improvements. If Tenant does not remove the Satellite Dish(es) and all of the
related equipment, as required hereunder, Landlord may, at its sole option, either retain such
items as its own, without any further actions, notice or compensation to Tenant, or remove and
dispose of such items in any manner it chooses, restore the Property as required hereunder and
charge Tenant for all costs incurred in that effort.

Exhibit D,
Page 8

 

     (h) Utilities. Tenant shall pay for all costs of electrical service provided to the
Satellite Dishes, related equipment, and the Licensed Area. If Tenant’s usage of electricity
exceeds what Landlord determines to be excessive, Landlord may determine the amount of such excess
use by any reasonable means (including the installation at Landlord’s request but at Tenant’s
expense of a separate meter or other measuring device) and charge Tenant for the cost of such
excess usage.

     (i) Relocation. Upon sixty (60) days prior written notice from Landlord Tenant shall
relocate the Satellite Dish or Satellite Dishes to a different location on the roof of the Building
at Landlord’s cost, which area shall become the new Licensed Area.

     (j) Indemnification and Waiver. In addition to the indemnification of Landlord set
forth in the Lease, Tenant shall indemnify, protect, defend and hold harmless Landlord from any
Claims arising out of or resulting from, in whole or in part, any loss, injury or damage occurring
or caused to any person or property during the Term (i) in or about the Licensed Area, or the roof
of the Building, arising from the acts or omissions of Tenant, its agents, employees, contractors,
or others acting under its control or at its discretion, or by the existence of Tenant’s cabling
and any other improvements on the roof of the Building, or (ii) within the vicinity of the Building
caused by the Satellite Dish(es) becoming detached from the roof; provided, however, that the
foregoing indemnification by Tenant shall not apply to the extent any such Claims are caused by
acts or omissions of Landlord that constitute gross negligence or willful misconduct. This
indemnification shall apply and be enforced to the fullest extent permitted by Law and shall
survive termination or expiration of the Term. Landlord shall not be liable to Tenant, and Tenant
hereby waives all claims it may have against Landlord, for any loss, injury or damage to any person
or property in or about the Licensed Area or the roof of the Building, or resulting from the
Satellite Dish(es) becoming detached from the roof, any interruption of services and loss of use of
the Satellite Dish(es), from any cause, without limitation as to type or description and
specifically including acts or omissions constituting the active or sole negligence of Landlord,
but excluding from all of the foregoing the acts or omissions of Landlord that constitute gross
negligence or willful misconduct. Notwithstanding any other provision of the Lease, in no event
shall Landlord be liable to Tenant for any punitive or consequential damages or damages for loss of
business by Tenant. It is the intent of the foregoing provisions that Tenant shall look to its own
insurance for payment or reimbursement for any such loss, damage, injury or liability.

42. SIGNS.

     Tenant shall be permitted to use the existing sign (“Existing Sign”) which is located at the
Existing Premises. Tenant shall also have the right to use the existing sign which is located at
the Expansion Premises (the “Expansion Premises Sign”). During the Term Tenant shall maintain and
repair the Existing Sign and Expansion Premises Sign in a condition comparable to similar signs at
similar properties in the vicinity of the Project. Any changes to the Existing Sign or the
Expansion Premises Sign shall be subject to Landlord’s prior written approval, and any approval
required by the City of Cupertino, or any other applicable government agency.

Exhibit D,
Page 9

	 	 	 	 
	 
	INITIALS:	 
	 
	Landlord  
	JH

	 
	Tenant
	SG

 

EXHIBIT E

ATTACHED TO AND FORMING A PART OF

LEASE AGREEMENT

DATED AS OF APRIL 24, 2007

BETWEEN

ECI TWO RESULTS LLC, AS LANDLORD,

AND

ARCSIGHT, INC., AS TENANT (“LEASE”)

APPROVED LETTER OF CREDIT FORM

[Letterhead of Issuing Bank]

[must be a Bank whose location, credit and practices Landlord has approved]

			
	RE:	 	IRREVOCABLE COMMERCIAL STANDBY LETTER OF CREDIT NO.                    

TO: [Name of project owner] (“Landlord”),                                                             
[Landlord’s address]

Gentlemen:

We hereby issue our Irrevocable Commercial Letter of Credit in your favor, for the account of
                                                             [name of tenant and type of entity (e.g. “ABC Corporation, a
California corporation”)] (“Tenant”), in the amount of                                          Dollars
($                    ). This amount is available to you on presentation of your sight draft drawn upon us
referring to the above letter of credit number, date and amount being drawn hereunder, accompanied
by the signed statement of you or your authorized agent, either Embarcadero Capital Partners LLC,
or Hamilton Partners, LP, that the amount drawn hereunder is being drawn pursuant to the terms of
the                                          [title of lease document (e.g. Office Lease, Lease Agreement, etc.)] dated as
of                     , between Tenant, as tenant, and Landlord, as landlord, for certain premises located
at                                                              (the “Lease”).

Any draft presented for payment must be presented on or before                                          [term should
be at least one year], the date this Letter of Credit expires. Partial drawings are permitted.

If you sell or otherwise transfer any interest in the “Building” (as defined in the Lease) [be sure
to use the defined terms used in the Lease (e.g. if the building is called the “Property” in the
Lease, then use that term here)], in the land upon which the same is located, in the Lease, or in
Landlord (including consolidations, mergers or other entity changes), you shall have the right to
transfer this Letter of Credit to your transferee(s), successors or assigns.

We hereby certify that this is an unconditional and irrevocable Letter of Credit and agree that a
draft drawn under and in compliance with the terms hereof will be honored upon presentation at

Exhibit E,
Page 1

 

our office at                                                              [it must be a location easily accessible to us (e
..g.
no country banks located in some tiny town in the Southeastern corner of Texas].

This Letter of Credit shall automatically be extended and renewed for successive one year periods
at the end of the stated expiration date and each anniversary thereof unless we notify you in
writing, no later than forty-five (45) days prior to the then applicable expiration date, that we
will not extend and renew the Letter of Credit for another one year term.

Except to the extent inconsistent with the express provisions hereof, this Letter of Credit is
subject to and governed by Uniform Customs and Practice for Documentary Credits (1993 Revision)
International Chamber of Commerce publication number 500.

	 	 	 	 	 
	 

	 	[Name of Bank]	 	 
	 
	 	 	 	 
	 

	 	 

Authorized Signature
	 	 

Exhibit E,
Page 2

	 	 	 	 
	 
	INITIALS:	 
	 
	Landlord  
	JH

	 
	Tenant
	SG

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