10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended March 31, 2008

OR

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number: 000-30931

OPNET TECHNOLOGIES, INC.

(Exact name of registrant as specified in its charter)

DELAWARE	52-1483235
(State or other jurisdiction of Incorporation or organization)	(I.R.S. Employer Identification No.)

7255 Woodmont Avenue, Bethesda, Maryland 20814-7900

(Address of principal executive offices) (Zip Code)

Registrant’s telephone number; including area code: (240) 497-3000

Securities registered pursuant to Section 12(b) of the Act: Common Stock, $0.001 par value

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    YES  ¨    NO  x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.    YES  ¨    NO  x

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    YES  x    NO  ¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  x

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer”, “accelerated filer”, or “smaller reporting company in Rule 12b-2 of the Exchange Act (check one).

Large accelerated filer  ¨    Accelerated filer  x    Non-accelerated filer  ¨    Smaller reporting company  ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    YES  ¨    NO  x

The aggregate market value of the voting stock held by non-affiliates of the registrant, computed using the closing sale price of the registrant’s Common Stock on September 30, 2007, as reported on the NASDAQ Global Market, was approximately $121,779,561. Shares of Common Stock held by each officer and director and by each person who owns 5% or more of the outstanding Common Stock have been excluded because such persons may be deemed to be affiliates. This determination of affiliate status is not necessarily conclusive for other purposes.

The number of shares of the registrant’s Common Stock outstanding on June 2, 2008 was 20,430,548.

DOCUMENTS INCORPORATED BY REFERENCE

Certain portions of the registrant’s definitive Proxy Statement for the 2008 Annual Meeting of Stockholders are incorporated by reference into Part III of this Form 10-K.

OPNET TECHNOLOGIES, INC.

ANNUAL REPORT ON FORM 10-K

FOR THE FISCAL YEAR ENDED MARCH 31, 2008

TABLE OF CONTENTS

ITEM			PAGE
		PART I
1.	—	Business	1
1A.	—	Risk Factors	11
1B.	—	Unresolved Staff Comments	19
2.	—	Properties	19
3.	—	Legal Proceedings	19
4.	—	Submission of Matters to a Vote of Security Holders	19
		PART II
5.	—	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	20
6.	—	Selected Financial Data	22
7.	—	Management’s Discussion and Analysis of Financial Condition and Results of Operations	23
7A.	—	Quantitative and Qualitative Disclosures About Market Risk	41
8.	—	Financial Statements and Supplementary Data	41
9.	—	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	41
9A.	—	Controls and Procedures	41
9B.	—	Other Information	46
		PART III
10.	—	Directors, Executive Officers and Corporate Governance	47
11.	—	Executive Compensation	47
12.	—	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	47
13.	—	Certain Relationships and Related Transactions, and Director Independence	47
14.	—	Principal Accounting Fees and Services	47
		PART IV
15.	—	Exhibits and Financial Statement Schedules	48
SIGNATURES			49
EXHIBIT INDEX			82

PART I

Forward Looking Information

This Annual Report contains forward-looking statements that involve substantial risks and uncertainties. You can identify these statements by forward-looking words such as ‘‘anticipate,’’ ‘‘believe,’’ ‘‘could,’’ ‘‘estimate,’’ ‘‘expect,’’ ‘‘intend,’’ ‘‘may,’’ ‘‘plan,’’ ‘‘potential,’’ ‘‘should,’’ and ‘‘would’’ or similar words. You should read statements that contain these words carefully because they discuss our future expectations, contain projections of our future results of operations or of our financial position, or state other forward-looking information. We believe that it is important to communicate our future expectations to our investors. However, there may be events in the future that we are not able to predict accurately or control. The factors listed in this Annual Report on Form 10-K under “Risk Factors,” as well as any cautionary language in this Annual Report on Form 10-K, provide examples of risks, uncertainties, and events that may cause our actual results to differ materially from the expectations we describe in our forward-looking statements. You should also carefully review the risks outlined in other documents that we file from time to time with the Securities and Exchange Commission, including our Quarterly Reports on Form 10-Q that we will file in fiscal 2009.

The forward-looking statements provided in this Annual Report on Form 10-K represent our expectations as of June 9, 2008. We anticipate that subsequent events and developments may cause our expectations to change. However, while we may elect to update this forward-looking information at some point in the future, we specifically disclaim any obligation to do so. This forward-looking information should not be relied upon as representing our expectations as of any date subsequent to June 9, 2008.

Fiscal Year Convention

The years ended March 31, 2008, 2007 and 2006, are referred to as “fiscal 2008,” “fiscal 2007” and “fiscal 2006,” respectively, in this Annual Report on Form 10-K.

ITEM 1. BUSINESS

(dollar and share amounts in thousands)

In this Annual Report on Form 10-K, or Annual Report, the “Company” “we,” “us,” and “our” refer to OPNET Technologies, Inc. and its wholly owned subsidiaries unless the context otherwise indicates.

OPNET Technologies, Inc. is a provider of software products and related services for managing networks and applications. Our products address: application performance management; network operations, capacity management, and network research and development.

OPNET differentiates itself from traditional providers of network and application management products by focusing on analytics. Traditional application and network management products focus on data collection and monitoring. These systems typically report on historical trends and the status of networks and systems. They are limited by their lack of understanding of the underlying technologies that support applications, and the relationships among these technologies. While they provide useful information, they do not automate the next important step, which is analyzing collected data to transform it into actionable information. OPNET’s analysis capabilities drive the rapid resolution of performance problems, and also proactively prevent problems from occurring. These problems include, for example, network configuration errors, network congestion, poor interaction between the network and applications, inefficient use of the network by applications, application bugs, and database inefficiencies. We believe that OPNET’s analytics can significantly improve the performance and availability of mission-critical networks and applications.

Embedded in OPNET software is expert knowledge about how network devices, network protocols, applications, and servers operate and interact. This intelligence enables users in application development, network operations, engineering, planning, and security functions to be more effective in optimizing performance and availability of their networks and applications. We believe our software products can appeal to a broad customer base, including corporate enterprises, government and defense agencies, network service providers, and network equipment manufacturers, empowering them to make better use of resources, rapidly troubleshoot operational problems, and improve competitiveness.

We market focused software products for each of our target markets. We sell our products to both Fortune 1000 and mid-size companies. Some examples of our customers include:

• corporate enterprises, such as Capital One Financial, Cargill, GEICO Insurance, GlaxoSmithKline, GoDaddy.Com, IBM Global Services, Lowes, and the Philadelphia Stock Exchange;

• government agencies, such as the Federal Bureau of Investigations, the Federal Communications Commission, the Internal Revenue Service, the United States Department of Defense, the United States Department of Homeland Security, and the United States Department of State; and

• service providers, such as British Telecom , NTT, Telus, T-Mobile, and Verizon; and

• network equipment manufacturers, such as Cisco Systems, Intel Corporation, Motorola, and Nokia.

Industry Background

Growth and Increased Complexity of Networks and Dependence on Applications

Organizations rely on networks and enterprise software applications to successfully execute their strategies. The increasing use of applications, such as enterprise resource planning, business intelligence, corporate intranets, e-mail, web meetings, virtualization, portals, web services, voice over IP, wireless, and streaming multimedia, has resulted in significant growth in underlying network and application infrastructures. In addition, the proliferation and widespread adoption of the Internet and web services architectures have expanded the role of networks beyond organizational boundaries.

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Enterprises and service providers must now manage the convergence of voice, data, and video traffic over traditional, wireless, and optical architectures by integrating numerous existing and emerging technologies. The complexity is exacerbated by the current corporate regulatory environment, which requires improved management processes and documentation. As a result of these factors, businesses and government entities are forced to confront significant challenges related to the cost, risk, and performance of information technology, or IT.

IT infrastructures are sophisticated, dynamic systems that evolve on a daily basis. Applications are typically distributed across many clients, servers, and network segments. New and enhanced business applications are regularly being deployed and re-deployed. The geographic distribution of users relative to IT services shifts due to the consolidation of organizations and infrastructures. Traffic levels exhibit steady growth, necessitating constant evaluation of and improvements to the network-underlying infrastructure in order to maintain business and application performance. However, due to the dependencies among network, server, and application configurations, it is very difficult for IT professionals to identify the true root cause of performance problems when they occur. The data required to diagnose problems is often difficult to obtain, and processes for analyzing this data are often manual and time consuming, requiring significant experience and expertise. When an end-user experiences performance problems with an important business application, the challenge facing a typical IT manager is to determine: whether there is enough bandwidth available; whether the database server has enough capacity; whether network routing protocols are tuned properly; whether protocols on the client and server are likewise tuned properly; and whether the application was designed and implemented efficiently with end-user performance in mind.

Without a clear understanding of the source of problems and the specific changes required to solve them, IT managers resort to uninformed decision-making that often results in wasteful spending on unnecessary and ineffective server and network upgrades. IT professionals need software products that enable them to focus their time and resources in the right places when problems occur in distributed enterprise applications, and to maximize the use of existing infrastructure. Further, since modifications to infrastructure have the potential to cause service level degradation or even network failures, there is a growing need to plan and implement network changes in a controlled manner, taking into account the potential consequences of each action.

Market Opportunity for OPNET Software Products

Organizations need network and application management software products that possess the analytics required to overcome the limitations of traditional tools for rapidly detecting and resolving complex problems and proactively preventing problems from occurring. OPNET software products are focused on these areas. Our software products have embedded knowledge and operational understanding of networks, applications, and systems for quickly troubleshooting problems and automatically predicting the impact of changes. We believe business executives and IT professionals require software products like ours to:

• reduce down time of mission critical applications;

• reduce operating and capital costs;

• increase business productivity; and

• manage risk.

We believe the value proposition from OPNET software products apply to a broad range of potential customers including:

• large and medium-sized enterprises that rely on IT to conduct business;

• government/defense agencies;

• service providers, including telecommunications carriers, internet service providers, or ISPs, and managed service providers, or MSPs; and

• network equipment manufacturers.

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Enterprises require analytics for more effectively identifying the root causes of application performance problems, ensuring the successful deployment of new applications, auditing device configurations for security and policy compliance, validating changes, and performing critical operational and strategic planning functions.

Government and defense agencies have needs similar to those of enterprises, service providers, and network equipment manufacturers. These agencies also sometimes require specialized services to support large projects that incorporate OPNET’s technology. United States government customers, including the Department of Defense, utilize our software and professional services to take advantage of our extensive expertise and intellectual property in networking, applications, and protocols. For the Department of Defense, our software products and related services are used for both network and application performance management, as well as for analyzing and developing communications technologies for network-centric transformational programs. Our ability to model and simulate end-to-end network and application performance is valuable in determining the impact of tactical or strategic changes to networks, planning for contingencies, and evaluating the impact of new network technologies and protocols. In addition, our software products are scalable and address large, complex military systems and networks, such as mobile networks, with a variety of operationally proven, advanced predictive performance techniques.

Service providers require analytics for optimizing their investments in network infrastructure, more effectively troubleshooting network issues, ensuring network configuration integrity and security, planning for services based on new technologies including wireless and optical, and making better use of network resources to increase competitiveness.

Network equipment manufacturers require advanced modeling and simulation software products for accelerating network research and development, reducing time-to-market for new technologies, developing custom network design and analysis software, and for reducing sales cycles for sophisticated technology products.

OPNET Software Products

Our software products use a variety of advanced technologies to support the analysis of network, application, and server performance under a wide range of current and future operating conditions. Our software products include model libraries that permit the simulation and analysis of major network technologies and communication protocols. We sell both off-the-shelf and customized software products that offer interfaces to third party network management products, including those from AlterPoint, BMC, Cisco Systems, Computer Associates, EMC Smarts, Fluke Networks, HP, IBM Micromuse, InfoVista, NetScout, and others. Most OPNET software products share a significant amount of core software based on an open architecture. Our software architecture enables us to create new software more efficiently, to foster interoperability of our software products, and to provide interfaces to a wide range of external data sources including third party management tools and network topology, traffic, and configuration information.

The following sections summarize the OPNET software product portfolio by target market:

Primary Target Market: Enterprise IT (Corporate and Government/Defense)

• ACE Analyst, first introduced in May 2000 as ACE, enables application performance management through advanced analytics. ACE Analyst is used to troubleshoot performance problems in production applications and to enable successful application deployment during quality assurance.

• ACE Live was introduced in November 2007 following OPNET’s acquisition of specified assets from Network Physics. ACE Live performs real-time end user experience monitoring, leveraging on-board analytics to quickly determine the root source of application performance problems. ACE Live utilizes “passive” monitoring, that does not rely on the use of distributed agents. The ACE Live software product can be delivered on a hardware appliance, if the customer chooses.

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• IT Guru Network Planner was first introduced in August 1998 as IT Guru. It provides predictive network capacity planning and design optimization, as well as validation of network configuration changes.

• IT Guru Systems Planner was introduced in December 2006 as an option for IT Guru. It provides capacity planning for servers, including planning for migration from physical-to-virtual server environments.

• IT Netcop was first introduced in September 2003 as NETCOP. It provides enterprises with centralized, real-time visibility of network topology, traffic, and status in a single, integrated view. IT Netcop provides a unified view to quickly recognize the impact of network events, and assisted troubleshooting to rapidly resolve problems.

• IT Sentinel was first introduced in August 2004. IT Sentinel provides automatic and continuous network configuration integrity and security auditing, and proactive change validation.

• OPNET Panorama was first introduced in December 2004 following OPNET’s acquisition of Altaworks Corporation. Panorama provides real-time system analytics for application performance management. Like ACE Analyst, it is used throughout the application life cycle to ensure the successful deployment of applications, and rapidly troubleshoot performance problems in production applications. With Panorama focusing on advanced application analysis from the server perspective, and ACE Analyst’s network perspective, we believe that we are well positioned to address the complex issues that our clients may face as they migrate to web services architectures.

• SLA Commander was first introduced in December 2004 following OPNET’s acquisition of Altaworks Corporation. Commander provides active application response time monitoring for web-based applications, complementing the passive monitoring approach of ACE Live.

• VNE Server was first introduced in June 2002. VNE Server, or Virtual Network Environment Server automatically maintains a detailed, near real-time data model of the production IT network. VNE Server includes a suite of adapters that obtain topology, traffic, and other information from network devices as well as a broad range of third party data sources. VNE Server automates the data collection process for other OPNET products, including IT Guru Network Planner and SP Guru Network Planner. VNE Server capabilities are included in IT Sentinel and SP Sentinel.

Primary Target Market: Network Service Providers (both Commercial and Government/Defense)

• SP Guru Network Planner was first introduced in June 2001. SP Guru Network Planner is built on the IT Guru Network Planner product, and contains analytics that are valuable to service providers for planning, network design optimization, and validation of configuration changes. SP Guru Network Planner includes modeling and analysis technologies for IP, MPLS, and ATM networks, and when combined with SP Guru Transport Planner, provides a single environment for network-level and optical transport-level analysis.

• SP Guru Transport Planner, formerly WDM Guru, was first introduced in December 2001. SP Guru Transport Planner is an optical network-planning product for designing resilient, cost-efficient optical networks. SP Guru Transport Planner is also sold to network equipment manufacturers.

• SP Netcop was first introduced in September 2003 as NETCOP. SP Netcop provides service providers with centralized, real-time visibility of network topology, traffic, and status in a single, integrated view. SP Netcop provides a unified view to quickly recognize the impact of network events, and assisted troubleshooting to rapidly resolve problems.

• SP Sentinel was first introduced in August 2004. SP Sentinel provides automated and continuous network configuration integrity and security auditing for service providers, and proactive change validation.

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Primary Target Market: Network R&D Organizations (Defense and Equipment Manufacturers)

• OPNET Modeler was OPNET’s first product, introduced in 1987. OPNET Modeler is a network modeling and simulation product. It enables users to evaluate how networking equipment, communications technologies, systems, and protocols will perform under simulated network conditions.

OPNET Modules

We develop and sell a variety of software modules that provide additional functions to our application and network management software products.

OPNET Model Libraries

The model libraries are used by OPNET software to simulate and analyze major networking technologies and communication protocols. These libraries provide the building blocks used to generate models of networks. A network model consists of software objects that correspond to the devices, computers, and links that constitute the actual network of interest. The behavior of these objects is controlled by models of devices, computers, applications, communication protocols, and links. IT Guru Network Planner, IT Guru Systems Planner, IT Netcop, IT Sentinel, SP Guru Network Planner, SP Netcop, SP Sentinel, and OPNET Modeler include extensive libraries of popular and emerging networking technologies and communication protocols, such as TCP/IP, hypertext transfer protocol, or HTTP, open shortest path first routing, or OSPF, asynchronous transfer mode, or ATM, frame relay, IP-QoS, 802.11, or Wi-Fi, and 802.16, or WiMAX. Some of our model libraries are included in our base products and others are available for an additional fee as modules.

Our software license agreements provide our customers with perpetual and term licenses for use by a specified number of concurrent users or for use by an unlimited number of concurrent users.

Customers

For fiscal 2008, fiscal 2007, and fiscal 2006 we generated 20.2%, 21.1%, and 21.7% respectively, of our total revenue from customers located outside the United States. No single customer accounted for 10% or more of revenue for fiscal 2008, 2007, or 2006. As of March 31, 2008, more than 98% of our property and equipment were held inside the United States. As of March 31, 2008, all of our intangible assets were held inside the United States. Note 15 to our consolidated financial statements presents information regarding revenue generated in the United States and internationally.

We derive a substantial portion of our revenue from sales directly or indirectly to United States government agencies. For fiscal 2008, revenue from transactions with United States government agencies was approximately 41% of our total revenue. For both fiscal 2007 and 2006, revenue from transactions with United States government agencies was approximately 43% of our total revenue. Government sales are subject to a variety of risks, including appropriation of funds by the United States Congress, termination for convenience, contract renegotiations/extensions, and a decline in government spending.

In January 2003, we were awarded a consulting contract with the United States Department of Defense. In February 2006, we were awarded the contract option for calendar year 2006 in the amount of $2,899. The option contributed approximately $2,329 and $596 of consulting revenue for fiscal 2007 and 2006, respectively. In February 2007, we were awarded the last contract option for calendar year 2007 in the amount of $2,119. As of December 31, 2007 we received additional awards of $2,905 associated with the last contract option. The option for calendar year 2007 and associated additional awards of $2,905 received as of March 31, 2008 contributed approximately $1,730 and $167 of consulting revenue for fiscal 2008 and 2007, respectively. This contract expired at the end of calendar 2007 and there are no remaining extensions on the contract. Accordingly, we do not expect to receive meaningful additional revenue from this contract.

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Sales and Marketing

We sell our software products and related services through our direct sales force, our international subsidiaries, third-party distributors, and a number of original equipment manufacturers, or OEMs, and value-added resellers, or VARs. To date, OEMs and VARs have not accounted for more than 10% of our revenue. In North America, our direct sales force accounts for the majority of our sales. As of March 31, 2008, our sales and marketing teams consisted of 168 employees, including 88 quota-carrying and inside salespersons located in our headquarters in Bethesda, Maryland and our domestic offices in Cary, North Carolina; Dallas, Texas; Nashua, New Hampshire; and Santa Clara, California; our overseas subsidiaries in Paris, France; Slough, United Kingdom; Frankfurt, Germany; Ghent, Belgium; and Singapore; and our branch office in Beijing, China.

Our international sales activities are also supported by 28 resellers that offer our products in Australia, Austria, Brazil, Finland, France, Germany, Greece, India, Indonesia, Israel, Japan, Netherlands, New Zealand, Norway, Poland, Romania, Russia, South Africa, South Korea, Spain, Sweden, Switzerland, Turkey and the United Kingdom. Our marketing division works internally with our engineering and sales teams to develop customer value propositions and product messages, and externally with various third parties to develop brand awareness and leads for sales. Our external marketing activities are aimed at existing customers, new customer prospects, the media, and industry analysts. These include:

• participation in industry tradeshows;

• technology seminars and users group meetings;

• advertisements in trade journals and online;

• direct mailings;

• product collateral development and maintaining OPNET’s website;

• free software for academic use at universities;

• specialized product sales support;

• specialized sales support with OPNET resellers;

• briefings with industry analysts; and

• a variety of public relations activities, including our annual international technology conference OPNETWORK.

For each of the last eleven years, we have sponsored OPNETWORK, an annual international technology conference convened in Washington, D.C. that focuses on application and network management for professionals in all areas of networking and information technology. OPNETWORK 2007, which was held in August 2007, included approximately 784 hours of classes, labs, and panels led by OPNET employees and outside experts. Not including OPNET employees, more than 1,672 IT and engineering professionals, representing 30 countries, participated in the conference. OPNETWORK 2008 is scheduled to be held in Washington, D.C. in August 2008.

Service and Support

Our service and support offerings include:

• consulting services;

• software license updates, technical support and services, which includes license updates, training for customers with current maintenance agreements, and technical support (by telephone, e-mail or fax), all provided on a when-and-if-available basis (except technical support) under our maintenance agreement; and

• training for customers without current maintenance agreements, which includes courses that enable our customers to more effectively use our products.

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We offer consulting services to assist our clients to facilitate the adoption of our software products and to provide installation services for our product offerings. Installation services are performed by our consulting staff, which consists of software development engineers, quality assurance engineers, technical documentation specialists, and project managers. Some customers also choose to engage our consulting services for troubleshooting application performance problems, network planning, network design, communication protocol design and customization services. As of March 31, 2008, our consulting staff consisted of 126 employees.

Our customers may purchase software license updates, technical support and services, all provided on a when-and-if available basis (except technical support) under our maintenance agreement. Payments for software license updates, technical support and services whether on initial order or on renewal, are generally made in advance and are nonrefundable.

Software license updates consist of the right to unspecified software updates on a when-and-if-available basis and are typically entered into in connection with the initial software license purchase. Software license updates, technical support and services may be renewed upon expiration of the term, which is generally one year. Customers can purchase software license updates separately from technical support and services. Customers purchasing technical support are still required to purchase periodic unspecified product updates.

We provide customer support from our support center at our headquarters in Bethesda, Maryland, as well as from support staff in France, the United Kingdom and Singapore. We have designed and implemented a comprehensive information system to ensure that customer inquiries are addressed promptly, tracked until fully resolved, and recorded for future reference. Reports on the overall responsiveness of the technical support infrastructure, and the status of pending customer inquiries, are provided regularly to our technical support staff, technical support management, and executive management.

We have a core team of 16 technical support staff supplemented by a number of product developers and consultants who perform technical support on a rotational basis. We believe this staffing approach maximizes the access customers have to the best available product expertise, while providing product developers with direct customer feedback, which in turn helps us improve our software products.

We regularly offer training courses to our customers to assist them in maximizing the benefit they receive from using our products. Our training classes cover a broad range of topics. Training classes are offered at our headquarters in Bethesda, Maryland, our facilities in Santa Clara, California; Cary, North Carolina; Paris, France; and Slough, United Kingdom; and at our customers’ locations. As of March 31, 2008, our full-time training staff consisted of 5 employees.

Research and Development

We believe that our ability to enhance our current software products and create new software products in response to the needs of our customer base is an important factor for our future success. Accordingly, we intend to continue to commit significant resources to product research and development. We expect to accomplish a large part of our software product improvements and new software product development through internal development efforts. New capabilities may also be integrated into our product lines through the acquisition of technologies or businesses, or the licensing of externally developed technologies.

Our total expenses for research and development for fiscal 2008, 2007, and 2006 were approximately $27,471, $21,688, and $18,643, respectively. Our research and development efforts to date have been conducted at our offices in Bethesda, Maryland; Cary, North Carolina; Nashua, New Hampshire; and Ghent, Belgium. All related costs have been expensed as incurred. As of March 31, 2008, our research and development staff consisted of 185 engineers and technical professionals.

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Our research and development efforts are directed at increasing our revenue by expanding the scope of our software products and service offerings to address additional customer requirements. Our existing customers provide a meaningful source of information, which we use in order to guide our future research and development activities. In addition, we invest in research and analysis of trends in our industry and our product markets, and we expect that our future software products may reflect the results of these analyses.

Competition

The market for our software products and related services is evolving rapidly and is highly competitive. We believe that this market is likely to become more competitive as the demand for intelligent application and network management software products continues to increase. Although we believe that none of our competitors offer software products that are identical to ours, we are subject to current and potential competition from:

• software and hardware vendors with network and application performance management offerings, such as Computer Associates, or CA, Compuware Corporation, or Compuware, IBM Tivoli, NetScout Systems, and Quest Software;

• consultants who offer advisory services related to network and application performance management; and

• customers who develop their own network and application management capabilities, either internally or through outsourcing.

Also, it is possible that other vendors as well as some of our customers or distributors may develop and market competitive products in the future. Many of our current and potential competitors are larger and have substantially greater financial and technical resources than we do. We believe the principal competitive factors affecting the market for our software products and related services are the following:

• scope, quality, and cost-effectiveness of application and network management software products;

• industry knowledge and expertise embedded in the software;

• the interoperability of software products with existing network management software products;

• product performance, accuracy, technical features, ease of use, and price;

• customer service and support;

• consultants who offer advisory services related to network and application performance management; and

• customers who develop their own network and application management capabilities, either internally or through outsourcing.

Intellectual Property

We rely on a combination of copyright, trademark, patent, and trade secret laws, confidentiality agreements, and contractual provisions to protect our intellectual property. However, we believe that these laws and agreements afford us only limited protection. Despite our efforts to protect our intellectual property, unauthorized parties may infringe upon our proprietary rights. In addition, the laws of some foreign countries do not provide as much protection of our proprietary rights as do the laws of the United States.

We currently hold registered trademarks in the United States for all of our primary marks including the following: OPNET, OPNETWORK, IT Guru, IT Sentinel, Netbiz, NetDoctor, OPNET Modeler, SP Guru, SP Sentinel, VNE Server, WDM Guru, OPNET LoadScaler, and OPNET TestCreator. We have pending applications in the United States for the trademark registrations of Netcop, OPNET Panorama, and SLA Commander, all of

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which have been approved by the U.S. Patent and Trademark Office. We also hold additional registered and unregistered trademarks in the United States and have additional pending applications. We fully intend to maintain our trademark portfolio commensurate with the continued use of these marks, especially our house mark OPNET. As appropriate and in accordance with our use of our marks internationally, we have applied for and obtained numerous registrations for our marks in foreign countries. In particular for the term OPNET, we hold registrations in the following countries: Benelux, France, Germany, Japan, the Peoples Republic of China, Taiwan and the United Kingdom and have applications pending in Italy and Spain. Currently, we are negotiating in Spain for a consent agreement that will allow us to receive a registration in that jurisdiction. Other trademarks or service marks appearing in this Annual Report on Form 10-K are the property of their respective holders.

In addition, we have twenty-one patents granted by the United States Patent and Trademark Office, eleven of which were obtained in the acquisition of specified assets of Network Physics. Our patents will expire between 2018 and 2025. We also have eighty-one pending United States patent applications that, if granted, would expire approximately twenty years from their respective filing dates. Twelve of these were obtained in the acquisition of specified assets of Network Physics, and another twelve are provisional patent applications for which we expect to pursue non-provisional applications within the next year. We currently have two pending European patent applications and we plan to pursue a third within the next year. We believe that, because of the rapid pace of change in our industry, intellectual property protection for our software products and the knowledge, abilities, and experience of our employees will be significant factors for our future success.

Executive Officers and Directors of the Registrant

Our executive officers and directors, and their ages as of June 9, 2008, are as follows:

Name	Age	Position
Marc A. Cohen	44	Chairman of the Board and Chief Executive Officer
Alain J. Cohen	41	President, Chief Technology Officer and Director
Mel F. Wesley	36	Vice President and Chief Financial Officer
Steven G. Finn, PhD (1)(2)(3)	62	Director
Ronald W. Kaiser (1)(2)(3)	54	Director
William F. Stasior (1)(2)(3)	67	Director

(1) Member of the Audit Committee

(2) Member of the Compensation Committee

(3) Member of the Nominating Committee

Set forth below is information regarding the professional experience for each of our executive officers and directors. These executive officers and directors were elected to serve until their successors have been elected. Marc A. Cohen and Alain J. Cohen are brothers. There is no other family relationship between any of our other executive officers or between any of these officers and any of our directors.

Marc A. Cohen, one of our founders, has served as our Chairman of the Board since our inception in 1986 and as our Chief Executive Officer since 1994. From 1986 to 1992, Mr. Cohen was also a consultant with Booz Allen Hamilton Inc., or Booz Allen, an international management and consulting company. Mr. Cohen received a bachelor’s degree in engineering science from Harvard University and a master’s degree in electrical engineering from Stanford University. Mr. Cohen also serves as a Trustee and as a member of the Board of Directors of the Dana-Farber Cancer Institute in Boston, Massachusetts.

Alain J. Cohen, one of our founders, has served as our President and Chief Technology Officer and as a member of our Board of Directors since our inception in 1986. Mr. Cohen received a bachelor’s degree in electrical engineering from the Massachusetts Institute of Technology, or M.I.T.

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Mel F. Wesley has served as our Vice President and Chief Financial Officer since July 2005. Mr. Wesley served as our Acting Chief Financial Officer from December 2004 to July 2005 and our Corporate Controller from June to December 2004. From August 2003 to June 2004, Mr. Wesley served as Corporate Controller for SteelCloud, Inc., a publicly traded corporation that provides design, development and manufacturing of network appliances and infrastructure server products. From October 2000 to August 2003, Mr. Wesley served as an Assistant Controller for Learning Tree International, Inc., a publicly traded corporation that provides training to information technology professionals and managers.

Dr. Steven G. Finn has served as a member of our Board of Directors since March 1998. Dr. Finn has been a principal research scientist and lecturer at M.I.T. since 1991. Dr. Finn has also served as a consultant with Matrix Partners, a venture capital firm, since 1991.

Ronald W. Kaiser has served as a member of our Board of Directors since October 2003. Since January 2008, he has served as an independent consultant and board member. From January 2007 through December 2008, Mr. Kaiser served as Chief Financial Officer of Sucampo Pharmaceuticals, Inc., a specialty pharmaceutical company. Mr. Kaiser served as Chief Financial Officer of Pharmathene, Inc, a privately held bio-defense company from April of 2005 through December of 2006. Mr. Kaiser served as Chief Financial Officer, Treasurer and Secretary of Air Cargo, Inc., a privately held provider of United States and European cargo transportation logistics from February 2003 through March 2005. Air Cargo filed for Chapter 11 bankruptcy on December 7, 2004. Mr. Kaiser served as Chief Financial Officer and Treasurer of OTG Software, Inc., or OTG, from June 1998 until the sale of OTG to Legato Systems, Inc. in May 2002. OTG was a publicly traded corporation that provided online data storage and data access software products for business applications, email management and related services. Mr. Kaiser serves on the board of directors of Vocus, Inc., a provider of public relations management software.

William F. Stasior has served as a member of our Board of Directors since March 1998. Since October 1999, he has served as Senior Chairman of Booz Allen. From 1991 to 1999, he served as Chairman and Chief Executive Officer of Booz Allen. Mr. Stasior currently serves on the Board of Directors of SkyTerra Communications, Inc., a telecommunications service provider

Employees

As of March 31, 2008, we had 560 full-time employees, 513 of whom were located in the United States. The 560 full-time employees included 168 in sales and marketing, 147 in professional services and support, 185 in engineering, research, and development, and 60 in general and administrative functions. Our employees are not represented by a collective bargaining agreement and we consider our relations with our employees to be good.

Corporate Information

We are a Delaware corporation, our principal executive office is located at 7255 Woodmont Avenue, Bethesda, Maryland 20814-7900 and our telephone number is (240) 497-3000. Our website address is www.opnet.com. The information on our website is not incorporated by reference into this Annual Report on Form 10-K and should not be considered to be a part of this Annual Report on Form 10-K. Our website address is included in this Annual Report on Form 10-K as an inactive textual reference only.

Availability of SEC Reports

Our website address is www.opnet.com. We make available free of charge on our website our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, and amendments to these reports, as soon as reasonably practicable after we electronically file such material with, or furnish such material to, the Securities and Exchange Commission, or SEC. The information on our website is not incorporated by reference into this Annual Report and should not be considered to be a part of this Annual Report. Our website address is included in this Annual Report as an inactive textual reference only.

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We file our reports with the SEC electronically via the SEC’s Electronic Data Gathering, Analysis and Retrieval system, or EDGAR. The SEC maintains a website that contains reports, proxy and information statements, and other information regarding companies that file electronically with the SEC via EDGAR. The address of this website is www.sec.gov.

Any reports, statements or other information that we file with the SEC may be read or copied at the SEC’s Public Reference Room at 100 F Street, N.E., Room 1580, Washington, D.C. 20549. Copies of these documents can be requested upon payment of a duplicating fee, by writing to the SEC. Please call the SEC at 1 (800) SEC-0330 for further information on the operation of the Public Reference Room. Upon request, we make available free of charge, electronic or paper copies of any reports, statements or other information that we file with the SEC.

Code of Business Conduct and Ethics

On May 4, 2004 we adopted a code of business conduct and ethics for all directors, officers, and employees pursuant to Section 406 of the Sarbanes-Oxley Act of 2002. The Code of Business Conduct and Ethics is available on our website at www.opnet.com. Suspected violations of this Code may be reported on a confidential or anonymous basis by facsimile or by e-mail to our General Counsel and to the Chairman of the Audit Committee of the Board of Directors. We intend to disclose any amendment to, and any waiver from, any provision of this Code that applies to any director, the Chief Executive Officer, Chief Financial Officer, or any other executive officer and that relates to any element of this Code enumerated in Item 406(b) of Regulation S-K, on Form 8-K.

ITEM 1A. RISK FACTORS

The following important factors, among others, could cause actual results to differ materially from those indicated by forward-looking statements made in this Annual Report and presented elsewhere by management from time to time. You should consider carefully the following information before making an investment in our securities.

Our operating results may fluctuate significantly as a result of factors outside of our control, which could cause the market price of our stock to decline.

Our operating results have fluctuated in the past, and are likely to fluctuate significantly in the future. Our financial results may as a consequence fall short of the expectations of public market analysts or investors, which could cause the price of our common stock to decline. Our revenue and operating results may vary significantly from quarter to quarter due to a number of factors, many of which are beyond our control. Factors that could affect our operating results include:

• the timing of large orders;

• changes in the proportion of software arrangements requiring contract accounting;

• changes in the mix of our sales, including the mix between higher margin software solution products and lower margin hardware products, services and maintenance, and the proportion of our license sales requiring us to make royalty payments;

• the timing and amount of our marketing, sales, and product development expenses;

• the cost and time required to develop new software products;

• the introduction, timing, and market acceptance of new software products introduced by us or our competitors;

• changes in network technology or in applications, which could require us to modify our software products or develop new software products;

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• general economic conditions, which can affect our customers’ purchasing decisions, the length of our sales cycle, and our customers’ ability to pay us on time, if at all;

• changes in our pricing policies or those of our competitors; and

• the timing and size of potential acquisitions by us.

We expect to make significant expenditures in all areas of our business, particularly sales and marketing operations, in order to promote future growth. Because the expenses associated with these activities are relatively fixed in the short term, we may be unable to adjust spending quickly enough to offset any unexpected shortfall in revenue growth or any decrease in revenue levels. In addition, our revenue in any quarter depends substantially on orders we receive and ship in that quarter. We typically receive a significant portion of orders in any quarter during the last month of the quarter, and we cannot predict whether those orders will be placed and shipped in that period. If we have lower revenue than we expect, we may not be able to respond quickly enough to reduce our operating expenses. Therefore, any significant shortfall in revenue or delay of customer orders could have an immediate adverse effect on our operating results in that quarter.

For all of these reasons, quarterly comparisons of our financial results are not necessarily meaningful, and you should not rely on them as an indication of our future performance.

If we do not successfully expand our sales force, we may be unable to increase our sales.

We sell our software products and related services primarily through our direct sales force, and we must expand the size of our sales force to increase revenue. If we are unable to hire or retain qualified sales personnel, if newly hired personnel fail to develop the necessary skills to be productive, or if they reach productivity more slowly than anticipated, our ability to increase our revenue and grow our business could be compromised. Our sales people require a long period of time to become productive, typically three to nine months. The time required to reach productivity, as well as the challenge of attracting, training, and retaining qualified candidates, may make it difficult to meet our sales force growth targets. Further, we may not generate sufficient sales to offset the increased expense resulting from growing our sales force, or we may be unable to manage a larger sales force.

The market for intelligent network and application management software is new and evolving, and if this market does not develop as anticipated, our revenue could decline.

We derive all of our revenue from the sale of software products and related services that are designed to allow our customers to manage the performance of networks and applications. Accordingly, if the market for intelligent network and application management software does not continue to grow, we could face declining revenue, which could ultimately lead to our becoming unprofitable. The market for intelligent network and application management software products is evolving. Therefore, we cannot accurately assess the size of the market and may be unable to identify an effective distribution strategy, the competitive environment that will develop, and the appropriate features and prices for products to address the market. If we are to be successful, our current and potential customers must recognize the value of intelligent network management software products, decide to invest in the management of their networks, and, in particular, adopt and continue to use our software products.

Our customers are primarily in four target groups and our operating results may be adversely affected by changes in one or more of these groups.

Our software products and related services are designed to meet the needs of enterprises, United States government agencies, service providers, and network equipment manufacturers, and we market our software products and related services to those four customer groups. Consequently, our financial results depend, in

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significant part, upon the economic conditions of enterprises, United States government agencies, service providers, and network equipment manufacturers. An economic downturn or adverse change in the regulatory environment or business prospects for one or more of these customer groups may decrease our revenue or lower our growth rate.

A decline in information technology spending may result in a decrease in our revenue or lower our growth rate.

A decline in the demand for information technology among our current and prospective customers may result in decreased revenue or a lower growth rate for us because our sales depend, in part, on our customers’ budgets for new or additional information technology systems and services. A continued economic downturn may cause our customers to reduce or eliminate information technology spending and force us to lower prices of our software products and related services, which would substantially reduce the number of new software licenses we sell and the average sales price for these licenses. Accordingly, we cannot assure you that we will be able to increase or maintain our revenue.

Our sales to United States government agencies subject us to special risks that could adversely affect our business.

We derive a substantial portion of our revenue from sales directly or indirectly to United States government agencies. Transactions with United States government agencies accounted for approximately 41% of our total revenue for fiscal 2008, and 43% of our total revenue for fiscal 2007 and fiscal 2006. Government sales entail a variety of risks including:

• Government contracts are subject to the approval of appropriations by the United States Congress to fund the expenditures by the agencies under these contracts. Congress often appropriates funds for government agencies on a yearly basis, even though their contracts may call for performance over a number of years.

• A significant decline in government expenditures generally, or a shift in budget priorities away from agencies or programs that we support, could cause a material decline in our government business. In particular, a decline in government spending on information technology or related services could hurt our government business.

• Our software products and related services are included on a General Services Administration, or GSA, schedule. We believe that the GSA schedule facilitates our sales to United States government agencies. The loss of the GSA schedule covering our software products and related services could adversely affect our results of operations.

• We must comply with complex federal procurement laws and regulations in connection with government contracts, which may impose added costs on our business.

• Some of our government business requires that we maintain facility security clearances, and requires some of our employees to maintain individual security clearances. If we were to lose these clearances, our government business would decline.

• The federal government audits and reviews the performance of federal contractors on contracts, pricing practices, cost structure, and compliance with applicable laws, regulations, and standards. An audit of our work could result in a finding that we overcharged the government, which could result in an adjustment to our previously reported operating results. If a government audit uncovers improper or illegal activities, we may be subject to civil and criminal penalties and administrative sanctions, including termination of contracts, forfeiture of profits, suspension of payments, fines, and suspension or debarment from doing business with United States federal government agencies.

• Some of our government contracts are firm fixed-price contracts. To the extent that the assumptions we have used in pricing these contracts prove inaccurate, we could incur and accrue losses on contracts, which would adversely affect our operating results.

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• A portion of our sales to the United States government are made indirectly as a subcontractor to another government contractor, referred to as the prime contractor, who has the direct relationship with the government. We also team with prime contractors to bid on competitive government opportunities for which we hope to serve as a subcontractor. If prime contractors lose existing business on which we serve as a subcontractor, or fail to win the competitive bids on which we team with them, our government business would be hurt.

• We could face expense and delay if any of our competitors, or competitors of the prime contractors to which we serve as a subcontractor, protest or challenge contract awards made to us or our prime contractors pursuant to competitive bidding.

• Federal government contracts contain provisions and are subject to laws and regulations that provide government clients with rights and remedies not typically found in commercial contracts. These rights and remedies allow government clients, among other things, to terminate existing contracts, with short notice, for convenience without cause; reduce or modify contracts or subcontracts; and claim rights in products, systems, and technology produced by us.

If our newest software products, particularly those targeted primarily for enterprises and United States government agencies, do not gain widespread market acceptance, our revenue might not increase and could even decline.

We expect to continue to derive a substantial portion of our revenue in the future from sales to enterprises and United States government agencies of our Application Performance Management and Network Operations software product offerings. Our business depends on customer acceptance of these software products and our revenue may not increase, or may even decline, if our target customers do not adopt and expand their use of our software products.

We may not be able to grow our business if service providers do not buy our products.

An element of our strategy is to continue selling to service providers our Network Planning and Design and our Network Operations software products. Accordingly, if our products fail to perform favorably in the service provider environment, or fail to gain wider adoption by service providers, our business and future operating results could suffer.

Our lengthy and variable sales cycle makes it difficult to predict operating results.

It is difficult for us to forecast the timing and recognition of revenue from sales of our software products because prospective customers often take significant time evaluating our software products before licensing them. The period between initial customer contact and a purchase by a customer may vary from three months to more than a year. During the sales process, the customer may decide not to purchase or may reduce proposed orders of our software products for various reasons, including changes in budgets and purchasing priorities. Our prospective customers routinely require education regarding the use and benefit of our software products. This may also lead to delays in receiving customers’ orders.

Our ability to increase our sales may be impaired if we do not expand and manage our indirect distribution channels.

To increase our sales, we must, among other things, further expand and manage our indirect distribution channels, which consist primarily of international distributors, OEMs and resellers. If we are unable to expand and manage our relationships with our distributors, our distributors are unable or unwilling to market and sell our software products effectively, or we lose existing distributor relationships, we might not be able to increase our revenue. Our international distributors, OEMs and resellers have no obligation to market or purchase our software products. In addition, they could partner with our competitors, bundle or resell competitors' products, or internally develop products that compete with our software products.

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We may not be able to successfully manage our expanding operations, which could impair our ability to operate profitably.

We may be unable to operate our business profitably if we fail to manage our growth. Our growth has sometimes strained, and may in the future continue to strain, our managerial, administrative, operational, and financial resources and controls. We plan to continue to expand our operations and increase the number of our full-time employees. Our ability to manage growth may depend in part on our ability to continue to enhance our operating, financial, and management information systems and have expanded facility capacities to accommodate growth. Our personnel, systems, and controls may not be adequate to support our growth. In addition, our revenue may not continue to grow at a sufficient rate to absorb the costs associated with a larger employee base and expanded facilities.

If we are unable to introduce new and enhanced products on a timely basis that respond effectively to changing technology, our revenue may decline.

Our market is characterized by rapid technological change, changes in customer requirements, frequent new product and service introductions and enhancements, and evolving industry standards. If we fail to develop and introduce new and enhanced software products on a timely basis that respond to these changes, our software products could become obsolete, demand for our software products could decline and our revenue could fall. Advances in network management technology, software engineering, and simulation technology, or the emergence of new industry standards, could lead to new competitive products that have better performance, more features, or lower prices than our software products and could render our software products unmarketable.

Our future revenue is substantially dependent upon our existing customers continuing to license additional software, renew maintenance agreements, and purchase additional services.

Our existing customers have traditionally generated additional revenue from consulting services, renewed maintenance agreements, and purchase of additional software licenses, which represents a majority of our annual revenue. The maintenance agreements are generally renewable at the option of the customers and there are no mandatory payment obligations or obligations to license additional software. In addition, customers may decide not to purchase additional software products or related services. If our existing customers fail to renew their maintenance agreements or purchase additional software products or related services, our revenue could decrease.

Increases in professional services revenue as a percentage of total revenue could decrease overall margin.

We realize significantly lower margin on professional service revenue than we do on other types of revenue. As a result, if professional services revenue increases as a proportion of total revenue, our gross margin will be lower.

Professional services accounted for 27.4%, 25.1% and 26.2% of our total revenue for fiscal 2008, 2007 and 2006, respectively.

If we fail to retain our key personnel and attract and retain additional qualified personnel, we might not be able to maintain our current level of revenue.

Our future success and our ability to maintain our current level of revenue depends upon the continued service of our executive officers and other key sales and research and development personnel. The loss of any of our key employees, in particular Marc A. Cohen, our Chairman of the Board and Chief Executive Officer, who is also acting as our principal sales executive, and Alain J. Cohen, our President and Chief Technology Officer, could also adversely affect our ability to pursue our growth strategy. We do not have employment agreements or any other arrangements that obligate any of our officers or key employees to remain with us.

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We must also continue to hire highly qualified individuals, particularly software engineers and sales and marketing personnel. Our failure to attract and retain technical personnel for our research and development activities, consulting services, and technical support teams may limit our ability to develop new software products or software product enhancements. Competition for these individuals is intense, and we may not be able to attract and retain additional highly qualified personnel in the future. In addition, limitations imposed by federal immigration laws and the availability of visas could impair our ability to recruit and employ skilled technical professionals from other countries to work in the United States.

Our international operations subject our business to additional risks, which could cause our sales or profitability to decline.

In fiscal 2008, 20.2% of our revenue, or $20,506, was generated from customers outside the United States. We plan to increase our international sales activities, but these plans are subject to a number of risks that could cause our sales to decline or could otherwise cause a decline in profitability. These risks include:

• difficulty in attracting distributors that will market and support our software products effectively;

• greater difficulty in accounts receivable collection and longer collection periods;

• the need to comply with varying employment policies and regulations that could make it more difficult and expensive to manage our employees if we need to establish more direct sales or support staff outside the United States;

• potentially adverse tax consequences;

• the effects of currency fluctuations; and

• political and economic instability.

We expect to face increased competition, which could cause us to lose sales, resulting in lower profitability.

Increasing competition in our market could cause us to lose sales and become unprofitable. We believe that the market for intelligent network management software is likely to become more competitive as it evolves and the demand for intelligent network management software products continues to increase. At least one of our current competitors and many of our potential competitors are larger and have substantially greater financial and technical resources than we do. In addition, it is possible that other vendors as well as some of our customers or distributors may develop and market software products that compete with our software products in the future.

If our software products contain errors and we are unable to correct those errors, our reputation could be harmed and our customers could demand refunds from us or assert claims for damages against us.

Our software products could contain significant errors or bugs that may result in:

• the loss of or delay in market acceptance and sales of our software products;

• the delay in introduction of new software products or updates to existing products;

• diversion of our resources;

• injury to our reputation; and

• increased support costs.

Bugs may be discovered at any point in our software's life cycle. We expect that errors in our software may be found in the future, particularly in new software product offerings and new releases of our current software products.

Because our customers use our software products to manage networks that are critical to their business operations, any failure of our software products could expose us to product liability claims. In addition, errors in our software products could cause our customers’ networks and systems to fail or compromise their data, which

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could also result in liability to us. Product liability claims brought against us could divert the attention of management and key personnel, could be expensive to defend, and may result in adverse settlements and judgments.

Our software products rely on our intellectual property, and any failure to protect our intellectual property could enable our competitors to market products with similar features that may reduce our revenue and could allow the use of our software products by users who have not paid the required license fee.

If we are unable to protect our intellectual property, our competitors could use our intellectual property to market products similar to our software products, which could reduce our revenue. In addition, we may be unable to prevent the use of our software products by persons who have not paid the required license fee, which could reduce our revenue. Our success and ability to compete depend substantially upon the internally developed technology that is incorporated in our software products. Policing unauthorized use of our software products is difficult, and we may not be able to prevent misappropriation of our technology, particularly in foreign countries where the laws may not protect our proprietary rights as fully as those in the United States. Others may circumvent the patents, copyrights, and trade secrets we own. In the ordinary course of business, we enter into a combination of confidentiality, non-competition, and non-disclosure agreements with our employees.

These measures afford only limited protection and may be inadequate, especially because our employees are highly sought after and may leave our employ with significant knowledge of our proprietary information. In addition, any confidentiality, non-competition and non-disclosure agreements we enter into may be found to be unenforceable, or our copy protection mechanisms embedded in our software products could fail or could be circumvented.

Our software products employ technology that may infringe on the proprietary rights of others, and, as a result, we could become liable for significant damages.

We expect that our software products may be increasingly subject to third-party infringement claims as the number of competitors in our industry segment grows and the functionalities of products in different industry segments overlap.

Regardless of whether these claims have any merit, they could:

• be time-consuming to defend;

• result in costly litigation;

• divert our management's attention and resources;

• cause us to delay or cease product shipments; or

• require us to enter into royalty or licensing agreements.

These royalty or licensing agreements may not be available on terms acceptable to us, if at all. A successful claim of product infringement against us or our failure or inability to license the infringed or similar technology could adversely affect our business because we would not be able to sell the affected software solution or product without redeveloping it or incurring significant additional expense.

Future interpretations of existing accounting standards could adversely affect our operating results.

The Securities and Exchange Commission, American Institute of Certified Public Accountants and various other authoritative accounting bodies continue to issue interpretations and guidance for applying the relevant standards to a wide range of sales contract terms and business arrangements that are prevalent in the software industry. Future interpretations of existing accounting standards or changes in our business practices could result in changes in our revenue recognition accounting policies that could have a material adverse effect on our results of operations.

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As with other software vendors, we may be required to delay revenue recognition into future periods, which could adversely affect our operating results.

We have in the past had to, and in the future may have to, defer recognition for license fees due to several factors, including whether:

• software arrangements include undelivered elements for which we do not have vendor specific evidence of fair value;

• we must deliver services for significant customization, enhancements and modifications of our software;

• the transaction involves material acceptance criteria or there are other identified product-related issues;

• the transaction involves contingent payment terms or fees;

• we are required to accept a fixed-fee services contract; or

• we are required to accept extended payment terms.

Because of the factors listed above and other specific requirements under accounting principles generally accepted in the United States of America for software revenue recognition, we must have very precise terms in our software arrangements in order to recognize revenue when we initially deliver software or perform services. Negotiation of mutually acceptable terms and conditions can extend the sales cycle, and sometimes we do not obtain terms and conditions that permit revenue recognition at the time of delivery.

If we undertake acquisitions, they may be expensive and disruptive to our business and could cause the market price of our common stock to decline.

We completed our acquisition of specified assets of Network Physics in October 2007. We may continue to acquire or make investments in companies, products or technologies if opportunities arise. Any acquisition could be expensive, disrupt our ongoing business, distract our management and employees, and adversely affect our financial results and the market price of our common stock. We may not be able to identify suitable acquisition or investment candidates, and if we do identify suitable candidates, we may not be able to make these acquisitions or investments on commercially acceptable terms or at all. If we make an acquisition, we could have difficulty integrating the acquired technology, employees, or operations. In addition, the key personnel of the acquired company may decide not to work for us.

We also expect that we would incur substantial expenses if we acquire other businesses or technologies. We might use cash on hand, incur debt, or issue equity securities to pay for any future acquisitions. If we issue additional equity securities, our stockholders could experience dilution and the market price of our stock may decline.

Our software products are subject to changing computing environments, including operating system software and hardware platforms, which could render our products obsolete.

The evolution of existing computing environments and the introduction of new popular computing environments may require us to redesign our software products or develop new software products. Computing environments, including operating system software and hardware platforms, are complex and change rapidly. Our software products are designed to operate in currently popular computing environments. Due to the long development and testing periods required to adapt our software products to new or modified computing environments, our research and development efforts could be distracted and we could experience significant delays in software product releases or shipments, which could result in lost revenue and significant additional expense.

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Due to recent uncertainties in the credit markets, we have been unable to liquidate some holdings of our auction rate securities and as a result, we have incurred unrealized losses from these investments. In addition, given the complexity of auction rate securities and their valuations, our estimates of their fair value may differ from the actual amount we would be able to collect in an ultimate sale.

We invest in auction rate securities as part of our cash management program. Auction rate securities are long-term debt instruments that provide liquidity through a Dutch-auction process that resets the applicable interest rate at pre-determined calendar intervals, generally every 28 days. This mechanism is intended to allow investors to roll-over their holdings and continue to own their respective securities or liquidate their holdings by selling their securities at par value.

Recent uncertainties in the credit markets have prevented us from liquidating our holdings of auction rate securities because the amount of securities submitted for sale during the auction exceeded the amount of purchase orders. As of March 31, 2008, we held securities with a face value of $8,800 that had experienced these “failed auctions”. On May 21, 2008, we were able to liquidate $1,500 of the $8,800 held as of March 31, 2008 at the face value plus accrued interest. We continue to hold the remaining securities. We are owed interest at a higher rate on auction rate securities as to which the auctions have failed than similar securities for which auctions have cleared. These investments consist of highly rated non-mortgage related auction rate securities and are insured against loss of principal and interest by bond insurers whose AAA ratings are under review. Additionally, a significant portion of the collateral underlying the auction rate securities we hold is backed by the Department of Education.

It is uncertain when the liquidity issues relating to these investments will improve. Although we do not currently anticipate having to sell these securities in order to operate our business, if that were to change, or if the liquidity issues continue over a prolonged period, we might be unable to liquidate some holdings of our auction rate securities and, as a result, might suffer losses from these investments. In addition, given the complexity of auction rate securities and their valuations, our estimates of their fair value may differ from the actual amount we would be able to collect in an ultimate sale. We determined that fair value of the auction rate securities was $8,419 at March 31, 2008, and accordingly we recorded a temporary impairment of $381, which reduced other comprehensive income on our consolidated balance sheets. If the credit ratings of the issuer, the bond insurer or the collateral deteriorate or the carrying value of the investments decline for any other reason, we may need to further adjust the carrying value of these investments.

ITEM 1B. UNRESOLVED STAFF COMMENTS

Not applicable.

ITEM 2. PROPERTIES

Our corporate office and principal facility is located in Bethesda, Maryland and consists of approximately 82,000 square feet of office space held under two leases. The lease for 60,000 square feet expires on January 31, 2011, exclusive of renewal options, and the lease for 22,000 square feet expires on January 31, 2016, exclusive of renewal options. We also lease office space in the following locations: Cary, North Carolina; Dallas, Texas; Santa Clara, California; Nashua, New Hampshire; Ghent, Belgium; Paris, France; Slough, United Kingdom; Singapore; and Beijing China.

ITEM 3. LEGAL PROCEEDINGS

We are involved in various claims and legal proceedings arising from our normal operations. We do not regard any of those matters to be material.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matters were submitted to a vote of our stockholders during the fourth quarter of fiscal 2008.

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PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Market for Common Stock

Our common stock began trading on the NASDAQ Global Market on August 2, 2000, under the symbol “OPNT.” The following table sets forth, on a per share basis, for the indicated periods, the high and low intra-day sale prices of our common stock as reported by the NASDAQ Global Market.

Quarter ended	High		Low
June 30, 2006	$	15.00	$	10.07
September 30, 2006		14.29		10.74
December 31, 2006		16.82		12.89
March 31, 2007		15.98		12.86
June 30, 2007		14.17		9.90
September 30, 2007		11.92		9.41
December 31, 2007		12.89		8.07
March 31, 2008		9.50		7.52

Number of Stockholders of Record

As of June 2, 2008, we had approximately 119 holders of record of common stock. Because many of these shares are held by brokers and other institutions on behalf of stockholders, we are unable to estimate the total number of stockholders represented by these holders of record.

Securities Authorized for Issuance Under Equity Compensation Plans

The following table provides information regarding our current equity compensation plans as of March 31, 2008.

Equity Compensation Plan Information

Plan Category	Number of securities to be issued upon exercise of outstanding options (a)	Weighted- average exercise price of outstanding options		Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))
				(1)
Equity compensation plans approved by security holders	2,720,121	$	10.79	2,180,225	(2)
Equity compensation plans not approved by security holders	—		—	—
Total	2,720,121	$	10.79	2,180,225

(1) In addition to being available for future issuance upon exercise of options that may be granted after March 31, 2008, all of the remaining 2,167,321 shares under our Amended and Restated 2000 Stock Incentive Plan, or the 2000 plan, may instead be issued in the form of restricted stock, stock appreciation rights or other stock-based awards.

(2) Includes 12,904 shares issuable under our 2000 Employee Stock Purchase Plan, including shares issuable in connection with the current offering period which ends on July 31, 2008. Also includes 2,167,321 shares issuable under the 2000 Plan. Under the 2000 Plan, the number of shares available for issuance automatically increases on the first trading day of each calendar year by an amount equal to 3% of the

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shares of Common Stock outstanding on the last trading day of the preceding calendar year, not to exceed an annual increase of 1,000,000 shares, or a lesser amount determined by the Board of Directors, or the Board. The Board did not approve any increase in shares for issuance on the first trading day of calendar year 2008.

Dividends

We have never paid or declared any cash dividends on our common stock or other securities. Our loan agreement with a commercial bank prohibits the payment of dividends. We currently intend to retain all future earnings, if any, for use in the operation of our business, and therefore, do not anticipate paying cash dividends in the foreseeable future.

Use of Proceeds

In August 2000, we closed an initial public offering of our common stock. The Registration Statement on Form S-1 (No. 333-32588) was declared effective by the Securities and Exchange Commission on August 1, 2000 and we commenced the offering on that date. After deducting the underwriting discounts and commissions and the offering expenses, the net proceeds from the offering were approximately $54,114.

As of March 31, 2008, the proceeds from the offering had been used to fund approximately (i) $10,005 of acquisition and acquisition related expenses for specified assets of Network Physics, Inc. (ii) $10,561 of general corporate expenses and working capital (iii) $22,548 for capital expenditures and leasehold improvements (iv) $6,200 of acquisition and acquisition-related expenses for the NetMaker acquisition, (v) $1,400 of the purchase price for WDM NetDesign and (vi) $3,400 of acquisition and acquisition-related expenses for the Altaworks acquisition. None of these amounts were paid directly or indirectly to any director, officer, or general partner of us or their associates, persons owning 10% or more of any class of our equity securities, or any affiliate of us. As of March 31, 2008, there were no remaining proceeds from the offering.

Stock Repurchase Plan

Issuer Purchases of Equity Securities

Period	Total Number of Shares Purchased	Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs (1)	Maximum Number of Shares That May Yet Be Purchased Under the Plans or Programs
January 1 – 31, 2008	—		—	—	37,114
February 1 – 28, 2008	72,801	$	8.05	72,801	964,313
March 1 – 31, 2008	—		—	—	964,313
Total	72,801	$	8.05	72,801	964,313

(1) On January 31, 2005, we announced a stock repurchase program pursuant to which we are authorized to purchase up to 1,000,000 shares of common stock from time to time on the open market or in privately negotiated transactions. This program does not have a specified termination date. On February 4, 2008, we announced that our Board of Directors approved an increase of an additional 1,000,000 shares under our stock repurchase program. Any repurchased shares will be available for use in connection with our stock plans or other corporate purchases.

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ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA

(dollars and share amounts in thousands, except per share data)

The following selected consolidated financial data should be read in conjunction with our consolidated financial statements and the related notes and ‘‘Management’s Discussion and Analysis of Financial Condition and Results of Operations’’ included elsewhere in this Annual Report. The statement of operations data for the years ended March 31, 2008, 2007, and 2006, and the balance sheet data as of March 31, 2008 and 2007, are derived from our audited consolidated financial statements included in this Annual Report. The balance sheet data as of March 31, 2006, 2005 and 2004 and the statement of operations data for the years ended March 31, 2005 and 2004 are derived from our consolidated financial statements that are not included in this Annual Report. Historical results are not necessarily indicative of results that may be expected for any future period.

	Year Ended March 31,
	2008			2007		2006			2005		2004
	(in thousands, except per share data)
Statement of Operations Data:
Revenue:
New software licenses	$	38,838		$	43,186	$	31,976		$	29,507	$	28,164
Software license updates, technical support and services		34,787			28,062		24,226			19,805		15,152
Professional services		27,721			23,882		19,913			14,931		13,137
Total revenue		101,306			95,130		76,115			64,243		56,453
Cost of revenue:
New software licenses		1,035			638		657			778		831
Software license updates, technical support and services		4,514			3,264		2,637			2,348		1,730
Professional services		19,154			15,904		13,705			10,154		7,510
Amortization of acquired technology		1,486			723		832			651		509
Total cost of revenue		26,189			20,529		17,831			13,931		10,580
Gross profit		75,157			74,601		58,284			50,312		45,873
Operating expenses:
Research and development		27,471			21,688		18,643			15,455		13,040
Sales and marketing		39,357			34,133		26,300			22,803		19,446
General and administrative		11,747			10,994		13,375			9,742		5,717
Total operating expenses		78,575			66,815		58,318			48,000		38,203
(Loss) income from operations		(3,418	)		7,786		(34	)		2,312		7,670
Interest and other income, net		3,579			3,834		2,680			1,384		594
Income before (benefit) provision for income taxes		161			11,620		2,646			3,696		8,264
(Benefit) provision for income taxes		(372	)		3,655		509			1,644		2,506
Net income	$	533		$	7,965	$	2,137		$	2,052	$	5,758
Basic net income per common share	$	0.03		$	0.39	$	0.10		$	0.10	$	0.29
Diluted net income per common share	$	0.03		$	0.38	$	0.10		$	0.10	$	0.28
Basic weighted average shares outstanding		20,342			20,358		20,374			20,158		19,697
Diluted weighted average shares outstanding		20,621			21,206		20,604			20,624		20,650
Balance Sheet Data (end of period):
Cash, cash equivalents and short-term and long-term marketable securities	$	85,829		$	91,381	$	85,861		$	82,185	$	81,493
Total assets		153,538			147,658		127,347			125,185		116,682
Long-term debt		—			—		103			150		300
Total stockholders’ equity		110,645			112,871		99,398			99,965		96,371

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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(dollars and share amounts in thousands, except per share data)

You should read the following discussion and analysis in conjunction with our consolidated financial statements and the related notes included elsewhere in this Annual Report on Form 10-K. This discussion and analysis contains forward-looking statements that involve risks, uncertainties, and assumptions. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of certain factors, including, but not limited to, those set forth under ‘‘Item 1A. Risk Factors’’ and elsewhere in this Annual Report on Form 10-K.

Overview

OPNET Technologies, Inc. is a provider of software products and related services for managing networks and applications. Our software products and related services address: application performance management, network operations, capacity management, and network research and development. Our customers include corporate enterprises, government and defense agencies, network service providers, and network equipment manufacturers. Our software products and related services are designed to help our customers make better use of resources, reduce operational problems and improve competitiveness.

We operate in one reportable industry segment, the development and sale of computer software programs and related services. Our operations are principally in the United States, and we have subsidiaries in Australia, Belgium, France, Germany, the United Kingdom and Singapore. The wholly-owned subsidiary in Singapore was registered in August 2007. We primarily depend upon our direct sales force to generate revenue in the United States. Sales outside the United States are made through our international sales team as well as third-party distributors and value-added resellers, who generally are responsible for providing technical support and service to customers within their territory.

Our revenue is derived from three primary sources: (1) new software licenses, (2) software license updates, technical support and services, and (3) professional services, which include consulting and training services for customers without current maintenance agreements. New software license revenue represents all fees earned from granting customers licenses to use our software and fees associated with hardware necessary to run our software, and excludes revenue derived from software license updates, which are included in software license updates, technical support, and services revenue. Our software master license agreement provides our customers with the right to use our software either perpetually, which we refer to as perpetual licenses, or during a defined term, generally for one to four years, which we refer to as term licenses. For the twelve months ended March 31, 2008, perpetual licenses represented approximately 97% of software license revenue. Substantially all of our software license arrangements include both perpetual and/or term licenses and software license updates, technical support, and services. Software license updates, technical support, and services revenue represent fees associated with the sale of unspecified license updates, technical support and when-and-if available training under our maintenance agreements. We offer professional services, under both time-and-material and fixed-price agreements, primarily to facilitate the adoption of our software products.

We consider our consulting services to be an integral part of our business model as they are centered on our software product offerings. Because our consulting services facilitate the adoption of our software product offerings, we believe that they ultimately generate additional sales of software licenses.

The key strategies of our business plan include increasing sales to existing customers, increasing deal size by selling modules and introducing new software products, improving our sales and marketing execution, establishing alliances to extend our market reach, increasing our international presence and increasing profitability. We have focused our sales, marketing, and other efforts on corporate enterprise and United States government opportunities, and to a much lesser extent, service provider and network equipment manufacturer

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opportunities. Our focus and strategies are designed to increase revenue and profitability. Because of the uncertainty surrounding the amount and timing of revenue growth, we expect to need to closely control the increases in our total expenses as we implement these strategies.

In March 2008, we launched an initiative to extend our market reach by establishing sales alliances with third parties called the Synergy program. The Synergy program is designed to increase the penetration of our software products into mid-sized organizations. The Synergy program’s initial focus will be on selling our application performance management software products, including ACE Live that provides end-user experience monitoring and real-time application performance analytics, as we believe these software products are particularly well-suited for channel distribution.

In March 2008, we restructured our worldwide distribution agreement with Cisco Systems, or Cisco. Under the terms of the restructured agreement, Cisco will distribute our software products as OPNET-branded software products.

In April 2007, we entered into a multi-year worldwide distribution agreement with Computer Associates that built upon the referral agreement entered into with Computer Associates in November of 2005. Under the terms of the agreement, Computer Associates is distributing our IT Guru Systems Planner Solution as a CA-branded solution and we are collaborating with Computer Associates to offer professional services and support.

In November 2005, we entered into a global sales and marketing referral agreement with Computer Associates. Under the terms of the agreement, Computer Associates began marketing our systems performance and capacity modeling technologies as OPNET-branded software products. Computer Associates began sales of our products under this agreement in the third quarter of fiscal 2006.

Acquisition of Specified Assets of Network Physics

On October 19, 2007, we completed the acquisition of specified assets of Network Physics for a total purchase price of $10,005. We paid the purchase price in cash from working capital. As a result of the acquisition, we acquired technology that enabled us to accelerate the release of our ACE Live software product, which had been in development since the summer of 2006 and were under development to address the appliance-based end user monitoring market. In addition to the technology acquired from Network Physics, we also acquired several non-executive employees to provide us with greater engineering depth and technical expertise. We did not acquire Network Physics’ value-added reseller agreements or associated relationships, which generated substantially all of their revenue.

The purchase of specified assets of Network Physics did not constitute the purchase of a business for purposes of SEC reporting or for purposes of financial reporting under SFAS 141, “Business Combinations” or EITF No. 98-3, “Determining Whether a Nonmonetary Transaction Involves Receipt of Productive Assets or of a Business”. Most key attributes of Network Physics necessary for continuity of operations did not remain with the acquired assets after the acquisition including a portion of the non-executive employee base, executive employees, market distribution systems and customer maintenance contracts. Furthermore, the transferred set of Network Physics’ activities could not sustain normal operations for the purpose of providing a return to investors.

Management believes that financial information related to Network Physics prior to the acquisition would not be material or relevant to an understanding of our operations subsequent to the asset acquisition for several key reasons. First, value-added resellers used by Network Physics to market and distribute their products to customers and generate substantially all of their revenue were not acquired. Second, significant changes were made to the purchased technology in order to distribute the technology to our customers. Third, our decision to purchase specified assets of Network Physics was based on the end-user appliance based market opportunity that we believe exists and the complementary nature of our existing performance management software products to

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the end-user appliance based market and was not based on the nature and amount of revenue historically generated by Network Physics. Finally, we did not acquire the rights to any continuing revenue stream including customer maintenance contracts.

Summary of Our Fiscal 2008 Financial Performance

During fiscal 2008, our income from operations and net income decreased as compared to fiscal 2007. The decrease in profitability was primarily the result of an increase in total operating expenses and a decrease in license revenue, which have higher gross margins than our other sources of revenue. The increase in operating expenses was largely the result of increased personnel costs and costs related to acquiring technology necessary to pursue our growth strategies. The decrease in license revenue was predominantly the result of a decrease in license sales to United States and international government customers.

Our cash, cash equivalents and marketable securities balance as of March 31, 2008 decreased as compared to March 31, 2007 largely due to the acquisition of specified assets of Network Physics for a total cash purchase price of $10,005. Our deferred revenue as of March 31, 2008 increased as compared to March 31, 2007, largely due to an increase in sales of software license updates, technical support and services arrangements.

The following table summarizes information on some of our key financial and operating metrics.

	Fiscal 2008			Fiscal 2007			Amount Change			Percentage Change
	(dollars in thousands, except per share data)
Operations Data:
Total revenue	$	101,346		$	95,130		$	6,216		6.5	%
Total cost of sales	$	26,189		$	20,529		$	5,660		27.6	%
Gross profit	$	75,157		$	74,601		$	556		0.7	%
Gross profit as a percentage of total revenue (gross margin)		74.2	%		78.4	%
Total operating expenses	$	78,575		$	66,815		$	11,760		17.6	%
(Loss) income from operations	$	(3,418	)	$	7,786		$	(11,204	)	(143.9	)%
(Loss) income from operations as a percentage of total revenue (operating margin)		(3.4	)%		8.2	%
Net income	$	533		$	7,965		$	(7,432	)	(93.3	)%
Diluted net income per common share	$	0.03		$	0.38		$	(0.35	)	(92.1	)%
Total employees (period end)		560			490			70		14.3	%
Total average employees		560			487			73		15.0	%
Total consultants (period end)		126			111			15		13.5	%
Total period end quota-carrying sales persons (excluding managers and inside sales representatives)		70			54			16		29.6	%
Financial Condition and Liquidity Data:
Cash, cash equivalents, and short-term and long-term marketable securities (period end)	$	85,829		$	91,381		$	(5,552	)	(6.1	)%
Cash flows from operating activities	$	12,900		$	6,201		$	6,699		108.0	%
Total deferred revenue (period end)	$	30,494		$	23,307		$	7,187		30.8	%

We achieved growth in total revenue during fiscal 2008 driven by growth in revenue from software license updates, technical support and services and professional services, partially offset by a decrease in revenue from new software licenses. The growth in revenue from software license updates, technical support and services and professional services was generated by growth in sales to corporate enterprises, and to a lesser extent, sales to United States government customers. The decrease in revenue from new software licenses was largely due to a decrease in sales to Unites States and international government customers. While total revenue generated from sales to United States government customers increased in absolute dollars by $467 during fiscal 2008, the percentage of revenue from United States government customers decreased to 41% in fiscal 2008 from 43% in fiscal 2007.

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Our international revenue increased 2.2% to $20,506, or 20.2% of total revenue, for fiscal 2008. We expect revenue from sales outside the United States to continue to account for a significant portion of our total revenue in the future. International revenue in fiscal 2008 benefited from a more experienced direct sales force and our increased focus on sales to corporate enterprises. Sales to corporate enterprises accounted for the largest portion of our international revenue during fiscal 2008. We believe that continued growth and profitability will require further expansion of our sales, marketing and customer service functions in international markets.

During fiscal 2008, gross profit increased 0.7% to $75,157. While our gross profit increased in absolute dollars during fiscal 2008, our gross margin decreased to 74.2% for fiscal 2008 from 78.4% in fiscal 2007. The decrease in our gross margin was primarily due to a decrease in license revenue of $4,348 in fiscal 2008, which is a more profitable source of our revenue. The decrease in license revenue was largely the result of a decrease in license sales to United States and international government customers, which was partially offset by an increase in license sales to corporate enterprise customers.

As a software company, we believe that our business model has the potential to generate operating margins of 17% or more. Our operating margin decreased to negative 3.4% during fiscal 2008 from positive 8.2% during fiscal 2007. The decrease in operating margin was largely the result of an increase in research and development expenses of $5,783, an increase in sales and marketing expenses of $5,224 and a decrease in license revenue of $4,348.

Trends That May Affect Our Business and Future Results

While we anticipate a challenging economic environment in the near term, we believe the recent expansion of our network applications portfolio into the appliance-based end user monitoring space, recent enhancements to our core software products, such as Panorama, and our focus on improving the productivity of our sales force and controlling operating expenses has us well positioned to improve our profitability as compared to fiscal 2008. The demand for our software products and related services by corporate enterprise and United States government customers has been much stronger than the demand from service providers and network equipment manufacturers, which is consistent with our expectations. We believe that lower business activity with service providers and network equipment manufacturers is primarily due to the challenging economy in which these businesses operate, which we expect to continue, at least in the near term. Consequently, our revenue growth and profitability depend, in significant part, upon our ability to sell in a challenging economic environment and the economic health of corporate enterprises and United States government agencies.

We intend to take advantage of our market position and expanded software product portfolio to increase both total revenue and new software license revenue. We anticipate the following trends and patterns over the next several quarters:

Total Revenue. We currently expect future growth in total revenue to come from sales to corporate enterprise customers and the United States government. Based on historic patterns of demand, we expect revenue from sales to service providers and network equipment manufacturers to fluctuate from quarter to quarter with the potential for periods of declining license revenue. Our ability to increase professional service revenue will depend upon our ability to generate revenue from contracts with the United States government and to attract and retain additional qualified consultants, including those with security clearances. As a result of these factors, we believe that we may experience fluctuations in quarterly revenue.

International Revenue. Our international sales are affected by the mix of direct and indirect sales channels and our focus on increasing sales to corporate enterprises. We believe that these factors affect the timing of sales orders as well as our ability to forecast future revenue. We expect overall international revenue growth in fiscal 2009; however, we expect to continue experiencing quarterly fluctuations of international revenue.

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Gross Profit Margin. We anticipate modest increases in the cost of professional services primarily from hiring additional consultants to support demand for our services. Our overall gross profit margin will be affected by the profitability of individual consulting engagements as well as the amount of gross profit from the sale of new software licenses and software license updates, technical support and services, which have substantially higher gross margins than the gross margin on professional services revenue. Our ability to increase gross profit margin will depend largely upon our ability to increase revenue generated from the sale of new software licenses, which declined by $4,348 in fiscal 2008 as compared to fiscal 2007.

Research and Development Expenses. We believe that continued investment in research and development will be required to maintain our competitive position and broaden our software product lines, as well as enhance the features and functionality of our current software products. We made significant personnel investments in research and development during fiscal 2008. We expect that the absolute dollar amount of these expenses will continue to grow but generally decrease as a percentage of total revenue in future periods. Our ability to decrease these expenses, as a percentage of revenue, will depend upon increases in our revenue growth, among other factors.

Sales and Marketing Expenses. We depend upon our direct sales model to generate revenue and believe that increasing the size of our quota-carrying sales team is essential for long-term growth. We plan to add quota-carrying sales persons during fiscal 2009 to pursue our growth strategies. We anticipate that we will continue to commit substantial resources to sales and marketing in the future. We made significant personnel investments in sales and marketing during fiscal 2008. We expect that the absolute dollar amount of these expenses will continue to grow but generally decrease as a percentage of total revenue in future periods.

General and Administrative Expenses. General and administrative expenses are expected to increase as we continue to expand our operations; however, we expect the dollar amount of these expenditures to decrease as a percentage of total revenue in future periods. Our general and administrative expenses increased 6.8% during fiscal 2008 as compared to fiscal 2007. Our ability to decrease these expenses, as a percentage of revenue, will depend upon increases in our revenue growth, among other factors.

Operating Margin. Since a significant portion of our software license arrangements close in the latter part of each quarter, we may not be able to adjust our cost structure in the short-term to respond to lower than expected revenue, which would adversely impact our operating margin and earnings. Our operating margin decreased to negative 3.4% during fiscal 2008 from positive 8.2% during fiscal 2007. We remain committed to increasing profitability and long-term growth. We do not believe that significant changes to our cost structure are necessary at this time, but we intend to closely control expenses and focus on near-term increases in profitability by increasing sales of new software licenses.

Critical Accounting Policies and Use of Estimates

The accompanying discussion and analysis of our financial condition and results of operations are based upon our audited consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States, or GAAP. The preparation of these financial statements requires that we make estimates and judgments that affect the reported amounts of assets, liabilities, revenue and expenses, and related disclosure of contingent assets and liabilities. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results could differ from the estimates made by management with respect to these and other items that require management’s estimates.

We have identified the accounting policies that are critical to understanding our historical and future performance, as these policies affect the reported amounts of revenue and the more significant areas involving management’s judgments and estimates. These critical accounting policies relate to revenue recognition and

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deferred revenue, stock based compensation, allowance for doubtful accounts, valuation of long-lived assets, including intangible assets and impairment review of goodwill, software development costs, and income taxes. These policies, and our procedures related to these policies, are described in detail below. In addition, please refer to Note 1 to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K for further discussion of our accounting policies.

Revenue Recognition. We derive revenue from three primary sources: (1) new software licenses, (2) software license updates, technical support and services, which include software license update, certain training provided and offered on a when-and-if available basis to customers, and technical support, and (3) professional services, which include consulting and custom training services for customers without a current maintenance agreement. We recognize revenue based on the provisions of the American Institute of Certified Public Accountants Statement of Position, or SOP, No. 97-2, “Software Revenue Recognition,” as amended by SOP No. 98-9, “Modification of SOP No. 97-2, Software Revenue Recognition, With Respect to Certain Transactions,” SOP No. 81-1, “Accounting for Performance of Construction-Type and Certain Production-Type Contracts” and the SEC Staff Accounting Bulletin No. 104, “Revenue Recognition in Financial Statements.”

New Software License Revenue

New software license revenue represents all fees earned from granting customers licenses to use our software, and excludes revenue derived from software license updates, which are included in software license updates, technical support and services revenue. Our new software license revenue consists of perpetual and term license sales of software products. For the twelve months ended March 31, 2008, perpetual licenses represented approximately 97% of software license revenue. New software license revenue is recognized when the following four criteria are met: (i) persuasive evidence of an arrangement exists, (ii) delivery of the software has occurred, (iii) the software license fee is fixed or determinable, and (iv) collectibility is probable. We define each of these four criteria as follows:

• Persuasive evidence of an arrangement exists. For license arrangements with end-users, it is our customary practice to have a written software license agreement, which is signed by both the end user and us, and a purchase order or equivalent. A written contract can be executed based on the customer-specific format or on the standard “shrink wrap” software master license agreement. For those end users who have previously negotiated a software license agreement with us, the initial software license agreement is used as evidence of a written contract. Sales to distributors, resellers, and value-added resellers, which we collectively refer to as resellers, are primarily made outside of North America and are evidenced by a master reseller agreement governing the relationship, which is signed by both the reseller and us, together with a purchase order on a transaction-by-transaction basis. To further evidence an arrangement, our master reseller agreement requires that the reseller provide us copies of the end user’s purchase order and executed copies of the end user’s software master license agreements.

• Delivery has occurred. Physical delivery of our software products to end users or resellers, which are collectively referred to as customers, is generally considered to have occurred upon the transfer of media containing our software products to a common carrier (usually FOB shipping point based on standard agreement terms). Software products may also be delivered electronically to end users. Electronic delivery is deemed to occur after end users have been provided with access codes that allow them to take immediate possession of the software. If a software arrangement includes undelivered software products or services that are essential to the functionality of delivered software products, delivery is not considered to have occurred until these software products or services are delivered.

• The fee is fixed or determinable. It is our policy to not provide customers the right to any adjustments or refund of any portion of their license fees paid, acceptance provisions, cancellation privileges, or rights of return. Our normal payment terms for our software products and services currently range from net 30 days to net 90 days and primarily vary based on the country in which an agreement is executed. Payments that extend beyond our normal payment terms from the contract date but that are due within six months are generally deemed to be fixed or determinable based on our successful collection history

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on such arrangements, and thereby satisfy the required criteria for revenue recognition. Arrangements with payment terms extending beyond six months are considered not to be fixed or determinable, and revenue from such arrangements is recognized as payments become due and payable.

• Collectibility is probable. Collectibility is assessed on a customer-by-customer basis. We typically sell to customers for whom there is a history of successful collection. New customers are subject to a credit review process that evaluates the customer’s ability to pay. If we determine from the outset of an arrangement that collectibility is not probable, revenue is recognized as cash is collected.

In instances when any of the four criteria are not met, we defer recognition of software license revenue until the criteria are met. When the sale of the software product requires us to make significant enhancements, customization or modifications to the software that are essential to its functionality, software license revenue and consulting fees are recognized using contract accounting under SOP 81-1. We estimate the percentage-of-completion, under SOP 81-1, based on its estimate of total hours to complete the project as a percentage of total hours incurred and the estimated hours to complete.

The process of estimation inherent in the application of the percentage-of-completion method of accounting for revenue is subject to judgments and uncertainties and may affect the amounts of software license revenue and professional services revenue under certain contracts and related expenses reported in our consolidated financial statements. A number of internal and external factors can affect our estimates to complete client engagements, including skill level and experience of project managers, staff assigned to engagements and continuity and attrition level of professional services staff. Changes in the estimated stage of completion of a particular project could create variability in our revenue and results of operations if it is required to increase or decrease previously recognized revenue related to a particular project or if it expects to incur a loss on the project.

Software License Updates, Technical Support and Services Revenue

Software license updates, technical support and services revenue represents fees associated with the sale of license updates, training, and technical support, all provided on a when-and-if-available basis (except technical support) under our maintenance agreement. Payments for software license updates, technical support and services on initial order or on renewal are generally made in advance and are nonrefundable. License updates consist of the right to unspecified software updates on a when-and-if-available basis and are typically entered into in connection with the initial software license purchase. License updates, technical support and services may be renewed upon expiration of the term. Customers can purchase license updates separately from technical support and services. Revenue from license updates, technical support and services is deferred and recognized as revenue on a straight-line basis over the term of the maintenance agreement.

Revenue under multiple-element arrangements, which typically include new software licenses, consulting services, training and maintenance agreements sold together, are allocated to each element in the arrangement primarily using the residual method based upon the fair value of the undelivered elements, which is specific to our vendor-specific objective evidence of fair value, or VSOE. This means that we defer revenue from the arrangement fee equivalent to the fair value of the undelivered elements. Discounts, if any, are applied to the delivered elements, usually software licenses, under the residual method. For periodic unspecified product updates and technical support agreements, VSOE is based upon either the renewal rate specified in each contract or the price charged when sold separately. For consulting services and training for customers without a current maintenance agreement, VSOE is based upon the rates charged for these services when sold separately.

If we are unable to establish VSOE for an undelivered post contract support, or PCS, element, for example, in a two-year term license where the license term and PCS are coterminous and no PCS renewal period exists, all revenue is recognized ratably over the contract period. For income statement classification purposes, our allocation methodology is based on VSOE of fair value for our professional services which is determined by the price charged when sold separately, and the contractually stated renewal rates for our PCS, generally 18% to 21% of the license fee paid on perpetual licenses. We use the residual method to allocate any remaining arrangement fee to new software license revenue.

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Professional Services Revenue

Professional services revenue consists of fees from consulting services and training for customers without a current maintenance agreement and is recognized as the services are performed. When we enter into consulting service arrangements that include significant modifications to the software that are essential to the customer’s use and the arrangement is bundled with software, revenue under the entire arrangement is recognized under the percentage-of-completion method. For income statement classification purposes, we have developed a revenue allocation methodology for these arrangements that is consistent with the residual method used, and described under SOP 97-2, when services are not essential to the functionality of the software. In these circumstances, revenue is allocated to the various elements of the arrangement based on our VSOE of fair value and the residual amount is allocated to new software license revenue.

We sell new software licenses, license updates, technical support and services agreements to distributors at predetermined prices. Sales to distributors are not contingent upon resale of the software to the end user. In most cases, we provide license updates, technical support and services agreements directly to distributors and the distributors provide support to the end customer. Revenue from sales to distributors is recorded at the amounts charged to the distributor and in the same manner as new software license, license updates, technical support and services sales sold through our direct sales force. Amounts received in advance of revenue recognition are classified as deferred revenue.

Income Taxes. Effective April 1, 2007, we adopted FASB Interpretation No. 48, “Accounting for Uncertainty in Income Taxes”, or FIN No. 48. As a result of the implementation, we recognized a $653 increase to our liability for unrecognized tax benefits. The portion of the increase that was accounted for as an adjustment to the beginning balance of retained earnings on the balance sheet was $510. The total amount of gross unrecognized tax benefits as of April 1, 2007 was $810. Of this total, $781 (net of federal benefit on state issues) represents the amount of unrecognized tax benefits that, if recognized, would favorably affect the effective income tax rate in any future periods. At March 31, 2008, the gross unrecognized benefit was $838, $808 of which would favorably affect the effective income tax rate in future periods. A reconciliation of the beginning and ending amount of unrecognized tax benefits follows:

Unrecognized tax benefits at April 1, 2007	$	810
Gross increases – tax positions in prior period		—
Gross decreases – tax positions in prior period		(80	)
Gross increases – current period tax positions		79
Settlements		—
Lapse of statute of limitations		—
Foreign currency translation adjustment		29
Unrecognized tax benefits at March 31, 2008	$	838

The following table summarizes the tax years that are either currently under audit or remain open under the statute of limitations and are subject to examination by the tax authorities in the most significant jurisdictions that we operate:

Australia	FY03 – FY08
Belgium	FY04 – FY08
France	FY04 – FY08
Germany	FY04 – FY08
United Kingdom	FY07 – FY08
United States	FY02 – FY03
United States	FY05 – FY08
Maryland	FY04 – FY08
New York	FY07 – FY08

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Our continuing practice is to recognize interest, if any, related to income tax matters in interest expense in our consolidated statements of operations and penalties as part of general and administrative expense in our consolidated statements of operations. In conjunction with the adoption of FIN 48, we recognized $20 and $8 for the payment of interest and penalties, respectively, at April 1, 2007 which is included in accrued interest on the balance sheet. During fiscal 2008, we recognized $6 in potential interest expense associated with uncertain tax positions. The total accrued interest and accrued penalties related to uncertain tax positions at March 31, 2008 is $30 and $2, respectively.

We believe it is reasonably possible that significant changes in the liability for uncertain tax positions will occur in the next twelve months as a result of final decisions related to the voluntary payments of our state and local income taxes and lapse of statute of limitations. In the aggregate, we believe the liability for uncertain tax positions could decrease by $235 in the next twelve months.

The income tax provision includes income taxes currently payable plus the net change during the year in deferred tax assets or liabilities. Deferred tax assets and liabilities reflect the differences between the carrying value under GAAP and the tax basis of assets and liabilities using enacted statutory tax rates in effect for the period in which the differences are expected to reverse. Judgments and estimates are required in the calculation of the deferred tax assets, valuation allowance, accrual of contingencies, research and development tax credits, and foreign tax credits.

Stock-Based Compensation. On April 1, 2006, we adopted SFAS 123R, which revised SFAS 123, “Accounting for Stock-Based Compensation.” Prior to fiscal year 2007 and the adoption of SFAS 123R, we followed the intrinsic value method of accounting for our stock-based employee compensation arrangements as defined by Accounting Principles Board Opinion, or APB, No. 25, “Accounting for Stock Issued to Employees.” We have identified our accounting for stock-based compensation as a critical accounting policy, as this policy affects the reported amount of stock-based compensation expense and involves the use of management’s judgments and estimates. Stock-based compensation expense in connection with our application of SFAS 123R was $929 and $1,208 for fiscal 2008 and 2007, respectively.

SFAS 123R requires an entity to recognize an expense within its income statement for all share-based payment arrangements, which includes employee stock option plans, restricted stock grants, and Employee Stock Purchase Plan, or ESPP. We have elected to continue straight-line amortization of stock-based compensation expense for the entire award over the service period since the awards have only service conditions and graded vesting. Our stock options and nonvested stock do not contain performance conditions. There have been no modifications to awards in 2008 or 2007. We adopted SFAS 123R under the modified prospective method. Under the modified prospective method, SFAS 123R applies to new awards and to awards modified, repurchased, or cancelled after April 1, 2006 as well as to the unvested portion of awards outstanding as of April 1, 2006. Stock-based compensation for unvested awards granted prior to April, 1, 2006 is based upon the grant date fair value of such compensation as determined under pro forma provisions of SFAS No 123.

Our stock option programs are accounted for as equity awards. The expense is based on the grant-date fair value of the options granted, and is recognized over the requisite service period.

To estimate the grant-date fair value of our stock options, we use the Black-Scholes option-pricing model, consistent with that used for pro forma disclosure under SFAS No 123. The Black-Scholes model estimates the per share fair value of an option on its date of grant based on the following: the option’s exercise price; the price of the underlying stock on the date of grant; the estimated dividend yield; a “risk-free” interest rate; the estimated option term; and the expected volatility. For the “risk-free” interest rate, we use a U.S. Treasury bond due in a number of years equal to the option’s expected term. To estimate expected volatility, we analyzed the historic volatility of our common stock. There were no stock options granted in fiscal 2008.

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Compensation cost for stock option grants is recognized on a straight-line basis over the requisite service period for the entire award from the date of grant through the period of the last separately vesting portion of the grant. Compensation cost is recognized within the income statement in the same expense line as the cash compensation paid to the respective employees. SFAS 123R also requires us to estimate forfeitures in calculating the expense related to stock-based compensation. We have concluded that our historical forfeiture rate is the best measure to estimate future forfeitures of granted stock options. The impact on compensation costs due to changes in the expected forfeiture rate will be recognized in the period that they become known. As of March 31, 2008, nonvested stock-based deferred compensation associated with stock options totaled $162, which we expect to be recognized over a weighted average period of 3 months.

Our restricted stock grants are accounted for as equity awards. The expense is based on the price of our common stock, and is recognized on a straight-line basis over the requisite service period. We did not grant any restricted stock prior to February 2006. The restricted stock agreements do not contain any post-vesting restrictions. We have concluded that our historical forfeiture rate is the best measure to estimate future forfeitures of granted stock options. As of March 31, 2008, nonvested stock-based deferred compensation associated with restricted stock totaled $1,699, which we expect to be recognized over a weighted average period of 1.3 years.

Our 2000 Employee Stock Purchase Plan, or ESPP, provides all eligible employees to collectively purchase up to a total of 450 shares of our common stock. An employee may authorize a payroll deduction up to a maximum of 10% of his or her compensation during the plan period. The purchase price for each share purchased is the lesser of 85% of the closing price of the common stock on the first or last day of the plan period. The plan period for the ESPP ends in January and July of each year. The expense is calculated based on the difference between the fair market value of the shares purchased at the close of each plan period and the discounted price paid by the employee, and that expense is recognized on a straight-line basis over the plan period. As of March 31, 2008, nonvested stock-based deferred compensation associated with ESPP totaled $139 and is expected to be recognized over a weighted average period of 4 months.

Auction Rate Securities. As of March 31, 2008, we held auction rate securities, or ARS, totaling $8,800 at par value, which are classified as available for sale securities and short-term and long-term marketable securities on our consolidated balance sheet. Contractual maturities for these ARS extend through November 2047 with an interest rate reset date approximately every 28 days. The ARS are primarily collateralized by United States government-backed student loans and were rated AAA at March 31, 2008. Historically, the carrying value of ARS approximated fair value due to the frequent successful auctions that reset the interest rates. With the liquidity issues experienced in the global credit and capital markets, our ARS have experienced failed auctions. While we continue to earn and receive interest on these marketable securities at the maximum contractual rate, we determined that the estimated fair value of these ARS no longer approximate par value.

Since there is little or no active market data for our ARS, we developed our own assumptions to determine the fair value of the securities. We assumed that the fair value is an exit price, representing the amount that would be received if we sold the ARS in an orderly transaction between market participants. We prepared our fair value analysis to determine the exit price by focusing on the structure of each ARS, the collateral underlying each ARS, the cash flow characteristics, and the current trading environment of such securities. We also considered the valuation prepared for us by a third-party valuation firm. With regard to the structure of each ARS, we charted the cash flows pertaining to the ARS and modeled the net present value. While we believe that the estimates we used are reasonable, should any of these factors change, our estimates may also change, which could affect the valuation of our ARS. In addition, we performed extensive research on the collateral underlying the ARS and the trading environment for such financial products. It is our view that a number of factors have contributed to the recent market disruption: real and perceived decline in value of collateralized assets and other financial instruments; increased defaults on home mortgages and bankruptcies; tightening of credit among lenders; increasing commodity prices and the weakening of the United States dollar; and fears of a United States recession. Based on our analysis and our belief that the ARS are of high credit quality, we determined that the fair value of the ARS at March 31, 2008 was $8,419 and recorded a temporary impairment charge of $381. We

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currently intend, and believe we have the ability, to hold the ARS for a period of time sufficient to allow for a recovery in the market. Accordingly, we believe that the impairment is temporary. We recorded the temporary impairment charge to other comprehensive income on our consolidated balance sheet. We also classified $6,968 of the ARS as long-term marketable securities on our consolidated balance sheet as of March 31, 2008.

Allowance for Doubtful Accounts. We maintain an allowance for doubtful accounts receivable for estimated losses resulting from the inability of our customers to make required payments and for the limited circumstances when the customer disputes the amounts due us. Our methodology for determining this allowance requires significant estimates. In estimating the allowance, we consider the age of the receivable, the creditworthiness of the customer, the economic conditions of the customer’s industry and general economic conditions. While we believe that the estimates we use are reasonable, should any of these factors change, our estimates may also change, which could affect the amount of our future allowance for doubtful accounts as well as future operating income. Specifically, if the financial condition of our customers were to deteriorate, resulting in an impairment of their ability to make payments to us, additional allowances could be required. As of March 31, 2008 and 2007, accounts receivable totaled $26,146 and $25,300, net of an allowance for doubtful accounts of $154 and $133, respectively.

Valuation of Intangible Assets and Goodwill. We account for our goodwill and intangible assets in accordance with SFAS No. 141, “Business Combinations” and SFAS No. 142, “Goodwill and Other Intangible Assets.” Our intangible assets consist of acquired technology related to our acquisitions of a software product for modeling voice communications in December 2003, Altaworks in October 2004, and purchased technology we purchased from RadView Software, Ltd. in December 2005, SQMworks, Inc. in April 2006 and Network Physics, Inc. in October 2007. Our intangible assets also consist of customer relationships and acquired workforce we purchased from Network Physics, Inc. related to the purchase of specified assets of Network Physics in October 2007. The acquired and purchased technology are stated at the lower of unamortized cost or net realizable value and are amortized on a straight-line basis over their expected useful lives of three to five years. Our customer relationship and workforce intangible assets we purchased from Network Physics, Inc. are amortized on an accelerated depreciation basis over their expected useful lives of four and one half years and five years, respectively. We use the projected discounted cash flow method in valuing our acquired technology and purchased customer relationships using certain assumptions including revenue growth, cost levels, present value discount rate, and working capital requirements. We use the lower of the amount of cash paid or the present value of projected discounted cash flows to value purchased technology. The workforce asset associated with the purchase of specified assets of Network Physics, Inc. was valued on a replacement cost basis. While we believe the assumptions used to value our acquired technology related to acquisitions are reasonable, actual results will likely differ from those assumptions. Future cash flows are subject to change for a variety of internal and external factors. We will periodically review the value of acquired technology and purchased intangible assets for reasonableness in accordance with SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets”. If changes in our assumptions at the time of future periodic reviews indicate that the carrying value of our acquired technology and purchased intangible assets exceeds their fair value and we determine that carrying amounts can not be recovered, it would result in impairment losses. As of March 31, 2008 and 2007, intangible assets totaled $8,633 and $899, net of accumulated amortization of $5,302 and $3,648, respectively. No impairment losses have been recorded to date.

Goodwill is recorded when the consideration paid for acquisitions exceeds the fair value of net tangible and intangible assets acquired. Goodwill is not amortized. We perform an annual review no later than our fourth quarter to identify any facts or circumstances that indicate the carrying value of goodwill is impaired. The review is based on various analyses including cash flow and profitability projections and the market capitalization of our common stock. Impairment, if any, is based on the excess of the carrying amount of goodwill over its fair value. We performed our annual impairment test of goodwill as of March 31, 2008 and 2007 and concluded that there was no goodwill impairment. As of March 31, 2008 and 2007, goodwill was $14,639. No impairment losses have been recorded to date.

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Accounting for Software Development Costs. Costs incurred in the research and development of new software products are expensed as incurred until technological feasibility is established. Development costs are capitalized beginning when a product’s technological feasibility has been established and ending when the product is available for general release to our customers. Technological feasibility is reached when the product reaches the working model stage. To date, products and enhancements have generally reached technological feasibility and have been released for sale at substantially the same time and all research and development costs have been expensed. Consequently, no research and development costs were capitalized in fiscal 2008, 2007 or 2006.

Results of Operations

The following table sets forth items from our consolidated statements of operations expressed as a percentage of total revenue for the periods indicated:

	Fiscal 2008		Fiscal 2007		Fiscal 2006
Revenue:
New software licenses	38.3	%	45.4	%	42.0	%
Software license updates, technical support and services	34.3		29.5		31.8
Professional services	27.4		25.1		26.2
Total revenue	100.0		100.0		100.0
Cost of revenue:
New software licenses	1.0		0.7		0.9
Software license updates, technical support, and services	4.4		3.4		3.4
Professional services	18.9		16.7		18.0
Amortization of acquired technology	1.5		0.8		1.1
Total cost of revenue	25.8		21.6		23.4
Gross profit	74.2		78.4		76.6
Operating expenses:
Research and development	27.1		22.8		24.6
Sales and marketing	38.9		35.8		34.5
General and administrative	11.6		11.6		17.5
Total operating expenses	77.6		70.2		76.6
(Loss) income from operations	(3.4	)	8.2		(0.0	)
Interest and other income, net	3.5		4.0		3.5
Income before (benefit) provision for income taxes	0.1		12.2		3.5
(Benefit) provision for income taxes	(0.4	)	3.8		0.7
Net income	0.5	%	8.4	%	2.8	%

The following table sets forth, for each component of revenue, the cost of the revenue as a percentage of the related revenue for the periods indicated:

	Fiscal 2008		Fiscal 2007		Fiscal 2006
Cost of new software licenses	2.7	%	1.5	%	2.1	%
Cost of software license updates, technical support, and services	13.0		11.6		10.9
Cost of professional services	69.1		66.6		68.8

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Revenue

New Software License Revenue. New software licenses revenue was $38,838, $43,186, and $31,976, in fiscal 2008, 2007, and 2006, respectively, representing a decrease of 10.1% in fiscal 2008 from fiscal 2007 and an increase of 35.1% in fiscal 2007 from fiscal 2006. For fiscal 2008, the decrease in license revenue was primarily due to a decrease in sales to United States and international government customers, partially offset by an increase in sales to corporate enterprise customers. For fiscal 2007, the increase in license revenue as compared to fiscal 2006 was largely due to an increase in sales to corporate enterprises and United States government customers.

Software License Updates, Technical Support and Services Revenue. Software license updates, technical support and services revenue was $34,787, $28,062, and $24,226 in fiscal 2008, 2007, and 2006, respectively, representing increases of 24.0% in fiscal 2008 from fiscal 2007 and 15.8% in fiscal 2007 from fiscal 2006. Software license updates, technical support and services revenue growth rates are partially affected by the overall new software license revenue growth rates, as well as the renewal rate of annual maintenance contracts by existing customers. The increase in software license updates, technical support and services revenue in fiscal 2008 and fiscal 2007 primarily reflected increases in the overall customer installed base as compared to the prior fiscal year.

Professional Services Revenue. The components of professional services revenue for fiscal 2008, fiscal 2007, and fiscal 2006 were as follows:

	Fiscal 2008		Fiscal 2007		Fiscal 2006
	(in thousands)
Consulting services	$	27,099	$	22,399	$	18,639
Training and other revenue		622		1,483		1,274
Professional services	$	27,721	$	23,882	$	19,913

Professional services revenue was $27,721, $23,882, and $19,913 in fiscal 2008, 2007 and 2006, respectively, representing increases of 16.1% in fiscal 2008 from fiscal 2007 and of 19.9% in fiscal 2007 from fiscal 2006. Consulting services revenue accounted for 97.8%, 93.8%, and 93.6% of professional services revenue for fiscal 2008, 2007, and 2006, respectively. The increases in professional services revenue were largely due to growing demand for our consulting services by United States government customers, and to a lesser extent, corporate enterprise customers. Revenue from consulting services provided to United States government customers for fiscal 2008, 2007 and 2006 were $18,644, $15,845, and $13,868, respectively, representing increases of 17.7% in fiscal 2008 from fiscal 2007 and 14.3% in fiscal 2007 from fiscal 2006. Training and other revenue was $622, $1,483 and $1,274 in fiscal 2008, 2007 and 2006, respectively. The decrease in training revenue in fiscal 2008 as compared to fiscal 2007 and fiscal 2006 was the result of offering training to maintained customers on a when-and-if available basis beginning January 1, 2007.

In January 2003, we were awarded a consulting contract with the United States Department of Defense. In February 2006, we were awarded the contract option for calendar year 2006 in the amount of $2,899. The option contributed approximately $2,329 and $596 of consulting revenue for fiscal 2007 and 2006, respectively. In February 2007, we were awarded the last contract option for calendar year 2007 in the amount of $2,119. As of December 31, 2007 we received additional awards of $2,905 associated with the last contract option. The option for calendar year 2007 and associated additional awards of $2,905 received as of March 31, 2008 contributed approximately $1,730 and $167 of consulting revenue for fiscal 2008 and 2007, respectively. This contract expired at the end of calendar 2007 and there are no remaining extensions on the contract. Accordingly, we do not expect to receive meaningful additional revenue from this contract.

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International Revenue. Our international revenue increased 2.2% to $20,506, or 20.2% of total revenue in fiscal 2008 from $20,059, or 21.1% of total revenue, for fiscal 2007. Our international revenue increased 21.3% during fiscal 2007 from $16,541, or 21.7% of total revenue, for fiscal 2006. The increase in international revenue in fiscal 2008 and fiscal 2007 was primarily the result of an increase in sales to corporate enterprise customers. Our international revenue is primarily generated in Europe and Japan. We have focused our efforts on increasing international sales to corporate enterprises. International revenue from corporate enterprises comprised the largest portion of international revenue for fiscal 2008. During fiscal 2008, 2007, and 2006, we expanded our operations outside the United States through the hiring of additional direct sales persons in our foreign subsidiaries. During fiscal 2008, we further expanded our operations outside the United States through a wholly owned subsidiary in Singapore.

Cost of Revenue

Cost of new software license revenue consists primarily of the cost of hardware associated with our ACE Live software products and royalties, and to a lesser extent, media, manuals, and distribution costs. Cost of license updates, technical support and services revenue consists of personnel-related costs necessary to provide technical support and training to customers with active maintenance contracts on a when-and-if-available basis, royalties, media, and distribution costs. Cost of professional services revenue consists primarily of personnel-related costs necessary to provide consulting and training to customers without active maintenance contracts. Gross margins on new software license revenue and on software license updates, technical support and services revenue are substantially higher than gross margin on professional services revenue, due to the low amount of cost for delivering new software licenses and providing technical support and maintenance compared with the relatively high personnel costs associated with providing consulting services.

Cost of New Software License Revenue. Cost of software license revenue was $1,035, $638, and $657 in fiscal 2008, fiscal 2007, and fiscal 2006, respectively. Gross margin on software license revenue was 97.3%, 98.5%, and 98.0% for fiscal 2008, 2007 and 2006, respectively. The increase in costs and the decrease in gross margin for fiscal 2008 as compared to fiscal 2007 was primarily the result of $383 in hardware costs associated with our ACE Live software product. Our ACE Live software products were released during the three months ended December 31, 2007. Accordingly, the cost of hardware associated with our ACE Live software products has not previously been recorded as a cost of new software license revenue. The decrease in costs and increase in gross margin for fiscal 2007 as compared to fiscal 2006 was primarily related to the decrease in the proportion of licenses we sold that required us to make royalty payments in fiscal 2007 as compared to fiscal 2006.

Cost of Software License Updates, Technical Support and Services Revenue. Cost of software license updates, technical support and services revenue was $4,514, $3,264, and $2,637 in fiscal 2008, fiscal 2007, and fiscal 2006, respectively. Gross margin on software license updates, technical support, and services revenue was 87.0%, 88.4%, and 89.1% for fiscal 2008, 2007 and 2006, respectively. The cost of software license updates, technical support and services revenue is primarily affected by the cost of labor associated with providing technical support and related services to customers with technical support contracts, and to a lesser extent, royalty payments required for some of our license update sales. The increase in costs and the decrease in gross margin for fiscal year 2008 as compared to 2007 was largely related to a $693 increase in costs necessary to provide training to customers with maintenance contracts and a $331 increase in personnel costs necessary to provide technical support. The increase in costs and the decrease in gross margin for fiscal year 2007 as compared to fiscal 2006 was primarily related to a $248 increase in costs necessary to provide training to maintained customers and a $331 increase in personnel costs necessary to provide technical support. Costs necessary to provide training to maintained customers did not affect fiscal 2006, as we did not begin offering training to customers with maintenance contracts on a when-and-if available basis until January 1, 2007. Stock-based compensation expense included in cost of software license updates, technical support and services was $21 and $16 for fiscal 2008 and fiscal 2007, respectively. There was no stock-based compensation expense for fiscal 2006.

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Cost of Professional Services Revenue. Cost of professional services revenue was $19,154, $15,904, and $13,705 in fiscal 2008, fiscal 2007, and fiscal 2006, respectively. Gross margin on professional services revenue decreased to 30.9% for fiscal 2008 from 33.4% for fiscal 2007. Gross margin on professional services revenue increased to 33.4% for fiscal 2007 from 31.2% for fiscal 2006. The increase in cost of professional services in fiscal 2008 from fiscal 2007 and in fiscal 2007 from fiscal 2006 were primarily due to an increase in our consulting staff necessary to meet demand for our services. We had 126, 111, and 96 consulting employees at the end of fiscal 2008, 2007, and 2006, respectively. The decrease in gross margin in fiscal 2008 from fiscal 2007 was primarily due to lower effective billing rates for consulting projects during fiscal 2008 as compared to fiscal 2007. The increase in gross margin in fiscal 2007 from fiscal 2006 was primarily due to higher effective billing rates for consulting projects during fiscal 2007 as compared to fiscal 2006. We expect the cost of professional services revenue as a percentage of professional services revenue to vary based primarily on the profitability of individual consulting engagements and, to a lesser extent, costs necessary to recruit and train new consulting staff. Stock-based compensation expense included in cost of professional services was $148 and $175 for fiscal 2008 and fiscal 2007, respectively. There was no stock-based compensation expense for fiscal 2006.

Operating Expenses

Research and Development. Research and development expenses were $27,471, $21,688, and $18,643 in fiscal 2008, fiscal 2007, and fiscal 2006, respectively, representing increases of 26.7% in fiscal 2008 from fiscal 2007 and 16.3% in fiscal 2007 from fiscal 2006. The increase in fiscal 2008 from fiscal 2007 and the increase in fiscal 2007 from fiscal 2006 were primarily due to higher personnel costs as a result of increased staffing levels required for developing new products as well as sustaining and upgrading existing products. We do not capitalize research and development costs since we release our products to the public at the same time that technological feasibility is reached. We had 185, 161, and 150 research and development employees at the end of fiscal 2008, 2007, and 2006, respectively. Stock-based compensation expense included in research and development was $568 and $533 for fiscal 2008 and fiscal 2007, respectively. There was no stock-based compensation expense for fiscal 2006.

Sales and Marketing. Sales and marketing expenses were $39,357, $34,133, and $26,300 in fiscal 2008, fiscal 2007, and fiscal 2006, respectively. The 15.3% increase in fiscal 2008 from fiscal 2007 was due to an increase in personnel costs and commission expense of $3,428, travel costs of $537, facility costs of $506 and conference costs of $428. Our sales and marketing personnel increased 19.1% to 168 in fiscal 2008 from 141 in fiscal 2007. The 29.8% increase in fiscal 2007 from fiscal 2006 was due to an increase in commission expense and personnel costs of $5,375 related to sales growth and personnel growth, an increase in conference costs of $1,009, an increase in professional services costs of $496 and an increase in advertising of $322. Our sales and marketing personnel increased 10.2% to 141 in fiscal 2007 from 128 in fiscal 2006. The increases in fiscal 2008 from fiscal 2007 and in fiscal 2007 from fiscal 2006 were the result of efforts to pursue our growth strategies. Stock-based compensation expense included in sales and marketing was $374 and $329 for fiscal 2008 and fiscal 2007, respectively. There was no stock-based compensation expense for fiscal 2006.

General and Administrative. General and administrative expenses were $11,747, $10,994, and $13,375 in fiscal 2008, fiscal 2007, and fiscal 2006, respectively. The 6.8% increase in fiscal 2008 from fiscal 2007 was largely due to an increase in professional services costs. The increase in professional services during fiscal 2008 was largely due to $720 in fees related to the acquisition of specified assets of Network Physics. The 17.8% decrease in fiscal 2007 from fiscal 2006 was primarily due to a decrease in professional services during fiscal 2007. The decrease in professional services costs in fiscal 2007 was primarily the result of incurring legal expenses of $3,851 during fiscal 2006 related to the lawsuit filed by Compuware Corporation in September of 2004. No significant legal expenses related to the lawsuit filed by Compuware Corporation were incurred during fiscal 2007, as the lawsuit was settled in April 2006. The decrease in professional services costs during fiscal 2007 was partially offset by a $1,234 increase in personnel costs necessary to support our growth strategies. Stock-based compensation expense included in general and administrative was $428 and $409 for fiscal 2008 and fiscal 2007, respectively. There was no stock-based compensation expense for fiscal 2006.

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Interest and Other Income, net. Interest and other income, net was $3,579, $3,834, and $2,680 in fiscal 2008, fiscal 2007 and fiscal 2006, respectively. The increases in fiscal 2008 and fiscal 2007 were primarily due to increases in interest income earned on our cash and cash equivalents and marketable securities resulting from increases in the aggregate balances of cash, cash equivalents, and marketable securities together with increases in interest rates.

Provision for Income Taxes. Our effective tax rates were negative 231%, positive 32%, and positive 19% for fiscal 2008, fiscal 2007 and fiscal 2006, respectively. The decrease in our effective tax rate in fiscal 2008 from fiscal 2007 was primarily the result of a decrease in book income and an increase in permanent book to tax differences such as tax exempt interest income. The increase in our effective tax rate in fiscal 2007 from fiscal 2006 was primarily the result of the reduced benefit of research and development tax credits and adjusting projected foreign tax credits and projected research and development tax credits to the actual amount of the credits computed in conjunction with completing and filing our fiscal 2006 tax return in December of fiscal 2007. The effective tax rate differs from the statutory tax rate and varies from period to period due principally to the amount of income before taxes from various tax jurisdictions, tax-exempt interest income, foreign tax expense, and the amount of tax credits available to us in each period from incremental research expenditures. Future provisions for taxes will depend, among other things, on the mix and amount of worldwide income, the tax rates in effect for various tax jurisdictions and the amount of research and development tax credits, foreign tax credits and other items for which we are eligible.

Liquidity and Capital Resources

Since inception, we have funded our operations primarily through cash provided by operating activities and through the sale of equity securities. In August 2000, we completed our initial public offering in which we raised approximately $54,114, net of underwriting discounts and offering expenses payable by us. As of March 31, 2008 and 2007, we had cash, cash equivalents, short-term and long-term marketable securities totaling $85,829 and $91,381, respectively. Prior to March 31, 2008, our long-term marketable securities of $6,968 were classified as short-term marketable securities. Our long-term marketable securities were comprised of highly rated auction rate securities with maturities in excess of one year. The majority of these auction rate securities were collateralized by United States government-backed obligations. During the three months ended March 31, 2008, the auction rate securities became subject to adverse market conditions, and the liquidity typically associated with the financial markets for such instruments became restricted as auctions for auction rate securities began to fail. As a result of the failed auctions, we classified $6,968 of our auction rate securities as long-term marketable securities, and we determined that the auction rate securities were temporarily impaired and recorded a temporary impairment charge in other comprehensive income in our consolidated balance Sheet of $381 at March 31, 2008.

Cash provided by operating activities was $12,900, $6,201, and $8,705 for fiscal 2008, 2007 and 2006, respectively. Cash provided by operating activities is primarily derived from net income, as adjusted for non-cash items such as depreciation and amortization expense, tax benefits from the exercise of employee stock options, and changes in operating assets and liabilities. The increase in cash provided by operating activities in fiscal 2008 from fiscal 2007 was primarily attributable to an increase in cash resulting from an increase in depreciation and amortization expense, deferred revenue and accounts payable and accrued expenses, which was partially offset by an decrease in cash resulting from a decrease in net income and an increase in prepaid expenses. The decrease in cash provided by operating activities in fiscal 2007 from fiscal 2006 was primarily attributable to a decrease in cash resulting from an increase in accounts receivable, which was partially offset by an increase in cash resulting from an increase in net income and deferred revenue.

Net cash provided by investing activities was $27,254 in fiscal 2008. Net cash used in financing activities was $41,377 in fiscal 2007. Net cash provided by investing activities was $22,667 in fiscal 2006. Investing activities include the purchase, sale or maturity of marketable securities, acquisition of property and equipment, and net expenditures for business combinations and technology acquisitions. For fiscal 2008, we used funds of $10,005 to purchase specified assets from Network Physics, funds of $114,799 to purchase short-term and

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long-term marketable securities, and funds of $4,557 to purchase property and equipment. We received proceeds of $156,615 from the sale or maturity of short-term marketable securities for fiscal 2008. For fiscal 2007, funds were used to purchase short-term marketable securities of $109,637, purchase property and equipment of $3,529 and purchase intangible assets of $366. Proceeds from the sale or maturity of short-term marketable securities were $72,155 for fiscal 2007. For fiscal 2008, 2007 and 2006, a majority of our capital expenditures were for information technology and software purchases.

Cash used in financing activities was $3,630 for fiscal 2008. Cash provided by financing activities was $2,452 for fiscal 2007. Cash used in financing activities was $2,514 in fiscal 2006. We used cash of $5,013 to acquire 522 shares of treasury stock during fiscal 2008. We used cash of $1,521 to acquire 104 shares of treasury stock during fiscal 2007. Cash provided by financing activities for 2008 reflects the proceeds received from the exercise of stock options of $365 and proceeds from the sale of common stock under our 2000 Employee Stock Purchase Plan of $989. Cash provided by financing activities for 2007 reflects the proceeds received from the exercise of stock options of $2,987 and proceeds from the sale of common stock under our 2000 Employee Stock Purchase Plan of $753. Prior to the adoption of SFAS 123R, we reported tax benefits from the exercise of stock options as an operating cash flow in the consolidated statement of cash flows. In the period beginning April 1, 2006, excess tax benefits from the exercise of stock options are presented as an increase in cash flow from financing activities. For fiscal 2008 and fiscal 2007, excess tax benefits from the exercise of stock options were $29 and $383, respectively.

We have commitments under contractual arrangements to make future payments for goods and services. These contractual arrangements secure the rights to various assets and services to be used in the future in the normal course of business. For example, we are contractually committed to make minimum lease payments for the use of property under operating lease agreements. In accordance with current accounting rules, the future rights and related obligations pertaining to such contractual arrangements are not reported as assets or liabilities on our consolidated balance sheets. Our FIN No. 48 liability for unrecognized tax benefits is reported on our consolidated balance sheets. We expect to fund these contractual arrangements with our cash, cash equivalents and marketable securities as well as cash generated from operations in the normal course of business.

The following table summarizes our contractual operating lease arrangements and our FIN No. 48 Liability at March 31, 2008, and the timing and effect that such commitments are expected to have on our liquidity and cash flow in future periods.

	Payments Due by Period
Contractual Obligations and FIN No. 48 Liability	Total		FY09		FY10 – FY11		FY12 – FY13		After FY13
(in thousands)
Facilities Operating Lease Obligations	$	29,964	$	5,079	$	9,943	$	4,138	$	10,804
Other Operating Lease Obligations		346		163		183		—		—
FIN No. 48 Liability		838		235		524		79		—
Total	$	31,148	$	5,477	$	10,650	$	4,217	$	10,804

See Notes 9 and 10 to our consolidated financial statements for additional information related to our operating leases. As of March 31, 2008, we had no capital lease obligations.

Effective June 10, 2002, we entered into a credit facility with a commercial bank. The credit facility permits the use of funds for general corporate purposes and the issuance of letters of credit up to a maximum of $10,000 in the aggregate. Borrowings under the credit facility are limited to 80% of eligible accounts receivable. We used the facility to issue an irrevocable letter of credit for approximately $2,122 to satisfy the security deposit requirements for our corporate office lease. Upon a default, as defined in the corporate office lease agreement, and written notice from the landlord to us, the landlord had the right to draw upon the letter of credit in whole or in part. Interest under this facility is payable monthly, based on LIBOR plus the applicable margin ranging from 2% to 2.5% as stated in the loan agreement. The credit facility includes a fee in the amount of 0.25% per annum

39

on the unused portion of the credit facility. The credit facility is collateralized by our accounts receivable. The loan agreement contains customary affirmative and negative covenants including a restriction on the payment of dividends. We were in compliance with all affirmative and negative covenants as of March 31, 2008. Effective June 10, 2007, the credit facility was renewed for $2,000 and is due to expire on June 30, 2008. As of March 31, 2007, we had available borrowings of $249 under the credit facility. We plan to renew the credit facility in fiscal 2009.

We expect working capital needs to increase in the foreseeable future in order for us to execute our business plan and growth strategies. We anticipate that operating activities, as well as planned capital expenditures, will constitute a material use of our cash resources. In addition, we may utilize cash resources to fund acquisitions or investments in complementary businesses, technologies or products as well as repurchase our common stock in accordance with our stock repurchase program authorized by our Board on February 4, 2008.

We believe that our current cash and cash equivalents, marketable securities, and cash generated from operations will be sufficient to meet our anticipated cash requirements for working capital and capital expenditures at least through fiscal 2009.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements with unconsolidated entities or related parties and, accordingly, there are no off-balance sheet risks to our liquidity and capital resources from unconsolidated entities.

Recently Issued Accounting Pronouncements

In September 2006, the FASB issued Statement of Financial Accounting Standards No. 157, “Fair Value Measurements,” or SFAS No. 157. This standard clarifies the principle that fair value should be based on the assumptions that market participants would use when pricing an asset or liability. Additionally, it establishes a fair value hierarchy that prioritizes the information used to develop those assumptions. SFAS No. 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007. We have not yet determined the impact that the implementation of SFAS No. 157 will have on our results of operations or financial condition.

In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities,” or SFAS No. 159. SFAS No. 159 permits entities to choose to measure, on an item-by-item basis, specified financial instruments and certain other items at fair value. Unrealized gains and losses on items for which the fair value option has been elected are required to be reported in earnings at each reporting date. SFAS No. 159 is effective for fiscal years beginning after November 15, 2007, the provisions of which are required to be applied prospectively. We have not yet determined the impact that the implementation of SFAS No. 159 will have on our results of operations or financial condition.

In December 2007, FASB issued SFAS No. 141(R), “Business Combinations,” or SFAS No. 141(R). SFAS No. 141 (R) which replaces SFAS No. 141 requires that the acquisition method of accounting, which SFAS No. 141 called the “purchase method”, be used for all business combinations and for an acquirer to be identified for each business combination. SFAS No. 141 (R ) also establishes principles and requirements for how the acquirer: recognizes and measures in its financial statement the identifiable assets acquired, the liabilities assumed, and any noncontrolling interest in the acquiree; recognizes and measures the goodwill acquired in the business combination or a gain from a bargain purchase; and determines what information to disclose to enable users of the financial statements to evaluate the nature and financial effects of the business combination. SFAS No. 141 (R) also requires that acquisition-related costs be recognized separately from the business combination. SFAS No. 141 (R) will apply prospectively to business combinations for which the acquisition date is after fiscal years beginning on or after December 15, 2008. We have not yet determined the impact that the implementation of SFAS No. 141 (R) will have on our results of operations or financial condition.

40

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

(dollars in thousands)

We consider all highly liquid investments purchased with a maturity of three months or less to be cash equivalents, and those with maturities greater than three months are considered to be marketable securities. Cash equivalents and marketable securities consist primarily of investment grade securities with high credit ratings of relatively short duration that trade in highly liquid markets. Accordingly, we have no quantitative information concerning the market risks and believe that the risk is minimal. We currently do not hedge interest rate exposure, but do not believe that an increase in interest rates would have a material effect on the value of our cash equivalents, marketable securities or notes payable.

At March 31, 2008, we had $71,410 in cash and cash equivalents and $14,419 in short-term and long-term marketable securities. Prior to March 31, 2008, the long-term marketable securities were classified as short-term marketable securities. The long-term marketable securities consisted of highly rated auction rate securities with maturities in excess of one year. The majority of these auction rate securities were collateralized by United States government-backed student loans and were rated AAA at March 31, 2008. During the three months ended March 31, 2008, the auction rate securities became subject to adverse market conditions, and the liquidity typically associated with the financial markets for such instruments became restricted as auctions began to fail. As a result of the failed auctions, we determined that the auction rate securities were temporarily impaired and recorded a $381 impairment charge at March 31, 2008. Based on our cash, cash equivalents, and marketable securities as of March 31, 2008, a one percentage point increase or decrease in the interest rates would increase or decrease our annual interest income and cash flows by approximately $866.

A majority of our revenue transactions outside the United States are denominated in local currencies and the majority of operating expenses associated with our foreign subsidiaries are denominated in local currencies; therefore, our results of operations are subject to fluctuations due to changes in foreign currency exchange rates, particularly changes in the British pound and the European Union euro. We currently do not hedge foreign exchange rate risk. Due to the limited nature of our foreign operations, we do not believe that a 5% change in exchange rates would have a material effect on our business, financial condition, or results of operations.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Our financial statements together with the related notes and the report of Deloitte & Touche LLP, independent registered public accounting firm, are set forth in the Index to Financial Statements at Item 15 of this Form 10-K.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURES

Not applicable.

ITEM 9A. CONTROLS AND PROCEDURES

Our management, with the participation of the Chief Executive Office and Chief Financial Officer, evaluated the effectiveness of the disclosure controls and procedures as of March 31, 2008. The “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, as appropriate to

41

allow timely decisions regarding required disclosure. Management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on the evaluation of our disclosure controls and procedures as of March 31, 2008, our Chief Executive Officer and Chief Financial Officer concluded that, as of such date, our disclosure controls and procedures were effective at the reasonable assurance level.

Managements’ report on our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) and the independent registered public accounting firm’s related audit report on internal control over financial reporting are included in this Item 9A of this Form 10-K.

No change in our internal control over financial reporting occurred during the fiscal quarter ended March 31, 2008 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

42

MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

Management of OPNET Technologies, Inc. and its subsidiaries (the “Company”) is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is defined in Rule 13a-15(f) or 15d-15(f) promulgated under the Securities Exchange Act of 1934 as a process designed by, or under the supervision of, the company’s principal executive and principal financial officers and effected by the Company’s Board of Directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that:

(i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;

(ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorization of management and directors of the Company; and

(iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Our management assessed the effectiveness of our internal control over financial reporting as of March 31, 2008. In making this assessment, our management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework. Based on our assessment and those criteria, management concluded that the Company’s internal control over financial reporting was effective as of March 31, 2008.

OPNET Technologies, Inc.

June 9, 2008

43

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ON

INTERNAL CONTROL OVER FINANCIAL REPORTING ON THE

CONSOLIDATED FINANCIAL STATEMENTS

To the Audit Committee and Stockholders of

OPNET Technologies, Inc.

Bethesda, Maryland

We have audited the internal control over financial reporting of OPNET Technologies, Inc. and its subsidiaries (the “Company”) as of March 31, 2008, based on the criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained, in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company’s internal control over financial reporting is a process designed by, or under the supervision of, the company’s principal executive and principal financial officers, or persons performing similar functions, and effected by the company’s board of directors, management, and other personnel to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with accounting principles generally accepted in the United States of America (“generally accepted accounting principles”), and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of the inherent limitations of internal control over financial reporting, including the possibility of collusion or improper management override of controls, material misstatements due to error or fraud may not be prevented or detected on a timely basis. Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to future periods are subject to the risk that the controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

In our opinion, the Company maintained effective internal control over financial reporting as of March 31, 2008, in all material respects, based on the criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated financial statements as of and for the year ended March 31, 2008, of the Company and our report dated June 9, 2008, expressed an unqualified opinion on those consolidated financial

44

statements and included an explanatory paragraph regarding the change in method of accounting in fiscal year 2008 for uncertain tax positions to conform to Financial Accounting Standards Board (FASB) Interpretation No. 48, Accounting for Uncertainty in Income Taxes, and the change in method of accounting in fiscal year 2007 for share-based payments to conform to FASB Statement No. 123 (revised 2004), Share-Based Payment.

McLean, Virginia

June 9, 2008

45

ITEM 9B. OTHER INFORMATION

Not applicable.

46

PART III

Certain information required by Part III is omitted from this Annual Report as we intend to file our definitive Proxy Statement for the 2008 Annual Meeting of Stockholders (the “Proxy Statement”) pursuant to Regulation 14A of the Securities Exchange Act of 1934, as amended, not later than 120 days after the end of the fiscal year covered by this Annual Report, and certain information included in the Proxy Statement is incorporated herein by reference.

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

The information in the section entitled “Executive Officers and Directors of the Registrant” in Part I hereof is incorporated herein by reference. The information in the sections entitled “Election of Directors,” “Section 16(a) Beneficial Ownership Reporting Compliance” and “Code of Business Conduct and Ethics” in the Proxy Statement is incorporated herein by reference.

ITEM 11. EXECUTIVE COMPENSATION

The information in the sections entitled "Summary Compensation Table," "Compensation of Directors," “Compensation Committee Interlocks and Insider Participation” and “Compensation Discussion and Analysis” in the Proxy Statement is incorporated herein by reference.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The information in the sections entitled “Equity Compensation Plan Information” and “Security Ownership of Certain Beneficial Owners and Management” in the Proxy Statement are incorporated herein by reference.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

The information in the section entitled "Certain Transactions" in the Proxy Statement is incorporated herein by reference.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

The information in the section entitled “Independent Registered Public Accounting Firm Fees and Other Matters” in the Proxy Statement is incorporated herein by reference.

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PART IV

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a) The following documents are filed as part of this Form 10-K:

1. Financial Statements. The following financial statements of OPNET Technologies, Inc. are filed as part of this Form 10-K on the pages indicated:

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

	Page
Report of Independent Registered Public Accounting Firm on the Consolidated Financial Statements	50
Consolidated Balance Sheets as of March 31, 2008 and 2007	51
Consolidated Statements of Operations for the years ended March 31, 2008, 2007, and 2006	52
Consolidated Statements of Changes in Stockholders’ Equity for the years ended March 31, 2008, 2007, and 2006	53
Consolidated Statements of Cash Flows for the years ended March 31, 2008, 2007, and 2006	54
Notes to Consolidated Financial Statements	55

(b) Exhibits. The exhibits listed in the Exhibits Index immediately preceding such exhibits are filed as part of this Annual Report on Form 10-K.

(c) Financial Statement Schedules. Financial statement schedules are omitted as the required information is inapplicable or the information is presented in the financial statements or related notes in this Annual Report on Form 10-K.

48

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized on the 9th day of June 2008.

OPNET TECHNOLOGIES, INC.
By:	/s/    MARC A. COHEN
	Marc A. Cohen Chairman of the Board and Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the 9th day of June 2008.

Signature	Title
/s/    MARC A. COHEN         Marc A. Cohen	Chairman of the Board of Directors and Chief Executive Officer (Principal Executive Officer)
	President, Chief Technology Officer and Director
Alain J. Cohen
/s/    MEL F. WESLEY         Mel F. Wesley	Vice President and Chief Financial Officer (Principal Financial and Accounting Officer)
/s/    STEVEN G. FINN, PHD         Steven G. Finn, PhD	Director
Ronald W. Kaiser	Director
/s/    WILLIAM F. STASIOR         William F. Stasior	Director

49

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ON THE CONSOLIDATED FINANCIAL STATEMENTS

To the Audit Committee and Stockholders of

OPNET Technologies, Inc.

Bethesda, Maryland

We have audited the accompanying consolidated balance sheets of OPNET Technologies, Inc. and its subsidiaries (the “Company”) as of March 31, 2008 and 2007, and the related consolidated statements of operations, changes in stockholders’ equity, and cash flows for each of the three years in the period ended March 31, 2008. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of OPNET Technologies, Inc. and its subsidiaries as of March 31, 2008 and 2007, and the results of their operations and their cash flows for each of the three years in the period ended March 31, 2008, in conformity with accounting principles generally accepted in the United States of America.

As discussed in Note 1 to the consolidated financial statements, in fiscal year 2008, the Company changed its method of accounting for uncertain tax positions to conform to Financial Accounting Standards Board (FASB) Interpretation No. 48, Accounting for Uncertainty In Income Taxes, and in fiscal year 2007, the Company changed its method of accounting for share-based payments to conform to FASB Statement No. 123 (revised 2004), Share-Based Payment.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Company’s internal control over financial reporting as of March 31, 2008, based on the criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated June 9, 2008 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.

McLean, Virginia

June 9, 2008

50

OPNET TECHNOLOGIES, INC.

CONSOLIDATED BALANCE SHEETS

(in thousands, except per share data)

	March 31,
	2008			2007
ASSETS
Current assets:
Cash and cash equivalents	$	71,410		$	34,766
Marketable securities		7,451			56,615
Accounts receivable, net of $154 and $133 in allowance for doubtful accounts at March 31, 2008 and 2007, respectively		20,780			21,604
Unbilled accounts receivable		5,366			3,696
Inventory		319			—
Prepaid expenses and other current assets		3,627			4,366
Total current assets		108,953			121,047
Marketable securities		6,968			—
Property and equipment, net		10,884			8,745
Intangible assets, net		8,633			899
Goodwill		14,639			14,639
Deferred income taxes and other assets		3,461			2,328
Total assets	$	153,538		$	147,658
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	489		$	276
Accrued liabilities		8,555			8,321
Deferred and accrued income taxes		658			458
Deferred rent		326			210
Deferred revenue		28,722			22,414
Total current liabilities		38,750			31,679
Accrued liabilities		59			259
Deferred rent		1,762			1,956
Deferred revenue		1,772			893
Other income tax		550			—
Total liabilities		42,893			34,787
Commitments and contingencies (Note 9)
Stockholders’ equity:
Common stock—par value $0.001; 100,000 shares authorized; 27,576 and 27,289 shares issued at March 31, 2008 and 2007, respectively; 20,407 and 20,641 shares outstanding at March 31, 2008 and 2007, respectively		28			27
Additional paid-in capital		89,878			86,881
Retained earnings		34,838			34,815
Accumulated other comprehensive income		160			394
Treasury stock—7,169 and 6,647 shares at March 31, 2008 and 2007, respectively, at cost		(14,259	)		(9,246	)
Total stockholders’ equity		110,645			112,871
Total liabilities and stockholders’ equity	$	153,538		$	147,658

See accompanying notes to consolidated financial statements.

51

OPNET TECHNOLOGIES, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share data)

	Year Ended March 31,
	2008			2007		2006
Revenues:
New software licenses	$	38,838		$	43,186	$	31,976
Software license updates, technical support and services		34,787			28,062		24,226
Professional services		27,721			23,882		19,913
Total revenues		101,346			95,130		76,115
Cost of revenues:
New software licenses		1,035			638		657
Software license updates, technical support and services		4,514			3,264		2,637
Professional services		19,154			15,904		13,705
Amortization of acquired technology		1,486			723		832
Total cost of revenues		26,189			20,529		17,831
Gross profit		75,157			74,601		58,284
Operating expenses:
Research and development		27,471			21,688		18,643
Sales and marketing		39,357			34,133		26,300
General and administrative		11,747			10,994		13,375
Total operating expenses		78,575			66,815		58,318
(Loss) income from operations		(3,418	)		7,786		(34	)
Interest and other income, net		3,579			3,834		2,680
Income before (benefit) provision for income taxes		161			11,620		2,646
(Benefit) provision for income taxes		(372	)		3,655		509
Net income	$	533		$	7,965	$	2,137
Basic net income per common share	$	0.03		$	0.39	$	0.10
Diluted net income per common share	$	0.03		$	0.38	$	0.10
Basic weighted average common shares outstanding		20,342			20,358		20,374
Diluted weighted average common shares outstanding		20,621			21,206		20,604

See accompanying notes to consolidated financial statements.

52

OPNET TECHNOLOGIES, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(in thousands)

	Common Stock					Additional Paid in Capital			Treasury Stock				Retained Earnings			Accumulated Other Comprehensive Income			Total Stockholders’ Equity
	Shares Issued	Shares Outstanding		Amount					Shares	Amount
Balance, April 1, 2005	26,443	20,309		$	26	$	79,406		6,134	$	(4,100	)	$	24,713		$	(80	)	$	99,965
Net income														2,137						2,137
Foreign currency translation																	(315	)		(315	)
Unrealized gain on marketable securities																	50			50
Total comprehensive income																				1,872
Issuance of common stock:
Exercise of options	179	179					612													612
Employee stock purchase plan	73	73			1		497													498
Tax benefit from exercise of stock options							49													49
Restricted stock issuance	43	43					408													408
Purchase of treasury shares		(409	)						409		(3,625	)								(3,625	)
Deferred compensation							(408	)												(408	)
Amortization of deferred compensation							27													27
Balance, March 31, 2006	26,738	20,194			27		80,591		6,543		(7,725	)		26,850			(345	)		99,398
Net income														7,965						7,965
Foreign currency translation																	758			758
Unrealized loss on marketable securities																	(19	)		(19	)
Total comprehensive income																				8,704
Issuance of common stock:
Exercise of options	381	381					2,987													2,987
Employee stock purchase plan	85	85					753													753
Tax benefit from exercise of stock options							1,088													1,088
Restricted stock issuance	85	85					—													—
Purchase of treasury shares		(104	)						104		(1,521	)								(1,521	)
Stock based compensation expense							1,462													1,462
Balance, March 31, 2007	27,289	20,641			27		86,881		6,647		(9,246	)		34,815			394			112,871
Net income														533						533
Foreign currency translation																	147			147
Unrealized loss on marketable securities																	(381	)		(381	)
Total comprehensive income																				299
Adoption of FIN48—cumulative effect														(510	)					(510	)
Exercise of options	60	60					365													365
Employee stock purchase plan	121	121			1		988													989
Tax benefit from exercise of stock options							105													105
Restricted stock issuance	107	107
Purchase of treasury shares		(522	)						522		(5,013	)								(5,013	)
Stock based compensation expense							1,539													1,539
Balance, March 31, 2008	27,576	20,407		$	28	$	89,878		7,169	$	(14,259	)	$	34,838		$	160		$	110,645

See accompanying notes to consolidated financial statements.

53

OPNET TECHNOLOGIES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

	Year Ended March 31,
	2008			2007			2006
Cash flows from operating activities:
Net income	$	533		$	7,965		$	2,137
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		4,018			2,348			2,422
Loss on disposition of fixed assets		11			12			5
Provision for losses on accounts receivable		96			25			27
Deferred income taxes		(882	)		50			(275	)
Non-cash stock-based compensation expense		1,539			1,462			27
Changes in assets and liabilities:
Accounts receivable		(942	)		(9,944	)		413
Inventory		(116	)		—			—
Prepaid expenses and other current assets		1,315			(2,151	)		1,484
Other assets		(49	)		38			(34	)
Accounts payable		213			(743	)		191
Accrued liabilities		466			(762	)		1,665
Accrued income taxes		(382	)		512			(118	)
Deferred revenue		7,187			6,728			697
Deferred rent		(78	)		1,044			15
Excess tax benefit from exercise of stock options		(29	)		(383	)		49
Net cash provided by operating activities		12,900			6,201			8,705
Cash flows from investing activities:
Acquisition of specified assets from Network Physics		(10,005	)		—			—
Acquired technology		—			(366	)		(793	)
Purchase of property and equipment		(4,557	)		(3,529	)		(1,452	)
Purchase of investments		(114,799	)		(109,637	)		(31,940	)
Proceeds from sale/maturity of investments		156,615			72,155			56,852
Net cash provided by (used in) investing activities		27,254			(41,377	)		22,667
Cash flows from financing activities:
Acquisition of treasury stock		(5,013	)		(1,521	)		(3,625	)
Payment of note payable		—			(150	)		—
Excess tax benefit from exercise of stock options		29			383			—
Proceeds from exercise of common stock options		365			2,987			613
Issuance of common stock under employee stock purchase plan		989			753			498
Net cash (used in) provided by financing activities		(3,630	)		2,452			(2,514	)
Effect of exchange rate changes on cash and cash equivalents		120			780			(319	)
Net increase (decrease) in cash and cash equivalents		36,644			(31,944	)		28,539
Cash and cash equivalents, beginning of year		34,766			66,710			38,171
Cash and cash equivalents, end of year	$	71,410		$	34,766		$	66,710

See accompanying notes to consolidated financial statements.

54

OPNET TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(dollar and share amounts in thousands, except per share data)

March 31, 2008, 2007 and 2006

1. Organization and Significant Accounting Policies

Organization. OPNET Technologies, Inc., (hereafter, the Company or OPNET), is a provider of software products and related services for managing networks and applications. The Company’s software products address application performance management, network operations, capacity management and network research and development. The Company sells products to corporate enterprises, government and defense agencies, network service providers, and network equipment manufacturers. The Company markets software products and related services in North America primarily through a direct sales force and, to a lesser extent, several resellers and original equipment manufacturers. Internationally, the Company conducts research and development through a wholly-controlled subsidiary in Ghent, Belgium and markets software products and related services through wholly-owned subsidiaries in Paris, France; Frankfurt, Germany; Slough, United Kingdom; Sydney, Australia; and Singapore; wholly-controlled subsidiary in Ghent, Belgium; third-party distributors; and value-added resellers. The wholly-owned subsidiary in Singapore was registered in August 2007. The Company is headquartered in Bethesda, Maryland and has offices in Cary, North Carolina; Dallas, Texas; Santa Clara, California; and Nashua, New Hampshire.

Principles of Consolidation. The consolidated financial statements include the results of OPNET Technologies, Inc., its wholly-owned subsidiaries: OPNET Technologies SAS; OPNET Technologies Limited; OPNET Technologies, Pty. Ltd.; OPNET Analysis, Inc.; OPNET Technologies, GmbH; and OPNET Technologies Asia, Pte. Ltd., and its wholly-controlled subsidiary OPNET Technologies, BVBA. All intercompany accounts and transactions have been eliminated in consolidation.

Use of Estimates. The preparation of financial statements in conformity with generally accepted accounting principles, or GAAP, requires management to make estimates, judgments and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results may differ from these estimates. Significant items subject to such estimates and assumptions include revenue recognition, carrying amount and useful lives of long-lived assets, valuation allowances for accounts receivable and deferred tax assets, research and development tax credit, software development costs, valuation of acquired intangible assets, valuation of auction rate securities, or ARS, valuation of stock based compensation, and loss contingencies, such as litigation, claims and assessments.

Cash and Cash Equivalents. Cash and cash equivalents consist of deposits in banks and all highly liquid investments with maturities of three months or less when purchased.

Marketable Securities. The Company has determined that all of its investments in marketable securities are marketable securities to be classified as available-for-sale. Available-for-sale securities are carried at fair value, with the unrealized gains and losses reported in stockholders’ equity in the accompanying consolidated balance sheets under the caption “Accumulated other comprehensive income.” The amortized cost of debt securities is adjusted for amortization of premiums and accretion of discounts to maturity. Such amortization is included in the “Interest income” line item on the accompanying consolidated statements of operations. Realized gains and losses on available-for-sale securities are included in the “Interest income” line item on the consolidated statements of operations. The cost of securities sold is based on the specific identification method. Interest and dividends on securities classified as available-for-sale are included in the “Interest income” line item on the consolidated statements of operations.

55

OPNET TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(dollar and share amounts in thousands, except per share data)

March 31, 2008, 2007 and 2006

As of March 31, 2008, the Company held ARS totaling $8,800 at par value, which are classified as available for sale securities and short-term and long-term marketable securities on the Company’s consolidated balance sheet. Contractual maturities for these ARS extend through November 2047 with an interest rate reset date approximately every 28 days. The ARS are primarily collateralized by United States government-backed student loans and were rated AAA at March 31, 2008. Historically, the carrying value of ARS approximated fair value due to the frequent successful auctions that reset the interest rates. With the liquidity issues experienced in the global credit and capital markets, the Company’s ARS have experienced failed auctions. While the Company continues to earn and receive interest on these marketable securities at the maximum contractual rate, we determined that the estimated fair value of these ARS no longer approximate par value.

Since there is little or no active market data for the Company’s ARS, the Company developed its own assumptions to determine the fair value of the securities. The Company assumed that the fair value is an exit price, representing the amount that would be received if it sold the ARS in an orderly transaction between market participants. The Company prepared its fair value analysis to determine the exit price by focusing on the structure of each ARS, the collateral underlying each ARS, the cash flow characteristics, and the current trading environment of such securities. The Company also considered the valuation prepared for it by a third-party consulting firm. With regard to the structure of each ARS, the Company charted the cash flows pertaining to the ARS and modeled the net present value. While the Company believes that the estimates it used are reasonable, should any of these factors change, its estimate may also change, which could affect the valuation of the ARS. In addition, the Company performed extensive research on the collateral underlying the ARS and the trading environment for such financial products. It is the Company’s view that a number of factors have contributed to the recent market disruption: real and perceived decline in value of collateralized assets and other financial instruments; increased defaults on home mortgages and bankruptcies; tightening of credit among lenders; increasing commodity prices and the weakening of the United States dollar; and fears of a United States recession. Based on its analysis and the Company’s belief that the ARS are of high credit quality, the Company determined that the fair value of the ARS at March 31, 2008 was $8,419 and recorded a temporary impairment charge of $381. The Company currently intends, and believes it has the ability, to hold the ARS for a period of time sufficient to allow for a recovery in the market. Accordingly, the Company believes that the impairment is temporary. The Company recorded the temporary impairment charge to other comprehensive income on its consolidated balance sheet. The Company also classified $6,968 of the ARS as long-term marketable securities on its consolidated balance sheet as of March 31, 2008.

Supplemental Cash Flow Information.

	Year ended March 31,
	2008			2007			2006
Cash paid during the fiscal year for:
Income taxes	$	768		$	3,415		$	53
Non-cash financing and investing activities:
Unrealized (loss) gain on marketable securities		(381	)		(19	)		50
Restricted stock issued		1,022			1,152			408
Accrued liability for the purchase of property and equipment		218			852			19

Advertising Expense. Advertising expenses are expensed when incurred. Advertising expense for fiscal 2008, fiscal 2007, and fiscal 2006 was $542, $686, and $367, respectively.

56

OPNET TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(dollar and share amounts in thousands, except per share data)

March 31, 2008, 2007 and 2006

Concentration of Credit Risk. Financial instruments that potentially subject the Company to a concentration of credit risk consist principally of cash, marketable securities and accounts receivable. The Company generally does not require collateral on accounts receivable, as the majority of its customers are large, well-established companies, or government entities.

The Company maintains its cash balances at several financial institutions. The Federal Deposit Insurance Corporation insures the bank accounts up to $100. Although balances exceed that amount, the Company has not experienced any losses in such accounts and believes it is not exposed to any significant credit risk to cash.

Fair Value of Financial Instruments. The fair value of the Company’s cash and cash equivalents, marketable securities, accounts receivable, accounts payable, and accrued expenses approximates their respective carrying amounts. See Marketable Securities above for a discussion of how the Company determines fair value for its ARS.

Software Development Costs. Development costs incurred in the research and development of new software products and enhancements to existing software products are expensed as incurred until technological feasibility has been established. The Company considers technological feasibility to be established when all planning, designing, coding, and testing has been completed according to design specifications. After technological feasibility has been established, any additional costs are capitalized in accordance with Statement of Financial Accounting Standards, or SFAS No. 86, “Accounting for the Costs of Computer Software to be Sold, Leased, or Otherwise Marketed.” Through March 31, 2008, software development has been substantially completed concurrently with the establishment of technological feasibility and, accordingly, no costs have been capitalized to date.

Property and Equipment. Property and equipment are stated at cost. Depreciation on property and equipment is computed using the straight-line method over the estimated useful lives of the assets, of five to seven years. Leasehold improvements are depreciated over the shorter of the estimated useful life of the assets, the non-cancelable term of the related lease, or the non-cancelable lease term plus all periods for which executive management believes that the failure to renew the lease imposes a penalty in an amount such that the renewal appears, at the inception of the lease, to be reasonably assured. Repairs and maintenance are expensed as incurred.

Intangible Assets. The Company accounts for its goodwill and intangible assets in accordance with SFAS No. 141, “Business Combinations” and SFAS No. 142, “Goodwill and Other Intangible Assets.” Its intangible assets consist of acquired technology related to its acquisitions of a software product for modeling voice communications in December 2003, Altaworks in October 2004, and purchased technology the Company purchased from RadView Software, Ltd. in December 2005, SQMworks, Inc. in April 2006, and Network Physics, Inc. in October 2007. The Company’s intangible assets also consist of customer relationships and acquired workforce assets it purchased from Network Physics, Inc. related to the purchase of specified assets of Network Physics in October 2007. The acquired and purchased technology are stated at the lower of unamortized cost or net realizable value and are amortized on a straight-line basis over their expected useful lives of three to five years. The Company’s customer relationship and workforce assets it purchased from Network Physics, Inc. are amortized on an accelerated depreciation basis over their expected useful lives of four and one-half years and five years, respectively. The Company uses the projected discounted cash flow method in valuing its acquired technology and purchased customer relationships using certain assumptions including revenue growth, cost levels, present value discount rate, and working capital requirements. The Company uses the lower of the amount of cash paid or the present value of projected discounted cash flows to value purchased technology. The

57

OPNET TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(dollar and share amounts in thousands, except per share data)

March 31, 2008, 2007 and 2006

workforce asset associated with the purchase of specified assets of Network Physics, Inc. was valued on a replacement cost basis. While the Company believes the assumptions used to value its acquired technology related to acquisitions are reasonable, actual results will likely differ from those assumptions. Future cash flows are subject to change for a variety of internal and external factors. The Company will periodically review the value of acquired technology and purchased intangible assets for reasonableness in accordance with SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets”. If changes in the Company’s assumptions at the time of future periodic reviews indicate that the carrying value of its acquired technology and purchased intangible assets exceeds their fair value and it determines that carrying amounts can not be recovered, it would result in impairment losses. As of March 31, 2008 and 2007, intangible assets totaled $8,633 and $899, net of accumulated amortization of $5,302 and $3,648, respectively. There has been no impairment as of March 31, 2008 or 2007.

Goodwill. In accordance with SFAS No. 142, goodwill is not amortized but is tested for impairment annually during the Company’s fourth quarter and whenever events and circumstances occur indicating that goodwill might be impaired. The Company performed its annual impairment test of goodwill as of March 31, 2008 and 2007 and concluded that there was no goodwill impairment.

Valuation of Long-Lived Assets. In accordance with SFAS No. 144 the Company reviews its long-lived assets, including property and equipment, for impairment whenever events or changes in circumstances indicate that the carrying amounts of the assets may not be fully recoverable. If the total of the expected undiscounted future net cash flows is less than the carrying amount of the asset, a loss is recognized for the difference between the fair value and carrying amount of the asset. There has been no impairment as of March 31, 2008 or 2007.

Revenue Recognition. The Company derives revenue from three primary sources: (1) new software licenses, (2) software license updates, technical support and services, which include software license update, certain training provided and offered on a when-and-if available basis to customers, and technical support, and (3) professional services, which include consulting and custom training services for customers without a current maintenance agreement. The Company recognizes revenue based on the provisions of the American Institute of Certified Public Accountants Statement of Position, or SOP No. 97-2, “Software Revenue Recognition,” as amended by SOP No. 98-9, “Modification of SOP No. 97-2, Software Revenue Recognition, With Respect to Certain Transactions,” SOP No. 81-1, “Accounting for Performance of Construction-Type and Certain Production-Type Contracts” and the SEC Staff Accounting Bulletin No. 104, “Revenue Recognition in Financial Statements.”

New Software License Revenue

New software license revenue represents all fees earned from granting customers licenses to use the Company’s software, and excludes revenue derived from software license updates, which are included in software license updates, technical support and services revenue. The Company’s new software license revenue consists of perpetual and term license sales of software products. For the twelve months ended March 31, 2008, perpetual licenses represented approximately 97% of software license revenue. New software license revenue is recognized when the following four criteria are met: (i) persuasive evidence of an arrangement exists, (ii) delivery of the software has occurred, (iii) the software license fee is fixed or determinable, and (iv) collectibility is probable. The Company defines each of these four criteria as follows:

• Persuasive evidence of an arrangement exists. For license arrangements with end-users, it is the Company’s customary practice to have a written software license agreement, which is signed by both the end user and the Company, and a purchase order or equivalent. A written contract can be executed

58

OPNET TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(dollar and share amounts in thousands, except per share data)

March 31, 2008, 2007 and 2006

based on the customer-specific format or on the standard “shrink wrap” software master license agreement. For those end users who have previously negotiated a software license agreement with the Company, the initial software license agreement is used as evidence of a written contract. Sales to distributors, resellers, and value-added resellers, which the Company collectively referred to as resellers, are primarily made outside of North America and are evidenced by a master reseller agreement governing the relationship, which is signed by both the reseller and the Company, together with a purchase order on a transaction-by-transaction basis. To further evidence an arrangement, the Company’s master reseller agreement requires that the reseller provide to the Company copies of the end user’s purchase order and executed copies of the end user’s software master license agreements.

• Delivery has occurred. Physical delivery of the Company’s software products to end users or resellers, which are collectively referred to as customers, is generally considered to have occurred upon the transfer of media containing the Company’s software products to a common carrier (usually FOB shipping point based on standard agreement terms). Software products may also be delivered electronically to end users. Electronic delivery is deemed to occur after end users have been provided with access codes that allow them to take immediate possession of the software. If a software arrangement includes undelivered software products or services that are essential to the functionality of delivered software products, delivery is not considered to have occurred until these software products or services are delivered.

• The fee is fixed or determinable. It is the Company’s policy to not provide customers the right to any adjustments or refund of any portion of their license fees paid, acceptance provisions, cancellation privileges, or rights of return. The Company’s normal payment terms for its software products and services currently range from net 30 days to net 90 days and primarily vary based on the country in which an agreement is executed. Payments that extend beyond the Company’s normal payment terms from the contract date but that are due within six months are generally deemed to be fixed or determinable based on its successful collection history on such arrangements, and thereby satisfy the required criteria for revenue recognition. Arrangements with payment terms extending beyond six months are considered not to be fixed or determinable, and revenue from such arrangements is recognized as payments become due and payable.

• Collectibility is probable. Collectibility is assessed on a customer-by-customer basis. The Company typically sells to customers for whom there is a history of successful collection. New customers are subject to a credit review process that evaluates the customer’s ability to pay. If the Company determines from the outset of an arrangement that collectibility is not probable, revenue is recognized as cash is collected.

In instances when any of the four criteria are not met, the Company defers recognition of software license revenue until the criteria are met. When the sale of the software product requires the Company to make significant enhancements, customization or modifications to the software that are essential to its functionality, software license revenue and consulting fees are recognized using contract accounting under SOP 81-1. The Company estimates the percentage-of-completion, under SOP 81-1, based on its estimate of total hours to complete the project as a percentage of total hours incurred and the estimated hours to complete.

The process of estimation inherent in the application of the percentage-of-completion method of accounting for revenue is subject to judgments and uncertainties and may affect the amounts of software license revenue and professional services revenue under certain contracts and related expenses reported in the Company’s consolidated financial statements. A number of internal and external factors can affect the Company’s estimates

59

OPNET TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(dollar and share amounts in thousands, except per share data)

March 31, 2008, 2007 and 2006

to complete client engagements, including skill level and experience of project managers, staff assigned to engagements, and continuity and attrition level of professional services staff. Changes in the estimated stage of completion of a particular project could create variability in the Company’s revenue and results of operations if it is required to increase or decrease previously recognized revenue related to a particular project or if it expects to incur a loss on the project.

Software License Update, Technical Support, and Services Revenue

Software license updates, technical support and services revenue represents fees associated with the sale of license updates, training, and technical support, all provided on a when-and-if-available basis (except for technical support) under the Company’s maintenance agreement. Payments for software license updates, technical support and services on initial order or on renewal are generally made in advance and are nonrefundable. License updates consist of the right to unspecified software updates on a when-and-if-available basis and are typically entered into in connection with the initial software license purchase. License updates, technical support and services may be renewed upon expiration of the term. Customers can purchase license updates separately from technical support and services. Revenue from license updates, technical support and services is deferred and recognized as revenue on a straight-line basis over the term of the maintenance agreement.

Revenue under multiple-element arrangements, which typically include new software licenses, consulting services, training and maintenance agreements sold together, are allocated to each element in the arrangement primarily using the residual method based upon the fair value of the undelivered elements, which is specific to the Company vendor-specific objective evidence of fair value, or VSOE. This means that the Company defers revenue from the arrangement fee equivalent to the fair value of the undelivered elements. Discounts, if any, are applied to the delivered elements, usually software licenses, under the residual method. For periodic unspecified product updates and technical support agreements, VSOE is based upon either the renewal rate specified in each contract or the price charged when sold separately. For consulting services and training for customers without a current maintenance agreement, VSOE is based upon the rates charged for these services when sold separately.

If the Company is unable to establish VSOE for an undelivered postcontract customer support, or PCS, element, for example, in a two-year term license where the license term and PCS are coterminous and no PCS renewal period exists, all revenue is recognized ratably over the contract period. For income statement classification purposes, the Company’s allocation methodology is based on VSOE of fair value for its professional services which is determined by the price charged when sold separately, and the contractually stated renewal rates for its PCS, generally 18% to 21% of the license fee paid, on perpetual licenses. The Company uses the residual method to allocate any remaining arrangement fee to new software license revenue.

Professional Services Revenue

Professional services revenue consists of fees from consulting services and training for customers without a current maintenance agreement and is recognized as the services are performed. When the Company enters into consulting service arrangements that include significant modifications to the software that are essential to the customer’s use and the arrangement is bundled with software, revenue under the entire arrangement is recognized under the percentage-of-completion method. For income statement classification purposes, the Company has developed a revenue allocation methodology for these arrangements that is consistent with the residual method used, and described under SOP 97-2, when services are not essential to the functionality of the software. In these circumstances, revenue is allocated to the various elements of the arrangement based on the Company’s VSOE of fair value and the residual amount is allocated to new software license revenue.

60

OPNET TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(dollar and share amounts in thousands, except per share data)

March 31, 2008, 2007 and 2006

The Company sells new software licenses, license updates, technical support and services agreements to distributors at predetermined prices. Sales to distributors are not contingent upon resale of the software to the end user. In most cases, the Company provides license updates, technical support and services agreements directly to distributors and the distributors provide support to the end customer. Revenue from sales to distributors is recorded at the amounts charged to the distributor and in the same manner as new software license, license updates, technical support and services sales sold through the Company’s direct sales force. Amounts received in advance of revenue recognition are classified as deferred revenue.

Sales taxes and other taxes collected from customers and remitted to governmental authorities are presented on a net basis, and as such, are excluded from revenues.

Allowance for Doubtful Accounts. The Company maintains an allowance for doubtful accounts receivable for estimated losses resulting from the inability of its customers to make required payments and for the limited circumstances when the customer disputes the amounts due the Company. The Company’s methodology for determining this allowance requires significant estimates. In estimating the allowance, the Company considers the age of the receivable, the creditworthiness of the customer, the economic conditions of the customer’s industry and general economic conditions.

Income Taxes. The income tax provision includes income taxes currently payable plus the net change during the year in deferred tax assets or liabilities. Deferred tax assets and liabilities reflect the differences between the carrying value under GAAP and the tax basis of assets and liabilities using enacted statutory tax rates in effect for the period in which the differences are expected to reverse. Judgments and estimates are required in the calculation of the deferred tax assets, valuation allowance, research and development tax credits, and foreign tax credits.

Effective April 1, 2007, the Company adopted Financial Accounting Standards Board, or FASB, issued FASB Interpretation, or FIN, No. 48, “Accounting for Uncertainty in Income Taxes,” or FIN No. 48. As a result of the implementation, the Company recognized a $653 increase to its liability for unrecognized tax benefits. The portion of the increase that was accounted for as an adjustment to the beginning balance of retained earnings on the balance sheet was $510. The total amount of gross unrecognized tax benefits as of April 1, 2007 was $810. Of this total, $781 (net of federal benefit on state issues) represents the amount of unrecognized tax benefits that, if recognized, would favorably affect the effective income tax rate in any future periods. At March 31, 2008, the gross unrecognized benefit was $838, $808 of which would favorably affect the effective income tax rate in future periods.

Foreign Currency Transactions. Revenue and expenses denominated in foreign currencies are translated at the average exchange rates during the period. Gains or losses on foreign exchange transactions are reported in the consolidated statements of operations.

Foreign Currency Translation. The results of operations for the Company’s international subsidiaries are translated from the designated functional currencies into United States dollars using average exchange rates during each period. Assets and liabilities are translated using exchange rates at the end of each period. Translation gains and losses are reported as a component of accumulated other comprehensive income in stockholders’ equity.

Comprehensive Income. Certain revenues, expenses, gains and losses are recognized in comprehensive income but excluded from net income. Comprehensive income includes net income, foreign currency translation adjustments, and unrealized gains and losses on marketable securities.

61

OPNET TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(dollar and share amounts in thousands, except per share data)

March 31, 2008, 2007 and 2006

Earnings per Share. Basic earnings per share is computed by dividing net income available to common shareholders by the weighted average number of common shares outstanding for the period. Diluted earnings per share reflects the potential dilution that could occur if securities or other contracts to issue common shares were exercised or converted into common shares for all periods presented.

Stock-Based Compensation. Beginning in fiscal 2007, the Company accounts for stock-based compensation given to employees in accordance with Financial Accounting Standards No. 123R, “Share-Based Payment”, or SFAS No. 123R, which is a revision of SFAS No. 123 “Accounting for Stock-Based Compensation,” as amended by SFAS No. 148, “Accounting for Stock-Based Compensation—Transition and Disclosure,” and supersedes Accounting Principles Board, or APB Opinion No. 25. SFAS No. 123R requires all share-based payments and nonvested shares (restricted stock) to employees, including grants of employee stock options, to be valued at fair value on the date of grant, and to be expensed over the applicable vesting period. Pro forma disclosure of the income statement effects of share-based payments is no longer an alternative. SFAS No. 123R is effective for all stock-based awards granted on or after January 1, 2006. In addition, the Company also recognized compensation expense related to any awards that were not fully vested as of the effective date.

Prior to fiscal 2007, the Company accounted for stock-based compensation given to employees using the intrinsic value method in accordance with APB Opinion No. 25, and accordingly, recognized compensation expense for fixed stock option grants when the exercise price was less than the quoted market price of the shares on the date of the grant. SFAS No. 123 permitted the use of either a fair-value based method or the intrinsic value method provided in APB No. 25 to account for employee stock-based compensation arrangements. Companies that elected to use the intrinsic value method provided in APB No. 25 were required to disclose the pro forma net income and earnings per share that would have resulted from the use of the fair value method. We have provided below the pro forma disclosures of the effect on net income and earnings per share as if SFAS No. 123, as amended, had been applied in measuring compensation expense for fiscal 2006.

The following table illustrates the effect on net income and related net income per share for fiscal 2006 had compensation cost for employee stock-based compensation plans been determined based upon the fair value method prescribed under SFAS No. 123, as amended:

	2006
Net income	$	2,137
Add: Stock-based employee compensation expense included in reported net income, net of related tax effects		15
Deduct: Total stock-based employee compensation expense determined under fair value based method for all awards, net of related tax effects		(1,728	)
Pro forma net income	$	424
Basic net income per common share:
As reported	$	0.10
Pro forma	$	0.02
Diluted net income per common share:
As reported	$	0.10
Pro forma	$	0.02

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OPNET TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(dollar and share amounts in thousands, except per share data)

March 31, 2008, 2007 and 2006

Recently Issued Accounting Pronouncements

In September 2006, the FASB issued Statement of Financial Accounting Standards No. 157, “Fair Value Measurements,” or SFAS No. 157. This standard clarifies the principle that fair value should be based on the assumptions that market participants would use when pricing an asset or liability. Additionally, it establishes a fair value hierarchy that prioritizes the information used to develop those assumptions. SFAS No. 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007. The Company has not yet determined the impact that the implementation of SFAS No. 157 will have on its results of operations or financial condition.

In February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities,” or SFAS No. 159. SFAS No. 159 permits entities to choose to measure, on an item-by-item basis, specified financial instruments and certain other items at fair value. Unrealized gains and losses on items for which the fair value option has been elected are required to be reported in earnings at each reporting date. SFAS No. 159 is effective for fiscal years beginning after November 15, 2007, the provisions of which are required to be applied prospectively. The Company has not yet determined the impact that the implementation of SFAS No. 159 will have on its results of operations or financial condition.

In December 2007, FASB issued SFAS No. 141(R), “Business Combinations,” or SFAS No. 141(R). SFAS No. 141 (R) which replaces SFAS No. 141 requires that the acquisition method of accounting (which SFAS No. 141 called the “purchase method”) be used for all business combinations and for an acquirer to be identified for each business combination. SFAS No. 141 (R ) also establishes principles and requirements for how the acquirer: recognizes and measures in its financial statement the identifiable assets acquired, the liabilities assumed, and any noncontrolling interest in the acquiree; recognizes and measures the goodwill acquired in the business combination or a gain from a bargain purchase; and determines what information to disclose to enable users of the financial statements to evaluate the nature and financial effects of the business combination. SFAS No. 141 (R) also requires that acquisition-related costs be recognized separately from the business combination. SFAS No. 141 (R) will apply prospectively to business combinations for which the acquisition date is after fiscal years beginning on or after December 15, 2008. The Company has not yet determined the impact that the implementation of SFAS No. 141 (R) will have on its results of operations or financial condition.

2. Stock-Based Compensation

The Company’s Amended and Restated 2000 Stock Incentive Plan, or 2000 Plan, provides for the granting of incentive and non-qualified stock options and restricted stock to purchase up to 5,540 shares of the Company’s common stock. The number of shares available for issuance will automatically increase on the first trading day of each calendar year by an amount equal to the lesser of 3% of the shares of common stock outstanding on the last trading day of the preceding calendar year, or an amount determined by the Board of Directors, not to exceed an annual increase of 1,000 shares. The Board of Directors voted not to increase the number of shares for issuance on the first trading day of calendar year 2008, 2007, or 2006. Options are granted for terms up to ten years and generally vest over periods ranging from one to six years from the date of the grant. Restricted stock granted to employees under this plan generally vests over four years from the date of the grant. Restricted stock granted to non-employees under this plan generally vests over six months from the date of the grant. New option grants and restricted stock grants are granted from new shares of the Company’s common stock.

The Company’s 1993 Incentive Stock Option Plan, or 1993 Plan, provides for the granting of incentive stock options to purchase up to 3,000 shares of common stock of the Company. Options are granted for terms of

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(dollar and share amounts in thousands, except per share data)

March 31, 2008, 2007 and 2006

up to ten years, and generally vest over periods ranging from one to six years from the date of the grant. The Board of Directors approved a resolution to make no further grants for options or stock awards under the 1993 Plan upon approval of the 2000 Plan.

In March 2000, the Board of Directors approved the adoption of the 2000 Director Stock Option Plan, which provides for the automatic annual granting of options to purchase stock to the Company’s directors, who are not its employees, for up to a total of 225 shares of common stock of the Company.

The Company’s 2000 Employee Stock Purchase Plan, or ESPP, provides all eligible employees to collectively purchase up to a total of 450 shares of its common stock. An employee may authorize a payroll deduction up to a maximum of 10% of his or her compensation during the plan period. The purchase price for each share purchased is the lesser of 85% of the closing price of the common stock on the first or last day of the plan period. The plan period for the ESPP ends in January and July of each year. The expense is calculated based on the difference between the fair market value of the shares purchased at the close of each plan period and the discounted price paid by the employee, and that expense is recognized on a straight-line basis over the plan period.

On April 1, 2006, the Company adopted SFAS 123R, which revised SFAS 123 using the modified prospective method. Prior to fiscal year 2007 and the adoption of SFAS 123R, the Company followed the intrinsic value method of accounting for its stock-based employee compensation arrangements as defined by Accounting Principles Board Opinion, or APB, No. 25.

SFAS 123R requires an entity to recognize an expense within its income statement for all share-based payment arrangements, which includes employee stock option plans, restricted stock grants, and ESPP. The Company has elected to continue straight-line amortization of stock-based compensation expense for the entire award over the service period since the awards have only service conditions and graded vesting. The Company adopted SFAS 123R under the modified prospective method. Under the modified prospective method, SFAS 123R applies to new awards and to awards modified, repurchased, or cancelled after April 1, 2006 as well as to the nonvested portion of awards outstanding as of April 1, 2006. Stock-based compensation for awards granted prior to April 1, 2006 is based upon the grant date fair value of such compensation as determined under the pro forma provisions of SFAS No 123.

Prior to the adoption of SFAS 123R, the Company reported tax benefits from the exercise of stock options as an operating cash flow in the consolidated statement of cash flows. In the period beginning April 1, 2006, excess tax benefits from the exercise of stock options are presented as a cash flow from financing activity. For fiscal 2008, 2007, and 2006, excess tax benefits from the exercise of stock options were $29, $383 and $49, respectively.

A summary of the total stock-based compensation expense for fiscal 2008, 2007 and 2006 is as follows:

	2008		2007		2006
	(in thousands)
Stock options	$	482	$	979	$	12
Restricted stock		611		253		15
ESPP		446		230		—
Total stock-based compensation	$	1,539	$	1,462	$	27

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(dollar and share amounts in thousands, except per share data)

March 31, 2008, 2007 and 2006

A summary of the total nonvested stock-based deferred compensation at March 31, 2008 and 2007 is as follows:

	2008		2007
	(in thousands)
Restricted stock	$	1,699	$	1,278
Stock options		162		644
ESPP		139		111
Total nonvested stock-based compensation	$	2,000	$	2,033

The cost of the nonvested restricted stock, stock options, and ESPP at March 31, 2008 are expected to be recognized over a weighted average period of 1.3 years, 3 months and 4 months, respectively.

Stock Options

The Company’s stock option programs are accounted for as equity awards. The expense is based on the grant-date fair value of the options granted, and is recognized over the requisite service period.

A summary of the option transactions for fiscal 2008, 2007, and 2006 is as follows:

	2008
	Options (in thousands)		Weighted Average Exercise Price		Weighted Average Remaining Contract Life (Years)	Aggregate Intrinsic Value (in thousands)		Weighted Average Grant Date Fair Value
Outstanding at beginning of period	2,841		$	10.73	—	$	1,405	$	7.51
Granted	—			—	—		—		—
Exercised	(60	)		6.08	—		256		4.23
Forfeited or expired	(61	)		12.37	—		—		8.65
Outstanding at end of period	2,720			10.79	3.92		1,256		7.56
Exercisable at end of period	2,643			10.85	3.85		1,256		7.61
Nonvested at end of period	77			9.01	6.35		—		6.01
Nonvested options expected to be exercised	73			9.01	6.60		4		6.01

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(dollar and share amounts in thousands, except per share data)

March 31, 2008, 2007 and 2006

	2007
	Options (in thousands)		Weighted Average Exercise Price		Weighted Average Remaining Contract Life (Years)	Aggregate Intrinsic Value (in thousands)		Weighted Average Grant Date Fair Value
Outstanding at beginning of period	3,233		$	10.37	—	$	11,362	$	7.31
Granted	30			13.25	—		8		3.90
Exercised	(381	)		7.84	—		2,406		5.53
Forfeited or expired	(41	)		10.78	—		113		7.30
Outstanding at end of period	2,841			10.73	4.91		9,092		7.51
Exercisable at end of period	2,650			10.80	4.71		8,356		7.65
Nonvested at end of period	191			9.67	7.68		735		5.68

	2006
	Options (in thousands)		Weighted Average Exercise Price		Weighted Average Remaining Contract Life (Years)	Aggregate Intrinsic Value (in thousands)		Weighted Average Grant Date Fair Value
Outstanding at beginning of period	3,573		$	10.10	—	$	5,396	$	7.13
Granted	30			8.61	—		48		4.31
Exercised	(180	)		3.41	—		1,083		2.35
Forfeited or expired	(190	)		11.59	—		91		8.06
Outstanding at end of period	3,233			10.37	5.57		4,135		7.31
Exercisable at end of period	2,772			10.78	5.30		3,038		7.66
Nonvested at end of period	461			7.85	7.17		1,097		5.19

During fiscal 2008, 112 stock options vested with a weighted average grant date fair value of $10.20.

To estimate the grant-date fair value of its stock options, the Company uses the Black-Scholes option-pricing model. The Black-Scholes model estimates the per share fair value of an option on its date of grant based on the following: the option’s exercise price; the price of the underlying stock on the date of grant; the estimated dividend yield; a “risk-free” interest rate; the estimated option term; and the expected volatility. For the “risk-free” interest rate, the Company uses a U.S. Treasury Bond due in a number of years equal to the option’s expected term. To determine expected volatility, the Company analyzes the historical volatility of its stock over the expected term of the option.

The Company did not grant any stock options during fiscal 2008. The weighted average assumptions to determine the grant-date fair value for stock options for fiscal 2007 and 2006 are as follows:

	2007		2006
Risk-free interest rate	5.02	%	4.01	%
Expected dividend yield	0.00	%	0.00	%
Expected life	2 years		4 years
Volatility factor	43	%	61	%

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(dollar and share amounts in thousands, except per share data)

March 31, 2008, 2007 and 2006

Compensation cost for option grants is recognized on a straight-line basis over the requisite service period for the entire award (from the date of grant through the period of the last separately vesting portion of the grant). Compensation cost is recognized within the income statement in the same expense line as the cash compensation paid to the respective employees. SFAS 123R also requires the Company to estimate forfeitures in calculating the expense related to stock-based compensation. The Company has concluded that its historical forfeiture rate is the best measure to estimate future forfeitures of granted stock options. The impact on compensation cost due to changes in the expected forfeiture rate will be recognized in the period that they become known. To date there has been no change in the Company’s forfeiture rate, so there has been no impact on compensation cost.

During fiscal 2008, 2007 and 2006, respectively, the Company received proceeds of approximately $365, $2,987, and $612 and issued 60, 381, and 179 shares of common stock, pursuant to employee exercises of stock options.

On October 26, 2005, the Company’s Board of Directors approved the accelerated vesting of all unvested options that had an exercise price of $11.75 or greater and were held by current employees, including executive officers. This accelerated vesting affected options with respect to 254 shares of the Company’s common stock that was not vested under such options, and was effective for stock options outstanding as the close of business on October 26, 2005.

The Board of Director’s primary purpose in accelerating vesting was to eliminate future stock-based employee compensation expense that the Company would have otherwise recognized in its consolidated statement of operations with respect to these accelerated options once SFAS 123R became effective. Furthermore, the Board of Directors concluded that the retention value of the unvested portion of these options was minimal given the then-current market price for the Company’s common stock. Because these options have exercise prices well in excess of the Company’s then-current stock price which was $8.13 at the close of business on October 26, 2005, as reported by the NASDAQ National market, the Board of Directors concluded that these options would not offer sufficient incentive to the employees to remain with the Company when compared to the future compensation expense that would have been attributable to the options. The estimated maximum future expense that was eliminated was approximately $922.

All of these options had an exercise price of $11.75, a grant date of October 23, 2003, and a vesting schedule that provided for pro rata annual vesting for 99.8% of the grants over five years from the date of the grant and for all cliff vesting for 0.2% of the grant in three years from the date of the grant. In the case of options held by executive officers of the Company, vesting was accelerated with respect to 48 shares for the Company’s CEO.

Restricted Stock

The Company’s restricted stock grants are accounted for as equity awards. The expense is based on the price of the Company’s common stock, and is recognized on a straight-line basis over the requisite service period. The Company did not grant any restricted stock prior to February 2006. The Company’s restricted stock agreements do not contain any post-vesting restrictions.

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(dollar and share amounts in thousands, except per share data)

March 31, 2008, 2007 and 2006

A summary of the restricted stock grants is as follows:

	2008
	Restricted Stock Grants (in thousands)		Weighted Average Grant Fair Value
Nonvested at beginning of period	127		$	12.14
Granted	108			9.86
Vested	(22	)		11.16
Forfeited	—			—
Nonvested at end of period	213			11.07

	2007
	Restricted Stock Grants (in thousands)		Weighted Average Grant Fair Value
Nonvested at beginning of period	43		$	9.39
Granted	89			13.48
Vested	(1	)		13.44
Forfeited	(4	)		11.67
Nonvested at end of period	127			12.14

	2006
	Restricted Stock Grants (in thousands)	Weighted Average Grant Fair Value
Nonvested at beginning of period	—		—
Granted	43	$	9.39
Vested	—		—
Forfeited	—		—
Nonvested at end of period	43		9.39

Employee Stock Purchase Plan

A total of 121, 85, and 73 shares of the Company’s common stock were issued under the ESPP in fiscal 2008, 2007 and 2006, respectively. The issuance of the common stock resulted in proceeds to the Company of $989, $753, and $497, respectively.

The weighted average assumptions to determine the value for ESPP shares for fiscal 2008 and 2007 are as follows:

	Plan Period Starting February 2008		Plan Period Starting August 2007		Plan Period Starting February 2007		Plan Period Starting August 2006
Risk-free interest rate	2.15	%	4.96	%	5.16	%	5.18	%
Expected dividend yield	0.00	%	0.00	%	0.00	%	0.00	%
Expected life	0.5 years		0.5 years		0.5 years		0.5 years
Volatility factor	60	%	49	%	45	%	48	%

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(dollar and share amounts in thousands, except per share data)

March 31, 2008, 2007 and 2006

3. Marketable Securities

Marketable securities as of March 31, 2008 and 2007 consisted of the following:

	March 31, 2008
	Amortized Cost		Gross Unrealized Gain		Gross Unrealized Loss			Market Value
Municipal securities	$	6,000	$	—	$	—		$	6,000
ARS		8,800		—		(381	)		8,419
Marketable securities	$	14,800	$	—	$	(381	)	$	14,419
	March 31, 2007
Corporate bonds and notes	$	46,615	$	—	$	—		$	46,615
United States government agencies		10,000		—		—			10,000
Marketable securities	$	56,615	$	—	$	—		$	56,615

As of March 31, 2008, the Company held ARS totaling $8,800 at par value, which are classified as available for sale securities and short-term and long-term marketable securities on the Company’s consolidated balance sheet. Contractual maturities for these ARS extend through November 2047 with an interest rate reset date approximately every 28 days. The ARS are primarily collateralized by United States government-backed student loans and were rated AAA at March 31, 2008. Historically, the carrying value of ARS approximated fair value due to the frequent resetting of the interest rates. With the liquidity issues experienced in the global credit and capital markets, the Company’s ARS have experienced failed auctions. While the Company continues to earn and receive interest on these marketable securities at the maximum contractual rate, the estimated fair value of these ARS no longer approximate par value.

Since there is little or no active market data for the Company’s ARS the Company developed its own assumptions to determine the fair value of the securities. The Company assumed that the fair value is an exit price, representing the amount that would be received if it sold the ARS in an orderly transaction between market participants. The Company prepared its fair value analysis to determine the exit price by focusing on the structure of each ARS, the collateral underlying each ARS, the cash flow characteristics, and the current trading environment of such securities. The Company also considered the valuation prepared for it by a third-party valuation firm. With regard to the structure of each ARS, the Company charted the cash flows pertaining to the ARS and modeled the net present value. While the Company believes that the estimates it used are reasonable, should any of these factors change; its estimates may also change, which could affect the valuation of its ARS. In addition, the Company performed extensive research on the collateral underlying the ARS and the trading environment for such financial products. It is the Company’s view that a number of factors have contributed to the recent market disruption: real and perceived decline in value of collateralized assets and other financial instruments; increased defaults on home mortgages and bankruptcies; tightening of credit among lenders; increasing commodity prices and the weakening of the United States dollar, and fears of a United States recession. Based on its analysis and the Company’s belief that the ARS are of high credit quality, the Company determined that the fair value of the ARS at March 31, 2008 was $8,419 and recorded a temporary impairment charge of $381. The Company believes that the impairment charge is temporary because it has the intent and ability to hold the ARS for a period of time sufficient to allow for a recovery in the market. Accordingly, the

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(dollar and share amounts in thousands, except per share data)

March 31, 2008, 2007 and 2006

temporary impairment was recorded to other comprehensive income on the Company’s consolidated balance sheet. The Company also classified $6,968 of the ARS as long-term marketable securities on its consolidated balance sheet as of March 31, 2008.

4. Acquisition of Specified Assets of Network Physics, Inc.

On October 19, 2007, the Company completed the acquisition of specified assets of Network Physics, Inc. (Network Physics). Pursuant to the asset purchase agreement, the purchase price totaled $10,005 and was paid in cash from the Company’s working capital. The Company accounted for the asset acquisition as the purchase of productive assets and followed the guidance in SFAS 141 to perform the purchase price allocation. The Company expensed $720 in transaction-related professional services costs during fiscal 2008 in connection with the asset acquisition. The Company has conducted a review and analysis of the purchase price. A summary of the assets acquired follows:

	March 31, 2008		Amortization Method	Useful Life
	(in thousands)
Current assets	$	45
Property, plant and equipment		572	Straight-line	1-3 years
Acquired technology		7,827	Straight-line	5 years
Customer relationships		724	Double-declining balance	4.5 years
Acquired workforce		837	Double-declining balance	5 years
Total consideration	$	10,005

The assets acquired were recorded at estimated fair values as determined by the Company’s management based on information currently available and on current assumptions as to future operations. The Company obtained valuation services from an independent company to assist in the Company’s determination of the fair value of acquired intangibles and their remaining useful lives.

The Company’s purchase of specified assets of Network Physics constituted the acquisition of productive assets and not the acquisition of a business under Emerging Issues Task Force, or EITF, 98-3, “Determining Whether a Nonmonetary Transaction Involves Receipt of Productive Assets or of a Business.”

5. Intangible Assets

Intangible assets consisted of the following:

	At March 31, 2008			At March 31, 2007
	(in thousands)
Acquired and purchased technology	$	12,374		$	4,547
Customer relationships		724			—
Acquired workforce		837			—
Total		13,935			4,547
Less: accumulated amortization		(5,302	)		(3,648	)
Intangible assets, net	$	8,633		$	899

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(dollar and share amounts in thousands, except per share data)

March 31, 2008, 2007 and 2006

Intangible assets associated with acquired and purchased technology consist of acquired technology related to the Company’s acquisitions of a software product for modeling voice communications in December 2003, Altaworks in October 2004, purchased technology from RadView Software, Ltd. in December 2005, and SQMworks, Inc. in April 2006, and the purchase of technology from Network Physics in October 2007. Intangible assets associated with customer relationships and acquired workforce relate to the purchase of specified assets from Network Physics in October 2007. Acquired and purchased intangible assets resulted in amortization expense for fiscal 2008, 2007 and 2006 of $1,654, $723 and $832, respectively. Amortization expense from acquired and purchased technology and customer relationships is included in cost of revenue in the consolidated statements of operations. Amortization expense from the acquired workforce asset is included in research and development expenses in the consolidated statements of operations. The Company amortizes acquired and purchased technology on a straight-line basis over their expected useful lives of three to five years. The customer relationships and workforce assets that the Company purchased from Network Physics are amortized on an accelerated depreciation basis over their expected useful lives of four and one half years and five years, respectively. The Company currently expects future amortization expense attributable to these intangible assets of $2,440 in the fiscal 2009, $1,850 in fiscal 2010, $1,755 in fiscal 2011, $1,755 in fiscal 2012, and $833 in fiscal 2013.

Goodwill is primarily derived from the Company’s acquisitions of Altaworks in October 2004, WDM NetDesign in January 2002, and NetMaker in March 2001. The Company made no adjustment to goodwill during fiscal 2007 or fiscal 2008.

6. Property and Equipment

Property and equipment consisted of the following at March 31, 2008 and 2007:

	2008			2007
Computer equipment	$	8,371		$	7,866
Leasehold improvements		6,699			4,395
Construction in progress		237			2,320
Purchased software		4,094			2,165
Office furniture and equipment		1,656			1,456
Total		21,057			18,202
Less: accumulated depreciation		(10,173	)		(9,457	)
Property and equipment, net	$	10,884		$	8,745

In December 2006, the Company entered into an operating lease in Bethesda, MD to increase the office space of our corporate facilities. At March 31, 2007, the Company had $2,320 in construction in progress associated with the build out of this space. The $237 in construction in progress at March 31, 2008 is primarily attributable to the build out of office space to replace its existing office space in Cary, North Carolina. The Company entered into the new operating lease in April 2007 and moved into the space in May 2008. See Note 9 for more information regarding the Company’s office space.

Depreciation expense for fiscal 2008, 2007, and 2006 was $2,364, $1,625, and $1,590, respectively.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(dollar and share amounts in thousands, except per share data)

March 31, 2008, 2007 and 2006

7. Accrued Liabilities

Accrued liabilities consisted of the following at March 31, 2008 and 2007:

	2008		2007
Accrued compensation and bonuses	$	4,866	$	4,709
Accrued accounting and tax services		970		505
Accrued legal services		11		195
Accrued leasehold improvements		—		724
Other		2,708		2,188
Total	$	8,555	$	8,321

8. Income Taxes

The components of the provision for income taxes for the years ended March 31, 2008, 2007 and 2005, were as follows:

	2008			2007			2006
Current provision:
Federal	$	115		$	2,471		$	397
State		13			785			98
Foreign		382			349			289
Total current provision		510			3,605			784
Deferred provision (benefit):
Federal		(748	)		(28	)		(297	)
State		(131	)		23			(27	)
Foreign		(3	)		55			49
Total deferred (benefit) provision		(882	)		50			(275	)
Total (benefit) provision for income taxes	$	(372	)	$	3,655		$	509

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(dollar and share amounts in thousands, except per share data)

March 31, 2008, 2007 and 2006

At March 31, 2008 and 2007, respectively, the components of the Company’s deferred tax assets and deferred tax liabilities were as follows:

	2008			2007
Deferred tax assets:
Accrued expenses	$	1,346		$	1,146
Deferred revenue		315			178
In-process research and development		158			178
Deferred rent		777			832
Research and development tax credit carryforward		1,483			1,188
Accelerated book amortization of acquired technology		960			437
Bad debt reserve		59			51
Federal net operating loss carryforward		12,995			13,049
Foreign net operating loss carryforward		73			61
Foreign tax credit carryforward		138			—
Deferred stock based compensation		808			396
Accelerated depreciation		128			124
Other temporary differences		29			49
Gross deferred tax assets		19,269			17,689
Less: valuation allowance		(13,289	)		(13,289	)
Total deferred tax asset		5,980			4,400
Deferred tax liabilities:
Tax amortization of goodwill		(1,961	)		(1,680	)
Tax liabilities related to acquisitions		—			(44	)
Tax accounting for unbilled accounts receivable		(988	)		(593	)
Total deferred tax liabilities		(2,949	)		(2,317	)
Net deferred tax asset	$	3,031		$	2,083

SFAS No. 109 “Accounting for Income Taxes,” or SFAS No. 109 requires that the Company assess the realizability of deferred tax assets at each reporting period. These assessments generally consider several factors including the reversal of existing deferred tax asset temporary differences, projected future taxable income, tax planning strategies, and historical and future book income adjusted for permanent book to tax differences. As stated below, the Company has established a valuation allowance related to a portion of the deferred tax asset associated with the Altaworks transaction due to limitations under Section 382 of the Internal Revenue Code. The Company believes that it is more likely than not that the remaining net deferred tax asset of $3,031will be realized, based upon its history of profitability, estimates of future taxable income, and the period over which the tax benefits can be realized.

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(dollar and share amounts in thousands, except per share data)

March 31, 2008, 2007 and 2006

The provision for income taxes for fiscal 2008, 2007 and 2006 differs from the amount computed by applying the statutory United States Federal income tax rate to income before taxes as a result of the following:

	2008		2007		2006
Statutory United States Federal rate	34.0	%	34.0	%	34.0	%
Increase (decrease) in taxes resulting from:
State income taxes—net of Federal benefit	(7.0	)	4.5		5.8
Nondeductible meals and entertainment	38.0		0.5		2.1
Nondeductible fines and penalties	3.6		0.1		—
Nondeductible stock compensation	93.9		0.1		—
Nondeductible expenses—other	4.3		0.1		0.2
Section 199 deduction	(10.2	)	(0.6	)	—
Tax credits	(209.3	)	(6.2	)	(31.5	)
Provision to return true-ups (permanent items)	148.9		0.5		(0.6	)
Foreign tax expense	(173.6	)	—		8.8
Tax exempt income	(234.0	)	(1.9	)	—
Other	13.0		0.1		1.0
FIN 48	45.2		—		—
Changes to estimates	8.2		0.5		—
Foreign tax rate differential	14.5		(0.2	)	(0.5	)
Effective tax rate	(230.5	)%	31.5	%	19.3	%

The decrease in the Company’s effective tax rate in fiscal 2008 from fiscal 2007 was primarily the result of a decrease in book income and an increase in permanent book to tax differences such as tax exempt interest income. The increase in the Company’s effective tax rate in fiscal 2007 from fiscal 2006 was primarily the result of the reduced benefit of research and development credits and adjusting projected foreign tax credits and projected research and development tax credits to the actual amount of the credits computed in conjunction with completing and filing its fiscal 2006 tax return in December of fiscal 2007.

At March 31, 2008, the Company had a United States federal research and development tax credit carryforward of approximately $1,483 and net operating loss carryforwards of approximately $38,220, which will expire in the years 2019 through 2024. At March 31, 2008, the Company’s German and Singapore subsidiaries had foreign net operating loss carryforwards of $87 and $259, respectively. Both of the foreign net operating losses can be carried forward indefinitely under local tax legislation.

As part of the Altaworks Corporation acquisition, the Company received a federal net operating loss carryforward of approximately $38,775 and a research and development credit carryforward of approximately $1,188. The related deferred tax assets amount to $14,372. These tax assets are subject to an annual limitation under Section 382 of the Internal Revenue Code. Because of the limitation imposed, management believes it is more likely than not that a portion of the assets will not be realized and has placed a valuation allowance of $13,289 against that portion.

At March 31, 2008, the Company had cumulative undistributed earnings of foreign subsidiaries, for which no United States income or foreign withholding taxes have been recorded, of approximately $1,943, which have been reinvested indefinitely. Determination of the amount of unrecognized deferred tax liability with respect to

74

OPNET TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(dollar and share amounts in thousands, except per share data)

March 31, 2008, 2007 and 2006

such earnings is not practicable. The additional taxes on the earnings of foreign subsidiaries, if remitted, would be partially offset by United States tax credits for foreign taxes already paid.

Effective April 1, 2007, the Company adopted FIN No. 48. As a result of the implementation, the Company recognized a $653 increase to its liability for unrecognized tax benefits. The portion of the increase that was accounted for as an adjustment to the beginning balance of retained earnings on the balance sheet was $510. The total amount of gross unrecognized tax benefits as of April 1, 2007 was $810. Of this total, $781 (net of federal benefit on state issues) represents the amount of unrecognized tax benefits that, if recognized, would favorably affect the effective income tax rate in any future periods. At March 31, 2008, the gross unrecognized benefit was $838, $808 of which would favorably affect the effective income tax rate in future periods. A reconciliation of the beginning and ending amount of unrecognized tax benefits follows:

Unrecognized tax benefits at April 1, 2007	$	810
Gross increases—tax positions in prior period		—
Gross decreases—tax positions in prior period		(80	)
Gross increases—current period tax positions		79
Settlements		—
Lapse of statute of limitations		—
Foreign currency translation adjustment		29
Unrecognized tax benefits at March 31, 2008	$	838

The following table summarizes the tax years that are either currently under audit or remain open under the statute of limitations and are subject to examination by the tax authorities in the most significant jurisdictions that the Company operates:

Australia	FY03 – FY08
Belgium	FY04 – FY08
France	FY04 – FY08
Germany	FY04 – FY08
United Kingdom	FY07 – FY08
United States	FY02 – FY03
United States	FY05 – FY08
Maryland	FY04 – FY08
New York	FY07 – FY08

The Company’s continuing practice is to recognize interest, if any, related to income tax matters in interest expense in its consolidated statement of operations and penalties as part of general and administrative expense in its consolidated statement of operations. In conjunction with the adoption of FIN 48, the Company recognized $20 and $8 for the payment of interest and penalties, respectively, at April 1, 2007 which is included in accrued interest on the balance sheet. During fiscal 2008, the Company recognized $6 in potential interest expense associated with uncertain tax positions. The total accrued interest and accrued penalties related to uncertain tax positions for fiscal 2008 was $30 and $2, respectively.

75

OPNET TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(dollar and share amounts in thousands, except per share data)

March 31, 2008, 2007 and 2006

The Company believes it is reasonably possible that significant changes in the liability for uncertain tax positions will occur in the next twelve months as a result of final decisions related to the voluntary payments of its state and local income taxes and lapse of statute of limitations. In the aggregate, the Company believes the liability for uncertain tax positions could decrease by $235 in the next twelve months.

9. Commitments and Contingencies

The Company’s corporate office and principal facility is located in Bethesda, Maryland and consists of approximately 82,000 square feet of office space held under two leases. The lease for 60,000 square feet expires on January 31, 2011, exclusive of renewal options. The lease provides for two five-year renewal options. The rent is subject to escalation based upon a consumer price index adjustment of up to 3% each year. The lease also requires the Company to maintain a security deposit of approximately $2,122 in the form of a bank letter of credit, as discussed in Note 10, which is subject to annual reductions based upon meeting certain minimum financial requirements. The lease for 22,000 square feet expires on January 31, 2016, exclusive of renewal options. The lease provides for one five-year renewal options. The rent is subject to escalation based upon a consumer price index adjustment of up to 3% each year. The lease also requires the Company to maintain a security deposit of approximately $69 in the form of a bank letter of credit, as discussed in Note 10, which is subject to annual reductions based upon meeting certain minimum financial requirements.

In addition, the Company leases office space under non-cancelable operating leases. The leases for office space contain escalation clauses that provide for increased rentals based primarily on increases in real estate taxes, operating expenses, or the average consumer price index. Total rent expense under all leases for fiscal 2008, 2007, and 2006 was $4,495, $3,821, and $3,437, respectively. At March 31, 2008, future minimum lease payments required under non-cancelable leases were as follows:

Year ending March 31,
2009	$	5,079
2010		5,155
2011		4,788
2012		2,174
2013		1,963
Thereafter		10,804
Total minimum lease payments	$	29,963

The Internal Revenue Service, or IRS, is examining the Company’s federal corporate income tax returns for fiscal 2002 and 2003. While the IRS examination of the Company’s returns is not final at this time, the Company has reached an agreement with respect to the amount of research and development tax credits that it claimed on its tax returns for those years. As a result of this agreement, the Company is reducing the amount of the research and development tax credits claimed on its tax returns for fiscal 2002 and 2003 by approximately $350. The IRS also asserted tax deficiencies related to the timing of revenue reported on the Company’s tax returns for fiscal 2002 and 2003. The IRS has asserted that revenue associated with certain contracts reported on the Company’s fiscal year 2003 tax return, should have been included in taxable income on its tax return for the fiscal 2002. The Company does not believe any tax deficiencies related to the timing of reporting revenue will be material to the financial statements.

76

OPNET TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(dollar and share amounts in thousands, except per share data)

March 31, 2008, 2007 and 2006

The Company accounts for guarantees in accordance with Financial Accounting Standards Board issued Interpretation No. 45, “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others”, or “Interpretation No. 45”. Interpretation No. 45 elaborates on the disclosures required in financial statements concerning obligations under certain guarantees. It also clarifies the requirements related to the recognition of liabilities by a guarantor at the inception of certain guarantees. The provisions related to recognizing a liability at inception of the guarantee do not apply to product warranties or indemnification provisions in the Company’s software license agreements.

Under the terms of substantially all of the Company’s license agreements, it has agreed to defend and pay any final judgment against its customers arising from claims against such customers that the Company’s software products infringe the intellectual property rights of a third party. To date: i) the Company has not received any notice that any customer is subject to an infringement claim arising from the use of its software products, ii) the Company has not received any request to defend any customers from infringement claims arising from the use of its software products, and iii) the Company has not paid any final judgment on behalf of any customer related to an infringement claim arising from the use of its software products. Because the outcome of infringement disputes are related to the specific facts in each case, and given the lack of previous or current indemnification claims, the Company cannot estimate the maximum amount of potential future payments, if any, related to its indemnification provisions. However, the Company reasonably believes these indemnification provisions will not have a material adverse effect on its operating performance or financial condition. As of March 31, 2008, the Company has not recorded any liabilities related to these indemnifications.

The Company’s standard license agreement includes a warranty provision for software products. The Company generally warrants for the first ninety days after delivery that the software shall operate substantially as stated in the then current documentation provided that the software is used in a supported computer system. The Company provides for the estimated cost of product warranties based on specific warranty claims, provided that it is probable that a liability exists and provided the amount can be reasonably estimated. To date, the Company has not had any material costs associated with these warranties.

The Company is involved in other claims and legal proceedings arising from its normal operations. The Company does not expect these matters, individually or in the aggregate, to have a material effect on its financial condition, results of operations, or cash flows.

10. Credit Agreements and Notes Payable

Effective June 10, 2002, the Company entered into a credit facility with a commercial bank. The credit facility permits the borrowing of funds for general corporate purposes and the issuance of letters of credit up to a maximum of $10,000 in the aggregate. Borrowings under the credit facility are limited to 80% of eligible accounts receivable. The Company used the facility to issue an irrevocable letter of credit for approximately $2,122 to satisfy the security deposit requirements for its corporate office lease. Upon a default, as defined in the corporate office lease agreement, and written notice from the landlord to the Company, the landlord has the right to draw upon the letter of credit in whole or in part. Interest is payable monthly, based on LIBOR plus the applicable margin ranging from 2% to 2.5% as stated in the loan agreement. The credit facility includes a fee in the amount of 0.25% per annum on the unused portion of the credit facility. The credit facility is collateralized by the Company’s accounts receivable. The loan agreement contains customary affirmative and negative covenants including a restriction on the payment of dividends. The Company was in compliance with all affirmative and negative covenants as of March 31, 2008. Effective June 10, 2007, the credit facility was renewed for $2,000 and

77

OPNET TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(dollar and share amounts in thousands, except per share data)

March 31, 2008, 2007 and 2006

is due to expire on June 30, 2008. As of March 31, 2008, we had available borrowings of $249 under the credit facility. We plan to renew the credit facility in fiscal 2009.

11. Employee Benefit Plan

Effective August 1, 1993, the Company established a 401(k) retirement plan, or the Plan covering all eligible employees, as defined. Eligible employees who are at least 21 years old may participate. Under the terms of the Plan, participants may defer a portion of their salaries as employee contributions. The Company makes matching contributions and may make discretionary and extra contributions. Employee contributions and extra contributions made by the Company are 100% vested immediately. In general, the Company’s matching and discretionary contributions vest ratably over a five-year period. The Company’s expense under this Plan for fiscal 2008, 2007 and 2006 was $1,259, $1,056, and $890, respectively.

12. Earnings per Share

The following is a reconciliation of the amounts used in calculating basic and diluted net income per common share for fiscal 2008, 2007 and 2006:

	2008		2007		2006
Net Income (Numerator):
Basic and diluted net income	$	533	$	7,965	$	2,137
Shares (Denominator):
Weighted average shares outstanding (basic)		20,342		20,358		20,374
Plus:
Effect of other dilutive securities—options		254		832		229
Effect of other dilutive securities—restricted stock		25		16		1
Weighted average shares outstanding (diluted)		20,621		21,206		20,604
Net income per common share:
Basic	$	0.03	$	0.39	$	0.10
Diluted	$	0.03	$	0.38	$	0.10

The weighted average shares outstanding (diluted) is not impacted during any period where the exercise price of a stock option is greater than the average market price. The Company had options for the purchase of 1,826, 470 and 2,367 common shares that were excluded from the diluted average shares outstanding for the fiscal 2008, 2007, and 2006 respectively, because their effect was anti-dilutive.

13. Treasury Stock

On January 31, 2005, the Company announced that the Board of Directors had authorized the repurchase of up to 1,000 shares of the Company’s common stock from time to time on the open market or in privately negotiated transactions. On February 4, 2008, the Company announced that the Board of Directors had authorized the repurchase of an additional 1,000 shares of the Company’s common stock under the stock repurchase program. This stock repurchase program does not have a specified termination date. Any repurchased shares will be available for use in connection with the Company’s stock plans or other corporate purposes. The Company expended $5,013, $1,521 and $3,625 to purchase 522, 104 and 409 shares during fiscal 2008, 2007 and

78

OPNET TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(dollar and share amounts in thousands, except per share data)

March 31, 2008, 2007 and 2006

2006, respectively, at an average price of $9.61, $14.62 and $8.84. Restricted stock shares withheld from employees to satisfy the minimum statutory withholding obligations with respect to the income recognized by these employees upon the vesting of their restricted stock shares during the year are included in these totals. As of March 31, 2008, the Company had repurchased 1,036 shares of common stock under the stock repurchase program.

14. Comprehensive Income

Comprehensive income includes net income, foreign currency translation adjustments, and net unrealized (losses)/gains on marketable securities. The components of comprehensive income for fiscal 2008, 2007, and 2006, net of tax, are as follows:

	2008			2007			2006
Net income	$	533		$	7,965		$	2,137
Foreign currency translation adjustments		147			758			(315	)
Net unrealized (losses) gains on marketable securities		(381	)		(19	)		50
Total comprehensive income	$	299		$	8,704		$	1,872

15. Business Segment and Geographic Area Information

The Company operates in one industry segment, the development and sale of computer software programs and related services. The Chief Operating Officer evaluates the performance of the Company using one industry segment. For the years ended March 31, 2008, 2007 and 2006, revenue from transactions with United States government agencies was approximately 41%, 43%, and 43% of total revenue, respectively. No single customer accounted for 10% or more of revenue for fiscal 2008, 2007 or 2006. In addition, there was no country, with the exception of the United States, where aggregate sales accounted for 10% or more of total revenue. The Company’s assets were primarily held in the United States for fiscal 2008, 2007 and 2006.

Revenue by geographic destination and as a percentage of total revenue for fiscal 2008, 2007 and 2006 are as follows:

	2008			2007			2006
Geographic Area by Destination
United States	$	80,840		$	75,071		$	59,574
International		20,506			20,059			16,541
	$	101,346		$	95,130		$	76,115
Geographic Area by Destination
United States		79.8	%		78.9	%		78.3	%
International		20.2			21.1			21.7
		100.0	%		100.0	%		100.0	%

79

OPNET TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(dollar and share amounts in thousands, except per share data)

March 31, 2008, 2007 and 2006

16. Valuation and Qualifying Accounts

The following table sets forth activity in our valuation accounts:

	Balance at Beginning of Period		Charges to Expenses		Other		Deductions (1)			Balance at End of Period
Accounts receivable reserve account:
Year ended March 31, 2008	$	133	$	96	$	—	$	(75	)	$	154
Year ended March 31, 2007	$	140	$	25	$	—	$	(32	)	$	133
Year ended March 31, 2006	$	180	$	27	$	—	$	(67	)	$	140
Deferred tax valuation account:
Year ended March 31, 2008	$	13,289	$	—	$	—	$	—		$	13,289
Year ended March 31, 2007	$	13,289	$	—	$	—	$	—		$	13,289
Year ended March 31, 2006	$	13,289	$	—	$	—	$	—		$	13,289

(1) Deductions represent write-offs of receivables previously reserved and adjustments to reflect accounts receivable at net realizable value.

17. Quarterly Financial Data (Unaudited)

	First Quarter			Second Quarter		Third Quarter			Fourth Quarter
Year Ended March 31, 2008
Revenue	$	23,332		$	24,991	$	26,017		$	27,006
Gross profit		17,474			19,026		19,091			19,566
(Loss) income from operations		(59	)		211		(2,346	)		(1,224	)
Net income (loss)		647			1,301		(1,312	)		(103	)
Basic net income (loss) per common share	$	0.03		$	0.06	$	(0.06	)	$	(0.00	)
Diluted net income (loss) per common share	$	0.03		$	0.06	$	(0.06	)	$	(0.00	)
Basic weighted average common shares outstanding		20,516			20,409		20,273			20,200
Diluted weighted average common shares outstanding		21,180			20,926		20,273			20,200
	First Quarter			Second Quarter		Third Quarter			Fourth Quarter
Year Ended March 31, 2007
Revenue	$	22,632		$	23,617	$	24,522		$	24,359
Gross profit		17,867			18,693		19,358			18,683
Income from operations		1,820			1,796		2,733			1,437
Net income		1,635			1,727		3,024			1,579
Basic net income per common share	$	0.08		$	0.09	$	0.15		$	0.07
Diluted net income per common share	$	0.08		$	0.08	$	0.15		$	0.07
Basic weighted average common shares outstanding		20,190			20,266		20,365			20,487
Diluted weighted average common shares outstanding		20,664			21,019		21,387			21,337

80

OPNET TECHNOLOGIES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)

(dollar and share amounts in thousands, except per share data)

March 31, 2008, 2007 and 2006

18. Interest and Other Income, Net

The components of interest and other income, net for fiscal 2008, 2007, and 2006 are as follows:

	2008			2007			2006
Interest income	$	3,646		$	3,825		$	2,748
Interest expense		(31	)		(26	)		(56	)
Other income		—			38			18
Other expense		(36	)		(3	)		(30	)
Interest and other income, net	$	3,579		$	3,834		$	2,680

81

OPNET TECHNOLOGIES, INC.

EXHIBIT INDEX

Exhibit Number	Description	Source
3.1	Third Amended and Restated Certificate of Incorporation of the Registrant	Incorporated by reference from exhibit 3.2 to the Registrant’s Registration Statement on Form S-1 (File No. 333-2588).
3.2	Second Amended and Restated By-Laws of the Registrant, as amended	Incorporated by reference from exhibit 3.2 to the Registrant’s Annual Report on Form 10-K for the period ended March 31, 2007, as filed with the SEC on June 11, 2007.
4.1	Specimen common stock certificate	Incorporated by reference from exhibit 4.1 to the Registrant’s Registration Statement on Form S-1 (File No. 333-32588).
4.2	See Exhibits 3.1 and 3.2 for provisions of the Certificate of Incorporation and By-Laws of the Registrant defining the rights of holders of common stock of the Registrant	Incorporated by reference from exhibit 4.2 to the Registrant’s Registration Statement on Form S-1 (File No. 333-32588).
10.1	2000 Employee Stock Purchase Plan, as Amended	Incorporated by reference from exhibit 99.1 to the Registrant’s Current Report on Form 8-K as filed with the SEC on August 22, 2006.
10.2	Amended and Restated Registration Rights Agreement, dated as of March 30, 2001, by and among the Registrant, Summit Ventures IV, L.P., Summit Investors III, L.P., Alain J. Cohen, Marc A. Cohen and Make Systems, Inc.	Incorporated by reference from exhibit 10.1 to the Registrant’s Annual Report on Form 10-K for the period ended March 31, 2001 as filed with the SEC on June 29, 2001.
10.3	Asset Purchase Agreement, dated as of March 20, 2001, by and among the Registrant, Make Systems, Inc. and Metromedia Company	Incorporated by reference from exhibit 2.1 to the Registrant’s Current Report on Form 8-K dated March 22, 2001 filed with the SEC on March 23, 2001 (File No. 000-30931).
10.4	Stock Purchase and Option Agreement, dated as of November 1, 1999, between the Registrant and Steven G. Finn	Incorporated by reference from exhibit 10.6 to the Registrant’s Registration Statement on Form S-1 (File No. 333-32588).
10.5	Stock Purchase and Option Agreement, dated as of November 1, 1999, between the Registrant and William F. Stasior	Incorporated by reference from exhibit 10.7 to the Registrant’s Registration Statement on Form S-1 (File No. 333-32588).
10.6	Amended and Restated 1993 Incentive Stock Option Plan	Incorporated by reference from exhibit 10.10 to the Registrant’s Registration Statement on Form S-1 (File No. 333-32588).
10.7	2000 Director Stock Option Plan	Incorporated by reference from exhibit 10.13 to the Registrant’s Registration Statement on Form S-1 (File No. 333-32588).
10.8	Non-competition Agreement, dated as of December 31, 1997, between the Registrant and Marc A. Cohen	Incorporated by reference from exhibit 10.15 to the Registrant’s Registration Statement on Form S-1 (File No. 333-32588).

82

Exhibit Number	Description	Source
10.9	Non-competition Agreement, dated as of December 31, 1997, between the Registrant and Alain J. Cohen	Incorporated by reference from exhibit 10.16 to the Registrant’s Registration Statement on Form S-1 (File No. 333-32588).
10.10	Office Lease Agreement, dated May 2000, between the Registrant and Street Retail, Inc.	Incorporated by reference from exhibit 10.21 to the Registrant’s Annual Report on Form 10-K for the period ended March 31, 2001 as filed with the SEC on June 29, 2001.
10.11	Loan Agreement, dated June 10, 2000, between the Registrant and Bank of America, N.A.	Incorporated by reference from exhibit 10.22 to the Registrant’s Annual Report on Form 10-K for the period ended March 31, 2002.
*10.12	Office Lease Agreement, dated December 2006 between the Registrant and Street Retail, Inc.	Exhibit 10.12 to this Annual Report on Form 10-K.
10.13	Amended and Restated 2000 Stock Incentive Plan	Incorporated by reference from exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q for the period ended December 31, 2001 as filed with the SEC November 14, 2001.
*10.14	Loan Modification Agreement, dated June 20, 2007, between Registrant and Bank of America, N.A.	Exhibit 10.14 to this Annual Report on Form 10-K.
10.15	Form of Restricted Stock Agreement	Incorporated by reference from exhibit 10.1 to the Registrant’s Current Report on Form 8-K as filed with the SEC on February 17, 2006.
*21	Subsidiaries of the Registrant	Exhibit 21 to this Annual Report on Form 10-K.
*23	Consent of Deloitte & Touche LLP	Exhibit 23 to this Annual Report on Form 10-K.
*31.1	Certification of the Chief Executive Officer Pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended	Exhibit 31.1 to this Annual Report on Form 10-K.
*31.2	Certification of the Chief Financial Officer Pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended	Exhibit 31.2 to this Annual Report on Form 10-K.
*32.1	Certification of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002	Exhibit 32.1 to this Annual Report on Form 10-K.
*32.2	Certification of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002	Exhibit 32.2 to this Annual Report on Form 10-K.

* filed herewith

83

EX-10.12

OFFICE LEASE AGREEMENT

BETWEEN

STREET RETAIL, INC., LANDLORD

AND

OPNET TECHNOLOGIES, INC., TENANT

DATE: December 21^st, 2006

HOLLAND & KNIGHT LLP

TABLE OF CONTENTS

Article/Section		Page Number
ARTICLE I REFERENCE PROVISIONS, DEFINITIONS AND EXHIBITS		1
Section 1.01	Reference Provisions	1
	A.     Leased Premises	1
	B.     Intentionally Omitted	1
	C.     Term Commencement Date	1
	D.     Termination Date	1
	E.     Minimum Rent	1
	F.      Security Deposit	1
	G.     Rent Payments	1
	H.     Notice Addresses	1
	I.       Building	1
	J.      Parking Spaces	2
	K.     Renewal Option	2
	L.     Schedules and Exhibits	2
Section 1.02	Definitions	2
	A.     Common Areas	2
	B.     Floor Area	2
	C.     Interest	2
	D.     Lease Year	2
	E.     Partial Lease Year	2
	F.      Operating Year	2
	G.     Base Year	2
	H.     Person	2
	I.       Additional Rent	2
	J.      Rent	2
	K.     Tenant’s Operating Costs Share	2
	L.     Tenant’s Tax Share	3
	M.    Base Operating Costs	3
	N.     Base Taxes	3
	O.     Building Hours	3
ARTICLE II LEASED PREMISES		3
Section 2.01	Leased Premises	3
ARTICLE III TERM		4
Section 3.01	Term	4
Section 3.02	End of Term	4
Section 3.03	Holding Over	4
Section 3.04	Renewal	5
ARTICLE IV USE AND OPERATION OF THE LEASED PREMISES		6
Section 4.01	Intentionally Deleted	6
Section 4.02	Use	6
Section 4.03	Intentionally Deleted	7
Section 4.04	Signs and Advertising	7
ARTICLE V RENT		8
Section 5.01	Rent Payable	8
Section 5.02	Payment of Minimum Rent	8
ARTICLE VI COMMON AREAS		8
Section 6.01	Use of Common Areas	8
Section 6.02	Management and Operation of Common Areas	8
Section 6.03	Tenant’s Share of Operating Costs and Taxes	9
ARTICLE VII SERVICES AND UTILITIES		12
ARTICLE VIII INDEMNITY AND INSURANCE		14
Section 8.01	Indemnity by Landlord and Tenant	14
	A.     Indemnity by Tenant	14
	B.     Indemnity by Landlord	14
Section 8.02	Landlord Not Responsible for Acts of Others	14
Section 8.03	Tenant’s Insurance	14
Section 8.04	Tenant’s Contractor’s Insurance	15
Section 8.05	Policy Requirements	15
Section 8.06	Increase in Insurance Premiums	15
Section 8.07	Waiver of Right of Recovery	15
Section 8.08	Landlord’s Insurance	16
ARTICLE IX CONSTRUCTION AND ALTERATIONS		16
Section 9.01	Condition of Leased Premises Upon Delivery	16
Section 9.03	Alterations	16
Section 9.04	Work Requirements	17

i HOLLAND & KNIGHT LLP

TABLE OF CONTENTS

Article/Section		Page Number
Section 9.05	Ownership of Improvements	17
Section 9.06	Removal of Tenant’s Property	17
Section 9.07	Mechanic’s Liens	17
ARTICLE X REPAIRS, MAINTENANCE, AND LANDLORD’S ACCESS		18
Section 10.01	Repairs by Landlord	18
Section 10.02	Repairs and Maintenance by Tenant	18
Section 10.03	Inspections, Access and Emergency Repairs by Landlord	18
Section 10.04	Landlord’s Compliance with Laws	18
ARTICLE XI CASUALTY		18
Section 11.01	Fire or Other Casualty	18
Section 11.02	Right to Terminate	18
Section 11.03	Landlord’s Duty to Reconstruct	19
Section 11.04	Tenant’s Duty to Reconstruct	19
ARTICLE XII CONDEMNATION		19
Section 12.01	Taking of Leased Premises	19
Section 12.02	Taking of Building	19
Section 12.03	Condemnation Award	19
ARTICLE XIII PARKING		20
Section 13.01	Parking Rights	20
Section 13.02	Parking Rules and Conditions	20
ARTICLE XIV SUBORDINATION AND ATTORNMENT		20
Section 14.01	Subordination	20
Section 14.02	Attornment	20
Section 14.03	Estoppel Certificate	20
Section 14.04	Quiet Enjoyment	20
ARTICLE XV ASSIGNMENT AND SUBLETTING		21
Section 15.01	Landlord’s Consent Required	21
ARTICLE XVI DEFAULT AND REMEDIES		23
Section 16.01	Default	23
Section 16.02	Remedies and Damages	23
Section 16.03	Remedies Cumulative	24
Section 16.04	Waiver	24
ARTICLE XVII MISCELLANEOUS PROVISIONS		24
Section 17.01	Notices	24
Section 17.02	Recording	24
Section 17.03	Interest and Administrative Cost	24
Section 17.04	Legal Expenses	25
Section 17.05	Successors and Assigns	25
Section 17.06	Limitation on Right of Recovery Against Landlord	25
Section 17.07	Security Deposit	25
	A.     Amount	25
	B.     Security	25
	C.     Form	25
	D.     Right to Draw	25
	E.     Right to Pledge or Assign	26
	F.      Reservation of Rights	26
	G.     Return of Security Deposit	26
Section 17.08	Entire Agreement; No Representations; Modification	26
Section 17.09	Severability	27
Section 17.10	Joint and Several Liability	27
Section 17.11	Broker’s Commission	27
Section 17.12	Irrevocable Offer, No Option	27
Section 17.13	Inability to Perform	27
Section 17.14	Survival	27
Section 17.15	Corporate Tenants	27
Section 17.16	Construction of Certain Terms	27
Section 17.17	Showing of Leased Premises	27
Section 17.18	Relationship of Parties	27
Section 17.19	Intentionally Omitted	27
Section 17.20	Choice of Law	27
Section 17.21	Choice of Forum	27
Section 17.22	Intentionally Omitted	27
Section 17.23	Financial Statements	28
Section 17.24	Time is of the Essence	28

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TABLE OF CONTENTS

Article/Section		Page Number
ARTICLE XVIII RIGHT OF FIRST OFFER FOR WACHOVIA SPACE		28
Section 18.01	Wachovia Space	28
ARTICLE XIX ANTENNA RIGHTS		29

LIST OF CERTAIN DEFINITIONS

Additional Rent	2
Affiliate Notice	22
Alterations	16
Antenna	29
Availability Notice	28
Brokers	27
Building Permit	Exhibit B
Casualty	18
Common Restrooms	6
Construction Documents	Exhibit B
Default	23
Escalation Date	8
Relocation Notice	28
Extension Option	5
Extension Terms	5
Force Majeure	3
FRIT	14
Holdover Minimum Rent	4
Holdover Occupancy	4
Interest Rate	23
Landlord	1
Landlord’s Agent	Exhibit B
Landlord’s Indemnified Parties	14
Lease	1
Leasehold Improvements	17
Letter of Credit	25
Market Rate	4
Mortgage	20
Mortgagee	20
Negotiation Period	5
Notice	24
Operating Costs	10
Operating Costs Statement	10
Permitted Alterations Notice	16
Permitted Capital Expenditures	11
Permitted Exterior Signage	7
Plans	Exhibit B
Preliminary Plans	Exhibit B
Premises Systems	6
Qualified Lender	20
Qualified Tenant Affiliate	22
Released Parties	15
Relocation Notice	28
Right of First Offer	28
Security Deposit	1
Substitute Tenant	23
Taking	19
Taxes	11
Tenant	1
Tenant Work	Exhibit B
Tenant Work Allowance	Exhibit B
Tenant’s Agent	Exhibit B
Tenant’s Indemnified Parties	14
Tenant’s Insurance	15
Tenant’s Property	17
Tenant’s Share of Operating Costs and Taxes	9
Transfer	21
Transfer Response Failure Notice	21
Transferee	21
Wachovia Lease	28
Wachovia Relocation Amendment	28
Wachovia Space	28
Waiving Party	15

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OFFICE LEASE AGREEMENT

THIS OFFICE LEASE AGREEMENT (this “Lease”) is made this 21^st day of December, 2006, by and between STREET RETAIL, INC., a Maryland corporation (“Landlord”), and OPNET TECHNOLOGIES, INC., a Delaware corporation (“Tenant”).

IN CONSIDERATION of the payments of rents and other charges provided for herein and the covenants and conditions hereinafter set forth, Landlord and Tenant hereby covenant and agree as follows:

ARTICLE I

REFERENCE PROVISIONS, DEFINITIONS AND EXHIBITS

As used in this Lease, the following terms shall have the meanings set forth in Sections 1.01 and 1.02 below.

Section 1.01 Reference Provisions.

A. Leased Premises. The premises consisting of the entire rentable area on the second (2^nd) floor (designated as Suite 200) of the Building described in Section 1.01.1, below, as shown on the floor plan attached hereto as Exhibits A-1, and consisting of approximately twenty-two thousand two hundred fifty-three (22,253) square feet of rentable office space, which square footage is stipulated by Landlord and Tenant and shall conclusively be deemed to be the rentable square feet of the Leased Premises for purposes of this Lease.

B. Intentionally Omitted.

C. Term Commencement Date. December 20, 2006, subject to adjustment pursuant to Section 3.01.B hereof.

Rent Commencement Date. April 1, 2007.

D. Termination Date. January 31, 2016, or any earlier date on which this Lease is terminated in accordance with the provisions hereof.

E. Minimum Rent. Eight Hundred Twenty-three Thousand Three Hundred Sixty-one and ^Zero/100 Dollars ($823,361.00) for the first Lease Year, payable in twelve (12) equal monthly installments of Sixty-eight Thousand Six Hundred Thirteen and ^forty-^two/1oo Dollars ($68,613.42) for the first Lease Year (at $37.00 per rentable square foot in the Leased Premises), which shall be increased on each Escalation Date (hereinafter defined) in accordance with the provisions of Section 5.02 hereof.

F. Security Deposit. One (1) month’s Minimum Rent, being Sixty-eight Thousand Six Hundred Thirteen and ^*DrtlHwo/1OO Dollars ($68,613.42).

G. Rent Payments. The rent payments due herein shall be made payable to Landlord at the following address:

Street Retail, Inc. - Property #1022

c/o Federal Realty Investment Trust

P.O. Box 8500-9320

Philadelphia, Pennsylvania

Attention: Legal Department

H. Notice Addresses.

TO LANDLORD:	Street Retail, Inc.
	1626 East Jefferson Street
	Rockville, Maryland 20852-4041
	Attention: Legal Department
TO TENANT:	OPNET Technologies, Inc.
	7255 Woodmont Avenue
	Bethesda, Maryland
	Attention: Alberto Morales

I. Building. That certain building, consisting of 63,068 square feet of rentable office and retail space and currently having a street address of 7250 Woodmont Avenue, in the City of Bethesda, County of Montgomery, in the State of Maryland, including the land upon which the Building is situated (the legal description of which is set forth on Exhibit A), which square footage is stipulated by Landlord and Tenant and shall conclusively be deemed to be the rentable square feet of the Building for purposes of this Lease. The Building contains 44,840 square feet of rentable office area, which square footage is stipulated by Landlord and Tenant and shall conclusively be deemed to be the rentable square feet of the office area in the Building for purposes of this Lease.

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J. Parking Spaces. Twelve (12) monthly parking contracts (based upon the ratio of one (1) monthly parking contract for every two thousand (2,000) square feet of rentable area of the Leased Premises, rounded up to the next whole number), the terms of which are set forth in Article XIII.

K. Renewal Option. One (1)five (5)-year option. as provided in Section 3.04 hereof.

L. Schedules and Exhibits. The schedules and exhibits listed below are attached to this Lease and are hereby incorporated in and made a part of this Lease.

Exhibit A	Legal Description of the Land
Exhibit A-1	Second Floor Plan
Exhibit B	Work Agreement
Exhibit C	Rules and Regulations
Exhibit D	Rules for Tenant’s Contractors
Exhibit E	Intentionally Omitted
Exhibit F	Intentionally Omitted
Exhibit G	Intentionally Omitted
Exhibit H	Additional Exclusions to Operating Costs
Exhibit I	Intentionally Omitted
Exhibit J	Form of Letter of Credit
Exhibit K	Location and Parameters of Permitted Exterior Signage
Exhibit L	Intentionally Omitted
Exhibit M	Cleaning Specifications
Exhibit N	Right of First Offer

Section 1.02 Definitions.

A. Common Areas. Any existing or future improvements, equipment, areas and/or spaces for the non-exclusive, common and joint use or benefit of Landlord, Tenant and other tenants, occupants and users of the Building. The Common Areas include without limitation sidewalks, roofs, gutters and downspouts, parking areas, access roads, driveways, landscaped areas, service drives and service roads, traffic islands, loading and service areas, stairs, landings, ramps, elevators, escalators, utility and mechanical rooms and equipment, corridors, lobbies, public washrooms, and other similar areas and improvements.

B. Floor Area. When used with respect to the Leased Premises, the number of rentable square feet set forth in Section 1.01 .A, above, which the Leased Premises shall be deemed to contain. When used with respect to any other space in the Building, Floor Area shall mean the number of rentable square feet of such space as reasonably determined by Landlord; provided, however, when used with respect to any other office space in the Building, Floor Area shall mean the number of rentable square feet of such space as reasonably determined by Landlord in accordance with BOMA.

C. Interest. A rate per annum of twelve percent (12%).

D. Lease Year. Each twelve (12) month period beginning with the Rent Commencement Date, and each anniversary thereof, provided the Rent Commencement Date occurs on the first day of a month. If the Rent Commencement Date occurs on a day other than the first day of a month, then the first Lease Year shall begin on the Rent Commencement Date and shall terminate on the last day of the twelfth (12^th) full calendar month after the Rent Commencement Date. Each subsequent Lease Year shall commence on the date immediately following the last day of the preceding Lease Year and shall continue for a period of twelve (12) full calendar months, except that the last Lease Year of the Term shall terminate on the date this Lease expires or is otherwise terminated.

E. Partial Lease Year. Any period during the Term which is less than a full Lease Year.

F. Operating Year. Each respective calendar year or part thereof during the Term of this Lease or any renewal thereof, or at the option of Landlord, any other twelve month period or part thereof designed by Landlord.

G. Base Year. The calendar year commencing January 1, 2007.

H. Person. An individual, firm, partnership, association, corporation, limited liability company, or any other legal entity.

I. Additional Rent. All sums payable by Tenant to Landlord under this Lease, other than Minimum Rent.,

J. Rent. Minimum Rent plus Additional Rent.

K. Tenant’s Operating Costs Share. Shall mean a fraction, the numerator of which is the Floor Area of the Leased Premises and the denominator of which is the total Floor Area of the office portion of the Building, which is 44,840 rentable square feet, as measured in accordance with BOMA. Tenant’s Operating Costs Share is currently 49:63%.

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L. Tenant’s Tax Share. Shall mean a fraction, the numerator of which is the Floor Area of the Leased Premises and the denominator of which is the total Floor Area of the office and retail portions of the Building. Tenant’s Tax Share is currently 35.28%.

M. Base Operating Costs. The Operating Costs for the Base Year.

N. Base Taxes. Taxes applicable to the first Lease Year.

O. Building Hours. At least from 8:00 a.m. until 6:00 p.m. on weekdays (excluding holidays) and from 9:00 a.m. until 1:00 p.m. on Saturdays (excluding holidays).

P. Force Majeure. Any acts of God, strikes, sabotage, acts of war, fire and casualty, legal requirements, government restrictions or controls on construction, unusual shortages or inability to obtain labor, materials or equipment, energy shortage, the failure in the applicable governmental authority to promptly issue any building permit, conduct inspections or issue any required certificate or approval in connection with any work undertaken by Landlord, or any causes beyond the reasonable control of Landlord.

ARTICLE II

LEASED PREMISES

Section 2.01 Leased Premises.

A. Landlord demises and leases to Tenant, and Tenant leases and takes from Landlord, the Leased Premises together with the right to use for ingress to and egress from the Leased Premises, in common with others, the Common Areas. Landlord has the exclusive right, subject to any express limitation set forth in Section 4.04 and Article XIX hereof, to (i) use the exterior faces of all perimeter walls of the Building, the roof and all air space above the Building and (ii) install, maintain, use, repair and replace pipes, ducts, cables, conduits, plumbing, vents, utility lines and wires to, in, through, above and below the Leased Premises and other parts of the Building; provided, that if any such pipes, ducts, cables, conduits, plumbing, vents, utility lines and wires are installed in the Leased Premises by Landlord pursuant to this Article II or Section 7.02, then (a) Landlord shall use reasonable efforts to either install such items within or behind the walls or above the ceiling or as near to a wall or ceiling of the Leased Premises as is reasonably practicable or otherwise minimize the impact such items may have on the interior design of the Leased Premises, and (b) Landlord shall repair any damage caused by such installation.

B. Provided Tenant has delivered to Landlord evidence reasonably satisfactory to Landlord that all insurance required to be carried by Tenant and its contractor hereunder is effective, Tenant shall have access to the Leased Premises immediately upon the Term Commencement Date; provided, however, Tenant shall not be entitled to make any alterations or improvements to the Leased Premises until the Plans (as defined in the Work Agreement) have been finally approved by Landlord in accordance with the Work Agreement. Except for purposes of constructing the Tenant Work in accordance with the Work Agreement, Tenant shall not be permitted to occupy the Leased Premises for purposes of conducting its business therein or for any other purpose, unless and until Tenant delivers to Landlord a certificate of occupancy and any other approvals required for Tenant’s occupancy of the Leased Premises from any governmental authorities having jurisdiction over the Leased Premises, all of which shall be obtained by Tenant at Tenant’s sole cost and expense. If Landlord notifies Tenant that the Leased Premises are otherwise available for Tenant to take possession thereof, but Tenant is not permitted to take possession of the Leased Premises because Tenant has failed to deliver to Landlord evidence reasonably satisfactory to Landlord that all insurance required hereunder to be carried by Tenant and its contractor is effective, then (i) Landlord shall be deemed to have tendered possession of the Leased Premises to Tenant, (ii) neither the Term Commencement Date, nor the Rent Commencement Date shall be delayed as a result thereof, and (iii) Tenant shall be entitled to access the Leased Premises when such evidence of insurance has been delivered to Landlord.

C. In the event that as of the Term Commencement Date the Common Restrooms are in violation of any laws, rules, regulations or legal requirements, then in effect, of any governmental authority having jurisdiction over the Building or the Leased Premises (an “Existing Common Restroom Violation”) and Tenant notifies Landlord of such Existing Common Restroom Violation within 30 days after the Term Commencement Date (“Violation Notice Date”) and prior to making any improvements or alteration (other than cosmetic alterations such as painting and floor and wall covering), Landlord shall either (i) make such improvements or alteration required to cure any such Existing Common Restroom Violation, or (ii) reimburse Tenant for the reasonable cost of such improvements or alteration required to cure any such Existing Common Restroom Violation, provided such costs are approved by Landlord in advance. Notwithstanding anything contained herein to the contrary (including the provisions of Section 10.04 and 4.02.B), in the event that Tenant makes any alteration to any component of the Common Restrooms to which any such Existing Common Restroom Violation applies, Landlord shall not have any obligation with respect to such Existing Common Restroom Violation and Tenant shall be required to bring such component into compliance with any and all laws, rules, regulations and legal requirements of any governmental authority having jurisdiction over the Building or the Leased Premises (including curing any Existing Common Restroom Violation). In addition, notwithstanding any other provision of this Lease to the contrary (including the provisions of Section 10.04 and 4.02.B), from and after the Violation Notice Date, Tenant, as a part of the Tenant Work and at its sole cost, shall be required to cure any Existing Common Restroom Violation, unless Tenant has given Landlord notice of such Existing Common Restroom Violation prior to the Violation Notice Date and Tenant does not alter the component of the

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Common Restrooms to which such Existing Common Restroom Violation applies. Tenant shall also be responsible for the cost of any Tenant Work or Alteration to the Common Restrooms undertaken by Tenant, including any improvements that exceed current code. The cost incurred in connection with Landlord’s repair, maintenance and cleaning of the Common Restroom shall be included in Operating Costs, subject to and in accordance with the terms of this Lease.

ARTICLE III

TERM

Section 3.01 Term.

A. This Lease shall be effective as of the date hereof. The Term shall commence on the Term Commencement Date specified in Section 1.01.C. above (except as expressly set forth in Section 3.01 B hereof), and shall be for the period time specified in Section 1.01.B., above, and expire on the Termination Date specified in Section 1.01 .D, above.

B. In the event that Landlord has not tendered possession of the Leased Premises to Tenant by the Term Commencement Date (as set forth in Section 1.01.C) for any reason or cause, then the Term Commencement Date shall be delayed and shall be the date that Landlord tenders possession of the Leased Premises to Tenant. In the event the Term Commencement Date is so delayed, Landlord shall not be liable or responsible for any claims, damages, or liabilities by reason of such delay, but the Rent Commencement Date shall be delayed by one (1) day for each day that the Term Commencement Date is so delayed.

C. Minimum Rent shall commence on the Rent Commencement Date irrespective of the date that Tenant actually completes the Tenant Work and occupies the Leased Premises, which Rent Commencement Date is subject to adjustment only pursuant to the provisions of Section 3.01 B hereof. It is understood and agreed that Landlord will not make, and is under no obligation to make, any structural or other alterations, decorations, additions or improvements in or to the Leased Premises in connection with Tenant’s initial occupancy thereof. Provided Tenant has delivered to Landlord evidence reasonably satisfactory to Landlord that all insurance required to be carried by Tenant and its contractor hereunder is effective, Tenant shall have access to the Leased Premises to commence the Tenant Work in the Leased Premises in accordance with the Plans (as defined in Exhibit B hereof; i.e., the Construction Documents approved by Landlord) on the Term Commencement Date. Except for purposes of constructing the Tenant Work in accordance with Exhibit B and installing furniture and equipment, Tenant shall not be permitted to occupy the Leased Premises for purposes of conducting its business therein or for any other purpose, unless and until Tenant delivers to Landlord a certificate of occupancy and any other approvals required for Tenant’s occupancy of the Leased Premises from any governmental authorities having jurisdiction over the Leased Premises, all of which shall be obtained by Tenant at Tenant’s sole cost and expense. If Landlord notifies Tenant that the Leased Premises are otherwise available for Tenant to take possession thereof, but Tenant is not permitted to take possession of the Leased Premises because Tenant has failed to deliver to Landlord evidence reasonably satisfactory to Landlord that all insurance required hereunder to be carried by Tenant and its contractor is effective, then (a) Landlord shall be deemed to have tendered possession of the Leased Premises to Tenant; (b) neither the Term Commencement Date nor the Rent Commencement Date shall be delayed as a result thereof; and (c) Tenant shall be entitled to access the Leased Premises when such evidence of insurance has been delivered to Landlord.

D. Within five (5) days after request from Landlord, Landlord and Tenant shall execute an amendment to the Lease setting forth the Term Commencement Date, Rent Commencement Date and Termination Date.

Section 3.02 End of Term. This Lease shall terminate on the Termination Date without the necessity of notice from either Landlord or Tenant. Upon the Termination Date, Tenant shall quit and surrender to Landlord the Leased Premises, broom-clean, in good order and condition, ordinary wear and tear excepted; and shall surrender to Landlord all keys and access cards, if applicable, to or for the Leased Premises.

Section 3.03 Holding Over. If Tenant fails to vacate the Leased Premises on the Termination Date, Landlord shall have the benefit of all provisions of law respecting the speedy recovery of possession of the Leased Premises (whether by summary proceedings or otherwise). In addition to and not in limitation of the foregoing, occupancy subsequent to the Termination Date (“Holdover Occupancy”) shall be a tenancy at will. Holdover Occupancy shall be subject to all terms, covenants, and conditions of this Lease (including those requiring payment of Additional Rent), except that the Minimum Rent for each day that Tenant holds over (“Holdover Minimum Rent”) shall be equal to one and one-half (1 1/2) times the per diem Minimum Rent payable in the last Lease Year. Landlord also shall be entitled to recover all damages, including lost business opportunity regarding any prospective tenant(s) for the Leased Premises, suffered by Landlord as a result of Tenant’s Holdover Occupancy; provided, however, Landlord shall waive its right to such damages if Tenant vacates and surrenders to Landlord the Leased Premises in the condition required pursuant to this Lease on or before the date that is forty-five (45) days after the expiration of the Term.

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Section 3.04 Renewal.

A. Landlord grants Tenant the option (referred to as the “Extension Option,”) to extend the Term for one (1) period of five (5) years (the “Extension Term”). Tenant shall have no right to an extension of the Term if at the time Tenant seeks to exercise the Extension Option, or at the time the Extension Term would have otherwise commenced, Tenant (i) has then assigned this Lease (other than to a Qualified Tenant Affiliate) or sublet more than fifty percent (50%) of the Leased Premises (other than to a Qualified Tenant Affiliate); (ii) is then in an uncured Default (as defined in Section 16.01 hereof); or (iii) has been in Default (as defined in Section 16.01 hereof) under this Lease two (2) or more times in the prior thirty-six (36) month period. To exercise the Extension Option, Tenant shall give notice of its exercise to Landlord not earlier than eighteen (18) months prior to the Termination Date and not later than twelve (12) months prior to the Termination Date. If Tenant is entitled to and gives Landlord notice in accordance with the terms of this Section, the Term shall be extended for the period of the Extension Term commencing on the day after expiration of the initial Term, and except as set forth below in this Section, shall be on the same terms and condition as are set forth in this Lease. Minimum Rent during the extended Term shall be the then-current (i.e., as of the commencement of the applicable Extension Term) market rent for renewal tenants in first-class office properties of comparable quality and character to the Building in Bethesda, Maryland, taking into consideration market concessions, allowances and other relevant factors applicable to renewal tenant at such time (the “Market Rate”), but in no event less than ninety percent (90%) of the Minimum Rent payable as of the Termination Date, with subsequent escalations in Minimum Rent thereafter to be determined by market practice with respect to comparable space, as such Minimum Rent is reasonably determined by Landlord (and notice thereof delivered to Tenant on or before the date that is the later of (i) sixty (60) days after Tenant’s notice of exercise of the Extension Option or (ii) thirteen (13) months prior to the Extension Term).

B. If Tenant disagrees with Landlord’s determination of Minimum Rent for any Extension Term, Tenant shall give Landlord notice of objection within fifteen (15) days after Tenant receives Landlord’s notice of Landlord’s Minimum Rent determination; otherwise Landlord’s determination shall be deemed conclusive. If Tenant timely delivers to Landlord such notice of objection as provided above, then Landlord and Tenant shall negotiate in good faith to determine the amount of Minimum Rent within ten (10) days of the date of Landlord’s receipt of Tenant’s written notice of objection (the “Negotiation Period”).

C. In the event Landlord and Tenant are unable to agree upon the Minimum Rent for the Extension Term within the Negotiation Period, then either Landlord or Tenant shall be entitled to elect to proceed with the binding arbitration process set forth below by delivering written notice of such election to the other party within twenty (20) days after the expiration of the Negotiation Period. If either party timely elects to proceed with binding arbitration, then the Minimum Rent for the Extension Term shall be based upon the Market Rate for renewal tenants in first-class office properties of comparable quality and character to the Building in Montgomery County, Maryland (taking into consideration market concessions, allowances and other relevant factors applicable to renewal tenant at such time), as determined by binding arbitration in accordance with the following procedures. Within fifteen (15) days after either party first delivers notice to the other party of its election to proceed to binding arbitration, Landlord and Tenant shall each select a real estate broker (based on the criteria set forth in Section 3.04.D hereof). Within twenty (20) days of their selection, each broker shall make a written determination of the Market Rate for the Extension Term. All determinations of the Market Rate shall be in writing. The party appointing each broker shall be obligated, promptly after receipt of the valuation report prepared by the broker appointed by such party, to deliver a copy of such valuation report to an escrow agent who, after receiving both valuation reports, shall deliver each party’s valuation report to the other party. If the Market Rate determination of the broker designated by Landlord is within five percent (5%) of the Market Rate determination of the broker designated by Tenant, then the Minimum Rent for the applicable Extension Term shall be the average of the two Minimum Rent determinations for the Extension Term. If the Market Rate determinations of these two brokers vary by more than five percent (5%), then a third broker shall be selected by the initial two brokers within fifteen (15) business days after the initial two valuation reports have been delivered to the parties (the third broker also having the qualifications set forth in Section 1 .D(iv) below). If a third broker is appointed, the third broker shall review the valuation reports of the initial two brokers and select the one of the initial two valuation reports that most closely reflects the Market Rate for the Extension Term. The third broker shall promptly deliver a report of his determination to each of the parties. The determination of the Market Rate for the applicable Extension Term pursuant to this Section 3.04.C hereof (but in no event less than ninety percent (90%) of the Minimum Rent payable as of the Termination Date) shall be final and binding upon Landlord and Tenant. The expenses of each of the first two brokers appointed under this Section 3.04.C shall be borne by the party appointing such broker. The expenses of the third broker appointed under this Section 3.04.C shall be paid one-half (1/2) by Landlord and one-half (1/2) by Tenant.

D. The real estate brokers selected by Landlord and Tenant shall have the following qualifications: (i) must be a independent and licensed real estate broker in the State of Maryland; (ii) must have a minimum of ten (10) years’ experience in commercial office leasing in the Montgomery County, Maryland area; (iii) must be an active broker in the Montgomery County, Maryland area and known for commercial office expertise; (iv) in the case of the third broker only, must have experience representing both landlords and tenants; (v) in the case of the third broker only, is not then representing either Landlord or Tenant; and (vi) in the case of the third broker only, shall not have been involved in any disputes with Landlord, Tenant or any of the other brokers. In the event that real estate brokers with the qualifications described in this Section 3.04.D are unavailable, qualified consultants with similar qualifications may be substitutes.

E. An amendment modifying this Lease to set forth the Minimum Rent for the Leased Premises during the Extension Term shall be executed by Landlord and Tenant within ten (10) days of Landlord’s determination thereof, of the parties’ agreement thereto (if applicable) or of the determination of the Minimum

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Rent by the brokers pursuant to Section 3.04.C hereof. In the event that (i) Tenant and Landlord fail to agree on the Minimum Rent for the Extension Term within the Negotiation Period, and neither Landlord nor Tenant timely elects to proceed with binding arbitration, or (ii) any of the conditions set forth in Section 3.04.A, above are not satisfied, then, at Landlord’s option, this Extension Option shall be null, void and of no further force or effect and this Lease shall end on the date otherwise scheduled for expiration thereof, unless earlier terminated in accordance with the terms thereof. Tenant shall have no further right or option to extend the Term. Time is of the essence with respect to this Section 3.04.

ARTICLE IV

USE AND OPERATION OF THE LEASED PREMISES

Section 4.01 Intentionally Deleted.

Section 4.02 Use.

A. Tenant shall use the Leased Premises solely for general office use, and for no other purpose, and to the extent permitted under applicable zoning statutes, laws, rules, orders, regulations and ordinances, computer labs and training rooms, provided that no more than 20% of the rentable area in the Leased Premises may be used for such purposes and provided further that Tenant complies with all other provisions hereof in connection therewith (including any provisions governing the equipment and improvements installed in the Lease Premises).

B. Tenant shall comply with all statutes, laws, rules, orders, regulations and ordinances affecting the Leased Premises or relating to the use, occupancy or alteration thereof and all the orders or recommendations of any insurance underwriters, insurance rating bureau or any insurance companies providing insurance to Landlord. Except as may otherwise be provided in this Lease, Tenant shall not be required to make any alterations outside of the Leased Premises or to any base Building systems or to the Common Restrooms (hereinafter defined) in order to comply with the any of the foregoing requirements; provided, however, that, if Landlord makes any alteration to any part of the Building as a result of any damage or alteration to the Leased Premises caused or made by or on behalf of Tenant or in order to comply with any requirement of any statutes, laws, rules, orders, regulations and ordinances and such requirement is a result of Tenant’s particular business or use of the Leased Premises, then Tenant shall reimburse Landlord upon demand for the cost thereof. For purposes of this Lease, the base Building HVAC ducts, VAV boxes, central air handlers, that portion of the electrical system the supplies power to the main electrical closet serving the Leased Premises, and that portion of the plumbing system that supplies water and sewage service to the existing bathrooms and wet stacks serving the Leased Premises and the vertical main sprinkler line for the Building shall be part of the base Building systems in the Leased Premises. All other electrical, mechanical, plumbing and any other systems within the Leased Premises or exclusively servicing the Leased Premises, including without limitation, any supplemental HVAC systems exclusively servicing the Leased Premises and telecommunication systems (the “Premises Systems”) shall not be part of the base Building systems and shall be the sole responsibility of Tenant to repair and maintain in a manner that is reasonably comparable to other similar first class office buildings in the Montgomery County, Maryland area of a similar location, size and age. “Common Restrooms” shall mean the restrooms (but not any private restrooms) located on any floor of the Building that is occupied entirely by Tenant, to the extent such restrooms would have been part of the common area of the Building had Tenant not occupied such entire floor. In no event shall Tenant use the Leased Premises for purposes which are prohibited by zoning or similar laws or regulations, or covenants, conditions or restrictions (provided that with respect to any covenants conditions or restrictions that are not of record as of the date hereof, Tenant shall have received written notice thereof). Tenant acknowledges and agrees it is solely responsible for determining if its business complies with the applicable zoning regulations, and that Landlord makes no representation (explicit or implied) concerning such zoning regulations.

C. Tenant shall, at its sole expense: (i) keep the Leased Premises in a good order and condition consistent with the operation of similar first-class office buildings in the Montgomery County, Maryland area (which obligation shall not relieve Landlord from providing to the Leased Premises janitorial and other services required of Landlord pursuant to the provisions of this Lease); (ii) pay before delinquency any and all taxes, assessments and public charges levied, assessed or imposed upon Tenant’s business, upon the leasehold estate created by this Lease or upon Tenant’s fixtures, furnishings or equipment in the Leased Premises; (iii) not use or permit or suffer the use of any portion of the Leased Premises for any unlawful purpose; (iv) not use the plumbing facilities for any purpose other than that for which they were constructed, or dispose of any foreign substances therein; (v) not place a live load on any floor exceeding 100 pounds per square foot, and not install, operate or maintain in the Leased Premises any heavy item of equipment except in such manner as to achieve a proper distribution of weight; (vi) not strip, overload, damage or deface the Leased Premises, or the hallways, stairways, elevators, parking facilities or other public areas of the Building, or the fixtures therein or used therewith, nor permit any hole (except in connection with hanging customary weight pictures and similar office decorations on the walls of the Leased Premises) to be made in any of the same; (vii) not to move any furniture or equipment into or out of the Leased Premises except at such reasonable times and in such manner as Landlord may from time to time reasonably approve; (viii) not install or operate in the Leased Premises any electrical heating, air conditioning or refrigeration equipment, or other equipment not shown on approved plans which will increase the amount of electricity required for use of the Leased Premises as general office space (other than ordinary office kitchenette appliances customarily found in first-class office buildings in Montgomery County, Maryland and office equipment such as personal computers, printers, copiers and the like) without first obtaining the written consent of Landlord; (ix) not install any other equipment of any kind or nature which will or may necessitate any changes, replacements or additions to, or in the use of, the water, heating, plumbing, air conditioning or electrical systems of the Leased Premises or the Building, without first obtaining the written consent of Landlord.

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D. In addition to and not in limitation of the other restrictions on use of the Leased Premises set forth in this Section 4.02, Tenant hereby agrees that the following uses of the Leased Premises shall not be considered to be “office use” and shall not be permitted: (1) any use of the Leased Premises by an organization or person enjoying sovereign or diplomatic immunity; (2) any use of the Leased Premises by or for any medical, mental health or dental practice; (3) any use of the Leased Premises by or for an employment agency or bureau; (4) any use of the Leased Premises for classroom purposes (other than for training purposes for employees, vendors and customers provided that in no event shall the area of the training facilities be more than fifteen percent (15%) of the rentable square feet in the Leased Premises); (5) any use of the Leased Premises by or for any user which distributes governmental or other payments, benefits or information to persons that personally appear at the Leased Premises; (6) any other use of the Leased Premises or any portion of the Building by any user that will attract a volume, frequency or type of visitor or employee to the Leased Premises or any portion of the Building which is not consistent with the standards of a high quality, first-class, office building in the general area of the Building or that will in any way impose an excessive demand or use on the facilities or services of the Leased Premises or the Building.

Section 4.03 Intentionally Deleted.

Section 4.04 Signs and Advertising. Except for the Permitted Exterior Signage (hereinafter defined), Tenant shall not inscribe, paint, affix, or otherwise display any sign, advertisement or notice on any part of the outside or inside of the Building. Landlord shall provide, at the cost of Tenant, standard suite entry signage, if applicable, to be affixed at the entrance to the Leased Premises. Landlord shall also prepare and install at Tenant’s expense a name plate designating Tenant on the directory for the Building. Landlord shall not unreasonably withhold its consent to any signage in the lobby of the Leased Premises on any floor that is entirely occupied by Tenant, provided that such signage is consistent with a first-class office building in Montgomery County, Maryland. If any other signs, advertisements or notices are painted, affixed, or otherwise displayed that are outside the Leased Premises or visible from outside the Leased Premises without the prior approval of Landlord, Landlord shall have the right to remove the same, and Tenant shall be liable for any and all costs and expenses incurred by Landlord in such removal. Tenant, at Tenant’s sole cost and expense, shall have the non-exclusive right to install one (1) sign at the top of the Building (in the location and subject to the parameters set forth on Exhibit K ) identifying “OPNET Technologies, Inc.” (or similar trade name of Tenant) as a tenant of the Building (the “Permitted Exterior Signage”), provided that (i) the Permitted Exterior Signage is permitted under the laws, rules and regulations of the Montgomery County, Maryland and any other governmental authorities having appropriate jurisdiction over the Building; (ii) the Permitted Exterior Signage conforms to all such laws, rules and regulations, and to the terms and conditions hereinafter set forth; (iii) Tenant has obtained all permits, licenses and approvals that may be required in order to install the Permitted Exterior Signage; and (iv) Tenant has not assigned this Lease (other than to a Qualified Tenant Affiliate) and is occupying at least one (1) full floor i.e., all the rentable area on such floor) of the Building. The exact design, location, dimensions and style of the Permitted Exterior Signage shall be subject to Landlord’s prior review and prior written approval exercised in good faith; provided that such approval shall not be unreasonably withheld, conditioned or delayed if such design, location, dimensions and style of the Permitted Exterior Signage is consistent with Exhibit K hereof (it being understood that the size of Tenant’s sign shall be no greater that 50% of the signage area permitted under applicable law for office tenants of the building). The Permitted Exterior Signage may be illuminated, provided that such sign is not internally illuminated, and the Permitted Exterior Signage shall not be a “box sign.” The quality of the installation of the Permitted Exterior Signage is extremely important to Landlord, and Landlord reserves the right to approve in its sole discretion the manner in which the sign is affixed. In order to obtain Landlord’s approval, Tenant must submit to Landlord for Landlord’s approval samples of materials to be used for the Permitted Exterior Signage (showing, among other things, the thickness thereof), samples of any colors used for the Permitted Exterior Signage, complete shop drawings of the Permitted Exterior Signage and plans and specifications for the actual construction and attachment of the Permitted Exterior Signage and any illumination thereof. All Permitted Exterior Signage shall be installed by a contractor selected by Tenant and reasonably approved by Landlord and maintained by a contractor reasonably acceptable to Landlord. On or before the end of the Term, or in the event that Tenant at anytime is leasing less than one (1) full floor in the Building or Tenant assigns this Lease (other than to a Qualified Tenant Affiliate) or Tenant or such Qualified Tenant Affiliate occupies less than seventy-five percent (75%) of the total rentable square feet of the Leased Premises (by reason of a sublet of all or a portion of the Leased Premises or otherwise), Tenant shall, at its expense, have a contractor selected by Landlord remove the Permitted Exterior Signage and repair the Building affected thereby to the condition such part of the Building was in at the time such Permitted Exterior Signage was installed. Tenant hereby agrees to indemnify and hold Landlord and its agents, officers, directors and employees harmless from and against any cost, damage, claim, liability or expense (including reasonable attorneys’ fees) incurred by or claimed against Landlord and its agents, officers, directors and employees, directly or indirectly, as a result of or in any way arising from the installation and maintenance of any Permitted Exterior Signage, except to the extent caused by the negligence of Landlord. Tenant shall obtain property insurance coverage for such Permitted Exterior Signage and such Permitted Exterior Signage. Tenant’s rights under this Section 4.04 are personal to OPNET Technologies, Inc., and no assignee (other than to a Qualified Tenant Affiliate in connection with an assignment of this Lease) or sublessee of Tenant shall have any signage rights hereunder. Tenant will pay for all costs associated with the Permitted Exterior Signage, including without limitation all design, construction, installation and permitting costs as well as all ongoing maintenance, repair and removal costs.

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ARTICLE V

RENT

Section 5.01 Rent Payable.

A. Tenant shall pay all Rent to Landlord, without prior notice or demand and without offset, deduction or counterclaim whatsoever, in the amounts, at the rates and times set forth herein, and at such place as is provided in Section 1.01 .G, above, or by wire transfer to Landlord’s bank account or at such other place as Landlord may from time to time designate by notice to Tenant.

B. If Tenant fails to make any payment of Rent within ten (10) days from the date that such Rent is due, Tenant shall pay Landlord a late payment charge equal to the greater of (i) five percent (5%) of such payment of Rent, or (ii) Twenty Dollars ($20.00) per day from the date such Rent is due until the date such Rent is received; provided, however, on the first occasion of the late payment of Rent in any twelve (12)-month period, and no more than once in any twelve (12)-month period, Landlord agrees to waive its right to collect such late payment charge on such payment of Rent if such payment is made no later than the fifth (5^th) day after Landlord delivers to Tenant written notice of such late payment. Payment of such late charge shall not excuse or waive the late payment of Rent.

C. If Landlord receives two (2) or more checks from Tenant that are dishonored by Tenant’s bank within any 24-month period, all checks for Rent thereafter shall be bank certified and Landlord shall not be required to accept checks except in such form. Tenant shall pay Landlord any bank service charges resulting from dishonored checks, plus Fifty Dollars ($50.00) for each dishonored check as compensation to Landlord for the additional cost of processing such check.

D. Any payment by Tenant of less than the total Rent due shall be treated as a payment on account. Acceptance of any check bearing an endorsement, or accompanied by a letter stating, that such amount constitutes “payment in full” (or terms of similar import) shall not be an accord and satisfaction or a novation, and such statement shall be given no effect. Landlord may accept any check without prejudice to any rights or remedies which Landlord may have against Tenant.

E. For any portion of a calendar month at the beginning of the Term, Tenant shall pay in advance the pro-rated amount of the Rent for each day included in such portion of the month.

Section 5.02 Payment of Minimum Rent. The Minimum Rent for the first Lease Year shall be as set forth in Section 1.01 .E, above. Commencing on the first day of the second Lease Year, and on the first day of each Lease Year thereafter (each, an “Escalation Date”), the Minimum Rent then in effect shall be increased by an amount equal to (i) the Minimum Rent then in effect, times (ii) three percent (3%) of the Minimum Rent then in effect. Tenant shall pay Landlord the Minimum Rent in equal monthly installments, in advance, commencing on the Term Commencement Date, and on the first day of each calendar month thereafter throughout the Term. An amount equal to the first month’s Minimum Rent shall be paid in advance upon execution of this Lease and such amount shall be credited toward the first payment of Minimum Rent due.

ARTICLE VI

COMMON AREAS

Section 6.01 Use of Common Areas. Tenant shall have a non-exclusive license to use the Common Areas for ingress to and egress from the Leased Premises, subject to the exclusive control and management of Landlord and the rights of Landlord and of other tenants. Tenant shall comply with such rules and regulations as Landlord prescribes regarding use of the Common Areas. Tenant shall not use the Common Areas for any sales or display purposes, or for any purpose which would impede or create hazardous conditions for the flow of pedestrian or other traffic. Landlord shall use good faith efforts to enforce any provision in the leases of other office tenants in the Building that similarly prohibits the use of the Common Areas by such tenant for any purpose which would impede or create hazardous conditions for the flow of pedestrian or other traffic. The Common Areas shall at all times be subject to the exclusive control and management of Landlord.

Section 6.02 Management and Operation of Common Areas. Landlord shall operate, repair, equip and maintain the Common Areas and shall have the exclusive right and authority to employ and discharge personnel with respect thereto. Without limiting the foregoing, provided that Tenant’s use of the Leased Premises that is permitted hereunder and reasonable access to the Leased Premises are not materially adversely affected, Landlord may (i) use the Common Areas for promotions, exhibits, displays, outdoor seating, food facilities and any other use which tends to benefit the Building, tenants of the Building or visitors to the Building; (ii) grant the right to conduct sales in the Common Areas; (iii) erect, remove and lease kiosks, planters, pools, sculptures and other improvements within the Common Areas; (iv) enter into, modify and terminate easements and other agreements pertaining to the use and maintenance of the Building; (v) construct, maintain, operate, replace and remove lighting, equipment, and signs on all or any part of the Common Areas, provided that Tenant’s rights expressly set forth in Section 4.04 hereof are not materially adversely affected; (vi) provide security personnel for the Building; and (vii) restrict parking in the Building, provided that Tenant’s parking rights are not thereby diminished. Landlord and Tenant agree that the Common Restrooms and elevator lobbies within the Leased Premises shall not be deemed part of the Common Areas for purposes of this Lease. Landlord reserves the right at any time and from time to time to change or alter the location, layout, nature or arrangement of the Common Areas or any portion thereof, including but not limited to the arrangement and/or location of

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entrances, passageways, doors, corridors, stairs, lavatories, elevators, parking areas, and other public areas of the Building, which work shall be at Landlord’s sole cost and shall not be included in Operating Costs, unless (a) such work is performed in connection with the operation, maintenance, repair or management of the Building or in order to comply with any and all applicable laws, rules, regulations and requirements of any governmental authority having jurisdiction over the Building, and (b) the cost of such work is not expressly excluded from Operating Costs pursuant to Exhibit H hereof. Landlord shall have the right to close temporarily all or any portion of the Common Areas to such extent as may, in the reasonable opinion of Landlord, be necessary for repairs, replacements or maintenance to the Common Areas, provided such repairs, replacements or maintenance are performed expeditiously and in such a manner as not to deprive Tenant of access to the Leased Premises. Landlord shall have the right, at any time, to (i) make alterations or additions to any part of, the Building; (ii) build other buildings or improvements in or about the land on which the Building is located; and (iii) convey to others or withdraw portions of such land; provided, however, that (a) Landlord shall use reasonable efforts to minimize any interference with Tenant’s business operations in connection with such work, (b) Landlord shall use reasonable efforts to provide Tenant with forty-eight (48) hours (or 30 days if it relates to clause (ii) or (iii) hereof) prior notice (except in the event of an emergency, when no such notice shall be required) if such work is likely to have a material adverse affect on Tenant’s business operations in the Leased Premises, and (c) if as a direct result of any such work performed by Landlord at Landlord’s election, the Leased Premises or any substantial part thereof are rendered untenantable for three (3) consecutive business days and Tenant in fact does not occupy the Leased Premises (or the untenantable portion thereof), then the Base Rent which the Tenant is obligated to pay hereunder shall abate proportionately (based on the number of square feet rendered untenantable and not occupied) as of the fourth (4th) business day after the Leased Premises (or any substantial part thereof) are rendered untenantable until the Leased Premises or such part thereof are again tenantable, unless such work performed by Landlord is requested by, or is for the benefit of, Tenant or is required to comply with any legal requirements applicable to the Building (other than to cure a violation existing as of the Term Commencement Date of any legal requirement in effect as of the Term Commencement Date) or to fulfill Landlord’s obligations hereunder or as a result of any casualty or damage to the Building, in which case no Base Rent shall abate, unless otherwise expressly provided in this Lease. In connection with Landlord’s construction of any such additional improvements on the land on which the Building is located, Landlord may temporarily restrict (but in no event more than two (2) consecutive weeks) Tenant’s use of certain of its parking spaces as Landlord deems reasonably appropriate to facilitate such construction. Landlord shall use reasonable efforts to minimize the disruption to Tenant’s use of such parking spaces and in the event Tenant is prohibited from using any such spaces, Landlord shall make arrangements for alternative parking in reasonably close proximity to the Building for the number of spaces that Tenant is entitled to use in the Building’s parking area, but is prohibited from using as a result of such construction.

Section 6.03 Tenant’s Share of Operating Costs and Taxes.

A. For the Operating Year commencing January 1, 2008 and each Operating Year thereafter, Tenant shall pay to Landlord, in the manner provided herein, Tenant’s share of increases in Operating Costs and Taxes (“Tenant’s Share of Operating Costs and Taxes”), which shall be equal to the sum of (i) the product obtained by multiplying Tenant’s Operating Costs Share times the amount, if any, by which Operating Costs for such Operating Year exceed the Base Operating Costs, and (ii) the product obtained by multiplying Tenant’s Tax Share times the amount, if any, by which Taxes for such Operating Year exceed the Base Taxes; provided, however, that for the Operating Years during which the Term begins and ends, Tenant’s Share of Operating Costs and Taxes shall be prorated based upon the actual number of days Tenant occupied, or could have occupied, the Leased Premises during each such Operating Year. If for any Operating Year after the Base Year the management fee percentage (i.e., the percentage applied to Landlord’s gross receipts for purposes of calculating the management fee) used for determining the management fee for such Operating Year is greater than the management fee percentage used in the Base Year, then for purposes of determining Tenant’s Share of Operating Costs and Taxes for such Operating Year, the management fee for the Base Year shall be recalculated based upon the management fee percentage used in such Operating Year. In addition if for any Operating Year after the Base Year the management fee percentage used for determining the management fee for such Operating Year is less than the management fee percentage used in any prior Operating Year or the Base Year, then for purposes of determining Tenant’s Share of Operating Costs and Taxes for such Operating Year, the management fee for the Base Year shall be recalculated based upon the management fee percentage used in such Operating Year, it being understood that for purposes of determining Tenant’s Share of Operating Costs and Taxes for any Operating Year, the management fee for the Base Year shall be calculated based upon the management fee percentage used in such Operating Year. Tenant’s Share of Operating Costs and Taxes shall be abated for the period from January 1, 2008 until March 31, 2008.

B. Tenant’s Share of Operating Costs and Taxes shall be paid, in advance, without notice, demand, abatement (except as otherwise specifically provided in this Lease), deduction or set-off, on the first day of each calendar month during the Term, said monthly amounts to be determined on the basis of estimates prepared by Landlord on an annual basis and delivered to Tenant prior to the commencement of each Operating Year. If, however, Landlord fails to furnish any such estimate prior to the commencement of an Operating Year, then (a) until the first day of the month following the month in which such estimate is furnished to Tenant, Tenant shall pay to Landlord on the first day of each month an amount equal to the monthly sum payable by Tenant to Landlord under this Section 6.03 in respect of the last month of the preceding Operating Year; (b) promptly after such estimate is furnished to Tenant, Landlord shall give notice to Tenant whether the installments of Tenant’s Share of Operating Costs and Taxes paid by Tenant for the current Operating Year have resulted in a deficiency or overpayment compared to payments which would have been paid under such estimate, and Tenant, within thirty (30)

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days after receipt of such estimate, shall pay any deficiency to Landlord and any overpayment shall, at Tenant’s option, be credited against future payments required by Tenant under such estimate or refunded to Tenant promptly; and (c) on the first day of the month following the month in which such estimate is furnished to Tenant and monthly thereafter throughout the remainder of the Operating Year, Tenant shall pay to Landlord the monthly payment shown on such estimate. Landlord may at any time or from time to time furnish to Tenant a revised estimate of Tenant’s Share of Operating Costs and Taxes for such Operating Year, and in such case, Tenant’s monthly payments shall be adjusted and paid or credited, as the case may be substantially in the same manner as provided in the preceding sentence. After the expiration of each Operating Year, Landlord shall submit to Tenant a statement showing the determination of Tenant’s Share of Operating Costs and Taxes (the “Operating Costs Statement”). If such statement shows that the total of Tenant’s monthly payments pursuant to this Section 6.03 exceed Tenant’s Share of Operating Costs and Taxes, then Landlord will refund such overpayment with the notice; provided, however, that no such refund shall be made while Tenant remains in default of any non-monetary provision of this Lease (beyond any applicable notice and cure period expressly set forth herein) or is in default of any monetary provision of this Lease. If such Operating Costs Statement shows that Tenant’s Share of Operating Costs and Taxes exceeded the aggregate of Tenant’s monthly payments pursuant to this Section 6.03 for the applicable Operating Year, then Tenant shall, within thirty (30) days after receiving the statement, pay such deficiency to Landlord. Each Operating Costs Statement provided by Landlord shall be conclusive and binding upon Tenant unless within one hundred twenty (120) days after receipt thereof, Tenant notifies Landlord that it disputes the correctness thereof. If Tenant believes that any Operating Costs Statement includes charges that are not permitted pursuant to this Section 6.03 or contains an error in calculation or otherwise, then Tenant shall be entitled to the following audit right. Such audit right shall be exercisable by Tenant providing Landlord, within one hundred twenty (120) days of receipt of such Operating Costs Statement, notice of such objection, notice of its exercise of such audit right. If within sixty (60) days after Landlord’s receipt of Tenant’s written notice and statement, Landlord and Tenant are unable to resolve Tenant’s objections, then not later than fifteen (15) days after the expiration of such sixty (60)-day period Tenant shall notify Landlord that it wishes to employ an independent certified public accounting firm reasonably acceptable to Landlord to inspect and audit Landlord’s books and records relating to the Operating Costs Statement. If Tenant elects to employ such accountant as set forth above, then Tenant shall deliver to Landlord a confidentiality and nondisclosure agreement satisfactory to Landlord executed by such accountant, and provide Landlord not less than thirty (30) days notice of the date on which the accountant desires to examine Landlord’s books and records during regular business hours; provided, however, that such date shall be between thirty (30) and ninety (90) days after Tenant delivers to Landlord such notice (but in no event between January 1 and April 1 of any year (“Blackout Dates”); provided that if all or a part of such 60 day period (i.e., the period between 30 and 90 days after Tenant delivers to Landlord such notice) falls between the Blackout Dates of any year, then starting on April 2 of such year and continuing for such number of the 60 days falling between such Blackout Dates, Tenant shall be entitled to conduct such examination of Landlord’s books and records in accordance with the terms hereof. The firm or person engaged by Tenant to conduct such audit cannot be compensated on a “contingency” or “success fee” basis. Such audit shall be limited to a determination of whether Landlord calculated the Operating Costs Statement in accordance with the terms and conditions of this Lease. All costs and expenses of any such audit shall be paid by Tenant. Any audit performed pursuant to the terms of this section shall be conducted only by an independent certified public accounting firm reasonably acceptable to Landlord. Notwithstanding anything contained herein to the contrary, Tenant shall be entitled to exercise its right to audit pursuant to this Section 6.03 only in strict accordance with the foregoing procedures and each such audit shall relate only to the most recent calendar year covered by the audited Operating Costs Statement and the Base Year (provided that such audit of the Base Year is conducted only once and is conducted within three (3) years of the end of such Base Year). If on account of any errors in the Operating Costs Statement under audit, Tenant is entitled to a refund or credit of the amount paid by Tenant for Tenant’s Share of Operating Costs and Taxes for the Operating Year under audit because such Expense Statement overstated the amounts to which Landlord was entitled hereunder, then Landlord shall refund such amount to Tenant promptly after becoming aware thereof, and if such Operating Costs Statement overstated the amounts to which Landlord was entitled hereunder by more than four percent (4%) of the amount of Operating Costs and Taxes for the applicable Operating Year, then Landlord shall also promptly reimburse Tenant for the reasonable costs and expenses incurred in any audit conducted in connection with such Operating Costs Statement, but in no event more than Ten Thousand Dollars ($10,000.00) (“Audit Fee Cap”) for such audit, which Audit Fee Cap shall be increased on the first day of each Operating Year by 3% of the Audit Fee Cap in effect for the prior Operating Year.

C. “Operating Costs” means all expenses and costs (but not specific costs which are allocated or separately billed to and paid by specific tenants) of every kind and nature which Landlord shall pay or become obligated to pay, on an accrual basis (consistently applied), because of or in connection with owning, operating, managing, painting, repairing, insuring and cleaning the Building, including, but not limited to, the following:

(i) cost of all supplies and materials used, and labor charges incurred, in the operation, maintenance, decoration, repairing and cleaning of the Building, including janitorial service for all Floor Area leased to tenants;

(ii) cost of all equipment purchased or rented which is utilized in the performance of Landlord’s obligations hereunder, and the cost of maintenance and operation of any such equipment;

(iii) cost of all maintenance and service agreements for the Building and the equipment therein, including, without limitation, alarm service, security service, window cleaning, and elevator maintenance;

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(iv) costs of roof and exterior maintenance (including repainting) repair or replacement;

(v) wages, salaries and related expenses of all on-site agents or employees engaged in the operation, maintenance, security and management of the Building up to the level of property manager; provided, however, the wages, salaries and related expenses of any agents or employees not exclusively engaged in the operation, maintenance, security and management of the Building shall be reasonably apportioned;

(vi) cost of all insurance coverage for the Building from time to time maintained by Landlord, including but not limited to the costs of premiums for insurance with respect to personal injury, bodily injury, including death, property damage, business interruption, workmen’s compensation insurance covering personnel and such other insurance as Landlord shall deem reasonably necessary, which insurance Landlord may maintain under policies covering other properties owned by Landlord in which event the premium shall be reasonably allocable;

(vii) cost of repairs, replacements and general maintenance to the Building, including without limitation the mechanical, plumbing, fire and life/safety, electrical and heating, ventilating and air-conditioning equipment and/or systems;

(viii) any and all Common Area maintenance and repair (except for any item expressly excluded under Exhibit H attached hereto), including repainting and exterior and interior landscaping;

(ix) cost of removal of trash, rubbish, garbage and other refuse from the Building as well as removal of ice and snow from the sidewalks on or adjacent to the Building;

(x) all charges for electricity, gas, water, sewerage service, heating, ventilation and air-conditioning and other utilities furnished to the Building;

(xi) annual amounts amortizing the following items (“Permitted Capital Expenditures”): capital expenditures incurred either to improve the efficient operation of the Building or reduce Operating Costs (provided that Landlord in good faith believes that the annual costs savings will exceed the annual amortization for such item) or to comply with any law, order or regulation of any governmental, quasi-governmental, public or other authority (other than to cure a violation existing as of the Term Commencement Date of any legal requirement in effect as of the Term Commencement Date); provided that (i) the cost of each such capital improvement shall be amortized (on any basis permitted under generally accepted accounting principals) and only that portion attributable to each Operating Year shall be included herein for such Operating Year, and (ii) in no event shall Landlord include in Operating Costs for any Operating Year amortization of Permitted Capital Expenditures in excess of fifty centers ($.50) per square foot of space in the Building; and

(xii) management fees.

Notwithstanding anything contained herein to the contrary, Operating Costs shall not include (a) payments of principal and interest on any mortgages, deeds of trust or other financing instruments relating to the financing of the Building; (b) leasing commissions or brokerage fees; (c) costs associated with preparing, improving or altering for space for any leasing or releasing of any space within the Building; and (d) the additional exclusions from Operating Costs set forth on Exhibit H.

D. “Taxes” means all governmental or quasi-governmental real estate taxes, fees, charges and assessments (whether general, special, ordinary, or extraordinary) applicable to the Building (including without limitation any assessments or charges by any business improvement district, together with all reasonable costs and fees (including reasonable appraiser, consultant and attorney’s fees) incurred by Landlord in any tax contest, appeal or negotiation. “Taxes” shall also include that portion of any ground rent payments made by Landlord that represent the pass-through of real estate taxes from any ground lessor to Landlord and all rent or services taxes and/or so-called “gross receipts” or “receipts” taxes (including, but not limited to, any business license, sales, use or similar taxes) whether or not enacted in addition to, in lieu of or in substitution for any other tax. Taxes shall be accounted for on an accrual basis (consistently applied). “Taxes” shall also include any personal property taxes incurred on Landlord’s personal property used in connection with the Building. “Taxes” shall not include personal income taxes, personal property taxes, inheritance taxes, or franchise taxes levied against the Landlord, and not directly against said property, even though such taxes might become a lien against said property. If Taxes paid by Landlord for any calendar year during the Term, or any part thereof, for which Tenant has paid Tenant’s Share of Operating Costs and Taxes, are refunded to Landlord as a result of a final determination of such Taxes, then, provided Tenant is not then in default under this Lease, Tenant shall be entitled to a refund of Taxes in an amount equal to Tenant’s Tax Share of such refund (net of expenses incurred to obtain the refund); provided, however, that no such refund shall be made while Tenant remains in default of any non-monetary provision of this Lease (beyond any applicable notice and cure period expressly set forth herein) or is in default of any monetary provision of this Lease. Notwithstanding the foregoing, if the garage in the Building is leased to a third party operator and such operator of the garage pays a portion of Taxes attributable to the garage pursuant to its lease, then “Taxes” shall exclude such amount received by Landlord from the garage operator. Taxes in the Base Year and any subsequent Operating Year during which the Building is assessed for Taxes at a time when less than ninety-five percent (95%) of the rentable area of the Building is occupied with tenants paying rent for the entire year, shall be

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grossed up to the amount that Landlord reasonably determines that such Taxes would have been had the Building been at least ninety-five percent (95%) occupied (with tenant’s paying rent) for such entire year, determined as follows: (1) in the event the real estate tax assessor’s worksheet for any such year’s assessment reflects any deductions to the capitalized value of stabilized net operating income for items such as (x) losses due to the failure to achieve at least ninety-five percent (95%) occupancy (with tenants paying rent); (y) the costs of required capital improvements to achieve ninety-five percent (95%) occupancy (with tenants paying rent) which are not yet completed; and/or (z) items similar to the foregoing made for purposes of adjustments due to the failure to achieve at least ninety-five percent (95%) occupancy (with tenants paying rent), then and in such event the Real Estate Taxes shall be grossed up to reflect the amount of Real Estate Taxes which would have been payable during such year in the absence of such deduction(s); and (2) in the event that the real estate tax assessors worksheet indicates that an income approach was not considered as a part of the Base Year assessment, then Taxes in the Base Year shall be adjusted to be the amount that Landlord reasonably estimates such Taxes would have been had the Building been ninety-five percent (95%) occupied (with the tenant paying rent) for the entire Base Year and had the assessment therefor taken into consideration, in addition to the other factors typically used, a typical income approach. Landlord agrees to either provide Tenant with a copy of the assessor’s worksheet or to authorize Tenant to obtain a copy of same from the assessor upon its request.

E. If for any period during the Term less than ninety-five percent (95%) of the Floor Area of the office portion of the Building is occupied by tenants during any part of such period, then, in calculating Operating Costs for such period (including without limitation, the Base Year), Landlord shall increase those components of Operating Costs that Landlord reasonably believes would have been incurred during such period assuming the Building were ninety-five percent (95%) occupied during the entire period. In addition, if for any period during the Term any part of the Building is leased to a tenant who, in accordance with the terms of its lease, provides its own cleaning services and/or any other services otherwise included in Operating Costs during any part of such period, then Operating Costs for such period shall be increased by the additional costs for cleaning and/or such other applicable expenses that Landlord reasonably estimates would have been incurred by Landlord if Landlord had furnished and paid for cleaning and/or such other services for the space occupied by such tenant during the entire period.

ARTICLE VII

SERVICES AND UTILITIES

Section 7.01 Landlord shall provide the following facilities and services to Tenant as part of Landlord’s Operating Costs (except as otherwise provided herein):

A. Electricity serving the Leased Premises for normal lighting purposes and the operation of ordinary office equipment, subject to Section 7.03, below;

B. Normal and usual cleaning and char services after Building Hours each day except on Saturdays, Sundays and legal holidays recognized by the United States Government. Attached hereto as Exhibit M are the cleaning specifications currently applicable to the Building, which are subject to change from time to time in Landlord’s sole (but good faith) discretion; provided, however, if Landlord changes such cleaning specifications, such new cleaning specifications must be comparable to the cleaning specifications that are normally and customarily used for comparable first-class office buildings in the Montgomery County, Maryland area;

C. Rest room facilities and necessary lavatory supplies, including hot and cold running water at the points of supply, toilet tissue and paper towels as provided for the general use of all tenants in the Building and routine maintenance, painting, and electric lighting service for all Common Areas of the Building in such manner as Landlord deems reasonable;

D. During Building Hours (i.e., a total of 54 hours a week during non-holiday weeks), central heating and air conditioning during the seasons of the year when these services are normally and usually furnished based upon standard electrical energy requirements of 5 watts per square foot and a human occupancy of not more than one person for each 150 square feet of rentable area of the Leased Premises. After-hours HVAC (i.e., anytime other than Building Hours) shall be provide upon Tenant’s request at a cost equal to Landlord’s reasonable estimate of the cost of utilities, maintenance and depreciation in connection with such service plus a 15% administrative fee. The Landlord will modify the HVAC controls so that (a) the individual package units can be run independently, such that any one (or more) of the package units may be turned on without the necessity of turning all of the units on and (b) the Tenant will have the ability to turn on the after hours HVAC with a switch in the Leased Premises. Regarding the two HVAC units exclusively serving the second (2nd) floor, since these HVAC units will be modified to run independently, the Landlord will provide HVAC services to the second (2^nd) floor of the Leased Premises for up to 54 hours per week (less 10 hours per holiday day occurring during any such week) at times and days of the week selected by Tenant, which time/days may change from time to time (Tenant must give Landlord minimum 48 hours advance notice for any changes to the schedule). Any hours in excess of 54 hours for any week will be deemed after hours HVAC use, the charge for which shall be as set forth above. Regarding the third HVAC unit, which serves both the 2nd and 3rd floors, Tenant shall have use of the third HVAC unit during Building Hours and pay for any use of the unit after- hours;

E. Elevator service by means of automatically operated elevators at least during the Building Hours. Landlord shall have the right to remove elevators from service as the same shall be required for moving freight or for servicing or maintaining the elevators and/or the Building; provided, however, that at least one elevator will remain in service 24 hours per day, 365 days per year, subject to compliance with Landlord’s reasonable rules and regulations concerning after Building Hours and weekend access. Tenant shall have access to the Leased Premises 24 hours per day, 365 days per year;

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F. All electric bulbs and fluorescent tubes for building standard light fixtures in the Leased Premises and Common Areas, at Tenant’s request and Landlord shall, at Tenant’s sole cost, reasonably stock all non-standard electric bulbs and fluorescent tubes for Tenant’s light fixtures in the Leased Premises purchased by Tenant. The cost of installing such bulbs and tubes shall be included in Operating Costs;

G. Landlord shall provide a proximity card reader electronic access system with computerized card access (or similar devise) 24 hours per day, 365 days per year, for (i) access to the Building through the office lobby of the Building at the Woodmont Avenue entrance to the Building, (ii) access to the Building from the parking structure, and (iii) access to each floor of the Leased Premises from the elevator lobby on each such floor that is occupied entirely by Tenant. The current card reader electronic access system for the Building or for the 7255 Building (hereinafter defined) will be modified, at Landlord’s sole cost, to be sufficiently compatible with each other, so that Tenant’s access card will be able to work at the entrance to both the Building and the 7255 Building. Landlord shall not be responsible for the quality, action or inaction of the Building access system or for any damage or injury to Tenant, its employees, invitees or others, or their property, resulting from any failure, action or inaction of the Building access system; provided, however, that Landlord shall repair any damage to such access system reasonably promptly after Tenant notifies Landlord thereof in writing. Tenant shall be entitled to one (1) access card per employee at the Leased Premises as of the Term Commencement Date. Any additional or replacement cards shall be at the then prevailing rate charged by Landlord, which is currently Ten Dollars ($10.00) per card. Landlord shall use reasonable efforts to provide any such additional or replacement cards to Tenant within two (2) days after receipt of a written request therefor; and

H. Notwithstanding the foregoing, in the event that for any reason not caused by Tenant (or any of its employees or agents) or an event of Force Majeure any interruption or stoppage of any service Landlord is required hereunder to provide to the Building shall continue for more than five (5) consecutive business days and shall render at least twenty-five percent (25%) of the Leased Premises untenantable for general office purposes and Tenant shall actually cease to conduct business in such portion of the Leased Premises, then, provided no default exists, the portion of Minimum Rent attributable to such untenantable area shall, commencing on the sixth (6^th) business day after receipt from Tenant of written notice that Tenant has experienced such an interruption or stoppage of services and has ceased the use thereof, abate until the earlier of the date that (i) Tenant again uses such portion of the Leased Premises, or (ii) such portion of the Leased Premises is again tenantable.

Section 7.02 Landlord shall have access to and reserves the right, subject to the provisions of Section 2.01 .A, to inspect, erect, use, connect to, maintain and repair pipes, ducts, conduits, cables, plumbing, vents and wires, and other facilities in, to and through the Leased Premises as and to the extent that Landlord may now or hereafter deem to be necessary or appropriate for the proper operation and maintenance of the Building (including the servicing of other tenants in the Building) and the right at all times to transmit water, heat, air conditioning and electric current through such pipes, conduits, cables, plumbing, vents and wires and the right to interrupt the same in emergencies without eviction of Tenant or abatement of Rent (except as may be provided pursuant to Section 7.01.H, above). Any failure by Landlord to furnish the foregoing services, resulting from circumstances beyond Landlord’s reasonable control or from interruption of such services due to repairs or maintenance, shall not render Landlord liable in any respect for damages to either person or property, nor be construed as an eviction of Tenant, nor cause an abatement of Rent hereunder, nor relieve Tenant from any of its obligations hereunder. If any public utility or governmental body shall require Landlord or Tenant to restrict the consumption of any utility or reduce any service for the Leased Premises or the Building, Landlord and Tenant shall comply with such requirements, whether or not the utilities and services referred to in this Article VII are thereby reduced or otherwise affected, without any liability on the part of Landlord to Tenant or any other person or any reduction or adjustment in Rent payable hereunder. Landlord and its agents shall be permitted reasonable access to the Leased Premises for the purpose of installing and servicing systems within the Leased Premises deemed reasonably necessary by Landlord to provide the services and utilities referred to in this Article VII to Tenant and other tenants in the Building. Landlord recognizes that Tenant is a government contractor and, except in the case of an emergency, in connection with any access to the Leased Premises by Landlord pursuant hereto, Landlord shall complying with such reasonable security requirements of any applicable law or regulation enacted by the United States Government governing such access, provided Tenant delivers to Landlord written notice and a copy of such requirements.

Section 7.03 Landlord shall be under no obligation to furnish electrical energy to Tenant in amounts greater than needed for lighting and normal and customary items of equipment for general office purposes (i.e., not more than an average of five (5) watts per square foot of the Leased Premises), and Tenant shall not install or use within the Leased Premises any electrical equipment, appliance or machine which shall require amounts of electrical energy exceeding such standard wattage provided for the Building, unless the installation and use of such additional electrical equipment, appliance, or machine has been approved by Landlord, which approval may be conditioned upon the payment by Tenant, as Additional Rent, of the cost of the additional electrical energy and modifications to the Building’s electrical system required for the operation of such electrical equipment, appliance or machine. Landlord shall have the right to charge Tenant for the cost of its electricity consumption beyond Business Hours (to the extent Landlord reasonably determines that such after hours use is in excess of the average for the Building) or in excess of five (5) watts per square foot of rentable area of the Leased Premises and for the cost of any additional wiring or other improvements to the Building as may be occasioned by or required as a result of any such excess use. In the event of any such excessive consumption of any utilities

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(including without limitation any consumption beyond Building Hours to the extent Landlord reasonably determines that such after hours use is in excess of the average for the Building), Landlord shall be entitled to require that Tenant install in the Leased Premises (at Tenant’s cost and in a location approved by Landlord) submeters to measure Tenant’s utility consumption for the Leased Premises or for any specific equipment causing excess consumption, as Landlord shall require; in which case, Tenant shall maintain in good order and repair (and replace, if necessary) such submeters. If submeters are installed for measuring Tenant’s consumption of any utilities, Tenant shall pay the costs of the same to Landlord as Additional Rent, within thirty (30) days of its receipt of a bill therefor based on such submeter readings.

ARTICLE VIII

INDEMNITY AND INSURANCE

Section 8.01 Indemnity by Landlord and Tenant.

A. Indemnity by Tenant. Tenant shall indemnify, defend and hold Landlord and its lessors, shareholders, members, trustees, agents, employees and Mortgagee(s) (collectively, the “Landlord’s Indemnified Parties”) harmless from and against all liabilities, obligations, damages, judgments, penalties, claims, costs, charges and expenses, including reasonable architects’ and attorneys’ fees, which may be imposed upon, incurred by, or asserted against any of the Landlord’s Indemnified Parties and arising, directly or indirectly, out of or in connection with (i) Tenant’s breach of its obligations under this Lease, (ii) the acts or negligence of Tenant, its agents, contractors, and employees, (iii) the use or occupancy of the Leased Premises or the Building by Tenant, its agents, servants, employees, and contractors; and (iv) injury or death to individuals or damage to property sustained in or about the Leased Premises. If any action or proceeding is brought against any of Landlord’s Indemnified Parties by reason of any of the foregoing, Tenant shall reimburse Landlord for the cost of defending such action or proceeding or, upon Landlord’s request and at Tenant’s sole cost and expense, resist and defend such action and proceeding by competent counsel. Tenant shall not be obligated to indemnify Landlord’s Indemnified Parties against loss, liability, damage, cost or expense arising out of a claim for which Tenant is released from liability pursuant to Section 8.07, below (or a claim arising out of the willful or negligent acts or omissions of Landlord or its agents, employees or contractors). Except in connection with any default under the provisions of Sections 3.03, 14.01 or 14.03, in no event shall Tenant have any liability to Landlord on account of any claims for any indirect, consequential or punitive damages arising from the foregoing indemnity; provided, however, in no event shall the foregoing relieve Tenant of any obligations hereunder with respect to the payment of any Rent payable hereunder.

B. Indemnity by Landlord. Landlord shall indemnify, defend and hold Tenant, its officers, shareholders, members, trustees, principals, agents and employees (collectively “Tenant’s Indemnified Parties”) harmless from and against all liabilities, obligations, damages, penalties, claims, costs, charges and expenses, including reasonable attorneys’ fees which may be imposed upon, incurred by, or asserted against any of the Tenant’s Indemnified Parties and arises out of the negligence or willful acts or omissions of Landlord, its agents, contractors and employees, except as shall be occasioned by the negligence or willful acts or omissions of Tenant, its agents, servants and/or employees. In no event, however, shall Landlord’s Indemnity cover, or shall Landlord otherwise be liable for any lost revenue or business or any consequential damages (e.g., lost profits), punitive damages or any damages other than direct, actual and compensatory damages incurred by Tenant. Landlord shall not be obligated to indemnify Tenant’s Indemnified Parties against loss, liability, damage, cost or expense arising out of a claim for which Landlord is released from liability pursuant to Section 8.07, below (or a claim arising out of the willful or negligent acts or omissions of Tenant or its agents, employees or contractors).

Section 8.02 Landlord Not Responsible for Acts of Others. To the maximum extent permitted by law, Landlord’s Indemnified Parties shall not be liable for, and Tenant waives all claims for, loss or damage to Tenant’s business or injury or damage to Person or property sustained by Tenant, or any Person claiming by, through or under Tenant, resulting from any accident or occurrence in, on, or about the Building, including claims for loss, theft, injury or damage resulting from: (i) any equipment or appurtenances being or becoming out of repair; (ii) wind or weather; (iii) any defect in or failure to operate any sprinkler, HVAC equipment, electric wiring, gas, water or steam pipe, stair, railing or walk; (iv) broken glass; (v) the backing up of any sewer pipe or downspout; (vi) the escape of gas, steam or water; (vii) water, snow or ice being upon the Building or coming into the Leased Premises; (viii) the falling of any fixture, plaster, tile, stucco or other material; or (ix) any act, omission or negligence of other tenants, licensees or any other Persons including occupants of the Building, occupants of adjoining or contiguous buildings, owners of adjacent or contiguous property, or the public; provided, however, in the event of any injury or damage to Person or property resulting directly from Landlord’s negligent failure to fulfill any of its repair obligations expressly set forth herein (with respect to a condition of which Landlord had knowledge prior to such injury or damage), the indemnity provisions of Section 8.01 hereof shall apply in such case, subject to the limitations set forth therein and otherwise in this Lease.

Section 8.03 Tenant’s Insurance. Commencing on the date of delivery of possession of the Leased Premises to Tenant and at all times thereafter, Tenant shall carry and maintain, at its sole cost and expense:

A. Commercial General Liability Insurance (ISO form or equivalent) naming Tenant as the named insured and Landlord and (at Landlord’s request) Landlord’s mortgagee (and managing agent), if any, and Federal Realty Investment Trust (“FRIT”), if FRIT is not the Landlord under this Lease, as additional insureds, protecting Tenant and the additional insureds against liability for bodily injury, death and property damage occurring upon or in the Leased Premises, with a minimum combined single limit of One Million Dollars ($1,000,000.00) and a general aggregate limit of Two Million Dollars ($2,000,000.00).

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If the policy also covers locations other than the Leased Premises, the policy shall include a provision to the effect that the aggregate limit of Two Million Dollars ($2,000,000.00) shall apply separately at the Leased Premises. If Tenant sells, serves or distributes alcoholic beverages in or on the Leased Premises, then such General Liability Insurance shall include, at the same minimum limits of liability as shown above, Liquor Legal Liability coverage.

B. “All Risks” or “Special Form” property insurance covering all Leasehold Improvements and all of Tenant’s Property (as defined in Section 9.05, below), and written for at least the full replacement cost with a deductible of not more than Five Thousand Dollars ($5,000.00).

C. Worker’s Compensation or similar insurance policy offering statutory coverage and containing statutory limits, which policy shall provide Employer’s Liability Coverage of not less than Five Hundred Thousand Dollars ($500,000.00) per occurrence.

Section 8.04 Tenant’s Contractor’s Insurance. Tenant shall cause any contractor performing work on the Leased Premises to obtain, carry and maintain, at no expense to Landlord: (i) worker’s compensation insurance and employer’s liability as required by the jurisdiction in which the Building is located; (ii) builder’s risk insurance with a deductible no greater than Ten Thousand Dollars ($10,000.00), in the amount of the full replacement cost of the Tenant’s Property and the Leasehold Improvements; and (iii) Commercial General Liability Insurance providing on an occurrence basis a minimum combined single limit of One Million Dollars ($1,000,000.00) per occurrence (and Two Million Dollars ($2,000,000.00) general aggregate, if applicable). If the contractor fails to acquire such insurance, Tenant shall provide such insurance (except worker’s compensation insurance and employer’s liability) at its sole cost and expense.

Section 8.05 Policy Requirements. Any company writing any insurance which Tenant is required to maintain or cause to be maintained under Sections 8.03 and 8.04, above, as well as any other insurance pertaining to the Leased Premises or the operation of Tenant’s business therein (all such insurance being referred to as ‘Tenant’s Insurance”) shall at all times be licensed and qualified to do business in the jurisdiction in which the Leased Premises are located and shall have received an A or better (and be in a financial size category of class VII or higher) rating by the latest edition of A.M. Best’s Insurance Rating Service. All of Tenant’s Insurance may be carried under a blanket policy covering the Leased Premises and any other location of Tenant, if (i) the coverage afforded Landlord and any designees of Landlord shall not be reduced or otherwise adversely affected, and (ii) such blanket policy allocates to the properties and liabilities to be insured under this Article VIII an amount not less than the amount of insurance required to be covered pursuant to this Article VIII, so that the proceeds of such insurance shall not be less than the proceeds that would be available if Tenant were insured under a unitary policy. All policies of Tenant’s Insurance shall contain endorsements requiring the insurer(s) to give to all additional insureds at least thirty (30) days’ advance notice of any material reduction, cancellation, termination or non-renewal of said insurance. Tenant shall be solely responsible for payment of premiums for all of Tenant’s Insurance. Tenant shall deliver to Landlord at least fifteen (15) days prior to the time Tenant’s Insurance is first required to be carried by Tenant, and upon renewals at least fifteen (15) days prior to the expiration of the term of any such insurance policy, a certificate of insurance of all policies procured by Tenant in compliance with its obligations under this Lease. The limits of Tenant’s Insurance shall not limit Tenant’s liability under this Lease, at law, or in equity. If Tenant fails to deposit a certificate of insurance with Landlord for a period of three (3) days after notice from Landlord, Landlord may acquire such insurance, and Tenant shall pay Landlord the amount of the premium applicable thereto within five (5) days following notice from Landlord.

Section 8.06 Increase in Insurance Premiums. Tenant shall not keep or do anything in the Leased Premises that will (i) result in an increase in the rate of any insurance on the Building; (ii) violate the terms of any insurance coverage on the Building carried by Landlord or any other tenant; (iii) prevent Landlord from obtaining such policies of insurance acceptable to Landlord or any Mortgagee of the Building; or (iv) violate the rules, regulations or recommendations of Landlord’s insurers, applicable insurance rating bureau, the National Fire Protection Association, or any similar body having jurisdiction over the Leased Premises. If Tenant does so, Tenant shall pay to Landlord upon demand the amount of any increase in any such insurance premium. In determining the cause of any increase in insurance premiums, the schedule or rate of the organization issuing the insurance or rating procedures shall be conclusive evidence of the items and charges which comprise the insurance rates and premiums on such property.

Section 8.07 Waiver of Right of Recovery.

A. Landlord and Tenant (each, a “Waiving Party”) each hereby waives and releases all rights of recovery against the other and the other’s agents and employees (the “Released Parties”) on account of loss or damage to the property of the Waiving Party to the extent that such loss or damage is required to be insured against under any property damage insurance policies required to be carried by this Lease. By this waiver it is the intent of the parties that the Released Parties shall not be liable to the Waiving Party or any insurance company (by way of subrogation or otherwise) insuring the Waiving Party for any loss or damage insured against (or that could have been insured against) under any property damage insurance required by this Article VIII, even though such loss or damage might be caused by the negligence of one (1) or more of the Released Parties; provided, however, the mutual release contained herein shall not apply to damage to the Waiving Party’s property caused by the willful misconduct of any of the Released Parties. If the Waiving Party does not carry, or is not required to carry, property damage insurance pursuant to this Lease, this release shall apply to damage to the Waiving Party’s property that would have been covered by a policy of “all risk” or “special form” property damage insurance if the Waiving Party had maintained such insurance.

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B. Each of Landlord and Tenant shall include in each of its property damage insurance policies a waiver of the insurer’s right of subrogation against the other party and the officers, directors, agents and employees of, and the partners and members in, the other party. If such waiver is not, or ceases to be, obtainable without additional charge (other than a nominal administrative charge) or at all, the insuring party shall so notify the other party promptly after notice thereof. If the other party agrees in writing to pay the insurer’s additional charge therefor, such waiver shall (if obtainable) be included in the policy. Landlord and Tenant hereby acknowledge that such waiver is obtainable under normal commercial insurance practice on the date of this Lease at no additional charge (other than a nominal administrative charge).

C. The waiver and release in Section 8.07.A, above, shall not apply to loss or damage to property of the Waiving Party to the extent of the deductible contained in the Waiving Party’s policies of property damage insurance.

Section 8.08 Landlord’s Insurance. Landlord agrees to maintain in full force throughout the Term, a policy of insurance upon the Building (provided that Landlord shall have no obligation to insure any improvements, alterations or additions in the Leased Premises or any other tenants’ premises) insuring against fire and other casualties covered under an “all risk” coverage endorsement in an amount at least equal to at least eighty percent (80%) of the full replacement value of the Building (excluding costs of excavation, foundations and footings), as well as insurance against breakdown of boilers. Landlord shall supply to Tenant from time to time, upon written request of Tenant (but no more often that annually), certificates of all such insurance issued by or on behalf of the insurers named therein by a duly authorized agent. Notwithstanding anything to the contrary contained in this Lease, Landlord may self insure against the risks covered by the aforementioned insurance provided: (1) Landlord has a net worth of Twenty-five Million Dollars ($25,000,000.00); (2) Landlord maintains loss histories evidencing the losses incurred by Landlord; and (3) Landlord establishes and funds a reserve adequate to cover the amount of losses projected by the loss histories. Furthermore, provided the insurance coverage carried by Landlord pursuant to (i) above shall not be reduced or otherwise adversely affected, all of Landlord’s insurance may be carried under a blanket policy covering the Building and any other property owned, leased or operated by Landlord or its affiliates, provided the insurance requirements in this Lease are fulfilled and the insurance coverage is not diminished in anyway.

ARTICLE IX

CONSTRUCTION AND ALTERATIONS

Section 9.01 Condition of Leased Premises Upon Delivery. It is understood and agreed that Landlord is under no obligation to make any alterations, decorations, additions or improvements in or to the Leased Premises from its “as is” condition, except as otherwise expressly provided in this Lease (including Exhibit B attached hereto); provided, however the foregoing shall not limit any repair and maintenance obligations that Landlord may have hereunder.

Section 9.02 Tenant Improvements. Landlord and Tenant, at their respective sole cost and expense, agree to provide all improvements to the Leased Premises in accordance with their respective obligations set forth in Exhibit B.

Section 9.03 Alterations. Except with respect to Permitted Alterations (hereinafter defined), Tenant shall not make or cause to be made any alterations, additions, renovations, improvements or installations (“Alterations”) in or to the Leased Premises without Landlord’s prior consent, which such consent shall not be unreasonably withheld, conditioned or delayed, unless Landlord determines that the proposed Alterations could (i) affect the exterior or common areas of the Building or aversely affect the Building’s structure or safety; (ii) adversely affect in any material respect the electrical, plumbing or mechanical systems of the Building or the functioning thereof; (iii) be or become visible from the exterior of the Leased Premises; or (iv) interfere with the operation of the Building or the provision of services or utilities to other tenants in the Building. Landlord shall have fifteen (15) business days from the receipt of Tenant’s request for Landlord’s approval of any Alteration (together with all information required under this Lease in connection therewith, including without limitation plans and specification therefor, and other information reasonably requested by Landlord with respect thereto) to review Tenant’s request and to notify Tenant whether it will consent to such proposed Alteration, provided that Tenant in its written request for such approval refers to this provision and states in capital bold letters in such request and on the outside of the envelope containing such request the following: “LANDLORD MUST RESPOND TO TENANT’S REQUEST CONTAINED HEREIN WITHIN FIFTEEN (15) BUSINESS DAYS.” If (i) Landlord fails to notify Tenant whether or not it will consent to such proposed Alteration within such fifteen (15) business day period, and, thereafter, Tenant delivers notice (“Alteration Response Failure Notice”) to Landlord of such failure (which Alteration Response Failure Notice must refer to this provision and state in capital bold letters in the Alteration Response Failure Notice and on the outside of the envelope containing the Sublet Response Failure Notice the following: “LANDLORD MUST RESPOND TO TENANT’S REQUEST CONTAINED HEREIN WITHIN SEVEN (7) BUSINESS DAYS OF RECEIPT OR SUCH REQUEST SHALL BE DEEMED APPROVED,” and (ii) Landlord fails to respond to such request within seven (7) business days after Landlord’s receipt of the Alteration Response Failure Notice, then Landlord’s consent to such proposed Alteration shall be deemed given. If Landlord consents to any such alterations, additions, renovations, improvements or installations by Tenant, Landlord shall have the right (but not the obligation) in its sole discretion to manage or supervise such work and Tenant shall pay to Landlord a reasonable fee to reimburse Landlord for overhead and administrative costs and expenses incurred in connection with the management or supervision of such work by Landlord. Notwithstanding anything contained in this Section 9.03, Tenant shall have the right to make Permitted Alterations (hereinafter defined) in the Leased Premises, without Landlord’s consent (but with ten (10) days prior written notice (the “Permitted Alterations Notice”), which notice shall contain a description of the

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Permitted Alterations proposed to be undertaken by Tenant and state that such Alterations are Permitted Alterations). A Permitted Alteration shall mean any Alterations in the Leased Premises that could not (i) affect the exterior or common areas of the Building or the structure or safety of the Building; (ii) affect the electrical, plumbing or mechanical systems of the Building or the functioning thereof; (iii) be or become visible from the exterior of the Leased Premises; (iv) interfere with the operation of the Building or the provision of services or utilities to other tenants in the Building; (v) cost more than the lesser of Twenty-five Thousand Dollars ($25,000.00) or the amount which when added to all other Alterations made within the prior twelve (12) months equals Fifty Thousand Dollars ($50,000.00), and (vi) require a permit. In the event that, within ten (10) days after receiving the Permitted Alterations Notice, Landlord determines, in its reasonable discretion, that the proposed Alterations are not Permitted Alterations, and so notifies Tenant, Tenant shall apply for Landlord’s consent for such Alterations in accordance with the provisions of this Article IX. Tenant shall be required, if requested by Landlord in accordance with the provisions of Section 9.06 hereof, to remove any and all Alterations as Landlord may direct.

Section 9.04 Work Requirements. All Alterations and other work performed by Tenant in the Leased Premises shall be performed (i) promptly and in a workmanlike manner with first-class materials; (ii) by duly qualified or licensed persons; (iii) without interference with, or disruption to, the operations of Landlord or other tenants or occupants of the Building; and (iv) in accordance with (a) plans and specifications approved in writing in advance by Landlord (as to both design and materials), it being understood that the standard for Landlord’s approval of such plans and specifications shall be the same as the standard for approving the Alteration to which such plans and specifications relate, and (b) all applicable governmental permits, rules and regulations.

Section 9.05 Ownership of Improvements. All present and future alterations, additions, renovations, improvements and installations made to the Leased Premises, including without limitation the Tenant Work (“Leasehold Improvements”), shall be deemed to be the property of Landlord when made and, upon Tenant’s vacation or abandonment of the Leased Premises, unless Landlord directs otherwise, shall remain upon and be surrendered with the Leased Premises in good order, condition and repair. All movable goods, inventory, office furniture, equipment, trade fixtures and other movable personal property belonging to Tenant that are not permanently affixed to the Leased Premises (including supplemental HVAC units and such other items of personal property that are temporarily affixed to the Leased Premises by bolts or screws, but can be removed without any damage to the Leased Premises or the Building), shall remain Tenant’s property (“Tenant’s Property”) and shall be removable by Tenant at any time, provided that Tenant shall repair any damage to the Leased Premises or the Building caused by the removal of any of Tenant’s Property.

Section 9.06 Removal of Tenant’s Property. Tenant shall remove all of Tenant’s Property (and any Leasehold Improvements as Landlord may direct) prior to the Termination Date or the termination of Tenant’s right to possession. Tenant shall repair any damage to the remaining Leasehold Improvements, the Leased Premises or any other portion of the Building caused by such removal. If Tenant fails to timely remove said items, they shall be considered as abandoned and shall become the property of Landlord, or Landlord may have them removed and disposed of. Notwithstanding anything contained herein to the contrary, Landlord shall only be entitled to require that Tenant remove at the expiration or termination of the Term the following items and restore the affected area to the condition existing prior to the installation of any such items: any vault, safe, file systems (exclusive of typical and customary file cabinets in individual offices or secretarial stations), interior staircases between floors or similar items or any items that Landlord determines in its reasonable discretion are not typically found in office space in first-class office buildings in the Montgomery County, Maryland area or would cost more to remove than typical leasehold improvements (such as partitions) typically found in office space in first-class office buildings in the Montgomery County, Maryland area (collectively referred to as “Required Removable Items”). The foregoing provisions of this Article IX shall not be construed as Landlord’s consent to Tenant installing any of the foregoing items and any such installation must be approved by Landlord pursuant to the terms of this Lease. Notwithstanding the foregoing, Tenant shall not be required to remove any item of Leasehold Improvements if at the time Tenant requests Landlord’s approval of the installation of such item of Leasehold Improvements, Tenant specifically requests in writing that such item be permitted to remain in the Leased Premises at the expiration or termination of the Term and Landlord so approves such request. Tenant shall not be required to remove any item of Tenant Work clearly shown on the Construction Documents (hereinafter defined), unless at the time that Landlord approves the Construction Documents pursuant to Paragraph 2(A) of Exhibit B, Landlord determines that such item is a Required Removable Item and Landlord provides Tenant notice that such item must be removed.

Section 9.07 Mechanic’s Liens. No mechanic’s or other lien shall be allowed against the Building as a result of Tenant’s improvements to the Leased Premises. Tenant shall promptly pay all Persons furnishing labor, materials or services with respect to any work performed by Tenant on the Leased Premises. If any mechanic’s or other lien shall be filed against the Leased Premises or the Building by reason of work, labor, services or materials performed or furnished, or alleged to have been performed or furnished, to or for the benefit of Tenant, Tenant shall cause the same to be discharged of record or bonded to the satisfaction of Landlord within ten (10) days subsequent to the filing thereof. If Tenant fails to discharge or bond any such lien, Landlord, in addition to all other rights or remedies provided in this Lease, may bond said lien or claim (or pay off said lien or claim if it cannot with reasonable effort be bonded) without inquiring into the validity thereof and all expenses incurred by Landlord in so discharging said lien, including reasonable attorney’s fees, shall be paid by Tenant to Landlord as Additional Rent on twenty (20) days’ demand.

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ARTICLE X

REPAIRS, MAINTENANCE, AND LANDLORD’S ACCESS

Section 10.01 Repairs by Landlord. Except as otherwise provided in this Lease (including without limitation the provisions of Section 10.02 hereof) and except for ordinary wear and tear, Landlord covenants to keep, maintain, manage and operate the Common Areas in a manner comparable with the operation of other first-class office buildings in Montgomery County, Maryland of a similar size, location and age to the Building. Subject to the terms of this Lease, Landlord agrees to maintain the roof, the exterior and structural portions of the Building, the central or base Building mechanical, electrical and plumbing systems and vertical sprinkler main (specifically excluding any supplemental HVAC system, horizontal distribution portion of the sprinkler system or any other system exclusively servicing the Leased Premises) in a manner that is comparable to other first-class office buildings in Montgomery County, Maryland of a similar size, location and age. If any such repairs are necessitated by Tenant’s breach of this Lease, or by any act or omission of Tenant, its agents, employees, assigns, concessionaires, contractors or invitees, Tenant shall reimburse to Landlord the reasonable cost incurred in completing such repairs. Nothing herein shall diminish Tenant’s responsibility to maintain and repair any special Tenant equipment, including but not limited to any special fire protection equipment, kitchen equipment and air conditioning equipment serving and specially installed for the Leased Premises. If (i) Tenant notifies Landlord (at the number and in the manner designated by Landlord to Tenant) that the repair of an item for which Landlord is responsible hereunder requires immediate repair, (ii) Tenant’s use of the Leased Premises will be materially impaired until such repair is undertaken, and (iii) the repair of such item is within Landlord’s reasonable control to undertake, then Landlord shall use good faith efforts to generally respond to any such requests by Tenant for such repair and commence such repair within twelve (12) hours of such notification; provided, however, that Landlord’s failure to respond or commence such repairs as set forth above shall not be a breach, violation or default under this Lease.

Section 10.02 Repairs and Maintenance by Tenant. Throughout the Term Tenant shall maintain the Leased Premises, including any Leasehold Improvements, alterations or other improvements therein, in good order, condition and repair. Tenant shall not cause or permit any waste, damage or injury to the Leased Premises or the Building. Tenant’s obligations shall include, without limitation, the repair and replacement of appliances and equipment installed specifically for Tenant such as refrigerators, disposals, computer room, air conditioning, sinks and special plumbing fixtures, special fixtures and the purchase of non-standard bulbs for those fixtures, and any non-standard outlets.

Section 10.03 Inspections, Access and Emergency Repairs by Landlord. Upon reasonable prior notice and without materially adversely affecting Tenant’s business within the Leased Premises, Tenant shall permit Landlord to enter all parts of the Leased Premises to inspect the same. In the event of an emergency, Landlord may enter the Leased Premises at any time and make such inspection and repairs as Landlord deems necessary.

Section 10.04 Landlord’s Compliance with Laws. If the common areas of the Building are in violation of any applicable requirements of any federal or state law, rule or regulation and an order (after all final appeals have been exhausted) of any court or governmental entity requires that such violation be cured, then Landlord shall promptly cure such violation, and if such violation exists as of the Term Commencement Date, Landlord shall be responsible for the cost of curing such violation (without including such expenditure as an “Operating Cost”). Notwithstanding the foregoing, if the requirement that is violated results from Tenant’s particular use of the Leased Premises (as opposed to a requirement applicable as a result of any general office use) or any damage caused or alteration made by Tenant in the Leased Premises or Tenant or any of its agents or employees otherwise caused such violation or was responsible for maintaining the item in violation pursuant to the terms hereof, then Tenant shall pay for or reimburse Landlord for the cost to cure such violation.

ARTICLE XI

CASUALTY

Section 11.01 Fire or Other Casualty. Tenant shall give prompt notice to Landlord in case of fire or other casualty (“Casualty”) to the Leased Premises or the Building.

Section 11.02 Right to Terminate.

A. If (i) the Building is damaged to the extent of more than fifty percent (50%) of the cost of replacement thereof; (ii) during the last Lease Year or in any Partial Lease Year at the end of the Term, the Leased Premises are damaged and Landlord determines that the damage cannot be repaired within ninety (90) days after the date of the damage, or (iii) the Leased Premises are damaged to the extent of fifty percent (50%) or more of the cost of replacement thereof (more than fifty percent (50%) of the Floor Area of the Leased Premises immediately before such Casualty is rendered untenantable) and Landlord determines that such damage cannot be repaired within one hundred fifty (150) days from the date of such occurrence; then Landlord may terminate this Lease by notice to Tenant within forty-five (45) days after the date of the Casualty. If Landlord so terminates this Lease then the Termination Date shall be the date set forth in the notice to Tenant, which date shall not be less than thirty (30) days nor more than sixty (60) days after the giving of said notice. The “cost of replacement” shall be determined by the company or companies insuring Landlord against the Casualty, or, if there shall be no such determination, by a qualified Person selected by Landlord to determine such “cost of replacement.”

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B. If as a result of a Casualty (i) either during the last Lease Year or in any Partial Lease Year at the end of the Term, the Leased Premises are damaged and Landlord determines that the damage cannot be repaired within ninety (90) days after the date of the damage, or (ii) more than fifty percent (50%) of the Floor Area of the Leased Premises immediately before such Casualty is rendered untenantable and Landlord determines that such damage cannot be repaired within one hundred eighty (180) days from the date of such occurrence, Tenant may terminate this Lease by giving Landlord forty-five (45) days’ prior notice given within sixty (60) days after the date of the Casualty. If the Casualty shall render the Leased Premises untenantable, in whole or in part, all Rent shall abate proportionately during the period of such untenantability, computed on the basis of the ratio which the amount of Floor Area of the Leased Premises rendered untenantable bears to the total Floor Area of the Leased Premises. Notwithstanding the foregoing, such abatement shall terminate on the earlier of (i) thirty (30) days after the date any such repair and restoration work that Landlord is required hereunder to undertake is substantially completed by Landlord, or (ii) the date Tenant uses for business purposes that portion of the Leased Premises previously rendered untenantable. Except to the extent specifically set forth in this Section 11.02, neither the Rent nor any other obligations of Tenant under this Lease shall be affected by any Casualty, and Tenant hereby specifically waives all other rights it might otherwise have under law or by statute.

Section 11.03 Landlord’s Duty to Reconstruct. If this Lease is not terminated pursuant to Sections 11.02.A or 11.02.B below, subject to Landlord’s ability to obtain the necessary permits and the availability of insurance proceeds, Landlord shall repair the Leased Premises (excluding Tenant’s Property and Leasehold Improvements) which shall be Tenant’s obligation to repair, restore or replace) to a substantially similar condition as existed prior to the Casualty; provided, Landlord shall not be required to expend an amount in excess of the insurance proceeds received by Landlord in performing such repairs or reconstruction.

Section 11.04 Tenant’s Duty to Reconstruct. If this Lease is not terminated pursuant to Sections 11.02.A or 11.02.B below, Tenant shall promptly commence and diligently pursue to completion the redecorating and refixturing of the Leased Premises, including repairing, restoring or replacing Tenant’s Property and Leasehold Improvements and to a substantially similar condition as existed prior to the Casualty; provided, however, Tenant shall have no obligation to expend any money to repair, restore and replace Tenant’s Property and the Leasehold Improvements in excess of the insurance proceeds available to Tenant (plus any deductible amount) or the proceeds that would have been available to Tenant (plus any deductible amount) had Tenant maintained in full force and effect the Insurance required hereunder. In no event, however, shall Tenant’s obligation to pay rent be affected as a result of adequate insurance proceeds not being available, but such rent obligation shall remain subject to the provisions of Section 11.02.B. hereof. Tenant shall reopen for business in the Leased Premises as soon as practicable after the occurrence of the Casualty.

ARTICLE XII

CONDEMNATION

Section 12.01 Taking of Leased Premises.

A. If more than fifty percent (50%) of the Floor Area of the Leased Premises shall be appropriated or taken under the power of eminent domain, or conveyance shall be made in anticipation or in lieu thereof (“Taking”), either party may terminate this Lease as of the effective date of the Taking by giving notice to the other party of such election within thirty (30) days prior to the date of such Taking.

B. If there is a Taking of a portion of the Leased Premises and this Lease is not terminated pursuant to Section 12.01.A, above, then (i) as of the effective date of the Taking, this Lease shall terminate only with respect to the portion of the Leased Premises taken; (ii) after the effective date of the Taking, the Rent shall be reduced by multiplying the same by a fraction, the numerator of which shall be the Floor Area taken and the denominator of which shall be the Floor Area of the Leased Premises immediately prior to the Taking; (iii) as soon as reasonably possible after the effective date of the Taking, Landlord shall, to the extent feasible, restore the remaining portion of the Leased Premises to a complete unit of a similar condition as existed prior to any work performed by Tenant, provided, however, Landlord shall not be required to expend more on such alteration or restoration work than the condemnation award received and retained by Landlord for the Leased Premises.

Section 12.02 Taking of Building. If there is a Taking of any portion of the Building so as to render, in Landlord’s judgment, the remainder unsuitable for use as an office building, Landlord shall have the right to terminate this Lease upon thirty (30) days’ notice to Tenant. Provided Tenant is not then in default under this Lease, Tenant shall receive a proportionate refund from Landlord of any Rent Tenant paid in advance.

Section 12.03 Condemnation Award. All compensation awarded for a Taking of any part of the Leased Premises (including the Leasehold Improvements) or a Taking of any other part of the Building shall belong to Landlord. Tenant hereby assigns to Landlord all of its right, title and interest in any such award. Tenant shall have the right to collect and pursue any separate award as may be available under local procedure for moving expenses or Tenant’s Property, so long as such award does not reduce the award otherwise belonging to Landlord as aforesaid.

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ARTICLE XIII

PARKING

Section 13.01 Parking Rights. Provided that Tenant is occupying the Leased Premises and is not in Default (as defined in Section 16.01 hereof) under this Lease, Tenant shall have the right to purchase the number of monthly parking space contracts set forth in Section 1.01.J, above, from the Building garage operator, at the then prevailing rates charged by the Building garage operator and on such other terms and conditions as reasonably established by the Building garage operator from time to time. Such parking contracts shall be for reserved parking spaces. Such parking spaces shall be marked as reserved for Opnet and shall be in a location to be mutually agreed to by Landlord and Tenant prior to February 1, 2007 and set forth in an Exhibit attached to an amendment to this Lease.

Section 13.02 Parking Rules and Conditions. Use of the Building garage by Tenant, its employees, agents and business invitees is subject to the reasonable rules and regulations of Landlord and/or the Building garage operator as may be promulgated or amended by Landlord and/or the Building garage operator from time to time. All monthly parking space contracts obtained by Tenant are non-transferable other than to permitted sublessees and assignees hereunder. If Tenant fails to maintain, or elects to purchase fewer than, the full number of monthly parking space contracts to which it is entitled under Section 13.01, above, Tenant’s right to purchase the remaining contracts shall expire and be of no further force or effect. Tenant’s employees with monthly parking contracts for the Building’s parking garage shall have access to the parking garage 24 hours per day, 365 days per year.

ARTICLE XIV

SUBORDINATION AND ATTORNMENT

Section 14.01 Subordination. Tenant’s rights under this Lease are subordinate to: (i) all present and future ground or underlying leases affecting all or any part of the Building; and (ii) any easement, license, mortgage, deed of trust or other security instrument now or hereafter affecting the Building (those documents referred to in (i) and (ii) above being collectively referred to as a “Mortgage” and the Person or Persons having the benefit of same being collectively referred to as a “Mortgagee”). In confirmation of such subordination, Tenant shall, at Landlord’s request, promptly execute any requisite or appropriate subordination or other document, but Tenant’s subordination provided in this Section 14.01 is self-operative and no further instrument of subordination shall be required. Landlord shall obtain a subordination, non-disturbance and attornment agreement for Tenant from any holder of a mortgage or the ground lessor under a ground lease, currently encumbering the Building; provided that (i) if such mortgagee or ground lessor is a Qualified Lender (hereinafter defined), then the form of such subordination, non-disturbance and attomment agreement shall be in such mortgagee’s or such ground lessor’s customary form, and (ii) if such mortgagee or ground lessor is not a Qualified Lender, then the form of such subordination, non-disturbance and attornment agreement shall be either, at Landlord’s election, in a form used by a Qualified Lender or in such form that is otherwise commercially reasonable. In addition, Tenant’s subordination and attornment to any future mortgage or ground lease as set forth in this Section 14.01, shall be conditioned upon Landlord obtaining a subordination, non-disturbance and attornment agreement for Tenant from the holder of such mortgage or the ground lessor under such ground lease; provided that (i) if such mortgagee or ground lessor is a Qualified Lender (hereinafter defined), then the form of such subordination, non-disturbance and attornment agreement shall be in such mortgagee’s or such ground lessor’s customary form, and (ii) if such mortgagee or ground lessor is not a Qualified Lender, then the form of such subordination, non-disturbance and attornment agreement shall be either, at Landlord’s election, in a form used by a Qualified Lender or in such form that is otherwise commercially reasonable. For purposes hereof, the term “Qualified Lender” shall mean any entity that is in the business of, or regularly engages in, underwriting or originating commercial real estate loans, including without limitation, any life insurance company, bank, financial institution, savings and loan institution, pension fund, real estate investment trust, conduit, correspondent loan originator, investment banking company or real estate investment trust.

Section 14.02 Attornment. If any Person succeeds to all or part of Landlord’s interest in the Leased Premises, whether by purchase, foreclosure, deed in lieu of foreclosure, power of sale, termination of lease or otherwise, Tenant shall, without charge, attorn to such successor-in-interest upon request from Landlord, provided such Person recognizes this Lease.

Section 14.03 Estoppel Certificate. Each of Landlord and Tenant, within fourteen (14) days after receiving notice from, and without charge or cost to, the other, shall certify by written instrument to the other or any other Person designated by Landlord or Tenant: (i) that this Lease is in full force and effect and unmodified (or if modified, stating the modification); (ii) the dates, if any, to which each component of the Rent due under this Lease has been paid; (iii) whether Landlord or Tenant has failed to perform any covenant, term or condition under this Lease, and the nature of Landlord’s or Tenant’s failure, if any; and (iv) such other relevant information as Landlord or Tenant may request.

Section 14.04 Quiet Enjoyment. Landlord covenants that it has full right, power and authority to enter into this Lease and that Tenant, upon performing all of Tenant’s obligations under this Lease and timely paying all Rent, shall peaceably and quietly have, hold and enjoy the Leased Premises during the Term without hindrance, ejection or molestation by any Person lawfully claiming by, through or under Landlord.

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ARTICLE XV

ASSIGNMENT AND SUBLETTING

Section 15.01 Landlord’s Consent Required.

A. Tenant and any permitted Transferee, as hereinafter defined, shall not voluntarily or involuntarily, by operation of law or otherwise: (i) transfer, assign, mortgage, encumber, pledge, hypothecate, or assign all or any of its interest in this Lease, or (ii) sublet or permit the Leased Premises, or any part thereof, to be used by others including, but not limited to concessionaires or licensees, or (iii) issue new stock (or partnership shares or membership interests), create additional classes of stock (or partnership shares or membership interests), or sell, assign, hypothecate or otherwise transfer the outstanding voting stock (or partnership shares or membership interests) so as to result in a change in the present control of Tenant or any permitted Transferee, if in connection with any such issuance, sale, assignment, hypothecation or transfer either (1) any of the assets of Tenant are transferred, granted or pledged as security for the purchase price (or other consideration) of the stock (or other instrument(s) representing or containing voting interest(s) in Tenant) issued, sold, assigned, hypothecated or transferred, but only if the loan secured by such assets is more than fifty percent (50%) of the fair value of such assets, or (2) immediately after giving effect to such issuance, sale, assignment, hypothecation or transfer, Tenant’s net worth or general creditworthiness is less than its net worth or general creditworthiness immediately prior to such transfer or pledge (provided, however, that this subsection (iii) shall not be applicable to Tenant if it is a publicly owned corporation whose outstanding voting stock is listed on a national securities exchange (as defined in the Securities Exchange Act of 1933 or the Securities Exchange Act of 1934, as amended) or is traded actively in the over-the-counter market), or (iv) sell, assign or otherwise transfer all or substantially all of Tenant’s or any permitted Transferee’s assets; without the prior consent of Landlord, in each instance, which consent Landlord may withhold in its sole and absolute discretion (except as provided below). All of the foregoing transactions shall be referred to collectively or singularly as a “Transfer”, and the Person to whom Tenant’s interest is transferred shall be referred to as a “Transferee.” Notwithstanding the foregoing, Landlord shall not unreasonably withhold, condition or delay its consent to any proposed assignment of the Lease or any proposed subletting of the Leased Premises, provided that Landlord determines that the proposed assignee or subtenant (a) is of a type and quality consistent with the first-class nature of the Building; (b) has the financial capacity and creditworthiness to undertake and perform the obligations of this Lease or the sublease (as applicable); (c) proposes to use the Leased Premises only for the uses expressly permitted hereunder and not for any purposes prohibited hereunder; and (d) is not a party by whom any suit or action could be defended on the ground of sovereign immunity. In addition, Landlord shall be entitled to limit the number of sublettings of the Leased Premises at any one time to a reasonable amount determined by Landlord.

B. Any Transfer requiring Landlord’s consent that is made without Landlord’s consent shall not be binding upon Landlord, shall confer no rights upon any third Person, and shall, without notice or grace period of any kind, constitute a Default by Tenant under this Lease. Acceptance by Landlord of Rent following any Transfer shall not be deemed to be a consent by Landlord to any such Transfer, acceptance of the Transferee as a tenant, release of Tenant from the performance of any covenants herein, or waiver by Landlord of any remedy of Landlord under this Lease, although amounts received shall be credited by Landlord against Tenant’s Rent obligations. Consent by Landlord to any one Transfer shall not be a waiver of the requirement for consent to any other Transfer. No reference in this Lease to assignees, concessionaires, subtenants or licensees shall be deemed to be a consent by Landlord to occupancy of the Leased Premises by any such assignee, concessionaire, subtenant or licensee.

C. Tenant shall remain fully and primarily liable and obligated under this Lease for the entire Term in the event of any Transfer, and in the event of a Default by the Transferee, Landlord shall be free to pursue Tenant, the Transferee, or both, without prior notice or demand to either. Landlord may require as a condition to its consent to any assignment of this Lease that the assignee execute an instrument in which such assignee assumes the obligations of Tenant hereunder and that the Tenant execute a guaranty or other instrument in which such Tenant confirms its continued liability hereunder. In the event Tenant assigns this Lease (other than to a Qualified Tenant Affiliate) or sublets more than fifty percent (50%) of the Leased Premises (other than to a Qualified Tenant Affiliate) when permitted to do so by Landlord, all of Tenant’s options under this Lease to renew or extend the Term shall, upon the date of such subletting, be null and void and forever terminated. In the event Tenant assigns this Lease or sublets more than forty percent (40%) of the Leased Premises when permitted to do so by Landlord, all of Tenant’s options under this Lease to lease additional space, and any other option or right of first refusal, right to first negotiation and similar rights shall, upon the date of such subletting, be null and void and forever terminated.

D. If Tenant desires the consent of Landlord to a Transfer, Tenant shall submit to Landlord, at least fifteen (15) business days prior to the proposed effective date of the Transfer, a written notice which includes the business terms of the assignment or subletting, financial information and statements concerning the proposed transferee and such other information as Landlord may reasonably require about the proposed Transfer and the transferee. Landlord shall have fifteen (15) business days from the receipt of such notice (together with all information required to be contained in such notice, including any information reasonably requested by Landlord with respect thereto) to review Tenant’s request and to notify Tenant whether it will consent to such proposed Transfer, provided that Tenant in its written request for such consent refers to this provision and states in capital bold letters in such request and on the outside of the envelope containing such request the following: “LANDLORD MUST RESPOND TO TENANT’S REQUEST CONTAINED HEREIN WITHIN FIFTEEN (15) BUSINESS DAYS.” If (i) Landlord fails to notify Tenant whether or not it will consent to a proposed assignment or sublease within such fifteen (15) business day period, and, thereafter, Tenant delivers notice (“Transfer Response Failure Notice”) to Landlord of such

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failure (which Transfer Response Failure Notice must refers to this provision and states in capital bold letters in the Transfer Response Failure Notice and on the outside of the envelope containing the Transfer Response Failure Notice the following: “LANDLORD MUST RESPOND TO TENANT’S REQUEST CONTAINED HEREIN WITHIN SEVEN (7) BUSINESS DAYS OF RECEIPT OR SUCH REQUEST SHALL BE DEEMED APPROVED,” and (ii) Landlord fails to respond to such request within seven (7) business days after Landlord’s receipt of the Transfer Response Failure Notice, then Landlord’s consent to the proposed assignment or subletting shall be deemed given.

E. Landlord shall have the right to (i) terminate this Lease in the event of a proposed assignment of this Lease, (ii) terminate this Lease with respect to any portion of the Leased Premises proposed to be sublet if (a) the term of such subletting (including renewals thereof) is scheduled to expire within one (1) year of the expiration of the Term, or (b) the square footage of the space Tenant proposes to sublet plus the square footage of all other space then being sublet by Tenant is at least fifty percent (50%) of the square footage of the Leased Premises. Landlord may exercise such right to terminate by giving notice to Tenant at any time within thirty (30) days after the date on which Tenant has requested consent to the Transfer. If Landlord exercises such right to terminate, Landlord shall be entitled to recover possession of, and Tenant shall surrender such portion of, the Leased Premises (with appropriate demising partitions erected at the expense of Tenant) on the later of (i) the effective date of the proposed Transfer, or (ii) sixty (60) days after the date of Landlord’s notice of termination. In the event Landlord exercises such right to terminate, Landlord shall have the right to enter into a lease with the proposed transferee without incurring any liability to Tenant on account thereof. Notwithstanding the foregoing, if (i) Landlord provides such notice to Tenant that it is terminating the Lease with respect to space proposed to be sublet, and (ii) such right of termination is pursuant to Section 15.E(ii)(b), above (i.e., the square footage of the space proposes to sublet plus the square footage of all other space then being sublet is at least fifty percent (50%) of the square footage of the Leased Premises), then Tenant shall be entitled to revoke its request for consent to such proposed subletting by delivering to Landlord written notice thereof within five (5) business days after Tenant receives notice of such termination. If such revocation is timely delivered to Landlord, Landlord’s termination of the Lease with respect to such space proposed to be sublet shall be void and the Lease with respect to such space shall remain in full force and effect (as if it was not so terminated by Landlord).

F. If Landlord consents to any Transfer, Tenant shall pay to Landlord fifty percent (50%) of all rent and other consideration received by Tenant (less all reasonable out-of-pocket costs and expenses paid by Tenant in connection with consummating such Transfer) in excess of the Rent paid by Tenant hereunder for the portion of the Leased Premises so transferred. Such rent shall be paid as and when received by Tenant. In addition, Tenant shall pay to Landlord any costs or expenses (including without limitation attorneys’ fees) incurred by Landlord in connection with any proposed Transfer, whether or not Landlord consents to such Transfer. In calculating any excess rent payable by Tenant to Landlord pursuant to this Section, Tenant shall first be entitled to deduct (a) any improvement allowances or other economic concessions granted by Tenant to the assignee or sublessee; (b) the unamortized costs of initial improvements to the subject portion of the Leased Premises paid for by Tenant in connection with such assignment or sublease; (c) costs incurred by Tenant to buy-out or take over the previous lease of the assignee or sublessee; (d) all costs incurred by Tenant to advertise the subject portion of the Leased Premises for assignment or sublease; (e) brokerage commissions and/or legal fees paid by Tenant in connection with an assignment or sublease; and (f) all other reasonable costs incurred by Tenant in connection with the assignment or sublease.

G. Notwithstanding anything contained herein to the contrary, Tenant may upon at least thirty (30) days prior written notice to Landlord (the “Affiliate Notice”), but without Landlord’s prior written consent, assign this Lease, or sublet all or a portion of the Leased Premises to a Qualified Tenant Affiliate (hereinafter defined), provided that no monetary default exists hereunder and no non-monetary Default (as defined in Section 16.01) exists hereunder and no event exists which event with notice and/or the passage of time would constitute a default hereunder if not cured within the applicable cure period. A “Qualified Tenant Affiliate” shall mean a corporation or other entity which (i) shall control, be controlled by or be under common control with Tenant or which results from a merger or consolidation with Tenant or succeeds to all the business and assets of Tenant, (ii) is of a type and quality consistent with the first-class nature of the Building, (iii) is not a party by whom any suit or action could be defended on the ground of sovereign immunity, and (iv) in the case of a merger or consolidation, has a net worth immediately after such merger or consolidation at least equal to the net worth of Tenant immediately prior to such merger or consolidation. For purposes of the immediately preceding sentence, “control” shall be deemed to be ownership of more than fifty percent (50%) of the legal and equitable interest of the controlled corporation or other business entity. In the event of any assignment to a Qualified Tenant Affiliate, Tenant shall remain fully liable to perform the obligations of the Tenant under this Lease, such obligations to be joint and several with the obligations of the Qualified Tenant Affiliate as tenant under this Lease, and Tenant shall execute such guaranty or other agreement as Landlord shall request to confirm such liability. Notwithstanding any provision contained in this Lease to the contrary, Landlord’s prior written consent shall be required to (a) any merger, consolidation or asset acquisition involving Tenant or the assets or ownership interest of Tenant if in connection therewith, any of the assets of Tenant are transferred, granted or pledged as security for the purchase price (or other consideration) for such merger, consolidation or asset acquisition, but only if the loan secured by such assets is more than fifty percent (50%) of the fair value of such assets, and (b) any sale, conveyance or transfer of all or substantially all of Tenant’s assets to an entity that does not assume all of the obligations of Tenant under this Lease.

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ARTICLE XVI

DEFAULT AND REMEDIES

Section 16.01 Default. Each of the following events shall constitute a default (“Default”) by Tenant under this Lease: (i) if Tenant fails to pay any Rent (or any installment thereof) when the same shall be due and payable (without the necessity of demand or notice) and such failure is not cured within five (5) days after Landlord has delivered to Tenant written notice of such failure; (ii) if Tenant breaches or fails to observe or perform of any term, condition or covenant of this Lease, other than those involving the payment of Rent or failure to continuously occupy and operate the Leased Premises as required, and such breach or failure is not cured within thirty (30) days after Tenant’s receipt of notice thereof, unless such condition cannot reasonably be cured within such thirty (30) days, in which case Tenant must commence such cure within said thirty (30) days and diligently pursue said cure to its completion (provided, however, if such breach or failure creates a hazard, public nuisance or dangerous situation, said thirty (30) day grace period shall be reduced to forty-eight (48) hours after Tenant’s receipt of notice); or (iii) if Tenant fails to carry and maintain the insurance required by this Lease. Notwithstanding the preceding sentence, if Landlord shall give notice of two (2) such Defaults within any twelve (12) month period, then thereafter, Tenant shall be in Default under this Lease if it fails to pay any Rent within ten (10) days after the same shall be due and payable, without the necessity of notice.

Section 16.02 Remedies and Damages.

A. If a Default described in Section 16.01, above, occurs, Landlord shall have all the rights and remedies provided in this Section 16.02, in addition to all other rights and remedies available under this Lease or provided at law or in equity.

B. Landlord may, upon notice to Tenant, terminate this Lease, or terminate Tenant’s right to possession without terminating this Lease (as Landlord may elect). If this Lease or Tenant’s right to possession under this Lease are at any time terminated under this Section 16.02 or otherwise, Tenant shall immediately surrender and deliver the Leased Premises peaceably to Landlord. If Tenant fails to do so, Landlord shall be entitled to the benefit of all provisions of law respecting the speedy recovery of possession of the Leased Premises (whether by summary proceedings or otherwise).

C. Landlord may also perform, on behalf and at the expense of Tenant, any obligation of Tenant under this Lease which Tenant fails to perform, the cost of which (with interest thereon at the Interest Rate (hereinafter defined) per year from the date such costs were incurred by Landlord) shall be paid by Tenant to Landlord upon demand. The term “Interest Rate” shall mean the greater of the following rates on a per annum basis (i) twelve percent (12%), or (ii) the Prime Rate in effect from time to time (as published from time to time by The Wall Street Journal, which rate is currently calculated based upon the corporate loan rates of the nations largest banks) plus four percentage points (4%). In performing any obligations of Tenant, Landlord shall incur no liability for any loss or damage that may accrue to Tenant, the Leased Premises or Tenant’s Property by reason thereof, except to the extent provided in Section 8.01 hereof (subject to all limitations set forth therein and otherwise in this Lease). The performance by Landlord of any such obligation shall not constitute a release or waiver of any of Tenant’s obligations under this Lease.

D. Upon termination of this Lease or of Tenant’s right to possession under this Lease, Landlord may at any time and from time to time relet all or any part of the Leased Premises for the account of Tenant or otherwise, at such rentals and upon such terms and conditions as Landlord shall deem appropriate. Landlord agrees to use commercially reasonable efforts to mitigate any damages that Landlord may suffer as a result of any default by Tenant hereunder, which commercially reasonable efforts may include Landlord undertaking to lease the Leased Premises to another tenant (a “Substitute Tenant”); provided, however, notwithstanding anything contained herein to the contrary (i) Landlord shall have no obligation to solicit or entertain negotiations with any other prospective tenants for the Leased Premises until Landlord obtains full and complete possession of the Leased Premises; (ii) Landlord shall not be obligated to offer the Leased Premises to a prospective tenant when other premises in the Building suitable for that prospective tenant’s use are (or soon will be) available; (iii) Landlord shall not be obligated to lease the Leased Premises to a Substitute Tenant for a rental less than the current fair market rental then prevailing for similar office uses in comparable buildings in the same market area as the Building, nor shall Landlord be obligated to enter into a new lease under other terms and conditions that are unacceptable to Landlord under Landlord’s then current leasing policies for comparable space in the Building; (iv) Landlord shall not be obligated to enter into a lease with any proposed tenant whose use would: (1) violate any restriction, covenant or requirement contained in the lease of another tenant of the Building; (2) adversely affect the reputation of the Building; or (3) be incompatible with the operation of the Building as a first class building; and (v) Landlord shall not be obligated to enter into a lease with any proposed Substitute Tenant which does not have, in Landlord’s reasonable opinion, sufficient financial resources or operating experience to operate the Leased Premises in a first class manner. Tenant agrees to use commercially reasonable efforts to mitigate any damages that Tenant may suffer as a result of any default by Landlord hereunder. Landlord shall receive and collect the rents therefor, applying the same first to the payment of such expenses as Landlord may incur in recovering possession of the Leased Premises, including legal expenses and attorneys’ fees, in placing the Leased Premises in good order and condition and in preparing or altering the same for re-rental; second, to the payment of such expenses, commissions and charges as may be incurred by or on behalf of Landlord in connection with the reletting of the Leased Premises; and third, to the fulfillment of the covenants of Tenant under this Lease, including the various covenants to pay Rent. Any such reletting may be for such term(s) as Landlord elects. Thereafter, Tenant shall pay Landlord until the end of the Term of this Lease the equivalent of the amount of all the Rent and all other sums required to be paid by Tenant, less the net avails of such reletting, if any, on the dates such Rent and

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other sums above specified are due. Any reletting by Landlord shall not be construed as an election by Landlord to terminate this Lease unless notice of such intention is given by Landlord to Tenant. Notwithstanding any reletting without termination of this Lease, Landlord may at any time thereafter elect to terminate this Lease. In any event, Landlord shall not be liable for, nor shall Tenant’s obligations hereunder be diminished by reason of, any failure by Landlord to relet the Leased Premises or any failure by Landlord to collect any sums due upon such reletting.

E. Without limiting any of the foregoing remedies of Landlord, if Tenant shall vacate the Leased Premises (whether or not Tenant is in default of this Lease), then Tenant shall make, at Tenant’s sole cost, such alterations to the suite entry area of the Leased Premises as Landlord reasonably determines appropriate to minimize risks of damage to the Building and any adverse effect the vacant Leased Premises may have on the aesthetics of the floor on which the Leased Premises are located, which alterations may include without limitation, locking-off the elevator to any floor occupied entirely by Tenant and/or the replacement of any glass suite entry area in the Leased Premises with Building standard wood doors and any conforming replacements of any other glass portion of the suite entry area.

Section 16.03 Remedies Cumulative. No reference to any specific right or remedy in this Lease shall preclude Landlord from exercising any other right, from having any other remedy, or from maintaining any action to which it may otherwise be entitled under this Lease, at law or in equity.

Section 16.04 Waiver.

A. Landlord shall not be deemed to have waived any provision of this Lease, or the breach of any such provision, unless specifically waived by Landlord in a writing executed by an authorized officer of Landlord. No waiver of a breach shall be deemed to be a waiver of any subsequent breach of the same provision, or of the provision itself, or of any other provision.

B. Tenant hereby expressly waives any and all rights of redemption and any and all rights to relief from forfeiture which would otherwise be granted or available to Tenant under any present or future statutes, rules or case law.

C. In any litigation (whether or not arising out of or relating to this Lease) in which Landlord and Tenant shall be adverse parties, both Landlord and Tenant knowingly, voluntarily and intentionally waive their respective rights to trial by jury.

ARTICLE XVII

MISCELLANEOUS PROVISIONS

Section 17.01 Notices.

A. Whenever any demand, request, approval, consent or notice (singularly and collectively, “Notice”) shall or may be given by one party to the other, such Notice shall be in writing and addressed to the parties at their respective addresses as set forth in Section 1.01 .H, above, and served by (i) hand, (ii) a nationally recognized overnight express courier, or (iii) registered or certified mail return receipt requested. The date the notice is received shall be the date of service of Notice. If an addressee refuses to accept delivery, however, then Notice shall be deemed to have been served on either (i) the date hand delivery is refused, (ii) the next business day after the Notice was sent in the case of attempted delivery by overnight courier, or (iii) five (5) business days after mailing the notice in the case of registered or certified mail. Either party may, at any time, change its Notice address by giving the other party Notice, in accordance with the above, stating the change and setting forth the new address.

B. If any Mortgagee shall notify Tenant that it is the holder of a Mortgage affecting the Leased Premises, no Notice thereafter sent by Tenant to Landlord shall be effective unless and until a copy of the same shall also be sent to such Mortgagee, in the manner prescribed in this Section 17.01, to the address as such Mortgagee shall designate.

Section 17.02 Recording. Neither this Lease nor a memorandum thereof shall be recorded without the consent of Landlord.

Section 17.03 Interest and Administrative Costs.

A. If (i) Tenant fails to make any payment under this Lease when due, (ii) Landlord performs any obligation of Tenant under this Lease, or (iii) Landlord incurs any costs or expenses as a result of Tenant’s Default under this Lease, then Tenant shall pay, upon demand, Interest from the date such payment was due or from the date Landlord incurs such costs or expenses relating to the performance of any such obligation or Tenant’s Default.

B. If Tenant requests Landlord to review and/or execute any documents in connection with this Lease, including Assignment and Transfer documents, and Landlord’s Waiver of Lien, Tenant shall pay to Landlord, upon demand, as a reasonable administrative fee for the review and/or execution thereof, all costs and expenses, including reasonable attorney’s fees (which shall include the cost of time expended by in-house counsel) incurred by Landlord and/or Landlord’s agent.

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Section 17.04 Legal Expenses. If Landlord or Tenant institutes any suit against the other in connection with the enforcement of their respective rights under this Lease, the violation of any term of this Lease, the declaration of their rights hereunder, or the protection of Landlord’s or Tenant’s interests under this Lease, the non-prevailing party shall reimburse the prevailing party for its reasonable expenses incurred as a result thereof including court costs and attorneys’ fees. Notwithstanding the foregoing, if Landlord files any legal action for collection of Rent or any eviction proceedings, whether summary or otherwise, for the non-payment of Rent, and Tenant pays such Rent prior to the rendering of any judgment, the Landlord shall be entitled to collect, and Tenant shall pay, all court filing fees and the reasonable fees of Landlord’s attorneys.

Section 17.05 Successors and Assigns. This Lease and the covenants and conditions herein contained shall inure to the benefit of and be binding upon Landlord and Tenant, and their respective permitted successors and assigns. Upon any sale or other transfer by Landlord of its interest in the Leased Premises, Landlord shall be relieved of any obligations under this Lease occurring subsequent to such sale or other transfer.

Section 17.06 Limitation on Right of Recovery Against Landlord. No shareholder, member, trustee, partner, director, officer, employee, representative or agent of Landlord shall be personally liable in respect of any covenant, condition or provision of this Lease. If Landlord breaches or defaults in any of its obligations in this Lease, Tenant shall look solely to the equity of the Landlord in the Building for satisfaction of Tenant’s remedies.

Section 17.07 Security Deposit.

A. Amount. Simultaneously with the execution of this Lease, Tenant shall deposit with Landlord the amount set forth in Section 1.01 .F, above, as a security deposit.

B. Security. Such Security Deposit shall be considered as security for the payment and performance by Tenant of all of Tenant’s obligations, covenants, conditions and agreements under this Lease except as hereinafter provided.

C. Form. Such Security Deposit may, at Tenant’s option, be deposited by Tenant with Landlord in the form of cash or Tenant shall deliver to Landlord an irrevocable letter of credit (the “Letter of Credit”), in the amount set forth in Section 17.07.A, above; provided, however, that Tenant on three (3) occasions during the Term, Tenant shall be entitled to either (i) replace the then existing Letter of Credit security deposit with a cash security deposit or (ii) replace the then existing cash security deposit with a Letter of Credit security deposit (meeting the requirements hereof). If Tenant elects to provide the Letter of Credit as such Security Deposit, Tenant shall maintain the Letter of Credit in full force and effect throughout the entire term of this Lease and until thirty (30) days after the Termination Date occurs, and shall cause the Letter of Credit to be renewed or replaced not less than thirty (30) days prior to its expiry date. The Letter of Credit shall (i) be unconditional, irrevocable, transferable, payable to Landlord on sight at a metropolitan Washington, D.C. area financial institution, in partial or full draws, (ii) be substantially in the form attached hereto and incorporated herein as Exhibit J, and otherwise be in form and content acceptable to Landlord, (iii) shall be issued by a financial institution acceptable to Tenant and Landlord, and (iv) contain an “evergreen” provision which provides that it is automatically renewed on an annual basis unless the issuer delivers sixty (60) days’ prior written notice of cancellation to Landlord and Tenant. Any and all fees or costs charged by the issuer in connection with the Letter of Credit shall be paid by Tenant.

D. Right to Draw.

(i) If the Security Deposit is in the form of cash, in the event of any default (after the expiration of any applicable cure period expressly set forth in Section 16.01 hereof) by Tenant hereunder, Landlord shall have the right, but shall not be obligated, to apply all or any portion of the Security Deposit to compensate Landlord (whether in whole or in part) for such default, in which event, within fifteen (15) days thereafter, Tenant shall be obligated to deposit with Landlord the amount necessary to restore the balance of the Security Deposit to its original amount; provided, however, neither the application of the Security Deposit as set forth above nor the payment by Tenant to restore such Security Deposit shall operate to cure such default or to estop Landlord from pursuing any remedy to which Landlord would otherwise be entitled.

(ii) If the Security Deposit is in the form of a Letter of Credit, Landlord shall have the right to draw upon the Letter of Credit in whole or in part and apply the proceeds thereof as may be necessary to compensate Landlord for any default under this Lease on the part of Tenant, and Tenant, within fifteen (15) days after Landlord delivers written demand therefor to Tenant, shall forthwith restore the Letter of Credit to its original amount; provided, however, neither the application of the Security Deposit as set forth above nor the restoration by Tenant of such Security Deposit shall operate to cure such default or to estop Landlord from pursuing any remedy to which Landlord would otherwise be entitled. Should Landlord elect to draw the full amount of the Letter of Credit upon a default by Tenant (after the expiration of any applicable cure period expressly set forth in Section 16.01 hereof), Tenant expressly waives any right it might otherwise have to prevent Landlord from drawing on the Letter of Credit and agrees that an action for damages and not injunctive or other equitable relief shall be Tenant’s sole remedy in the event Tenant disputes Landlord’s claim to any such amounts.

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(iii) Landlord shall have the right to draw upon the Letter of Credit in any of the following circumstances: (i), if the total assets of the issuer of the Letter of Credit are at anytime less than Three Billion Dollars ($3,000,000,000.00), or such issuer has a Standard & Poor’s commercial paper rating of less than A-1 (provided if at anytime the current Standard & Poor’s commercial paper rating system is no longer in existence, a comparable rating of a comparable commercial paper rating system from a comparable company shall be selected by Landlord, in its reasonable discretion, for purposes of this Section 17.07) and Tenant fails to deliver to Landlord a replacement Letter of Credit complying with the terms of this Lease within thirty (30) days of request therefor from Landlord, (ii) the issuer of the Letter of Credit shall enter into any supervisory agreement with any governmental authority, or the issuer of the Letter of Credit shall fail to meet any capital requirements imposed by applicable law, and Tenant fails to deliver to Landlord a replacement Letter of Credit complying with the terms of this Lease within thirty (30) days of request therefor from Landlord, or (iii) if Tenant fails to provide Landlord with any renewal or replacement Letter of Credit complying with the terms of this Lease at least sixty (60) days prior to expiration of the then-current Letter of Credit. In the event the Letter of Credit is drawn upon due solely to the circumstances described in the foregoing clauses (i), (ii) or (iii), the amount drawn shall be held by Landlord without interest as a Security Deposit to be otherwise retained, expended or disbursed by Landlord for any amounts or sums due under this Lease to which the proceeds of the Letter of Credit could have been applied pursuant to this Lease, and Tenant shall be liable to Landlord for restoration, in cash or Letter of Credit complying with the terms of this Lease, of any amount so expended to the same extent as set forth in this Section 17.07.

E. Right to Pledge or Assign. Landlord shall have the right to pledge or assign its interest in the Security Deposit and proceeds thereof as security to any lender holding a security interest in the Leased Premises. In the event of any sale or transfer of Landlord’s interest in the Building, Landlord shall have the right to transfer the Security Deposit to such purchaser or transferee, in which event Tenant shall look solely to the new landlord for the return of the Security Deposit and Landlord shall thereupon be released from all liability to Tenant for the return of such Security Deposit, provided that the Landlord has transferred such Security Deposit to such purchaser or transferee and such purchaser or transferee has actually received such Security Deposit and such purchaser or transferee assumes the Landlord’s obligations hereunder with respect to the Security Deposit by such sale or transfer of such interest in the Building being made subject to the terms and conditions of this Lease, or by an assumption of leases or otherwise. No mortgagee or other purchaser of any or all of the Building at any foreclosure proceeding brought under the provisions of any mortgage shall (regardless of whether the Lease is at the time in question subordinated to the lien of any mortgage) be liable to Tenant or any other person for any or all of such sums or the return of any Security Deposit (or any other or additional Security Deposit or other payment made by Tenant under the provisions of this Lease), unless Landlord has actually delivered the Security Deposit, or proceeds thereof, to such mortgagee or purchaser. If the Security Deposit is in the form of a Letter of Credit and if requested by any such mortgagee or other purchaser, Tenant shall obtain an amendment to the Letter of Credit which names such mortgagee or other purchaser as the beneficiary thereof in lieu of Landlord. This Security Deposit shall not be transferable by Tenant to any assignee or subtenant, but shall be held and returned directly to Tenant.

F. Reservation of Rights. No right or remedy available to Landlord as provided in this Section 17.07 shall preclude or extinguish any other right to which Landlord may be entitled. In furtherance of the foregoing, it is understood that in the event Tenant fails to perform its obligations and to take possession of the Leased Premises on the Term Commencement Date, any amounts recovered from the Security Deposit shall not be deemed liquidated damages. Landlord may apply such sums to reduce Landlord’s damages and such application of funds shall not in any way limit or impair Landlord’s right to seek or enforce any and all other remedies available to Landlord to the extent allowed hereunder, at law or in equity.

G. Return of Security Deposit. Upon the expiration of the term hereof, Landlord shall (provided that Tenant is not in default under the terms hereof) return and pay back any Security Deposit to Tenant, less such portion thereof as Landlord shall have retained to make good any default by Tenant with respect to any of Tenant’s aforesaid obligations, covenants, conditions or agreements. Notwithstanding the foregoing, Landlord shall have the right, at Landlord’s discretion, to hold such Security Deposit until such time that a final determination is made of all obligations of Tenant under this Lease; provided, however, that such determination shall be made no later than one hundred twenty (120) days after the end of the calendar year in which the Term expires or sixty (60) days after the expiration of the Term.

Section 17.08 Entire Agreement; No Representations; Modification. This Lease is intended by the parties to be a final expression of their agreement and as a complete and exclusive statement of the terms thereof. All prior negotiations, considerations and representations between the parties (oral or written) are incorporated herein. No course of prior dealings between the parties or their officers, employees, agents or affiliates shall be relevant or admissible to supplement, explain or vary any of the terms of this Lease. No representations, understandings, agreements, warranties or promises with respect to the Leased Premises or the Building, or with respect to past, present or future tenancies, rents, expenses, operations, or any other matter, have been made or relied upon in the making of this Lease, other than those specifically set forth herein. This Lease may only be modified, or a term thereof waived, by a writing signed by an authorized officer of Landlord and Tenant expressly setting forth said modification or waiver.

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Section 17.09 Severability. If any term or provision of this Lease, or the application thereof to any Person or circumstance, shall be invalid or unenforceable, the remainder of this Lease, or the application of such term or provision to Persons or circumstances other than those as to which it is held invalid or unenforceable, shall not be affected thereby, and each term and provision of this Lease shall be valid and be enforced to the fullest extent permitted by law.

Section 17.10 Joint and Several Liability. If two or more Persons shall sign this Lease as Tenant, the liability of each such Person to pay the Rent and perform all other obligations hereunder shall be deemed to be joint and several, and all Notices, payments and agreements given or made by, with or to any one of such Persons shall be deemed to have been given or made by, with or to all of them. In like manner, if Tenant shall be a partnership or other legal entity, the partners or members of which are, by virtue of any applicable law, rule, or regulation, subject to personal liability, the liability of each such partner or member under this Lease shall be joint and several and each such partner or member shall be fully obligated hereunder and bound hereby as if each such partner or member had personally signed this Lease. Notwithstanding the foregoing, no officer, director, employee, partner or shareholder of OPNET Technologies, Inc. shall have any liability for Tenant’s obligations accruing under this Lease.

Section 17.11 Broker’s Commission. Landlord and Tenant each warrants and represents to the other that no broker, finder or agent has acted for or on its behalf in connection with the negotiation, execution or procurement of this Lease other than CB Richard Ellis and Studley, Inc. (the “Brokers”). Landlord and Tenant each agrees to indemnify and hold the other harmless from and against all liabilities, obligations and damages arising, directly or indirectly, out of or in connection with a claim from a broker, finder or agent with respect to this Lease or the negotiation thereof (other than the Brokers), including costs and attorneys’ fees incurred in the defense of any claim made by a broker (other than the Brokers) alleging to have performed services on behalf of the indemnifying party.

Section 17.12 Irrevocable Offer, No Option. The submission of this Lease by Landlord to Tenant for examination shall not constitute an offer to lease or a reservation of or option for the Leased Premises. Tenant’s execution of this Lease shall be deemed an offer by Tenant, but this Lease shall become effective only upon execution thereof by both parties and delivery thereof to Tenant.

Section 17.13 Inability to Perform. Except for the payment of monetary obligations, if Landlord or Tenant is delayed or prevented from performing any of its obligations under this Lease by reason of strike, labor troubles, or any similar cause whatsoever beyond their control, the period of such delay or such prevention shall be deemed added to the time herein provided for the performance of any such obligation by Landlord or Tenant. Notwithstanding the foregoing, under no circumstances shall the provisions of this Section 17.13 delay or otherwise impact the Term Commencement Date or the Rent Commencement Date.

Section 17.14 Survival. Occurrence of the Termination Date shall not relieve Tenant or Landlord from its respective obligations accruing prior to the expiration of the Term. All such obligations shall survive termination of this Lease.

Section 17.15 Corporate Tenants. If Tenant is not an individual, the individual(s) executing this Lease on behalf of Tenant hereby covenant(s) and warrant(s) that: Tenant is a duly formed, qualified to do business and in good standing in the state in which the Building is located; and such Person(s) are duly authorized by such Person to execute and deliver this Lease on behalf of Tenant. Tenant shall remain qualified to do business and in good standing in said state throughout the Term.

Section 17.16 Construction of Certain Terms. The term “including” shall mean in all cases “including, without limitation.” Wherever Tenant is required to perform any act hereunder, such party shall do so at its sole cost and expense, unless expressly provided otherwise. All payments to Landlord, other than Minimum Rent, whether as reimbursement or otherwise, shall be deemed to be Additional Rent, regardless whether denominated as “Additional Rent.”

Section 17.17 Showing of Leased Premises. Landlord may enter upon the Leased Premises, after notice and during Building Hours, for purposes of showing the Leased Premises to Mortgagees or prospective Mortgagees at any time during the Term and to prospective tenants during the last six (6) months of the Term.

Section 17.18 Relationship of Parties. This Lease shall not create any relationship between the parties other than that of Landlord and Tenant.

Section 17.19 Intentionally Omitted.

Section 17.20 Choice of Law. This Lease shall be construed, and all disputes, claims, and questions arising hereunder shall be determined, in accordance with the laws of the state within which the Building is located. (For purposes of this provision, the District of Columbia shall be deemed to be a state.)

Section 17.21 Choice of Forum. Any action involving a dispute relating in any manner to this Lease, the relationship of Landlord/Tenant, the use or occupancy of the Leased Premises, and/or any claim of injury or damage shall be filed and adjudicated solely in the state or federal courts of the jurisdiction in which the Leased Premises are located.

Section 17.22 Intentionally Omitted.

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Section 17.23 Financial Statements. Tenant (and any guarantor of this Lease), within fifteen (15) days after Landlord delivers to Tenant (or such guarantor) written request therefor, will provide Landlord with a copy of its most recent financial statements, consisting of a Balance Sheet, Earnings Statement, Statement of Changes in Financial Position, Statement of Changes in Owner’s Equity, and related footnotes, prepared in accordance with generally accepted accounting principles. Such financial statements must be opined on by a certified public accountant that they are fairly presented in accordance with generally accepted accounting principles. The financial statements provided must be as of a date not more than fifteen (15) months prior to the date of request. Landlord shall retain such statements in confidence, but may provide copies to lenders and potential lenders as required.

Section 17.24 Time is of the Essence. Time is of the essence with respect to each and every obligation arising under this Lease.

ARTICLE XVIII

RIGHT OF FIRST OFFER FOR WACHOVIA SPACE

Section 18.01 Wachovia Space.

A. Landlord currently owns that office building located on at 7255 Woodmont Avenue, Bethesda, Maryland (“7255 Building”). Wachovia Bank, NA is currently leasing certain space (the ‘Wachovia Space”) on the second floor of the 7255 Building pursuant to a lease (the “Wachovia Lease”) between Wachovia Bank, NA and Landlord. In the event that the Wachovia Space becomes or is reasonably anticipated by Landlord to become vacant and freely available for Landlord to lease to Tenant during the Term, except as provided below, Landlord shall provide Tenant with written notice (“Availability Notice”) of the availability of such space. Provided that (i) no monetary default and no non-monetary Default (as defined in Section 16.01 hereof) has occurred under this Lease and then remains uncured, (ii) no more than two (2) Defaults have occurred during the thirty-six (36) month period prior to the date of the Availability Notice; (iii) Tenant has not assigned this Lease (other than to a Qualified Tenant Affiliate) and has not sublet more than fifty percent (50%) of the Leased Premises; (iv) as of the Takeover Date (hereinafter defined), at least three (3) years remain on the Term of this Lease; and (v) Tenant provides to Landlord written notice (“Relocation Notice”), within ten (10) days after receipt of Landlord’s Availability Notice, of Tenant’s desire to relocate into the Wachovia Space, Tenant shall have the first opportunity (the “Right of First Offer”) to negotiate with Landlord, for the ten (10) day period immediately following Tenant’s delivery of such Relocation Notice, the Minimum Rent for the Wachovia Space and the terms on which it will relocate into the Wachovia Space and secure an amendment (the “Wachovia Relocation Amendment”) executed and delivered by Landlord and Tenant evidencing such terms. Landlord and Tenant shall negotiate the Minimum Rent based upon the then current market rental rate, and escalations thereto based upon market escalations (“Market Rate”) with respect to comparable space in Bethesda, Maryland at the time of the relocation, taking into account any allowances or tenant concession, if any that Landlord elects in its sole discretion to provide and market allowances and tenant concession with respect to comparable space in Bethesda, Maryland at the time of the relocation and other relevant factors. In the event of such relocation, Tenant shall pay to Landlord, upon execution of the Wachovia Relocation Amendment, a relocation payment (the “Termination Payment”), by certified check, in an amount equal to the balance of the unamortized portion of Lease Costs (as hereinafter defined) as of the date such Relocation Notice is delivered, based upon imputed interest accruing on such unamortized balance at the rate of ten percent (10%) per annum. The Lease Costs shall be amortized over the period commencing with the Term Commencement Date and ending with the Termination Date (as set forth in Section 1.01 D) as if such Lease Costs were a loan made by Landlord to Tenant on the Term Commencement Date and payments of principal and interest thereon were made by Tenant in equal monthly installments over such period. In the event that (i) Landlord and Tenant fail to agree on such terms and execute and deliver a Wachovia Expansion Amendment within such ten (10) day period, or (ii) Tenant fails to deliver the Relocation Notice (or otherwise fails to comply with any other condition to the exercise of its right of first offer) within the time period set forth above, Tenant’s right of first offer to lease the Wachovia Space pursuant to this Section 18.01 shall terminate, and Landlord shall have the right to lease the Wachovia Space at any time to any other person or entity upon any terms and conditions which Landlord desires, in its sole discretion. Time is of the essence with respect to this Section 18.01.

B. If Tenant leases the Wachovia Space, within the time and in the manner provided in this Article XVIII, then as of the Takeover Date (as defined below), the following shall apply:

(i) the Leased Premises shall be defined as the Wachovia Space and Tenant’s lease thereof shall be governed by all of the provisions of this Lease, which shall continue in full force and effect and be applicable to the Wachovia Space;

(ii) the rentable area of the Leased Premises shall be the rentable area of the Wachovia Space;

(iii) Tenant shall commence paying Rent based upon the new Minimum Rent and new rentable area of the Leased Premises (i.e., the Wachovia Space);

(iv) the Minimum Rent per square foot of rentable area of the Wachovia Space shall be equal to the amount set forth in the Wachovia Expansion Amendment;

(v) the Wachovia Space shall be delivered to Tenant in its “as is” condition; and

(vi) the Takeover Date shall be the date the Wachovia Lease has expired and Landlord has delivered the Wachovia Space to Tenant.

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C. Notwithstanding anything to the contrary contained in this Article XVIII, Landlord and Tenant agree that the foregoing right of first offer shall be subject to any and all contractual obligations of Landlord exists in any leases in effect as of the date hereof, including without limitation any expansion rights and rights of first offer, negotiation or refusal. In addition, the foregoing right of first offer shall be personal to OPNET Technologies, Inc. and can not be exercised by any assignee (other than a Qualified Tenant Affiliate), subtenant or any other person or entity. In addition the foregoing right of first negotiation is subject to any and all renewal or extensions of the term of the lease for the Wachovia Space in the Building, whether or not the right to so extend or renew currently exists, is hereafter granted or otherwise agreed to by Landlord.

D. In the event that Tenant leases the Wachovia Space from Landlord within the time and manner provided in this Article XVIII, and Landlord is unable to deliver possession of such space to Tenant for any reason or condition beyond Landlord’s control, including, without limitation, the failure of Wachovia or any then existing occupant to vacate such space, Landlord, its agents and employees, shall not be liable or responsible for any claims, damages or liabilities in connection therewith or by reason thereof, but Landlord shall use good faith efforts to make such space available to Tenant.

E. Notwithstanding anything contained in this Lease to the contrary, in the event that at anytime either the Building or the 7255 Building is not owned by Street Retail, Inc. (or a wholly owned subsidiary of Federal Realty Investment Trust), then this Article XVIII and the provisions hereof shall be void and of no force or effect, and Tenant shall have no right hereunder to relocate into the Wachovia Space.

F. Tenant acknowledges that (i) pursuant to Section 18.02 of the lease between Landlord and Tenant at the 7255 Building (the “7255 Lease”), Landlord has provided to Tenant the Outside Availability Notice required with respect to all of the space on the second floor and the portion of the third floor of the Building previously leased to Development Alternatives Incorporated (the “Outside ROFO Space”), (ii) Tenant did not provide Outside Expansion Notice (as defined in the 7255 Lease) in accordance with the 7255 Lease; and, accordingly, did not exercise its right to lease such Outside ROFO Space, (iii) Tenant is leasing the entire second floor of the Building pursuant to the terms of this Lease, and (iii) Landlord shall have the right to lease any of the Outside ROFO Space on the third floor of the Building at any time to any other person or entity upon any terms and conditions which Landlord desires, in its sole discretion. Tenant shall be entitled to the right of first offer set forth on Exhibit N.

ARTICLE XIX

ANTENNA RIGHTS

Section 19.01. Tenant shall have the right to use a portion of the roof of the Building for the installation of two (2) dish/antenna (collectively, the “Antenna”); provided that (i) the Antenna is permitted under the laws, rules and regulations of the Federal Communications Commission, the Federal Aviation Administration and Montgomery County, Maryland and any other governmental and quasi-governmental authorities having jurisdiction over the Building or the Landlord, (II) the Antenna conforms to all such laws, rules and regulations, (iii) Tenant has obtained all permits, licenses, variances, authorizations and approvals that may be required in order to install such Antenna and any insurance required by Landlord, (iv) the Antenna is not more than thirty-six inches (36”) in diameter (or 36” wide if the Antenna is not a dish) and four (4) feet in height and not more than the weight that Landlord shall determine is appropriate for the roof (which Landlord shall specify to Tenant upon Tenant’s written request), (v) Tenant shall have obtained Landlord’s prior written consent, which consent shall not be unreasonably withheld, (vi) Tenant installs any screen or other covering for the Antenna that Landlord in its reasonable discretion may require (the size, type and style of which shall, be subject to Landlord’s prior written approval) in order to, camouflage or conceal the Antenna, (vii) Tenant shall pay Landlord (within 30 days after receipt of an invoice therefor) an amount equal to all cost incurred by Landlord to have an engineer review the plans and specifications for the Antenna, the location specifications for the Antenna and the plans, specifications and method for attaching the Antenna to the Building, and (viii) the Antenna does not affect any antenna or other equipment that is currently on the roof of the Building. In addition, the style, color, materials, exact location and method of installation of the Antenna must be approved by Landlord (in its sole discretion). Tenant shall maintain the Antenna in good condition and repair and in compliance with all applicable laws, rules, regulations and requirements. The rights set forth in this Section 19.01 shall be personal to OPNET Technologies, Inc. and shall not be transferable to any other third party, tenant, subtenant or assignee (other than a Qualified Tenant Affiliate that is assigned this Lease or that is a subtenant of the Leased Premises).

Section 19.02. Prior to or contemporaneous with requesting Landlord’s approval of the installation of the Antenna, Tenant shall provide to Landlord: (i) plans and specifications for the Antenna (including size, location, height, weight and color) and specifications for installation thereof; (ii) copies of all required governmental and quasi-governmental permits, licensees, special zoning variances, and authorizations, all of which Tenant shall obtain at its own cost and expense; and (iii) a policy or certificate of insurance evidencing such insurance coverage as may reasonably be required by Landlord for the installation, operation and maintenance of the Antenna and sufficient to cover, among other things, the indemnities from Tenant to Landlord provided in the Lease. Landlord may withhold its approval of the installation of the Antenna if the installation, operation or removal of the Antenna may (a) damage the structural integrity of the Building or void any warranty or guaranty applicable to the roof or Building, (b) interfere with any service provided by Landlord to the Building or any tenant thereof, (c) interfere with the use of any part of the Building by any tenant in the Building, (d) cause the violation of any zoning ordinance or other governmental or quasi-governmental law, rule or regulation applicable to the Building, or,(e) reduce the amount of leasable space in the Building. Tenant shall not be entitled to rely on any such approval as being a representation by Landlord that such installation and operation is permitted by or in accordance with any zoning ordinance or other governmental or quasi-governmental law, rule or regulation applicable to the Building.

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Section 19.03. Landlord, at its sole option and discretion, may require Tenant, at any time prior to the expiration of the Lease, to terminate the operation of the Antenna if it is causing physical damage to the structure of the Building or voids any warranty or guaranty applicable to the roof or the Building, interfering with any other service provided by the Building, interfering with any other tenant’s business, or causing the violation of any condition or provision of the Lease or any governmental or quasi-governmental law, rule or regulation applicable to the Building (now or hereafter in effect). If, however, Tenant can correct the damage or prevent said interference caused by the Antenna to Landlord’s satisfaction within thirty (30) days, Tenant may restore its operation so long as Tenant promptly commences to cure such damage and diligently pursues such cure to completion. If the Antenna is not completely corrected and restored to operation within thirty (30) days, Landlord, at its sole option, may require that the Antenna be removed at Tenant’s expense. If Landlord or any other tenant in the Building shall require that the Antenna be moved to another location on the roof or the Property, either to accommodate Landlord to or to provide other tenants in the Building with access to the roof or the Building for placement of other Antenna, other electrical equipment or other Landlord-approved uses or installations, Landlord shall have the right, at its sole expense, to relocate the Antenna to other places on the roof or Building, provided that such new locations do not materially adversely affect the operation of such Antenna.

Section 19.04. At the expiration or earlier termination of the Lease or upon termination of the operation of the Antenna as provided above, at Tenant’s sole cost, the Antenna and all cabling and other equipment relating thereto shall be removed from the Building and the areas where the Antenna were located shall be restored to their condition existing prior to such installation in a manner and with materials determined by Landlord. Tenant hereby authorizes Landlord to remove and dispose of the Antenna and charge Tenant for all costs and expenses incurred in connection therewith. Tenant agrees that Landlord shall not be liable for any property disposed of or removed by Landlord. Tenant’s obligation to perform and observe this covenant shall survive the expiration or earlier termination of the term of the Lease.

Section 19.05. Tenant covenants and agrees that the installation, operation and removal of the Antenna will be at its sole risk. Tenant covenants and agrees absolutely and unconditionally to indemnify, defend and hold Landlord harmless from and against all claims, actions, damages, liability, judgments, settlements, costs and expenses (including attorney’s fees and expenses) arising out of the installation, operation, maintenance or removal of the Antenna, including without limitation, any loss or injury resulting from transmissions from the Antenna.

[signatures on following page]

30 HOLLAND & KNIGHT LLP

IN WITNESS WHEREOF, the parties hereto intending to be legally bound hereby have executed this Lease under their respective hands and seals as of the day and year first above written.

WITNESS:			LANDLORD:
			STREET RETAIL, INC., a Maryland corporation
	[Illegible]		By:	/s/ Deborah A. Colson
				Name:	Deborah A. Colson
				Title:	Vice President-Legal Operations
WITNESS:			TENANT:
			OPNET TECHNOLOGIES, INC., a Delaware Corporation
	/s/ ALBERTO MORALES		By:	/s/ ALAIN J. COHEN
	Name:	ALBERTO MORALES		Name:	ALAIN J. COHEN
	Title:	CIO		Title:	PRESIDENT AND CHIEF TECHNOLOGY OFFICER
	[Corporate Seal]

31 HOLLAND & KNIGHT LLP

EXHIBIT A

LEGAL DESCRIPTION OF THE LAND

Being three (3) parcels of land located in the Seventh (7th) Section District of Montgomery County, Maryland and being part of the land conveyed by Woodmont West Limited Partnership to Woodmont West LLC by deed dated April 21, 1998 and recorded among the Land Records of Montgomery County, Maryland in Liber 15815 at Folio 250 and being mote particularly described in the Washington Metropolitan Area Transit Authority Datum by Maoris, Hendricks and Glascock, P.A, in three (3) parts as follows:

PART ONE:

Beginning at a point on the northerly right-of-way limits of Bethesda Avenue (60’R/W), said point also being at the end of the sixth (6th) line as described in a Deed of Right-of-way from Woodmont West LLC to Montgomery County, Maryland, dated June 22,2001 and recorded among the aforesaid Land Records in Liber 19553 at Folio 654, then leaving said Bethesda Avenue and binding reversely with the sixth (6th), fifth (5th) and fourth (4th) lines of said conveyance and the easterly limits of Arlington Road the following three (3) courses:

1. Nona 44° 08’37” West, 27.14 feet to a point, then

2. North 02° 35’ 59” West, 330.20 feet to a point, then

3. North 32” 48’ 35” East, 30.09 feet to a point, said point being on the southerly right right-of-way limits of Elm Street, said point also being on the third (3rd) or North 75° 06’ 25” East, 45,11 foot line as described in the aforesaid Liber 15815 at Folio 250,12.92 feet from the beginning thereof, then binding with the balance of the third (3rd) and the fourth (4th) through ninth (9th) lines of said conveyance

4. North 75° 06’ 25” East, 32.19 feet to a point, then

5. North 87” 25’ 30” East, 170.63 feet to a point, then leaving said Elm Street and continuing to cross and include part of Block “C” of Miller’s Second Addition to Bethesda

6. South 02° 34” 30” East, 94.81 feet to a point, said point being at the beginning of the first (1st) line as described in a conveyance from Montgomery County, Maryland to Woodmont West Limited Partnership by deed dated November 28,1990 and recorded among the aforesaid Land Records in Liber 9756 at Folio 618, then binding with, the first (1st) thru third (3rd) lines of said conveyance:

7. North 87°26’ 10” East, 11.07 feet to a point, then

8. South 02° 33’ 50” East, 105.33 feet to a point, then

9. South 87° 26’10” West, 11.05 feet to a point, then

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10. South 02° 34’ 30” East 181.76 feet to a point, said point being at the beginning of the thirtieth (30th) line as described in the aforesaid Liber 15815 at Folio 250, said point also being on the aforesaid northerly right-of-way of Bethesda Avenue, then binding with said Bethesda Avenue and part of the said 30th line of Liber 15815 at Folio 250

11. South 87° 25’ 30” West, 201.35 feet to the point of the beginning; containing 84,346 square feet; or 1.93632 acres of land.

Part Two

Beginning at the beginning of the twenty fifth (25th) or South 02° 34’ 30” East, 100.00 foot line as described in the aforementioned Liber 15815 at Folio 250, then binding with the twenty fifth (25th) thru twenty seventh (27th) lines of said conveyance

1. South 02 ° 34’ 30” East, 100.00 feet to a point, said point being on the on northerly line of Bethesda Avenue, then binding with said right-of-way

2. South 87° 25’ 30” West, 75.40 feet to a point, then leaving said Bethesda Avenue

3. North 02° 34’ 30” West, 100.00 feet to a point, said point being on the tenth (10th), or North 87° 25’ 30” East, 125.40 foot line of the aforesaid Liber 15815 at Folio 250,60.10 feet easterly from the westerly end thereof, then binding with said line

4. North 87° 25’30” East, 75.40 feet to the point of beginning; containing 7,540 square feet or 0.17309 of an acre of land.

Part Three

Beginning at a point on the northerly right-of-way limits of Bethesda Avenue (60 R/W), said point being at the beginning of the twenty third (23rd) or North 02° 34’ 30” West, 100.00 foot line as described in the aforesaid Liber 15185 at Folio 250, then leaving said Bethesda Avenue and binding with said twenty third (23rd) line

1. North 02” 34’30” West, 100.00 feet to the point, then

2. North 87° 25’ 30” East, 100.00 feet to the point said point being at the beginning of the fifteenth (15th) line as described in the aforementioned Liber 15185 at Folio 250, then binding with the fifteenth (15th) line as described in the aforementioned Liber 15185 at Folio 250, them binding with the fifteenth (15th) thru twenty second (22nd) lines of said conveyance

3. North 02° 34’ 30” West, 91.98 feet to a point, then

4. North 87° 25’ 30” East, 20.00 feet to the easterly line of Hagar Lane (20’ Alley), then binding with said easterly line

5. North 02° 34’ 30” West, 187.49 feet to a point on the southerly side of Elm Street and 30 feet from the centerline thereof; then binding with the said right of way

6. North 87° 34’45” East, 54.43 feet to a point, then

7. South 56° 17’ 48” East, 25.68 feet to a point, said point being on the westerly right-of-way line of Woodmont Avenue (80’R/W) as delineated on Montgomery County Department of Transportation Right of Way Plat File No. 103, then binding with said right-of-way

8. 347.19 feet along the arc of a curve deflecting to the left, having a radius of 500.00 feet and a chord bearing and length of South 26° 26’ 28” East, 340.26 feet to a broken P.K. nail found, then

9. South 24° 52’ 49” West, 60.59 feet to a point on the northerly right-of-way line of Bethesda Avenue (60’R/W), then binding with said right-of-way

10. South 87° 25’ 30” West, 306.67 feet to the point of beginning; containing 63,770 square feet or 1.46396 acres of land.

Together with easements reconveyed to Woodmont West Limited Partnership by Montgomery County, Maryland by Agreement of Easement dated November 31,1989 and recorded February 9,1990 in Liber 9193 Folio 355 and revised by Agreement of Easement (Revised) dated June 6, 1991 and recorded July 11, 1991 in Liber 9839 Folio 315.

Together with easements granted to Woodmont West Limited Partnership by Montgomery County, Maryland by Agreement of Easement dated April 30, 1990 and recorded June 15,1990 in Liber 9359 Folio 717.

Together with easement and right of way over Hagar Lane established by Deed of Easement dated March 6,1951 and recorded in Liber 1501 Folio 315.

Together with reciprocal and non-exclusive easement for ingress and egress over a portion of Lot 12 as established by Common Loading Dock and Ingress/Egress Agreement dated August 7,1989 recorded September 7,1989 in Liber 8984 Folio 18.

Together with reciprocal easements contained Declaration of Covenants and Easements dated February 26, 2003 recorded March 26, 2003 in Liber 23361 folio 446.

Together with Declaration of Reciprocal Easement and Covenants by and between Woodmont West Limited Partnership, Federal Realty Investment Trust Department of Transportation of Montgomery County, Maryland dated August 20, 1996 recorded August 29, 1996 in Liber 14337 Folio 510.

Together with Stormwater Management Easement Agreement by and between Bethesda Avenue Row LLC (also known as Bethesda Avenue Row Limited Liability Company), a Maryland limited liability company), a Maryland limited liability company, aka Bethesda Avenue Row Limited Partnership, Woodmont West LLC (also known as Woodmont West limited liability company), a Maryland limited liability company, fka Woodmont West Limited Partnership and W. M. Limited Partnership, a Maryland limited partnership dated July 9, 2002 recorded July 12, 2002 in liber 21414 folio 757.

PARCEL I.D. NO.: 7-1-2785464 - (N-628)

PARCEL I.D. NO.: 7-1-2785475 - (N-632)

PARCEL I.D. NO.: 7-1-2919248 - (N-664)

PARCEL I.D. NO.: 7-1-429544 - (N-681)

PARCEL I.D. NO.: 7-1-2608572 - (N-682)

PARCEL I.D. NO.: 7-1-2785486 - (N-683)

PARCEL I.D. NO.: 7-1-2785497 - (N-685)

EXHIBIT A-1

SECOND FLOOR PLAN

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EXHIBIT B

WORK AGREEMENT

This Work Agreement is attached to and made a part of that certain Office Lease (the “Lease”) by and between Street Retail, Inc., a Maryland corporation, as landlord (“Landlord”) and OPNET Technologies, Inc., as tenant (“Tenant”) for the premises (the “Leased Premises”) described therein and consisting of approximately 22,253 square feet of Gross Rentable Area in the building located at 7250 Woodmont Avenue, Bethesda, Maryland (the “Building”). This Work Agreement sets forth the understandings and agreements of Landlord and Tenant regarding the performance by Landlord of work in and to the Leased Premises for Tenant’s original occupancy and use (all such work shall be referred to herein as “Tenant Work”). Any capitalized terms used herein, not otherwise defined herein, shall have the meanings set forth elsewhere in the Lease.

1. Tenant’s Agent. Tenant hereby designates Steve Tassi (“Tenant’s Agent”) as having authority to approve plans and specifications, to accept cost estimates, and to authorize changes or additions to Tenant Work during construction. Landlord hereby designates Dave Rudorfer (703-851-3708) (“Landlord’s Agent”) as having authority to approve plans and specifications and to authorize changes or additions to Tenant Work during construction.

2. Plans and Specifications.

(A) It is agreed that Tenant will develop plans and necessary specifications for completion of Tenant Work in accordance with the following schedule; provided, however, that Tenant’s architect (who shall be subject to Landlord’s prior reasonable approval and shall be licensed in Maryland) shall be entitled to deliver, on Tenant’s behalf, any such plans and specifications required hereunder to be delivered by Tenant to Landlord:

(i) Tenant shall deliver to Landlord Tenant’s Preliminary Plans (as defined below) for the entire Leased Premises and shall indicate its approval of the Preliminary Plan in writing by signing and dating such Preliminary Plans. The “Preliminary Plans” shall set forth:

(a) the location and specification of telephone and other communications outlets;

(b) the location and specification of electrical outlets, especially those required to accommodate items such as computers and 220-volt equipment;

(c) the location of copy machines larger than table-top size, computer equipment, telex machines, and other heat-producing machines, and specification of heat output (BTU/hour) and required operating conditions (maximum/minimum temperature, hours of operation);

(d) the location of conference rooms and other rooms subject to occupancy by more than six (6) persons at a time and the specification of maximum expected occupancy;

(e) a reflected ceiling plan for all lighting desired by Tenant, and specification of any Tenant Work involving lighting;

(f) any Tenant Work which is likely to require a longer-than-usual period of time to construct or acquire;

(g) the location of all partitions in the Leased Premises; and

(h) any special requirements.

(ii) Within five (5) business days after Tenant delivers to Landlord Tenant’s Preliminary Plans, Landlord shall deliver to Tenant in writing its approval of the Preliminary Plans or changes to the Preliminary Plans that will be required to obtain Landlord’s approval.

(iii) Within five (5) business days after Landlord delivers to Tenant its required revisions to the Preliminary Plans, Tenant shall deliver to Landlord revised Preliminary Plans containing the required revisions and such suggested revisions as Tenant chooses to incorporate.

(iv) Within two (2) business days after Tenant delivers to Landlord revised Preliminary Plans, Landlord shall deliver its confirmation that all required revisions have been made (if such is the fact) and its approval of the revised Preliminary Plans.

(v) Within thirty (30) days after Landlord has approved the Preliminary Plans, Tenant shall deliver to Landlord detailed architectural, mechanical, plumbing and electrical (and structural, if required) working drawings and construction documents for the Tenant Work (including without limitation, the HVAC systems and fire and life safety systems and the location of furniture and office equipment), based upon the approved Preliminary Plans, prepared by Tenant’s architects and engineers, and Tenant shall indicate its approval of such working drawings and construction documents in writing by signing and dating such working drawings and construction documents (the “Construction Documents”).

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(vi) Within five (5) business days after Tenant delivers to Landlord the Construction Documents, Landlord shall indicate its approval of the Construction Documents in writing by signing and dating such Construction Documents in the space provided, or shall indicate the revisions required due to errors or omissions in the drawings.

(vii) Within five (5) business days after Landlord indicates the revisions required due to errors or omissions in the Construction Documents, Tenant shall correct such errors or omissions and resubmit the Construction Documents to Landlord for its approval. Provided such errors or omissions have been corrected, Landlord shall then approve the Construction Documents. Pursuant to the letter from David Rudorfer dated November 25, 2006 (the “Approval Letter”), Landlord has approved the Construction Documents submitted by Tenant, subject to Tenant complying with the requirements and addressing the issues set forth in the Approval Letter to Landlord’s satisfaction. If Tenant desires to make revisions in the Construction Documents after Landlord has approved such Construction Documents, such changes shall require Tenant to approve and date the revised Construction Documents and shall be subject to Landlord’s written approval. Promptly after the Tenant Work has been completed, Tenant shall provide to Landlord a CAD diskette of the Construction Documents as revised pursuant to this Work Agreement.

(B) The Construction Documents, as finally approved by both Landlord and Tenant shall constitute the “Plans.” Any revisions to the Plans are expressly subject to Landlord’s prior written approval. Landlord shall respond to any request for its approval of any changes to the Plans within five (5) business days after Landlord receives written request for such approval from Tenant. Tenant shall be solely responsible for the content of the Plans and coordination of the Plans with base Building design. Landlord’s approval of any of the Plans (and any change orders thereto) shall not be unreasonably withheld, conditioned or delayed, unless the proposed Tenant Work could, in Landlord’s judgment (i) adversely affect the structure of the Building, (ii) adversely affect in any material manner the electrical, plumbing or mechanical systems of the Building or the functioning thereof, (iii) be or become visible from the exterior of the Leased Premises, or (iv) interfere with the operation of the Building or the provision of services or utilities to other tenants in the Building. In addition, Landlord’s approval of the Plans shall not constitute a warranty, covenant or assurance by Landlord that (i) any equipment or system shown thereon will have the features or perform the functions for which such equipment or system was designed; (ii) the Plans satisfy applicable code requirements; (iii) the Plans are sufficient to enable Tenant or Tenant’s architect to obtain a building permit for the Tenant Work; or (iv) the Tenant Work described thereon will not interfere with, and/or otherwise adversely affect, base Building systems. Tenant shall be solely responsible for the Plans’ compliance with all applicable laws, rules and regulations of any governmental entity having jurisdiction over the Building and the Leased Premises. Notwithstanding the foregoing, if Landlord determines at anytime that the Tenant Work described on the Plans does or will interfere with and/or otherwise adversely affect any base Building systems or does not or will not comply with any applicable law, rule or regulation, or the fire marshal, inspector or other governmental authority requires a revision to the Tenant Work, then the Plans shall be amended, at Tenant’s cost, so that the Tenant Work will not interfere with, and/or otherwise adversely affect, such base Building systems and/or will not violate any applicable law, rule or regulation, and will comply with any requests of any applicable governmental authority.

(C) Tenant shall pay the cost of preparing the Plans. Tenant may elect to apply a portion of the Tenant Work Allowance (hereinafter defined) against the cost of the Plans.

(D) Tenant at its sole cost shall obtain and maintain a building permit (the “Building Permit”), in a form satisfactory to Landlord, that permits Tenant to construct the Tenant Work, and shall make such amendments to the Plans (subject to Landlord’s approval) as necessary to obtain and maintain such permit. Tenant shall be required to hire, at Tenant’s sole cost, an expeditor reasonably acceptable to Landlord, to assist in obtaining the Building Permit.

3. Construction of Tenant Work.

(A) The Plans shall be conclusive as to the entire scope of Tenant Work to be performed by Tenant. Tenant agrees to provide and install the Tenant Work shown on the Plans in a good and workmanlike manner in strict accordance with the Plans approved by Landlord. Tenant shall pay the cost of all Tenant Work, subject to application of the Tenant Work Allowance as set forth in Paragraph 6 hereof.

(B) If Tenant shall request changes to the Plans or the Tenant Work after the date that the Plans were approved by Landlord, Tenant shall be responsible for directing its architects and engineers to revise the Plans and shall pay all fees incurred in making such revisions. Tenant shall deliver to Landlord any such revised Plans approved and dated by Tenant in writing. Any such changes and/or additions shall be subject to Landlord’s prior written approval of the Plans depicting such changes and/or additions.

(C) Tenant shall pay an administrative fee to compensate Landlord for reviewing the Plans and/or monitoring the Tenant Work equal to the actual out-of-pocket costs incurred in connection therewith, plus fifteen percent (15%) of such actual out-of-pocket costs as reimbursement of administrative expenses, but in no event more than seventy-five hundredths percent (.75%) of the hard costs of the Tenant Work. Such administrative fee shall be payable as Additional Rent and at Landlord’s election shall be either paid by Tenant to Landlord within ten (10) calendar days after receipt of invoice from Landlord, or deducted from any available Tenant Work Allowance.

Exhibit B, Page 2 HOLLAND & KNIGHT LLP

(D) Tenant shall pay the cost of all Tenant Work, subject to application of the Tenant Work Allowance as set forth in Paragraph 6 hereof. Any costs payable under this Work Agreement to Landlord that are not paid from the Tenant Work Allowance shall be payable as Additional Rent by Tenant to Landlord within ten (10) calendar days after receipt of an invoice therefor from Landlord. Landlord shall be entitled to order Tenant to suspend construction of any of the Tenant Work while Tenant is late on the payment of any amount payable under the Lease (including without limitation, any provision of this Work Agreement) or while Tenant is in violation or default of any provision of the Lease (including without limitation, any provision of the Work Agreement), provided that Landlord has first applied any or all of the available Tenant Work Allowance pursuant to Paragraph 6 hereof towards satisfaction of such payment obligations or towards curing any other such default. Tenant shall be responsible for any delay resulting therefrom.

4. Tenant’s Construction Requirements. Tenant covenants and agrees to satisfy (and cause its contractors and subcontractors to satisfy) the following conditions and requirements in connection with its construction of the Tenant Work:

(A) Tenant or Tenant’s contractor shall be required to utilize the subcontractors specified by Landlord for all roofing work, sprinkler shutdown work and fire alarm tie-in work;

(B) The contractors, subcontractors or laborers employed in connection with such work shall comply with any applicable law and work rules and regulations established by Landlord from time to time for all work in the Building, including the Rules for Tenant’s Contractors attached hereto as Exhibit D;

(C) Tenant, or its contractors and their subcontractors, shall be bondable and shall provide such insurance, bonding (for the general contractor only) and/or indemnification as Landlord may reasonably require for its protection from negligence or malfeasance on the part of such contractors and subcontractors (provided, however, that Landlord shall require a bond from a contractor only if it is reasonable based upon the net worth and general creditworthiness of such contractor, and Landlord shall not require any such bonding if the contractor is Hitt Construction Company). In Landlord’s judgment (reasonably exercised), such work or the identities or presence of such contractors or their subcontractors will not result in delays, stoppages or other action or the threat thereof which may interfere with construction progress or delay in completion of other work in the Building or on or about the rest of the Property, or in any manner impair any guarantee or warranty from Landlord’s contractor or its subcontractors, or conflict with any labor agreements applicable to the construction of the Building or the improvement of the rest of the Property. Tenant or its contractor shall carry such Builder’s risk insurance in connection with the Tenant Work as Landlord may reasonably require;

(D) Each such contractor and subcontractor, and the nature and extent of the work to be performed by it shall be approved by Landlord (which approval shall not be unreasonably withheld, conditioned or delayed), but such approval shall not relieve Tenant of its responsibility to comply with the applicable provisions of this Exhibit B nor constitute a waiver by Landlord of any of its rights under the Lease;

(E) The time required by Tenant’s contractors to perform the Tenant Work shall not delay the Term Commencement Date or the Rent Commencement Date, notwithstanding the fact that the Leased Premises may not be completed and Tenant may not be in occupancy of the Leased Premises at such time;

(F) Tenant shall indemnify, hold harmless, and defend Landlord from any loss, damage, cost or expense (including attorneys’ fees and court costs) incurred by Landlord, whether before or after the Term Commencement Date, as a result of the performance by Tenant of such work, and Landlord shall have the right to invoice Tenant for the same as Additional Rent, which shall be payable within ten (10) business days after receipt of such invoice;

(G) Tenant must promptly make available to Landlord for Landlord’s prior review, and at Landlord’s request, all construction documentation as Landlord deems reasonably necessary;

(H) Landlord, at its cost, shall have the right to monitor the Tenant Work throughout the construction process to insure that Tenant’s contractor(s)/subcontractor(s) are adhering to Landlord-approved Plans for Leased Premises and to insure that the Building’s systems (plumbing, electrical, HVAC, etc.) are not being affected adversely during such construction process and will not be affected adversely after completion of Tenant Work;

(I) All of Tenant’s contracts with any contractors shall be in the name of Tenant and this provision shall not create any direct or indirect relationship between Landlord and said contractors nor any obligations or liability by Landlord to said contractors, nor shall this provision create any direct or indirect liability for Landlord in connection with the improvements to the Leased Premises; and

(J) Tenant’s contractor and subcontractors shall not post any signs on any part of the Leased Premises or the Building.

5. Base Building Changes. If Tenant requests work to be done in the Leased Premises or for the benefit of the Leased Premises that necessitates changes to the base Building or Building systems, or the design thereof, any such changes shall be subject to prior written approval of Landlord, in its sole discretion, and Tenant shall be responsible for all costs resulting from such changes, including architectural and engineering charges, and any special permits or fees attributed thereto. Tenant shall be responsible for any delay resulting from such changes. Before any such changes are made, Tenant shall pay to Landlord fifty percent (50%) of the full costs estimated to be incurred by Landlord in connection with such changes, and Tenant shall pay the balance upon Landlord notifying Tenant that such changes are substantially complete.

Exhibit B, Page 3 HOLLAND & KNIGHT LLP

6. Tenant Work Allowance. Landlord agrees to provide Tenant with an allowance (“Tenant Work Allowance”) in the amount of Forty Dollars ($40.00) per square foot of rentable area in the Leased Premises, to be applied against the actual out-of-pocket third party costs and expenses incurred in connection with the design and construction of the Tenant Work (including the actual construction costs and architectural and engineering fees incurred in connection therewith); provided, however, a portion of the Tenant Work Allowance, but in no event more than Five Dollars ($5.00) per square foot of rentable area in the Leased Premises, may be applied against the actual out-of-pocket expenses incurred by Tenant in connection with telephone and computer cabling and furniture and equipment for the Leased Premises. The Tenant Work Allowance shall not be applied to the costs of any furniture, computers, equipment, personal property, or for any other costs other than as provided above. After Tenant has completed fifty percent (50%) of the Tenant Work, Tenant shall deliver to Landlord a written request for partial payment of the Tenant Work Allowance and evidence of satisfaction of the following conditions (the “50% Allowance Request”): (a) receipt by Landlord of a signed statement from Tenant and Tenant’s architect certifying that Tenant has completed at least fifty percent (50%) of the Tenant Work and Tenant has incurred out-of-pocket construction and/or design costs for the Tenant Work (for which Tenant has not previously been reimbursed) against which the Tenant Work Allowance may be applied in the amount requested to be paid from the Tenant Work Allowance (but in no event more than fifty percent of the Tenant Work Allowance); (b) receipt by Landlord of appropriate paid receipts or invoices approved by Tenant and lien waivers in a form satisfactory to Landlord from the contractors and subcontractors performing the Tenant Work, which lien waivers must cover the work for which such contractors has then provided (but such lien waivers may be conditioned upon receipt of payment for the work that is the subject of such 50% Allowance Request); and (c) Tenant shall not be in default of any term, condition or provision of this Lease. If a complete 50% Allowance Request (complying with the foregoing requirements) is received by Landlord from Tenant, Landlord shall use reasonable efforts to pay to Tenant the amount covered by the 50% Allowance Request, but no more than fifty percent (50%) of the unapplied Tenant Work Allowance, within fifteen (15) days after receipt of the 50% Allowance Request (and satisfaction of the foregoing conditions). After Tenant has substantially completed the Tenant Work, Tenant shall deliver to Landlord a written request for partial payment of the Tenant Work Allowance and evidence of satisfaction of the following conditions (the “80% Allowance Request”): (a) receipt by Landlord of a signed statement from Tenant and Tenant’s architect certifying that Tenant has substantially completed the Tenant Work and Tenant has incurred out-of-pocket construction and/or design costs for the Tenant Work (for which Tenant has not previously been reimbursed) against which the Tenant Work Allowance may be applied in the amount requested to be paid from the Tenant Work Allowance (but in no event shall such amount plus any other prior distributions of Tenant Work Allowance be more than eighty percent (80%) of the Tenant Work Allowance); (b) receipt by Landlord of appropriate paid receipts or invoices approved by Tenant and lien waivers in a form satisfactory to Landlord from the contractors and subcontractors performing the Tenant Work, which lien waivers must cover the work for which such contractors has then provided; and (c) Tenant shall not be in default of any term, condition or provision of this Lease. If a complete 80% Allowance Request (complying with the foregoing requirements) is received by Landlord from Tenant, Landlord shall pay to Tenant the amount covered by the 80% Allowance Request, but no more than an amount which when added to the previously distributed Tenant Work Allowance equals eighty percent (80%) of the unapplied Tenant Work Allowance. Landlord shall use reasonable efforts to make such payment within fifteen (15) days after receipt of the 80% Allowance Request (and satisfaction of the foregoing conditions). After Tenant has completed one hundred percent (100%) of the Tenant Work and received all final lien waivers, Tenant shall deliver to Landlord a written request for final payment of the Tenant Work Allowance and evidence of satisfaction of the following conditions (the “Final Allowance Request”): (a) receipt by Landlord of a signed statement from Tenant and Tenant’s architect certifying that Tenant has completed the Tenant Work in accordance with the Plans and Tenant has incurred out-of-pocket construction and/or design costs for the Tenant Work (for which Tenant has not previously been reimbursed) against which the Tenant Work Allowance may be applied in the amount requested to be paid from the Tenant Work Allowance (but in no event more than remainder of the Tenant Work Allowance); (b) receipt by Landlord of an occupancy permit for the Leased Premises, and Tenant’s occupancy of the Leased Premises, (c) receipt by Landlord of appropriate paid receipts or invoices and final lien waivers from all contractor and subcontractors performing any Tenant Work in a form satisfactory to Landlord, and (d) Tenant shall have fully performed all of its obligations under this Work Agreement and not be in default of any monetary provision under the Lease or in Default (as defined in Section 16.01) of any non-monetary monetary provision under the Lease. If a complete Final Allowance Request (complying with the foregoing requirements) is received by Landlord from Tenant, Landlord shall use reasonable efforts to pay to Tenant the amount covered by the Final Allowance Request, but no more than the remaining unapplied Tenant Work Allowance, within fifteen (15) days after receipt of the Final Allowance Request (and satisfaction of the foregoing conditions). Notwithstanding the foregoing, Landlord shall have the right, without the obligation, to apply all or any portion of the undisbursed Tenant Work Allowance to remedy any default by Tenant occurring hereunder; provided, however, it is expressly covenanted and agreed that such remedy by Landlord shall not be deemed to waive, or release, the default of Tenant. In addition, Landlord shall provide to Tenant an allowance, in the amount of Ten Cents ($.10) per rentable square foot of the Leased Premises, to be applied against the out-of-pocket expenses incurred by Tenant in undertaking a test fit for the Leased Premises. Such allowance will be paid to Tenant within thirty (30) days of completion of such work and receipt by Landlord of invoices substantiating the costs thereof incurred by Tenant, in a form reasonably acceptable to Landlord. Notwithstanding anything contained in this Paragraph 6 to the contrary, Tenant shall not be required to obtain a lien waiver from any contractor or subcontractor to the extent the total cost of the work in, to or for the Leased Premises provided by such contractor or subcontractor is less than Ten Thousand Dollars ($10,000.00).

Exhibit B, Page 4 HOLLAND & KNIGHT LLP

7. Landlord Work. Landlord, at its cost, shall perform the following initial work to the Building (“Landlord Work”): (i) alter the elevator system to permit the elevators to be programmed to limit access to second floor to individuals with an access key, which can be accessed with Tenant’s access cards, (ii) modify the current Building card reader access system to comply with the requirements of Section 7.01 .G of the Lease, (iii) modify the current HVAC control system to comply with the requirements of Section 7.01.D of the Lease, and (iv) any modifications to the Common Restrooms required pursuant to the terms of Section 2.01 .C of the Lease. Such Landlord Work will be done after Landlord has delivered the Leased Premises to Tenant for Tenant to commence the Tenant Work, and Landlord and Tenant shall reasonably cooperate with each other during any times that Landlord requires access to the Leased Premises to undertaking any Landlord Work while Tenant is undertaking Tenant Work in the Leased Premises.

Exhibit B, Page 5 HOLLAND & KNIGHT LLP

EXHIBIT C

RULES AND REGULATIONS

Tenant expressly covenants and agrees, at all times during the Term, and at such other times as Tenant occupies the Leased Premises or any part thereof, to comply, at its own cost and expense, with the following:

1. Tenant shall not obstruct or permit its agents, clerks or servants to obstruct, in any way, the sidewalks, entry passages, corridors, halls, stairways or elevators of the Building, or use the same in any other way than as a means of passage to and from the offices of Tenant; bring in, store, test or use any materials in the Building which could cause a fire or an explosion or produce any fumes or vapor; make any disruptive noises in the Building; smoke in the elevators; throw substances of any kind out of the windows or doors, or in the halls and passageways of the Building; sit on the window sills; or clean the exterior of the windows.

2. Waterclosets and urinals shall not be used for any purpose other than those for which they are constructed; and no sweepings, rubbish, ashes, newspaper or any other substances of any kind shall be thrown into them. Waste of electricity or water is prohibited.

3. Tenant shall not (i) obstruct the windows, partitions and lights that reflect or admit light into the halls or other places in the Building, or (ii) except as expressly permitted by the Lease, inscribe, paint, affix, or otherwise display signs, advertisements or notices in, on, upon or behind any windows or on any door, partition or other part of the interior or exterior of the Building that is visible outside the Leased Premises, without the prior written consent of Landlord. If such consent be given by Landlord, any such sign, advertisement, or notice shall be inscribed, painted or affixed by Tenant, or a company approved by Tenant, and the cost of the same shall be charged to and paid by Tenant, and Tenant agrees to pay the same promptly, on demand.

4. No contract of any kind with any supplier of towels, water, ice, toilet articles, waxing, rug shampooing, venetian blind washing, furniture polishing, lamp servicing, cleaning of electrical fixtures, removal of waste paper, rubbish or garbage, or other like services shall be entered into by Tenant, nor shall any vending machine of any kind be installed in the Building, without the prior written consent of Landlord which shall not be unreasonably withheld, conditioned or delayed

5. When electric wiring of any kind is introduced, it must be connected as directed by Landlord, and no stringing of any kind or cutting of wires will be allowed, except with the prior written consent of Landlord. Tenant shall notify Landlord in writing of the number and location of telephones, telegraph instruments, electric appliances, call boxes, etc., and any electrical work in the Leased Premises shall be subject to Landlord’s approval, which shall not be unreasonably withheld, conditioned or delayed. No tenants shall be in direct contact with the floor of the Leased Premises; and if linoleum or other similar floor covering is desired to be used, an interlining of builder’s deadening felt shall be first affixed to the floor by a paste or other material, the use of cement or similar adhesive material being expressly prohibited.

6. No additional lock or locks shall be placed by Tenant on any interior door in the Leased Premises without providing Landlord with a key therefor. In addition, no lock or locks shall be placed by Tenant on any suite entry door in the Building without Landlord’s prior written consent and without providing Landlord with a copy of the keys for such locks. Tenant, its agents and employees, shall not have any duplicate key made and shall not change any locks. All keys to doors and washrooms shall be returned to Landlord at the termination of the tenancy, and in the event of loss of any keys furnished, Tenant shall pay Landlord the cost of replacing the lock or locks to which such keys were fitted and the keys so lost.

7. Tenant shall not employ any person or persons other than Landlord’s janitors for the purpose of cleaning the Leased Premises, without prior written consent of Landlord. Landlord shall not be responsible to Tenant for any loss of property from the Leased Premises however occurring, or for any damage done to the effects of Tenant by such janitors or any of its employees, or by any other person or any other cause.

8. No bicycles, vehicles or animals of any kind shall be brought into or kept in or about the Leased Premises.

9. Tenant shall not conduct, or permit any other person to conduct, any auction upon the Leased Premises; manufacture or store goods, wares or merchandise upon the Leased Premises, without the prior written approval of Landlord, except the storage of usual supplies and inventory to be used by Tenant in the conduct of its business; permit the Leased Premises to be used for gambling; make any disruptive noises in the Building; permit to be played any musical instruments, recorded or wired music in such a loud manner as to disturb or annoy other tenants; or permit any unusual odors to be produced upon the Leased Premises.

10. No awnings or other projections shall be attached to the outside walls of the Building. No curtains, shades or screens shall be attached to or hung in, or used in connection with, any window or door of the Leased Premises, without the prior written consent of Landlord. Such curtains, blinds and shades must be of a quality, type, design, and color, and attached in a manner, approved by Landlord.

HOLLAND & KNIGHT LLP

11. Canvassing, soliciting and peddling in the Building are prohibited, and Tenant shall cooperate to prevent the same. Retail sales will be limited to the ground level and lower level retail store areas.

12. There shall not be used in the Leased Premises or in the Building, either by Tenant or by others in the delivery or receipt of merchandise, any hand trucks, except those equipped with rubber tires and side guards.

13. Tenant, before closing and leaving the Leased Premises, shall ensure that all entrance doors to the Leased Premises are locked.

14. Landlord shall have the right to prohibit any advertising by Tenant which mentions the name or address of the Building and in Landlord’s reasonable opinion tends to impair the reputation of the Building or its desirability as a building for offices, and upon written notice from Landlord, Tenant shall refrain from or discontinue such advertising.

15. Landlord hereby reserves to itself any and all rights not granted to Tenant hereunder, including, but not limited to, the following rights which are reserved to Landlord for its purpose in operating the Building:

(i) the exclusive right to the use of the name of the Building for all purposes, except that Tenant may use the name as its business address and for no other purpose;

(ii) the right to change the name or address of the Building, without incurring any liability to Tenant for so doing provided that if Landlord changes the street number of the Building and such change is not made, directed or requested by the postal service or any governmental or quasi-governmental authority, then Landlord shall reimburse Tenant for the actual cost of the letterhead and other stationary or business cards on hand which bears the old address of the Building, but in no event more than Ten Thousand Dollars ($10,000.00);

(iii) the right to install and maintain a sign or signs on the exterior of the Building, subject to the terms of the Lease;

(iv) the exclusive right to use or dispose of the use of the roof of the Building, subject to Tenant’s express rights under the Lease;

(v) the right to limit the space on the directory of the Building to be allotted to Tenant, subject to Tenant’s express rights under the Lease; and

(vi) the right to grant to anyone the right to conduct any particular business or undertaking in the Building.

16. As used herein, the term “Leased Premises” or “Premises” shall mean and refer to the “Leased Premises” as defined in Article I of the Lease.

17. All safes shall stand on a base of such size as shall be designated by the Landlord. The Landlord reserves the right to inspect all freight to be brought into the Building and to exclude from the Building all freight which violates any of these Rules and Regulations or the Lease of which these Rules and Regulations are a part. No machinery of any kind or articles of unusual weight or size will be allowed in the Building without the prior written consent of Landlord. Business machines and mechanical equipment that cause vibration or make noise, if so consented to by Landlord, shall be placed and maintained by Tenant, at Tenant’s expense, in settings sufficient to absorb and prevent all vibration, noise and annoyance.

18. The Leased Premises shall not be used for lodging or sleeping purposes, and cooking therein (other than microwave cooking for Tenant’s employees in the pantry area of the Leased Premises) is prohibited.

19. After 6:00 p.m. until 8:00 a.m. on weekdays, after 1:00 p.m. on Saturdays, and at all hours on Sundays and legal holidays, all persons entering or leaving the Building may be required to identify themselves to establish their rights to enter or leave the Building. Landlord or its agents may exclude from the Building during such periods all persons who do not present satisfactory identification. Each tenant shall be responsible for all persons for whom it requests admission and shall be liable to Landlord for all acts of such persons.

21. In addition to all other liabilities for breach of any provision of these Rules and Regulations, Tenant shall pay to Landlord all damages caused by such breach. The violation of any such provision may be restrained by injunction.

22. Landlord shall enforce the rules and regulations against the Tenant in a non-discriminatory manner.

Exhibit C, Page 2 HOLLAND & KNIGHT LLP

EXHIBIT D

RULES FOR TENANT’S CONTRACTORS

The following rules and regulations apply to any construction by Tenant in the Building:

1. All demolition and/or construction work generating sufficient noise to disturb Building occupants (e.g., core drilling and ramset shots) must be accomplished before or after normal operating hours. Determination of sufficient noise levels to cause a disturbance shall be made at the Landlord’s sole discretion.

2. Loading dock use for the delivery of materials and/or equipment or for the removal of trash shall be before or after the normal hours of operation for the Building. For isolated special cases, arrangements may be made with the property manager of the Building (“Property Manager”) for deliveries during Building Hours. Landlord agrees to cooperate with Tenant to accommodate Tenant’s reasonable request for such use during Building Hours during Tenant’s initial build-out of the Leased Premises

3. Freight elevator use for the delivery of materials and/or equipment or the removal of trash shall normally be before or after the normal hours of operation for the Building and only with the express permission of the Property Manager. For isolated special cases, special arrangements may be made with the Property Manager for deliveries during Building Hours. All elevator use must be with the full knowledge and consent of the Property Manager.

4. Construction debris must be removed from the Building in suitable containers. Removal must be accomplished in a manner which does not cause damages to the Building, create any disturbances to tenants, or create additional cleaning for Building personnel. Sufficient precautions must be taken to protect finishes in the path of removal. Damages resulting from negligence will result in an assessment to the contractor for damages.

5. Contractors are responsible for timely cleaning of all public areas affected by their construction activities. Contractors are further responsible for providing and promptly removing their own trash containers.

6. Any work not to be installed in strict adherence with the construction contract documents must be approved by the Landlord prior to installation.

7. All workmen must conduct themselves in a reasonable manner at all times. The removal of any workmen using profanity, loitering in the Building, or creating a disturbance to tenants will be required.

8. All of the contractor’s personnel are responsible for their own parking and the associated cost. Unauthorized vehicles found in loading areas or parking garages will be ticketed and towed.

9. All work requiring connection to the Building fire alarm system is subject to the Landlord’s requirements. The completion of the tie-in must be accomplished utilizing the Landlord’s specified contractor. Any warranties voided as a result of the contractor’s or subcontractor’s failure to comply with this requirement will result in the contractor’s replacing the voided warranty in compliance with the Landlord’s requirements.

10. Any roof penetrations required must be performed and repaired by the Landlord’s designated subcontractor. Any warranties voided as a result of failure to comply with this requirement will result in the contractor’s replacing the voided warranty in compliance with the Landlord’s requirements.

11. Any work requiring the partial or full shutdown of any base Building systems, including electrical, mechanical or plumbing, must be scheduled with and approved by the Property Manager twenty-four (24) hours in advance. The shutdowns generally must be done after Building Hours.

12. All painting utilizing oil-based or polymer-based paints shall be performed before or after Building operating hours. The contractor shall be responsible for scheduling with the Property Manager any HVAC required for proper ventilation of work areas and adjacent tenant spaces.

13. The protection of existing mechanical equipment, including but not limited to baseboard heaters, heat pumps, air handlers, air conditioners, ductwork and distribution equipment, from physical damage or damage from dust and debris is the responsibility of the contractor. Damage as a result of failure to protect equipment will result in an assessment against the contractor for such damages and the resulting required repairs.

14. All penetrations to slab materials require the review and approval of the Landlord’s structural engineer without exception. The cost of this review and approval is the contractor’s responsibility.

15. All testing of fire alarm equipment requiring the sounding of bells, sirens, or voice annunciation must be scheduled with the Property Manager forty-eight (48) hours in advance of the test. Pre-testing of new fire alarm work is mandatory. Rescheduled test as a result of the contractor’s failure to coordinate with the Property Manager, the contractor’s failure to completely pre-test the system, or the contractor’s failure to pass municipal test shall be the contractor’s responsibility.

16. Normal Building operating hours are generally 9:00 a.m. to 6:00 p.m., Monday through Friday (except Holidays).

17. These rules are subject to change at the Landlord’s discretion.

HOLLAND & KNIGHT LLP

EXHIBIT E

Intentionally Omitted

HOLLAND & KNIGHT LLP

EXHIBIT F

Intentionally Omitted

HOLLAND & KNIGHT LLP

EXHIBIT G

Intentionally Omitted

HOLLAND & KNIGHT LLP

EXHIBIT H

ADDITIONAL OPERATING COSTS EXCLUSIONS

In addition to the exclusions from Operating Costs set forth in Section 6.03.C of the Lease and notwithstanding anything contained in the Lease to the contrary, Operating Costs shall not include:

1. the cost of any improvements which under generally accepted accounting principles, consistently applied, are properly classified as capital improvements, except for any Permitted Capital Expenditures;

2. painting or decorating of any leased or leasable area (specifically excluding any common or public areas of the Building or any base Building systems or structures), unless the Leased Premises are comparably painted or decorated;

3. any tenant work performed or alteration of specific space leased to Tenant or any other tenants or occupants of the Building (specifically excluding any common or public areas of the Building or any base Building systems or structures), whether such work or alteration is performed for the initial occupancy by such tenant or occupant or thereafter, unless such tenant work or alterations are similarly provided to, or benefit generally, Tenant;

4. any cash or other consideration paid by Landlord to a specific Tenant on account of, with respect to or in lieu of the tenant work or alterations described in clause (3) above;

5. ground rent (except with respect to any portion thereof relating to the pass-through of any operating expenses or real estate taxes incurred by the ground lessor;

6. depreciation or amortization of any Building improvements, except with respect to any Permitted Capital Expenditures;

7. cost of any repairs required as a direct result of the gross negligence of Landlord (provided that such repairs would not have been required but for such gross negligence) or required in order to cure any violations existing as of the Term Commencement Date of any laws relating to the common area of the Building;

8. costs of enforcement of leases relating to rent or other items that do not benefit Tenant, tenants or the Building generally or the operation of the Building;

9. principal and interest on indebtedness or any costs of financing or refinancing the building, the building equipment, or the building improvements, replacements, or repairs, except for interest (at a fair market rate) on Permitted Capital Expenditures;

10. management fees in excess of three percent (3%) (or the percent management fee paid in the Base Year by Landlord, if less) of gross rental income or collections (as may be grossed-up to a full service basis if any expenses are separately paid by any tenants of the building);

11. compensation paid to officers or executives of the Landlord;

12. leasing commissions, advertising and promotional expenses;

13. accounting, legal, or other professional or consulting costs or fees, whether internal or paid to third parties, except to the extent related to the operation, management or maintenance of the Building (excluding legal fees incurred in connection with negotiation of leases in the Building or in connection with disputes with tenants of the Building), or in connection with the preparation of expense statements for the tenants of the Building;

14. the cost of repairs incurred by reason of fire or other casualty or condemnation to the extent that either (1) Landlord is compensated therefor through proceeds of insurance or condemnation awards; (2) Landlord would have been compensated therefor had Landlord obtained the insurance coverage against such fire or casualty required hereunder to be carried by Landlord; or (3) Landlord is not fully compensated therefor due to the coinsurance provisions of its insurance policies on account of Landlord’s failure to obtain the insurance required hereunder to be carried by Landlord;

15. the cost of future capital improvements to the Building, except with respect to Permitted Capital Expenditures;

16. the cost to provide after Building Hours HVAC or electricity costs to a specific tenant of the Building, if such tenant is charged separately for such use (other than through Operating Costs pass-throughs);

17. Landlord’s cost incurred in connection with providing services to a particular tenant of the Building for which Landlord is entitled to be reimbursed by such tenant under its lease (except for costs that are reimbursable to Landlord in the form of pass-throughs of operating costs), but only to the extent such services are not standard for the Building and are not available to Tenant without specific additional charge therefor and Landlord is directly reimbursed therefor from such tenant;

18. expenses incurred by Landlord with respect to space located in another building of any kind or nature in connection with the leasing of space to a specific tenant in the Building (e.g., buy-out of a tenant’s pre-existing lease as a tenant concession);

19. any amounts payable by Landlord by way of indemnity or damages as a result of Landlord’s default under this Lease or any other leases in the Building, but only to the extent Landlord would not have incurred such amount but for such default (it being understood that any amount was paid by Landlord that represents the reimbursement of a cost which if paid directly by Landlord would have been included in Operating Costs shall be included in Operating Costs);

20. any fine, interest or penalty incurred as a result of Landlord’s late payment of Taxes or utility bills, unless (a) Landlord acted in good faith and made reasonable efforts in contesting the amount of such payments which, if such contest were successful, would have reduced Operating Costs or Taxes or would otherwise have been beneficial to Tenant, or (b) Tenant is not current on all payments of any Rent due hereunder at the time such payments are due and at the time any such fines, penalties, interest are incurred by Landlord;

21. any improvement installed or work performed or any other cost or expense incurred by Landlord in order to comply with the requirements to obtain the initial base Building certificate of occupancy (i.e., the core and shell completion certificate);

22. the profit component of any amount paid to a corporation, entity, or person which controls, is controlled by, or is in common control with Landlord for goods or services, to the extent such amount is not reasonably comparable to the amount paid for similar goods or services provided to first-class office buildings in Montgomery County, Maryland providing services similar to, and to the same level as, those provided for the Building (it being understood that for purposes of this item, “control” shall be deemed to be ownership of more than fifty percent (50%) of the legal and equitable interest of the controlled corporation or other business entity);

23. expenses solely relating to maintaining the retail space in the Building;

HOLLAND & KNIGHT LLP

24. any cost or expense for which Landlord is reimbursed by any tenant or the proceeds of any insurance policy

25. all operating expenses of the Building allocated by Landlord on a reasonable basis to the retail area of the Building;

26. costs associated with operating the parking garage for the Building; and

27. costs resulting from any defect in the physical condition of the common areas of the Building existing as of the Term Commencement Date resulting from the original construction of the common areas of the Building (specifically excluding repairs and replacements resulting from ordinary wear and tear, use, fire, casualty or vandalism), provided that Tenant delivers to Landlord written notice thereof promptly upon becoming aware thereof and in no event later than the expiration of the fifth (5^th) Lease Year.

Exhibit H, Page 2 HOLLAND & KNIGHT LLP

EXHIBIT I

Intentionally Omitted

HOLLAND & KNIGHT LLP

EXHIBIT J

FORM OF LETTER OF CREDIT

[Lending Institution Name]
[Address of Lending Institution]	Date:             ,

IRREVOCABLE STANDBY LETTER OF CREDIT NO.                     

Account Party	[Account Party’s Name]
	[Account Party Address]
In favor of:	Beneficiary
	[Beneficiary Name], its successors and assigns
	[Beneficiary Address]

AMOUNT	EXPIRATION DATE:
USD	[Expiration Date]
[Dollar Amount] U.S. Dollars Only

Gentlemen:

We hereby establish our irrevocable letter of credit in favor of [Beneficiary Name] in the amount of USD [Numeric Dollar Amount] ([Alphabetic Dollar Amount] U.S. Dollars Only), effective immediately. Funds under this Letter of Credit are available to you by your draft at sight drawn on the [Lending Institution Name, Lending Institution Address], bearing the clause “Drawn under [Lending Institution Name] Letter of Credit No.            dated             , 200        ,” and accompanied by the following document:

Beneficiary’s signed statement stating that: “The undersigned Beneficiary is entitled to draw upon this Letter of Credit pursuant to the terms of that Lease dated [Lease Date] for premises at [Premises Address] between [Tenant’s name] and [Landlord’s Name], as such Lease may have been modified or amended to date. The undersigned Beneficiary hereby makes demand for the payment of             of the Letter of Credit.”

Such statement shall be conclusive as to such matters and we will accept such statement as binding and correct without having to investigate or having to be responsible for the accuracy, truthfulness or validity thereof or any part thereof and notwithstanding the claim of any person to the contrary.

Partial draws are permitted hereunder. This Letter of Credit is transferable by Beneficiary, provided that such transfer does not violate any rule, order or regulations of any applicable governmental entity. Any such transfer of this Letter of Credit shall be subject to our receipt of Beneficiary’s instructions in the form attached hereto as Exhibit A, accompanied by the original of this Letter of Credit and any amendments thereto. The costs and expenses of such transfer shall be the expense of the Account Party.

This Letter of Credit sets forth in full the terms of our undertaking and such undertaking shall not in any way be modified, amended, or amplified by reference to any document(s), instrument(s), contract(s), or agreement(s) referred to herein or in which this Letter of Credit relates, and any such reference shall not be deemed to incorporate herein by reference any document(s), instrument(s), contract(s), or agreement(s).

It is a condition of this Letter of Credit that it shall be deemed automatically extended without amendment for one year from the present or any future expiration date of this Letter of Credit unless at least sixty (60) days prior to the then current expiration date we notify the Beneficiary by certified mail, return receipt requested that we elect not to consider this Letter of Credit renewed for such additional period. If such notice is given, then during such notice period (i.e., the at least sixty (60) day period commencing on the date of such notice and ending with the then applicable expiration date of this Letter of Credit), this Letter of Credit shall remain in full force and effect and Beneficiary may draw up to the full amount of the sum then remaining under this Letter of Credit when accompanied by a statement described above in the first paragraph of this Letter of Credit.

We hereby agree with you that drafts drawn and presented in compliance with the terms of this Letter of Credit will be honored by us promptly (but in no event later than the close of business on the third (3^rd) business day after the date of presentment in immediately available funds if presented at our offices designated below for presentment on or before the expiration date of this Letter of Credit, as such date may be extended pursuant to the terms hereof. Presentment of this Letter of Credit may be made at the following location(s): [Address(s) for presentment]

Unless otherwise stated in this Letter of Credit, this Letter of Credit is subject to The Uniform Customs and Practice for Documentary Credits (1993 Revision), International Chamber of Commerce Publication No. 500, which is incorporated by reference herein.

Very truly yours,

Authorized Signature

NOTE: Landlord and Tenant hereby agree that, upon Landlord’s written request, Tenant shall cause the Letter of Credit to name Landlord and any mortgagee of Landlord (designated by Landlord) as beneficiaries under the Letter of Credit, with each such beneficiary having the authority to present the Letter of Credit and draw upon the Letter of Credit, without needing the other beneficiary to join in such presentment or receive the proceeds of any draw made upon the Letter of Credit.

HOLLAND & KNIGHT LLP

EXHIBIT K

LOCATION AND PARAMETERS OF PERMITTED EXTERIOR SIGNAGE

HOLLAND & KNIGHT LLP

LANDLORD

¨ APPROVED

x APPROVED AS NOTED For Concept Only

¨ NOT APPROVED

¨ REVISE & RESUBMIT

¨ PROCESS FOR CONSTRUCTION

BY    KMB    DATE 12-7-06

TENANT                             

BY                DATE            

“LANDLORD’S APPROVAL OF TENANT DRAWINGS SHALL IN NO WAY BE CONSTRUED TO ABROGATE OF MODIFY THE TERMS OF THE LEASE AGREEMENT.”

Approval is subject to submittal of all details for final review and approval, and obtaining approval of local jurisdiction for placement of the sign. The Sign shall be scaled for its location, mounting details shall be appropriate for the building, and the lighting shall be studied to provide complete coverage.

EXHIBIT L

Intentionally Omitted

HOLLAND & KNIGHT LLP

EXHIBIT M

CLEANING SPECIFICATIONS

I. TENANT’S OFFICE AREA - NIGHTLY (MONDAY-FRIDAY)

A. All waste baskets and ashtrays will be emptied and wiped clean. Waste containers shall be washed as necessary and lined with plastic liners.

B. Desk tops, furniture and horizontal surfaces up to 72” high will be dusted.

C. Uncarpeted floor areas will be dust mopped with a treated mop. Waxed floors will be damp mopped to remove spill marks.

D. All carpeted areas will be power vacuumed. Accessory tools will be used in hard-to-get areas.

E. Walls, doors, hardware, light switches, painted wood-work and partition glass will be kept free of marks and smudges.

F. Lights will be turned off (except where otherwise designated) and doors will be locked.

G. All windows will be locked and venetian blinds adjusted.

II. TENANT’S OFFICE AREA - WEEKLY (More often as needed)

A. Composition floors will be spray buffed to maintain appearance.

B. Glass partitions, door and door hardware will be cleaned and bright work polished.

C. Air conditioning and heating grills will be kept free of dust.

D. Where needed, as needed, carpets will be spot cleaned to remove stains.

III. TENANT’S OFFICE AREA - QUARTERLY

A. Composition floors will stripped, scrubbed, waxed and buffed.

B. High Dusting (above 72”) with a treated cloth.

C. Venetian blinds will be dusted with a treated cloth.

IV. REST ROOMS AND COMMON AREAS - NIGHTLY (MONDAY-FRIDAY)

A. Clean all fixtures, including mirrors, lights, pipes, commode and urinals with a germicidal detergent.

B. Clean basins and hardware with a soft cloth using a non-abrasive cleaner. Dry with a soft cloth.

C. Clean all bright work.

D. Special care will be given to cleaning rims, tops and bottoms of toilet seats, bases, using a germicidal detergent.

E. Refill paper towel and tissue holders and soap dispensers.

F. Wet mop and deodorize floors with disinfectant.

V. REST ROOMS AND COMMON AREAS - MONTHLY

A. Power scrub tile floors and buff with no-slip wax.

B. Dust ceiling vents.

C. Wax floors.

VI. CORRIDORS, STAIRWAYS AND ELEVATORS - NIGHTLY (MONDAY-FRIDAY)

A. All uncarpeted areas will be dust mopped with a treated mop. Marks and spills will be removed.

B. All carpeted areas will be power vacuumed with particular attention to the edges, corners and hard-to-get areas.

C. Water fountains will be cleaned with a disinfectant and polished.

D. Walls, light switches, doors and painted woodwork will be kept free of marks and smudges.

E. Elevators will be cleaned thoroughly, including entrance sills and bright work. The floors will be vacuumed and spot cleaned as necessary.

F. Elevator entrance doors and frames will be wiped and kept free of finger marks and smudges.

G. Stairwells, railings and walls to be kept clean of smudges.

H. Fire bells and other horizontal surfaces will be dusted.

VII. CORRIDORS, STAIRWAYS AND ELEVATORS - AS NEEDED

A. Uncarpeted floors will be stripped, scrubbed and refinished as necessary to remove wax build-up and maintain appearance.

B. Carpets will be spot cleaned to remove stains.

VIII. ENTRANCE LOBBIES - NIGHTLY (MONDAY-FRIDAY)

A. Lobby floors shall be mopped and or scrubbed with a neutral cleaner and buffed as necessary to maintain appearance.

B. Glass window and door areas will be cleaned with glass cleaner.

C. Architectural surfaces and bright work will be cleaned and polished.

IX. ENTRANCE LOBBIES - WEEKLY

A. Dust, or whenever necessary, spot clean walls in main lobbies and elevator lobbies to a height of 72”.

X. TENANT LUNCHROOMS - NIGHTLY (MONDAY-FRIDAY)

A. All tables and counter tops will be wiped clean.

B. Ashtrays will be emptied and wiped clean.

C. Trash will be collected and placed in designated areas.

D. Flooring will be cleaned as needed.

XI. MISCELLANEOUS

A. Elevator carpets will be shampooed as requested.

B. All janitor storage areas will be kept tidy and clean. No water will be left running, sinks left with standing water, or lights left on in the closets. All mops, sponges and other reusable cleaning implements will be cleaned off, rinsed and wrung out each night. Sour or mildewed mop heads or sponges will be replaced.

C. Exterior windows shall be cleaned two (2) times each year.

D. The HVAC filters will be checked monthly and changed quarterly, and the VAV will be checked monthly.

NOTE: Tenant shall be entitled, at its sole cost, to have cleaning services provided on Monday mornings and such additional cleaning services that Tenant may reasonably request and Landlord reasonably approve.

HOLLAND & KNIGHT LLP

EXHIBIT N

RIGHT OF FIRST OFFER

A. In the event that any office space, comprising a single contiguous block of space in excess of seven thousand five hundred (7,500) rentable square feet, in the Building becomes or is reasonably anticipated by Landlord to become vacant and freely available for Landlord to lease to Tenant during the Term (following the expiration or earlier termination of an initial letting of any space that is currently vacant, including any renewal or extension periods for such letting), except as provided below, Landlord shall provide Tenant with written notice (“Availability Notice”) of the availability of such space (the “ROFO Space”). Provided that (i) no default has occurred under this Lease and remains uncured; (ii) no more than two (2) Defaults have occurred during the thirty-six (36) month period prior to the Availability Notice; (iii) Tenant has not assigned this Lease (other than to a Qualified Tenant Affiliate) and is then occupying sixty percent (60%) of the Leased Premises; (iv) as of the Takeover Date (hereinafter defined), at least three (3) years remain on the Term of this Lease; and (v) Tenant provides to Landlord written notice (“Expansion Notice”), within ten (10) days after receipt of Landlord’s Availability Notice, of Tenant’s desire to lease the ROFO Space, Tenant shall have the first opportunity (the “Right of First Offer”) to negotiate with Landlord, for the ten (10) day period immediately following Tenant’s delivery of such Expansion Notice, the terms on which it will lease the ROFO Space (provided, however, that in no event shall the Minimum Rent per square foot of rentable area of the ROFO Space be less than an amount equal to ninety percent (90%) of the Minimum Rent per square foot which Tenant is obligated to pay for the “Leased Premises” at the 7255 Building in effect during the calendar month in which Tenant shall occupy the ROFO Space) and secure a lease (the “ROFO Lease”) executed and delivered by Landlord and Tenant evidencing such terms. In the event that (i) Landlord and Tenant fail to agree on such terms and execute and deliver a ROFO Lease within such ten (10) day period, or (ii) Tenant fails to deliver the Expansion Notice (or otherwise fails to comply with any other condition to the exercise of its right of first offer) within the time period set forth above, Tenant’s right of first offer to lease the ROFO Space pursuant to this Exhibit N shall terminate, and Landlord shall have the right to lease the ROFO Space at any time to any other person or entity upon any terms and conditions which Landlord desires, in its sole discretion. Time is of the essence with respect to the provisions of this Exhibit N.

B. If Tenant leases the Outside ROFO Space, within the time and in the manner provided in this Section Exhibit N, then as of the Takeover Date (as defined below), then (i) Tenant shall commence paying Rent on the ROFO Space; (ii) the Minimum Rent per square foot of rentable area of the ROFO Space shall be equal to the amount set forth in the ROFO Lease; (iii) the ROFO Space shall be delivered to Tenant in its “as is” condition; and (iv) the Takeover Date shall be the date the initial tenant’s lease of the ROFO Space has expired and Landlord has delivered such space to Tenant.

C. Notwithstanding anything to the contrary contained in this Exhibit N, Landlord and Tenant agree that the foregoing right of first offer shall be subject to any and all contractual obligations of Landlord that exists in any leases in effect as of the date the Availability Notice would otherwise be delivered to Tenant, including without limitation any expansion rights and rights of first offer, negotiation or refusal with respect to such space possessed by any tenant in the Building at such time. In addition, the foregoing right of first offer shall be personal to OPNET Technologies, Inc. and can not be exercised by any assignee (other than a Qualified Tenant Affiliate), subtenant or any other person or entity.

D. In the event that Tenant leases the ROFO Space from Landlord within the time and manner provided in this Exhibit N, and Landlord is unable to deliver possession of such space to Tenant for any reason or condition beyond Landlord’s control, including, without limitation, the failure of an existing tenant to vacate such space, Landlord, its agents and employees, shall not be liable or responsible for any claims, damages or liabilities in connection therewith or by reason thereof.

HOLLAND & KNIGHT LLP

EX-10.14

Exhibit 10.14

Loan Modification Agreement

This Loan Modification Agreement (“Agreement”) is made this 20^th day of June, 2007, by and between BANK OF AMERICA, N.A. organized and existing under the laws of the United States of America with offices at 100 Federal Street, Boston Massachusetts 02110 (the “Bank”) and OPNET TECHNOLOGIES, INC. a Delaware Corporation, with an address at 7255 Woodmont Avenue, Bethesda Maryland 20814 (the “Borrower”).

RECITALS

WHEREAS, Reference is made to a certain loan arrangement (the “Loan Arrangement”) between the Bank and the Borrower evidenced by, among any other documents, instruments, and agreements, (i) a certain Promissory Note, dated June 10, 2005 in favor of the Bank in the original principal amount of Two Million Six Hundred Thousand ($2,600,000.00) Dollars as amended from time to time (the “Note”) and (ii) a Loan Agreement dated June 10, 2002, between the Borrower and the Bank (“Loan Agreement”) and (iii) a Security Agreement dated June 10, 2002 as amended as amended from time to time (the “Security Agreement”) and (iv) UCC-1 Financing Statement (“Financing Statement”) bearing file number 2219573 and filed with the Delaware Secretary of State. The Note, the Loan Agreement, and the Security Agreement and the Financing Statement together with any and all other instruments, documents contracts or agreements which evidence, secure or otherwise relate to the Borrower’s obligations with respect to the Loan Arrangement, all as modified by any prior amendment agreements are herein collectively referred to as the “Loan Documents.”

WHEREAS, the Borrower has requested that the Bank agree to the modification of the Loan Documents to, among other things, the maturity date of the Note as hereinafter described, and the Bank has so agreed, but only upon the terms and conditions set forth hereinafter.

AGREEMENT

NOW THEREORE, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, it is hereby agreed by the Bank and the Borrower that the Loan Documents are amended effective as of June 30^th, 2007 (the “Effective Date”), as follows:

1. The above referenced Recitals are true and correct and are incorporated herein by reference and made a part hereof. Capitalized terms used herein and not otherwise defined shall have the same meaning herein as in the Loan Agreement.

2. The Note is amended as follows:

(a) Delete references to $2,600,000 and Two Million Six Hundred Thousand Dollars and substitute therefore $2,000,000 and Two Million dollars wherever context requires.

(b) Delete the paragraph entitled “PAYMENT” and to substitute the following therefore:

“PAYMENT”. Borrower will pay this loan in one payment of all outstanding principal plus all accrued unpaid interest on June 30, 2008 (the “Maturity Date”). In addition, Borrower will pay regular monthly payments of all accrued unpaid interest due as of each payment date, beginning July 31^st 2007, with all subsequent interest payments to be due on the same day of each month after that until the Maturity Date. Unless otherwise agreed or required by

applicable law, payments will be applied first to any accrued unpaid interest; then to any late charges, and then to any unpaid collection costs. The annual interest rate for this Note is computed on a 365/360 basis; that is, by applying the ratio of the annual interest rate over a year of 360 days multiplied by the outstanding principal balance, multiplied by the actual number of days the principal balance is outstanding. Borrower will pay Lender at Lenders address shown above or at such other place as the Lender may designate in writing.”

3. The Loan Agreement is amended as follows:

(a) Delete only that portion of Section 2 of the Loan Agreement entitled Loan and in its place substitute the following:

“2. LOANS.

A. Loans. Bank hereby agrees to make (or has made) one or more loans or financial accommodations to Borrower in the aggregate principal face amount of $2,000,000. The obligation to repay the loans is evidenced by a promissory note or notes originally dated June 10, 2002 and as amended from time to time (the promissory note or notes together with any and all renewals, extensions or rearrangements thereof being hereafter collectively referred to as the “Note.”

The balance of Section 2 shall remain intact except as amended herein.

3. Amend Section 2(iv) of the Loan Agreement entitled Letter of Credit Subfeature to reflect that the aggregate amount of Letters of Credit at any one time shall not exceed $2,000,000 and to delete any reference to any other amount contained in that section.

3. In all other respects, the Loan Documents, including, but not limited to, the Note, the Loan Agreement, and the Security Agreement are hereby confirmed, reaffirmed and ratified and all terms and provisions not amended hereby shall remain in full force and effect. To the extent that any term and condition of any Loan Document is inconsistent with the terms and provisions hereof, such Loan Document is hereby amended to reflect the modifications and amendments set forth in this Agreement.

4. To induce the Bank to enter into this Agreement, the Borrower represents and warrants that (a) all the representations and warranties contained in the Loan Documents, after giving effect to the amendments and modifications contemplated hereby are true and correct on and as of the date hereof as though made on and as of the date hereof; (b) as of the date hereof, the Borrower has no defenses, counterclaims, offsets or other claims against the Bank or any of its officers, employees, agents, attorneys, predecessors, affiliates, or other representatives of any nature, relating to the Loan Arrangement; (c) no default or breach under any of the Loan Documents after giving effect to the amendments contemplated hereby, and no event which the passage of time or giving of notice or both would constitute such a default or breach, exists on the date hereof; and (d) the security interest granted to the Bank in the Loan Documents remains a first perfected security interest in the Collateral and neither Borrower nor any guarantor has done anything to impair said security interest and Borrower will take whatever steps Bank deems reasonably necessary to protect and preserve the said security interest.

5. This Agreement does not constitute a discharge, release or waiver of any of the Borrower’s or any Guarantor’s obligations or liabilities under the Loan Documents, or any other agreements to which the Bank and the Borrower and any guarantor are parties, all of which remain in full force and effect.

2

MISCELLANEOUS

1. This Agreement and the rights and obligations of the parties hereunder shall be deemed to be a document executed under seal and shall be construed and interpreted in accordance with the laws of the State of Maryland (excluding the laws applicable to conflicts or choice of law).

2. This Agreement shall be binding upon and inure to the benefit of the parties hereto, their respective administrators, successors and assigns. This Agreement may only be amended in writing. This Agreement may be signed in as many counterparts as necessary or convenient, and by the different parties on separate counterparts, each of which, when so executed, shall be deemed an original but all such counterparts shall constitute but one and the same agreement. Article and paragraph headings are for reference only and shall not affect the interpretation or meaning of any provisions of this Agreement. If any part of this Agreement is not enforceable, the rest of the Agreement may be enforced. The Bank retains all rights, even if it makes a loan after default. If the Bank waives a default, it shall not be construed as a waiver of any future default.

3. The Borrower shall reimburse the Bank for any reasonable costs and attorneys’ fees incurred by the Bank in connection with the execution of this Agreement and in connection with the enforcement or preservation of any rights or remedies under the Loan Documents. Further the Borrower indemnifies and holds the Bank harmless from any loss, liability, damages, judgments, and costs of any kind relating to or arising directly or indirectly out of (a) this Agreement or any document, instrument or agreement required hereunder, (b) any credit extended or committed by the Bank to the Borrower under the Loan Documents, and (c) any litigation or proceeding related to or arising out of this Agreement, any Loan Document evidencing and/or securing any such credit. This indemnity includes but is not limited to, attorneys’ fees (including the allocated cost of in-house counsel). This indemnity extends to the Bank, its parent, subsidiaries and all of their directors, officers, employees, agents, successors, attorneys and assigns. This indemnity shall survive repayment of the Borrower’s obligations to the Bank. All sums due to the Bank under this paragraph shall be obligations of the Borrower, due and payable immediately without demand.

IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed as of the Effective Date.

WITNESSES:			BANK: BANK OF AMERICA, successor by merger to Fleet National Bank
	/s/ Michael Shuhy		By:	/s/ John Desmond
	Print Name:	Michael Shuhy		John Desmond
				Its:	Managing Director
				(Duly Authorized)
			BORROWER: OPNET TECHNOLOGIES, INC.
			By:	/s/ Marc A. Cohen
			Print Name:  Marc A. Cohen
				Its:	CEO
				(Duly Authorized)

3

EX-21

Exhibit 21

Subsidiaries of the Registrant

OPNET Analysis, Inc. (formerly MIL 3 Analysis, Inc.), a corporation organized under the laws of the State of Delaware.

OPNET Technologies Societe par Actions Simplifiee, a corporation organized under the laws of France.

OPNET Technologies Limited, a corporation organized under the laws of England and Wales.

OPNET Technologies b.v.b.a, (formerly WDM NetDesign, b.v.b.a), a corporation organized under the laws of Belgium.

OPNET Technologies Pty Limited, a corporation organized under the laws of Australia.

OPNET Technologies, GmbH, a corporation organized under the laws of Germany.

OPNET Technologies Asia Pte. Ltd., a corporation organized under the laws of Singapore.

EX-23

Exhibit 23

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the incorporation by reference in Registration Statements No’s. 333-81504 and 333-4430 on Form S-8 of our reports relating to the consolidated financial statements of OPNET Technologies, Inc. and its subsidiaries (which report expresses an unqualified opinion and includes an explanatory paragraph relating to the change in method of accounting for uncertain tax positions to conform to Financial Accounting Standards Board (FASB) Interpretation No. 48, Accounting for Uncertainty in Income Taxes, and the change in method of accounting for share-based payments to conform to FASB No. 123 (revised 2004), Share Based Payment), and the effectiveness of OPNET Technologies, Inc.’s internal control over financial reporting, dated June 9, 2008, appearing in this Annual Report on Form 10-K of OPNET Technologies, Inc. and its subsidiaries for the year ended March 31, 2008.

/s/ DELOITTE & TOUCHE LLP

McLean, Virginia

June 9, 2008

EX-31.1

Exhibit 31.1

Certification of the Chief Executive Officer Pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended

I, Marc A. Cohen, certify that:

1. I have reviewed this annual report on Form 10-K of OPNET Technologies, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Dated: June 9, 2008	By:	/s/     MARC A. COHEN
		Marc A. Cohen
		Chairman and Chief Executive Officer (Principal Executive Officer)

EX-31.2

Exhibit 31.2

Certification of the Chief Financial Officer Pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended

I, Mel F. Wesley, certify that:

1. I have reviewed this annual report on Form 10-K of OPNET Technologies, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f) for the registrant and we have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Dated: June 9, 2008	By:	/s/     MEL F. WESLEY
		Mel F. Wesley
		Vice President and Chief Financial Officer (Principal Financial and Accounting Officer)

EX-32.1

Exhibit 32.1

Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

In connection with this annual report on Form 10-K of OPNET Technologies, Inc. (the “Company”), I, Marc A. Cohen, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: June 9, 2008	By:	/s/     MARC A. COHEN
		Marc A. Cohen
		Chairman and Chief Executive Officer

EX-32.2

Exhibit 32.2

Certification of Chief Financial Officer pursuant to U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

In connection with this annual report on Form 10-K of OPNET Technologies, Inc. (the “Company”), I, Mel F. Wesley, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: June 9, 2008	By:	/s/     MEL F. WESLEY
		Mel F. Wesley
		Vice President and Chief Financial Officer