VirnetX Holding Corp (Form: 10-K, Received: 03/02/2015 17:54:29)

EXHIBIT 10.6

VIRNETX HOLDING CORPORATION

2013 EQUITY INCENTIVE PLAN

STOCK OPTION AGREEMENT

Unless otherwise defined herein, the terms defined in the VirnetX Holding Corporation 2013 Equity Incentive Plan (the “Plan”) will have the same defined meanings in this Stock Option Agreement, including the Notice of Stock Option Grant (the “Notice of Grant”) and the Terms and Conditions of Stock Option Grant, attached hereto as Exhibit A (all together, the “Agreement”).

NOTICE OF STOCK OPTION GRANT

	Participant:	«Name»

	Address:

Participant has been granted an Option to purchase Common Stock of VirnetX Holding Corporation (the “Company”), subject to the terms and conditions of the Plan and this Agreement, as follows:

	Grant Number

	Date of Grant	«Grant_Date»

	Vesting Commencement Date	«VCD»

	Number of Shares Granted	«Number_of_Shares»

	Exercise Price per Share	$ «Price_Per_Share»

	Total Exercise Price	$«Exercise_Price»

	Type of Option	_____ Incentive Stock Option

		X Nonstatutory Stock Option

	Term/Expiration Date	«Expiration_Date»

	Vesting Schedule :

Subject to accelerated vesting as set forth below or in the Plan, this Option will be exercisable, in whole or in part, in accordance with the following schedule:

Initials: _________

Date:___________

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«VestingSchedule»

Notwithstanding the foregoing, the vesting of the Shares subject to the Option shall be subject to any vesting acceleration provisions contained in the Plan and/or any employment or service agreement, offer letter, change in control severance agreement, or any other agreement that has been or is, after the date of this Agreement, entered into between Participant and the Company or any Parent, Subsidiary, or Affiliate (such agreement a “Separate Agreement”).

Termination Period :

Except as otherwise provided in a Separate Agreement:

If on the date of grant, Participant was (a) a member of the Company’s board of directors (the “Board”) or (b) an employee of the Company that was designated by the Board as an “officer” for the purposes of Section 16 of the Securities Exchange Act of 1934 (a “Section 16 Officer”), this Option will be exercisable for twelve (12) months after Participant ceases to be a Service Provider, unless such termination is due to Participant’s death, Disability, or Cause.

If on the date of grant, Participant was a Service Provider to the Company but was not a Section 16 Officer or a member of the Board, this Option will be exercisable for thirty (30) days after Participant ceases to be a Service Provider, unless such termination is due to Participant’s death, Disability, or Cause.

If Participant ceases to be a Service Provider as a result of the Participant’s Disability, this Option will be exercisable for six (6) months after Participant ceases to be a Service Provider.

If Participant ceases to be a Service Provider as a result of Participant’s death, or in the event of Participant’s death within one (1) month following the date Participant ceases to be a Service Provider, this Option will be exercisable for twelve (12) months from the earlier of the date of Participant’s death or the date Participant ceases to be a Service Provider.

If Participant ceases to be a Service Provider as a result of Participant’s termination for Cause, this Option will immediately terminate and cease to be exercisable. In the event Participant’s status as a Service Provider is suspended pending investigation of whether such status shall be terminated for Cause, all of Participant’s rights under this Option, including the right to exercise this Option, shall be suspended during the investigation period.

Notwithstanding the foregoing, in no event may this Option be exercised after the Term/Expiration Date as provided above and may be subject to earlier termination as provided in Section 15(c) of the Plan.

Initials: _________

Date:___________

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By Participant’s signature and the signature of the Company’s representative below, Participant and the Company agree that this Option is granted under and governed by the terms and conditions of the Plan and this Agreement, all of which are made a part of this document. Participant has reviewed the Plan and this Agreement in their entirety, has had an opportunity to obtain the advice of counsel prior to executing this Agreement and fully understands all provisions of the Plan and Agreement. Participant hereby agrees to accept as binding, conclusive and final all decisions or interpretations of the Administrator upon any questions relating to the Plan and Agreement. Participant further agrees to notify the Company upon any change in the residence address indicated below.

PARTICIPANT		VIRNETX HOLDING CORPORATION


Signature		By

«Name»
Print Name		Title

Address :

Initials: _________

Date:___________

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EXHIBIT A

TERMS AND CONDITIONS OF STOCK OPTION GRANT

1. Grant of Option . The Company hereby grants to the Participant named in the Notice of Grant (the “Participant”) an option (the “Option”) to purchase the number of Shares, as set forth in the Notice of Grant, at the exercise price per Share set forth in the Notice of Grant (the “Exercise Price”), subject to all of the terms and conditions in this Agreement and the Plan, which is incorporated herein by reference. Subject to Section 20(c) of the Plan, in the event of a conflict between the terms and conditions of the Plan and the terms and conditions of this Agreement, the terms and conditions of the Plan will prevail.

(a) For U.S. taxpayers, the Option will be designated as either an Incentive Stock Option (“ISO”) or a Nonstatutory Stock Option (“NSO”). If designated in the Notice of Grant as an ISO, this Option is intended to qualify as an ISO under Section 422 of the Internal Revenue Code of 1986, as amended (the “Code”). However, if this Option is intended to be an Incentive Stock Option, to the extent that it exceeds the $100,000 rule of Code Section 422(d) it will be treated as an NSO. Further, if for any reason this Option (or portion thereof) will not qualify as an ISO, then, to the extent of such nonqualification, such Option (or portion thereof) shall be regarded as a NSO granted under the Plan. In no event will the Administrator, the Company or any Parent, Subsidiary, or Affiliate, or any of their respective employees or directors have any liability to Participant (or any other person) due to the failure of the Option to qualify for any reason as an ISO.

(b) For non-U.S. taxpayers, the Option will be designated as an NSO.

2. Vesting Schedule . Except as provided in Section 3, the Option awarded by this Agreement will vest in accordance with the vesting provisions set forth in the Notice of Grant. Shares scheduled to vest on a certain date or upon the occurrence of a certain condition will not vest in Participant in accordance with any of the provisions of this Agreement, unless Participant will have been continuously a Service Provider from the Date of Grant until the date such vesting occurs.

3. Administrator Discretion . The Administrator, in its discretion, may accelerate the vesting of the balance, or some lesser portion of the balance, of the unvested Option at any time, subject to the terms of the Plan. If so accelerated, such Option will be considered as having vested as of the date specified by the Administrator.

4. Exercise of Option .

(a) Right to Exercise . This Option may be exercised only within the term set out in the Notice of Grant, and may be exercised during such term only in accordance with the Plan and the terms of this Agreement. In the event Participant’s status as a Service Provider is suspended pending investigation of whether such status shall be terminated for Cause, all of Participant’s rights under this Option, including the right to exercise this Option, shall be suspended during the investigation period.

Initials: _________

Date:___________

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(b) Method of Exercise . This Option is exercisable by delivery of an exercise notice, in the form attached as Exhibit B (the “Exercise Notice”) or in a manner and pursuant to such procedures as the Administrator may determine , which will state the election to exercise the Option, the number of Shares in respect of which the Option is being exercised (the “Exercised Shares”), and such other representations and agreements as may be required by the Company pursuant to the provisions of the Plan. The Exercise Notice will be completed by Participant and delivered to the Company. The Exercise Notice will be accompanied by payment of the aggregate Exercise Price as to all Exercised Shares together and of any Tax-Related Items (as defined in Section 6(a)). This Option will be deemed to be exercised upon receipt by the Company of such fully executed Exercise Notice accompanied by the aggregate Exercise Price.

5. Method of Payment . Payment of the aggregate Exercise Price will be by any of the following, or a combination thereof, at the election of Participant:

(a) cash or check;

(b) cancellation of indebtedness;

(c) at the discretion of the Administrator on a case by case basis, if Participant is a U.S. employee, surrender of other Shares which have a Fair Market Value on the date of surrender equal to the aggregate Exercise Price of the Exercised Shares, provided that accepting such Shares, in the sole discretion of the Administrator, will not result in any adverse accounting consequences to the Company; or

(d) consideration received by the Company under a formal cashless exercise program adopted by the Company in connection with the Plan;

6. Tax Obligations .

(a) Withholding of Taxes . Notwithstanding any contrary provision of this Agreement, no certificate representing the Shares will be issued to Participant, unless and until satisfactory arrangements (as determined by the Administrator) will have been made by Participant with respect to the payment of income, employment, social insurance, payroll tax, fringe benefit tax, payment on account or other tax-related items related to Participant’s participation in the Plan and legally applicable to Participant (“Tax-Related Items”) which the Company determines must be withheld with respect to such Shares. If Participant is a non-U.S. employee, payment of Tax-Related Items may not be effectuated by surrender of other Shares with a Fair Market Value equal to the amount of any Tax-Related Items. To the extent determined appropriate by the Company in its discretion, it will have the right (but not the obligation) to satisfy any Tax-Related Items by reducing the number of Shares otherwise deliverable to Participant. If Participant fails to make satisfactory arrangements for the payment of any required Tax-Related Items hereunder at the time of the Option exercise, Participant acknowledges and agrees that the Company may refuse to honor the exercise and refuse to deliver the Shares if such amounts are not delivered at the time of exercise. Further, if Participant is subject to tax in more than one jurisdiction between the Date of Grant and the date of any relevant taxable or tax withholding event, as applicable, Participant acknowledges and agrees that the Company and/or Participant’s employer (the “Employer”), or former employer, as applicable, may be required to withhold or account for tax in more than one jurisdiction.

Initials: _________

Date:___________

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(b) Notice of Disqualifying Disposition of ISO Shares . If the Option granted to Participant herein is an ISO, and if Participant sells or otherwise disposes of any of the Shares acquired pursuant to the ISO on or before the later of (i) the date two (2) years after the Date of Grant, or (ii) the date one (1) year after the date of exercise, Participant will immediately notify the Company in writing of such disposition. Participant agrees that Participant may be subject to income tax withholding by the Company on the compensation income recognized by Participant.

(c) Code Section 409A . Under Code Section 409A, an option that vests after December 31, 2004 (or that vested on or prior to such date but which was materially modified after October 3, 2004) that was granted with a per share exercise price that is determined by the Internal Revenue Service (the “IRS”) to be less than the fair market value of a share on the date of grant (a “Discount Option”) may be considered “deferred compensation.” A Discount Option may result in (i) income recognition by Participant prior to the exercise of the option, (ii) an additional twenty percent (20%) federal income tax, and (iii) potential penalty and interest charges. The Discount Option may also result in additional state income, penalty and interest charges to Participant. Participant acknowledges that the Company cannot and has not guaranteed that the IRS will agree that the per Share Exercise Price of this Option equals or exceeds the Fair Market Value of a Share on the Date of Grant in a later examination. Participant agrees that if the IRS determines that the Option was granted with a per Share Exercise Price that was less than the Fair Market Value of a Share on the Date of Grant, Participant will be solely responsible for Participant’s costs related to such a determination.

7. Rights as Stockholder . Neither Participant nor any person claiming under or through Participant will have any of the rights or privileges of a stockholder of the Company in respect of any Shares deliverable hereunder unless and until certificates representing such Shares will have been issued, recorded on the records of the Company or its transfer agents or registrars, and delivered to Participant. After such issuance, recordation and delivery, Participant will have all the rights of a stockholder of the Company with respect to voting such Shares and receipt of dividends and distributions on such Shares.

8. No Guarantee of Continued Service . PARTICIPANT ACKNOWLEDGES AND AGREES THAT THE VESTING OF SHARES PURSUANT TO THE VESTING SCHEDULE HEREOF IS EARNED ONLY BY CONTINUING AS A SERVICE PROVIDER AT THE WILL OF THE COMPANY (OR THE PARENT, SUBSIDIARY, OR AFFILIATE EMPLOYING OR RETAINING PARTICIPANT) AND NOT THROUGH THE ACT OF BEING HIRED, BEING GRANTED THIS OPTION OR ACQUIRING SHARES HEREUNDER. PARTICIPANT FURTHER ACKNOWLEDGES AND AGREES THAT THIS AGREEMENT, THE TRANSACTIONS CONTEMPLATED HEREUNDER AND THE VESTING SCHEDULE SET FORTH HEREIN DO NOT CONSTITUTE AN EXPRESS OR IMPLIED PROMISE OF CONTINUED ENGAGEMENT AS A SERVICE PROVIDER FOR THE VESTING PERIOD, FOR ANY PERIOD, OR AT ALL, AND WILL NOT INTERFERE IN ANY WAY WITH PARTICIPANT’S RIGHT OR THE RIGHT OF THE COMPANY (OR THE PARENT, SUBSIDIARY, OR AFFILIATE EMPLOYING OR RETAINING PARTICIPANT) TO TERMINATE PARTICIPANT’S RELATIONSHIP AS A SERVICE PROVIDER AT ANY TIME, WITH OR WITHOUT CAUSE.

Initials: _________

Date:___________

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9. Nature of Grant . In accepting the Option, Participant acknowledges, understands and agrees that:

(a) the Plan is established voluntarily by the Company, it is discretionary in nature, and may be amended, suspended or terminated by the Company at any time, to the extent permitted by the Plan;

(b) the grant of the Option is voluntary and occasional and does not create any contractual or other right to receive future grants of options, or benefits in lieu of options, even if options have been granted in the past;

(d) Participant is voluntarily participating in the Plan;

(e) the Option and any Shares acquired under the Plan are not intended to replace any pension rights or compensation;

(f) the Option and Shares acquired under the Plan and the income and value of same, are not part of normal or expected compensation for purposes of calculating any severance, resignation, termination, redundancy, dismissal, end-of-service payments, bonuses, long-service awards, pension or retirement or welfare benefits or similar payments;

(g) the future value of the Shares underlying the Option is unknown, indeterminable, and cannot be predicted with certainty;

(h) if the underlying Shares do not increase in value, the Option will have no value;

(i) if Participant exercises the Option and acquires Shares, the value of such Shares may increase or decrease in value, even below the Exercise Price;

(j) for purposes of the Option, Participant’s engagement as a Service Provider will be considered terminated as of the date Participant is no longer actively providing services to the Company or any Parent, Subsidiary, or Affiliate (regardless of the reason for such termination and whether or not later found to be invalid or in breach of employment laws in the jurisdiction where Participant is a Service Provider or the terms of Participant’s engagement agreement, if any), and unless otherwise expressly provided in this Agreement or determined by the Administrator, (i) Participant’s right to vest in the Option under the Plan, if any, will terminate as of such date and will not be extended by any notice period ( e.g ., Participant’s period of service would not include any contractual notice period or any period of “garden leave” or similar period mandated under employment laws in the jurisdiction where Participant is a Service Provider or Participant’s engagement agreement, if any, unless Participant is providing bona fide services during such time); and (ii) the period (if any) during which Participant may exercise the Option after such termination of Participant's engagement as a Service Provider will commence on the date Participant ceases to actively provide services and will not be extended by any notice period mandated under employment laws in the jurisdiction where Participant is employed or terms of Participant’s engagement agreement, if any; the Administrator shall have the exclusive discretion to determine when Participant is no longer actively providing services for purposes of his or her Option grant (including whether Participant may still be considered to be providing services while on a leave of absence);

Initials: _________

Date:___________

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(k) unless otherwise provided in the Plan or by the Company in its discretion, the Option and the benefits evidenced by this Agreement do not create any entitlement to have the Option or any such benefits transferred to, or assumed by, another company nor to be exchanged, cashed out or substituted for, in connection with any corporate transaction affecting the Shares; and

(l) the following provisions apply only if Participant is providing services outside the United States:

(i)

the Option and the Shares subject to the Option are not part of normal or expected compensation or salary for any purpose;

(ii)

Participant acknowledges and agrees that none of the Company, the Employer, or any Parent, Subsidiary, or Affiliate shall be liable for any foreign exchange rate fluctuation between Participant’s local currency and the United States Dollar that may affect the value of the Option or of any amounts due to Participant pursuant to the exercise of the Option or the subsequent sale of any Shares acquired upon exercise; and

(iii)

no claim or entitlement to compensation or damages shall arise from forfeiture of the Option resulting from the termination of Participant’s engagement as a Service Provider (for any reason whatsoever, whether or not later found to be invalid or in breach of employment laws in the jurisdiction where Participant is a Service Provider or the terms of Participant’s engagement agreement, if any), and in consideration of the grant of the Option to which Participant is otherwise not entitled, Participant irrevocably agrees never to institute any claim against the Company, any Parent, any Subsidiary, any Affiliate or the Employer, waives his or her ability, if any, to bring any such claim, and releases the Company, any Parent, any Subsidiary, any Affiliate, and the Employer from any such claim; if, notwithstanding the foregoing, any such claim is allowed by a court of competent jurisdiction, then, by participating in the Plan, Participant shall be deemed irrevocably to have agreed not to pursue such claim and agrees to execute any and all documents necessary to request dismissal or withdrawal of such claim.

Initials: _________

Date:___________

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10. No Advice Regarding Grant . The Company is not providing any tax, legal or financial advice, nor is the Company making any recommendations regarding Participant’s participation in the Plan, or Participant’s acquisition or sale of the underlying Shares. Participant is hereby advised to consult with his or her own personal tax, legal and financial advisors regarding his or her participation in the Plan before taking any action related to the Plan.

11. Data Privacy . Participant hereby explicitly and unambiguously consents to the collection, use and transfer, in electronic or other form, of Participant’s personal data as described in this Agreement and any other Option grant materials by and among, as applicable, the Employer, the Company and any Parent, Subsidiary, or Affiliate for the exclusive purpose of implementing, administering and managing Participant’s participation in the Plan.

Participant understands that the Company and/or the Employer may hold certain personal information about Participant, including, but not limited to, Participant’s name, home address and telephone number, date of birth, social insurance number or other identification number, salary, nationality, job title, any shares of stock or directorships held in the Company, details of all Options or any other entitlement to stock awarded, canceled, exercised, vested, unvested or outstanding in Participant’s favor (“Data”), for the exclusive purpose of implementing, administering and managing the Plan.

Participant understands that Data will be transferred to a stock plan service provider as may be selected by the Company in the future, which is assisting the Company with the implementation, administration and management of the Plan. Participant understands that the recipients of the Data may be located in the United States or elsewhere, and that the recipient’s country (e.g., the United States) may have different data privacy laws and protections than Participant’s country. Participant understands that if he or she resides outside the United States, he or she may request a list with the names and addresses of any potential recipients of the Data by contacting his or her local human resources representative. Participant authorizes the Company and any other possible recipients which may assist the Company (presently or in the future) with implementing, administering and managing the Plan to receive, possess, use, retain and transfer the Data, in electronic or other form, for the sole purposes of implementing, administering and managing Participant’s participation in the Plan. Participant understands that Data will be held only as long as is necessary to implement, administer and manage Participant’s participation in the Plan. Participant understands that if he or she resides outside the United States, he or she may, at any time, view Data, request additional information about the storage and processing of Data, require any necessary amendments to Data or refuse or withdraw the consents herein, in any case without cost, by contacting in writing his or her local human resources representative. Further, Participant understands that he or she is providing the consents herein on a purely voluntary basis. If Participant does not consent, or if Participant later seeks to revoke his or her consent, his or her engagement as a Service Provider and career with the Employer will not be adversely affected; the only adverse consequence of refusing or withdrawing Participant’s consent is that the Company would not be able to grant Participant Options or other equity awards or administer or maintain such awards. Therefore, Participant understands that refusing or withdrawing his or her consent may affect Participant’s ability to participate in the Plan. For more information on the consequences of Participant’s refusal to consent or withdrawal of consent, Participant understands that he or she may contact his or her local human resources representative.

Initials: _________

Date:___________

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12. Address for Notices . Any notice to be given to the Company under the terms of this Agreement will be addressed to (a) the Company at VirnetX Holding Corporation, 308 Dorla Court, Suite 206, Zephyr Cove, NV 89448 and (b) the Company’s Stock Transfer Agent, Carylyn K. Bell, at Corporate Stock Transfer, 3200 Cherry Creek Drive South, Suite 430, Denver, CO 80209 or at such other address as the Company may hereafter designate in writing.

13. Non-Transferability of Option . This Option may not be transferred in any manner otherwise than by will or by the laws of descent or distribution and may be exercised during the lifetime of Participant only by Participant.

14. Binding Agreement . Subject to the limitation on the transferability of this grant contained herein, this Agreement will be binding upon and inure to the benefit of the heirs, legatees, legal representatives, successors and assigns of the parties hereto.

15. Additional Conditions to Issuance of Stock . If at any time the Company will determine, in its discretion, that the listing, registration, qualification or rule compliance of the Shares upon any securities exchange or under any state, federal or foreign law, the tax code and related regulations or the consent or approval of any governmental regulatory authority is necessary or desirable as a condition to the purchase by, or issuance of Shares to, Participant (or his or her estate) hereunder, such purchase or issuance will not occur unless and until such listing, registration, qualification, rule compliance, consent or approval will have been completed, effected or obtained free of any conditions not acceptable to the Company. The Company will make all reasonable efforts to meet the requirements of any such state, federal or foreign law or securities exchange and to obtain any such consent or approval of any such governmental authority or securities exchange. Assuming such compliance, for income tax purposes the Exercised Shares will be considered transferred to Participant on the date the Option is exercised with respect to such Exercised Shares.

16. Plan Governs . This Agreement is subject to all terms and provisions of the Plan. In the event of a conflict between one or more provisions of this Agreement and one or more provisions of the Plan, the provisions of the Plan will govern. Capitalized terms used and not defined in this Agreement will have the meaning set forth in the Plan.

17. Administrator Authority . The Administrator will have the power to interpret the Plan and this Agreement and to adopt such rules for the administration, interpretation and application of the Plan as are consistent therewith and to interpret or revoke any such rules (including, but not limited to, the determination of whether or not any Shares subject to the Option have vested). All actions taken and all interpretations and determinations made by the Administrator in good faith will be final and binding upon Participant, the Company and all other interested persons. No member of the Administrator will be personally liable for any action, determination or interpretation made in good faith with respect to the Plan or this Agreement.

Initials: _________

Date:___________

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18. Electronic Delivery and Acceptance . The Company may, in its sole discretion, decide to deliver any documents related to Options awarded under the Plan or future options that may be awarded under the Plan by electronic means or request Participant’s consent to participate in the Plan by electronic means. Participant hereby consents to receive such documents by electronic delivery and agrees to participate in the Plan through any on-line or electronic system established and maintained by the Company or a third party designated by the Company.

19. Captions . Captions provided herein are for convenience only and are not to serve as a basis for interpretation or construction of this Agreement.

20. Language . If Participant has received this Agreement, or any other document related to the Option and/or the Plan translated into a language other than English and if the meaning of the translated version is different than the English version, the English version will control.

21. Agreement Severable . In the event that any provision in this Agreement will be held invalid or unenforceable, such provision will be severable from, and such invalidity or unenforceability will not be construed to have any effect on, the remaining provisions of this Agreement.

22. Amendment, Suspension or Termination of the Plan . By accepting this Award, Participant expressly warrants that he or she has received an Option under the Plan, and has received, read and understood a description of the Plan. Participant understands that the Plan is discretionary in nature and may be amended, suspended or terminated by the Company at any time.

23. Governing Law and Venue . This Agreement will be governed by the laws of Nevada, without giving effect to the conflict of law principles thereof. For purposes of litigating any dispute that arises under this Option or this Agreement, the parties hereby submit to and consent to the jurisdiction of the State of Nevada , and agree that such litigation will be conducted in the courts of Douglas County, Nevada, or the federal courts for the United States for the District of Nevada, and no other courts, where this Option is made and/or to be performed.

24. Modifications to the Agreement . This Agreement constitutes the entire understanding of the parties on the subjects covered. Participant expressly warrants that he or she is not accepting this Agreement in reliance on any promises, representations, or inducements other than those contained herein. Modifications to this Agreement or the Plan can be made only in an express written contract executed by a duly authorized officer of the Company. Notwithstanding anything to the contrary in the Plan or this Agreement, the Company reserves the right to revise this Agreement as it deems necessary or advisable, in its sole discretion and without the consent of Participant, to comply with Code Section 409A or to otherwise avoid imposition of any additional tax or income recognition under Section 409A of the Code in connection with the Option.

25. Waiver . Participant acknowledges that a waiver by the Company of breach of any provision of this Agreement shall not operate or be construed as a waiver of any other provision of this Agreement, or of any subsequent breach by Participant or any other Participant.

Initials: _________

Date:___________

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EXHIBIT B

VIRNETX HOLDING CORPORATION

2013 EQUITY INCENTIVE PLAN

EXERCISE NOTICE

VirnetX Holding Corporation

308 Dorla Court, Suite 206

Zephyr Cove, NV 89448

Carylyn K. Bell

President

Corporate Stock Transfer

3200 Cherry Creek Drive South, Suite 430,

Denver, CO 80209

Attention: Stock Administration

1. Exercise of Option . Effective as of today, ________________, _____, the undersigned (“Purchaser”) hereby elects to purchase ______________ shares (the “Shares”) of the Common Stock of VirnetX Holding Corporation (the “Company”) under and pursuant to the 2013 Equity Incentive Plan (the “Plan”) and the Stock Option Agreement, dated ________ and including the Notice of Grant and the Terms and Conditions of Stock Option Grant (all together, the “Agreement”). The purchase price for the Shares will be $_____________, as required by the Agreement.

2. Delivery of Payment . Purchaser herewith delivers to the Company the full purchase price of the Shares and any Tax-Related Items (as defined in Section 6(a) of the Agreement) to be paid in connection with the exercise of the Option.

3. Representations of Purchaser . Purchaser acknowledges that Purchaser has received, read and understood the Plan and the Agreement and agrees to abide by and be bound by their terms and conditions.

4. Rights as Stockholder . Until the issuance (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company) of the Shares, no right to vote or receive dividends or any other rights as a stockholder will exist with respect to the Shares subject to the Option, notwithstanding the exercise of the Option. The Shares so acquired will be issued to Purchaser as soon as practicable after exercise of the Option. No adjustment will be made for a dividend or other right for which the record date is prior to the date of issuance, except as provided in Section 13 of the Plan.

Initials: _________

Date:___________

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5. Tax Consultation . Purchaser understands that Purchaser may suffer adverse tax consequences as a result of Purchaser’s purchase or disposition of the Shares. Purchaser represents that Purchaser has consulted with any tax consultants Purchaser deems advisable in connection with the purchase or disposition of the Shares and that Purchaser is not relying on the Company for any tax advice.

6. Entire Agreement; Governing Law . The Plan and Agreement are incorporated herein by reference. This Exercise Notice, the Plan and the Agreement constitute the entire agreement of the parties with respect to the subject matter hereof and supersede in their entirety all prior undertakings and agreements of the Company and Purchaser with respect to the subject matter hereof, and may not be modified adversely to the Purchaser’s interest except by means of a writing signed by the Company and Purchaser. This agreement is governed by the internal substantive laws, but not the choice of law rules, of Nevada.

Submitted by:		Accepted by:

PURCHASER		VIRNETX HOLDING CORPORATION


Signature		By

«Name»
Print Name		Its

Address :






		Date Received

Initials: _________

Date:___________

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EXHIBIT 10.23

AMENDED SETTLEMENT AND LICENSE AGREEMENT

This AMENDED SETTLEMENT AND LICENSE AGREEMENT (together with all Exhibits attached hereto, the “Agreement”), is made and entered into as of the date last executed by a Party (“Amendment Effective Date”) and amends and restates that certain Settlement and License Agreement dated May 14, 2010, by and among Microsoft Corporation, a Washington corporation (Microsoft Corporation together with its Affiliates, “Microsoft” as defined below), on the one hand, and VirnetX, Inc., a Delaware corporation (VirnetX, Inc. together with its Affiliates, “VirnetX” (as defined below), on the other hand. As used herein, “Party” refers to any of VirnetX or Microsoft individually, and “Parties” refers to VirnetX and Microsoft, collectively.

RECITALS

SAIC and VirnetX, Inc. have accused Microsoft of infringing U.S. Patent Nos. 6,502,135 B1; 7,188,180 B2; 7,490,151 B2; 7,987,274 B2; 7,418,504 B2; and 7,921,211 B2 (the “Patents-In-Suit”) in actions filed in the U.S. District Court for the Eastern District of Texas (“the Court”), designated Civ. Action No. 6:07CV80 (LED), Civ. Action No. 6:10CV94 (LED) and Civ. Action No. 6:13CV351 (the “Actions”).

Microsoft Corporation has denied any such infringement of the Patents-in-Suit and challenged the validity thereof. Microsoft has also challenged the enforceability of the Patents-in-Suit and raised other defenses.

Microsoft admits no liability with respect to any of the claims asserted in the Actions.

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties agree as follows:

AGREEMENT

Compromise Only. This Agreement is entered into for purposes of settlement and compromise only. Nothing contained in this Agreement, or done or omitted in connection with this Agreement, is intended as or shall be construed as an admission of or by any Party, or on behalf of any Microsoft Released Party (as defined below), of any fault, liability or wrongdoing whatsoever, or an admission of or by any Microsoft Released Party that any Licensed Patents (as defined below) are infringed, valid, or enforceable.

Definitions .

“ Licensed Patents ” shall mean (a) all patents and patent applications worldwide, now or in the future, that are owned (in whole or in part) or controlled by, or assigned to, VirnetX, Inc. or any entity that, as of the Amendment Effective Date, Controls, is Controlled by, or is under common Control with VirnetX, Inc. (including, without limitation, the Patents-In-Suit and the patents and applications set forth on Exhibit A); and (b) all patents and applications related to such patents and applications (including, without limitation, originals, divisionals, provisionals, re-exams, re-exam certificates, extensions, reissues, counterparts, parents, continuations, and continuations-in-part) in all countries of the world.

“ Microsoft ” shall mean Microsoft Corporation and its Affiliates.

“ VirnetX ” shall mean VirnetX, Inc. and its Affiliates.

“ Effective Date ” shall mean May 14, 2010.

“ Affiliate ” means any entity that Controls, is Controlled by, or is under common Control with a Party. For the avoidance of doubt, this definition applies to entities that became or become Affiliates at any time, whether in the past, currently, or in the future. For the avoidance of doubt, all Skype entities Controlled by Microsoft at any time are deemed to be Affiliates of Microsoft for purposes of this definition.

“ Control ” of an entity means the possession, directly or indirectly, through the ownership of voting securities, other voting interests, or otherwise, of the right to direct or cause the direction of management and policies of that entity. Control also includes the following: (a) direct or indirect ownership of 50% or more of the voting power, securities, or capital of that entity; or (b) direct or indirect ownership of interests representing 50% or more of the voting power to elect the board of directors or other governing body for that entity; or (c) in relation to a partnership, limited liability company, or other unincorporated association, the direct or indirect right to a share of 50% or more of its net assets or net income.

“ Licensees ” means Microsoft’s direct and indirect distributors, licensees and customers, but only to the extent such third parties utilize Microsoft Products.

“ Microsoft Products ” means any past, present, or future Microsoft products or services, including without limitation, Microsoft software, Microsoft hardware, or Microsoft protocols. For the avoidance of doubt, Microsoft Products include, without limitation, any past, present, or future products or services (including without limitation, Microsoft software, Microsoft hardware, or Microsoft protocols) designed, branded, made, sold (or leased), offered for sale (or offered for lease), purchased, obtained, made available, exported, imported, supplied, licensed, distributed, hosted, used, streamed, exploited, encoded, decoded, or otherwise provided to, by or for Microsoft. For the avoidance of doubt, Microsoft products or services (including without limitation, Microsoft software, Microsoft hardware, or Microsoft protocols) remain “Microsoft Products” even if combined with any past, present, or future products or services, but only as to those portions of the combination consisting of Microsoft Products. For clarity, a patent, by itself, is an intellectual property right and not a product.

“ Pending IPR’s ” means the inter partes review proceedings brought by Microsoft Corporation challenging the patents asserted in the Actions, and consists of: IPR2014-00614 (which has been consolidated with IPR2014-00613); IPR2014-00610; IPR2014-00615 (which has been consolidated with IPR2014-00618); IPR2014-00403; IPR2014-00404; IPR2014-01418; and IPR2014-01421.

“ SAIC ” means Science Applications International Corporation (SAIC Inc.) and Leidos, Inc., and their respective Affiliates.

“ Third Party ” means any entity that is neither a Party nor an Affiliate of a Party.

“ Third Party Products ” means products, and services, including protocols, of a Third Party designed or developed by such Third Party, but specifically excluding Microsoft Products.

Releases

3.1

Effective upon receipt of the payment set forth in Section 5.2, VirnetX, on behalf of itself and its predecessors, successors, assigns, attorneys, directors, shareholders, employees, and officers (collectively, the “VirnetX Releasing Parties”), hereby voluntarily, irrevocably and unconditionally fully and forever releases, discharges, acquits, covenants not to sue, and holds harmless Microsoft and predecessors to Microsoft’s businesses (including without limitation the previous owners of Microsoft’s businesses acquired from such persons or entities) and their predecessors, successors, assigns, attorneys, insurers, agents, servants, subcontractors, officers, directors, shareholders, representatives, employees, and Licensees (collectively, the “Microsoft Released Parties”) from and for any and all rights, claims, debts, liabilities, demands, suits, obligations, promises, damages, causes of action and claims for relief of any kind, manner, nature and description, known or unknown (collectively, “Claims”), which any of the VirnetX Releasing Parties have, may have had, might have asserted, may now have or assert, or may hereafter have or assert against the Microsoft Released Parties, or any of them, arising, accruing or occurring, in whole or in part, at any time prior to the Amendment Effective Date, including, without in any way limiting the generality of the foregoing, any claims or causes of action arising out of or related to any of the facts, transactions, matters or occurrences giving rise to or alleged, or that could have been alleged in or discovered in, the Actions or under any of the Licensed Patents. (For the avoidance of doubt, this release and covenant applies to Microsoft Affiliates both before and after the time they become an Affiliate of Microsoft). Notwithstanding the foregoing or anything to the contrary, this release does not apply to any Third Party (other than a Licensee) with respect to Third Party Products, except to the extent such Third Party is utilizing Microsoft Products.

3.2

Microsoft, on behalf of itself and its predecessors, successors and assigns (collectively, the “Microsoft Releasing Parties”), hereby voluntarily, irrevocably and unconditionally fully and forever releases, discharges, covenants not to sue, and holds harmless VirnetX and its predecessors, successors, assigns, attorneys, insurers, agents, servants, subcontractors, officers, directors, representatives, and employees (collectively, the “VirnetX Released Parties”) from and for any and all Claims which any of the Microsoft Releasing Parties have, may have had, might have asserted, or may now have or assert against the VirnetX Released Parties, or any of them, arising, accruing or occurring, in whole or in part, at any time prior to the Amendment Effective Date arising out of or related to any of the facts, transactions, matters or occurrences giving rise to or alleged, or that could have been alleged in or discovered in, the Actions as to VirnetX’s assertion of the Patents-in-Suit, except that the Microsoft Releasing Parties do not release or discharge (or grant a covenant or hold harmless as to) their Claims that the Licensed Patents are invalid, unenforceable, and/or not infringed by any Microsoft Releasing Parties. For the avoidance of doubt, the Microsoft Releasing Parties may raise any defense of invalidity, unenforceability or non-infringement in any later proceeding in any court or administrative agency (including without limitation any review in the U.S. Patent & Trademark Office) regardless of whether such defense was previously alleged or adjudicated in any forum.

3.3

With respect to all claims released herein, the VirnetX Releasing Parties and Microsoft Releasing Parties expressly waive any and all statutes, legal doctrines and other similar limitations upon the effect of general releases. By way of example, and without limitation, the foregoing parties waive the benefit of California Civil Code Section 1542, which states as follows:

“A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM MUST HAVE MATERIALLY AFFECTED HIS SETTLEMENT WITH THE DEBTOR.”

Each Party hereto acknowledges that the inclusion of such unknown claims in the releases above was separately bargained for and was a key element of this Agreement. Each Party hereto acknowledges that they may hereafter discover facts which are different from or in addition to those that they may now know or believe to be true with respect to any and all claims herein released and agree that all such unknown claims are nonetheless released and that the releases above shall be and remain effective in all respects even if such different or additional facts are subsequently discovered .

Grant of Licenses and Covenants

4.1

VirnetX hereby grants to Microsoft a worldwide, irrevocable, nonexclusive, non-sublicensable, royalty-free, fully paid-up (subject to payment under Section 5.2) license and covenant not to sue under the Licensed Patents. The license and covenant granted hereunder shall apply, without limitation, to all Microsoft Products and past, present and future activities of Microsoft. The license granted hereunder fully exhausts all of the Licensed Patents as to Microsoft Products.

4.2

VirnetX hereby grants to Licensees a worldwide, irrevocable, nonexclusive, non-sublicensable, royalty-free, fully paid-up (subject to payment under Section 5.2) license and covenant not to sue under the Licensed Patents solely as to Microsoft Products, including past, present and future activities of Licensees with respect to Microsoft Products.

4.3

Without limiting the scope of the forgoing Sections 4.1 and 4.2, VirnetX, Inc., and any entity that, as of the Amendment Effective Date, Controls, is Controlled by, or is under common Control with VirnetX, Inc., hereby covenants that it, directly or indirectly, will not assert a claim of infringement of any patent (including without limitation the Licensed Patents) or other intellectual property or proprietary rights claim, based in any way, in whole or any part, on any Microsoft Products. For the avoidance of doubt, VirnetX hereby covenants and agrees that no Microsoft Products shall be used or relied on (in whole or in part, and whether in litigation, mediation, arbitration, demand, cease and desist communication, licensing negotiation, PTO proceeding or otherwise) by VirnetX to satisfy (in whole or in part) any claim or any element, step, means, or limitation of any claim (including without limitation any in the preamble) of any of the Licensed Patents against any entity.

4.4

The license and covenants by VirnetX in this Section 4 shall extend to each Affiliate or business of Microsoft. If Microsoft divests an Affiliate or business, the licenses and covenants granted in this Amended Settlement Agreement will continue as to the Affiliate or business for those products and services existing at the time of divestiture, and direct derivatives thereof.

4.5

The releases, licenses and covenants not to sue are expressly set forth in Sections 3 and 4 above and no other releases, licenses or covenants not to sue are granted or conveyed under this Agreement, whether expressly or by implication, estoppel, reliance or otherwise, all of which are expressly disclaimed.

Consideration.

5.1.

Dismissals . To the extent not already dismissed pursuant to that certain Settlement and License Agreement, dated on or about May 14, 2010, by and between Microsoft Corporation and VirnetX, Inc, VirnetX shall dismiss with prejudice (and cause SAIC to join in such dismissal) all claims against Microsoft in the Actions, and Microsoft Corporation shall dismiss with prejudice all counterclaims in the Actions (except that Microsoft Corporation’s affirmative defenses and counterclaims of (i) non-infringement and invalidity shall be dismissed without prejudice and (ii) unenforceability shall be dismissed without prejudice by filing (and VirnetX causing SAIC to file) on or before December 19, 2014, Stipulations of Dismissal and Proposed Order substantially in the form attached as Exhibit E that provide that each of VirnetX, Inc., Microsoft Corporation and SAIC will bear its own costs, expenses and attorney’s fees in connection with the Actions. No Party shall take any action to oppose the Court’s entry of such dismissal, nor subsequently take any action to vacate, modify, or appeal such dismissal of the Actions. In addition, VirnetX, Inc. and Microsoft Corporation agree to execute such additional papers and motions as may be necessary to cause the Court to effect a disposal of all issues before it with respect to the Parties and a dismissal of the Actions for these Parties. For the avoidance of doubt only, the dismissal of the Actions ( i.e. , the prior lawsuits and the current lawsuit) are based solely on the consent of the parties, not the merits of any past ruling or present motions. Notwithstanding the foregoing or anything to the contrary in this Section 5.1, VirnetX shall not be obligated to dismiss any separate pending proceedings against any Third Party, but henceforth shall not include Microsoft Products as a basis in whole or in part for its allegations against any Third Party.

5.2.

Payment . In full and complete settlement of all claims asserted against Microsoft in the Actions, and in full and complete consideration of the licenses, releases, waivers, and other covenants and rights in this Agreement, to the extent not already paid, Microsoft Corporation shall pay a total lump sum amount of two-hundred, twenty-three million U.S. Dollars (USD $223,000,000) (“Payment”), as set forth in this Section 5.2. Of that Payment, two-hundred million U.S. Dollars (USD $200,000,000.00) was already paid on or about June 7, 2010 by Microsoft Corporation to VirnetX, Inc. The balance of the Payment (twenty-three million U.S. Dollars (USD $23,000,000)) shall be paid by Microsoft Corporation to VirnetX, Inc. by wire transfer into the following account within twenty(20) business days after the later of (i) the Amendment Effective Date, or (ii) the provision to Microsoft by VirnetX, Inc. and its counsel of an IRS Form W-9 and a letter on its letterhead with payment instructions consistent with this paragraph:

Account Name:

Texas IOLTA Trust Account – Caldwell Cassady & Curry

Account No.: 8094381388

ABA Number: 111014325

Bank Name and Address: Bank of Texas

6215 Hillcrest Avenue Dallas, TX 75205

Beneficiary Name: VirnetX, Inc.

VirnetX, Inc. shall be solely responsible for any taxes incurred as a consequence of the Payment or this Agreement. Microsoft shall not be responsible for any payment to SAIC.

Term. This Agreement shall remain in full force and effect until after the period ends in which any rights associated with the Licensed Patents might be exercised (for example, currently, as to U.S. patents: after six years after the expiration of the last patent to expire that is part of the Licensed Patents). Sections 3.1 (provided that the payment in Section 5.2 has been made), 3.2, 3.3, 4 (provided that the payment in Section 5.2 has been made) and 7.1 shall survive termination of the Agreement.

Miscellaneous.

7.1.

Confidentiality. The mere existence of this Agreement (including, without limitation, the identification of the Parties and any Licensed Patents) is not confidential. Within five (5) days after the Amendment Effective Date, Microsoft agrees that VirnetX may issue the press release in the form attached as Exhibit B. Microsoft may also issue the press release in the form attached as Exhibit B. Subject to the foregoing, no Party may issue a press release or otherwise affirmatively attempt to publicize the terms or existence of this Agreement, except as set forth below. The Parties further agree that the terms and conditions of this Agreement are confidential and shall not be disclosed by any Party to any other person except (a) as may be required by law (including, without limitation, SEC reporting requirements, or any other United States or foreign regulatory requirements) or stock exchange rule (after prior written notice to the other Party with opportunity to comment on the disclosure), (b) during the course of litigation so long as the disclosure of such terms and conditions are restricted in the same manner as is the confidential information of the litigating Party, which includes designating the Agreement under the highest available level of protection under a protective order; (c) in confidence to the professional legal, advisory, and financial counsel representing or auditing such Party; (d) in confidence, in connection with the enforcement of this Agreement or rights under this Agreement; (e) in confidence, in connection with a merger, or acquisition, divestiture, or proposed merger, acquisition, or divestiture of a Party, or the like; (f) in confidence by Microsoft to Licensees and any third parties covered by the terms of this Agreement; (g) in confidence to potential acquirers of all or substantially all of VirnetX; (h) in confidence to the insurers and third party claim administrators of Microsoft; (i) in confidence to any person covered by the releases, licenses, waivers or other covenants and rights granted herein; or (j) as otherwise agreed in writing by the Parties executing this Agreement. Prior to any disclosure by VirnetX pursuant to the foregoing subsection (a), VirnetX will provide Microsoft with a draft copy of the proposed disclosure or filing (including, without limitation, any filing with the SEC) at least three business days before such disclosure or filing is made, and the Parties will consult in good faith with respect to the content of the proposed disclosure and the potential for VirnetX to request confidential treatment with respect to portions of the Agreement that VirnetX reasonably believes must be disclosed or filed.

7.2.

Representations and Warranties. VirnetX represents, warrants, and covenants to Microsoft that:

(a)

VirnetX, Inc. represents and warrants that it is the sole, exclusive, and lawful owner of all right, title, and interest in and to the Licensed Patents (including, without limitation, the Patents-in-Suit). VirnetX, Inc. represents and warrants that it has all rights necessary to enforce and license the Licensed Patents and, together with any corporate or other authority required to bind VirnetX, thus the right to enter into this Agreement and grant all of the releases, licenses, waivers, and other covenants and rights under this Agreement. VirnetX, Inc. represents and warrants that from time to time in the Actions and in the Settlement and License Agreement between Microsoft Corporation and VirnetX, Inc. made and entered into on May 14, 2010, VirnetX, Inc. was referenced as “VirnetX Inc.” but that was a typographical error and at all times “VirnetX Inc.” should be considered to refer to VirnetX, Inc. VirnetX represents and warrants that the list of properties set forth on Exhibit A is a complete listing of all patents and applications owned or controlled by (in whole or in part), or assigned to VirnetX.

(b)

VirnetX further represents and warrants that, as of June 30, 2010, SAIC no longer has any right of reversion to the Licensed Patents. VirnetX further represents and warrants that SAIC has no right, title or interest in or to the Licensed Patents, and further represents and warrants that SAIC no longer holds the power to assert any claim or claims of the Licensed Patents against Microsoft Released Parties or Licensees. VirnetX further represents and warrants that SAIC holds no right to review this Agreement prior to its execution and that SAIC holds no right or ability to control the actions or decisions of VirnetX.

(c)

VirnetX represents and warrants that all releases, licenses, covenants, and other executory obligations made in this Agreement bind both SAIC and VirnetX, and fully encompass any and all rights and interests in the Licensed Patents. VirnetX further represents and warrants that the review, consent and approval of SAIC is not needed for this Agreement to be binding and enforceable.

(d)

In the event of any act (including without limitation, the assertion or threatened assertion of any of the Licensed Patents) by SAIC inconsistent with, or contrary to, any of the representations and warranties made by VirnetX in this Agreement, VirnetX agrees to defend, indemnify and hold harmless affected Microsoft Released Parties against SAIC’s actions, including any liability and attorneys’ fees incurred by Microsoft Released Parties.

(e)

No Claim released herein, and no portion of any such Claim, has been assigned or otherwise transferred by VirnetX to any other person or entity, either directly, indirectly, or by subrogation or operation of law. VirnetX has not filed, commenced, served, or otherwise instituted (in each case, either on its own, or in conjunction with any third party) any complaints, claims, causes of action, or demands against Microsoft or Licensees other than those asserted in connection with the Actions.

(f)

During the term of this Agreement any consideration required to be paid to any other person, corporation, or entity, if any, on account of any or all of the releases, licenses, waivers, or other covenants or rights granted under this Agreement to any Microsoft Released Parties shall be paid by VirnetX, and no additional consideration shall be required of any of the Microsoft Released Parties. VirnetX has not granted and will not grant any licenses, covenants, and/or other rights under the Licensed Patents and/or otherwise, that would conflict with, impair, and/or prevent any or all of the releases, licenses, waivers, or other covenants or rights granted under this Agreement. VirnetX, Inc. will cause its Affiliates to comply with the terms and conditions of this Agreement where applicable.

(g)

VirnetX has been represented by competent and independent counsel of their own choice throughout all negotiations preceding the execution of the Agreement, and have executed this Agreement upon the advice of said competent and independent counsel regarding the meaning and legal effect of this Agreement, and regarding the advisability of making the agreements provided for herein, and fully understand the same.

7.3.

Representations and Warranties. Microsoft represents, warrants, and covenants to VirnetX that:

(a)

No Claim released herein, and no portion of any such Claim, has been assigned or otherwise transferred by Microsoft to any other person or entity, either directly, indirectly, or by subrogation or operation of law. On or prior to the date of the execution of this Agreement, Microsoft has not filed, commenced, served, or otherwise instituted (in each case, either on its own, or in conjunction with any third party) any complaints, claims, causes of action, or demands against VirnetX other than those asserted in connection with the Actions and prior Patent Office proceedings, including the Pending IPRs, of the Licensed Patents.

(b)

Microsoft has been represented by competent and independent counsel of its own choice throughout all negotiations preceding the execution of the Agreement, and has executed this Agreement upon the advice of said competent and independent counsel regarding the meaning and legal effect of this Agreement, and regarding the advisability of making the agreements provided for herein, and fully understands the same.

7.4

Mutual Representations and Warranties. Each Party and each person signing this Agreement on behalf of a Party represents and warrants to the other that:

(a)

Such Party has not entered this Agreement in reliance upon any promise, inducement, agreement, statement, or representation other than those contained in this Agreement.

(b)

Such Party is duly organized, validly existing and in good standing under the laws of the state, province or country of its organization or incorporation, and has the full right and power to enter into this Agreement, and the person executing this Agreement has the full right and authority to enter into this Agreement on behalf of such Party and the full right and authority to bind such Party to the terms and obligations of this Agreement.

7.5

Notices. All notices and requests which are required or permitted to be given in connection with this Agreement shall be in writing and shall be deemed given as of the day they are received either by messenger, delivery service, or in the United States of America mails, postage prepaid, certified or registered, return receipt requested, and addressed as follows, or to such other address as the Party to receive the notice or request so designates by written notice to the other:

If to VirnetX, Inc.:

By Regular Mail to:

Attn: Kendall Larsen, Chief Executive Officer VirnetX, Inc.

P.O. Box # 439

Zephyr Cove, NV 89448

Facsimile: (831) 438-3078

By Any Other Service (Fedex, UPS, etc.) to:

Attn: Kendall Larsen, Chief Executive Officer VirnetX, Inc.

308 Dorla Ct.

Zephyr Cove, NV 89448

Facsimile: (831) 438-3078

with a copy to :

Caldwell Cassady & Curry

2101 Cedar Springs Road, Suite 1000, Dallas, TX 75201

Telephone: 214.888.4848

Facsimile: 214.888.4849

If to Microsoft:

Attn: Director of Licensing, LCA Patent Group Microsoft Corporation

One Microsoft Way Redmond, WA 98052

Fax: (425) 936-7329

with a copy to :

Attn: Law & Corporate Affairs Microsoft Corporation

One Microsoft Way Redmond, Washington 98052

Facsimile: (425) 936-7329

7.6.

Governing Law; Venue. This Agreement shall be construed and controlled by the internal laws of the State of Texas (excluding conflict of laws principles) and applicable federal laws. The sole and exclusive venue for any lawsuit arising out of or relating to this Agreement shall be the United States District Court for the Eastern District of Texas.

7.7.

Costs. Each Party shall bear its own costs, expenses and attorneys’ fees incurred in connection with the Actions, the making of this Agreement, and its performance under this Agreement. Each Party expressly waives any claim of costs and attorneys’ fees from or against the other Party.

7.8.

Successors and Assigns. The terms, covenants, conditions, provisions and benefits of this Agreement shall be binding upon and inure to the benefit of the Parties and their respective successors and assigns. For the avoidance of doubt only, the releases, licenses and covenants in Section 3.1 and Section 4 run with each of the Licensed Patents covered by this Agreement and are binding on any entity claiming a right, title or interest therein at any time, and VirnetX will inform any such transferee in writing of this restriction prior to transfer.

7.9.

No Construction Against Drafter. This Agreement results from negotiations between the Parties and their respective legal counsel, and each Party acknowledges that it has had the opportunity to negotiate modifications to the language of this Agreement. Accordingly, each Party agrees that in any dispute regarding the interpretation or construction of this Agreement, no statutory, common law or other presumption shall operate in favor of or against any Party by virtue of his, her or its role in drafting or not drafting the terms and conditions set forth herein.

7.10.

Captions. Captions or headings used in this Agreement are for the convenience of the Parties only, and shall not be considered part of this Agreement or used to construe the terms of this Agreement.

7.11.

Construction . If any provision of this Agreement shall be held by a court of competent jurisdiction to be illegal, invalid or unenforceable or otherwise in conflict with law, the remaining provisions shall remain in full force and effect. If any provisions of this Agreement are deemed not enforceable, they shall be deemed modified to the extent necessary to make them enforceable. The Parties undertake to replace the invalid provision or parts thereof by a new provision which will approximate as closely as possible the intent of the Parties. Provisions shall apply, as applicable, to past, current and successive events, parties, and transactions.

7.12.

Counterparts. This Agreement may be executed in any number of counterparts and by the different Parties on separate counterparts and each such counterpart shall be deemed to be an original, but all such counterparts shall together constitute but one and the same Agreement. Execution of this Agreement may be accomplished by signing this Agreement and transmitting the signature page to opposing counsel by facsimile or email. The Parties so executing and delivering shall promptly thereafter deliver signed originals of at least the signature page(s), but failure to do so shall not affect the validity or enforceability of this Agreement.

7.13.

Waiver. No waiver of any provision of this Agreement shall be deemed or shall constitute a waiver of any other provision, whether or not similar, nor shall any waiver constitute a continuing waiver unless expressly stated in writing by the Party making the waiver. No waiver of any provision shall be binding in any event unless executed in writing by the Party making the waiver.

7.14.

Entire Agreement. This Agreement (including, without limitation, all Exhibits attached hereto) constitutes the entire agreement between the Parties with respect to the subject matter hereof, and supersedes all prior and contemporaneous written or oral agreements (including, without limitation, the Settlement and License Agreement between Microsoft Corporation and VirnetX, Inc. made and entered into on May 14, 2010), memorandums of understanding (including, without limitation, the Memorandum of Understanding between Microsoft Corporation and VirnetX, Inc. dated May 12, 2010), or communications as to such subject matter, all of which are superseded, merged and fully integrated into this Agreement. It shall not be modified except by a written agreement dated subsequent to the date of this Agreement and signed on behalf of the Parties by their respective duly authorized representatives.

7.15.

Inter Partes Review . Microsoft and VirnetX shall cooperate (and if necessary, VirnetX will cause SAIC to cooperate) to file in each of the Pending IPRs, a joint motion to terminate with respect to Microsoft Corporation pursuant to 35 U.S.C. §317(a) in the form set forth in Exhibit C, and a joint request to keep this agreement confidential pursuant to 35 U.S.C. 317(b) and 37 C.F.R. § 42.74(c) in the form set forth in Exhibit D. Microsoft and VirnetX will contact (and if necessary, VirnetX will cause SAIC to contact) the Patent Trial and Appeal Board (“PTAB”) to request permission to file in each of the Pending IPRs the motion and the request within five (5) business days of the filing of the dismissals under Section 5.1, and upon receiving permission, file in each of the Pending IPRs the motion and the request within two (2) business days of the PTAB granting such permission. The parties will work together to modify the motion and request to address any issues raised by the PTAB. If the PTAB denies the motions to terminate, the Parties will take such other permitted steps to have Microsoft withdraw from the Pending IPRs. For example, Microsoft will not actively seek to participate in the Pending IPRs, and will not be bound by the results of the Pending IPRs. This covenant shall not be construed as preventing Microsoft from complying with any court or Patent Office order or applicable law.

7.16.

[***]

Certain information on this page has been omitted and filed separately with the Securities Exchange Commission. Confidential treatment has been requested with respect to the omitted portions.

IN WITNESS WHEREOF, VirnetX, Inc. and Microsoft Corporation, being fully authorized and empowered to bind themselves to this Agreement, have caused this Agreement to be made and executed by duly authorized officers as of the Amendment Effective Date.

VIRNETX, INC.	MICROSOFT CORPORATION

/s/ Sameer Mathur		/s/ David Howard

Name:	Sameer Mathur	Name:	David Howard
Title:	VP of Corporate Development & Product Marketing	Title:	Corporate VP
Date:	12/17/14	Date:	12/17/14

EXHIBIT A

Country	App. No.	Filing date	Patent No.	Issue Date
WO	PCT/US99/25325	10/29/1999
AU	00/14553	10/29/1999	761,388	09/18/2003
CA	2,349,519	10/29/1999		08/09/2011
CA	2,723,504	10/29/1999		04/29/2014
EP	99971606.1	10/29/1999	1125419	08/26/2009
EP-GB	99971606.1	10/29/1999	1125419	08/26/2009
EP-DE	99971606.1	10/29/1999	1125419	08/26/2009
EP-FR	99971606.1	10/29/1999	1125419	08/26/2009
EP-IT	46406/BE/2009	10/29/1999	1125419	08/26/2009
JP	2000-580350	10/29/1999	4,451,556	02/05/2010
JP	2009-246033	10/29/1999	4,824,108	09/16/2011

US	09/429,643	10/29/1999	7,010,604	03/07/2006
US	10/401,551	03/31/2003	7,133,930	11/07/2006
US	11/301,022	12/13/2005	7,996,539	08/09/2011
US	11/839,937	08/16/2007	8,874,771	10/28/2014
US	13/475,637	05/08/2012
US	13/620,550	09/14/2012
US	13/620,534	09/14/2012
US	09/429,643	02/15/2000	6,502,135	12/31/2002
WO	PCT/US01/04340	02/12/2001
EP	14172837.8	06/17/2014
HK	14111309.7	11/07/2014
EP	01910528.7	02/12/2001
JP	2001-560062	02/12/2001
US	10/082,164	02/26/2002	6,618,761	09/09/2003
US	10/401,888	03/31/2003	6,907,473	06/14/2005
US	10/082,285	02/26/2002	6,834,310	12/21/2004
US	10/259,494	09/30/2002	7,490,151	02/10/2009
US	11/839,969	08/16/2007	7,933,990	04/26/2011
US	13/075,081	03/29/2011
US	13/093,785	05/11/2011	8,516,117	08/20/2013
US	13/890,206	05/08/2013
WO	PCT/US99/25323	10/29/1999
AU	00/16003	10/29/1999	765914	01/15/2004
CA	2,349,520	10/29/1999
EP	99958693.6	10/29/1999
EP-DE	99958693.6	10/29/1999	1125414	12/22/2010
EP-FR	99958693.6	10/29/1999	1125414	12/22/2010
EP-GB	99958693.6	10/29/1999	1125414	12/22/2010
EP	10011949.4	09/30/2010
JP	2011-081416	04/01/2011	5198617	02/15/2013

Country	App. No.	Filing date	Patent No.	Issue Date
JP	2014-000051	04/01/2011		05/15/2014
WO	PCT/US01/13261	04/25/2001
EP	01932629.7	04/25/2001	1302047	08/01/2012
EP	06014499.5	04/25/2001
EP	06014500.0	04/25/2001
EP-CH	01932629.7	04/25/2001	1302047	08/01/2012
EP-DE	01932629.7	04/25/2001	1302047	08/01/2012
EP-NL	01932629.7	04/25/2001	1302047	08/01/2012
EP-GB	01932629.7	04/25/2001	1302047	08/01/2012
EP	10012357	09/30/2010
EP	10012236	09/30/2010
EP	11005789.0	07/15/2011
EP	11005792.4	07/15/2011
EP	11005793.2	07/15/2011
EP	10012356	09/30/2010
EP	12004353.4	06/08/2012
HK	07109112.7	08/21/2007
HK	07109113.6	08/21/2007
JP	2001-583006	04/25/2001	4765811	06/10/2011
JP	2010-239225		5377455	10/25/2013
JP	2011-085051	04/07/2011	5374535	10/25/2013
JP	2011-085052	04/07/2011	5374536	10/25/2013
US	10/702,486	11/07/2003	7,188,180	03/06/2007
US	11/679,416	02/27/2007	8,051,181	11/01/2011
US	11/839,987	08/16/2007	7,987,274	07/26/2011
US	10/702,522	11/07/2003	6,839,759	01/04/2005
US	10/702,580	11/07/2003	6,826,616	11/30/2004
US	13/181,041	07/12/2011
US	13/285,962	10/31/2011
US	14/526,669	10/29/2014
WO	PCT/US01/13260	04/25/2001
EP	01932628.9	04/25/2001	1284079	01/18/2006
EP-CH	01932628.9	04/25/2001	1284079	01/18/2006
EP-DE	60116754.6	04/25/2001	1284079	01/18/2006
EP-GB	01932628.9	04/25/2001	1284079	01/18/2006
EP-IT	01932628.9	04/25/2001	1284079	01/18/2006
EP-NL	01932628.9	04/25/2001	1284079	01/18/2006
EP	05102086.5	04/25/2001	1542429	06/12/2013
EP-CH	05102086.5	04/25/2001	1542429	06/12/2013
EP-DE	05102086.5	04/25/2001	1542429	06/12/2013

Country	App. No	Filing date	Patent No.	Issue Date
EP-IT	05102086.5	04/25/2001	1542429	06/12/2013
EP-GB	05102086.5	04/25/2001	1542429	06/12/2013
EP-NL	05102086.5	04/25/2001	1542429	06/12/2013
EP	10184542.8	09/30/2010
EP	10184502.2	09/30/2010
JP	2002-501144	04/25/2001
JP	2010-239197	04/25/2001	5180274	01/18/2013
JP	2011-083414	04/05/2011	5165776	12/28/2012
JP	2012-256213	11/22/2012	5478697	02/21/2014
JP	2012-256228	11/22/2012	5478698	02/21/2014
JP	2011-083415	04/05/2011	5377562	10/04/2013
US	10/714,849	11/18/2003	7,418,504	08/26/2008
US	11/840,560	08/17/2007	7,921,211	04/05/2011
US	11/840,508	08/17/2007	7,945,654	05/17/2011
US	13/049,552	03/16/2011	8,572,247	10/29/2013
US	13/080,680	04/06/2011
US	13/337,757	12/27/2011	8,504,696	08/06/2013
US	13/336,958	12/23/2011	8,513,131	08/20/2013
US	13/336,790	12/23/2011	8,458,341	06/04/2013
US	13/342,795	01/03/2012	8,560,705	10/15/2013
US	13/343,465	01/04/2012	8,521,888	08/27/2013
US	13/339,257	12/28/2011	8,504,697	08/06/2013
US	13/474,397	05/17/2012	8,554,899	10/08/2013
US	13/617,375	09/14/2012
US	13/617,446	09/14/2013
US	13/615,528	09/13/2012
US	13/615,536	09/13/2012
US	13/615,557	09/13/2012	8,868,705	10/21/2014
US	13/903,788	05/28/2013
US	13/911,792	06/06/2013	8,850,009	09/30/2014
US	13/911,813	06/06/2013	8,904,516	10/02/2014
US	13/950,877	07/25/2013
US	13/950,897	07/25/2013
US	13/950,919	07/25/2013	8,843,643	09/23/2014
US	14/482,956	09/10/2014
WO	PCT/US02/01070	01/17/2002
EP	02 0718836.6	01/17/2002	1360803	11/30/2011
EP-CH	02 0718836.6	01/17/2002	1360803	11/30/2011
EP-DE	02 0718836.6	01/17/2002	1360803	11/30/2011
EP-FR	02 0718836.6	01/17/2002	1360803	11/30/2011

Country	App. No.	Filing date	Patent No.	Issue Date
EP-GB	02 0718836.6	01/17/2002	1360803	11/30/2011
EP-IT	02 0718836.6	01/17/2002	1360803	11/30/2011
EP-NL	02 0718836.6	01/17/2002	1360803	11/30/2011
EP	10012248.0	12/22/2010	2264952	10/09/2013
EP-CH	10012248.0	12/22/2010	2264952	10/09/2013
EP-DE	10012248.0	12/22/2010	2264952	10/09/2013
EP-FR	10012248.0	12/22/2010	2264952	10/09/2013
EP-GB	10012248.0	12/22/2010	2264952	10/09/2013
EP-IT	10012248.0	12/22/2010	2264952	10/09/2013
EP-NL	10012248.0	12/22/2010	2264952	10/09/2013
EP	10012245.6	12/22/2010	2264951	07/31/2013
EP-CH	10012245.6	12/22/2010	2264951	07/31/2013
EP-DE	10012245.6	12/22/2010	2264951	07/31/2013
EP-GB	10012245.6	12/22/2010	2264951	07/31/2013
EP-IT	10012245.6	12/22/2010	2264951	07/31/2013
EP-NL	10012245.6	12/22/2010	2264951	07/31/2013
US	09/874,258	06/06/2001	7,209,479	04/24/2007
US	11/532,002	09/14/2006	7,986,688	07/26/2011
US	11/840,579	08/17/2007	7,944,915	05/17/2011
US	13/110,509	05/18/2011	8,571,025	10/29/2013
US	13/110,353	05/18/2011	8,761,168	06/24/2014
US	13/620,368	09/14/2012	8,780,906	07/15/2014
US	13/620,358	09/14/2012	8,780,905	07/15/2014
US	14/294,476	06/03/2014
US	13/554,582	07/09/2012
WO	PCT/US12/45921	07/09/2012
CA	2841166	01/07/2014
CN	201280034033.7	01/08/2014
EP	12743274.8	02/05/2014
HK	14110584.5	10/23/2014
JP	2014-519097	01/07/2014
AU	2012282841	07/09/2012
US	14/037,301	09/25/2013
WO	WO2008US74886A	08/29/2008
DE	DE69943057A	10/29/1999
DE	DE69941338A	10/29/1999
US	11/924,460	10/25/2007
US	09/558,209	4/26/2000
US	09/588,210	4/26/2000
US	60/262,063	1/18/2001

Country	App. No.	Filing date	Patent No.	Issue Date
US	60/969,226	08/31/2007
AU	AU200138123D	02/12/2001
AU	AU200159140D	04/25/2001
AU	AU200159141A	04/25/2001
JP	JP201451A	01/06/2014
AT	AT2002718836T	01/17/2002
AT	AT1999958693T	10/29/1999
AT	AT1999971606T	10/29/1999
JP	2000-580354	10/29/1999
EP	EP2008799013A	8/29/2008
EP	EP20103518A	02/12/2001
CA	CA2696665A	08/29/2008
AU	AU2008292833A	08/29/2008
AU	AU2001238123A	02/12/2001
AU	AU2001259140A	04/25/2001
AU	AU2001259141A	04/25/2001
AU	AU2002249950A	01/17/2002
JP	JP201452A	01/06/2014
JP	JP201181417A	04/01/2011
JP	JP2010523173A	08/29/2008
JP	JP2000580354A	10/29/1999
WO	PCT/US08/74886	8/29/2008
AU	2008292833	8/29/2008
CA	2696665	8/29/2008
EP	08799013.1	8/29/2008
JP	PCT/US08/74886	8/29/2008

EXHIBIT B

VirnetX and Microsoft Settle Pending Patent Disputes and

Agree to Jointly Petition to Terminate IPR Proceedings as to Microsoft

ZEPHYR COVE, Nevada and REDMOND, WA – December XX, 2014 – VirnetX Holding Corporation (NYSE MKT: VHC) and Microsoft Corporation announced today that on December XX, 2014, VirnetX, Inc. and Microsoft Corporation have signed an Amended Settlement and License Agreement. This agreement amends and restates certain terms of the original Settlement and License Agreement, dated May 14, 2010, between VirnetX, Inc. and Microsoft Corporation. As a result of the agreement, the parties have settled their pending patent disputes.

Under the terms of the amended agreement, Microsoft has agreed to pay $23 million to VirnetX to settle the patent dispute and expand Microsoft’s license. The parties have also agreed to dismiss the patent infringement case brought by VirnetX, Inc. before the U.S. District Court for the Eastern District of Texas and jointly move to terminate the pending inter partes review proceedings between Microsoft and VirnetX, Inc. as to Microsoft. All other aspects of the agreement were not disclosed.

“We are pleased to have come to an agreement with Microsoft Corporation and put all our legal disputes behind us,” said Kendall Larsen, Chief Executive Officer and Chairman of VirnetX, Inc. “This agreement allows us to focus our resources towards the release of our Gabriel Secure Communication Platform™ and Gabriel Collaboration Suite™ products in the first-half of 2015 and our ongoing licensing and strategic partnership efforts .”

“Microsoft Corporation is pleased to have come to an agreement with VirnetX and that the settlement includes an expanded license to VirnetX’s entire patent portfolio,” said a Microsoft spokesperson.

About Microsoft

Founded in 1975, Microsoft (Nasdaq “MSFT”) is the worldwide leader in software, services, devices and solutions that help people and businesses realize their full potential.

About VirnetX

VirnetX Holding Corporation is an Internet security software and technology company with patented technology for secure communications including 4G LTE security. The Company’s software and technology solutions, including its secure domain name registry and GABRIEL Connection Technology™, are designed to facilitate secure communications and to create a secure environment for real-time communication applications such as instant messaging, VoIP, smartphones, eReaders and video conferencing. The Company’s patent portfolio includes over 107 U.S. and international patents with over 100 pending applications. For more information, please visit www.virnetx.com .

Forward Looking Statements

Statements in this press release that are not statements of historical or current fact, including statements regarding the strength of Virnetx’s intellectual property, constitute “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements are based on expectations, estimates and projections about the markets in which the Company operates, management’s beliefs, and certain assumptions made by management and involve known and unknown risks, uncertainties and other unknown factors that could cause the actual results of the Company to be materially different from the historical results or from any future results expressed or implied by such forward-looking statements, including but not limited to (1) the outcome of any legal proceedings that have been or may be initiated by the Company or that may be initiated against the Company;, including pending and future inter partes review proceedings in the Patent and Trademark Office (2) the ability to capitalize on the Company’s patent portfolio and generate licensing fees and revenues; (3) the ability of the Company to be successful in entering into licensing relationships with its targeted customers on commercially acceptable terms; (4) potential challenges to the validity of the Company’s patents underlying its licensing opportunities; (5) the ability of the Company to achieve widespread customer adoption of the Company’s GABRIEL Communication Technology™ and its secure domain name registry; (6) the level of adoption of the 3GPP Series 33 security specifications; (7) whether or not the Company’s patents or patent applications may be determined to be or become essential to any standards or specifications in the 3GPP LTE, SAE project or otherwise; (8) the extent to which specifications relating to any of the Company’s patents or patent applications may be adopted as a final standard, if at all; and (9) the possibility that Company may be adversely affected by other economic, business, and/or competitive factors. In addition to statements which explicitly describe such risks and uncertainties, readers are urged to consider statements labeled with the terms “believes,” “belief,” “expects,” “intends,” “anticipates,” or “plans” to be uncertain and forward-looking. The forward-looking statements contained herein are also subject generally to other risks and uncertainties that are described from time to time in the Company’s reports and registration statements filed with the Securities and Exchange Commission, including those under the heading “Risk Factors” in Company’s Quarterly Report on Form 10-Q filed with the SEC on November 10, 2014. Many of the factors that will determine the outcome of the subject matter of this press release are beyond the Company’s ability to control or predict. Except as required by law, the Company is under no duty to update any of the forward-looking statements after the date of this press release to conform to actual results.

Contact:

Greg Wood

VirnetX Holding Corporation

775.548.1785

greg_wood@virnetx.com

David Cuddy

Microsoft Corporation

425.421.2502

dcuddy@microsoft.com

VirnetX and GABRIEL Connection Technology are trademarks of VirnetX Holding Corporation. Other company and product names may be trademarks of their respective owners.

EXHIBIT C1

JOINT MOTION TO TERMINATE

IPR2014-01418, AND IPR2014-01421

Joint Motion to Terminate Proceeding

IPR2014-000XX

U.S. Patent No. X,XXX,XXX

[Parties will edit the following caption and the motion as appropriate depending on the IPR and Board’s guidance.]

Filed on behalf of Microsoft Corporation and VirnetX, Inc.

UNITED STATES PATENT AND TRADEMARK OFFICE

BEFORE THE PATENT TRIAL AND APPEAL BOARD

MICROSOFT CORPORATION

Petitioner

VIRNETX, INC.

Patent Owner

Case IPR2014-000XX

U.S. Patent No. X,XXX,XXX

JOINT MOTION TO TERMINATE PROCEEDING

IPR2014-000XX
U.S. Patent No. X,XXX,XXX

I.	Precise Relief Requested

Pursuant to 35 U.S.C. § 317(a), Petitioner Microsoft Corporation (“Microsoft” or “Petitioner”) and Patent Owner VirnetX, Inc. (“Patent Owner” or “VirnetX”) jointly request that this inter partes review proceeding (“this Review”) involving U.S. Patent No. X,XXX,XXX (“the ’XXX patent”) be terminated based on a settlement between Petitioner and Patent Owner (“the Parties”).

II.	Reasons for Granting the Motion

Generally, the Board expects that a proceeding will terminate after the filing of a settlement agreement. See, e.g. , Office Patent Trial Practice Guide, 77 Fed. Reg. 48,756, 48,768 (Aug. 14, 2012). The Board authorized the filing of the instant motion in [the order/email] dated [MONTH DAY, YEAR]. IPR2013-00428, Paper No. 56 provides guidance as to the content of a motion to terminate. There, the Board indicates that a joint motion, such as this one, should (1) include a brief explanation as to why termination is appropriate; (2) identify all parties in any related litigation involving the patents at issue; (3) identify any related proceedings currently before the Office, and (4) discuss specifically the current status of each such related litigation or proceeding with respect to each party to the litigation or proceeding. Id . at 2. This motion satisfies each of the above requirements and is accompanied by a copy of the Parties’ settlement agreement, as required by 35 U.S.C. § 317(b) and 37 C.F.R. § 42.74(b).

IPR2014-000XX
U.S. Patent No. X,XXX,XXX

(1)

Brief Explanation of Why Termination is Appropriate

Termination is appropriate because a final written decision has not been reached in this Review. Indeed, Petitioner filed its petition for inter partes review on [MONTH DAY, YEAR]. Patent Owner filed its preliminary response on MONTH DAY, YEAR]. The Board has not yet instituted this proceeding.

Termination of this proceeding is appropriate because, if this Motion is granted, Microsoft will not be participating as a party in this proceeding going forward, and the Board has not decided the merits of the proceeding. The Parties have settled their dispute and executed a settlement agreement to terminate this proceeding, as well as the Parties’ related district court litigation regarding the ’XXX patent: VirnetX, Inc. and Science Applications International Corporation v. Microsoft Corporation , Case No. 6:13-cv-00351 (E.D. Tex.). The Parties expect that this district court litigation will be dismissed per the parties’ settlement agreement. For all these reasons, the Parties respectfully request termination of this proceeding.

(2)

All parties in any pending related litigation involving the patents at issue

Patent Owner, but not Petitioner, is also involved in several other pending related litigations involving the ’XXX patent. These related litigations, and their current status with respect to the litigating parties, are as follows:

IPR2014-000XX
U.S. Patent No. X,XXX,XXX

Related Case(s)	Defendants	Status

(3)

Related proceedings currently before the Office

Aside from this inter partes review proceeding, the ’XXX patent is also the subject of the following proceeding(s) currently before the Office:

Related Proceeding(s)	Requester/Petitioner	Status
Control No. XX/XXXXXX
IPR2014-000XX

(4)

Current status of each such related litigation or proceeding with respect to each party to the litigation or proceeding

Above, a status field indicates the status of each such related litigation or proceeding with respect to each party to the litigation or proceeding.

IPR2014-000XX
U.S. Patent No. X,XXX,XXX

III.	Settlement Agreement

Pursuant to 35 U.S.C. § 317(b) and 37 C.F.R. § 42.74(b), the Parties’ settlement agreement is in writing, and a true and correct copy is being filed concurrently herewith as Exhibit [XXXX]. ¹ The Parties are also filing concurrently herewith a joint request under 35 U.S.C. § 317(b) and 37 C.F.R. § 42.74(c) to treat the settlement agreement as business confidential information and keep it separate from the files of the involved patent.

Respectfully submitted,


[Name]		[Name]
[Address]		[Address]

Counsel for Petitioner		Counsel for Patent Owner
Microsoft Corporation		VirnetX, Inc.

Dated: [MONTH DAY, YEAR]

¹ The settlement agreement is being filed electronically via the Patent Review Processing System (PRPS) with access to the “Parties and Board Only.”

EXHIBIT C2

JOINT MOTION TO TERMINATE

IPR2014-00610, IPR2014-00614 (CONSOLIDATED WITH IPR2014-00613),

IPR2014-00615 (CONSOLIDATED WITH IPR2014-00618)

Joint Motion to Terminate Proceeding

IPR2014-000XX

U.S. Patent No. X,XXX,XXX

[Parties will edit the following caption and the motion as appropriate depending on the IPR and Board’s guidance.]

Filed on behalf of Microsoft Corporation and VirnetX, Inc.

UNITED STATES PATENT AND TRADEMARK OFFICE

BEFORE THE PATENT TRIAL AND APPEAL BOARD

MICROSOFT CORPORATION

Petitioner

VIRNETX, INC.

Patent Owner

Case IPR2014-000XX

U.S. Patent No. X,XXX,XXX

JOINT MOTION TO TERMINATE PROCEEDING

IPR2014-000XX
U.S. Patent No. X,XXX,XXX

I.	Precise Relief Requested

II.	Reasons for Granting the Motion

IPR2014-000XX
U.S. Patent No. X,XXX,XXX

(1)

Brief Explanation of Why Termination is Appropriate

Termination is appropriate because a final written decision has not been reached in this Review. Indeed, Petitioner filed its petition for inter partes review on [MONTH DAY, YEAR]. The Board instituted this proceeding on [MONTH DAY, YEAR]. Patent Owner has not filed a Patent Owner’s Response, and one is not due until [MONTH DAY, YEAR].

IPR2014-000XX
U.S. Patent No. X,XXX,XXX

(2)

All parties in any pending related litigation involving the patents at issue

Related Case(s)	Defendants	Status

(3)

Related proceedings currently before the Office

Aside from this inter partes review proceeding, the ’XXX patent is also the subject of the following proceeding(s) currently before the Office:

Related Proceeding(s)	Requester/Petitioner	Status
Control No. XX/XXXXXX
IPR2014-000XX

(4)

Current status of each such related litigation or proceeding with respect to each party to the litigation or proceeding

Above, a status field indicates the status of each such related litigation or proceeding with respect to each party to the litigation or proceeding.

IPR2014-000XX
U.S. Patent No. X,XXX,XXX

III.	Settlement Agreement

Pursuant to 35 U.S.C. § 317(b) and 37 C.F.R. § 42.74(b), the Parties’ settlement agreement is in writing, and a true and correct copy is being filed concurrently herewith as Exhibit [XXXX]. ² The Parties are also filing concurrently herewith a joint request under 35 U.S.C. § 317(b) and 37 C.F.R. § 42.74(c) to treat the settlement agreement as business confidential information and keep it separate from the files of the involved patent.

Respectfully submitted,


[Name]		[Name]
[Address]		[Address]

Counsel for Petitioner		Counsel for Patent Owner
Microsoft Corporation		VirnetX, Inc.

Dated: [MONTH DAY, YEAR]

² The settlement agreement is being filed electronically via the Patent Review Processing System (PRPS) with access to the “Parties and Board Only.”

EXHIBIT C3

JOINT MOTION TO TERMINATE

IPR2014-00403 AND IPR2014-00404

Joint Motion to Terminate Proceeding

IPR2014-000XX

U.S. Patent No. X,XXX,XXX

[Parties will edit the following caption and the motion as appropriate depending on the IPR and Board’s guidance.]

Filed on behalf of Microsoft Corporation and VirnetX, Inc.

UNITED STATES PATENT AND TRADEMARK OFFICE

BEFORE THE PATENT TRIAL AND APPEAL BOARD

MICROSOFT CORPORATION

Petitioner

VIRNETX, INC.

Patent Owner

Case IPR2014-000XX

U.S. Patent No. X,XXX,XXX

JOINT MOTION TO TERMINATE PROCEEDING WITH RESPECT TO MICROSOFT CORPORATION

I.	Precise Relief Requested

Pursuant to 35 U.S.C. § 317(a), Petitioner Microsoft Corporation (“Microsoft” or “Petitioner”) and Patent Owner VirnetX, Inc. (“Patent Owner” or “VirnetX”) jointly request that this inter partes review proceeding (“this Review”) involving U.S. Patent No. X,XXX,XXX (“the ’XXX patent”) be terminated with respect to Microsoft based on a settlement between Petitioner and Patent Owner (“the Parties”).

II.	Reasons for Granting the Motion

IPR2014-000XX
U.S. Patent No. X,XXX,XXX

(1)

Brief Explanation of Why Termination is Appropriate

With respect to Microsoft, termination is appropriate because a final written decision has not been reached in this Review. Indeed, Petitioner filed its petition for inter partes review on [MONTH DAY, YEAR]. The Board instituted this proceeding on [MONTH DAY, YEAR]. Patent Owner filed a Patent Owner’s Response on [MONTH DAY, YEAR], but Petitioner has not filed its Reply, which is not due until [MONTH DAY, YEAR].

Termination of this proceeding with respect to Microsoft is appropriate because, if this Motion is granted, Microsoft will not be participating as a party in this proceeding going forward, and the Board has not decided the merits of the proceeding. The Parties have settled their dispute and executed a settlement agreement to terminate this proceeding as to Microsoft, as well as the Parties’ related district court litigation regarding the ’XXX patent: VirnetX, Inc. and Science Applications International Corporation v. Microsoft Corporation , Case No. 6:13-cv-00351 (E.D. Tex.). The Parties expect that this district court litigation will be dismissed per the parties’ settlement agreement. For all these reasons, the Parties respectfully request termination of this proceeding with respect to Microsoft.

IPR2014-000XX
U.S. Patent No. X,XXX,XXX

(2)

All parties in any pending related litigation involving the patents at issue

Related Case(s)	Defendants	Status

(3)

Related proceedings currently before the Office

Aside from this inter partes review proceeding, the ’XXX patent is also the subject of the following proceeding(s) currently before the Office:

Related Proceeding(s)	Requester/Petitioner	Status
Control No. XX/XXXXXX
IPR2014-000XX

(4)

Current status of each such related litigation or proceeding with respect to each party to the litigation or proceeding

Above, a status field indicates the status of each such related litigation or proceeding with respect to each party to the litigation or proceeding.

IPR2014-000XX
U.S. Patent No. X,XXX,XXX

III.	Settlement Agreement

Pursuant to 35 U.S.C. § 317(b) and 37 C.F.R. § 42.74(b), the Parties’ settlement agreement is in writing, and a true and correct copy is being filed concurrently herewith as Exhibit [XXXX]. ³ The Parties are also filing concurrently herewith a joint request under 35 U.S.C. § 317(b) and 37 C.F.R. § 42.74(c) to treat the settlement agreement as business confidential information and keep it separate from the files of the involved patent.

Respectfully submitted,


[Name]		[Name]
[Address]		[Address]

Counsel for Petitioner		Counsel for Patent Owner
Microsoft Corporation		VirnetX, Inc.

Dated: [MONTH DAY, YEAR]

³ The settlement agreement is being filed electronically via the Patent Review Processing System (PRPS) with access to the “Parties and Board Only.”

EXHIBIT D

JOINT REQUEST TO TREAT SETTLEMENT

AGREEMENT AS CONFIDENTIAL

[Parties will edit the following caption and the request as appropriate depending on the IPR and Board’s guidance.]

Filed on behalf of Microsoft Corporation and VirnetX, Inc.

UNITED STATES PATENT AND TRADEMARK OFFICE

BEFORE THE PATENT TRIAL AND APPEAL BOARD

MICROSOFT CORPORATION

Petitioner

VIRNETX, INC.

Patent Owner

Case IPR2014-000XX

U.S. Patent No. X,XXX,XXX

JOINT REQUEST TO TREAT SETTLEMENT

AGREEMENT AS BUSINESS CONFIDENTIAL

UNDER 35 U.S.C. § 317(b) AND 37 C.F.R. § 42.74(c)

Pursuant to 35 U.S.C. § 317(b) and 37 C.F.R. § 42.74(c), and the Board’s [order/email] of [MONTH DAY, YEAR], authorizing the filing of this joint request, Petitioner Microsoft Corporation (“Petitioner”) and Patent Owner VirnetX, Inc. (“Patent Owner”), hereby jointly request that a true copy of the settlement agreement filed concurrently herewith as Exhibit [XXXX] be treated as business confidential information and be kept separate from the file of U.S. Patent No. X,XXX,XXX (“the ’XXX Patent”). Exhibit [XXXX] is being submitted in the PRPS system as “Parties and Board Only.” The Parties further request the Board to not make Exhibit [XXXX] available to any third party, except as provided for in 35 U.S.C. § 317(b) and 37 C.F.R. § 42.74(c).

Respectfully submitted,


[Name]		[Name]
[Address]		[Address]

Counsel for Petitioner		Counsel for Patent Owner
Microsoft Corporation		VirnetX, Inc.

Dated: [MONTH DAY, YEAR]

EXHIBIT E

UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF TEXAS

TYLER DIVISION

VIRNETX, INC., and

LEIDOS, INC.,

Plaintiffs/Counterclaim Defendants,

MICROSOFT CORPORATION,

Defendant/Counterclaimant.

Civil Action No. 6:13-cv-00351-LED

JOINT MOTION TO DISMISS BY ALL PARTIES

In accordance with a certain agreement between VirnetX, Inc. and Microsoft Corporation, VirnetX, Inc., Leidos, Inc. (formerly Science Applications International Corp.) (VirnetX, Inc. and Leidos, Inc. collectively “Plaintiffs”) and Microsoft Corporation (“Microsoft”) file this joint motion to dismiss the litigation captioned above.

Plaintiffs dismiss all claims in this action against Microsoft with prejudice. Microsoft dismisses without prejudice its affirmative defenses and counterclaims of (i) non-infringement and invalidity and (ii) unenforceability in this action. Microsoft dismisses with prejudice its other counterclaims in this action.

Each party shall bear its own costs, expenses, and attorney’s fees.

(signatures follow)

Dated: February 28, 2015	Respectfully submitted,

	FISH & RICHARDSON, P.C.

	/s/
	Melissa R. Smith (Texas Bar No. 24001351)
	303 South Washington Avenue
	Marshall, Texas 75670
	Telephone: 903.934.8450
	Facsimile: 903.934.9257

	Ruffin B. Cordell (Texas Bar No. 04820550)
	Indranil Mukerji (Massachusetts Bar No. 644059)
	FISH & RICHARDSON P.C.
	1425 K Street NW, Suite 1100
	Washington, DC 20005
	Telephone: 202.783.5070
	Facsimile: 202.783.5331

	David J. Healey (Texas Bar No. 09327980)
	Benjamin C. Elacqua (Texas Bar No. 24055443)
	Tony Nguyen (Texas Bar No. 24083565)
	FISH & RICHARDSON P.C.
	1221 McKinney Street, Suite 2800
	Houston, Texas 77010
	Telephone: 713.654.5300
	Facsimile: 713.652.0109

	Katrina G. Eash (Texas Bar No. 24074636)
	FISH & RICHARDSON P.C.
	1717 Main Street, Suite 5000
	Dallas, Texas 75201
	Telephone: 214.747.5070
	Facsimile: 214.747.2091

	Benjamin K. Thompson (Georgia Bar No. 633211)
	FISH & RICHARDSON P.C.
	1180 Peachtree Street, NE, 21 ^st Floor
	Atlanta, Georgia 30309
	Telephone: 404.892.5005
	Facsimile: 404.892.5002

	Attorneys for Defendant
	MICROSOFT CORPORATION

	Caldwell Cassady & Curry

	/s/
	Bradley W. Caldwell
	Texas State Bar No. 24040630
	E-mail: bcaldwell@caldwellcc.com
	Jason D. Cassady
	Texas State Bar No. 24045625
	E-mail: jcassady@caldwellcc.com
	John Austin Curry
	Texas State Bar No. 24059636
	E-mail: acurry@caldwellcc.com
	Daniel R. Pearson
	Texas State Bar No. 24070398
	E-mail: dpearson@caldwellcc.com
	Hamad M. Hamad
	Texas State Bar No. 24061268
	E-mail: hhamad@caldwellcc.com
	Justin T. Nemunaitis
	Texas State Bar No. 24065815
	E-mail: jnemunaitis@caldwellcc.com
	Christopher S. Stewart
	Texas State Bar No. 24079399
	E-mail: cstewart@caldwellcc.com
	John F. Summers
	Texas State Bar No. 24079417
	E-mail: jsummers@caldwellcc.com
	Jason S. McManis
	Texas State Bar No. 24088032
	E-mail: jmcmanis@caldwellcc.com

	Warren J. McCarty, III
	Illinois State Bar No. 6313452
	E-mail: wmccarty@caldwellcc.com
	CALDWELL CASSADY CURRY P.C.
	2101 Cedar Springs Road, Suite 1000
	Dallas, Texas 75201
	Telephone: 214.888.4848
	Facsimile: 214.888.4849

	Robert M. Parker
	Texas State Bar No. 15498000
	Email: rmparker@pbatyler.com
	R. Christopher Bunt
	Texas State Bar No. 00787165
	Email: rcbunt@pbatyler.com
	Charles Ainsworth
	Texas State Bar No. 00783521
	Email: charley@pbatyler.com
	PARKER, BUNT & AINSWORTH, P.C.
	100 East Ferguson, Suite 1114
	Tyler, Texas 75702
	Telephone: 903.531.3535
	Telecopier: 903.533.9687

	ATTORNEYS FOR PLAINTIFF LEIDOS, INC.

	/s/
	ANDY TINDEL (Lead Counsel)
	State Bar No. 20054500
	MT2 LAW GROUP
	Mann \| Tindel \| Thompson
	112 East Line Street, Suite 304
	Tyler, Texas 75702
	Telephone: 903.596.0900
	Facsimile: 903.596.0909
	Email: atindel@andytindel.com

	Of Counsel:

	DONALD URRABAZO
	California State Bar No. 189509
	ARTURO PADILLA
	California State Bar No. 188902
	URRABAZO LAW, P.C.
	2029 Century Park East, 14th Floor
	Los Angeles, CA 90067
	Direct: 310.388.9099
	Facsimile: 310.388.9088
	Email: durrabazo@ulawpc.com
	Email: apadilla@ulawpc.com

	ATTORNEYS FOR PLAINTIFF LEIDOS, INC., FORMERLY KNOWN AS SCIENCE APPLICATIONS INTERNATIONAL CORPORATION

CERTIFICATE OF SERVICE

The undersigned certifies that the foregoing document was filed electronically in compliance with Local Rule CV-5(a). As such, this document was served on all counsel who have consented to electronic service on this 17th day of December, 2014. Local Rule CV-5(a)(3)(A).

	/s/ Jason D. Cassady
	Jason D. Cassady

IN THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF TEXAS TYLER DIVISION

VIRNETX, INC. and

LEIDOS, INC. ,

Plaintiffs,

MICROSOFT CORPORATION,

Defendant.

Civil Action No. 6:13-cv-00351

JURY TRIAL DEMANDED

[PROPOSED] ORDER OF DISMISSAL

On this day came on to be heard the parties’ Joint Motion to Dismiss, and the Court having considered same, is of the opinion the dismissal should be GRANTED.

IT IS THEREFORE ORDERED that all claims asserted against Microsoft Corporation (“Microsoft”) in this action are dismissed with prejudice.

Microsoft’s affirmative defenses and counterclaims of (i) non-infringement and invalidity and (ii) unenforceability in this action are dismissed without prejudice. Microsoft’s other counterclaims in this action are dismissed with prejudice.

Each party shall bear its own costs, expenses, and attorney’s fees.

This is a final judgment.

Delaware		77-0390628
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification Number)

308 Dorla Court, Suite 206
Zephyr Cove, Nevada		89448
(Address of principal executive offices)		(Zip Code)

Title of Class		Name of Exchange on Which Registered
Common Stock, par value $0.0001 per share		NYSE MKT LLC

		Page

PART I

Item 1.	Business	4
Item 1A.	Risk Factors	14
Item 1B.	Unresolved Staff Comments	21
Item 2.	Properties	21
Item 3.	Legal Proceedings	22
Item 4.	Mine Safety Disclosure	23

PART II

Item 5.	Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	24
Item 6.	Selected Financial Data	25
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	26
Item 7A.	Quantitative and Qualitative Disclosures about Market Risk	35
Item 8.	Financial Statements and Supplementary Data	36
Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	57
Item 9A.	Controls and Procedures	57
Item 9B.	Other Information	57

PART III

Item 10.	Directors, Executive Officers and Corporate Governance	58
Item 11.	Executive Compensation	58
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matter	58
Item 13.	Certain Relationships and Related Transactions, and Director Independence	58
Item 14.	Principal Accountant Fees and Services	58

PART IV

Item 15.	Exhibits and Financial Statement Schedules	59

Quarter Ended	High		Low
3/31/13	$	36.84	$	17.98
6/30/13	$	26.25	$	16.10
9/30/13	$	22.41	$	16.70
12/31/13	$	23.20	$	17.16
3/31/14	$	25.49	$	12.68
6/30/14	$	18.57	$	12.10
9/30/14	$	18.24	$	4.18
12/31/14	$	6.85	$	3.80

	12/09	12/10	12/11	12/12	12/13	12/14

VirnetX Holding Corp	100.00	547.55	920.69	1079.61	715.68	202.43
S&P 500	100.00	115.06	117.49	136.30	180.44	205.14
RDG Technology Composite	100.00	111.01	110.85	126.07	167.16	193.22

	For the year ended December 31,
	2014			2013			2012			2011			2010
Consolidated Statement of Operations Data:
Revenue	$	1,249		$	2,197		$	412		$	20		$	68
Gain on settlement	$	23,000		$	—			—			—		$	200,000
Other operating expenses	$	(36,414	)	$	(30,784	)	$	(39,273	)	$	(17,396	)	$	(95,383	)
Income tax (expense) benefit	$	(15	)	$	(751	)	$	12,535		$	5,480		$	(34,062	)
Net (loss) income	$	(9,902	)	$	(27,608	)	$	(26,924	)	$	(17,263	)	$	41,417
Earnings (loss) per share	$	(0.19	)	$	(0.54	)	$	(0.53	)	$	(0.35	)	$	0.91
Dividends declared per common share	$	0.00		$	0.00		$	0.00		$	0.00		$	0.50
Consolidated Balance Sheet Data:
Cash and cash equivalents	$	18,658		$	19,173		$	19,661		$	49,482		$	34,635
Investments available for sale	$	22,571		$	19,815		$	26,493		$	14,438		$	43,457
Total assets	$	45,090		$	39,398		$	61,313		$	74,633		$	81,694
Long-term obligation		—			—			—			—			---
Stockholders’ equity (deficit)	$	32,627		$	34,024		$	53,944		$	68,277		$	59,453

	2014		2013
Deferred Revenue, beginning of year	$	667	$	-
Payment received		2,500		2,500
Less: Amount amortized as revenue		1,167		1,833
Deferred Revenue, end of year	$	2,000	$	667

	Year Ended December 31, 2014			Year Ended December 31, 2013			Year Ended December 31, 2012

United States federal statutory rate		35.00	%		35.00	%		35.00	%
State taxes, net of federal benefit		(0.02	)%		(1.48	)%		1.07	%
Valuation allowance		(41.67	)%		(37.11	)%		(4.41	)%
Stock options		0.39	%		(0.17	)%		0.14	%
Prior year adjustment		( 0.13	)%		( 1.32	)%		1.03	%
Warrants		7.92	%		2.10	%		(0.82	)%
Other		(1.64	)%		0.18	%		(0.32	)%
Effective income tax rate		(0.15	)%		(2.80	)%		31.69	%

	Page
Report of Farber Hass Hurley LLP, Independent Registered Public Accounting Firm	37
Consolidated Balance Sheets of VirnetX Holding Corporation as of December 31, 2014 and December 31, 2013	38
Consolidated Statements of Operations of VirnetX Holding Corporation for the years ended December 31, 2014, December 31, 2013 and December 31, 2012	39
Consolidated Statements of Comprehensive Loss of VirnetX Holding Corporation for the years ended December 31, 2014, December 31, 2013 and December 31, 2012	39
Consolidated Statements of Stockholders’ Equity of VirnetX Holding Corporation for the years ended December 31, 2014, December 31, 2013 and December 31, 2012	40
Consolidated Statements of Cash Flows of VirnetX Holding Corporation for the years ended December 31, 2014, December 31, 2013 and December 31, 2012	41
Notes to Financial Statements of VirnetX Holding Corporation	42

	/s/ Farber Hass Hurley LLP

Chatsworth, California
March 2, 2015

	As of December 31, 2014			As of December 31, 2013
ASSETS
Current assets:
Cash and cash equivalents	$	18,658		$	19,173
Investments available for sale		22,571			19,815
Prepaid expenses - current		653			357
Total current assets		41,882			39,345
Prepaid expenses – non-current		3,144			—
Property and equipment, net		64			53
Total assets	$	45,090		$	39,398
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities	$	3,554		$	1,748
Royalty payable		6,100			—
Related-party payable		81			—
Income tax liability		408			395
Deferred revenue, current portion		1,500			667
Derivative liability		320			2,564
Total current liabilities		11,963			5,374

Deferred revenue, non-current portion		500			—
Commitments and contingencies (Note 5)		—			—

Stockholders' equity:
Preferred stock, par value $0.0001 per share
Authorized: 10,000,000 shares at December 31, 2014 and 2013,
Issued and outstanding: 0 shares at December 31, 2014 and 2013		—			—
Common stock, par value $0.0001 per share
Authorized: 100,000,000 shares at December 31, 2014 and 2013, Issued and outstanding: 51,996,701 shares and 51,236,141 shares, at December 31, 2014 and 2013, respectively		5			5
Additional paid-in capital		133,072			124,589
Accumulated deficit		(100,435	)		(90,533	)
Accumulated other comprehensive loss		(15	)		(37	)
Total stockholders' equity		32,627			34,024
Total liabilities and stockholders' equity	$	45,090		$	39,398

	Year Ended December 31, 2014			Year Ended December 31, 2013			Year Ended December 31, 2012
Revenue	$	1,249		$	2,197		$	412
Operating expenses:
Royalty expense		6,100			—			—
Research and development		2,004			1,782			1,555
General, selling and administrative		28,310			29,002			37,718
Gain on settlement (Note 3)		(23,000	)		—			—
Total operating expenses		13,414			30,784			39,273
Loss from operations		(12,165	)		(28,587	)		(38,861	)
Gain (loss) on change in value of embedded derivative and warrants		2,238			1,608			(927	)
Interest income, net		40			122			329
Loss before taxes		(9,887	)		(26,857	)		(39,459	)
Income tax (expense) benefit		(15	)		(751	)		12,535
Net loss	$	(9,902	)	$	(27,608	)	$	(26,924	)
Basic and diluted loss per share:	$	(0.19	)	$	(0.54	)	$	(0.53	)
Weighted average shares outstanding basic and diluted		51,570,472			51,188,006			50,934,266

	Common Stock				Additional Paid-in		Accumulated			Other Comprehensive Income			Total Stockholders' Equity
	Shares		Amount		Capital		Deficit			(Expense)			(Deficit)
Balance at December 31, 2011		50,619,136	$	5	$	104,277	$	(36,001	)	$	(4	)	$	68,277

Stock issued for cash exercise of warrants at $3.93-3.59 per share, net		44,941				161								161
Stock-based compensation						6,162								6,162
Deferred tax benefit related to stock based compensation						3,111								3,111
Derivative liability						1,454								1,454
Exercise of options		486,165				1,691								1,691
Comprehensive income:
Net loss								(26,924	)					(26,924	)
Other comprehensive income net of tax											12			12
Comprehensive loss														(26,912	)
Balance at December 31, 2012		51,150,242	$	5	$	116,856	$	(62,925	)	$	8		$	53,944

Stock-based compensation						7,563								7,563
Exercise of options		39,833				170								170
Vested RSUs		46,066
Comprehensive income:
Net loss								(27,608	)					(27,608	)
Other comprehensive income net of tax											(45	)		(45	)
Comprehensive loss														(27,653	)
Balance at December 31, 2013		51,236,141	$	5	$	124,589	$	(90,533	)	$	(37	)	$	34,024

Stock issued for cash exercise of warrants at 3.59 per share, net		2,500				9								9
Stock-based compensation						8,189								8,189
Exercise of options		679,321				278								278
Vested RSUs		78,739
Derivative liability						7								7
Comprehensive income:
Net loss								(9,902	)					(9,902	)
Other comprehensive income net of tax											22			22
Comprehensive loss														(9,880	)
Balance at December 31, 2014		51,996,701	$	5	$	133,072	$	(100,435	)	$	(15	)	$	32,627

	December 31
	2014			2013			2012
Office furniture	$	70		$	70		$	70
Computer equipment		157			121			115
Total		227			191			185
Less accumulated depreciation		(163	)		(138	)		(115	)
	$	64		$	53		$	70

Options Outstanding									Options Vested and Exercisable
Date of Option Issue	Range of Exercise Prices		Number Outstanding		Weighted Average Remaining Contractual Life (Years)		Weighted Average Exercise Price		Number Exercisable		Weighted Average Remaining Contractual Life (Years)		Weighted Average Exercise Price
2006	$	0.24		41,516		1.22	$	0.24		41,516		1.22	$	0.24
2007	$	4.20		1,277,574		2.56		4.20		1,277,574		2.56		4.20
2007	$	5.88-6.47		563,931		2.99		5.88		563,931		2.99		5.88
2008	$	1.74-6.20		129,500		3.40		5.00		129,500		3.40		5.00
2009	$	1.15- 1.58		922,986		4.26		1.16		922,986		4.26		1.16
2010	$	5.48-6.03		259,896		5.17		5.49		259,896		5.17		5.49
2011	$	19.85-23.62		405,000		6.37		23.62		367,499		6.37		23.62
2012	$	23.84 – 35.25		357,500		7.40		27.03		242,083		7.38		27.03
2013	$	23.72 – 35.05		269,625		8.37		25.40		128,717		8.37		25.41
2014	$	14.52-15.40		261,500		9.50		15.21		41,928		9.46		14.97
				4,489,028		4.61	$	9.33		3,975,630		4.11	$	7.79

	Options
	Number of Shares			Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (Years)		Aggregate Intrinsic Value
Outstanding at December 31, 2011		4,906,998		$	5.12		—		—
Options granted		367,500			26.97		—		—
Options exercised		(486,165	)		3.48		—		—
Options cancelled		(12,109	)		17.34		—		—
Outstanding at December 31, 2012		4,776,224			6.94		—		—
Options granted		274,625			25.37		—		—
Options exercised		(39,833	)		4.27		—		—
Options cancelled		(34,167	)		20.57		—		—
Outstanding at December 31, 2013		4,976,849			7.86		—		—
Options granted		261,500			15.21		—		—
Options exercised		(679,321	)		0.41		—		—
Options cancelled		(70,000	)		13.38		—		—
Outstanding at December 31, 2014		4,489,028		$	9.33		4.61	$	6,000

	RSUs
	Number of RSUs			Weighted Average Grant Date Fair Value		Aggregate Intrinsic Value
Outstanding at December 31, 2011		—			—		—
RSUs granted		151,665			25.60		—
Outstanding at December 31, 2012		151,665		$	25.60	$	—
RSUs granted		156,415			23.72		—
RSUs vested		(55,832	)		27.06		—
RSUs cancelled		(3,333	)		24.75		—
Outstanding at December 31, 2013		248,915		$	24.10	$	—
RSUs granted		154,332			15.30		—
RSUs vested		(88,686	)		24.08		—
RSUs cancelled		(4,167	)		24.13		—
Outstanding at December 31, 2014		310,394		$	19.74	$	—

Stock-Based Compensation by Type of Award	Year Ended December 31, 2014		Year Ended December 31, 2013		Year Ended December 31, 2012
Employee stock options	$	5,951	$	6,488	$	5,171
RSUs		2,238		1,075		991
Total stock-based compensation expense	$	8,189	$	7,563	$	6,162

	Year Ended December 31,
	2014			2013			2012
Net loss	$	(9,902	)	$	(27,608	)	$	(26,924	)
Basic weighted average number of shares outstanding		51,570			51,188			50,934
Diluted weighted average number of shares outstanding		51,570			51,188			50,934
Basic and diluted loss per share	$	(0.19	)	$	(0.54	)	$	(0.53	)

Original Number of Warrants Issued		Exercise Price per Common Share		Exercisable at December 31, 2013		Became Exercisable		Exercised		Terminated / Cancelled / Expired		Exercisable at December 31, 2013		Expiration Date

2,619,036	(1)	$	3.59		159,967		—		2,500		—		157,467	March 2015
Total					159,967		—		2,500		—		157,467

	Year Ended December 31, 2014			Year Ended December 31, 2013
Deferred tax assets:
Reserves and accruals	$	-		$	58
State tax		1			1
Research and development credits and other credits		924			907
Net operating loss carry forward		11,190			8,249
Stock based compensation		8,452			6,600
Other		127			154
Total deferred tax assets		20,694			15,969

Valuation allowance		(20,679	)		(15,955	)
Deferred tax assets after valuation allowance		15			14

Deferred tax liability:
Depreciation and amortization		(15	)		(14	)

Total deferred tax liability		(15	)		(14	)

Net deferred tax assets	$	-		$	-

	December 31, 2014
	Adjusted Cost		Unrealized Gains		Unrealized Losses			Fair Value		Cash and Cash Equivalents		Investments Available for Sale
Cash	$	1,183	$	-	$	-		$	1,183	$	1,183	$	-

Level 1:
Mutual funds		10,139		-		-			10,139		10,139		-
Corporate securities		9,405		1		(3	)		9,403		1,645		7,758
U.S agency securities		20,504		2		(2	)		20,504		5,691		14,813
		40,048		3		(5	)		40,046		17,475		22,571
Total	$	41,231	$	3	$	(5	)	$	41,229	$	18,658	$	22,571

	December 31, 2013
	Adjusted Cost		Unrealized Gains		Unrealized Losses			Fair Value		Cash and Cash Equivalents		Investments Available for Sale
Cash	$	11,699	$	-	$	-		$	11,699	$	11,699	$	-

Level 1:
Mutual funds		73		-		-			73		73		-
Corporate securities		10,782		-		-			10,782		2,325		8,457
Municipal securities		2,172		-		-			2,172		665		1,507
U.S agency securities		14,287		-		(25	)		14,262		4,411		9,851
		27,314		-		(25	)		27,289		7,474		19,815
Total	$	39,013	$	-	$	(25	)	$	38,988	$	19,173	$	19,815

	Quoted Prices in Active Markets for Identical Assets		Significant Other Observable Inputs		Significant Unobservable Inputs
	(Level 1)		(Level 2)		(Level 3)		Total
Series l Warrants	$	—	$	—	$	320	$	320
Total	$	—	$	—	$	320	$	320

	Fair Value Measurements Using Significant Unobservable Inputs (Level 3)
	Year ended December 31, 2014			Year ended December 31, 2013			Year ended December 31, 2012
Beginning Balance	$	2,564		$	4,172		$	4,699
(Gain) losses included in net losses		(2,237	)		(1,608	)		927
Settlements		(7	)		—			(1,454	)
Ending Balance	$	320		$	2,564		$	4,172

	First			Second			Third			Fourth
	(in thousands except per share)
2014
Revenue	$	250		$	268		$	292		$	439
Gain on settlement		—			—			—			23,000
Income (loss) from operations		(6,953	)		(6,171	)		(6,250	)		6,870
Net Income/ (loss)		(6,087	)		(6,670	)		(4,468	)		7,325
Basic earnings (loss) per common share	$	(0.12	)	$	(0.13	)	$	(0.09	)	$	0.14
Diluted earnings (loss) per common share	$	(0.12	)	$	(0.13	)	$	(0.09	)	$	0.14

Plan Category	Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights		Weighted-Average Exercise Price of Outstanding Options, Warrants and Rights		Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans
Equity compensation plans approved by security holders		4,964,389	$	9.81		1,886,217
Equity compensation plans not approved by security holders		—				—
Total		4,964,389	$	9.81		1,886,217

	VirnetX Holding Corporation

	By:	/s/ Kendall Larsen
		Name: Kendall Larsen
		Title: Chief Executive Officer and President

Name	Capacity	Date

/s/ Kendall Larsen	Director, Chief Executive Officer and President	March 2, 2015
Kendall Larsen	( Principal Executive Officer )

/s/ Richard H. Nance	Chief Financial Officer	March 2, 2015
Richard H. Nance	( Principal Financial Officer and Principal Accounting Officer )

/s/ Robert D. Short III	Director	March 2, 2015
Robert D. Short III

/s/ Gary Feiner	Director	March 2, 2015
Gary Feiner

/s/ Michael F. Angelo	Director	March 2, 2015
Michael F. Angelo

/s/ Thomas M. O'Brien	Director	March 2, 2015
Thomas M. O'Brien

Exhibit		Incorporated by reference herein
Number	Description	Form	Exhibit No.	Filing Date	File No.
3.1	Certificate of Incorporation of the Company.	8-K	3.1	11/01/2007	000-26895
3.2	By-Laws of the Company.	8-K	3.2	11/01/2007	000-26895
4.1	Form of Warrant Agency Agreement by and between the Company and Corporate Stock Transfer, Inc. as Warrant Agent.	S-1/A	4.1	01/16/2009	333-153645
4.2	Form of Series I Warrant.	8-K	4.1	09/03/2009	001-33852
10.1	Form of Indemnification Agreement by and between the Company and each of Kendall Larsen, Robert D. Short III, Gary Feiner, Michael F. Angelo, Thomas M. O'Brien and Richard Nance.	8-K	10.3	07/12/2007	000-26895
10.2*	2007 Stock Plan, as amended on April 13, 2012.	10-Q	10.2	05/10/2012	001-33852
10.3*	Amended Form of Stock Option Agreement – 2007 Stock Plan.	10-Q	4.5	05/10/2011	001-33852
10.4*	Form of Restricted Stock Unit Award Agreement – 2007 Stock Plan.	10-Q	10.3	05/10/2012	001-33852
10.5*	2013 Equity Incentive Plan.	DEF 14A	Appendix A	04/12/2013	001-33852
10.6*	Form of Stock Option Agreement – 2013 Equity Incentive Plan.
10.7*	Form of Restricted Stock Unit Agreement – 2013 Equity Incentive Plan.
10.8	Voting Agreement among the Company and certain of its stockholders, dated as of December 12, 2007.	10-K	10.11	03/31/2008	001-33852
10.9	Securities Purchase Agreement, dated as of September 2, 2009, by and between the Company and the Purchasers (as defined therein).	8-K	10.1	09/03/2009	001-33852
10.10	Form of Registration Rights Agreement by and between the Company and the Purchasers (as defined therein).	8-K	10.2	09/03/2009	001-33852
10.11	Form of Underwriting Agreement between VirnetX Holding Corporation and Gilford Securities Incorporated.	S-1/A	1.1	01/16/2009	333-153645
10.12	Patent License and Assignment Agreement by and between the Company and Leidos, Inc. (formerly Science Applications International Corporation) dated as of August 12, 2005.	8-K	10.4	07/12/2007	000-26895
10.13	Amendment No. 1 to Patent License and Assignment Agreement by and between the Company and Leidos, Inc. dated as of November 2, 2006.	8-K	10.6	07/12/2007	000-26895
10.14	Amendment No. 2 to Patent License and Assignment Agreement by and between VirnetX, Inc. and Leidos, Inc. dated as of March 12, 2008.	8-K	10.1	03/18/2008	001-33852
10.15	Security Agreement by and between the Company and Leidos, Inc. dated as of August 12, 2005.	8-K	10.5	07/12/2007	000-26895
10.16	Assignment Agreement between the Company and Leidos, Inc. dated as of December 21, 2006.	8-K	10.7	07/12/2007	000-26895
10.17	Professional Services Agreement by and between the Company and Leidos, Inc. dated as of August 12, 2005.	8-K	10.8	07/12/2007	000-26895
10.18	IP Brokerage Agreement by and between ipCapital Group, Inc. and VirnetX, Inc., effective as of March 13, 2008.	8-K	10.2	03/18/2008	001-33852
10.19	Engagement Letter by and between VirnetX Holding Corporation and ipCapital Group, Inc. dated March 12, 2008.	8-K	10.3	03/18/2008	001-33852

Exhibit		Incorporated by reference herein
Number	Description	Form	Exhibit No.	Filing Date	File No.
10.20**	Engagement Letter dated June 8, 2009, by and between McKool Smith, a professional corporation, and VirnetX, Inc.	10-Q	10.1	08/10/2009	001-33852
10.21**	Engagement Letter dated April 15, 2010, by and between McKool Smith, a professional corporation, and VirnetX, Inc.	10-Q	10.1	05/07/2010	001-33852
10.22**	Settlement and License Agreement, by and between Microsoft Corporation and VirnetX, Inc., dated May 14, 2010.	10-Q/A	10.1	01/31/2011	000-33852
10.23***	Amended Settlement and License Agreement, by and between Microsoft Corporation and VirnetX, Inc., dated December 17, 2014.
10.24*	Employment Offer Letter from VirnetX, Inc. to Richard H. Nance.	10-Q	10.4	05/10/2012	001-33852
21.1	Subsidiaries of VirnetX Holding Corporation.
23.1	Consent of Farber Hass Hurley LLP, Independent Registered Public Accounting Firm.
31.1	Chief Executive Officer Certification pursuant to Rule 13a-14(a) of the Securities Exchange Act.
31.2	Chief Financial Officer Certification pursuant to Rule 13a-14(a) of the Securities Exchange Act.
32.1†	Chief Executive Officer Certification pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2†	Chief Financial Officer Certification pursuant to 18 U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS††	XBRL Instance Document
101.SCH††	XBRL Taxonomy Extension Schema Document
101.CAL††	XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF††	XBRL Taxonomy Extension Definition Linkbase Document
101.LAB††	XBRL Taxonomy Extension Label Linkbase Document
101.PRE††	XBRL Taxonomy Extension Presentation Linkbase Document

	Grant Number
	Date of Grant	«Date of Grant»
	Vesting Commencement Date	«Vesting Commencement Date»
	Number of Restricted Stock Units	«Number of Shares»

PARTICIPANT:		VIRNETX HOLDING CORPORATION


Signature		By

«Name»
Print Name		Title

Residence Address:

Name of Entity		Jurisdiction of Incorporation or Organization

Network Research Corporation Japan Ltd. (known as Network Research Corporation Japan Kabushiki Kaisha in Japan)		Japan

VirnetX Inc.		Delaware

	/s/ Kendall Larsen
	Kendall Larsen
	President and Chief Executive Officer
	(Principal Executive Officer)