Exhibit 10.9

STANDARD OFFICE/MULTI-TENANT LEASE – NNN

by and between

GRANITE CREEK BUSINESS CENTER

(“Landlord”)

and

VirnetX, INC.

(“Tenant”)

For the approximately 995 sq. ft. premises at
5615 Scotts Valley Drive, Suite 110, Scotts Valley, California

TABLE OF CONTENTS

Page

1.

PARTIES

1

2.

PREMISES

1

3.

DEFINITION

1

A.

Alterations

1

B.

Building

1

C.

Commencement Date

1

D.

Common Area

1

E.

HVAC

1

F.

Interest Rate

1

G.

Landlord’s Agents

1

H.

Monthly Rent

1

I.

Outside Area

1

J.

Project

2

K.

Real Property Taxes

2

L.

Rent

2

M.

Security Deposit

2

N.

Sublet

2

O.

Subrent

2

P.

Subtenant

2

Q.

Tenant Improvements

2

R.

Tenant Improvements Allowance

2

S.

Tenant’s Percentage

2

T.

Tenant’s Personal Property

3

U.

Term

3

V.

Consent

3

4.

LEASE TERM

3

A.

Term

3

B.

Early Entry

3

5.

RENT

3

A.

Monthly Rent

3

B.

Additional Rent

4

6.

LATE PAYMENT CHARGES

4

7.

SECURITY DEPOSIT

4

8.

HOLDING OVER

4

9.

TENANT IMPROVEMENTS

5

10.

CONDITION OF PREMISES

5

11.

USE OF THE PREMISES

5

A.

Tenant’s Use

5

B.

Compliance

5

12.

QUIET ENJOYMENT

6

13.

ALTERATIONS

6

14.

SURRENDER OF THE PREMISES

6

15.

REAL PROPERTY TAXES

7

A.

Payment by Tenant

7

B.

Taxes on Tenant Improvements and Personal Property

7

C.

Proration

8

16.

UTILITIES AND SERVICES

8

17.

REPAIR AND MAINTENANCE

8

A.

Landlord’s Obligations

8

B.

Tenant’s Obligations

9

C.

Tenant to Pay Expenses

9

D.

Monthly Payments

9

E.

Compliance with Governmental Regulations

10

18.

LIENS

10

19.

LANDLORD’S RIGHT TO ENTER THE PREMISES

10

20.

SIGNS

10

21.

INSURANCE

11

A.

Indemnification

11

B.

Tenant’s Insurance

11

C.

Premises Insurance

11

D.

Increased Coverage

12

E.

Co-Insurer

12

F.

Insurance Requirements

12

G.

Landlord’s Disclaimer

12

22.

WAIVER OF SUBROGATION

12

23.

DAMAGE OR DESTRUCTION

13

A.

Landlord’s Obligation to Rebuild

13

B.

Right to Terminate

13

C.

Limited Obligation to Repair

13

D.

Abatement of Rent

14

E.

Damage Near End of Term

14

24.

CONDEMNATION

14

25.

ASSIGNMENT AND SUBLETTING

15

A.

Landlord’s Consent

15

B.

Information to be Furnished

15

C.

Landlord’s Alternatives

15

D.

Exempt Sublets

15

26.

DEFAULT

15

A.

Tenant’s Default

15

B.

Remedies

16

C.

Landlord’s Default

17

27.

SUBORDINATION

17

28.

ESTOPPEL CERTIFICATES

18

29.

TRANSFER OF THE BUILDING OR THE PROJECT BY LANDLORD

19

30.

LANDLORD’S RIGHT TO PERFORM TENANT’S COVENANTS

19

31.

TENANT’S REMEDY

19

32.

MORTGAGEE PROTECTION

19

33.

BROKERS

19

34.

MODIFICATIONS FOR LENDER

19

35.

PARKING

20

36.

GENERAL

20

A.

Notices

20

B.

Attorneys’ Fees

20

C.

Acceptance

20

D.

Captions

20

E.

Executed Copy

20

F.

Time

20

G.

Separability

20

H.

Choice of Law

21

I.

Gender; Singular, Plural

21

J.

Binding Effect

21

K.

Waiver

21

L.

Entire Agreement

21

M.

Authority

21

N.

Exhibits

21

O.

Lease Summary

21

Exhibits

24

 

-i-

 

LEASE AGREEMENT

1.

Parties.  THIS LEASE (the “Lease”), dated March 15, 2006 is entered into by and
between Granite Creek Business Center, a California general partnership
(“Landlord”), whose address is c/o Toeniskoetter & Breeding, Inc., Development,
1960 The Alameda, San Jose, CA 95126 and VirnetX Inc., a Delaware Corporation
(“Tenant”), whose address is 157 Provincetown Court, Aptos, California 95003.

2.

Premises.  Landlord hereby leases to Tenant and Tenant hereby leases from
Landlord those certain premises consisting of approximately nine hundred
ninety-five (995) rentable square feet, as shown in EXHIBIT A (the “Premises”)
in that certain building, commonly known as 5615 Scotts Valley Drive (the
“Building”), as further defined in Paragraph 3.B., in the City of Scotts Valley
(the “City”), County of Santa Cruz, (the “County”), California, together with a
right in common to the Common Area as defined in Paragraph 3.D., and a right in
common to the Outside Area, as defined in Paragraph 3.1.  Tenant’s right to use
the Common Area and Outside Area shall be a right in common with other tenants
of the Building.

3.

Definition.  The following terms shall have the following meanings in this
Lease:

A.

Alterations.  Any alterations, additions or improvements made in, on or about
the Building or the Premises after the Commencement Date.

B.

Building.  That certain building on the Project consisting of approximately
thirty-two thousand (32,000) rentable square feet.

C.

Commencement Date.  The Commencement Date of this Lease shall be the first day
of the Term determined in accordance with Paragraph 4.A.

D.

Common Area.  All areas and facilities within the Building provided and
designated by Landlord for the general use and convenience of Tenant and other
tenants and occupants of any part of the Building, subject to the reasonable
rules and regulations and changes therein from time to time promulgated by
Landlord governing the use of the Common Area.

E.

HVAC.  Heating, ventilating and air conditioning.

F.

Interest Rate.  Twelve percent (12%) per annum, however, in no event to exceed
the maximum rate of interest permitted by law.

G.

Landlord’s Agents.  Landlord’s authorized agents, partners, subsidiaries,
directors, officers, and employees.

H.

Monthly Rent.  The rent payable pursuant to Paragraph 5.A., as adjusted from
time to time pursuant to the terms of this Lease.

I.

Outside Area.  All areas and facilities within the Project, exclusive of the
interior of the Building and the Adjacent Buildings, provided and designated by
Landlord for the general use and convenience of Tenant and other tenants and
occupants of the Project, subject to the reasonable rules and regulations and
changes therein from time to time promulgated by Landlord governing the use of
the Outside Area.

J.

Project.  That certain real property described in EXHIBIT B consisting of
approximately 5.35 acres, upon which are located the Building, together with two
(2) buildings of approximately fifty-eight thousand (58,000) total rentable
square feet (the “Adjacent Buildings”).

K.

Real Property Taxes.  Any form of assessment, property tax, fee, rent tax, or
penalty (if a result of Tenant’s delinquency), imposed by any authority having
the direct or indirect power to tax, or by any city, county, state or federal
government or any improvement or other district or division thereof, whether
such tax is: (i) determined by the area of the Project or any part thereof or
the rent and other sums payable hereunder by Tenant or by other tenants;
(ii) upon any legal or equitable interest of Landlord in the Project or the
Premises or any part thereof; (iii) upon this transaction or any document to
which Tenant is a party creating or transferring any interest in the Project;
(iv) levied or assessed in lieu of, in substitution for, or in addition to,
existing or additional taxes against the Project whether or not now customary or
within the contemplation of the parties; or (v) surcharged against the parking
area.

L.

Rent.  Monthly Rent plus the Additional Rent defined in Paragraph 5.B.

M.

Security Deposit.  That amount paid by Tenant pursuant to Paragraph 7.

N.

Sublet.  Any transfer, sublet, assignment, license or concession agreement,
change of ownership, mortgage, or hypothecation of this Lease or the Tenant’s
interest in the Lease or in and to all or a portion of the Premises.

O.

Subrent.  Any consideration of any kind received, or to be received, by Tenant
from a subtenant if such sums are related to Tenant’s interest in this Lease or
in the Premises, including, but not limited to, bonus money and payments (in
excess of book value) for Tenant’s assets.

P.

Subtenant.  The person or entity with whom a Sublet agreement is proposed to be
or is made.

Q.

Tenant Improvements.  Those certain improvements to the Premises to be
constructed by Landlord pursuant to Paragraph 9.

R.

Tenant Improvements Allowance.  That allowance to be provided by Landlord for
construction of the Tenant Improvements.

S.

Tenant’s Percentage.

(i)

Tenant’s Building Percentage.  The percentage of the area of the Premises to the
total area of the Building.  Tenant’s Building Percentage is agreed to be three
and 11/100 percent (3.11%) for the purpose of this Lease.

(ii)

Tenant’s Project Percentage.  The percentage of the area of the Premises to the
total area of all of the buildings on the Project.  Tenant’s Project Percentage
is agreed to be one and 11/100 percent (1.11%) for the purpose of this Lease.

T.

Tenant’s Personal Property.  Tenant’s trade fixtures, furniture, equipment and
other personal property in the Premises.

U.

Term.  The term of this Lease set forth in Paragraph 4.A., as it may be extended
hereunder pursuant to any options to extend granted herein.

V.

Consent.  Where consent is required herein by either party, such consent shall
not be unreasonably withheld or delayed.

4.

Lease Term.

A.

Term.  The Term of this Lease shall be twelve (12) months, commencing April 1,
2006 (the “Commencement Date”) and ending March 31, 2007, subject to any sooner
termination of this Lease pursuant to the terms hereof.  Tenant agrees that if
Landlord, for any reason whatsoever, is unable to deliver possession of the
Premises by April 1, 2006, Landlord shall not be liable to Tenant for any loss
or damage therefrom, nor shall this Lease be void or voidable.  In such event,
the Commencement Date, termination date and all other dates of this Lease shall
be extended to conform to the date of Landlord’s tender of possession of the
Premises to Tenant and Tenant shall not be obligated to pay Monthly Rent or
other sums due Landlord hereunder until possession of the Premises is tendered
to Tenant.

B.

Early Entry.  If Tenant is permitted to enter the Premises prior to the
Commencement Date for the purpose of fixturing or any other purpose permitted by
Landlord, such early entry shall be at Tenant’s sole risk and subject to all the
terms and provisions hereof, except for the payment of Rent, which shall
commence on the Commencement Date.  Landlord shall have the right to impose such
additional conditions on Tenant’s early entry as Landlord shall deem
appropriate, and shall further have the right to require that Tenant execute an
early entry agreement containing such conditions prior to Tenant’s early entry.

5.

Rent.

A.

Monthly Rent.  Tenant shall pay to Landlord, in lawful money of the United
States, for each calendar month of the Term, net Monthly Rent in advance, on the
first day of each calendar month, without abatement, deduction, claim, offset,
prior notice or demand in accordance with the schedule set forth below.
 Additionally, Tenant shall pay, as and with the net Monthly Rent, Tenant’s
Building Percentage of the estimated monthly Common Area Expenses and Tenant’s
Project Percentage of the estimated monthly Outside Area Expenses, as set forth
in Paragraph 17.C., and Tenant’s Building Percentage of the monthly cost of
insurance premiums required pursuant to Paragraph 21.C., as adjusted from time
to time hereunder.  Tenant shall deposit with Landlord upon execution of this
Lease One Thousand One Hundred Forty-Four and 25/100 Dollars ($1,144.25) to be
applied toward the net Monthly Rent due for the first month of the Term.

Months of Term

Net Monthly Rent

April 1, 2006 - May 31, 2006

$ 0.00 *

June 1, 2006 - October 31, 2006

$1,144.25/month

November 1, 2006 - March 31, 2007

$1,243.75/month

* Triple net expenses to be paid during free rent period

B.

Additional Rent.  All monies required to be paid by Tenant under this Lease,
including, without limitation, Real Property Taxes pursuant to Paragraph 15,
Outside Area and Common Area Expenses pursuant to Paragraph 17, and insurance
premiums pursuant to Paragraph 21, shall be deemed Additional Rent.

6.

Late Payment Charges.  Tenant acknowledges that late payment by Tenant to
Landlord of Rent and other charges provided for under this Lease will cause
Landlord to incur costs not contemplated by this Lease, the exact amount of such
costs being extremely difficult or impracticable to fix.  Therefore, if any
installment of Rent or any other charge due from Tenant is not received by
Landlord within five (5) days of becoming due, then Tenant shall pay to Landlord
an additional sum equal to five percent (5%) of the amount overdue as a late
charge.  The parties agree that this late charge represents a fair and
reasonable estimate of the costs that Landlord will incur by reason of the late
payment by Tenant.

Initials:

 

Landlord

Tenant

7.

Security Deposit.  Upon execution of this Lease, Tenant shall deposit with
Landlord the sum of One Thousand Two Hundred Forty Three and 75/100 Dollars
($1,243.75) as a Security Deposit.  The Security Deposit shall be held by
Landlord as security for the full and faithful performance of every provision of
this Lease to be performed by Tenant.  If Tenant defaults with respect to any
provision of this Lease, Landlord may apply all or any part of the Security
Deposit for the payment of any Rent or other sum in default, the repair of such
damage to the Premises or the payment of any other amount which Landlord may
spend or become obligated to spend by reason of Tenant’s default or to
compensate Landlord for any other loss or damage which Landlord may suffer by
reason of Tenant’s default to the full extent permitted by law.  If any portion
of the Security Deposit is so applied, Tenant shall, within ten (10) days after
written demand therefor, deposit cash with Landlord in an amount sufficient to
restore the Security Deposit to its original amount.  If Tenant is not otherwise
in default, the Security Deposit or any balance thereof shall be returned to
Tenant within thirty (30) days after the later of the termination of the Lease
or the surrender of the Premises by Tenant.

8.

Holding Over.  If Tenant remains in possession of all or any part of the
Premises after the expiration of the Term, with the express or implied consent
of Landlord, such tenancy shall be month-to-month only and shall not constitute
a renewal or extension for any further term.  If Tenant remains in possession
either with or without Landlord’s consent, Monthly Rent shall be increased to an
amount equal to one hundred fifty percent (150%) of the Monthly Rent payable
during the last month of the Term, and any other sums due under this Lease shall
be payable in the amount and at the times specified in this Lease.  Such
month-to-month tenancy shall be subject to every other term, condition, and
covenant contained herein.

9.

Tenant Improvements.  None – Premises delivered in as-is condition.

10.

Condition of Premises.  By taking possession of the Premises, Tenant shall be
deemed to have accepted the Premises in good, clean and completed condition and
repair, subject to all applicable laws, codes and ordinances.  Any damage to the
Premises caused by Tenant’s move-in shall be repaired or corrected by Tenant, at
its expense.  Tenant acknowledges that neither Landlord nor its Agents have made
any representations or warranties as to the suitability or fitness of the
Premises for the conduct of Tenant’s business or for any other purpose, nor has
Landlord or its Agents agreed to undertake any Alterations or construct any
Tenant Improvements to the Premises except as expressly provided in this Lease.

11.

Use of the Premises.

A.

Tenant’s Use.  Tenant shall use the Premises solely for general office purposes
and shall not use the Premises for any other purpose without obtaining the prior
written consent of Landlord.

B.

Compliance.

(i)

Tenant shall not use the Premises or suffer or permit anything to be done in or
about the Premises or the Project which will in any way conflict with any law,
statute, zoning restriction, ordinance or governmental law, rule, regulation or
requirement of public authorities now in force or which may hereafter be in
force, relating to or affecting the condition, use or occupancy of the Premises
or the Project.  Tenant shall not commit any public or private nuisance or any
other act or thing which might or would disturb the quiet enjoyment of any other
tenant of Landlord or any occupant of nearby property.  Tenant shall place no
loads upon the floors, walls or ceilings in excess of the maximum designed load
determined by Landlord or which endanger the structure; nor place any harmful
liquids in the drainage systems; nor dump or store waste materials or refuse or
allow such to remain outside the Building proper, except in the enclosed trash
areas provided.  Tenant shall not store or permit to be stored or otherwise
placed any other material of any nature whatsoever outside the building.

(ii)

In particular, Tenant, at its sole cost, shall comply with all laws relating to
the storage, use and disposal of hazardous, toxic or radioactive matter,
including those materials identified in Sections 66680 through 66685 of Title 22
of the California Administrative Code, Division 4, Chapter 30 (“Title 22”) as
they may be amended from time to time (collectively “Toxic Materials”).  If
Tenant does store, use or dispose of any Toxic Materials, Tenant shall notify
Landlord in writing at least ten (10) days prior to their first appearance on
the Premises.  Tenant shall be solely responsible for and shall defend,
indemnify and hold Landlord and its Agents harmless from and against all claims,
costs and liabilities, including attorneys’ fees and costs, arising out of or in
connection with its storage, use and disposal of Toxic Materials.  Tenant shall
further be solely responsible for and shall defend, indemnify and hold Landlord
and its Agents harmless from and against any and all claims, costs, and
liabilities, including attorneys’ fees and costs, arising out of or in
connection with the removal, clean-up and restoration work and materials
necessary to return the Premises and the Project and any other property of
whatever nature to their condition existing prior to the appearance of the Toxic
Materials on the Premises.  Tenant’s obligations hereunder shall survive the
termination of this Lease.

12.

Quiet Enjoyment.  Landlord covenants that Tenant, upon performing the terms,
conditions and covenants of this Lease, shall have quiet and peaceful possession
of the Premises as against any person claiming the same by, through or under
Landlord.

13.

Alterations.  After the Commencement Date, Tenant shall not make or permit any
Alterations in, on or about the Premises, except for nonstructural Alterations
that do not impact the Building systems nor exceed One Thousand Dollars
($1,000.00) in cost, without the prior written consent of Landlord, and
according to plans and specifications approved in writing by Landlord, which
consent shall not be unreasonably withheld.  Notwithstanding the foregoing
Tenant shall not, without the prior written consent of Landlord, make any: (i)
Alterations to the exterior of the Building; (ii) Alterations to and
penetrations of the roof of the Building; and (iii) Alterations visible from
outside the Premises, including the Common Area, to which Landlord may withhold
Landlord’s consent on wholly aesthetic grounds.

All Alterations shall be installed at Tenant’s sole expense, in compliance with
all applicable laws, by a licensed contractor, shall be done in a good and
workmanlike manner conforming in quality and design with the Premises existing
as of the Commencement Date, and shall not diminish the value of either the
Building or the Premises.  All Alterations made by Tenant shall be and become
the property of Landlord upon installation and shall not be deemed Tenant’s
Personal Property; provided, however, that if Landlord informed Tenant at the
time of its approval of any Alterations that Tenant would be required to remove
such Alterations from the Premises at the expiration or sooner termination of
this Lease, then Tenant shall, at Tenant’s expense, remove such Alterations from
the Premises at the expiration or sooner termination of this Lease and restore
the Premises to their condition existing prior to the installation of such
Alterations.  Notwithstanding any other provision of this Lease, Tenant shall be
solely responsible for the maintenance and repair of any and all Alterations
made by it to the Premises.  Tenant shall give Landlord written notice of
Tenant’s intention to perform work on the Premises at least twenty (20) days
prior to the commencement of such work to enable Landlord to post and record a
Notice of Nonresponsibility or other notice deemed proper before the
commencement of any such work.

14.

Surrender of the Premises.  Upon the expiration or earlier termination of the
Term, Tenant shall surrender the Premises to Landlord in its condition existing
as of the Commencement Date, normal wear and tear and fire or other casualty
excepted, with all interior walls repaired if damaged, all carpets shampooed and
cleaned, all broken, marred or nonconforming acoustical ceiling tiles replaced,
all windows washed, the plumbing and electric systems and lighting in good order
and repair, including replacement of any burned out or broken light bulb or
ballasts, and all floors cleaned and waxed, all to the reasonable satisfaction
of Landlord.  Tenant shall remove from the Premises all of Tenant’s Alterations
required to be removed pursuant to Paragraph 13 and all Tenant’s Personal
Property, and repair any damage and perform any restoration work caused by such
removal.  If Tenant fails to remove such Alterations and Tenant’s Personal
Property, and such failure continues after the termination of this Lease,
Landlord may retain such property and all rights of Tenant with respect to it
shall cease, or Landlord may place all or any portion of such property in public
storage for Tenant’s account.  Tenant shall be liable to Landlord for costs of
removal of any such Alterations and Tenant’s Personal Property and storage and
transportation costs of same, and the cost of repairing and restoring the
Premises, together with interest at the Interest Rate from the date of
expenditure by Landlord.  If the Premises are not so surrendered at the
termination of this Lease, Tenant shall indemnify Landlord and its Agents
against all loss or liability, including attorneys’ fees and costs, resulting
from delay by Tenant in so surrendering the Premises.

Normal wear and tear, for the purposes of this Lease, shall be construed to mean
wear and tear caused to the Premises by a natural aging process which occurs in
spite of prudent application of the best standards for maintenance, repair, and
janitorial practices.  It is not intended, nor shall it be construed, to include
items of neglected or deferred maintenance which would have or should have been
attended to during the Term of the Lease if the best standards had been applied
to properly maintain and keep the Premises at all times in good condition and
repair.

15.

Real Property Taxes.

A.

Payment by Tenant.  On or before April 1 and December 1 of each calendar year
during the Term, Tenant shall pay to Landlord, as Additional Rent, Tenant’s
Project Percentage of all Real Property Taxes as set forth on the County
assessor’s tax statement for the Project.  Landlord shall give Tenant at least
fifteen (15) days’ prior written notice of the amount so due.  Upon Landlord’s
receipt of the Real Property Tax payment from Tenant and other tenants of the
Property, Landlord shall pay the taxes to the County.  If Tenant fails to pay
Tenant’s Project Percentage of the Real Property Taxes on or before April 1 and
December 1, respectively, Tenant shall pay to Landlord any penalty incurred by
such late payment.  Tenant shall pay Tenant’s Project Percentage of any Real
Property Tax not included within the County tax assessor’s tax statement within
thirty (30) days after being billed for same by Landlord.  The foregoing dates
are based on the dates established by the County as the dates on which Real
Property Taxes become delinquent if not paid.  If such delinquency dates change,
the dates on which Tenant must pay Tenant’s Project Percentage of such taxes
shall be at least ten (10) days prior to the delinquency dates.  Notwithstanding
the foregoing, at any time, upon prior written notice to Tenant, Landlord shall
have the right to require that Tenant pay one-twelfth (1/12th) of the Real
Property Taxes payments to Landlord directly, on the first (1st) day of each
calendar month.  Assessments, taxes, fees, levies and charges may be imposed by
governmental agencies for such purposes as fire protection, street, sidewalk,
road, utility construction and maintenance, refuse removal and for other
governmental services which may formerly have been provided without charge to
property owners or occupants.  It is the intention of the parties that all new
and increased assessments, taxes, fees, levies and charges are to be included
within the definition of Real Property Taxes for purposes of this Lease.

B.

Taxes on Tenant Improvements and Personal Property.  Tenant shall pay any
increase in Real Property Taxes resulting from any and all Alterations and
Tenant Improvements of any kind whatsoever placed in, on or about the Premises
for the benefit of, at the request of, or by Tenant.  Tenant shall pay prior to
delinquency all taxes assessed or levied against Tenant’s Personal Property in,
on or about the Premises or elsewhere.  When possible, Tenant shall cause its
Personal Property to be assessed and billed separately from the real or personal
property of Landlord.

C.

Proration.  Tenant’s liability to pay Real Property Taxes shall be prorated on
the basis of a 365-day year to account for any fractional portion of a fiscal
tax year included at the commencement or expiration of the Term.  With respect
to any assessments which may be levied against or upon the Property, or which
under the laws then in force may be evidenced by improvements or other bonds or
may be paid in annual installments, only the amount of such annual installment
(with appropriate proration for any partial year) and interest due thereon shall
be included within the computation of the annual Real Property Taxes levied
against the Premises.

16.

Utilities and Services.  Tenant shall be responsible for and shall pay promptly
all charges for water, gas, electricity, telephone, refuse pickup, janitorial
service and all other utilities, materials and services furnished directly to or
used by Tenant in, on or about the Premises during the Term, together with any
taxes thereon.  If such utilities are not separately metered to the Premises,
Landlord shall bill Tenant for Tenant’s pro rata share based on Tenant’s
Building Percentage or other equitable basis as determined by Landlord.
 Landlord shall not be liable in damages or otherwise for any failure or
interruption of any utility service or other service furnished to the Premises,
except that resulting from the willful misconduct of Landlord.

17.

Repair and Maintenance.

A.

Landlord’s Obligations.  Landlord shall keep in good order, condition and
repair, at Landlord’s sole cost and expense, the roof membrane and the
structural parts of the Building, which structural parts include only the
foundation, subflooring, roof structure, exterior walls and exterior plumbing,
except that any damage thereto caused by the negligence or willful misconduct of
Tenant or Tenant’s agents, employees or invitees, or by reason of the failure of
Tenant to perform or comply with any terms of this Lease, or caused by
Alterations made by Tenant or by Tenant’s agents, employees or contractors,
shall be repaired at Tenant’s expense.  Landlord shall also maintain in good
order, condition and repair the Common Areas of the Building and the Outside
Area of the Project and Tenant shall reimburse Landlord for the cost thereof as
provided in Paragraphs 17.C and 17.D.  The manner in which the Common Area and
the Outside Area shall be maintained and the expenditures therefor shall be at
the sole discretion of Landlord.  Landlord shall at all times have exclusive
control of the Common Area and Outside Area and may at any time temporarily
close any part thereof, exclude and restrain anyone from any part thereof,
except the bona fide customers, employees and invitees of Tenant who use the
Common Area and Outside Area in accordance with the rules and regulations as
Landlord may from time to time promulgate, and may change the configuration or
location of the Common Area and Outside Area.  In exercising any such rights,
Landlord shall make a reasonable effort to minimize any disruption of Tenant’s
business.  Tenant waives the provisions of Sections 1941 and 1942 of the
California Civil Code and any similar or successor law regarding Tenant’s right
to make repairs and deduct the expenses of such repairs from the Rent due under
this Lease.

B.

Tenant’s Obligations.  Tenant shall at all times and at its own expense clean,
keep and maintain in good order, condition and repair every part of the Premises
which is not within Landlord’s obligation pursuant to Paragraph 17.A.  Tenant’s
repair and maintenance obligations shall include, all plumbing and sewage
facilities within the Premises, fixtures, interior walls and ceiling, floors,
windows, doors, entrances, plateglass, showcases, skylights, all electrical
facilities and equipment, including lighting fixtures, lamps, fans and any
exhaust equipment and systems, any automatic fire extinguisher equipment within
the Premises, electrical motors and all other appliances and equipment of every
kind and nature located in, upon or about the Premises.  Tenant shall also be
responsible for all pest control within the Premises.

C.

Tenant to Pay Expenses.  Tenant shall pay, as Additional Rent, Tenant’s Building
Percentage of all reasonable costs and expenses paid or incurred by Landlord
during the Term in operating, maintaining, repairing and replacing the Common
Area (the “Common Area Expenses”), and Tenant’s Project Percentage of all
reasonable costs and expenses paid or incurred by Landlord in operating,
maintaining, repairing and replacing the Outside Area (the “Outside Area
Expenses”).  The Common Area Expenses and Outside Area Expenses may include, as
appropriate, the cost of labor, materials, supplies and services used or
consumed in operating, maintaining, repairing and replacing the HVAC system,
Common Area lighting, the Building elevator, if any, and the Outside Area,
including landscaping and sprinkler systems, concrete walkways and paved parking
areas; maintaining and repairing signs and site lighting; all utilities provided
to the Building and the Outside Area; any alterations or improvements required
by governmental authority to comply with applicable laws (excluding, however,
any alterations or improvements required by the Americans with Disabilities
Act); the cost of maintaining, repairing and replacing exterior windows; and a
management fee.  Any Common Area Expenses or Outside Area Expense that
constitute capital expenditures shall be amortized over their useful life in
accordance with generally accepted accounting principles.

D.

Monthly Payments.  From and after the Commencement Date, Tenant shall pay to
Landlord on the first day of each calendar month of the Term an amount estimated
by Landlord to be Tenant’s Building Percentage of the monthly Common Area
Expenses and Tenant’s Project Percentage of the monthly Outside Area Expenses.
 The foregoing estimated monthly charges may be adjusted by Landlord at the end
of any calendar quarter on the basis of Landlord’s experience and reasonably
anticipated costs.  Any such adjustment shall be effective as of the calendar
month next succeeding receipt by Tenant of written notice of such adjustment.
 Within one hundred twenty (120) days following the end of each calendar year
Landlord shall furnish Tenant a statement of the actual Common Area Expenses and
Outside Area Expenses (“Actual Expenses”) for the calendar year and the payments
made by Tenant with respect to such period.  If Tenant’s payments for the Common
Area Expenses or the Outside Area Expenses, as the case may be, do not equal the
amount of the Actual Expenses, Tenant shall pay Landlord the deficiency within
ten (10) days after receipt of such statement.  If Tenant’s payments exceed the
Actual Expenses, Landlord shall either offset the excess against the Common Area
Expenses or Outside Area Expenses, as appropriate, next thereafter to become due
to Landlord, or shall refund the amount of the overpayments to Tenant, in cash,
as Landlord shall elect.  There shall be appropriate adjustments of the Common
Area Expenses and Outside Area Expenses as of the Commencement Date and
expiration of the Term.

E.

Compliance with Governmental Regulations.  Tenant shall, at its cost, comply
with all present and future regulations, rules, laws, ordinances, and
requirements of all governmental authorities (including, without limitation
state, municipal, County and federal governments and their departments, bureaus,
boards and officials) arising from Tenant’s use or occupancy of the Premises.

18.

Liens.  Tenant shall keep the Building and the Project free from any liens
arising out of any work performed, materials furnished or obligations incurred
by or on behalf of Tenant and hereby indemnifies and holds Landlord and its
Agents harmless from all liability and cost, including attorneys’ fees and
costs, in connection with or arising out of any such lien or claim of lien.
 Tenant shall cause any such lien imposed to be released of record by payment or
posting of a proper bond acceptable to Landlord within ten (10) days after
written request by Landlord.  Tenant shall give Landlord written notice of
Tenant’s intention to perform work on the Premises which might result in any
claim of lien at least ten (10) days prior to the commencement of such work to
enable Landlord to post and record a Notice of Nonresponsibility.  If Tenant
fails to so remove any such lien within the prescribed ten (10) day period, then
Landlord may do so at Tenant’s expense and Tenant shall reimburse Landlord for
such amounts upon demand.  Such reimbursement shall include all costs incurred
by Landlord including Landlord’s reasonable attorneys’ fees with interest
thereon at the Interest Rate.

19.

Landlord’s Right to Enter the Premises.  Tenant shall permit Landlord and its
Agents to enter the Premises at all reasonable times with reasonable notice,
except for emergencies in which case no notice shall be required, to inspect the
same, to post Notices of Nonresponsibility and similar notices, and “For Sale”
signs, to show the Premises to interested parties such as prospective lenders
and purchasers, to make necessary repairs, to discharge Tenant’s obligations
hereunder when Tenant has failed to do so within a reasonable time after written
notice from Landlord, and at any reasonable time within one hundred and eighty
(180) days prior to the expiration of the Term, to place upon the Building and
the Outside Area ordinary “For Lease” signs and to show the Premises to
prospective tenants.  The above rights are subject to reasonable security
regulations of Tenant, and to the requirement that Landlord shall at all times
act in a manner to cause the least possible interference with Tenant’s business.

20.

Signs.  Landlord shall provide Tenant space for Tenant’s identification sign on
an exterior monument sign in the Outside Area in common with other tenants of
the Project and shall provide Tenant with Building-standard signage at the
entrance to the Premises and a listing in the Building directory.  Tenant shall
have no right to maintain any Tenant identification sign in any other location
in, on or about the Building or the Project, and shall not display or erect any
other Tenant identification sign, display or other advertising material that is
visible from the exterior of the Building.  The size, design, color and other
physical aspects of Tenant’s monument signage shall be subject to Landlord’s
written approval prior to installation.  Tenant shall pay all costs associated
with Tenant’s monument signage, including installation, maintenance, repair and
removal.  Upon the expiration or sooner termination of this Lease, Tenant shall
remove its signage from the monument sign and repair any damage to the monument
sign caused by the installation and/or removal of Tenant’s sign.  If Tenant
fails to maintain its sign, or, if Tenant fails to remove its sign upon
termination of this Lease and repair any damage to the monument sign as required
herein, Landlord may do so at Tenant’s expense.

21.

Insurance.

A.

Indemnification.  Tenant hereby agree to defend, indemnify and hold harmless
Landlord and its Agents from and against any and all damage, loss, liability or
expense including attorneys’ fees and legal costs suffered directly or by reason
of any claim, suit or judgment brought by or in favor of any person or persons
for damage, loss or expense due to, but not limited to, bodily injury and
property damage sustained by such person or persons which arises out of, is
occasioned by or in any way attributable to the use or occupancy of the Premises
or the Project or any part thereof and adjacent areas by Tenant, the acts or
omissions of the Tenant, its agents, employees or any contractors brought onto
the Premises or the Project by Tenant, except to the extent caused by the gross
negligence or willful misconduct of Landlord or its Agents.  Tenant agrees that
the obligations assumed herein shall survive this Lease.

B.

Tenant’s Insurance.  Tenant agrees to maintain in full force and effect at all
times during the Term, at its own expense, for the protection of Tenant and
Landlord, as their interests may appear, policies of insurance issued by a
responsible carrier or carriers which afford the following coverages:

(i)

Commercial general liability insurance in an amount not less than Two Million
and no/100th Dollars ($2,000,000.00) combined single limit for both bodily
injury and property damage which includes blanket contractual liability broad
form property damage, personal injury, completed operations, products liability,
and fire damage legal (in an amount not less than Fifty Thousand Dollars
($50,000)), naming Landlord and its Agents as additional insureds.

(ii)

Special form property insurance (including, without limitation, vandalism,
malicious mischief, inflation endorsement, and sprinkler leakage endorsement) on
Tenant’s Personal Property located on or in the Premises.  Such insurance shall
be in the full amount of the replacement cost, as the same may from time to time
increase as a result of inflation or otherwise, and shall be in a form providing
coverage comparable to the coverage provided in the standard ISO All-Risk form.
 As long as this Lease is in effect, the proceeds of such policy shall be used
for the repair and replacement of such items so insured.  Landlord shall have no
interest in the insurance proceeds on Tenant’s Personal Property.

(iii)

Boiler and machinery insurance, including steam pipes, pressure pipes,
condensation return pipes and other pressure vessels and HVAC equipment,
including miscellaneous electrical apparatus, in an amount satisfactory to
Landlord.

C.

Premises Insurance.  During the Term Landlord shall maintain special form
property insurance (including inflation endorsement, sprinkler leakage
endorsement, and, at Landlord’s option, earthquake and flood coverage) on the
Building and the Adjacent Building(s), excluding coverage of all Tenant’s
Personal Property located on or in the Premises, but including the Tenant
Improvements, if any are provided for in Paragraph 9 of this Lease.  Such
insurance shall also include insurance against loss of rents, including, at
Landlord’s option, earthquake and flood, in an amount equal to the Monthly Rent
and Additional Rent, and any other sums payable under the Lease, for a period of
at least twelve (12) months commencing on the date of loss.  Such insurance
shall name Landlord and its Agents as named insureds and include a lender’s loss
payable endorsement in favor of Landlord’s lender (Form 438 BFU Endorsement).
 Tenant shall reimburse Landlord for Tenant’s Project Percentage of Landlord’s
annual cost of such insurance as Additional Rent, monthly on the first day of
each calendar month of the Term, prorated for any partial month, or on such
other periodic basis as Landlord shall elect.  If the Project insurance premiums
are increased after the Commencement Date, due to an increase in the value of
the Building or the Adjacent Building(s) or their replacement cost, Tenant shall
pay Tenant’s Percentage of such increase within ten (10) days of notice of such
increase.  If such insurance premiums are increased due to Tenant’s use of the
Premises, improvements installed by Tenant, or any other cause solely
attributable to Tenant, Tenant shall be required to pay the full amount of the
increase.

D.

Increased Coverage.  Upon demand, Tenant shall provide Landlord, at Tenant’s
expense, with such increased amount of existing insurance, and such other
insurance as Landlord or Landlord’s lender may reasonably require to afford
Landlord and Landlord’s lender adequate protection.

E.

Co-Insurer.  If, on account of the failure of Tenant to comply with the
foregoing provisions, Landlord is adjudged a co-insurer by its insurance
carrier, then, any loss or damage, Landlord shall sustain by reason thereof,
including attorneys’ fees and costs, shall be borne by Tenant and shall be
immediately paid by Tenant upon receipt of a bill therefor and evidence of such
loss.

F.

Insurance Requirements.  All insurance shall be in a form satisfactory to
Landlord and shall be carried with companies that have a general policy holder’s
rating of not less than “A” and a financial rating of not less than Class “X” in
the most current edition of Best’s Insurance Reports; shall provide that such
policies shall not be subject to material alteration or cancellation except
after at least thirty (30) days’ prior written notice to Landlord; and shall be
primary as to Landlord.  The policy or policies, or duly executed certificates
for them, together with satisfactory evidence of payment of the premium thereon
shall be deposited with Landlord prior to the Commencement Date, and upon
renewal of such policies, not less than thirty (30) days prior to the expiration
of the term of such coverage.  If Tenant fails to procure and maintain the
insurance required hereunder, Landlord may, but shall not be required to, order
such insurance at Tenant’s expense and Tenant shall reimburse Landlord.  Such
reimbursement shall include all costs incurred by Landlord including Landlord’s
reasonable attorneys’ fees, with interest thereon at the Interest Rate.

G.

Landlord’s Disclaimer.  Landlord and its Agents shall not be liable for any loss
or damage to persons or property resulting from fire, explosion, falling
plaster, glass, tile or sheetrock, steam, gas, electricity, water or rain which
may leak from any part of the Building, or from the pipes, appliances or
plumbing works therein or from the roof, street or subsurface, or from any cause
whatsoever, unless caused by or due to the sole negligence or willful acts of
Landlord.  Landlord and its Agents shall not be liable for any latent defect in
the Premises.  Tenant shall give prompt written notice to Landlord in case of a
casualty, accident or repair needed in the Premises.

22.

Waiver of Subrogation.  Landlord and Tenant each hereby waive all rights of
recovery against the other on account of loss or damage occasioned to such
waiving party for its property or the property of others under its control to
the extent that such loss or damage is insured against under any property policy
then in effect or would be insured against under a standard ISO special form
causes of loss, CP 0030, policy of insurance.  Tenant and Landlord shall, upon
obtaining policies of insurance required hereunder, give notice to the insurance
carrier that the foregoing mutual waiver of subrogation is contained in this
Lease and Tenant and Landlord shall cause each insurance policy obtained by such
party to provide that the insurance company waives all right of recovery by way
of subrogation against either Landlord or Tenant in connection with any damage
covered by such policy.

23.

Damage or Destruction.

A.

Landlord’s Obligation to Rebuild.  If the Premises or the Building is damaged or
destroyed, Landlord shall promptly and diligently repair the same unless it has
the right to terminate this Lease as provided herein and it elects to so
terminate.

B.

Right to Terminate.  Landlord shall have the right to terminate this Lease in
the event any of the following events occur:

(i)

Insurance proceeds together with such sums which Tenant may in its sole
discretion elect to contribute toward the cost of such repair are not available
to pay one hundred percent (100%) of the cost of such repair; excluding Tenant’s
pro rata share of the deductible for which Tenant shall be responsible;

(ii)

The Premises or the Building cannot, with reasonable diligence, be fully
repaired by Landlord within one hundred eighty (180) days after the date of the
damage or destruction; or

(iii)

The Premises or Building cannot be safely repaired because of the presence of
hazardous factors, including, but not limited to, earthquake faults, radiation,
chemical waste and other similar dangers.

If Landlord elects to terminate this Lease, Landlord may give Tenant written
notice of its election to terminate within thirty (30) days after such damage or
destruction, and this Lease shall terminate fifteen (15) days after the date
Tenant receives such notice.  If Landlord elects not to terminate the Lease,
Landlord shall promptly, following the date of such damage or destruction,
commence the process of obtaining necessary permits and approvals, and shall
commence repair of the Premises or the Building as soon as practicable and
thereafter prosecute the same diligently to completion, in which event this
Lease will continue in full force and effect.  All insurance proceeds from
insurance under Paragraph 21., excluding proceeds for Tenant’s Personal
Property, shall be disbursed and paid to Landlord.  Tenant shall be required to
pay to Landlord the amount of any deductibles payable in connection with any
insured casualties, unless the casualty was caused by the sole negligence or
willful misconduct of Landlord.

C.

Limited Obligation to Repair.  Landlord’s obligation, should it elect or be
obligated to repair or rebuild, shall be limited to the basic Premises, the
Tenant Improvements, or the basic Building, as the case may be.

D.

Abatement of Rent.  Rent shall be temporarily abated proportionately during any
period when, by reason of such damage or destruction, Landlord reasonably
determines that there is substantial interference with Tenant’s use of the
Premises, having regard to the extent to which Tenant may be required to
discontinue Tenant’s use of the Premises.  Such abatement shall commence upon
such damage or destruction and end upon substantial completion by Landlord of
the repair or reconstruction which Landlord is obligated or undertakes to do.
 Tenant shall not be entitled to any compensation or damages from Landlord for
loss of the use of the Premises, damage to Tenant’s Personal Property or any
inconvenience occasioned by such damage, repair or restoration.  Tenant hereby
waives the provisions of Section 1932, Subdivision 2, and Section 1933,
Subdivision 4, of the California Civil Code, and the provisions of any similar
law hereinafter enacted.

E.

Damage Near End of Term.  Anything herein to the contrary notwithstanding, if
the Premises or the Building is destroyed or damaged during the last twelve (12)
months of the Term, then Landlord may, at its option, cancel and terminate this
Lease as of the date of the occurrence of such damage.  If Landlord does not
elect to so terminate this Lease, the repair of such damage shall be governed by
Paragraphs 23.A. and 23.B.

24.

Condemnation.  If title to all of the Premises or Building or so much thereof is
taken for any public or quasi-public use under any statute or by right of
eminent domain so that reconstruction of the Premises or Building will not, in
Landlord’s and Tenant’s mutual opinion, result in the Premises being reasonably
suitable for Tenant’s continued occupancy for the uses and purposes permitted by
this Lease, this Lease shall terminate as of the date that possession of the
Premises or Building or part thereof be taken.  A sale by Landlord to any
authority having the power of eminent domain, either under threat of
condemnation or while condemnation proceedings are pending, shall be deemed a
taking under the power of eminent domain for all purposes of this paragraph.

If any part of the Premises or Building is taken and the remaining part is
reasonably suitable for Tenant’s continued occupancy for the purposes and uses
permitted by this Lease, this Lease shall, as to the part so taken, terminate as
of the date that possession of such part of the Premises or Building is taken.
 The Rent and other sums payable hereunder shall be reduced in the same
proportion that Tenant’s use and occupancy of the Premises is reduced.  If any
portion of the Common Area or Outside Area is taken, Tenant’s Rent shall be
reduced only if such taking materially interferes with Tenant’s use of the
Common Area or Outside Area and then only to the extent that the fair market
rental value is diminished by such partial taking.  If the parties disagree as
to the amount of Rent reduction, the matter shall be resolved by arbitration and
such arbitration shall comply with and be governed by the California Arbitration
Act, Sections 1280 through 1294.2 of the California Code of Civil Procedure.
 Each party hereby waives the provisions of Section 1265.130 of the California
Code of Civil Procedure allowing either party to petition the Superior Court to
terminate this Lease in the event of a partial taking of the Property or
Premises.

No award for any partial or entire taking shall be apportioned.  Tenant assigns
to Landlord its interest in any award which may be made in such taking or
condemnation, together with any and all rights of Tenant arising in or to the
same or any part thereof.  Nothing contained herein shall be deemed to give
Landlord any interest in or require Tenant to assign to Landlord any separate
award made to Tenant for the taking of Tenant’s Personal Property, for the
interruption of Tenant’s business, or its moving costs, or for the loss of its
good will.

25.

Assignment and Subletting.

A.

Landlord’s Consent.  Tenant shall not enter into a Sublet without Landlord’s
prior written consent, which consent shall not be unreasonably withheld.  Any
attempted or purported Sublet without Landlord’s prior written consent shall be
void and confer no rights upon any third person and, at Landlord’s election,
shall terminate this Lease.  Each subtenant shall agree in writing, for the
benefit of Landlord, to assume, to be bound by, and to perform the terms,
conditions and covenants of this Lease to he performed by Tenant.
 Notwithstanding anything contained herein, Tenant shall not be released from
personal liability for the performance of each term, condition and covenant of
this Lease by reason of Landlord’s consent to a Sublet unless Landlord
specifically grants such release in writing.

B.

Information to be Furnished.  If Tenant desires at any time to Sublet the
Premises or any portion thereof, it shall first notify Landlord of its desire to
do so and shall submit in writing to Landlord: (i) the name of the proposed
Subtenant; (ii) the nature of the proposed Subtenant’s business to be carried on
in the Premises; (iii) the terms and provisions of the proposed Sublet and a
copy of the proposed Sublet form containing a description of the subject
premises; and (iv) such financial information, including financial statements,
as Landlord may reasonably request concerning the proposed Subtenant.

C.

Landlord’s Alternatives.  Within five (5) days after Landlord’s receipt of the
information specified in Paragraph 25.B., Landlord shall, by written notice to
Tenant, elect: (i) to consent to the Sublet by Tenant; (ii) to refuse its
consent to the Sublet, or (iii) to terminate this Lease.  If Landlord consents
to the Sublet, Tenant may thereafter enter into a valid Sublet of the Premises
or portion thereof, upon the terms and conditions and with the proposed
Subtenant set forth in the information furnished by Tenant to Landlord pursuant
to Paragraph 25.B., subject, however, at Landlord’s election, to the condition
that any excess of the Subrent over the Rent required to be paid by Tenant under
this Lease less reasonable attorneys’ fees, brokerage commissions, and tenant
improvement costs paid by Tenant in connection with the Sublet, shall be paid to
Landlord.

D.

Exempt Sublets.  Notwithstanding the above, Landlord’s prior written consent
shall not be required for a Sublet to (i) an entity that controls, is controlled
by, or is under common control with, Tenant, or (ii) an entity resulting from a
merger with, consolidation or other corporate reorganization of Tenant, if
Tenant gives Landlord prior written notice of the name of any such Subtenant
and, in the event of an assignment, the assignee assumes, in writing, for the
benefit of Landlord all of Tenant’s obligations under this Lease.  An assignment
or other transfer of this Lease to a purchaser of all or substantially all of
the assets of Tenant shall be deemed a Sublet requiring Landlord’s prior written
consent.

26.

Default.

A.

Tenant’s Default.  A default under this Lease by Tenant shall exist if any of
the following occurs:

(i)

If Tenant fails to pay Rent or any other sum required to be paid hereunder when
due; or

(ii)

If Tenant fails to perform any term, covenant or condition of this Lease except
those requiring the payment of money, and Tenant fails to cure such breach
within twenty (20) days after written notice from Landlord where such breach
could reasonably be cured within such twenty (20) day period; provided, however,
that where such failure could not reasonably be cured within the twenty (20) day
period; that Tenant shall not be in default if it commences such performance
within the twenty (20) day period and diligently thereafter prosecutes the same
to completion; or

(iii)

If Tenant assigns its assets for the benefit of its creditors; or

(iv)

If the sequestration or attachment of or execution on any material part of
Tenant’s Personal Property essential to the conduct of Tenant’s business occurs,
and Tenant fails to obtain a return or release of such Personal Property within
thirty (30) days thereafter, or prior to sale pursuant to such sequestration,
attachment or levy, whichever is earlier; or

(v)

If a court makes or enters any decree or order other than under the bankruptcy
laws of the United States adjudging Tenant to be insolvent; or approving as
properly filed a petition seeking reorganization of Tenant; or directing the
winding up or liquidation of Tenant and such decree or order shall have
continued for a period of thirty (30) days.

B.

Remedies.  Upon a default, Landlord shall have the following remedies, in
addition to all other rights and remedies provided by law or otherwise provided
in this Lease, to which Landlord may resort cumulatively or in the alternative:

(i)

Landlord may continue this Lease in full force and effect, and this Lease shall
continue in full force and effect as long as Landlord does not terminate this
Lease, and Landlord shall have the right to collect Rent when due.

(ii)

Landlord may terminate Tenant’s right to possession of the Premises at any time
by giving written notice to that effect, and relet the Premises or any part
thereof.  Tenant shall be liable immediately to Landlord for all costs Landlord
incurs in reletting the Premises or any part thereof, including, without
limitation, broker’s commissions, expenses of cleaning and redecorating the
Premises required by the reletting and like costs.  Reletting may be for a
period shorter or longer than the remaining term of this Lease.  No act by
Landlord other than giving written notice to Tenant shall terminate this Lease.
 Acts of maintenance, efforts to relet the Premises or the appointment of a
receiver on Landlord’s initiative to protect Landlord’s interest under this
Lease shall not constitute a termination of Tenant’s right to possession.  On
termination, Landlord has the right to remove all Tenant’s Personal Property and
store same at Tenant’s cost and to recover from Tenant as damages:

(a)

The worth at the time of award of unpaid Rent and other sums due and payable
which had been earned at the time of termination; plus

(b)

The worth at the time of award of the amount by which the unpaid Rent and other
sums due and payable which would have been payable after termination until the
time of award exceeds the amount of such Rent loss that Tenant proves could have
been reasonably avoided; plus

(c)

The worth at the time of award of the amount by which the unpaid Rent and other
sums due and payable for the balance of the Term after the time of award exceeds
the amount of such Rent loss that Tenant proves could be reasonably avoided;
plus

(d)

Any other amount necessary which is to compensate Landlord for all the detriment
proximately caused by Tenant’s failure to perform Tenant’s obligations under
this Lease, or which, in the ordinary course of things, would be likely to
result therefrom, including, without limitation, and costs or expenses incurred
by Landlord: (i) in retaking possession of the Premises; (ii) in maintaining,
repairing, preserving, restoring, replacing, cleaning, altering or
rehabilitating the Premises or any portion thereof, including such acts for
reletting to a new tenant or tenants; (iii) for leasing commissions; or (iv) for
any other costs necessary or appropriate to relet the Premises; plus

(e)

At Landlord’s election, such other amounts in addition to or in lieu of the
foregoing as may be permitted from time to time by the laws of the State of
California.

The “worth at the time of award” of the amounts referred to in
Paragraphs 26.B(ii)(a) and 26.B(ii)(b) is computed by allowing interest at the
Interest Rate on the unpaid rent and other sums due and payable from the
termination date through the date of award.  The “worth at the time of award” of
the amount referred to in Paragraph 26.B(ii)(c) is computed by discounting such
amount at the discount rate of the Federal Reserve Bank of San Francisco at the
time of award plus one percent (1%).  Tenant waives redemption or relief from
forfeiture under California Code of Civil Procedure Sections 1174 and 1179, or
under any other present or future law, in the event Tenant is evicted or
Landlord takes possession of the Premises by reason of any default of Tenant
hereunder.

(iii)

Landlord may, with or without terminating this Lease, re-enter the Premises and
remove all persons and property from the Premises; such property may be removed
and stored in a public warehouse or elsewhere at the cost of and for the account
of Tenant.  No re-entry or taking possession of the Premises by Landlord
pursuant to this paragraph shall be construed as an election to terminate this
Lease unless a written notice of such intention is given to Tenant.

C.

Landlord’s Default.  Landlord shall not be deemed to be in default in the
performance of any obligation required to be performed by it hereunder unless
and until it has failed to perform such obligation within thirty (30) days after
receipt of written notice by Tenant to Landlord specifying the nature of such
default; provided, however, that if the nature of Landlord’s obligation is such
that more than thirty (30) days are required for its performance, then Landlord
shall not be deemed to be in default if it shall commence such performance
within such thirty (30) day period and thereafter diligently prosecute the same
to completion.

27.

Subordination.  This Lease is subject and subordinate to ground and underlying
leases, mortgages and deeds of trust (collectively “Encumbrances”) which may now
or hereafter affect the Building or the Project, provided, however, if the
holder or holders of any such Encumbrance (“Holder”) shall require that this
Lease to be prior and superior thereto, within seven (7) days of written request
of Landlord to Tenant, Tenant shall execute, have acknowledged and deliver any
and all documents or instruments, in the form presented to Tenant, which
Landlord or Holder deems necessary or desirable for such purposes.  Landlord
shall have the right to cause this Lease to be and become and remain subject and
subordinate to any and all Encumbrances which are now or may hereafter be
executed covering the Premises or any renewals, modifications, consolidations,
replacements or extensions thereof, for the full amount of all advances made or
to be made thereunder and without regard to the time or character of such
advances, together with interest thereon and subject to all the terms and
provisions thereof; provided only, that in the event of termination of any such
lease or upon the foreclosure of any such mortgage or deed of trust, so long as
Tenant is not in default, Holder agrees to recognize Tenant’s rights under this
Lease as long as Tenant shall pay the Rent and observe and perform all the
provisions of this Lease to be observed and performed by Tenant.  Within ten
(10) days after Landlord’s written request, Tenant shall execute any and all
documents required by Landlord or the Holder required to make this Lease
subordinate to any lien of the Encumbrance.  If Tenant fails to do so, it shall
be deemed that this Lease is subordinated.

Notwithstanding anything to the contrary set forth in this paragraph, Tenant
hereby attorns and agrees to attorn to any entity purchasing or otherwise
acquiring the Building or the Project at any sale or other proceeding or
pursuant to the exercise of any other rights, powers or remedies under such
Encumbrance.

28.

Estoppel Certificates.  Tenant shall within seven (7) days following written
request by Landlord,

(i)

Execute and deliver to Landlord any documents, including estoppel certificates,
in the form prepared by Landlord (a) certifying that this Lease is unmodified
and in fall force and effect or, if modified, stating the nature of such
modification and certifying that this Lease, as so modified, is in full force
and effect and the date to which the Rent and other charges are paid in advance,
if any; (b) acknowledging that there are not, to Tenant’s knowledge, any uncured
defaults on the part of Landlord, or, if there are uncured defaults on the part
of the Landlord, stating the nature of such uncured defaults; and (c) evidencing
the status of the Lease as may be required either by a lender making a loan to
Landlord to be secured by deed of trust or mortgage covering the Building or the
Project or a purchaser of the Building or the Project from Landlord.  Tenant’s
failure to deliver an estoppel certificate within seven (7) days after delivery
of Landlord’s written request therefor shall be conclusive upon Tenant (a) that
this Lease is in full force and effect, without modification except as may be
represented by Landlord (b) that there are now no uncured defaults in Landlord’s
performance and (c) that no Rent has been paid in advance.

(ii)

Deliver to Landlord the current financial statements of Tenant, and financial
statements of the two (2) years prior to the current financial statements year,
with an opinion of a certified public accountant, including a balance sheet and
profit and loss statement for the most recent prior year, all prepared in
accordance with generally accepted accounting principles consistently applied.

29.

Transfer of the Building or the Project by Landlord.  In the event of any
conveyance of the Building or the Project and assignment by Landlord of this
Lease, Landlord shall be and is hereby entirely released from all liability
under any and all of its covenants and obligations contained in or derived from
this Lease occurring after the date of such conveyance and assignment and Tenant
agrees to attorn to such transferee provided such transferee assumes Landlord’s
obligations under this Lease.

30.

Landlord’s Right to Perform Tenant’s Covenants.  If Tenant shall at any time
fail to make any payment or perform any other act on its part to be made or
performed under this Lease, Landlord may, but shall not be obligated to and
without waiving or releasing Tenant from any obligation of Tenant under this
Lease, make such payment or perform such other act to the extent Landlord may
deem desirable, and in connection therewith, pay expenses and employ counsel.
 All sums so paid by Landlord and all penalties, interest and costs in
connection therewith shall be due and payable by Tenant on the next day after
any such payment by Landlord, together with interest thereon at the Interest
Rate from such date to the date of payment by Tenant to Landlord, plus
collection costs and attorneys’ fees.  Landlord shall have the same rights and
remedies for the nonpayment thereof as in the case of default in the payment of
Rent.

31.

Tenant’s Remedy.  If, as a consequence of a default by Landlord under this
Lease, Tenant recovers a money judgment against Landlord, such judgment shall be
satisfied only out of the proceeds of sale received upon execution of such
judgment and levied thereon against the right, title and interest of Landlord in
the Building and out of Rent or other income from such property receivable by
Landlord or out of consideration received by Landlord from the sale or other
disposition of all or any part of Landlord’s right, title or interest in the
Building, and neither Landlord nor its agents shall be liable for any
deficiency.

32.

Mortgagee Protection.  If Landlord defaults under this Lease, Tenant will notify
any beneficiary of a deed of trust or mortgagee of a mortgage covering the
Building or the Project, and offer such beneficiary or mortgagee a reasonable
opportunity to cure the default, including time to obtain possession of the
Building or the Project by power of sale or a judicial foreclosure, if such
should prove necessary to effect a cure.

33.

Brokers.  Tenant and Landlord warrants and represents that it has had no
dealings with any real estate broker or agent in connection with the negotiation
of this Lease other than JR Parrish, and that it knows of no other real estate
broker or agent who is or might be entitled to a commission in connection with
this Lease.  Tenant agrees to indemnify, defend and hold Landlord and its Agents
harmless from and against any and all liabilities or expenses, including
attorneys’ fees and costs, arising out of or in connection with claims made by
any other broker or individual for commissions or fees resulting from Tenant’s
execution of this Lease.

34.

Modifications for Lender.  If, in connection with obtaining financing for the
Building or the Project or any portion thereof, Landlord’s lender shall request
reasonable modification to this Lease as a condition to such financing, Tenant
shall not unreasonably withhold, delay or defer its consent thereto, provided
such modifications do not materially adversely affect Tenant’s rights hereunder.

35.

Parking.  Tenant shall have the right to use its pro rata share of the Project’s
parking facilities in common with other tenants of the Project upon terms and
conditions, as may from time to time be established by Landlord.  Tenant agrees
not to overburden the parking facilities and agrees to cooperate with Landlord
and other tenants in the use of the parking facilities.  Landlord reserves the
right in its discretion to determine whether the parking facilities are becoming
crowded and to allocate and assign parking spaces among Tenant and the other
tenants.

36.

General.

A.

Notices.  Any notice or demand required or desired to be given under this Lease
shall be in writing and shall be personally served or in lieu of personal
service may be given by mail.  If given by mail, such notice shall be deemed to
have been given when seventy-two (72) hours have elapsed from the time when such
notice was deposited in the United States mail, registered or certified, and
postage prepaid, addressed to the party to be served.  At the date of execution
of this Lease, the addresses of Landlord and Tenant are as set forth in
Paragraph 1.  After the Commencement Date, the address of Tenant shall be the
address of the Premises.  All notices shall be served to both the Premises and
the address set forth in Paragraph 1.  Either party may change its address by
giving notice of same in accordance with this paragraph.

B.

Attorneys’ Fees.  If either party brings any action or legal proceeding for
damages for an alleged breach of any provision of this Lease, to recover rent,
or other sums due, to terminate the tenancy of the Premises or to enforce,
protect or establish any term, condition or covenant of this Lease or right of
either party, the prevailing party shall be entitled to recover as a part of
such action or proceedings, or in a separate action brought for that purpose,
reasonable attorneys’ fees and costs.

C.

Acceptance.  This Lease shall only become effective and binding upon full
execution hereof by Landlord and delivery of a signed copy to Tenant.  Neither
party shall record this Lease nor a short form memorandum thereof.

D.

Captions.  The captions and headings used in this Lease are for the purpose of
convenience only and shall not be construed to limit or extend the meaning of
any part of this Lease.

E.

Executed Copy.  Any fully executed copy of this Lease shall be deemed an
original for all purposes.

F.

Time.  Time is of the essence for the performance of each term, condition and
covenant of this Lease.

G.

Separability.  If one or more of the provisions contained herein, except for the
payment of Rent, is for any reason held invalid, illegal or unenforceable in any
respect, such invalidity, illegality, or unenforceability shall not affect any
other provisions of this Lease, but this Lease shall be construed as if such
invalid, illegal or unenforceable provision had not been contained herein.

H.

Choice of Law.  This Lease shall be construed and enforced in accordance with
the laws of the State of California.  The language in all parts of this Lease
shall in all cases be construed as a whole according to its fair meaning and not
strictly for or against either Landlord or Tenant.

I.

Gender; Singular, Plural.  When the context of this Lease requires, the neuter
gender includes the masculine, the feminine, a partnership or corporation or
joint venture, and the singular includes the plural.

J.

Binding Effect.  The covenants and agreement contained in this Lease shall be
binding on the parties hereto and on their respective successors and assigns to
the extent this Lease is assignable.

K.

Waiver.  The waiver by Landlord of any breach of any term, condition or
covenant, of this Lease shall not be deemed to be a waiver of such provision or
any subsequent breach of the same or any other term, condition or covenant of
this Lease.  The subsequent acceptance of Rent hereunder by Landlord shall not
be deemed to be a waiver of any preceding breach at the time of acceptance of
such payment.  No covenant, term or condition of this Lease shall be deemed to
have been waived by Landlord unless such waiver is in writing signed by
Landlord.

L.

Entire Agreement.  This Lease is the entire agreement between the parties, and
there are no agreements or representations between the parties except as
expressed herein.  Except as otherwise provided herein, no subsequent change or
addition to this Lease shall be binding unless in writing and signed by the
parties hereto.

M.

Authority.  If Tenant is a corporation or a partnership, each individual
executing this Lease on behalf of said corporation or partnership, as the case
may be, represents and warrants that he is duly authorized to execute and
deliver this Lease on behalf of said entity in accordance with its corporate
bylaws, statement of partnership or certificate of limited partnership, as the
case may be, and that this Lease is binding upon said entity in accordance with
its terms.  Landlord, at its option, may require a copy of such written
authorization to enter into this Lease.

N.

Exhibits.  All exhibits, amendments, riders and addenda attached hereto are
hereby incorporated herein and made a part hereof.

O.

Lease Summary.  The Lease Summary attached to this Lease is intended to provide
general information only.  In the event of any inconsistency between the Lease
Summary and the specific provisions of this Lease, the specific provisions of
this Lease shall prevail.

THIS LEASE is effective as of the date the last signatory necessary to execute
the Lease shall have executed this Lease:

TENANT:

LANDLORD:

VirnetX Inc., a Delaware corporation

By:  /s/ Kendall Larsen

GRANITE CREEK BUSINESS CENTER, a California general partnership

Its:  CEO

By:  TBI-SV III, a California limited Partnership, General Partner

Date:  3/21/06

By:  /s/ Charles J. Toeniskoetter

 

Charles J. Toeniskoetter, Trustee of the Toeniskoetter Family Trust dated
December 19, 2001

By:  Westwood Company – Scotts Valley, a California general partnership,
General Partner

By:  /s/ Anthony C. Morici

Anthony C. Morici, Trustee of the Morici Separate Property Trust dated June 3,
1983

Date:  3/23/06

LEASE SUMMARY

LEASE DATE:

March 15, 2006

LANDLORD:

Granite Creek Business Center

LANDLORD’S ADDRESS:

c/o Toeniskoetter & Breeding, Inc.,

Development, 1960 The Alameda, San Jose, CA 95126

TENANT:

VirnetX Inc., a Delaware corporation

TENANT’S ADDRESS:

157 Provincetown Ct., Aptos, CA 95003

CONTACT PERSON/TELEPHONE #:

Kendall Larsen (650) 642-4838

PREMISES:

approximately 995 rentable square feet

BUILDING ADDRESS:

5615 Scotts Valley Drive, Scotts Valley, Ca. 95066

BUILDING SQUARE FOOTAGE:

approximately 38,000 rentable square feet

PROJECT SQUARE FOOTAGE:

approximately 90,000 rentable square feet

TENANT’S BUILDING PERCENTAGE:

3.11%

TENANT’S PROJECT PERCENTAGE:

1.11%

ANTICIPATED COMMENCEMENT DATE:

April 1, 2006

LEASE TERM:

Twelve (12) months

INITIAL MONTHLY RENT:

$1,144.25/ MONTH, NNN

SECURITY DEPOSIT:

$1,248.75

 

GRANITE CREEK BUSINESS CENTER

Scotts Valley, California

FIRST AMENDMENT TO LEASE

THIS FIRST AMENDMENT TO LEASE (“First Amendment”) is entered into as of April 1,
2007, by and between Granite Creek Business Center, a California general
partnership (“Landlord”) and VirnetX Inc., a Delaware Corporation (“Tenant”) and
is an Amendment to the Lease Agreement dated March 15, 2006 (“Lease”), relating
to the Premises consisting of approximately nine hundred ninety-five (995)
rentable square feet, as shown on EXHIBIT A of the Lease (the “Premises”) in
that certain building, commonly known as 5615 Scotts Valley Drive, Scotts
Valley, CA 95066 (the “Building”)

The parties now desire to amend the Lease as follows:

1.

LEASE TERM.  Paragraph 4.A. of the Lease is amended to provide the termination
date to be March 31, 2008.

2.

RENT.  Paragraph 5.A. of the Lease is amended to reflect the following monthly
rent schedule (NNN):

Months of Term

Monthly Rent (NNN)

April 1, 2007 - March 31, 2008

$1,243.75 per month

Except as specifically amended herein, the Lease dated March 15, 2006 is hereby
ratified and affirmed.

LANDLORD

TENANT

GRANITE CREEK BUSINESS CENTER
A CALIFORNIA GENERAL PARTNERSHIP

VIRNETX, INC.

By /s/ Brad Krouskup

By /s/ Kendall Larsen

Its Member

Its President

Date 4/23/07

Date 4/17/07