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 December 31, 2007

or

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

For the transition period from              to             

Commission File Number 0-27084

CITRIX SYSTEMS, INC.

(Exact name of registrant as specified in its charter)

Delaware	75-2275152
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

851 West Cypress Creek Road

Fort Lauderdale, Florida 33309

(Address of principal executive offices, including zip code)

Registrant’s telephone number, including area code: (954) 267-3000

Securities registered pursuant to Section 12(b) of the Act:

Common Stock, $.001 Par Value	The NASDAQ Stock Market LLC
(Title of each class)	(Name of each exchange on which registered)

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.  ¨

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

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

Indicate by checkmark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).    Yes  ¨    No  x

The aggregate market value of Common Stock held by non-affiliates of the registrant computed by reference to the price of the registrant’s Common Stock as of the last business day of the registrant’s most recently completed second fiscal quarter (based on the last reported sale price on The Nasdaq Global Select Market as of such date) was $6,026,508,654. As of February 20, 2008 there were 185,289,377 shares of the registrant’s Common Stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

The registrant intends to file a proxy statement pursuant to Regulation 14A within 120 days of the end of the fiscal year ended December 31, 2007. Portions of such proxy statement are incorporated by reference into Part III of this Annual Report on Form 10-K.

CITRIX SYSTEMS, INC.

TABLE OF CONTENTS

Part I:
	Item 1	Business	3
	Item 1A.	Risk Factors	10
	Item 1B.	Unresolved Staff Comments	23
	Item 2	Properties	23
	Item 3	Legal Proceedings	23
	Item 4	Submission of Matters to a Vote of Security Holders	24
Part II:
	Item 5	Market for Registrant’s Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities	25
	Item 6	Selected Financial Data	26
	Item 7	Management’s Discussion and Analysis of Financial Condition and Results of Operations	27
	Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	44
	Item 8	Financial Statements and Schedules	45
	Item 9	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	45
	Item 9A.	Controls and Procedures	46
	Item 9B.	Other Information	46
Part III:
	Item 10	Directors, Executive Officers and Corporate Governance	48
	Item 11	Executive Compensation	48
	Item 12	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	48
	Item 13	Certain Relationships and Related Transactions, and Director Independence	48
	Item 14	Principal Accounting Fees and Services	48
Part IV:
	Item 15	Exhibits, Financial Statement Schedules	49

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PART I

This Annual Report on Form 10-K contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Actual results could differ materially from those set forth in the forward-looking statements. Certain factors that might cause such a difference are discussed in this report, including in Part I, Item 1A “Risk Factors” beginning on page 10.

ITEM 1. BUSINESS

General

Citrix Systems, Inc. is a Delaware corporation founded on April 17, 1989. We design, develop and market technology solutions that allow applications to be delivered, supported, and shared on-demand with high performance, enhanced security, and improved total cost of ownership, or TCO. We market and license our products through multiple channels such as value-added resellers, or VARs, channel distributors, system integrators, or SIs, independent software vendors, or ISVs, our Websites and original equipment manufacturers, or OEMs.

Business Overview

Our goal is to enable a world where virtually anyone can work from almost anywhere. In our drive to achieve our vision, we have been an innovator in the information technology, or IT, industry for more than a decade, since the completion of our initial public offering in December 1995.

Our three main waves of innovation have had a significant impact on the IT industry:

• Our first wave of innovation, in the mid-1990s, enabled the virtualization of the Windows desktop with our WinFrame^® product. This in turn enabled thin-client computing.

• Our second wave of innovation, from the late 1990s to the early 2000s, focused on bringing the advantages of application virtualization and IT centralization to businesses with our MetaFrame^® line of presentation server products. When an application is virtualized, the business logic of the application runs on a central server, and only screen pixels, keystrokes, and mouse movements – not actual data – are transmitted via an encrypted channel to the user’s computer. Keeping applications under the centralized control of IT administrators enhances data security and reduces the costs of managing separate clients and applications on every user’s desktop. Through our application virtualization solutions, we became a market leader in server-based computing.

• Our third wave of innovation is ongoing, focusing on a unique and holistic approach to solving application delivery problems, and equipping business to change on-demand. Since 2002, we have transformed Citrix from a company with one product line, to one that offers a broad portfolio of solutions that make people more productive through on-demand access to applications from virtually anywhere. In 2007, we took a major step forward in this wave of innovation by acquiring XenSource, Inc., or XenSource, a privately held leader in enterprise-grade virtual infrastructure solutions. This acquisition moves Citrix, a pioneer in the application virtualization market, into adjacent server and desktop virtualization markets. By acquiring XenSource, Citrix is positioned as the only company to offer organizations an end-to-end application delivery infrastructure that leverages the method of application, desktop and server virtualization suited for the dynamic delivery of applications to virtually any user.

During this period, our revenues have grown from $527.4 million in 2002 to $1.39 billion in 2007.

Today, we design, develop, market, sell and support multiple products in an IT market category called Application Delivery Infrastructure. Our product family brand, announced in early 2008, for all our infrastructure solutions is the Citrix Delivery Center. These products include solutions for application, server and desktop virtualization, Web application optimization, application performance monitoring, branch office application delivery and wide area network, or WAN, optimization, secure sockets layers/virtual private network, or SSL/VPN, gateways, and Internet Protocol, or IP, telephony.

We also offer our GoTo services - GoToMyPc^®, GoToMeeting^®, GoToAssist^®, GoToWebinar^™ and all their variants, collectively called Online Services - through our Online Services Division.

Products

Citrix Delivery Center is designed to offer comprehensive solutions across all dimensions of application, server and desktop virtualization as well as application and network optimization. In many cases, IT organizations have not taken a holistic, architectural approach to application delivery. Instead they have taken an incremental approach creating IT systems for delivering applications that are too static, too complex, and costly to maintain. With the realities of slow-growing technology budgets and fast-changing business needs the strategic, architectural approach to application, server and desktop delivery that we offer has the capacity to enable business change.

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We package and market complete application, server, desktop virtualization solutions and related services as Citrix Delivery Center. Internally, we organize our products into four principal groupings: Delivery Systems, Virtualization and Management Systems, Online Services and Technical Services. This overview provides a discussion of the major products and service offerings in these areas.

Delivery Systems

Our Delivery Systems are focused on developing and marketing technologies, solutions and products to build on our leadership in application virtualization, application networking and desktop virtualization.

Application Virtualization

• Citrix XenApp^™, the new name for Citrix Presentation Server™, is a widely-deployed application virtualization solution that runs the business logic of applications on a central server, transmitting only screen pixels, keystrokes, and mouse movements – no actual data – via an encrypted channel to users’ computers. Keeping applications under the centralized control of IT administrators enhances data security and reduces the costs of managing separate clients and applications on every user’s desktop. XenApp runs on virtually any platform, from Microsoft® Windows Server 2003 x64 Edition to Windows Server 2003, Windows® 2000 Server and UNIX®. We offer XenApp as a stand alone product in different editions. The Platinum Edition contains the most features of any version and adds critical capabilities for application performance monitoring, SSL VPN remote access with SmartAccess control and single sign-on application security. In early 2008, the Citrix Presentation Server product was re-branded as the XenApp product.

• Access Essentials™ is a secure, remote access product with simple centralized management of information resources for organizations with up to 75 users. This relatively cost-effective software turns a Windows Server into the secure access point for client-server applications, files and internal Websites, and quickly delivers on-demand access to users at a convenient location. Access Essentials both enables access and controls it, with wizard-driven installation and operation.

Application Networking

• Citrix® NetScaler® Web application delivery solutions are purpose built appliances that accelerate application performance up to five times, while simultaneously reducing datacenter costs. They provide visibility into the end-user application experience and comprehensive Web application security in concert with advanced traffic management. Citrix NetScaler is an ideal solution for any enterprise seeking accelerated Web application performance, improved Web application security and increased application availability.

• Citrix Access Gateway™ is an SSL VPN that securely delivers applications with policy-based SmartAccess control. Users have easy-to-use secure access to the applications and data they need to be productive. Organizations can cost effectively extend access to datacenter resources from outside the office, while maintaining unprecedented control through comprehensive SmartAccess policies.

• Citrix® WANScaler™ solutions provide high-performance application delivery to branch office users. WANScaler accelerates application performance across wide area networks, or WANs. With WANScaler in the network, end-users in the branch office experience local area network-line application performance over the WAN, which means less time waiting for slow applications and more time using the application. Citrix WANScaler accelerates applications to branch offices of all sizes, datacenters, and mobile workers. The AutoOptimizer Engine, which serves as the cornerstone of the WANScaler architecture, offers flexible deployment options. The WANScaler client software accelerates remote users in home offices and on the road, while users in larger branch offices are supported with WANScaler appliances.

Desktop Virtualization

• Citrix® XenDesktop™, announced in October 2007 and scheduled to ship in the first half of 2008, is designed to overcome the challenges of cost, complexity and user experience that have prevented virtual desktops from becoming a mainstream enterprise reality in the past. Citrix XenDesktop will be a fully integrated desktop delivery system, moving beyond the limitations of existing virtual desktop infrastructure, or VDI, point solutions to ensure the simple, secure, fast delivery of Windows desktops to any office worker over any network. Citrix XenDesktop will combine a powerful desktop delivery controller, based on Citrix Desktop Server™ with native ICA® protocol support, Xen virtualization infrastructure for hosting any number of virtual desktops in the datacenter, and virtual desktop provisioning to stream a single desktop image on-demand to multiple virtual machines in the datacenter, based on Citrix Provisioning Server™.

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Virtualization and Management Systems

Our Virtualization and Management Systems are focused on developing and marketing technologies and solutions and products for server virtualization, and application performance monitoring.

Server Virtualization

• Citrix®XenServer™ is an enterprise-class platform for managing server virtualization in the datacenter as a flexible aggregated pool of computing and storage resources. Based on the high-performance Xen virtualization engine, Citrix XenServer combines comprehensive server virtualization capabilities with scalability, performance and ease-of-use. The product line ranges from Citrix XenServer Express Edition, a single-server solution available for free download, to the more comprehensive Citrix XenServer Enterprise Edition, formerly XenEnterprise. In early 2008, we announced XenServer Platinum edition, which addresses both virtual and physical servers.

• Citrix Provisioning Server™ enables IT organizations to dynamically stream datacenter and desktop operating systems and workloads to both virtual and physical machines from a central location. The solution enables more agile and cost-effective delivery of applications and desktops, and complements XenServer.

Application Performance Monitoring

• Citrix® EdgeSight® for Endpoints is an agent-based monitoring solution that provides real-time visibility from the end-user perspective to the performance of virtually any application.

• Citrix EdgeSight for XenApp is an agent-based monitoring solution that provides real-time visibility from the end-user perspective to the performance of applications delivered by XenApp.

In 2008, we expect to add a key new product to Citrix Delivery Center which will allow customers to orchestrate communications between multiple Citrix Delivery Center products, called Citrix Workflow Studio. It will allow a simpler and faster integration of Citrix products as well as support third-party solutions.

Online Services

Online Services is focused on developing and marketing Web-based access, support and collaboration software and services.

• GoToMyPC® is an online, managed service that provides secure, remote access to Windows® PC desktops from virtually any Internet-connected computer. GoToMyPC, which sets up easily with a secure encrypted connection, enables individuals to remotely use any resources hosted on their desktop just as though they were sitting in front of their PC. GoToMyPC® Pro, tailored for the needs of professionals and small offices, supports up to 20 PCs, rolls out secure remote access for multiple users in minutes, and features an administration Website in which managers can add, suspend and delete users and run usage reports.

• GoToMeeting® is an online, easy-to-use, secure and cost-effective solution for online meetings, training sessions and collaborative gatherings. GoToMeeting allows a user with a PC and an Internet browser to easily host, attend or participate in an online meeting or session without significant training. GoToMeeting features advanced secure communication architecture that uses industry-standard SSL and meets U.S. government standards. The service offers flat-fee pricing for any number of meetings of any length, for up to 10 attendees per meeting. We also offer GoToMeeting Corporate which supports five or more organizers and 25 to 200 attendees per meeting, and features advanced secure communication architecture that uses industry-standard SSL and meets U.S. government standards.

• GoToAssist® is a leading, online, remote technical-support solution that enables organizations to provide secure, on-demand support over the Internet. GoToAssist enables support staff to view and control the desktop of a user, requires no client software or additional resources, works automatically and securely through virtually every firewall, even over dial-up connections, and integrates into existing infrastructure.

• GoToWebinar™ is a simple and affordable solution to conduct online events, such as large sales presentations and marketing events over the Internet. GoToWebinar has the capacity to scale to 1,000 attendees per event and includes such features as full-service registration with real-time reports, customized branding of Webinar materials, automated e-mail templates, free integrated voice conferencing or toll-free service, attendee polling and survey capability, Webinar dashboard to monitor audiences, and easy controls for quickly changing presenters.

Technical Services

We provide a portfolio of services designed to allow our customers and entities with which we have a technology relationship to maximize the value of our Citrix Delivery Center solutions. These services are available as a feature of our business-development program and are available for additional fees to customers.

• Consulting services’ objective is to help ensure the successful implementation of our solutions. Tested methodologies, certified professionals and best practices developed from real-world experience allow our consulting services organization to provide guidance and support to partners and customers to maximize the effectiveness of their access infrastructure implementations.

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• Technical Support Services accommodate the unique ongoing support needs of customers, our technical support services are specifically designed to address the variety of challenges facing access infrastructure environments. We offer five support-level options, global coverage and personalized relationship management.

• Product Training & Certification is a series of courses are designed to allow customers and channel members to learn new skills and effective strategies to help plan, implement and administer our products. Students may attend courses at one of approximately 240 Citrix Authorized Learning Centers™, or CALCs, worldwide.

Except for the Web-based desktop access, support and collaboration services offered by our Online Services division, our other service activities are related to post-sale technical support, pre- and post-sale consulting and product training services. Post-sale technical support is offered through Citrix-operated support centers located in the United States, Ireland, Tokyo, Hong Kong and Australia. In most cases, we provide technical advice to channel distributors and entities with which we have a technology relationship, who act as the first line of technical assistance for end-users. In some cases, end-users can also choose from a Citrix-delivered fee-based support program ranging from one-time incident charges to an enterprise-level support agreement covering multiple sites and servers. In addition, we also provide free technical advice through online support systems, including our Web-based “Knowledge Center.” For pre- and post-sale consulting, Citrix Consulting, a consulting services organization, provides both exploratory and fee-based consulting services. These services include on-site systems design and implementation services targeted primarily at enterprise-level clients with complex IT environments. Citrix Consulting is also responsible for the development of best practice knowledge that is disseminated to businesses with which we have a business relationship and end-users through training and written documentation. Leveraging these best practices enables our integration resellers to provide more complex systems, reach new buyers within existing customer organizations and provide more sophisticated system proposals to prospective customers. Citrix product training is available to businesses, end-users and partners online and through our CALCs. CALCs are staffed with instructors that have been certified by us and teach their students using Citrix-developed courseware. Online eLearning is accessible through our Website.

Technology

Our products are based on a full range of industry-standard technologies. In addition, certain of our products are also based on our proprietary technologies including our Independent Computing Architecture, or ICA, protocol.

The ICA® protocol is a core technology in application virtualization that allows an application’s graphical end-user interface to be displayed on most any client device while the application logic is executed on a central server. Centralizing application processing on the server enables centralized management of applications, end-users, servers, licenses and other system components for greater efficiency and lower cost.

Our ICA® technology also minimizes the amount of data traveling across an end-user’s network by limiting the data transported to and from the client device to encrypted screen refreshes, keystrokes and mouse clicks. This enhances access security, improves application performance, lowers bandwidth consumption, and lowers the TCO for deploying and accessing the latest, most powerful applications and information.

Our products are also based on the Extensible Markup Language, or XML. Leveraging our XML technology assures open systems interaction for customers regardless of data source or platform. By supporting XML, which is an important standard for Web services-based applications, we help customers get from the client/server world of today to the Web services environments of tomorrow.

In October 2007, in conjunction with the acquisition of XenSource, we acquired commercial hypervisor products built on the Xen® open source technology. The Xen® hypervisor is a key component of the Citrix® XenServer™ product line. See “Risk Factors,” for more information regarding the open source technology.

Customers

We take a unique and holistic approach to solving application delivery problems, and we equip businesses to change – on-demand. We do this through an expansive product portfolio that brings enormous benefits and cost savings to our customers. The strategic value that we offer brings multiple buyers to the table, each with a different perspective on the problems we solve. We believe that currently, the five primary IT buyers involved in decision-making related to application delivery solutions are:

• Strategic IT Executives – the senior executives, including chief information officers, chief technology officers and vice presidents of infrastructure, who have responsibility for ensuring all applications are delivered with the best performance, security and cost-savings.

• Network Architects – the people and groups responsible for delivering Web-based applications who have primary responsibility for the WAN infrastructure for all applications.

• IT Infrastructure Managers – the people and groups responsible for delivering Windows-based applications.

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• Desktop Operations Managers – the people and groups responsible for managing Windows Desktop environments.

• Server Operations Managers – the people and groups responsible for managing the datacenter.

In addition to these five primary IT buyers, we market and sell access and collaboration software and services to consumers, prosumers and small businesses through our Online Services division. Our Online Services division also markets and sells Web-based remote support systems to corporate help desks.

We offer perpetual and term-based software licenses for our Delivery Systems and Virtualization and Management Systems products, along with annual subscriptions for software maintenance, technical support and online services. Perpetual licenses allow our customers to use the version of software initially purchased into perpetuity while term-based licenses are limited to a specified period of time. Software maintenance gives customers the right to upgrade to software versions if and when any updates are delivered during the maintenance term. Perpetual license software products come in shrink-wrap and/or electronic-based forms to meet customer form factor requirements. Our Online Services products can be accessed over the Internet during the subscription period. Hardware appliances come pre-loaded with software for which customers can purchase perpetual licenses.

Technology Relationships

We have entered into a number of technology relationships to develop customer markets for our products for distributed Windows and non-Windows applications and to accelerate the development of our existing and future product lines.

Microsoft

Since our inception, we have had a number of license agreements with Microsoft, including licenses relating to Microsoft OS/2, Windows 3.x, Windows for Workgroups, Windows NT®, Windows CE and Internet Explorer. These agreements have provided us with access to certain Microsoft source and object code, technical support and other materials. We also have licensed our multi-user Windows NT extensions to Microsoft for inclusion in Microsoft’s NT Terminal Server, Windows 2000 Server and successor products.

In December 2004, we entered into a technology collaboration agreement with Microsoft to further enhance the overall extensibility of Windows® Terminal Server. In conjunction with the technology collaboration agreement, we and Microsoft entered into a patent cross license and source code licensing agreements to renew our access to source code for current versions of Microsoft Windows Server that had previously been provided to us pursuant to the agreement between Microsoft and us dated May 2002. The technology collaboration agreement also provides us access to the source code for Microsoft Windows Server 2008, formerly code named “Longhorn,” and in September 2007 we signed a source code license with Microsoft for the general release version of Windows Server 2008. The technology collaboration agreement has a five-year term which expires in December 2009. The technology collaboration, patent cross license and source code licensing agreements do not provide for payments to or from Microsoft.

In November 2007, we entered into a development agreement and certain licenses with Microsoft whereby we will develop and distribute a range of Windows-based appliances for branch offices. These appliances provide WAN optimization functionality as well as consolidate a range of functions that would normally be carried out by discrete servers in a branch. We anticipate beginning shipments of the appliances being developed under these agreements in the second half of 2008.

There can be no assurances that our agreements with Microsoft will be extended or renewed by Microsoft upon their respective expirations or that, if renewed or extended, such agreements will be on terms favorable to us. See “Risk Factors” for more information on our agreements with Microsoft.

Additional Relationships

As of December 31, 2007, we had entered into approximately 230 ICA license agreements. Currently, numerous devices incorporate Citrix ICA, including Windows CE devices, Macintosh clients, Linux Terminals, and other information appliances, such as wireless phones and other handheld devices. ICA licensees include Wyse Technologies, Hewlett-Packard Company, Fujitsu Limited, Philips Speech Recognition Systems and SAP AG, among others.

In addition, the Citrix Partner Network™, including Citrix Global Alliance Partners™, which is a coalition of approximately 8,000 companies from across the IT spectrum that design and market solutions that are complementary to the Citrix product family. A new initiative called Citrix Ready™ was introduced in 2007 as part of the Citrix Global Alliance Program™. Citrix Ready identifies recommended solutions that are trusted to enhance the Citrix Delivery Center. All products featured in Citrix Ready have completed verification testing, providing confidence in joint solution compatibility. By leveraging our industry leading alliances and Partner Network, Citrix Ready showcases select trusted solutions designed to meet various business needs. Through an online catalog and our Citrix Ready branding program, customers can easily find and build a trusted application delivery infrastructure. Citrix Ready not only demonstrates current mutual product compatibility, but it may also increase the probability of future interoperability. For further information on the Citrix Partner Network see “— Sales, Marketing and Support.”

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Research and Development

We focus our research and development efforts on developing new products and core technologies in the Application Delivery Infrastructure market and further enhancing the functionality, reliability, performance and flexibility of existing products. In 2005, we acquired additional expertise in Web application optimization, Transmission Control Protocol, or TCP, multiplexing, multi-protocol compression, SSL acceleration, application traffic management, dynamic caching, and Web application firewall technologies. In 2006, we acquired additional expertise in tools that monitor the end-user experience, WAN optimization and acceleration. In 2007, we acquired expertise in server and desktop virtualization. We solicit extensive feedback concerning product development from customers, both directly from and indirectly through our channel distributors.

We believe that our software development team and core technologies represent a significant competitive advantage for us. Included in the software development team is a group focused on research activities that include prototyping ways to integrate emerging technologies and standards into our product offerings, such as emerging Web services technologies, management standards and Microsoft’s newest technologies. Many groups within the software development team have expertise in XML-based software development, integration of acquired technology, multi-tier Web-based application development and deployment, SSL secure access and building software as a service. We maintain a team working on-site at Microsoft focused on enhancing and adding value to the next generation of Microsoft Windows Server, virtualization and management products. We incurred research and development expenses of approximately $205.1 million in 2007, $155.3 million in 2006 and $108.8 million in 2005.

Sales, Marketing and Support

We market and license our products and services primarily through multiple channels worldwide, including VARs, channel distributors, SIs and ISVs managed by our worldwide sales force. We provide training and certification to integrators, VARs and consultants for a full-range of Citrix-based infrastructure products, solutions and services through our Citrix Partner Network. In addition, our Online Services division provides software as a service through direct sales and our Websites.

In 2007, we continued to focus our efforts on increasing the productivity of our existing partners, integrating partners from our recent acquisitions into our program, and building capacity through recruitment of new partners to sell and implement our expanding product portfolio, including an effort to recruit partners to sell and implement XenServer, our server virtualization product. We continue to see success with our innovative channel incentive program, Citrix Advisor Rewards. The Citrix Advisor Rewards™ program is an innovative influencer program that rewards our partners for registering projects and providing value-added selling even if they do not fulfill the product. This program has helped limit channel conflict and increase partner loyalty to us. We regularly take actions to improve the effectiveness of our partner programs, and to strengthen our channel relationships, including managing non-performing partners, adding new partners with expertise in selling into new markets, and forming additional relationships with global and regional SIs and ISVs. SIs and ISVs are becoming a more central part of our strategy in the large enterprise and government markets. The SI program includes members such as Accenture Ltd., Atos Origin, Computer Sciences Corporation, Electronic Data Systems Corporation, Fujitsu-Siemens Computers GmbH, Hewlett-Packard Company, IBM Global Services, Infosys Technologies Limited, TATA Consultancy Services Limited and WiPro Technologies Limited, among others. The ISV program has a strong representation from targeted industry verticals such as healthcare, financial services and telecommunications. Members in the ISV program include Cerner Corporation, Epic Systems Corporation, ESRI, Hyperion Solutions Corporation, McKesson Corporation, Microsoft, Oracle Corporation, Sage Group plc, SAP AG and Siemens Medical Health Solutions, among many others.

Our sales and marketing organization actively supports our distributors and resellers. Our sales organization consists of field-based systems sales engineers and corporate sales professionals. Additional sales personnel, based all over the world support these field personnel. These additional sales personnel recruit prospective customers, provide technical advice with respect to our products and work closely with key distributors and resellers of our products. Over the last five years, we have grown our force of sales professionals that work closely with partners to sell to primary IT buyers, including Strategic IT Executives, Network Architects, IT Infrastructure Managers, Desktop Operations Managers and Server Operations Managers to address the multiple selling and buying opportunities presented by our expanded product line. These and other account penetration efforts are part of our strategy to increase the usage of our Citrix Delivery Center products within our customer’s IT organization.

Our marketing department provides training, sales event support, sales collateral, advertising, direct mail and public relations coverage to our indirect channels to aid in market development and in attracting new customers. In addition, marketing for our Online Services division utilizes multiple venues including radio, television and online advertising.

The Citrix Partner Network™ includes three categories of partners: Citrix Solution Advisor™, Citrix Global Alliance Partners™, and Citrix Certified™ Education Professional. This network represents the knowledge, skills and experience of the entire spectrum of our partners around the world, and makes it easier for end-users to engage their services and benefit from their solutions. Equally important, the Citrix Partner Network is designed to help partners build their business by sharing in opportunities for planning and implementing application delivery infrastructure solutions that arise from mutual customers and complement the sale of their own products.

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We provide most of our distributors with stock-balancing and price protection rights. These transactions are estimated and provided for at the time of sale as a reduction of revenue. Stock balancing rights permit distributors to return products to us up to the forty-fifth day of the fiscal quarter, subject to ordering an equal dollar amount of our other products prior to the last day of the same fiscal quarter. We are not obligated to accept product returns from our distributors under any other conditions, unless the product item is defective in manufacture. Product items returned to us under the stock-balancing program must be in new, unused and unopened condition. Price protection rights require that we grant retroactive price adjustments for inventories of our products held by distributors or resellers if we lower our prices for such products. In the event that we decide to reduce our prices, we will establish a reserve to cover exposure to distributor inventory. We have not reduced and have no current plans to reduce the prices of our products for inventory currently held by distributors or resellers. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Critical Accounting Policies and Estimates” and Note 2 to our consolidated financial statements included in this Annual Report on Form 10-K for the year ended December 31, 2007 for information regarding our revenue recognition policy.

Operations

We control all purchasing, inventory, scheduling, order processing and accounting functions related to our operations. For our Application and Server Virtualization products, including our XenServer product, and our Application Performance Monitoring products, production, warehousing and shipping are performed internally in the United States and by independent contractors on a purchase order basis in Ireland, depending upon the customer’s geographic market. Master software CD-ROMs, development of user manuals, packaging designs, initial product quality control and testing are primarily performed at our facilities. In some cases, independent contractors also duplicate CD-ROMs, print documentation and package and assemble products to our specifications. Production, final test, warehousing and shipping for our Application Networking products, including our NetScaler products and Access Gateway products are primarily performed by a third-party contract manufacturer. For our WANScaler products, we assemble, final test, warehouse and ship the final products to our customers.

For our Application and Server Virtualization products and our Application Performance Monitoring products, internal manufacturing capabilities and independent contractors provide a redundant source of manufacture and assembly. For our Application Networking products, including our NetScaler, Access Gateway and WANScaler products, internal manufacturing capabilities and independent contractors provide us with the flexibility needed to meet our customer product and delivery requirements. To date, we have not experienced any material difficulties or significant delays in the manufacture and assembly of our products.

We do not believe that backlog, as of any particular date, is a reliable indicator of future performance. While it is generally our practice to promptly ship product upon receipt of properly finalized purchase orders, we sometimes have orders that have not shipped or have otherwise not met all the required criteria for revenue recognition. Although the amount of such product license orders may vary, the amount, if any, of such orders at the end of a particular period is not material to our business.

We believe that our fourth quarter revenues and expenses are affected by a number of seasonal factors, including the lapse of many corporations’ fiscal year budgets and an increase in amounts paid pursuant to our sales compensation plans due to increases in fourth quarter revenue. We believe that these seasonal factors are common within our industry. Such factors historically have resulted in first quarter revenues in any year being lower than the immediately preceding fourth quarter. This trend is expected to continue through the first quarter of 2008. In addition, our European operations generally provide lower revenues in the summer months because of the generally reduced economic activity in Europe during the summer. This seasonal factor also typically results in higher fourth quarter revenues.

Competition

We sell our products in intensely competitive markets. Some of our competitors and potential competitors have significantly greater financial, technical, sales and marketing and other resources than we do. For example, our ability to market our Application Virtualization products, including XenApp and XenApp Platinum and other future product offerings, could be affected by Microsoft’s licensing and pricing scheme for client devices, servers and applications. Further, the announcement of the release, and the actual release, of new Windows-based server operating systems or products incorporating similar features to our products could cause our existing and potential customers to postpone or cancel plans to license certain of our existing and future product and service offerings.

Existing or new products and services that provide alternatives to our products and services, including those relating to application, server and desktop virtualization, Web application optimization, application performance monitoring, branch office application delivery, WAN optimization, SSL/VPN, gateways, on-demand assistance, online collaboration and IP telephony, can materially impact our ability to compete in these markets. Our current competitors in these markets include Adobe Systems, Inc., Cisco Systems, Inc., F5 Networks, Inc., Hewlett-Packard Company, IBM Corporation, Juniper Networks, Inc., Microsoft Corporation, Oracle Corporation, Riverbed Technology, Inc., Sun Microsystems, Inc., VMware, Inc., and Virtual Iron Software, Inc.

As the markets for our products and services continue to develop, additional companies, including companies with significant market presence in the computer appliances, software and networking industries, could enter the markets in which we compete and

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further intensify competition. In addition, we believe price competition could become a more significant competitive factor in the future. As a result, we may not be able to maintain our historic prices and margins, which could adversely affect our business, results of operations and financial condition. See “— Technology Relationships” and “Risk Factors.”

Proprietary Technology

Our success is dependent upon certain proprietary technologies and core intellectual property. We have been awarded a number of domestic and foreign patents and have a number of pending patent applications in the United States and foreign countries. Our technology is also protected under copyright laws. Additionally, we rely on trade secret protection and confidentiality and proprietary information agreements to protect our proprietary technology. We have trademarks or registered trademarks in the United States and other countries, including Citrix®, Citrix Presentation Server™, Citrix Access Gateway™, Citrix Password Manager™, GoToMeeting®, GoToAssist®, GoToMyPC®, GoToWebinar™, ICA®, NetScaler®, WanScaler™, and Xen®. While our competitive position could be affected by our ability to protect our proprietary information, we believe that because of the rapid pace of technological change in the industry, factors such as the technical expertise, knowledge and innovative skill of our management and technical personnel, our technology relationships, name recognition, the timeliness and quality of support services provided by us and our ability to rapidly develop, enhance and market software products could be more significant in maintaining our competitive position. See “Risk Factors.”

Available Information

Our Internet address is http://www.citrix.com. We make available, free of charge, on or through our Website our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, proxy statements on Form DEF 14A and any amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act as soon as reasonably practicable after such material is electronically filed with or furnished to the Securities and Exchange Commission. The information on our Website is not part of this Annual Report on Form 10-K for the year ended December 31, 2007.

Employees

As of December 31, 2007, we had 4,620 employees. We believe our relations with employees are good. In certain countries outside the United States, our relations with employees are governed by labor regulations.

ITEM 1A. RISK FACTORS

Our operating results and financial condition have varied in the past and could in the future vary significantly depending on a number of factors. From time to time, information provided by us or statements made by our employees contain “forward-looking” information that involves risks and uncertainties. In particular, statements contained in this Annual Report on Form 10-K for the year ended December 31, 2007, and in the documents incorporated by reference into this Annual Report on Form 10-K for the year ended December 31, 2007, that are not historical facts, including, but not limited to statements concerning new products, product development and offerings, Application Networking, Application Virtualization, Subscription Advantage, XenApp (formerly Presentation Server), NetScaler, XenServer and XenDesktop, Citrix Ready, WANscaler and Access Gateway, our Partner Network historical stock option granting practices and related restatements, stockholder derivative actions, cash and non-cash charges, contingent liabilities related to Internal Revenue Code Section 409A, product and price competition, auction rate securities our Online Services division, competition and strategy, customer diversification, employees, suppliers, product price and inventory, contingent consideration payments, deferred revenues, economic and political market conditions, potential government regulation, seasonal factors, natural disasters, stock-based compensation, licensing and subscription renewal programs, international operations and expansion, revenue recognition, profits, growth of revenues, composition of revenues, cost of revenues, operating expenses, sales and sales cycle, marketing and support expenses, general and administrative expenses, research and development expenses, valuations of investments and derivative instruments, technology relationships, reinvestment or repatriation of foreign earnings, gross margins, amortization expense, goodwill and intangible assets, interest income, interest expense, impairment charges, anticipated operating and capital expenditure requirements, cash inflows, contractual obligations, our Credit Facility and Term Loan, in-process research and development, advertising campaigns, tax rates and deductions, SFAS 123R, leasing and subleasing activities, acquisitions, stock repurchases, investment transactions, liquidity, litigation matters, intellectual property matters, distribution channels, stock price, payment of dividends, Advisor Rewards Program, Microsoft agreements; price protection rights, proprietary technology, security measures, third party licenses, and potential debt or equity financings constitute forward-looking statements and are made under the safe harbor provisions of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These statements are neither promises nor guarantees. Our actual results of operations and financial condition have varied and could in the future vary materially from those stated in any forward-looking statements. The following factors, among others, could cause actual results to differ materially from those contained in forward-looking statements made in this Annual Report on Form 10-K for the year ended December 31, 2007, in the documents incorporated by reference into this Annual Report on Form 10-K for the year ended December 31, 2007 or presented elsewhere by our management from time to time. Such factors, among others, could have a material adverse effect upon our business, results of operations and financial condition. We caution readers not to place undue reliance on any forward-looking statements, which only speak as of the date made. We undertake no obligation to update any forward-looking statement to reflect events or circumstances after the date on which such statement is made.

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The virtualization products and services we acquired in connection with our acquisition of XenSource are based on an emerging technology, and therefore the potential market for this line of products and services remains uncertain.

We acquired XenSource in October 2007 to enter the server and desktop virtualization markets. The virtualization products and services that we acquired as part of this acquisition are based on an emerging technology platform the success of which will depend on organizations and customers perceiving technological and operational benefits and cost savings associated with adopting server and desktop virtualization solutions. The limited operating history of XenSource prior to our acquisition and the relatively limited extent to which server and desktop virtualization solutions have been adopted may make it difficult to evaluate this technology’s impact on our business because the potential market for these products and services remains uncertain. To the extent that the server and desktop virtualization market develops more slowly or less comprehensively than we expect, the revenue growth associated with virtualization products and services may be slower than currently expected, which could adversely affect our business, results of operations and financial condition.

The benefits we anticipate from acquiring XenSource may not be realized.

We acquired XenSource with the expectation that the acquisition will result in various benefits including, among other things, enhanced revenue and profits, greater market presence and development, and enhancements to our product portfolio and customer base. We expect that the acquisition will move us into adjacent server and desktop virtualization markets that will allow us to extend our leadership in the broader Application Delivery Infrastructure market by adding key enabling technologies that make the end-to-end computing environment more flexible, dynamic and responsive to business change. We may not realize any of these benefits.

In addition, we may not achieve the anticipated benefits of our acquisition of XenSource as rapidly as, or to the extent, anticipated by our management and certain financial or industry analysts, and others may not perceive the same benefits of the acquisition as we do. For example, XenSource’s contribution to our financial results may not meet the current expectations of our management for a number of reasons, including the integration risks described above, and could dilute our profits beyond the current expectations of our management. Operations and costs incurred and potential liabilities assumed in connection with our acquisition of XenSource also could have an adverse effect on our business, financial condition and operating results. If these risks materialize, our stock price could be materially adversely affected.

Our business could be adversely impacted by conditions affecting the information technology market.

The demand for our products and services depends substantially upon the general demand for business-related computer appliances and software, which fluctuates based on numerous factors, including capital spending levels, the spending levels and growth of our current and prospective customers and general economic conditions. Fluctuations in the demand for our products and services could have a material adverse effect on our business, results of operations and financial condition. In the past, adverse economic conditions decreased demand for our products and negatively impacted our financial results. Future economic projections for the information technology sector are uncertain. If an unfavorable information technology spending environment develops, it could negatively impact our business, results of operations and financial condition.

Our long sales cycle for enterprise-wide sales could cause significant variability in our revenue and operating results for any particular period.

In recent quarters, a growing number of our large and medium-sized customers have decided to implement our enterprise customer license arrangements on a departmental or enterprise-wide basis. Our long sales cycle for these large-scale deployments makes it difficult to predict when these sales will occur, and we may not be able to sustain these sales on a predictable basis.

We have a long sales cycle for these enterprise-wide sales because:

• our sales force generally needs to explain and demonstrate the benefits of a large-scale deployment of our product to potential and existing customers prior to sale;

• our service personnel typically spend a significant amount of time assisting potential customers in their testing and evaluation of our products and services;

• our customers are typically large and medium size organizations that carefully research their technology needs and the many potential projects prior to making capital expenditures for software infrastructure; and

• before making a purchase, our potential customers usually must get approvals from various levels of decision makers within their organizations, and this process can be lengthy.

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The continued long sales cycle for these large-scale deployment sales could make it difficult to predict the quarter in which sales will occur. Delays in sales could cause significant variability in our revenue and operating results for any particular period.

We face intense competition, which could result in fewer customer orders and reduced revenues and margins.

We sell our products in intensely competitive markets. Some of our competitors and potential competitors have significantly greater financial, technical, sales and marketing and other resources than we do. For example, our ability to market our Application Virtualization products, including XenApp, Access Essentials, Password Manager and other future product offerings and upgrades, could be affected by Microsoft’s licensing and pricing scheme for client devices, servers and applications. Further, the announcement of the release, and the actual release, of new Windows-based server operating systems or products incorporating similar features to our products could cause our existing and potential customers to postpone or cancel plans to license certain of our existing and future product and service offerings.

In addition, alternative products for application delivery directly and indirectly compete with our current product lines and our online services.

Existing or new products and services that provide alternatives to our products and services, including those relating to application virtualization, server and desktop virtualization Web application optimization, application performance monitoring, branch office application delivery and WAN optimization, virtual desktop delivery, secure sockets layers/virtual private network, gateways, on-demand assistance, online collaboration and IP telephony, can materially impact our ability to compete in these markets.

Our current competitors in these markets include Adobe Systems, Inc., Cisco Systems, Inc., F5 Networks, Inc., Hewlett-Packard Company, IBM Corporation, Juniper Networks, Inc., Microsoft Corporation, Oracle Corporation, Riverbed Technology, Inc., Sun Microsystems, Inc., VMware, Inc. and Virtual Iron Software, Inc.

As the markets for our products and services continue to develop, additional companies, including companies with significant market presence in the computer appliances, software and networking industries, could enter the markets in which we compete and further intensify competition. In addition, we believe price competition could become a more significant competitive factor in the future. As a result, we may not be able to maintain our historic prices and margins, which could adversely affect our business, results of operations and financial condition.

Sales of products within our Application Virtualization product line constitute a majority of our revenue and decreases in demand for our Application Virtualization products could adversely affect our results of operations and financial condition.

We anticipate that sales of products within our Application Virtualization product line and related enhancements and upgrades will constitute a majority of our revenue for the foreseeable future. Our ability to continue to generate revenue from our Application Virtualization products will depend on market acceptance of Windows Server Operating Systems and/or UNIX Operating Systems. Declines and variability in demand for our Application Virtualization products could occur as a result of:

• new competitive product releases and updates to existing products;

• termination of our product offerings and enhancements;

• potential market saturation;

• technological change;

• general economic conditions; or

• lack of success of entities with which we have a technology relationship.

If our customers do not continue to purchase our Application Virtualization products as a result of these or other factors, our revenue would decrease and our results of operations and financial condition would be adversely affected. In addition, modification or termination of certain of our Application Virtualization products may cause variability in our revenue and make it difficult to predict our revenue growth and trends in our Application Virtualization products as our customers adjust their purchasing decisions in response to such events.

If we do not develop new products and services or enhancements to our existing products and services, our business, results of operations and financial condition could be adversely affected.

The markets for our products and services are characterized by:

• rapid technological change;

• evolving industry standards;

• fluctuations in customer demand;

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• changes in customer requirements; and

• frequent new product and service introductions and enhancements.

Our future success depends on our ability to continually enhance our current products and services and develop and introduce new products and services that our customers choose to buy. If we are unable to keep pace with technological developments and customer demands by introducing new products and services and enhancements, our business, results of operations and financial condition could be adversely affected. Our future success could be hindered by:

• delays in our introduction of new products and services;

• delays in market acceptance of new products and services or new releases of our current products and services; and

• our, or a competitor’s, announcement of new product or service enhancements or technologies that could replace or shorten the life cycle of our existing product and service offerings.

For example, we cannot guarantee that our Citrix Delivery Center and Online Services products will achieve the broad market acceptance by our channel partners and entities with which we have a technology relationship, customers and prospective customers necessary to generate significant revenue. In addition, we cannot guarantee that we will be able to respond effectively to technological changes or new product announcements by others. If we experience material delays or sales shortfalls with respect to our new products and services or new releases of our current products and services, those delays or shortfalls could have a material adverse effect on our business, results of operations and financial condition.

We believe that we could incur additional costs and royalties as we develop, license or buy new technologies or enhancements to our existing products. These added costs and royalties could increase our cost of revenues and operating expenses. However, we cannot currently quantify the costs for such transactions that have not yet occurred. In addition, we may need to use a substantial portion of our cash and investments to fund these additional costs.

Our business could be adversely impacted by a failure to renew our agreements with Microsoft for source code access.

In December 2004, we entered into a five-year technology collaboration and licensing agreement with Microsoft Corporation and in September 2007, we entered into a three-year source code license with Microsoft for the general release version of Windows Server 2008. These arrangements include a technology initiative for closer collaboration on terminal server functionality in future server operating systems, continued access to source code for key components of Microsoft’s current server operating systems, and a patent cross-licensing agreement. There can be no assurances that our current licenses with Microsoft will be extended or renewed by Microsoft after their respective expirations. In addition, Microsoft could terminate the current licenses before the expiration of the term for breach or upon a change of control. The early termination or the failure to renew certain of our current licenses with Microsoft in a manner favorable to us could negatively impact the timing of our release of future products and enhancements.

If we lose key personnel or cannot hire enough qualified employees, our ability to manage our business could be adversely affected.

Our success depends, in large part, upon the services of a number of key employees. Except for certain key employees of acquired businesses, we do not have long-term employment agreements with any of our key personnel. Any officer or employee can terminate his or her relationship with us at any time. The effective management of our growth, if any, could depend upon our ability to retain our highly-skilled technical, sales and services managerial, finance and marketing personnel. If any of those employees leave, we will need to attract and retain replacements for them. We also need to add key personnel in the future. The market for these qualified employees is competitive. We could find it difficult to successfully attract, assimilate or retain sufficiently qualified personnel in sufficient numbers. Furthermore, we may hire key personnel in connection with our future acquisitions; however, any of these employees will be able to terminate his or her relationship with us at any time. If we cannot retain and add the necessary staff and resources for these acquired businesses, our ability to develop acquired products, markets and customers could be adversely affected. Also, we may need to hire additional personnel to develop new products, product enhancements and technologies. If we cannot add the necessary staff and resources, our ability to develop future enhancements and features to our existing or future products could be delayed. Any delays could have a material adverse effect on our business, results of operations and financial condition.

If we fail to manage our operations and grow revenue or fail to continue to effectively control expenses, our future operating results could be adversely affected.

Historically, the scope of our operations, the number of our employees and the geographic area of our operations and our revenue have grown rapidly. In addition, we have acquired both domestic and international companies. This growth and the assimilation of acquired operations and their employees could continue to place a significant strain on our managerial, operational and financial resources. To manage our current growth and any future growth effectively, we need to continue to implement and improve additional management and financial systems and controls. We may not be able to manage the current scope of our operations or future growth effectively and still exploit market opportunities for our products and services in a timely and cost-effective way. Our future operating results could also depend on our ability to manage:

• our expanding product lines;

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• our marketing and sales organizations; and

• our client support organization as installations of our products increase.

In addition, to the extent our revenue grows, if at all, we believe that our cost of revenues and certain operating expenses could also increase. We believe that we could incur additional costs, including royalties, as we develop, license or buy new technologies or enhancements to our existing products and services. These added costs and royalties could increase our cost of revenues and operating expenses and lower our gross margins. For example, due to our recent acquisitions and the anticipated growth of the acquired companies, we currently expect that our future revenue will include a greater level of revenue from appliance sales as compared to our historical level of appliance sales, which we expect will reduce our gross margins from their historical levels. Furthermore, as our income from the recent acquisitions increases, we expect that our effective tax rate may increase due to the taxable income from these acquisitions being earned primarily in our geographic locations that are taxed at a higher rate. However, we cannot currently quantify the costs for such transactions that have not yet occurred or of these developing trends in our business. In addition, we may need to use a substantial portion of our cash and investments or issue additional shares of our common stock to fund these additional costs.

During the past two years, a large portion of our growth has been attributable to the growth of our Application Virtualization products, as well as growth in our Online Services and Application Networking products. We cannot provide any assurance that these markets and the revenues we derive from these markets will continue to grow. In addition, over the last four years we have grown our force of sales professionals that work closely with partners to sell to primary IT buyers, including Strategic IT Executives, Network Architects, IT Infrastructure Managers and Desktop Operations Managers, to address the multiple selling and buying opportunities presented by our expanded product lines. These and other account penetration efforts are part of our strategy to increase the usage of our Citrix Delivery Center products within our customer’s IT organizations. We cannot provide any assurance that this strategy will be successful or that the release of our application delivery infrastructure products or other new products or services will increase our revenue growth rate.

We cannot assure you that our operating expenses will be lower than our estimated or actual revenues in any given quarter. If we experience a shortfall in revenue in any given quarter, we likely will not be able to further reduce operating expenses quickly in response. Any significant shortfall in revenue could immediately and adversely affect our results of operations for that quarter. Also, due to the fixed nature of many of our expenses and our current expectation for revenue growth, our income from operations and cash flows from operating and investing activities could be lower than in recent years.

Acquisitions present many risks, and we may not realize the financial and strategic goals we anticipate at the time of an acquisition.

Our growth is dependent upon market growth, our ability to enhance existing products and services, and our ability to introduce new products and services on a timely basis. We intend to continue to address the need to develop new products and services and enhance existing products and services through acquisitions of other companies, product lines and/or technologies. However, acquisitions, including those of high-technology companies, are inherently risky. We cannot provide any assurance that any of our previous acquisitions, including our acquisitions over the past three years, or future acquisitions will be successful in helping us reach our financial and strategic goals either for that acquisition or for us generally or that the combined company resulting from any acquisition will continue to support the growth achieved by the companies separately.

The risks we commonly encounter in managing and integrating acquisitions are:

• difficulties and delays integrating the operations, technologies, and products of the acquired companies;

• undetected errors or unauthorized use of a third-party’s code in products of the acquired companies;

• the diversion of management’s attention from normal daily operations of the business;

• potential difficulties in completing projects associated with purchased in-process research and development;

• entry into markets in which we have no or limited direct prior experience and where competitors have stronger market positions and which are highly competitive;

• the potential loss of key employees of the acquired company; and

• an uncertain sales and earnings stream from the acquired company, which could unexpectedly dilute our earnings.

Our failure to manage growth effectively and successfully integrate acquired companies due to these or other factors could have a material adverse effect on our business, results of operations and financial condition.

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Attractive acquisition opportunities may not be available to us, which could negatively affect the growth of our business.

Our business strategy includes the selective acquisition of businesses and technologies. In the three years ended December 31, 2007, we completed six significant acquisitions, including the acquisition of XenSource, Inc. in 2007 and NetScaler, Inc. in 2005. We plan to continue to seek opportunities to expand our product portfolio, customer base, technology, and technical talent through acquisitions. However, we may not have the opportunity to make suitable acquisitions on favorable terms in the future, which could negatively impact the growth of our business. We expect that other companies in our industry will compete with us to acquire compatible businesses. This competition could increase prices for businesses and technologies that we would likely pursue, and our competitors may have greater resources than we do to complete these acquisitions.

If we determine that any of our goodwill or intangible assets, including technology purchased in acquisitions, are impaired, we would be required to take a charge to earnings, which could have a material adverse effect on our results of operations.

We have a significant amount of goodwill and other intangible assets, such as product and core technology, related to our acquisitions. We recorded significant additional goodwill and other intangible asset amounts in connection with the acquisition of XenSource. We do not amortize goodwill and intangible assets that are deemed to have indefinite lives. However, we do amortize certain product and core technologies, trademarks, patents and other intangibles. We periodically evaluate our intangible assets, including goodwill, for impairment at the reporting unit level (operating segment). As of December 31, 2007, we had $888.5 million of goodwill, of which approximately $43.7 million of goodwill was recorded in connection with our acquisitions of Reflectent Software, Inc., or Reflectent, and Orbital Data Corporation, or Orbital Data, in 2006 (we refer to these acquisitions as our 2006 Acquisitions), and $257.5 million of goodwill was recorded in connection with our acquisitions of XenSource and Ardence Delaware, Inc. or Ardence, in 2007 (we refer to these acquisitions as our 2007 Acquisitions). We review for impairment annually, or sooner if events or changes in circumstances indicate that the carrying amount could exceed fair value. Fair values are based on discounted cash flows using a discount rate determined by our management to be consistent with industry discount rates and the risks inherent in our current business model. Due to uncertain market conditions and potential changes in our strategy and product portfolio, it is possible that the forecasts we use to support our goodwill and other intangible assets could change in the future, which could result in non-cash charges that would adversely affect our results of operations and financial condition.

Furthermore, impairment testing requires significant judgment, including the identification of reporting units based on our internal reporting structure that reflects the way we manage our business and operations and to which our goodwill and intangible assets would be assigned. Significant judgments are required to estimate the fair value of our goodwill and intangible assets, including estimating future cash flows, determining appropriate discount rates, estimating the applicable tax rates, foreign exchange rates and interest rates, projecting the future industry trends and market conditions, and making other assumptions. Changes in these estimates and assumptions, including changes in our reporting structure, could materially affect our determinations of fair value.

We recorded approximately $490.7 million of goodwill and intangible assets in connection with our 2006 Acquisitions and our 2007 Acquisitions. If the actual revenues and operating profit attributable to acquired intangible assets are less than the projections we used to initially value these intangible assets when we acquired them, then these intangible assets may be deemed to be impaired. If we determine that any of the goodwill or other intangible assets associated with our recent acquisitions are impaired, then we would be required to reduce the value of those assets or to write them off completely by taking a related charge to earnings. If we are required to write down or write off all or a portion of those assets, or if financial analysts or investors believe we may need to take such action in the future, our stock price and operating results could be materially adversely affected.

At December 31, 2007, we had $276.3 million, net, of unamortized identified intangibles, which include core and product technology we purchased in acquisitions or under third party licenses. These intangibles are primarily associated with our Application Networking products and Server Virtualization products. However, our channel distributors and entities with which we have technology relationships, customers or prospective customers may not purchase or widely accept our new products. If we fail to complete the development of our anticipated future product and service offerings, including product offerings acquired through our acquisitions, if we fail to complete them in a timely manner, or if we are unsuccessful in selling any new lines of products, appliances and services, we could determine that the value of the purchased technology is impaired in whole or in part and take a charge to earnings. We could also incur additional charges in later periods to reflect costs associated with completing those projects that could not be completed in a timely manner. An impairment charge could have a material adverse effect on our results of operations. If the actual revenues and operating profit attributable to acquired product and core technologies are less than the projections we used to initially value product and core technologies when we acquired it, such intangible assets may be deemed to be impaired. If we determine that any of our intangible assets are impaired, we would be required to take a related charge to earnings that could have a material adverse effect on our results of operations.

Our business could be adversely affected if we are unable to expand and diversify our distribution channels.

We currently intend to continue to expand our distribution channels by leveraging our relationships with independent hardware and software vendors and system integrators to encourage them to recommend or distribute our products. In addition, an integral part

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of our strategy is to diversify our base of channel relationships by adding and training more channel members with abilities to reach larger enterprise customers and to sell our newer products. This strategy will require additional resources, as we will need to expand our internal sales and service coverage of these customers. If we fail in these efforts and cannot expand, train or diversify our distribution channels, our business could be adversely affected. In addition to this diversification of our base, we will need to maintain a healthy mix of channel members who cater to smaller customers. We may need to add and remove distribution members to maintain customer satisfaction and a steady adoption rate of our products, which could increase our operating expenses. Through our Citrix Partner Network, Citrix Authorized Learning Centers and other programs, we are currently investing, and intend to continue to invest, significant resources to develop these channels, which could reduce our profits.

We could change our licensing programs or subscription renewal programs, which could negatively impact the timing of our recognition of revenue.

We continually re-evaluate our licensing programs and subscription renewal programs, including specific license models, delivery methods, and terms and conditions, to market our current and future products and services. We could implement new licensing programs and subscription renewal programs, including offering specified and unspecified enhancements to our current and future product and service lines. Such changes could result in recognizing revenues over the contract term as opposed to upon the initial shipment or licensing of our software product. We could implement different licensing models in certain circumstances, for which we would recognize licensing fees over a longer period. Changes to our licensing programs and subscription renewal programs, including the timing of the release of enhancements, upgrades, and maintenance releases, the term of the contract, discounts and other factors, could impact the timing of the recognition of revenue for our products, related enhancements and services and could adversely affect our operating results and financial condition.

Sales of our Subscription Advantage product constitute substantially all of our License Updates revenue and a large portion of our deferred revenue.

We anticipate that sales of our Subscription Advantage product will continue to constitute a substantial portion of our License Updates revenue. Our ability to continue to generate both recognized and deferred revenue from our Subscription Advantage product will depend on our customers continuing to perceive value in automatic delivery of our software upgrades and enhancements. A decrease in demand for our Subscription Advantage product could occur as a result of a decrease in demand for our Application Virtualization, Application Networking, Server Virtualization and Application Performance Monitoring products. If our customers do not continue to purchase our Subscription Advantage product, our License Updates revenue and deferred revenue would decrease significantly and our results of operations and financial condition would be adversely affected.

As our international sales and operations grow, we could become increasingly subject to additional risks that could harm our business.

We conduct significant sales and customer support, development and engineering operations in countries outside of the United States. During the year ended December 31, 2007, we derived approximately 44.5% of our revenues from sales other than the United States. Our continued growth and profitability could require us to further expand our international operations. To successfully expand international sales, we must establish additional foreign operations, hire additional personnel and recruit additional international resellers. Our international operations are subject to a variety of risks, which could cause fluctuations in the results of our international operations. These risks include:

• compliance with foreign regulatory and market requirements;

• variability of foreign economic, political and labor conditions;

• changing restrictions imposed by regulatory requirements, tariffs or other trade barriers or by United States export laws;

• longer accounts receivable payment cycles;

• potentially adverse tax consequences;

• difficulties in protecting intellectual property;

• burdens of complying with a wide variety of foreign laws; and

• as we generate cash flow in non-U.S. jurisdictions, if required, we may experience difficulty transferring such funds to the U.S. in a tax efficient manner.

Our results of operations are also subject to fluctuations in foreign currency exchange rates. In order to minimize the impact on our operating results, we generally initiate our hedging of currency exchange risks one year in advance of anticipated foreign currency expenses. When the dollar is weak, foreign currency denominated expenses will be higher, and these higher expenses will be partially offset by the gains realized from our hedging contracts. If the dollar is strong, foreign currency denominated expenses will be lower. These lower expenses will in turn be partially offset by the losses incurred from our hedging contracts. There is a risk that there will be fluctuations in foreign currency exchange rates beyond the one year timeframe for which we hedge our risk. Due to the generally weaker dollar in 2007, our operating expenses benefited from gains produced by our hedging programs as compared to 2006.

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Our success depends, in part, on our ability to anticipate and address these risks. We cannot guarantee that these or other factors will not adversely affect our business or operating results.

Our proprietary rights could offer only limited protection. Our products, including products obtained through acquisitions, could infringe third-party intellectual property rights, which could result in material costs.

Our efforts to protect our proprietary rights may not be successful. We rely primarily on a combination of copyright, trademark, patent and trade secret laws, confidentiality procedures and contractual provisions to protect our proprietary rights. The loss of any material trade secret, trademark, trade name, patent or copyright could have a material adverse effect on our business. Despite our precautions, it could be possible for unauthorized third parties to copy or reverse engineer certain portions of our products or to otherwise obtain and use our proprietary information. If we cannot protect our proprietary technology against unauthorized copying or use, we may not remain competitive. Any patents owned by us could be invalidated, circumvented or challenged. Any of our pending or future patent applications, whether or not being currently challenged, may not be issued with the scope we seek, if at all, and if issued, may not provide any meaningful protection or competitive advantage.

In addition, our ability to protect our proprietary rights could be affected by:

• Differences in International Law; Enforceability of Licenses: The laws of some foreign countries do not protect our intellectual property to the same extent as do the laws of the United States and Canada. For example, we derive a significant portion of our sales from licensing our packaged products under “shrink wrap” or “click-to-accept” license agreements that are not signed by licensees and electronic enterprise customer licensing arrangements that are delivered electronically, all of which could be unenforceable under the laws of many foreign jurisdictions in which we license our products.

• Third Party Infringement Claims: We may become increasingly subject to infringement claims and claims alleging the unauthorized use of a third-party’s code in our products including the unauthorized use of open source code that may impose unwanted obligations on us. This may occur for a variety of reasons, including the expansion of our product lines, such as our Application Networking products and our Online Services division products, through product development and acquisitions, including our acquisition of XenSource in 2007, and the increase in the number of competitors in our industry segments and the resulting increase in the number of related products and the overlap in the functionality of those products, and the unauthorized use of third-party’s code in our product development process. Companies and inventors are more frequently seeking to patent software and business methods because of developments in the law that could extend the ability to obtain such patents. As a result, we could receive more patent infringement claims. Responding to any infringement claim, regardless of its validity, could result in costly litigation or injunctive relief or require us to obtain a license to intellectual property rights of those third parties. Licenses may not be available on reasonable terms, on terms compatible with the protection of our proprietary rights, or at all. In addition, attention to these claims could divert our management’s time and attention from developing our business. If a successful claim is made against us and we fail to develop or license a substitute technology or negotiate a suitable settlement arrangement, our business, results of operations, financial condition and cash flows could be materially adversely affected.

If open source software programmers, many of whom we do not employ, do not continue to develop and enhance the open source Xen hypervisor, we may be unable to develop new XenServer products, adequately enhance our existing XenServer products or meet customer requirements for innovation, quality and price of these Xen products.

We rely to a significant degree on an informal community of independent open source software programmers to develop and enhance the Xen hypervisor. A relatively small group of software engineers, many of whom are not employed by us, are primarily responsible for the development and evolution of the Xen hypervisor, which is the heart of the XenServer virtualization product. If these programmers fail to adequately further develop and enhance open source technologies, we would have to rely on other parties to develop and enhance the Xen hypervisor or we would need to develop and enhance the Xen hypervisor with our own resources. We cannot predict whether further developments and enhancements to these technologies would be available from reliable alternative sources. In either event, our development expenses could be increased and our product release and upgrade schedules could be delayed. Moreover, if third party software programmers fail to adequately further develop and enhance the Xen hypervisor, the development and adoption of this virtual server technology could be stifled and our products, including XenServer, could become less competitive. Delays in developing, completing or shipping new or enhanced products could result in delayed or reduced revenue for those products and could also adversely affect customer acceptance of those offerings.

We are subject to risks associated with our strategic and technology relationships.

Our business depends on strategic and technology relationships. We cannot assure you that those relationships will continue in the future. In addition to our relationship with Microsoft, we rely on strategic or technology relationships with such companies as Dell Inc., Hewlett-Packard Company, International Business Machines Corporation, SAP and others. We depend on the entities with which we have strategic or technology relationships to successfully test our products, to incorporate our technology into

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their products and to market and sell those products. We cannot assure you that we will be able to maintain our current strategic and technology relationships or to develop additional strategic and technology relationships. If any entities in which we have a strategic or technology relationship are unable to incorporate our technology into their products or to market or sell those products, our business, results of operations and financial condition could be materially adversely affected.

If we lose access to third party licenses, releases of our products could be delayed.

We believe that we will continue to rely, in part, on third party licenses to enhance and differentiate our products. Third party licensing arrangements are subject to a number of risks and uncertainties, including:

• undetected errors or unauthorized use of another person’s code in the third party’s software;

• disagreement over the scope of the license and other key terms, such as royalties payable;

• infringement actions brought by third party licensees; and

• termination or expiration of the license.

If we lose or are unable to maintain any of these third party licenses or are required to modify software obtained under third party licenses, it could delay the release of our products. Any delays could have a material adverse effect on our business, results of operations and financial condition.

Our success depends on our ability to attract and retain and further penetrate large enterprise customers.

We must retain and continue to expand our ability to reach and penetrate large enterprise customers by adding effective channel distributors and expanding our consulting services. Our inability to attract and retain large enterprise customers could have a material adverse effect on our business, results of operations and financial condition. Large enterprise customers usually request special pricing and generally have longer sales cycles, which could negatively impact our revenues. By granting special pricing, such as bundled pricing or discounts, to these large customers, we may have to defer recognition of some or all of the revenue from such sales. This deferral could reduce our revenues and operating profits for a given reporting period. Additionally, as we attempt to attract and penetrate large enterprise customers, we may need to increase corporate branding and marketing activities, which could increase our operating expenses. These efforts may not proportionally increase our operating revenues and could reduce our profits.

Our success may depend on our ability to attract and retain small-sized customers.

In order to successfully attract new customer segments to our XenApp products and expand our existing relationships with enterprise customers, we must reach and retain small-sized customers and small project initiatives within our larger enterprise customers. We have begun a marketing initiative to reach these customers that includes extending our Advisor Rewards program to include a broader range of license types. In 2005, we also introduced a new product, Access Essentials^TM, specifically developed, packaged and priced to bring secure application virtualization and efficient centralized management of information resources to small and mid-sized businesses. We cannot guarantee that our small-sized customer marketing initiative or new product will be successful. Our failure to attract and retain small sized customers and small project initiatives within our larger enterprise customers could have a material adverse effect on our business, results of operations and financial condition. Additionally, as we attempt to attract and retain small sized customers and small project initiatives within our larger enterprise customers, we may need to increase corporate branding and broaden our marketing activities, which could increase our operating expenses. These efforts may not proportionally increase our operating revenues and could reduce our profits.

We rely on indirect distribution channels and major distributors that we do not control.

We rely significantly on independent distributors and resellers to market and distribute our products and appliances. We do not control our distributors and resellers. Additionally, our distributors and resellers are not obligated to buy our products and could also represent other lines of products. We maintain and periodically revise our sales incentive programs for our independent distributors and resellers, and such program revisions may adversely impact our results of operations. Some of our distributors and resellers maintain inventories of our packaged products for resale to smaller end-users. If distributors and resellers reduce their inventory of our packaged products, our business could be adversely affected. Further, we could maintain individually significant accounts receivable balances with certain distributors. The financial condition of our distributors could deteriorate and distributors could significantly delay or default on their payment obligations. Any significant delays, defaults or terminations could have a material adverse effect on our business, results of operations and financial condition.

For certain of our products we rely on third-party suppliers and contract manufacturers, making us vulnerable to supply problems and price fluctuations.

We rely on a number of third-party suppliers who provide hardware or hardware components, many of which are sole-source suppliers. For example, all of the production, final test, warehousing and shipping for our Application Networking products,

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including our NetScaler products, Access Gateway products and WANScaler products are primarily performed by a third-party contract manufacturer. We do not typically have long-term supply agreements with our suppliers; and, in most cases, we purchase the products and components on an as-needed purchase order basis. In some instances, such as with respect to our Application Networking products, we maintain internal manufacturing capabilities to supplement third-party contract manufacturers and provide us with the flexibility needed to meet our product delivery requirements on sales orders on a limited basis. While we have not, to date, experienced any material difficulties or delays in the manufacture and assembly of our products, our suppliers may encounter problems during manufacturing due to a variety of reasons, including failure to follow specific protocols and procedures, failure to comply with applicable regulations, equipment malfunction and environmental factors, any of which could delay or impede their ability to meet our demand. Our reliance on these third-party suppliers and contract manufacturers subjects us to risks that could harm our business, including:

• we may have difficulty locating and qualifying alternative suppliers for our sole-source supplies;

• our suppliers, especially new suppliers, may make errors in manufacturing components that could negatively affect the efficacy of our products or cause delays in shipment;

• our suppliers manufacture products for a range of customers, and fluctuations in demand for the products these suppliers manufacture for others may affect their ability to deliver components and products to us in a timely manner; and

• our suppliers may encounter financial hardships unrelated to our demand for components, which could inhibit their ability to fulfill our orders and meet our requirements.

There may be delay associated with establishing additional or replacement suppliers, particularly for components that are available only from sole or limited sources. Any interruption or delay in the supply of products or components, or our inability to obtain products or components from alternate sources at acceptable prices in a timely manner, could impair our ability to meet the demand of our customers and adversely affect our business, financial condition or results of operations.

Our products could contain errors that could delay the release of new products and may not be detected until after our products are shipped.

Despite significant testing by us and by current and potential customers, our products, especially new products or releases or acquired products, could contain errors. In some cases, these errors may not be discovered until after commercial shipments have been made. Errors in our products could delay the development or release of new products and could adversely affect market acceptance of our products. Additionally, our products depend on third party products, which could contain defects and could reduce the performance of our products or render them useless. Because our products are often used in mission-critical applications, errors in our products or the products of third parties upon which our products rely could give rise to warranty or other claims by our customers.

Our synthetic lease is an off-balance sheet arrangement that could negatively affect our financial condition and results.

In April 2002, we entered into a seven-year synthetic lease with a lessor for our headquarters office buildings in Fort Lauderdale, Florida. The synthetic lease qualifies for operating lease accounting treatment under SFAS No. 13, Accounting for Leases, so we do not include the property or the associated lease debt on our condensed consolidated balance sheets. However, if the lessor were to change its ownership of our property or significantly change its ownership of other properties that it currently holds, under FIN No. 46, Consolidation of Variable Interest Entities (revised) we could be required to consolidate the entity, the leased facility and the associated debt at that time.

If we elect not to purchase the property at the end of the lease term, we have guaranteed a minimum residual value of approximately $51.9 million to the lessor. Therefore, if the fair value of the property declines below $51.9 million, our residual value guarantee would require us to pay the difference to the lessor, which could have a material adverse effect on our results of operations and financial condition.

We have entered into a credit facility agreement that restrict our ability to conduct our business and failure to comply with such agreements may have an adverse effect on our business, liquidity and financial position.

We, along with our subsidiary, Citrix Systems International GmbH, maintain a credit facility agreement that contains financial covenants tied to a maximum consolidated leverage ratio and minimum interest coverage, among other things. The credit facility agreement also contains affirmative and negative covenants, including limitations related to our ability to incur future indebtedness, contingent obligations or liens, conduct certain mergers or acquisitions, make certain investments and loans, alter our capital structure, sell stock or assets and pay dividends. If we fail to comply with these covenants or any other provision of the credit facility agreement, we may be in default under the credit facility agreement, and we cannot assure you that we will be able to obtain the necessary waivers or amendments of such default. Upon an event of default under our credit facility agreement not otherwise amended or waived, the affected lenders could accelerate the repayment of any outstanding principal and accrued interest on their outstanding loans and terminate their commitments to lend additional funds, which may have a material adverse effect on our liquidity and financial position.

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If our security measures are breached and unauthorized access is obtained to our Online Services division customers’ data, our services may be perceived as not being secure and customers may curtail or stop using our service.

Use of our GoToMyPC, GoToMeeting, GoToAssist or GoToWebinar services involves the storage and transmission of customers’ business and personally identifiable information, and security breaches could expose us to a risk of loss of this information, litigation and possible liability. If our security measures are breached as a result of third-party action, employee error, malfeasance or otherwise, and, as a result, someone obtains unauthorized access to one of our online customers’ personally identifiable data, our reputation will be damaged, our business may suffer and we could incur significant liability. Because techniques used to obtain unauthorized access to or sabotage systems change frequently and generally are not recognized until launched against a target, we may be unable to anticipate these techniques or to implement adequate preventative measures. If any compromises of security were to occur, it could have the effect of substantially reducing the use of the Web for commerce and communications. Anyone who circumvents our security measures could misappropriate credit card and other payment information, personally identifiable customer information or cause interruptions in our services or operations. Computer viruses, software programs that disable or impair computers, have been and continue to be distributed and have rapidly spread over the Internet. Computer viruses could be introduced into our systems or those of our vendors, which could disrupt our network or make it inaccessible to our Online Services division customers. If an actual or perceived breach of our security occurs, the market perception of the effectiveness of our security measures could be harmed and we could lose sales and customers for our Online Services division, and in the case of an actual breach we could incur fines and other penalties, which would significantly adversely affect our financial condition and the operating results for our Online Services division.

Evolving regulation of the Web may adversely affect our Online Services division.

As Web commerce continues to evolve, increasing regulation by federal, state or foreign agencies becomes more likely. For example, we believe increased regulation is likely in the area of laws and regulations applying to the solicitation, collection, processing or use of personal or consumer information. Additional regulation could impact our business through increased costs and restrictions on our ability to process and secure customer data. In addition, taxation of services provided over the Web or other charges imposed by government agencies or by private organizations for accessing the Web may also be imposed. Any regulation imposing greater fees for Web use or restricting information exchange over the Web could result in a decline in the use of the Web and the viability of Web-based services, which would significantly adversely affect our financial condition and the operating results for our Online Services division.

Natural disasters or other unanticipated catastrophes that result in a disruption of our operations could negatively impact our results of operations.

Our worldwide operations are dependent on our network infrastructure, internal technology systems and Website. Significant portions of our computer equipment, intellectual property resources and personnel, including critical resources dedicated to research and development and administrative support functions are presently located at our corporate headquarters in Fort Lauderdale, Florida, an area of the country that is particularly prone to hurricanes, and at our various locations in California, an area of the country that is particularly prone to earthquakes. We also have operations in various domestic and international locations that expose us to additional diverse risks. The occurrence of natural disasters, such as hurricanes or earthquakes, or other unanticipated catastrophes, such as telecommunications failures, cyber-attacks, fires or terrorist attacks, at any of the locations in which we do business, could cause interruptions in our operations. For example, in October 2005, Hurricane Wilma passed through southern Florida causing extensive damage to the region, including some minor damage to our corporate headquarters facility. In addition, even in the absence of direct damage to our operations, large disasters, terrorist attacks or other casualty events could have a significant impact on our partners’ and customers’ businesses, which in turn could result in a negative impact on our results of operations. Extensive or multiple disruptions in our operations, or our partners’ or customers’ businesses, due to natural disasters or other unanticipated catastrophes could have a material adverse effect on our results of operations.

If we do not generate sufficient cash flow from operations in the future, we may not be able to fund our product development and acquisitions and fulfill our future obligations.

Our ability to generate sufficient cash flow from operations to fund our operations and product development, including the payment of cash consideration in acquisitions and the payment of our other obligations, depends on a range of economic, competitive and business factors, many of which are outside our control. We cannot assure you that our business will generate sufficient cash flow from operations, or that we will be able to liquidate our investments, repatriate cash and investments held in our overseas subsidiaries, sell assets or raise equity or debt financings when needed or desirable. An inability to fund our operations or fulfill outstanding obligations could have a material adverse effect on our business, financial condition and results of operations. For further information, please refer to “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources.”

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Matters relating to or arising out of our historical stock option granting practices, including regulatory inquiries or proceedings, litigation matters and potential additional cash and non-cash charges, could have a material adverse effect on us.

As described in the Explanatory Note to our Annual Report on Form 10-K for the year ended December 31, 2006, Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and in Note 2 to our consolidated financial statements included therein, in the fourth quarter of 2006, the Audit Committee of our Board of Directors commenced a voluntary independent investigation of certain of our stock option granting practices and the related accounting during the period from January 1996 through December 2006. This investigation was conducted by the Audit Committee with the assistance of independent outside legal counsel and outside forensic accounting consultants. In addition to those grants evaluated as part of the Audit Committee’s investigation, we also evaluated all grants (consisting of two employee new hire grants) in December 1995, which was the month the Company completed its initial public offering, and all grants to non-employee directors. The Audit Committee completed its investigation in the second quarter of 2007. Based on the facts obtained in connection with the Audit Committee’s investigation and management’s supplemental review, we concluded that stock options granted during the period from December 1995 to March 2005, were accounted for using incorrect measurement dates, which required a restatement of our previously filed financial statements.

We incurred significant expenses related to legal, accounting, tax and other professional services in connection with the investigation of our historical stock option granting practices and the related restatements, and may incur significant expenses in the future with respect to such matters, including as a result of litigation matters or additional cash and non-cash charges. For example, as described in Part I, Item 3 “Legal Proceedings,” purported stockholder derivative actions have been filed relating to certain of our historical stock option grants. Even if resolved favorably, these matters may be time-consuming, expensive and disruptive to normal business operations, and the impact and outcomes of current or future litigation matters are difficult to predict and could have a material adverse effect on our business, results of operations and financial condition.

Additionally, as described in the Explanatory Note to our Annual Report on Form 10-K for the year ended December 31, 2006, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II Item 7 and in Note 2 to our consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2006 in Part IV Item 15, after the Audit Committee completed its investigation of our historical stock option granting practices and our review of the accounting treatment for our historical stock option grants, we recorded additional stock-based compensation expenses and related tax effects with regard to certain past stock option grants, and we restated previously issued financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2006. Although we believe we made appropriate judgments in determining the financial and tax impacts of our historical stock option granting practices and have consulted with the Office of the Chief Accountant of the SEC on certain interpretive matters, we cannot provide assurance that regulatory authorities, including the Internal Revenue Service, or IRS, will agree with the manner in which we have accounted for and reported, or not reported, the financial and tax impacts. Specifically, in light of the significant judgment used in establishing revised measurement dates, alternate approaches to those used by us could have resulted in different compensation expense charges than those reported in our Annual Report on Form 10-K for the year ended December 31, 2006 and those differences could be considered material. We considered various alternative approaches and believe that the approaches used by us were appropriate under the circumstances. For a complete discussion of the judgments underlying the revised measurement dates, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2006. If regulatory authorities disagree with our financial or tax adjustments and such disagreements result in material changes to our historical financial statements, we may be required to further restate our prior financial statements, amend prior filings with the SEC or take other action that is not currently contemplated. In addition, other adjustments for non-operating cash charges may be required in connection with the resolution of stock option related matters arising under any litigation commenced against us.

If stock balancing returns or price adjustments exceed our reserves, our operating results could be adversely affected.

We provide most of our distributors with stock balancing return rights, which generally permit our distributors to return products to us by the forty-fifth day of a fiscal quarter, subject to ordering an equal dollar amount of our products prior to the last day of the same fiscal quarter. We also provide price protection rights to most of our distributors. Price protection rights require that we grant retroactive price adjustments for inventories of our products held by distributors if we lower our prices for those products within a specified time period. To cover our exposure to these product returns and price adjustments, we establish reserves based on our evaluation of historical product trends and current marketing plans. However, we cannot assure you that our reserves will be sufficient to cover our future product returns and price adjustments. If we inadequately forecast reserves, our operating results could be adversely affected.

Our stock price could be volatile, and you could lose the value of your investment.

Our stock price has been volatile and has fluctuated significantly in the past. The trading price of our stock is likely to continue to be volatile and subject to fluctuations in the future. Your investment in our stock could lose some or all of its value. Some of the factors that could significantly affect the market price of our stock include:

• actual or anticipated variations in operating and financial results;

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• analyst reports or recommendations;

• changes in interest rates; and

• other events or factors, many of which are beyond our control.

The stock market in general, The NASDAQ Global Select Market (formerly, the Nasdaq National Market), and the market for software companies and technology companies in particular, have experienced extreme price and volume fluctuations. These broad market and industry factors could materially and adversely affect the market price of our stock, regardless of our actual operating performance.

Changes or modifications in financial accounting standards related to share-based compensation may have a material adverse impact on our reported results of operations.

Effective January 1, 2006, we adopted Statement of Financial Accounting Standards, or SFAS, No. 123R, Share-Based Payment, a complex accounting standard that requires companies to expense the fair value of employee stock options and similar awards. The application of SFAS No. 123R requires significant judgment and the use of estimates, particularly surrounding stock price volatility, option forfeiture rates and expected option lives, to build a model for appropriately valuing share-based compensation. There is a risk that, as a result of subsequent accounting guidelines or changes in our business, we could determine that the assumptions or model we used requires modification. Any such modification could result in significantly different charges in future periods and, potentially, could require us to correct the charges taken in prior periods. These modifications, as well as any such corrections of charges taken in a prior period could negatively affect our results of operations, stock price and our stock price volatility.

Our business is subject to seasonal fluctuations.

Our business is subject to seasonal fluctuations. Historically, our net revenues have fluctuated quarterly and have generally been the highest in the fourth quarter of our fiscal year due to corporate calendar year-end spending trends. In addition, our European operations generally provide lower revenues in the summer months because of the generally reduced level of economic activity in Europe during the summer. This seasonal factor also typically results in higher fourth quarter revenues. Quarterly results are also affected by the timing of the release of new products and services. Because of the seasonality of our business, results for any quarter, especially our fourth quarter, are not necessarily indicative of the results that may be achieved for the full fiscal year.

Funds from certain of our auction rate securities may not be accessible within 12 months and our auction rate securities may experience an other-than-temporary decline in value, which would adversely affect our income.

In February 2008, approximately $45.5 million of our investment portfolio consists of municipal auction rate securities whose underlying assets are generally student loans which are substantially backed by the federal government. The market for municipal auction rate securities held in our portfolio began experiencing auction failures on February 13, 2008. If the issuers of the affected securities are unable to successfully complete future auctions or refinance their obligations and their credit ratings deteriorate, we may be required to adjust the carrying value of these securities and recognize an impairment charge for an other-than-temporary decline in the fair values of these securities which will have an adverse impact on our results of operations. All of our auction rate securities, including those having recently experienced an auction failure, are currently rated triple-A by one or more rating agencies. We believe we will be able to liquidate our investment without significant loss within the next year, and we currently believe these securities are not significantly impaired. Based on our available cash and other investments, we do not currently anticipate that the lack of liquidity caused by failed auctions related to these securities will have a material adverse effect on our operating cash flows or will affect our ability to operate our business as usual.

Our business and investments could be adversely impacted by unfavorable economic political and social conditions.

General economic and market conditions, and other factors outside our control including significant natural disasters, terrorist attacks or military actions, could adversely affect our business and impair the value of our investments. For example, an economic downturn could result in impairment in the value of our investments requiring us to record losses related to such investments. Impairment in the value of these investments may disrupt our ongoing business and distract management. As of December 31, 2007, we had $600.7 million of short and long-term investments, including restricted investments, with various issuers and financial institutions. In many cases we do not attempt to reduce or eliminate our market exposure on these investments and could incur losses related to the impairment of these investments. Fluctuations in economic and market conditions could adversely affect the value of our investments, and we could lose some of our investment portfolio. A total loss of an investment could adversely affect our results of operations and financial condition. For further information on these investments, please refer to “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources.”

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ITEM 1B. UNRESOLVED STAFF COMMENTS

We have received no written comments regarding our periodic or current reports from the staff of the Securities and Exchange Commission that were issued 180 days or more preceding the end of our 2007 fiscal year that remain unresolved.

ITEM 2. PROPERTIES

We lease and sublease a total of 1,131,695 square feet of office space in the United States, Canada and Latin America, which is comprised of 474,150 square feet related to our Americas segment, 187,127 square feet related to our Online Services division and 470,418 square feet relating to our corporate headquarters located in Fort Lauderdale, Florida. Included in this total square footage is 368,843 square feet of office space in California, and 292,434 square feet of office space in other locations in the United States, Canada and Latin America.

We lease and sublease a total of 412,278 square feet of office space in various other facilities outside of North and Latin America, 198,899 of which relates to our Europe, the Middle East and Africa, or EMEA, segment and 213,379 of which relates to our Asia-Pacific segment. In addition, we own land and buildings in the United Kingdom with approximately 42,000 square feet of office space.

We believe that our existing facilities are adequate for our current needs. As additional space is needed in the future, we believe that suitable space will be available in the required locations on commercially reasonable terms.

ITEM 3. LEGAL PROCEEDINGS

Due to the nature of our business, we are subject to patent infringement claims. In 2006, we were sued in the United States District Court for the Northern District of Ohio for alleged patent infringement by our Online Services division’s GoToMyPC service and in the United States District Court for the Southern District of Florida for alleged patent infringement by our Online Services division’s GoToMyPC and GoToMeeting services. The complaints name Citrix Systems, Inc. and Citrix Online LLC, a wholly-owned subsidiary of Citrix Systems, Inc., as defendants and seek unspecified damages and other relief. In January 2007, a similar suit naming Citrix Systems, Inc. was filed in the United States District Court of the Eastern District of Texas. In response, we filed answers denying infringement and alleging, among other things, that the asserted claims of these patents are invalid. With respect to the Northern District of Ohio case, on November 2, 2006, the court held a hearing for the purpose of construing disputed terms of the claims of the patent-in-suit, and on March 13, 2007, the court issued a claim construction ruling. On March 21, 2007, we moved for leave to amend our answer in that case to assert an affirmative defense and counterclaim of inequitable conduct, which is a complete defense. On August 28, 2007, the court granted our motion. On December 7, 2007, we filed motions for summary judgment in the Northern District of Ohio case, seeking judgment that the asserted patent is invalid and that we have not infringed the patent, as well as judgments on other, non-dispositive issues. On the same day, we filed a request with the United States Patent and Trademark Office seeking inter partes reexamination of the patent in suit, and we subsequently filed a request with the court in the Northern District of Ohio seeking a stay of the litigation pending the Patent Office’s determination of our reexamination request. The court has all of these motions under advisement. The Patent Office has not yet ruled on our reexamination request. Trial in the Northern District of Ohio case currently is scheduled to begin March 24, 2008. Trial in the Southern District of Florida case currently is scheduled to begin April 28, 2008, and trial in the Eastern District of Texas case currently is scheduled to begin June 15, 2009. In addition, the United States Patent and Trademark Office has decided to reexamine the patent at issue in the Southern District of Florida case. We believe that we have meritorious defenses to the allegations made in each of the complaints and intend to vigorously defend these lawsuits; however, we are unable to currently determine the ultimate outcome of these matters or the potential exposure to loss, if any.

On March 6, 2007, a purported stockholder derivative action entitled Sheet Metal Workers Local 28 Pension Fund v. Roger W. Roberts et al. (C.A. No. 07-60316), was filed in the US District Court for the Southern District of Florida against certain of our current and former directors and officers, and against us as a nominal defendant. The lawsuit asserts, among other things, that certain stock option grants made by us were dated and accounted for inappropriately. The lawsuit seeks the recovery of monetary damages and other relief for damage allegedly caused to us. An amended complaint, which changed the plaintiff in the action, named additional defendants and included additional allegations concerning our stock option granting practices, was filed on January 15, 2008 under the caption Rappaport v. Roberts, et al. (CA No. 07-60316).

We also received a demand letter dated March 15, 2007 from a purported stockholder with respect to certain stock option grants made to our current and former directors and officers during the years 1996 through 2003. That demand letter asserted, among other things, that certain stock option grants made by us were dated and accounted for inappropriately. The demand letter sought, among other things, the commencement by our Board of Directors of an action against our directors and officers from 1996 forward for alleged breaches of fiduciary duties in connection with the granting of the options. A special committee of independent directors was appointed to review and consider the assertions contained in the demand letter. The special committee has completed its work and has determined that it would not be in the best interests of the company to pursue the claims referred to in the demand letter.

In July 2007, two additional purported stockholder derivative actions entitled Ekas v. Citrix, et al. (Case No. 07-16114-11) and Crouse v. Citrix, et al. (Case No. 07-16249-03) were filed in the Circuit Court for Broward County, Florida state court against certain of our current and former directors and officers, and against us as a nominal defendant. These actions assert, among other things, that certain stock option grants made by us were dated and accounted for inappropriately. As with the Sheet Metal Workers’ action, both the Ekas and Crouse actions seek the recovery of monetary damages and other relief for damages allegedly

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caused to us. Neither the purported stockholder derivative actions nor the demand letter described above seeks to recover amounts from us. An amended complaint in the Ekas action, which contains additional allegations concerning our stock option granting practices was filed on December 14, 2007.

During the course of our stock option investigation, we have periodically met and discussed the results of this investigation with the staff of the Securities and Exchange Commission, or SEC. On January 30, 2008, we received a letter from the SEC Staff stating that the Staff has completed its investigation and does not intend to recommend any enforcement action by the SEC against us.

In addition, we are a defendant in various litigation matters generally arising out of the normal course of business. Although it is difficult to predict the ultimate outcome of these cases, we believe that the ultimate outcome will not materially affect our business, financial position, results of operations or cash flows.

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

At the Company’s annual meeting of stockholders held on October 18, 2007, the Company’s stockholders took the following actions:

The Company’s stockholders elected Mark B. Templeton, Stephen M. Dow and Godfrey R. Sullivan, each as a Class III director, to serve for a three-year term expiring at the Company’s annual meeting of stockholders in 2010 or until his successor has been duly elected and qualified or until his earlier resignation or removal. The directors were elected by a plurality of the votes cast at the 2007 annual meeting as follows: 144,751,442 shares voted for the election of Mr. Templeton, 82,306,008 shares voted for the election of Mr. Dow and 100,138,443 shares voted for the election of Mr. Sullivan; and 5,572,519 shares were withheld from the election of Mr. Templeton, 68,017,953 shares were withheld from the election of Mr. Dow and 50,185,518 shares were withheld from the election of Mr. Sullivan. No other persons were nominated, nor received votes, for election as a director of the Company at the 2007 annual meeting. The other directors of the Company whose terms continued after the 2007 annual meeting were Murray J. Demo, Asiff S. Hirji, Thomas F. Bogan and Gary E. Morin.

The Company’s stockholders approved an amendment to the Company’s 2005 Equity Incentive Plan. The votes cast at the 2007 annual meeting were as follows: 106,272,831 shares voted for, 22,652,032 shares voted against and 1,824,402 shares abstained from voting. There were 19,574,696 broker non-votes with respect to this proposal.

The Company’s stockholders approved the stockholder proposal regarding the adoption of a majority voting standard for uncontested elections. The votes cast at the 2007 annual meeting were as follows: 91,375,597 shares voted for, 38,106,930 shares voted against and 1,266,737 shares abstained from voting. On December 6, 2007, we amended our by-laws and Corporate Governance Guidelines to implement a majority voting standard for uncontested director elections. There were 19,574,697 broker non-votes with respect to this proposal.

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PART II

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

Price Range of Common Stock and Dividend Policy

Our common stock is currently traded on The Nasdaq Global Select Market under the symbol “CTXS.” The following table sets forth the high and low closing prices for our common stock as reported on The Nasdaq Global Select Market for the periods indicated, as adjusted to the nearest cent. Such information reflects inter-dealer prices, without retail markup, markdown or commission and may not represent actual transactions.

	High		Low
Year Ended December 31, 2007:
Fourth quarter	$	43.86	$	36.12
Third quarter	$	40.68	$	31.79
Second quarter	$	34.61	$	30.48
First quarter	$	33.06	$	26.83
Year Ended December 31, 2006:
Fourth quarter	$	35.39	$	26.82
Third quarter	$	40.29	$	28.00
Second quarter	$	45.16	$	34.61
First quarter	$	37.90	$	29.24

On February 20, 2008, the last reported sale price of our common stock on The Nasdaq Global Select Market was $36.51 per share. As of February 20, 2008, there were approximately 1,458 holders of record of our common stock.

We currently intend to retain any earnings for use in our business, for investment in acquisitions and to repurchase shares of our common stock. We have not paid any cash dividends on our capital stock in the last two years and do not currently anticipate paying any cash dividends on our capital stock in the foreseeable future.

Equity Compensation Plan Information

The following table (in thousands, except option price) provides information as of December 31, 2007 about the securities authorized for issuance to our employees and non-employee directors under our fixed stock-based compensation plans:

Plan category	(A) Number of securities to be issued upon exercise of outstanding options, warrants and rights	(B) Weighted-average exercise price of outstanding options, warrants and rights		(C) Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (A))
Equity compensation plans approved by security holders(1)	25,565	$	32.64	8,772
Equity compensation plans not approved by security holders(2)	5,179	$	3.14	—
Total	30,744	$	27.67	8,772

⁽¹⁾ Includes securities issuable upon exercise of outstanding options, warrants and rights that were issued pursuant to our 1995 Stock Plan, the Third Amended and Restated 1995 Employee Stock Purchase Plan, the 2000 Director and Officer Stock Option and Incentive Plan, and the Amended and Restated 1995 Non-Employee Director Stock Option Plan. No additional awards will be granted under these plans. Also includes securities issuable upon exercise of outstanding options, warrants and rights that have been issued pursuant to our 2005 Equity Incentive Plan, which is currently available for future grants.

⁽²⁾ Consists of the following plans assumed in acquisitions: Ardence Delaware, Inc.’s 2005 Omnibus Plan, Ardence Delaware Inc.’s 2006 Restricted Stock Unit Plan, QuickTree, Inc.’s 2007 Restricted Stock Unit Plan, XenSource Inc.’s 2005 Stock Plan, the NetScaler Plan, the Teros Plan, the Reflectent Stock Plan, the Reflectent RSU Plan, the Orbital Incentive Plan, the Orbital RSU Plan, the 2000 Net6 Plan and the 2003 Net6 Plan.

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Issuer Purchases of Equity Securities

Our Board of Directors has authorized an ongoing stock repurchase program with a total repurchase authority granted to us of $1.8 billion, of which $300.0 million was authorized in January 2008. The objective of the stock repurchase program is to improve stockholders’ returns. At December 31, 2007, approximately $33.5 million was available to repurchase common stock pursuant to the stock repurchase program. All shares repurchased are recorded as treasury stock. The following table shows the monthly activity related to our stock repurchase program for the quarter ended December 31, 2007.

	Total Number of Shares Purchased (1)	Average Price Paid per Share			Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Approximate dollar value of Shares that may yet be Purchased under the Plans or Programs (in thousands)
October 1, 2007 through October 31, 2007	1,573,859	$	41.22	(2)	1,573,859	$	118,577
November 1, 2007 through November 30, 2007	2,284,670	$	39.52	(2)	2,284,670	$	33,474
December 1, 2007 through December 31, 2007	1,517,360	$	37.53	(2)	1,517,360	$	33,474
Total	5,375,889	$	39.46	(2)	5,375,889	$	33,474

⁽¹⁾ Represents shares received under our prepaid stock repurchase programs and shares acquired in open market purchases. We expended approximately $200.0 million during the quarter ended December 31, 2007 for repurchases of our common stock. For more information see Note 7 to our consolidated financial statements included in this Annual Report on Form 10-K for the year ended December 31, 2007.

⁽²⁾ These amounts represent the cumulative average of the price paid per share for shares acquired in open market purchases and those received under our prepaid stock repurchase programs, some of which extend over more than one fiscal period.

ITEM 6. SELECTED FINANCIAL DATA

The following selected consolidated financial data should be read in conjunction with the consolidated financial statements and notes thereto and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” appearing elsewhere in this Annual Report on Form 10-K for the year ended December 31, 2007.

	Year Ended December 31,
	2007			2006			2005			2004			2003
	(In thousands, except per share data)
Consolidated Statements of Income Date:
Net revenues	$	1,391,942		$	1,134,319		$	908,722		$	741,157		$	588,625
Cost of revenues (a)		137,607			98,698			58,099			26,656			31,639
Gross margin		1,254,335			1,035,621			850,623			714,501			556,986
Operating expenses:
Research and development		205,103			155,331			108,751			86,654			66,366
Sales, marketing and support		590,409			480,343			394,153			337,777			258,522
General and administrative		229,229			178,669			125,425			105,799			87,196
Amortization of other intangible assets		17,387			16,934			11,622			6,204			300
In-process research and development		9,800			1,000			7,000			19,100			—
Total operating expenses		1,051,928			832,277			646,951			555,534			412,384
Income from operations		202,407			203,344			203,672			158,967			144,602
Interest income		49,704			41,210			23,614			14,274			21,120
Interest expense		(737	)		(927	)		(2,426	)		(11,756	)		(18,436	)
Other expense, net		(466	)		(546	)		(506	)		2,851			3,458
Income before income taxes		250,908			243,081			224,354			164,336			150,744
Income taxes		36,425			60,084			58,745			33,049			30,702
Net income	$	214,483		$	182,997		$	165,609		$	131,287		$	120,042
Diluted earnings per share (b)	$	1.14		$	0.97		$	0.93		$	0.75		$	0.70

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	Year Ended December 31,
	2007		2006		2005		2004		2003
	(In thousands)
Consolidated Balance Sheet Data:
Total assets	$	2,534,693	$	2,024,473	$	1,698,982	$	1,306,416	$	1,369,768
Current portion of long-term debt		—		—		—		—		351,423
Stockholders’ equity		1,838,325		1,464,289		1,214,528		936,833		717,191
Long-term debt		—		—		31,000		—		—

^(a) Cost of revenues includes amortization of product related intangible assets of $29.6 million, $19.2 million, $16.8 million, $6.1 million, and $11.0 million in 2007, 2006, 2005, 2004 and 2003, respectively.

^(b) Our diluted weighted–average shares outstanding primarily fluctuates based on the level of shares issued under our stock-based compensation programs, stock repurchases made under our stock repurchase program and shares issued in connection with our acquisitions. See Notes 3, 6 and 7 to our consolidated financial statements included in this Annual Report on Form 10-K for the year ended December 31, 2007.

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

Overview

We design, develop and market technology solutions that allow applications to be delivered, supported and shared on-demand with high performance, enhanced security and improved total cost of ownership, or TCO. We market and license our products through multiple channels such as value-added resellers, channel distributors, system integrators, independent software vendors, our Websites and original equipment manufacturers.

2007 Acquisitions

Ardence Delaware Inc.

On January 5, 2007, we acquired all of the issued and outstanding capital stock of Ardence Delaware Inc. or the Ardence Acquisition, a leading provider of solutions that allow information technology administrators to set up and configure PCs, servers, and Web servers in real time from a centrally managed source. The Ardence Acquisition strengthens our application delivery capabilities with more robust streaming and provisioning technologies and increased security and reliability. The total consideration for the Ardence Acquisition was $51.7 million comprised of cash paid of $50.3 million and acquisition related costs of approximately $1.4 million. As part of the Ardence Acquisition, we assumed approximately 0.1 million non-vested stock-based awards and approximately 0.1 million stock option upon the closing of the transaction. The sources of funds for consideration paid in the transaction consisted of available cash and investments.

Xensource, Inc.

On October 19, 2007, we completed our acquisition of all of the issued and outstanding capital stock of XenSource, Inc., or the XenSource Acquisition, a privately held leader in enterprise-grade virtual infrastructure solutions. The acquisition positions us in adjacent server and desktop virtualization markets that will allow us to extend our leadership in the broader Application Delivery Infrastructure market by adding key enabling technologies that make the end-to-end computing environment more flexible, dynamic and responsive to business change. The total consideration for the XenSource Acquisition was approximately $328.5 million, comprised of approximately 7.1 million shares of our common stock valued at $232.3 million, $92.5 million in cash and approximately $3.7 million in direct transaction costs. In addition, in connection with the XenSource Acquisition we issued approximately 1.3 million unvested shares of our common stock and assumed approximately 3.3 million stock options each of which will be exercisable for the right to receive one share of our common stock upon vesting. The sources of funds for cash consideration paid in the transaction consisted of available cash and investments.

The Sevin Rosen funds, a venture capital firm, was a stockholder in XenSource. Stephen Dow, a member of our Board of Directors, is a general partner of the Sevin Rosen funds and did not directly hold any interest in XenSource. Although the Sevin Rosen funds were represented on the Board of Directors of XenSource, Mr. Dow was not a director of XenSource. Our acquisition of XenSource, provided a return to all the partners of the Sevin Rosen funds, including Mr. Dow. Subject to certain assumptions, we estimate that the allocation to Mr. Dow through the general partner entities of the Sevin Rosen funds related to the acquisition of XenSource will be approximately $1.9 million, if and when the Sevin Rosen funds distribute such allocations to its general partner entities. Mr. Dow has been on our Board of Directors since 1989 and currently owns 278,564 shares of our common stock. Mr. Dow did not attend the meeting at which our Board approved the transaction and recused himself from the vote to approve the transaction. Consistent with our policies and the charter of the Nominating and Corporate Governance Committee of our Board of Directors, the acquisition of XenSource was reviewed and approved by the Nominating and Corporate Governance Committee.

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There were no material relationships among us and XenSource or any of their respective affiliates or any of the parties to the agreement to acquire XenSource and related agreements, other than in respect of such agreements themselves and as disclosed in this Annual Report on form 10-K .

Revenues from the products acquired in the Ardence Acquisition and the XenSource Acquisition, or together, the 2007 Acquisitions, are primarily included in our Product License revenue. The 2007 Acquisitions results of operations have been included in our consolidated results of operations beginning after the date of the respective acquisitions.

Purchase Accounting for the 2007 Acquisitions

Under the purchase method of accounting, the purchase prices for the 2007 Acquisitions were allocated to the acquired companies’ net tangible and intangible assets based on their estimated fair values as of the date of the completion of the acquisitions. The allocation of the total purchase prices are summarized below (in thousands):

	Ardence				XenSource
	Purchase Price Allocation			Asset Life	Purchase Price Allocation			Asset Life
Current assets	$	6,326			$	19,177
Property and equipment		917		Various		1,224		Various
In-process research and development		1,200				8,600
Other assets		—				112
Intangible assets		22,160		1-7 years		146,440		2-8 years
Goodwill		43,187		Indefinite		214,299		Indefinite
Assets acquired		73,790				389,852
Current liabilities assumed		(10,851	)			(4,179	)
Long-term liabilities assumed		(2,673	)			—
Deferred tax liabilities, non-current		(8,577	)			(57,214	)
Net assets acquired, including direct transaction costs	$	51,689			$	328,459

Current assets acquired in connection with the Ardence Acquisition consisted mainly of accounts receivable and current assets acquired in connection with the XenSource Acquisition consisted mainly of short-term deferred tax assets and to a lesser extent, accounts receivable. Current liabilities acquired in the acquisition of Ardence consisted primarily of short-term debt and other accrued expenses and current liabilities acquired in the XenSource Acquisition consisted primarily of other accrued expenses. Long-term liabilities acquired in the Ardence Acquisition consisted primarily of facilities related costs. Of the goodwill related to the 2007 Acquisitions, approximately $184.5 million was assigned to our Americas segment, approximately $62.0 was assigned to our Europe, Middle East and Africa, or EMEA, segment and approximately $11.0 million was assigned to our Asia-Pacific segment. The goodwill is not deductible for tax purposes. Please refer to Note 12 to our consolidated financial statements included in this Annual Report on Form 10-K for the year ended December 31, 2007.

2006 Acquisitions

During 2006, we acquired all of the issued and outstanding capital stock of two privately held companies, Reflectent Software, Inc., a provider of solutions to monitor the real-time performance of client-server, Web and desktop applications from an end-user perspective, and Orbital Data Corporation, a provider of solutions that optimize the delivery of applications over wide area networks, together the 2006 Acquisitions. The 2006 Acquisitions strengthen our Citrix Delivery Center products which are designed to offer comprehensive solutions across all dimensions of application delivery. The total consideration for the 2006 Acquisitions was $68.0 million comprised of cash paid of $65.1 million and other costs related primarily to direct transaction costs of $2.9 million. As part of the 2006 Acquisitions, we assumed approximately 0.4 million non-vested stock-based awards upon the closing of the transaction. The sources of funds for consideration paid in these transactions consisted of available cash and investments. In connection with the 2006 Acquisitions, we allocated $43.7 million to goodwill, $17.3 million to core and product technology and $3.6 million to other intangible assets. We assigned all of the goodwill to our Americas segment

2005 Acquisitions

During 2005, we acquired all of the issued and outstanding capital stock of two privately held companies, NetScaler, Inc. and Teros, Inc., or together, the 2005 Acquisitions, for a total of $172.8 million in cash, 6.6 million shares of our common stock valued at $154.8 million and estimated direct transaction costs of $6.2 million. We also assumed approximately $20.6 million in non-vested stock-based compensation upon the closing of the NetScaler, Inc., or NetScaler, transaction that was accounted for in accordance with FASB Interpretation No. 44, Accounting for Certain Transactions Involving Stock Compensation (an Interpretation of APB Opinion No. 25) and was recorded as deferred compensation in the accompanying 2005 consolidated

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balance sheet. The assumed awards had an excess of fair value over intrinsic value of $0.5 million, which is reflected in the total consideration for the transaction. The 2005 Acquisitions further extended our Citrix Delivery Center products, which is designed to offer comprehensive solutions across all dimensions of application delivery. The results of operations of the acquired companies are included as part of our results beginning after their respective dates of acquisition and revenues from the acquired products are included in our Product License revenue and Technical Services revenue in the accompanying consolidated statements of income. In connection with the 2005 Acquisitions, we allocated $230.0 million to goodwill, $40.2 million to core technology and $35.8 million to other intangible assets. We assigned all of the goodwill to our Americas segment.

In-process Research and Development for Acquisitions

The fair values used in determining the purchase price allocation for certain intangible assets for our acquisitions were based on estimated discounted future cash flows, royalty rates and historical data, among other information. Purchased in-process research and development, or IPR&D, was expensed immediately upon the closing of our 2007 Acquisitions in the amount of $9.8 million, our 2006 Acquisitions in the amount of $1.0 million and our 2005 Acquisitions in the amount of $7.0 million, in accordance with FASB Interpretation No. 4, Applicability of FASB Statement No. 2 to Business Combinations Accounted for by the Purchase Method, due to the fact that it pertained to technology that was not currently technologically feasible, meaning it had not reached the working model stage, did not contain all of the major functions planned for the product, was not ready for initial customer testing and had no alternative future use. The fair value assigned to in-process research and development was determined using the income approach, which includes estimating the revenue and expenses associated with a project’s sales cycle and by estimating the amount of after-tax cash flows attributable to the projects. The future cash flows were discounted to present value utilizing an appropriate risk-adjusted rate of return, which ranged from 19%–36%. The rate of return included a factor that takes into account the uncertainty surrounding the successful development of the IPR&D.

Critical Accounting Policies and Estimates

Our discussion and analysis of financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent liabilities. We base these estimates on our historical experience and on various other assumptions that we believe to be reasonable under the circumstances, and these estimates form the basis for our judgments concerning the carrying values of assets and liabilities that are not readily apparent from other sources. We periodically evaluate these estimates and judgments based on available information and experience. Actual results could differ from our estimates under different assumptions and conditions. If actual results significantly differ from our estimates, our financial condition and results of operations could be materially impacted.

We believe that the accounting policies described below are critical to understanding our business, results of operations and financial condition because they involve more significant judgments and estimates used in the preparation of our consolidated financial statements. An accounting policy is deemed to be critical if it requires an accounting estimate to be made based on assumptions about matters that are highly uncertain at the time the estimate is made, and if different estimates that could have been used, or changes in the accounting estimates that are reasonably likely to occur periodically, could materially impact our consolidated financial statements. We have discussed the development, selection and application of our critical accounting policies with the Audit Committee of our Board of Directors and our independent auditors, and our Audit Committee has reviewed our disclosure relating to our critical accounting policies and estimates in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

Note 2 to our consolidated financial statements included in this Annual Report on Form 10-K for the year ended December 31, 2007 describes the significant accounting policies and methods used in the preparation of our Consolidated Financial Statements.

Revenue Recognition

The accounting related to revenue recognition in the software industry is complex and affected by interpretations of the rules and an understanding of industry practices, both of which are subject to change. As a result, revenue recognition accounting rules require us to make significant judgments. In addition, our judgment is required in assessing the probability of collection, which is generally based on evaluation of customer-specific information, historical collection experience and economic market conditions. If market conditions decline, or if the financial condition of our distributors or customers deteriorate, we may be unable to determine that collectability is probable, and we could be required to defer the recognition of revenue until we receive customer payments.

We license most of our products bundled with a one year contract for license updates that provide the end-user with free enhancements and upgrades to the licensed product on a when and if available basis. Customers may also elect to purchase subscriptions for license updates, when not bundled with the initial product release or purchase, technical support, product training or consulting services. We allocate revenue to license updates and any other undelivered elements of the arrangement

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based on vendor specific objective evidence, or VSOE, of fair value of each element and such amounts are deferred until the applicable delivery criteria and other revenue recognition criteria have been met. The balance of the revenue, net of any discounts inherent in the arrangement, is recognized at the outset of the arrangement using the residual method as the product licenses are delivered. If we cannot objectively determine the fair value of each undelivered element based on the VSOE fair value, we defer revenue recognition until all elements are delivered, all services have been performed, or until fair value can be objectively determined. We must apply judgment in determining all elements of the arrangement and in determining the VSOE of fair value for each element, considering the price charged for each product or applicable renewal rates for license updates.

In the normal course of business, we are not obligated to accept product returns from our distributors under any other conditions, unless the product item is defective in manufacture, but we do provide most of our distributors with stock balancing and price protection rights. Stock balancing rights permit distributors to return products to us up to the forty-fifth day of the fiscal quarter, subject to ordering an equal dollar amount of our other products prior to the last day of the same fiscal quarter. Price protection rights require that we grant retroactive price adjustments for inventories of our products held by distributors or resellers if we lower our prices for such products. Product items returned to us under the stock balancing program must be in new, unused and unopened condition. We establish provisions for estimated returns for stock balancing and price protection rights, as well as other sales allowances, concurrently with the recognition of revenue. The provisions are established based upon consideration of a variety of factors, including, among other things, recent and historical return rates for both specific products and distributors, estimated distributor inventory levels by product, the impact of any new product releases and projected economic conditions. Actual product returns for stock balancing and price protection provisions incurred are, however, dependent upon future events, including the amount of stock balancing activity by our distributors and the level of distributor inventories at the time of any price adjustments. We continually monitor the factors that influence the pricing of our products and distributor inventory levels and make adjustments to these provisions when we believe actual returns and other allowances could differ from established reserves. Our ability to recognize revenue upon shipment to our distributors is predicated on our ability to reliably estimate future stock balancing returns. If actual experience or changes in market condition impairs our ability to estimate returns, we would be required to defer the recognition of revenue until the delivery of the product to the end-user. Allowances for estimated product returns amounted to approximately $1.7 million at December 31, 2007 and 2006. We have not reduced and have no current plans to reduce our prices for inventory currently held by distributors or resellers. Accordingly, there were no reserves required for price protection at December 31, 2007 and December 31, 2006. We also record reductions to revenue for customer programs and incentive offerings including volume-based incentives, at the time the sale is recorded. If market conditions were to decline, we could take actions to increase our customer incentive offerings, which could result in an incremental reduction to our revenue at the time the incentive is offered.

Stock-Based Compensation

We adopted the provisions of Statement of Financial Accounting Standards, or SFAS, No. 123R, Share-Based Payment on January 1, 2006, the effective date for such adoption. Prior to January 1, 2006, we accounted for our stock-based compensation plans under the recognition and measurement provisions of Accounting Principles Board (“APB”) Opinion No. 25, Accounting for Stock Issued to Employees, and related Interpretations, as permitted by SFAS No. 123, Accounting for Stock-Based Compensation. We did not recognize compensation cost related to stock options granted to our employees and non-employee directors that had an exercise price equal to or above the market value of the underlying common stock on the date of grant in our consolidated statement of income prior to January 1, 2006. We elected to adopt SFAS No. 123R using the modified-prospective method, under which compensation cost, based on the requirements of SFAS No. 123R, is recognized beginning with the effective date for all stock-based awards granted to employees after the effective date and prior to the effective date that remain unvested as of the effective date. In addition, under the modified-prospective method prior periods are not revised for comparative purposes. Under the fair value recognition provisions of SFAS No. 123R, stock-based compensation cost is measured at the grant date based on the fair value of the award and is recognized as expense over the requisite service or performance period, which is the vesting period.

We currently use the Black-Scholes option pricing model to determine the fair value of stock options. The determination of the fair value of stock-based payment awards on the date of grant using an option-pricing model is affected by our stock price as well as assumptions regarding a number of complex and subjective variables. These variables include our expected stock price volatility over the term of the awards, the expected term of the award, the risk-free interest rate and any expected dividends.

For purposes of determining the expected volatility factor, we considered the implied volatility in two-year market-traded options on our common stock based on third party volatility quotes in accordance with the provisions of Staff Accounting Bulletin, or SAB, No. 107. Our decision to use implied volatility was based upon the availability of actively traded options on our common stock and our assessment that implied volatility is more representative of future stock price trends than historical volatility. The expected term of our options is based on historical employee exercise patterns. We also analyzed our historical pattern of option exercises based on certain demographic characteristics and we determined that there were no meaningful differences in option exercise activity based on demographic characteristics. The approximate risk free interest rate is based on the implied yield available on U.S. Treasury zero-coupon issues with remaining terms equivalent to the expected term on our options. We do not intend to pay dividends on our common stock in the foreseeable future and, accordingly, we used a dividend yield of zero in the

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option pricing model. We are required to estimate forfeitures at the time of grant and revise those estimates in subsequent periods if actual forfeitures differ from those estimates. We use historical data to estimate pre-vesting option forfeitures and record stock-based compensation expense only for those awards that are expected to vest. All stock-based payment awards that vest based on service, including those with graded vesting schedules, are amortized on a straight-line basis over the requisite service periods of the awards, which are generally the vesting periods. Beginning in 2006, we began issuing non-vested stock units and non-vested stock with performance goals to certain senior members of management. The number of non-vested stock units or non-vested stock underlying each award may be determined based on a range of attainment within defined performance goals. We are required to estimate the attainment that will be achieved related to the defined performance goals and number of non-vested stock units or non-vested stock that will ultimately be awarded in order to recognize compensation expense over the vesting period. If our initial estimates of performance goal attainment change, the related expense may fluctuate from quarter to quarter based on those estimates and if the performance goals are not met, no compensation cost will be recognized and any previously recognized compensation cost will be reversed. As of December 31, 2007, there was $217.7 million of total unrecognized compensation cost related to options, non-vested stock and non-vested stock units. That cost is expected to be recognized over a weighted-average period of 2.38 years.

If factors change and we employ different assumptions for estimating stock-based compensation expense in future periods or if we decide to use a different valuation model, the stock-based compensation expense we recognize in future periods may differ significantly from what we have recorded in the current period and could materially affect our operating income, net income and earnings per share. This may result in a lack of consistency in future periods and materially affect the fair value estimate of stock-based payments. It may also result in a lack of comparability with other companies that use different models, methods and assumptions. The Black-Scholes option-pricing model was developed for use in estimating the fair value of traded options that have no vesting restrictions and are fully transferable. These characteristics are not present in our option grants. Existing valuation models, including the Black-Scholes and lattice binomial models, may not provide reliable measures of the fair values of our stock-based compensation. Consequently, there is a risk that our estimates of the fair values of our stock-based compensation awards on the grant dates may bear little resemblance to the actual values realized upon the exercise, expiration, early termination or forfeiture of those stock-based payments in the future. Certain stock-based payments, such as employee stock options, may expire with little or no intrinsic value compared to the fair values originally estimated on the grant date and reported in our financial statements. Alternatively, the value realized from these instruments may be significantly higher than the fair values originally estimated on the grant date and reported in our financial statements. There is currently no market-based mechanism or other practical application to verify the reliability and accuracy of the estimates stemming from these valuation models, nor is there a means to compare and adjust the estimates to actual values. The guidance in SFAS No. 123R and SAB No. 107 is relatively new from an application perspective and the application of these principles may be subject to further interpretation and refinement over time. See Notes 2 and 6 to our consolidated financial statements included in this Annual Report on Form 10-K for the year ended December 31, 2007 for further information regarding our adoption of SFAS No. 123R.

Core and Product Technology Assets

We have acquired our core and product technology assets from our business combinations and other third party agreements. In applying purchase accounting, we allocate a portion of purchase price of acquired companies to the core and product technology assets acquired based on their estimated fair values. We typically engage third party appraisal firms to assist us in determining the fair values of core and product technology assets acquired. Such valuations require us to make significant estimates and assumptions. These estimates are based on historical experience and information obtained from the management of the acquired companies and are inherently uncertain. Critical estimates in determining the fair value of the core and product technology assets include but are not limited to future expected cash flows earned from the core and product technology and discount rates applied in determining the present value of those cash flows. Unanticipated events and circumstances may occur which may affect the accuracy or validity of such assumptions, estimates or actual results.

We review acquired core and product technology assets for impairment on a periodic basis by comparing the estimated net realizable value to the unamortized cost of the technology. The recoverability of these technologies is primarily dependent upon our ability to commercialize products utilizing these technologies. The estimated net realizable value of the purchased technology is based on the estimated undiscounted future cash flows derived from such technology. Our assumptions about future revenues and expenses require significant judgment associated with the forecast of the performance of our products. Actual revenues and costs could vary significantly from these forecasted amounts. As of December 31, 2007, the estimated undiscounted future cash flows expected from core and product technology assets from these acquisitions is sufficient to recover their carrying value. If these products are not ultimately accepted by our customers and distributors, and there is no alternative future use for the technology, we could determine that some or all of their remaining $177.3 million carrying value is impaired. In the event of impairment, we would record an impairment charge to earnings that could have a material adverse effect on our results of operations.

Goodwill

At December 31, 2007, we had $888.5 million in goodwill primarily related to our acquisitions. The goodwill recorded in relation to these acquisitions is not deductible for tax purposes. We operate in a single industry segment consisting of the design,

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development and marketing of technology solutions that deliver applications on-demand. Our revenues are derived from sales of our Citrix Delivery Center products and related technical services in the Americas, EMEA, and Asia-Pacific regions and from online services sold by our Online Services division. These three geographic regions and the Online Services division constitute our reportable segments. See Note 12 to our consolidated financial statements included in this Annual Report on Form 10-K for the year ended December 31, 2007 for additional information regarding our reportable segments. We evaluate goodwill along these segments, which represent our reporting units. Substantially all of our goodwill at December 31, 2007 was associated with our Americas and Online Services division reportable segments. Excluding goodwill, we have no intangible assets deemed to have indefinite lives.

We use judgment in assessing goodwill for impairment. Goodwill is reviewed for impairment annually, or sooner if events or changes in circumstances indicate that the carrying amount could exceed fair value. Fair values are based on discounted cash flows using a discount rate determined by our management to be consistent with industry discount rates and the risks inherent in our current business model. In accordance with SFAS No. 142, Goodwill and Other Intangible Assets, we completed the required annual impairment tests of goodwill as of December 31, 2007. There were no impairment charges recorded as a result of our annual impairment tests. Due to uncertain market conditions and potential changes in our strategy, product portfolio or reportable segments, it is possible that the forecasts we use to support our goodwill could change in the future, which could result in non-cash charges that would adversely affect our results of operations and financial condition.

Income Taxes

We are required to estimate our income taxes in each of the jurisdictions in which we operate as part of the process of preparing our consolidated financial statements. At December 31, 2007, we had approximately $43.0 million in deferred tax assets. SFAS No. 109, Accounting for Income Taxes, requires a valuation allowance to reduce the deferred tax assets reported if, based on the weight of the evidence, it is more likely than not that some portion or all of the deferred tax assets will not be realized. We review deferred tax assets periodically for recoverability and make estimates and judgments regarding the expected geographic sources of taxable income and gains from investments, as well as tax planning strategies in assessing the need for a valuation allowance. At December 31, 2007, we determined that no valuation allowance was necessary to reduce our deferred tax assets to the amount that will more likely than not be realized. If the estimates and assumptions used in our determination change in the future, we could be required to revise our estimates of the valuation allowances against our deferred tax assets and adjust our provisions for additional income taxes.

In the ordinary course of global business, there are transactions for which the ultimate tax outcome is uncertain, thus judgment is required in determining the worldwide provision for income taxes. We provide for income taxes on transactions based on our estimate of the probable liability. We adjust our provision as appropriate for changes that impact our underlying judgments. Changes that impact provision estimates include such items as jurisdictional interpretations on tax filing positions based on the results of tax audits and general tax authority rulings. Due to the evolving nature of tax rules combined with the large number of jurisdictions in which we operate, it is possible that our estimates of our tax liability and the realizability of our deferred tax assets could change in the future, which may result in additional tax liabilities and adversely affect our results of operations, financial condition and cash flows.

The following discussion relating to the individual financial statement captions, our overall financial performance, operations and financial position should be read in conjunction with the factors and events described in “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Overview” and “Risk Factors,” which could impact our future performance and financial position.

Stock Option Investigation and Related Matters

On November 30, 2006, our Audit Committee commenced a voluntary, independent investigation of our historical stock option granting practices and related accounting during the period from January 1996 through December 2006. In addition to the grants management evaluated as part of the Audit Committee’s investigation, we also evaluated all grants (consisting of two employee new hire grants) in December 1995, which was the month we completed our initial public offering, and all grants to non-employee directors. This voluntary investigation was not in response to any governmental investigation, stockholder lawsuit, whistleblower complaint or inquiries from media organizations. Our Annual Report on Form 10-K for the year ended December 31, 2006, which was filed on September 7, 2007, contains a description of the Audit Committee’s investigation, management’s related review, the conclusions of the Audit Committee and management and the restatement of our consolidated balance sheet as of December 31, 2005 and the related consolidated statements of income, stockholders’ equity and comprehensive income and cash flows for the years ended December 31, 2005 and 2004, and each of the quarters in the 2006 and 2005 fiscal years, to reflect additional stock-based compensation expense and related income tax effects for stock option awards granted since December 1995.

Since the beginning of our stock option investigation on November 30, 2006, we have incurred approximately $12.3 million in professional fees in connection with the investigation. Of the $12.3 million in investigation related expenses, we incurred approximately $11.3 million during the year ended December 31, 2007.

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Results of Operations

Our operations consist of the design, development and marketing of technology solutions that deliver applications on-demand with high performance, enhanced security and improved total cost of ownership, or TCO. We market and license our products through multiple channels such as value added resellers, channel distributors, system integrators, independent software vendors, our Websites and original equipment manufacturers.

A substantial majority of our overseas operating expenses and capital purchasing activities are transacted in local currencies and are subject to fluctuations in foreign currency exchange rates. In order to minimize the impact on our operating results, we generally initiate our hedging of currency exchange risks up to one year in advance of anticipated foreign currency expenses. When the dollar is weak, foreign currency denominated expenses will be higher; these higher expenses will be partially offset by the gain in our hedging contracts. If the dollar is strong, foreign currency denominated expenses will be lower, and our hedging practices will cause these lower expenses to be partially offset by the aggregate loss in our hedging contracts. There is a risk that there will be fluctuations in foreign currency exchange rates beyond the one year timeframe for which we hedge our risk. Due to the generally weaker dollar during the year ended December 31, 2007, our operating expenses benefited from gains in our hedging programs as compared to the year ended December 31, 2006.

Our cost of services revenues and operating expenses increased for 2006 when compared to 2005 due to the recognition of stock-based compensation expense related to our adoption of SFAS No. 123R. In 2008, we anticipate that our stock-based compensation expense will increase primarily due to awards assumed in conjunction with our XenSource Acquisition. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Critical Accounting Policies and Estimates” and “— 2007 Acquisitions” as well as Notes 2, 3 and 6 to our consolidated financial statements included in this Annual Report on Form 10-K for the year ended December 31, 2007 for more information related to our adoption of SFAS No. 123R and our acquisitions.

The following table sets forth our consolidated statements of income data and presentation of that data as a percentage of change from period-to-period.

	Year Ended December 31,									2007 Compared to 2006		2006 Compared to 2005
	2007			2006			2005
	(In thousands)
Revenues:
Product licenses	$	577,144		$	488,487		$	409,435		18.1	%	19.3	%
License updates		484,669			405,756			331,102		19.4		22.5
Online services		213,744			148,795			99,097		43.6		50.2
Technical services		116,385			91,281			69,088		27.5		32.1
Total net revenues		1,391,942			1,134,319			908,722		22.7		24.8
Cost of revenues:
Cost of product license revenues		42,984			32,911			14,404		30.6		128.5
Cost of services revenues		65,027			46,585			26,929		39.6		73.0
Amortization of product related intangible assets		29,596			19,202			16,766		54.1		14.5
Total cost of revenues		137,607			98,698			58,099		39.4		69.9
Gross margin		1,254,335			1,035,621			850,623		21.1		21.7
Operating expenses:
Research and development		205,103			155,331			108,751		32.0		42.8
Sales, marketing and support		590,409			480,343			394,153		22.9		21.9
General and administrative		229,229			178,669			125,425		28.3		42.5
Amortization of other intangible assets		17,387			16,934			11,622		2.7		45.7
In-process research and development		9,800			1,000			7,000		*		(85.7	)
Total operating expenses		1,051,928			832,277			646,951		26.4		28.6
Income from operations		202,407			203,344			203,672		(0.5	)	(0.2	)
Interest income		49,704			41,210			23,614		20.6		74.5
Interest expense		(737	)		(927	)		(2,426	)	(20.5	)	(61.8	)
Other expense, net		(466	)		(546	)		(506	)	(14.7	)	7.9
Income before income taxes		250,908			243,081			224,354		3.2		8.3
Income taxes		36,425			60,084			58,745		(39.4	)	2.3
Net income	$	214,483		$	182,997		$	165,609		17.2		10.5

* not meaningful.

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Revenues

Net revenues include the following categories: Product Licenses, License Updates, Online Services and Technical Services. Product Licenses primarily represent fees related to the licensing of the following products:

• Our Application Virtualization products, including XenApp (formerly Presentation Server) and Access Essentials;

• Our Application Networking products, including our NetScaler, Access Gateway and WANScaler products;

• Our Application Performance Monitoring products, including EdgeSight; and

• Our Server Virtualization products, including Provisioning Server (formerly Ardence) and XenServer, both acquired in our 2007 Acquisitions.

In addition, we offer incentive programs to our channel distributors and value-added resellers to stimulate demand for our products. Revenues associated with these programs are partially offset by these incentives to our channel distributors and value-added resellers.

Our Application Virtualization Product License revenue accounted for approximately 76.3% of our Product License revenue for the year ended December 31, 2007, 81.0% of our Product License revenue for the year ended December 31, 2006 and 93.2% of our Product License revenue for the year ended December 31, 2005. The decrease in our Application Virtualization Product License revenue as a percent of our total Product License revenue when comparing the year ended December 31, 2007 to the year ended December 31, 2006 is primarily due to increased sales of our Application Networking products, including the full year impact of the addition of our WANScaler products, and to a lesser extent, the addition of our Provisioning Server products in 2007 and the full year impact of our EdgeSight products. During 2008, we expect our Application Virtualization Product License revenue to continue to decrease as a percent of our total Product License revenue primarily due to expected increases in sales of our newly acquired XenServer product and our Application Networking products. License Updates consist of fees related to our Subscription Advantage program that are recognized ratably over the term of the contract, which is typically 12 to 24 months. Subscription Advantage is an annual renewable program that provides subscribers with automatic delivery of software upgrades, enhancements and maintenance releases when and if they become available during the term of the subscription. We anticipate that Subscription Advantage will continue to be of strategic importance to our business throughout 2008 because it fosters long-term customer relationships and gives us improved visibility and predictability due to the recurring nature of this revenue stream. Online Services revenues consist primarily of fees related to online service agreements and are recognized ratably over the contract term. Technical Services revenues are comprised of fees from technical support services which are recognized ratably over the contract term, as well as revenues from product training and certification, and consulting services revenue related to implementation of our products, which is recognized as the services are provided.

	Year Ended December 31,						2007 Compared to 2006		2006 Compared to 2005
	2007		2006		2005
	(In thousands)
Revenues:
Product licenses	$	577,144	$	488,487	$	409,435	$	88,657	$	79,052
License updates		484,669		405,756		331,102		78,913		74,654
Online services		213,744		148,795		99,097		64,949		49,698
Technical services		116,385		91,281		69,088		25,104		22,193
Total net revenues	$	1,391,942	$	1,134,319	$	908,722	$	257,623	$	225,597

Product Licenses

Product License revenue increased during 2007 when compared to 2006 primarily due to increased sales of our Application Virtualization and Application Networking products and, to a lesser extent due to sales of our Provisioning Server products acquired in 2007. Product License revenue increased during 2006 when compared to 2005 primarily due to the full year impact and increased sales of our Application Networking products and, to a lesser extent, increased sales of our Application Virtualization products. We currently anticipate that our Application Virtualization Product License revenue will be flat to slightly down when comparing the first quarter of 2008 to the fourth quarter of 2007; however, for fiscal year 2008, we expect Product License revenue to increase overall primarily due to growth from our Application Virtualization products, expected growth from sales of our newly acquired XenSource products, and to a lesser extent, increased sales of our Application Networking products.

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License Updates

License Updates revenue increased during 2007 when compared to 2006 and increased during 2006 when compared to 2005 primarily due to a larger base of subscribers and increasing renewals related to our Subscription Advantage program. We also currently anticipate that License Updates revenue will continue to increase in 2008 due primarily to increased renewals and continued growth in our installed customer base.

Online Services

Online Services revenue increased during 2007 when compared to 2006 primarily due to increased sales of our real time application collaboration products. Online Services revenue increased during 2006 when compared to 2005 primarily due to increased customer adoptions and renewals of our Online Services products. We currently expect Online Services revenues to continue to increase in 2008 but at a slower rate than experienced when comparing 2007 to 2006.

Technical Services

Technical Services revenue increased during 2007 when compared to 2006 primarily due to increased sales of support services related to our Application Networking products and to a lesser extent an increase in sales of support and services related to the implementation of our Application Virtualization products. Technical Services revenue increased during 2006 when compared to 2005 primarily due to the full year impact and increased sales of support and services related to our Application Networking products and an increase in sales of services and support related to the implementation of our Application Virtualization products.

Deferred Revenue

Deferred revenues are primarily comprised of License Updates revenue from our Subscription Advantage product, Online Services revenues from annual service agreements for our online services products and Technical Services revenues related to our support services and consulting contracts. Deferred revenues increased approximately $86.4 million as of December 31, 2007 compared to December 31, 2006 primarily due to increased renewals of our Subscription Advantage product, increased new sales of our Subscription Advantage product, increased sales of our online service agreements and, to a lesser extent, sales of services related to our Application Networking products. We currently expect deferred revenue to continue to increase in 2008.

We do not believe that backlog, as of any particular date, is a reliable indicator of future performance. While it is generally our practice to promptly ship our products upon receipt of properly finalized purchase orders, we sometimes have product license orders that have not shipped or have otherwise not met all the required criteria for revenue recognition. Although the amount of such product license orders may vary, the amount, if any, of such product license orders at the end of a particular period has not been material to total revenue at the end of the same period.

International Revenues

International revenues (sales outside the United States) accounted for approximately 44.5% of our net revenues for the year ended December 31, 2007, 47.4% of our net revenues for the year ended December 31, 2006 and 50.0% for the year ended December 31, 2005. The decrease in international revenue as a percent of net revenues for the year ended December 31, 2007 compared to the year ended December 31, 2006 is primarily due to increased sales performance and growth in our Online Services products, which are currently primarily comprised of domestic revenues, and increased performance in the United States across most product offerings. For detailed information on international revenues, please refer to Note 12 to our consolidated financial statements included in this Annual Report on Form 10-K for the year ended December 31, 2007.

Segment Revenues

An analysis of our reportable segment net revenue is presented below:

	Year Ended December 31,						Revenue Growth 2006 to 2007		Revenue Growth 2005 to 2006
	2007		2006		2005
	(In thousands)
Americas (1)	$	614,181	$	499,278	$	397,233	23.0	%	25.7	%
EMEA (2)		447,201		391,650		334,900	14.2		16.9
Asia-Pacific		116,816		94,596		77,492	23.5		22.1
Online Services division		213,744		148,795		99,097	43.6		50.2
Consolidated net revenues	$	1,391,942	$	1,134,319	$	908,722	22.7		24.8

⁽¹⁾ Our Americas segment is comprised of the United States, Canada and Latin America.

⁽²⁾ Defined as Europe, Middle East and Africa.

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With respect to our segment revenues, the increase in net revenues for the comparative periods presented was due primarily to the factors previously discussed across our reportable segments. For additional information on our segment revenues, please refer to Note 12 of our consolidated financial statements included in this Annual Report on Form 10-K for the year ended December 31, 2007.

Cost of Revenues

	Year Ended December 31,						2007 Compared to 2006		2006 Compared to 2005
	2007		2006		2005
	(In thousands)
Cost of product license revenues	$	42,984	$	32,911	$	14,404	$	10,073	$	18,507
Cost of services revenues		65,027		46,585		26,929		18,442		19,656
Amortization of product related intangible assets		29,596		19,202		16,766		10,394		2,436
Total cost of revenues	$	137,607	$	98,698	$	58,099	$	38,909	$	40,599

Cost of product license revenues consists primarily of hardware, product media and duplication, manuals, packaging materials, shipping expense, server capacity costs and royalties. Cost of services revenue consists primarily of compensation and other personnel-related costs of providing technical support and consulting, as well as the costs related to our Online Services products. Also included in cost of revenues is amortization of product related intangible assets.

Cost of product licenses revenues increased during 2007 when compared to 2006 primarily due to increased sales of our Application Networking products which contain hardware components that have a higher cost than our other software products. Cost of services revenues increased during 2007 compared to 2006 primarily due to increases in sales of our Online Services products and an increase in support related to our Application Virtualization and Application Networking products. Amortization of product related intangible assets increased during 2007 as compared to 2006 primarily due to amortization of product related intangible assets acquired in acquisitions. For more information regarding our acquisitions, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Overview” and Note 3 to our consolidated financial statements included in this Annual Report on Form 10-K for the year ended December 31, 2007. We currently anticipate that in 2008, cost of product license revenues will continue to increase as compared to current levels as we currently expect sales of our Application Networking products, which have a hardware component, to increase. In addition, in 2008, we currently expect our cost of services revenues to increase due to increased sales of our Online Services products and an increase in technical support costs and increased sales of services as we grow our customer base, have more frequent product releases and more complex products.

Cost of product licenses revenues increased during 2006 when compared to 2005 primarily due to increased sales and the full year impact of the acquisition of our Application Networking products which contain hardware components that have a higher cost than our other software products. Cost of services revenues increased during 2006 compared to 2005 primarily due to an increase in support and increased sales of our educational and consulting services related to our Application Virtualization products, increases in sales of our Online Services products, the full year impact and increased sales of support and educational services related to our Application Networking products and the impact of stock-based compensation expenses related to our adoption of SFAS No 123R. Amortization of product related intangible assets increased during 2006 as compared to 2005 primarily due to amortization of product related intangible assets acquired in acquisitions.

Gross Margin

Gross margin as a percent of revenue was 90.1% for 2007, 91.3% for 2006 and 93.6% for 2005. The decrease in gross margin as a percentage of net revenue for all periods presented was primarily due to the increase in cost of revenues as discussed above. We currently expect that our gross margin will continue to trend slightly downwards in 2008 due to the factors discussed above under “—Cost of Revenues.”

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Research and Development Expenses

	Year Ended December 31,						2007 Compared to 2006		2006 Compared to 2005
	2007		2006		2005
	(In thousands)
Research and development	$	205,103	$	155,331	$	108,751	$	49,772	$	46,580

Research and development expenses consisted primarily of personnel-related costs. We expensed substantially all development costs included in the research and development of our products and new functionality added to our existing products as incurred, except for certain core technologies with alternative future uses. Research and development expenses increased during 2007 as compared to 2006 primarily due to an increase in staffing and related personnel costs due to the full year impact of our 2006 Acquisitions, our 2007 Acquisitions and continued investments in our business, which included the hiring of personnel. We expect research and development expenses to increase in 2008 due to the full year impact of the XenSource Acquisition and continued investments in our business including the hiring of personnel. For more information regarding our acquisitions see, “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Overview” and Note 3 to our consolidated financial statements included in this Annual Report on Form 10-K for the year ended December 31, 2007.

Research and development expenses increased during 2006 as compared to 2005 primarily due to an increase in staffing and related personnel costs due to the full year impact of our 2005 Acquisitions, our 2006 Acquisitions, continued investments in our business including the hiring of personnel, and additional compensation expense related to the adoption of SFAS No. 123R.

Sales, Marketing and Support Expenses

	Year Ended December 31,						2007 Compared to 2006		2006 Compared to 2005
	2007		2006		2005
	(In thousands)
Sales, marketing and support	$	590,409	$	480,343	$	394,153	$	110,066	$	86,190

Sales, marketing and support expenses consisted primarily of personnel-related costs, including sales commissions, and the costs of marketing programs aimed at increasing revenue, such as advertising, trade shows, public relations and other market development programs. Sales, marketing and support expenses increased during 2007 compared to 2006 primarily due to an increase in headcount and the associated increase in salaries and employee related expenses due to our continued investment in our business and the full year impact of our 2006 Acquisitions and the impact of our 2007 Acquisitions. In addition, sales, marketing and support expenses increased during 2007 compared to 2006 due to an increase in commissions related to our growing sales-force and payments made under new programs adopted to promote sales of our newer products, an increase in commissions paid to our resellers and, to a lesser extent, an increase in marketing program costs related to our worldwide advertising campaigns. During 2007, we also increased our utilization of personnel for revenue generating activities, which is reflected as cost of service revenues rather than sales, marketing and support expenses. In 2008, we currently expect sales, marketing and support expenses to increase due to the full year impact of our XenSource Acquisition and increased compensation costs as we continue to make investments in our business and hire personnel. For more information regarding our acquisitions see, “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Overview” and Note 3 to our consolidated financial statements included in this Annual Report on Form 10-K for the year ended December 31, 2007.

Sales, marketing and support expenses increased during 2006 compared to 2005 primarily due to an increase in headcount and the associated increase in salaries, commissions and other variable compensation and employee related expenses, the full year impact of our 2005 Acquisitions and the impact of our 2006 Acquisitions, additional compensation costs related to our adoption of SFAS No. 123R and an increase in marketing program costs related to our worldwide advertising campaigns. During 2006, we increased our utilization of personnel for revenue generating activities during 2006 as compared to 2005, which is reflected as cost of service revenues rather than sales, marketing and support expenses.

General and Administrative Expenses

	Year Ended December 31,						2007 Compared to 2006		2006 Compared to 2005
	2007		2006		2005
	(In thousands)
General and administrative	$	229,229	$	178,669	$	125,425	$	50,560	$	53,244

General and administrative expenses consisted primarily of personnel-related related costs and expenses related to outside consultants assisting with regulatory compliance and information systems, as well as auditing and legal fees. General and

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administrative expenses increased during 2007 compared to 2006 primarily due to an increase in headcount and the associated salaries and employee related expenses due to our continued investment in our business and systems to support our growth, the full year impact of our 2006 Acquisitions and the impact of our 2007 Acquisitions, an increase in expenses related to outside consultants assisting us with information systems and regulatory compliance, increases in auditing, consulting and legal fees primarily related to the investigation of our historical stock option granting practices and the associated restatements of our prior consolidated financial statements and, to a lesser extent, an increase in depreciation primarily related to information systems. We expect general and administrative expenses to increase in 2008 primarily due to the full year impact of our XenSource Acquisition and continued investments to support our future growth. For more information regarding our acquisitions see, “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Overview” and Note 3 to our consolidated financial statements included in this Annual Report on Form 10-K for the year ended December 31, 2007.

General and administrative expenses increased during 2006 compared to 2005 primarily due to increases in auditing, consulting and legal fees which included costs related to the investigation of our historical stock option granting practices and the associated restatements of our prior consolidated financial statements, as well as additional compensation costs related to the adoption of SFAS No. 123R, an increase in headcount and the associated salaries and employee related expenses, and the full year impact of our 2005 Acquisitions and, to a lesser extent, the impact of our 2006 Acquisitions.

Amortization of Other Intangible Assets

	Year Ended December 31,						2007 Compared to 2006		2006 Compared to 2005
	2007		2006		2005
	(In thousands)
Amortization of the other intangible assets	$	17,387	$	16,934	$	11,622	$	453	$	5,312
The increase in amortization of other intangible assets during 2007 as compared to 2006 was not significant. Amortization of other intangible assets increased during 2006 as compared to 2005 due to an increase in amortization expense related to certain finite intangible assets acquired in our acquisitions. As of December 31, 2007, we had unamortized other identified intangible assets with estimable useful lives in the net amount of $99.0 million. We currently expect amortization expense to increase during 2008 as a result of our acquisitions. For more information regarding our acquisitions see, “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Overview” and Note 3 to our consolidated financial statements included in this Annual Report on Form 10-K for the year ended December 31, 2007.
In-Process Research and Development
	Year Ended December 31,						2007 Compared to 2006		2006 Compared to 2005
	2007		2006		2005
	(In thousands)
In-process research and development	$	9,800	$	1,000	$	7,000	$	8,800	$	(6,000	)

In 2007, $9.8 million of the purchase price paid for our 2007 Acquisitions was allocated to IPR&D, in 2006, $1.0 million of the purchase price paid for our 2006 Acquisitions was allocated to IPR&D, and in 2005, $7.0 million of the purchase price paid for our 2005 Acquisitions was allocated to IPR&D. The amounts allocated to IPR&D in our acquisitions had not yet reached technological feasibility, had no alternative future use and were written-off at the date of the acquisitions in accordance with FASB Interpretation No. 4, Applicability of FASB Statement No. 2 to Business Combinations Accounted for by the Purchase Method. For more information regarding the acquisitions, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Overview” and Note 3 to our consolidated financial statements in this Annual Report on Form 10-K for the year ended December 31, 2007.

Our efforts with respect to the acquired technologies currently consist of design and development that may be required to support the release of the technologies into updated versions of existing service offerings and potentially new product and service offerings related to the products acquired in our XenSource, Ardence, and NetScaler Acquisitions. We currently expect that we will successfully develop new products or services utilizing the acquired in-process technology, but there can be no assurance that commercial viability of future product or service offerings will be achieved. Furthermore, future developments in the software industry, changes in technology, changes in other products and offerings or other developments may cause us to alter or abandon product plans. Failure to complete the development of projects in their entirety, or in a timely manner, could have a material adverse impact on our financial condition and results of operations.

The fair value assigned to IPR&D was based on valuations prepared using methodologies and valuation techniques consistent with those used by independent appraisers. All fair values were determined using the income approach, which includes estimating the revenue and expenses associated with a project’s sales cycle and by estimating the amount of after-tax cash flows attributable

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to the projects. The future cash flows were discounted to present value utilizing an appropriate risk-adjusted rate of return, which ranged from 19% to 36%. The rate of return included a factor that takes into account the uncertainty surrounding the successful development of the IPR&D.

Interest Income

	Year Ended December 31,									2007 Compared to 2006		2006 Compared to 2005
	2007			2006			2005
	(In thousands)
Interest income	$	49,704		$	41,210		$	23,614		$	8,494	$	17,596
Interest income increased during 2007 as compared to 2006 primarily due to overall higher average cash, cash equivalent and investment balances that resulted primarily from an increase in cash from operations and proceeds received from employee stock-based compensation plans, partially offset by an increase in cash paid for acquisitions and capital expenditures. Interest income increased during 2006 as compared to 2005 due to higher interest rates earned on overall higher average cash, cash equivalent and investment balances that resulted primarily from increased proceeds received from employee stock-based compensation plans, a decrease in cash spent for acquisitions and an increase in cash from operations, partially offset by increased spending on stock repurchases, an increase in net payments made on our debt and an increase in capital expenditures. For more information see “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Overview” and “— Liquidity and Capital Resources” and Note 3 to our consolidated financial statements included in this Annual Report on Form 10-K for the year ended December 31, 2007.
Interest Expense
	Year Ended December 31,									2007 Compared to 2006		2006 Compared to 2005
	2007			2006			2005
	(In thousands)
Interest expense	$	(737	)	$	(927	)	$	(2,426	)	$	190	$	1,499

The decrease in interest expense during 2007 compared to 2006 is not significant. Interest expense decreased during 2006 compared to 2005 primarily due to the repayment of our term loan facility, or the Term Loan, in February 2006. For more information see “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources” and Note 8 to our consolidated financial statements included in this Annual Report on Form 10-K for the year ended December 31, 2007.

Other Expense, Net

	Year Ended December 31,									2007 Compared to 2006		2006 Compared to 2005
	2007			2006			2005
	(In thousands)
Other expense, net	$	(466	)	$	(546	)	$	(506	)	$	80	$	(40	)

Other expense, net is primarily comprised of remeasurement and foreign currency transaction gains (losses), other-than-temporary declines in the value of our equity investments and debt instruments and realized gains (losses) on the sale of available-for-sale investments. Other expense, net remained relatively flat when comparing 2007 to 2006 and when comparing 2006 to 2005.

Income Taxes

On October 22, 2004, the American Jobs Creation Act, or the AJCA, was signed into law. The AJCA provided for an 85% dividends received deduction on dividend distributions of foreign earnings to a U.S. taxpayer, if certain conditions are met. During the second quarter of fiscal 2005, we completed our evaluation of the effects of the repatriation provision of the AJCA and our Chief Executive Officer and Board of Directors approved our dividend reinvestment plan, or DRP, under the AJCA. During 2005, we repatriated approximately $503.0 million of certain foreign earnings, of which $500.0 million qualified for the 85% dividends received deduction. During 2005, we recorded an estimated tax provision of approximately $24.4 million related to the repatriation. Additionally, during 2005, we recorded the reversal of approximately $8.8 million for income taxes on certain foreign earnings for which a deferred tax liability had been previously recorded.

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We maintain certain operational and administrative processes in overseas subsidiaries and its foreign earnings are taxed at lower foreign tax rates. Other than the one-time repatriation provision under the AJCA described above, we do not expect to remit earnings from our foreign subsidiaries.

We establish tax reserves when, despite our belief that our tax return positions are fully supportable, certain of these positions may be challenged. While it is often difficult to predict whether we will prevail, we believe that our tax reserves reflect the probable outcome of known contingencies. As such, included in our effective tax rate for the year ended December 31, 2007 is the reduction of approximately $11.0 million in tax reserves related to the expiration of a statute of limitations for the 2003 tax year partially offset by an additional tax reserve of approximately $1.4 million related to uncertainties arising in 2007.

In 2007, our effective tax rate decreased to approximately (3.5%) from 25.5% when comparing the three months ended December 31, 2007 to the three months ended December 31, 2006 and decreased to 14.5% from 24.7% when comparing the twelve months ended December 31, 2007 to the twelve months ended December 31, 2006, primarily due to the reduction in tax reserves for uncertain tax positions related to prior years. In 2006, our effective tax rate decreased to approximately 24.7% from 26.2% primarily due to the tax impact of the dividend repatriated under the AJCA in 2005 partially offset by the tax effects of our adoption of SFAS No. 123R. Our effective tax rate may fluctuate throughout 2008 based on a number of factors including variations in estimated taxable income in our geographic locations, completed and potential acquisitions, the effects of FASB Interpretation, or FIN, No. 48, Accounting for Uncertainty in Income Taxes – an interpretation of FASB Statement No. 109, and the effects of SFAS No. 123R and changes in statutory tax rates, among others.

Liquidity and Capital Resources

During 2007, we generated positive operating cash flows of $424.1 million. These cash flows related primarily to net income of $214.5 million, adjusted for, among other things, non-cash charges including depreciation and amortization of $85.2 million, stock-based compensation expense of $65.5 million and the tax effect of stock-based compensation of $15.5 million. These cash inflows are partially offset by an operating cash outflow of $17.8 million related to the excess tax benefit due to the exercise of stock-based awards. Also attributing to these cash inflows is an aggregate increase in cash flow from our operating assets and liabilities of $40.3 million, net of the effects of acquisitions. Our investing activities used $417.6 million of cash consisting primarily of the net purchases after reinvestment, from sales and maturities of our available-for-sale investments of $180.4 million. These cash outflows also consisted of cash paid for our 2007 Acquisitions, net of cash acquired, of $148.1 million and the expenditure of $85.9 million for the purchase of property and equipment. Our financing activities used cash of $131.8 million primarily related to $260.0 million of cash paid under our stock repurchase programs and $8.0 million paid on our debt. These cash outflows are partially offset by $118.4 million in proceeds received from employee stock compensation plans and $17.8 million related to excess tax benefits from the exercise of stock-based awards.

During 2006, we generated positive operating cash flows of $328.7 million. These cash flows related primarily to net income of $183.0 million, adjusted for, among other things, non-cash charges including depreciation and amortization of $63.6 million, stock-based compensation expense of $61.6 million and the tax effect of stock-based compensation of $40.6 million. These cash inflows are partially offset by an operating cash outflow of $51.9 million related to the excess tax benefit due to the exercise of stock-based awards and a deferred income tax benefit of $4.4 million. Also attributed to these cash inflows is an aggregate increase in cash flow from our operating assets and liabilities of $24.6 million, net of the effects of acquisitions. Our investing activities used $437.3 million of cash consisting primarily of the net purchases after reinvestment, from sales and maturities of our available-for-sale investments of $323.7 million. These cash outflows also consisted of cash paid for the 2006 Acquisitions, net of cash acquired, of $61.5 million and the expenditure of $52.1 million for the purchase of property and equipment. Our financing activities used cash of $26.4 million primarily related to $274.2 million of cash paid under our stock repurchase programs and $34.9 million paid on our debt. These cash outflows are partially offset by $230.7 million in proceeds received from employee stock compensation plans and $51.9 million related to excess tax benefits from the exercise of stock-based awards.

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Historically, significant portions of our cash inflows were generated by our operations. We currently expect this trend to continue throughout 2008. We believe that our existing cash and investments together with cash flows expected from operations will be sufficient to meet expected operating and capital expenditure requirements for the next 12 months. We continue to search for suitable acquisition candidates and could acquire or make investments in companies we believe are related to our strategic objectives. We could from time to time seek to raise additional funds through the issuance of debt or equity securities for larger acquisitions.

Cash and Investments

	Year Ended December 31,				2007 Compared to 2006
	2007		2006
	(In thousands)
Cash and investments	$	798,510	$	743,381	$	55,129

The increase in cash and investments at December 31, 2007 as compared to December 31, 2006, is primarily due to an increase in cash from operations and proceeds received from employee stock-based compensation plans, partially offset by an increase in cash paid for acquisitions and capital expenditures. We generally invest our cash and cash equivalents in investment grade, highly liquid securities to allow for flexibility in the event of immediate cash needs. Our short-term and long-term investments primarily consist of interest-bearing securities. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources” and Note 4 to our consolidated financial statements included in this Annual Report on Form 10-K for the year ended December 31, 2007 for further information.

In February 2008, we held approximately $45.5 million in triple-A rated municipal auction rate securities whose underlying assets are generally student loans which are substantially backed by the federal government. The market for municipal auction rate securities in our portfolio began experiencing auction failures on February 13, 2008. For the securities that experienced a failure the issuer will pay interest at a failure rate on the regular auction date, which is every 28 days for the securities in our portfolio. The securities will not be liquid until the auctions are successful or the issuers are able to refinance, call and /or restructure their obligations to a different interest rate mode. In the event we need to access the funds related to the affected securities, we may not be able to do so without a potential loss of principal unless future auctions on these securities are successful. If the issuers are unable to successfully close future auctions or refinance their obligations and their credit ratings deteriorate, we may be required to adjust the carrying value of these securities and recognize an impairment charge for an other-than-temporary decline in the fair values. Based on our available cash and other investments, we do not currently anticipate that the lack of liquidity caused by the failed auctions of these securities will have a material adverse effect on our operating cash flows or financial position.

Restricted Cash Equivalents and Investments

	Year Ended December 31,				2007 Compared to 2006
	2007		2006
	(In thousands)
Restricted cash equivalents and investments	$	63,735	$	63,815	$	(80	)

Restricted cash equivalents and investments as of December 31, 2007 and 2006 are primarily comprised of approximately $62.8 million in investment securities and cash equivalents pledged as collateral for specified obligations under our synthetic lease arrangement. We maintain the ability to manage the composition of the restricted cash equivalents and investments within certain limits and to withdraw and use excess investment earnings from the pledged collateral for operating purposes. For further information regarding our synthetic lease, see Note 10 to our consolidated financial statements included in this Annual Report on Form 10-K for the year ended December 31, 2007.

Accounts Receivable, Net

	Year Ended December 31,						2007 Compared to 2006
	2007			2006
	(In thousands)
Accounts receivable	$	230,422		$	209,011		$	21,411
Allowance for returns		(1,670	)		(1,667	)		(3	)
Allowance for doubtful accounts		(2,891	)		(2,370	)		(521	)
Accounts receivable, net	$	225,861		$	204,974		$	20,887

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The increase in accounts receivable at December 31, 2007 compared to December 31, 2006 was primarily due to an increase in sales, particularly in the last month of 2007 compared to the last month of 2006. Our allowance for returns remained relatively constant during 2007 as compared to 2006. The activity in our allowance for returns was comprised of $3.8 million in credits issued for stock balancing rights during 2007 offset by $3.5 million of provisions for returns recorded during 2007 and $0.3 million charged to other accounts. Our allowance for doubtful accounts increased by $0.5 million when comparing 2007 to 2006. The activity in our allowance for doubtful accounts was comprised primarily of an additional $2.6 million of provisions for doubtful accounts recorded during the year partially offset by $2.1 million of uncollectible accounts written off, net of recoveries. From time to time, we could maintain individually significant accounts receivable balances from our distributors or customers, which are comprised of large business enterprises, governments and small and medium-sized businesses. If the financial condition of our distributors or customers deteriorates, our operating results could be adversely affected. At December 31, 2007 and 2006, no distributor or customer accounted for more than 10% of our accounts receivable. For more information regarding significant customers see Note 12 to our consolidated financial statements included in this Annual Report on Form 10-K for the year ended December 31, 2007.

Credit Facility and Term Loan

Effective on August 9, 2005, we entered into the Credit Facility with a group of financial institutions, or the Lenders. Effective September 27, 2006, we entered into an amendment and restatement of the Credit Facility, or the Amendment. The Amendment decreased the overall range of interest we will pay on amounts outstanding on the Credit Facility and lowered the facility fee. In addition, the Amendment extended the term of the Credit Facility. The Credit Facility, as amended, allows us to increase the revolving credit commitment up to a maximum aggregate revolving credit commitment of $175.0 million. The Credit Facility, as amended, currently provides for a revolving line of credit that will expire on September 27, 2011 in the aggregate amount of $100.0 million, subject to continued covenant compliance. A portion of the revolving line of credit (i) in the aggregate amount of $25.0 million may be available for issuances of letters of credit and (ii) in the aggregate amount of $15.0 million may be available for swing line loans. The Credit Facility, as amended, currently bears interest at the London Interbank Offered Rate, or LIBOR, plus 0.32% and adjusts in the future in the range of 0.32% to 0.80% above LIBOR based on the level of our total debt and our adjusted earnings before interest, taxes, depreciation and amortization, or EBITDA. In addition, we are required to pay an annual facility fee ranging from 0.08% to 0.20% based on the aggregate amount available under the Credit Facility, as amended, and the level of our total debt and adjusted EBITDA. During the year ended December 31, 2007, no funds were borrowed under the Credit Facility, as amended, and as of December 31, 2007 there were no amounts outstanding under the Credit Facility, as amended.

Effective on August 9, 2005, we entered into the Term Loan with the Lenders. The Term Loan provided for an eighteen-month single-draw term loan facility in the aggregate amount of $100.0 million. The Term Loan’s interest rate was LIBOR plus 0.5% and adjusted in the range of 0.5% to 1.25% above LIBOR based on the level of our total debt and adjusted EBITDA. In addition, we were required to pay an annual facility fee ranging from 0.125% to 0.25% based on the aggregate amount of the Term Loan and the level of our total debt and adjusted EBITDA. We used the proceeds from the Term Loan to partially fund the repatriation of certain of our foreign earnings in connection with the AJCA. In February 2006, we repaid the remaining $31.0 million outstanding under the Term Loan in full.

Stock Repurchase Program

Our Board of Directors has authorized an ongoing stock repurchase program with a total repurchase authority granted to us of $1.8 billion, of which $300 million was authorized in January 2008. We may use the approved dollar authority to repurchase stock at any time until the approved amounts are exhausted. The objective of our stock repurchase program is to improve stockholders’ return. At December 31, 2007, approximately $33.5 million was available to repurchase shares of our common stock pursuant to the stock repurchase program. All shares repurchased are recorded as treasury stock. A significant portion of the funds used to repurchase stock was provided by proceeds from employee stock option exercises and the related tax benefit.

We are authorized to make open market purchases of our common stock using general corporate funds. During 2007 and 2006, we entered into structured stock repurchase arrangements with large financial institutions using general corporate funds as part of our stock repurchase program in order to lower the average cost to acquire shares. These programs include terms that require us to make up-front payments to the counterparty financial institution and result in the receipt of stock during or at the end of the term of the agreement or the receipt of either stock or cash at the maturity of the agreement, depending on market conditions. We did not enter into any structured stock repurchase agreements or repurchase any shares of outstanding common stock during our voluntary investigation of our historical stock option granting practices and related accounting.

We made up-front payments to financial institutions, net of cash and premiums received of approximately $110.0 million in 2007 and $114.4 million in 2006 under our structured stock repurchase arrangements. In addition, we received cash and premiums of approximately $40.0 million in 2007 and $41.8 million in 2006 from expired prepaid programs based upon the terms of those agreements. We took delivery of 1,655,089 shares at an average price of $35.34 per share in 2007 and we took delivery of 4,307,112 shares at an average price of $30.76 per share in 2006 from our structured repurchase agreements. As of December 31, 2007, we had

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prepaid notional amounts of approximately $87.9 million remaining under our structured stock repurchase programs, which expire on various dates through September 2008. Due to the fact that the total shares to be received under our structured repurchase arrangements at December 31, 2007 is not determinable until the contracts mature, the above price per share amounts exclude the remaining shares to be received subject to the agreements.

During 2007, we expended approximately $150.0 million on open market purchases and repurchased 3,720,800 shares of outstanding common stock at an average price of $40.31 and, during 2006, we expended approximately $159.8 million on open market purchases and repurchased 5,193,410 shares of outstanding common stock at an average price of $30.77.

Contractual Obligations and Off-Balance Sheet Arrangement

Contractual Obligations

We have certain contractual obligations that are recorded as liabilities in our consolidated financial statements. Other items, such as operating lease obligations, are not recognized as liabilities in our consolidated financial statements, but are required to be disclosed in the notes to our consolidated financial statements.

The following table summarizes our significant contractual obligations at December 31, 2007 and the future periods in which such obligations are expected to be settled in cash. Additional details regarding these obligations are provided in the notes to our consolidated financial statements (in thousands):

	Payments due by period
	Total		Less than 1 Year		1-3 Years		4-5 Years		More than 5 Years
Operating lease obligations	$	204,231	$	39,968	$	65,167	$	45,725	$	53,371
Synthetic lease obligations		3,005		2,301		704		—		—
Purchase obligations (1)		11,100		11,100		—		—		—
Total contractual obligations (2)	$	218,336	$	53,369	$	65,871	$	45,725	$	53,371

(1) Purchase obligations represent non-cancelable commitments to purchase inventory ordered before year-end.

(2) Total contractual obligations do not include agreements where our commitment is variable in nature or where cancellations without payment provisions exist and excludes $27.3 million of liabilities related to uncertain tax positions recorded in accordance with FIN No. 48, because we could not make reasonably reliable estimates of the period or amount of cash settlement with the respective taxing authorities. See Note 11 to our consolidated financial statements included in this Annual Report on Form 10-K for the year ended December 31, 2007 for further information.

As of December 31, 2007, we did not have any individually material capital lease obligations or other material long-term commitments reflected on our consolidated balance sheets.

Off-Balance Sheet Arrangement

During 2002, we became a party to a synthetic lease arrangement totaling approximately $61.0 million for our corporate headquarters office space in Fort Lauderdale, Florida. The synthetic lease represents a form of off-balance sheet financing under which an unrelated third party lessor funded 100% of the costs of acquiring the property and leases the asset to us. The synthetic lease qualifies as an operating lease for accounting purposes and as a financing lease for tax purposes. We do not include the property as an asset or the lease debt as a liability on our accompanying consolidated balance sheets. Consequently, payments made pursuant to the lease are recorded as operating expenses in our consolidated statements of income. We entered into the synthetic lease in order to lease our headquarters properties under more favorable terms than under our previous lease arrangements. We do not materially rely on off-balance sheet arrangements for our liquidity or as capital resources. For information regarding cash outflows associated with our lease payments see “— Contractual Obligations.”

The initial term of the synthetic lease is seven years. Upon approval by the lessor, we can renew the lease twice for additional two-year periods. The lease payments vary based on LIBOR, plus a margin. At any time during the lease term, we have the option to sublease the property and upon thirty days’ written notice, we have the option to purchase the property for an amount representing the original property cost and transaction fees of approximately $61.0 million plus any lease breakage costs and outstanding amounts owed. Upon at least 180 days’ notice prior to the termination of the initial lease term, we have the option to remarket the property for sale to a third party. If we choose not to purchase the property at the end of the lease term, we have guaranteed a residual value to the lessor of approximately $51.9 million and possession of the buildings will be returned to the lessor. On a periodic basis, we evaluate the property for indications of permanent impairment. If an evaluation were to indicate that the fair value of the property were to decline below $51.9 million, we would be responsible for the difference under our residual value guarantee, which could have a material adverse effect on our results of operations and financial condition.

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The synthetic lease includes certain financial covenants including a requirement for us to maintain a restricted cash, cash equivalent or investment balance of approximately $62.8 million as collateral, which is classified as restricted cash equivalents and investments in our accompanying consolidated balance sheets. We maintain the ability to manage the composition of restricted investments within certain limits and to withdraw and use excess investment earnings from the pledged collateral for operating purposes. Additionally, we must maintain a minimum net cash and investment balance of $100.0 million, excluding our collateralized investments, equity investments and outstanding debt as of the end of each fiscal quarter. As of December 31, 2007, we had approximately $696.9 million in cash and investments in excess of this required level. The synthetic lease includes non-financial covenants, including the maintenance of the property and adequate insurance, prompt delivery of financial statements to the administrative agent of the lessor and prompt payment of taxes associated with the property. As of December 31, 2007, we were in compliance with all material provisions of the arrangement.

In January 2003, the FASB issued FIN No. 46, Consolidation of Variable Interest Entities, which addresses the consolidation of variable interest entities in which an enterprise absorbs a majority of the entity’s expected losses, receives a majority of the entity’s expected residual returns, or both, as a result of ownership, contractual or other financial interests in the entity. In December 2003, the FASB issued FIN No. 46 (revised), which replaced FIN No. 46. FIN No. 46 (revised) was effective immediately for certain disclosure requirements and variable interest entities referred to as special-purpose entities for periods ending after December 15, 2003 and for other types of entities for financial statements for periods ending after March 15, 2004. We determined that we are not required to consolidate the lessor, the leased facility or the related debt associated with our synthetic lease in accordance with FIN No. 46 (revised). Accordingly, there was no impact on our financial position, results of operations or cash flows from adoption. However, if the lessor were to change its ownership of the property or significantly change its ownership of other properties that it currently holds, we could be required to consolidate the entity, the leased facility and the associated debt in a future period.

Commitments

Capital expenditures were $85.9 million during 2007, $52.1 million during 2006 and $26.4 million during 2005. During 2007, capital expenditures were primarily related to application and infrastructure delivery to enable growth and enhance management reporting capabilities and leasehold improvements. During 2006, capital expenditures were primarily related to the implementation of certain systems to streamline business operations and enhance management reporting capabilities and leasehold improvements.

During 2002 and 2001, we took actions to consolidate certain of our offices, including the exit of certain leased office space and the abandonment of certain leasehold improvements. During the third quarter of 2006, we entered into an agreement, which assigned the operating lease and all remaining liability related to one of the closed offices to a third party. Lease obligations related to the remaining existing operating lease continue to 2018 with a total remaining obligation at December 31, 2007 of approximately $8.3 million, of which $1.3 million was accrued as of December 31, 2007, and is reflected in accrued expenses and other liabilities in our consolidated financial statements. In calculating this accrual, we made estimates, based on market information, including the estimated vacancy periods and sublease rates and opportunities. We periodically re-evaluate our estimates; and if actual circumstances prove to be materially worse than management has estimated, the total charges for these vacant facilities could be significantly higher.

Because virtually all holders of stock options granted by us were not involved in or aware of the incorrect pricing of certain options, we have taken and intend to take further actions to address certain adverse tax consequences that may be incurred by the holders of such incorrectly priced options. The primary adverse tax consequence is that the re-measured options vesting after December 31, 2004 subject the option holder to a penalty tax under Section 409A of the IRC (and, as applicable, similar excise taxes under state laws). As a result during 2007, we recorded $3.4 million, net of income tax benefits, in liabilities related to the anticipated payment by us of payroll and excise taxes on behalf of our employees for options that were exercised during open tax years under the related statutes.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The following discussion about our market risk includes “forward-looking statements” that involve risks and uncertainties. Actual results could differ materially from those projected in the forward-looking statements. The analysis methods we used to assess and mitigate risk discussed below should not be considered projections of future events, gains or losses.

We are exposed to financial market risks, including changes in foreign currency exchange rates and interest rates that could adversely affect our results of operations or financial condition. To mitigate foreign currency risk, we utilize derivative financial instruments. The counterparties to our derivative instruments are major financial institutions. All of the potential changes noted below are based on sensitivity analyses performed on our financial position as of December 31, 2007. Actual results could differ materially.

Discussions of our accounting policies for derivatives and hedging activities are included in Notes 2 and 13 to our consolidated financial statements included in this Annual Report on Form 10-K for the year ended December 31, 2007.

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Exposure to Exchange Rates

A substantial majority of our overseas expense and capital purchasing activities are transacted in local currencies, including Euros, British pounds sterling, Australian dollars, Swiss francs, Indian rupees, Japanese yen, Singapore dollars, Hong Kong dollars, Canadian dollars, Danish krone and Swedish krona. To reduce our exposure to a reduction in U.S. dollar value and the volatility of future cash flows caused by changes in currency exchange rates, we have established a hedging program. We use foreign currency forward contracts to hedge certain forecasted foreign currency expenditures. Our hedging program significantly reduces, but does not entirely eliminate, the impact of currency exchange rate movements.

At December 31, 2007 and 2006, we had in place foreign currency forward sale contracts with a notional amount of $104.3 million and $56.0 million, respectively, and foreign currency forward purchase contracts with a notional amount of $311.1 million and $220.0 million, respectively. At December 31, 2007, these contracts had an aggregate fair asset value of $5.8 million and at December 31, 2006, these contracts had an aggregate fair liability value of $4.6 million. Based on a hypothetical 10% appreciation of the U.S. dollar from December 31, 2007 market rates, the fair value of our foreign currency forward contracts would decrease the asset by $21.2 million, resulting in a net liability position. Conversely, a hypothetical 10% depreciation of the U.S. dollar from December 31, 2007 market rates would increase the fair value of our foreign currency forward contracts by $21.1 million. In these hypothetical movements, foreign operating costs would move in the opposite direction. This calculation assumes that each exchange rate would change in the same direction relative to the U.S. dollar. In addition to the direct effects of changes in exchange rates quantified above, changes in exchange rates could also change the dollar value of sales and affect the volume of sales as our competitors’ products become more or less attractive. We do not anticipate any material adverse impact to our consolidated financial position, results of operations, or cash flows as a result of these foreign exchange forward contracts.

Exposure to Interest Rates

We have interest rate exposures resulting from our interest-based available-for-sale securities. We maintain available-for-sale investments in debt securities and we limit the amount of credit exposure to any one issuer or type of instrument. The securities in our investment portfolio are not leveraged. The securities classified as available-for-sale are subject to interest rate risk. The modeling technique used measures the change in fair values arising from an immediate hypothetical shift in market interest rates and assumes that ending fair values include principal plus accrued interest and reinvestment income. If market interest rates were to increase by 100 basis points from December 31, 2007 and 2006 levels, the fair value of the available-for-sale portfolio would decline by approximately $3.2 million and $1.8 million, respectively. If market interest rates were to decrease by 100 basis points from December 31, 2007 and 2006 levels, the fair value of the available-for-sale portfolio would increase by approximately $3.2 million and $1.8 million, respectively. These amounts are determined by considering the impact of the hypothetical interest rate movements on our available-for-sale investment portfolios. This analysis does not consider the effect of credit risk as a result of the reduced level of overall economic activity that could exist in such an environment.

During 2005, we entered into the Credit Facility, as amended in 2006, or the Amended Credit Facility. Accordingly, we could be exposed to market risk from changes in interest rates on our long-term debt. This exposure relates to our $100.0 million Amended Credit Facility. Borrowings under the Amended Credit Facility currently bear interest at variable rates based on LIBOR plus 0.32% and adjusts in the future in the range of 0.32% to 0.80% above LIBOR based on our level of total debt and our adjusted earnings before interest, taxes, depreciation and amortization, or EBITDA. A hypothetical 1% interest rate change would not have any current impact on our results of operations as we had no amounts outstanding under the Amended Credit Facility as of December 31, 2007.

In April 2002, we entered into a synthetic lease with a substantive lessor totaling approximately $61.0 million related to office space utilized for our corporate headquarters in Fort Lauderdale, Florida. Payments under this synthetic lease are indexed to a variable interest rate (LIBOR plus a margin). Based upon our interest rate exposure under this synthetic lease at December 31, 2007, a 100 basis point change in the current interest rate would have an immaterial effect on our financial position and results of operations. In addition to interest rate exposure, if the fair value of our headquarters property, under this synthetic lease, were to significantly decline, there could be a material adverse effect on our results of operations and financial condition.

ITEM 8. FINANCIAL STATEMENTS AND SCHEDULES

Our consolidated financial statements and related financial statement schedule, together with the reports of independent registered public accounting firm, appear at pages F-1 through F-35 of this Annual Report on Form 10-K for the year ended December 31, 2007.

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

There have been no changes in or disagreements with our independent registered public accountants on accounting or financial disclosure matters during our two most recent fiscal years.

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ITEM 9A. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

As of December 31, 2007, our management, with the participation of our President and Chief Executive Officer and our Senior Vice President and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures pursuant to Rule 13a-15(b) promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Based upon that evaluation, our President and Chief Executive Officer and our Senior Vice President and Chief Financial Officer concluded that, as of December 31, 2007, our disclosure controls and procedures were effective in ensuring that material information required to be disclosed in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, including ensuring that such material information is accumulated and communicated to our management, including our President and Chief Executive Officer and our Senior Vice President and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Control Over Financial Reporting

During the quarter ended December 31, 2007, there were no changes in our internal control over financial reporting that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Management’s Annual Report on Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting as such term is defined in Exchange Act Rule 13a – 15(f). Our internal control system was designed to provide reasonable assurance to our management and the Board of Directors regarding the preparation and fair presentation of published financial statements. All internal control systems, no matter how well designed have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Our management assessed the effectiveness of our internal control over financial reporting as of December 31, 2007. 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 (the COSO criteria). Based on our assessment we believe that, as of December 31, 2007, our internal control over financial reporting is effective based on those criteria. The effectiveness of our internal control over financial reporting as of December 31, 2007 has been audited by Ernst & Young LLP, an independent registered public accounting firm, as stated in their report which appears below.

ITEM 9B. OTHER INFORMATION

Our policy governing transactions in its securities by its directors, officers and employees permits its officers, directors and certain other persons to enter into trading plans complying with Rule 10b5-1 under the Securities Exchange Act of 1934, as amended. We have been advised that Mark Templeton, our President and Chief Executive Officer, and Stephen Dow, a member of our Board of Directors, entered into trading plans in the fourth quarter of 2007 in accordance with Rule 10b5-1 and our policy governing transactions in its securities. Messrs. Templeton and Dow entered into their respective trading plans to exercise soon to expire stock options and to sell the underlying shares of common stock. We undertake no obligation to update or revise the information provided herein, including for revision or termination of an established trading plan.

46

Report of Independent Registered Public Accounting Firm

The Board of Directors and Stockholders of Citrix Systems, Inc.

We have audited Citrix Systems, Inc.’s internal control over financial reporting as of December 31, 2007, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (the COSO criteria). Citrix Systems, Inc.’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 Annual 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 based on the assessed risk, 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 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 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 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.

In our opinion, Citrix Systems, Inc. maintained, in all material respects, effective internal control over financial reporting as of December 31, 2007, based on the COSO criteria.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated balance sheets of Citrix Systems, Inc. as of December 31, 2007 and 2006, and the related consolidated statements of income, stockholders’ equity and comprehensive income, and cash flows for each of the three years in the period ended December 31, 2007 of Citrix Systems, Inc. and our report dated February 25, 2008 expressed an unqualified opinion thereon.

/s/ Ernst & Young LLP

Certified Public Accountants

Fort Lauderdale, Florida

February 25, 2008

47

PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

The information required under this item is incorporated herein by reference to the Company’s definitive proxy statement pursuant to Regulation 14A, which proxy statement will be filed with the Securities and Exchange Commission not later than 120 days after the close of the Company’s fiscal year ended December 31, 2007.

ITEM 11. EXECUTIVE COMPENSATION

The information required under this item is incorporated herein by reference to the Company’s definitive proxy statement pursuant to Regulation 14A, which proxy statement will be filed with the Securities and Exchange Commission not later than 120 days after the close of the Company’s fiscal year ended December 31, 2007.

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

The information required under this item is incorporated herein by reference to the Company’s definitive proxy statement pursuant to Regulation 14A, which proxy statement will be filed with the Securities and Exchange Commission not later than 120 days after the close of the Company’s fiscal year ended December 31, 2007.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE

The information required under this item is incorporated herein by reference to the Company’s definitive proxy statement pursuant to Regulation 14A, which proxy statement will be filed with the Securities and Exchange Commission not later than 120 days after the close of the Company’s fiscal year ended December 31, 2007.

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES

The information required under this item is incorporated herein by reference to the Company’s definitive proxy statement pursuant to Regulation 14A, which proxy statement will be filed with the Securities and Exchange Commission not later than 120 days after the close of the Company’s fiscal year ended December 31, 2007.

48

PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES

(a) 1. Consolidated Financial Statements.

For a list of the consolidated financial information included herein, see page F-1.

2. Financial Statement Schedules.

The following consolidated financial statement schedule is included in Item 8:

Valuation and Qualifying Accounts

3. List of Exhibits.

Exhibit No.		Description
2.1	(16)	Agreement and Plan of Merger dated as of June 1, 2005 by and among Citrix Systems, Inc., NCAR Acquisition Corporation, NCAR LLC, NetScaler, Inc. and Guarev Garg as stockholder representative
2.2	(17)	Amendment No. 1 to Agreement and Plan of Merger dated as of June 1, 2005 by and among Citrix Systems, Inc., NCAR Acquisition Corporation, NCAR LLC, NetScaler, Inc. and Guarev Garg as stockholder representative, dated as of June 24, 2005
2.3	(30)	Agreement and Plan of Merger, dated as of August 4, 2006, by and among Citrix Systems, Inc., Banyan Acquisition Corporation, Orbital Data Corporation and John Jaggers as the stockholder representative
2.4	(34)	Agreement and Plan of Merger and Reorganization, dated as of August 14, 2007, by and among Citrix Systems, Inc., PVA Acquisition Corporation, PVA Acquisition LLC, XenSource, Inc. and John G. Connors as stockholder representative
2.5	(35)	Amendment No. 1 to Agreement and Plan of Merger and Reorganization dated as of August 14, 2007 by and among Citrix Systems, Inc. PVA Acquisition Corporation, PVA Acquisition LLC, XenSource, Inc. and John G. Connors as stockholder representative, dated September 20, 2007
3.1	(1)	Amended and Restated Certificate of Incorporation of the Company
3.2		Certificate of Amendment of Amended and Restated Certificate of Incorporation
3.3	(38)	Amended and Restated By-laws of the Company
4.1	(2)	Specimen certificate representing the Common Stock
10.1*	(4)	Fourth Amended and Restated 1995 Stock Plan
10.2*		Second Amended and Restated 1995 Non-Employee Director Stock Option Plan
10.3*		Third Amended and Restated 1995 Employee Stock Purchase Plan
10.4*	(3)	Second Amended and Restated 2000 Director and Officer Stock Option and Incentive Plan
10.5*	(5)	2000 Director and Officer Stock Option and Incentive Plan, Non-Qualified Stock Option Agreement
10.6*	(6)	2000 Director and Officer Stock Option and Incentive Plan, Incentive Stock Option Agreement
10.7*	(7)	Amended and Restated 2000 Stock Incentive Plan of Net6 Inc. (a subsidiary of Citrix Systems, Inc.)
10.8*	(8)	Amended and Restated 2003 Stock Incentive Plan of Net6 Inc. (a subsidiary of Citrix Systems, Inc.)
10.9	(9)	Microsoft Master Source Code Agreement by and between the Company and Microsoft dated December 16, 2004
10.10	(10)	License Form by and between the Company and Microsoft Corporation dated December 16, 2004 (with certain information omitted pursuant to a request for confidential treatment and filed separately with the Securities and Exchange Commission)

49

10.11		Participation Agreement dated as of April 23, 2002, by and among Citrix Systems, Inc., Citrix Capital Corp., Selco Service Corporation and Key Corporate Capital, Inc. (the “Participation Agreement”) (with certain information omitted pursuant to a grant of confidential treatment and filed separately with the Securities and Exchange Commission)
10.12		Amendment No. 1 to Participation Agreement dated as of June 17, 2002 (with certain information omitted pursuant to a grant of confidential treatment and filed separately with the Securities and Exchange Commission)
10.13		Master Lease dated as of April 23, 2002 by and between Citrix Systems, Inc. and Selco Service Corporation (with certain information omitted pursuant to a grant for confidential treatment and filed separately with the Securities and Exchange Commission)
10.14*	(11)	2005 Executive Bonus Plan
10.15*	(23)	2006 Executive Bonus Plan
10.16*	(12)	2005 Equity Incentive Plan
10.17*	(25)	Amendment to Citrix Systems, Inc. 2005 Equity Incentive Plan
10.18*	(13)	2005 Employee Stock Purchase Plan
10.19*	(14)	2005 Equity Incentive Plan Incentive Stock Option Master Agreement (Domestic)
10.20*	(15)	2005 Equity Incentive Plan Non-Qualified Stock Option Master Agreement (Domestic)
10.21*	(26)	Citrix Systems, Inc. 2005 Equity Incentive Plan Non-Qualified Stock Option Master Agreement (Domestic)
10.22*	(27)	Citrix Systems, Inc. 2005 Equity Incentive Plan Stock Option Master Agreement (French)
10.23*	(22)	Form of Restricted Stock Unit Agreement under the Citrix Systems, Inc. 2005 Equity Incentive Plan
10.24*		Form of Executive Restricted Stock Unit Agreement under the Citrix Systems, Inc. 2005 Equity Incentive Plan (Time Based Vesting)
10.25*	(24)	Form of Restricted Stock Unit Agreement for Non-Employee Directors under the Citrix Systems, Inc. 2005 Equity Incentive Plan
10.26*	(18)	Change in Control Agreement dated as of August 4, 2005 by and between Citrix Systems, Inc. and Mark B. Templeton
10.27*	(19)	Change in Control Agreement dated as of August 4, 2005 by and between Citrix Systems, Inc. and each of David J. Henshall, David R. Freidman and John C. Burris
10.28*	(28)	Change in Control Agreement, dated as of August 4, 2006, by and between Citrix Systems, Inc. and Brett M. Caine
10.29	(29)	Amended and Restated Credit Agreement dated as of September 27, 2006 among Citrix Systems, Inc., Citrix Systems International GmbH, JPMorgan Chase Bank N.A., and certain other financial institutions
10.30	(20)	Term Loan Agreement dated as of August 9, 2005 by and among Citrix Systems, Inc., Citrix Systems International GMBH, JPMorgan Chase Bank, N.A., J.P. Morgan Securities Inc. and certain other financial institutions
10.31*	(21)	NetScaler, Inc. 1997 Stock Plan
10.32	(31)	Type # 3 License Form by and between the Company and Microsoft Corporation dated September 5, 2007 (with certain information omitted pursuant to a request for confidential treatment and filed with the Securities and Exchange Commission)
10.33*	(32)	Citrix Inc. Executive Bonus Plan
10.34*	(33)	Second Amendment to Citrix Systems, Inc. 2005 Equity Incentive Plan
10.35*	(36)	Employment Agreement dated as of August 14, 2007 by and between Citrix Systems, Inc. and Peter Levine
10.36*	(37)	XenSource, Inc. 2005 Stock Plan
21.1		List of Subsidiaries
23.1		Consent of Ernst & Young LLP
24.1		Power of Attorney (Included in signature page)

50

31.1	Rule 13a-14(a) / 15d-14(a) Certifications
31.2	Rule 13a-14(a) / 15d-14(a) Certification
32.1	Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

* Indicates a management contract or any compensatory plan, contract or arrangement.

(1) Incorporated herein by reference to Exhibit 3.2 to the Company’s Registration Statement on Form S-1 (File No. 33-98542), as amended.

(2) Incorporated herein by reference to Exhibit 4.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2000 (File No. 000-27084).

(3) Incorporated by reference herein to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2003.

(4) Incorporated by reference herein to Exhibit 10.1 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2003.

(5) Incorporated by reference herein to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2004.

(6) Incorporated by reference herein to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2004.

(7) Incorporated by reference herein to Exhibit 10.7 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2004.

(8) Incorporated by reference herein to Exhibit 10.8 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2004.

(9) Incorporated by reference herein to Exhibit 10.11 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2004.

(10) Incorporated by reference herein to Exhibit 10.12 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2004.

(11) Incorporated herein by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K dated as of February 10, 2005.

(12) Incorporated by reference herein to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2005.

(13) Incorporated by reference herein to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2005.

(14) Incorporated by reference herein to Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2005.

(15) Incorporated by reference herein to Exhibit 10.4 to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2005.

(16) Incorporated by reference herein to Exhibit 2.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2005.

(17) Incorporated by reference herein to Exhibit 2.2 to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2005.

(18) Incorporated by reference herein to Exhibit 10.5 to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2005.

51

(19) Incorporated by reference herein to Exhibit 10.6 to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2005.

(20) Incorporated by reference herein to Exhibit 10.4 to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2005.

(21) Incorporated by reference herein to Exhibit 10.5 to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2005.

(22) Incorporated by reference herein to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2006.

(23) Incorporated by reference herein to Exhibit 10.1 to the Company’s Current Report on Form 8-K dated as of April 18, 2006.

(24) Incorporated by reference herein to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2006.

(25) Incorporated by reference herein to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2006.

(26) Incorporated by reference herein to Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2006.

(27) Incorporated by reference herein to Exhibit 10.4 to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2006.

(28) Incorporated by reference herein to Exhibit 10.5 to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2006.

(29) Incorporated by reference herein to Exhibit 10.1 to the Company’s Current Report on Form 8-K dated as of September 27, 2006.

(30) Incorporated by reference herein to Exhibit 2.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2006.

(31) Incorporated by reference herein to Exhibit 10.31 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2006.

(32) Incorporated by reference herein to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2007.

(33) Incorporated by reference herein to Exhibit 10.1 to the Company’s Current Report on Form 8-K dated as of October 19, 2007.

(34) Incorporated by reference herein to Exhibit 2.5 to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2007.

(35) Incorporated by reference herein to Exhibit 2.6 to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2007.

(36) Incorporated by reference herein to Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2007.

(37) Incorporated by reference herein to Exhibit 10.4 to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2007.

(38) Incorporated by reference herein to Exhibit 3.1 to the Company’s Current Report on Form 8-K dated as of December 12, 2007.

52

(b) Exhibits.

The Company hereby files as part of this Annual Report on Form 10-K for the year ended December 31, 2007, the exhibits listed in Item 15(a)(3) above. Exhibits which are incorporated herein by reference can be inspected and copied at the public reference facilities maintained by the Securities and Exchange Commission, 100 F Street, N.E., Washington, D.C., 20549 and at the Commission’s regional offices at 175 W. Jackson Boulevard, Suite 900, Chicago, IL 60604 and 3 World Financial Center, Suite 400, New York, NY 10281-1022.

(c) Financial Statement Schedule.

The Company hereby files as part of this Annual Report on Form 10-K for the year ended December 31, 2007 the consolidated financial statement schedule listed in Item 15(a)(2) above, which is attached hereto.

53

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, in Fort Lauderdale, Florida on the 27th day of February, 2008.

CITRIX SYSTEMS, INC
By:	/s/ MARK B. TEMPLETON
	Mark B. Templeton
	President and Chief Executive Officer

POWER OF ATTORNEY AND SIGNATURES

We, the undersigned officers and directors of Citrix Systems, Inc., hereby severally constitute and appoint Mark B. Templeton and David J. Henshall, and each of them singly, our true and lawful attorneys, with full power to them and each of them singly, to sign for us in our names in the capacities indicated below, all amendments to this report, and generally to do all things in our names and on our behalf in such capacities to enable Citrix Systems, Inc. to comply with the provisions of the Securities Exchange Act of 1934, as amended, and all requirements of the Securities and Exchange Commission.

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 indicated below on the 27^th day of February, 2008.

Signature	Title(s)
/s/ MARK B. TEMPLETON Mark B. Templeton	President, Chief Executive Officer and Director (Principal Executive Officer)
/s/ DAVID J. HENSHALL David J. Henshall	Chief Financial Officer and Senior Vice President, Finance (Principal Financial and Accounting Officer)
/s/ THOMAS F. BOGAN Thomas F. Bogan	Chairman of the Board of Directors
/s/ MURRAY J. DEMO Murray J. Demo	Director
/s/ STEPHEN M. DOW Stephen M. Dow	Director
/s/ ASIFF S. HIRJI Asiff S. Hirji	Director
/s/ GARY E. MORIN Gary E. Morin	Director
/s/ GODFREY R. SULLIVAN Godfrey R. Sullivan	Director

54

CITRIX SYSTEMS, INC.

List of Financial Statements and Financial Statement Schedule

The following consolidated financial statements of Citrix Systems, Inc. are included in Item 8:
Report of Independent Registered Public Accounting Firm	F-2
Consolidated Balance Sheets — December 31, 2007 and 2006	F-3
Consolidated Statements of Income — Years ended December 31, 2007, 2006 and 2005	F-4
Consolidated Statements of Stockholders’ Equity and Comprehensive Income — Years ended December 31, 2007, 2006 and 2005	F-5
Consolidated Statements of Cash Flows — Years ended December 31, 2007, 2006 and 2005	F-6
Notes to Consolidated Financial Statements	F-7
The following consolidated financial statement schedule of Citrix Systems, Inc. is included in Item 15(a):
Schedule II Valuation and Qualifying Accounts	F-35

All other schedules for which provision is made in the applicable accounting regulation of the Securities and Exchange Commission are not required under the related instructions or are inapplicable and therefore have been omitted.

F-1

Report of Independent Registered Public Accounting Firm

The Board of Directors and Stockholders of Citrix Systems, Inc.

We have audited the accompanying consolidated balance sheets Citrix Systems, Inc. as of December 31, 2007 and 2006, and the related consolidated statements of income, stockholders’ equity and comprehensive income, and cash flows for each of the three years in the period ended December 31, 2007. Our audits also include the financial statement schedule listed in the Index at Item 15(a). These financial statements and schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements and schedule 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, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Citrix Systems, Inc. at December 31, 2007 and 2006, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 2007, in conformity with U.S. generally accepted accounting principles. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth herein.

As discussed in Notes 2 and 6 to the consolidated financial statements, Citrix Systems, Inc. changed its method of accounting for stock-based compensation as of January 1, 2006 and its method of accounting for uncertain tax positions as of January 1, 2007.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Citrix Systems, Inc.’s internal control over financial reporting as of December 31, 2007, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 25, 2008 expressed an unqualified opinion thereon.

/s/ Ernst & Young LLP

Certified Public Accountants

Fort Lauderdale, Florida

February 25, 2008

F-2

CITRIX SYSTEMS, INC.

CONSOLIDATED BALANCE SHEETS

	(In thousands, except par value) December 31,
	2007			2006
Assets
Current assets:
Cash and cash equivalents	$	223,749		$	349,054
Short-term investments		356,085			152,652
Accounts receivable, net of allowances of $4,561 and $4,037 in 2007 and 2006, respectively		225,861			204,974
Inventories, net		9,629			6,619
Prepaid expenses and other current assets		75,995			45,646
Current portion of deferred tax assets, net		43,026			52,792
Total current assets		934,345			811,737
Restricted cash equivalents and investments		63,735			63,815
Long-term investments		218,676			241,675
Property and equipment, net		134,907			92,580
Goodwill, net		888,516			631,690
Other intangible assets, net		276,315			130,462
Long-term portion of deferred tax assets, net		—			41,594
Other assets		18,199			10,920
Total assets	$	2,534,693		$	2,024,473
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	55,586		$	45,217
Accrued expenses		191,383			145,664
Income taxes payable		—			11,892
Current portion of deferred revenues		407,305			332,770
Total current liabilities		654,274			535,543
Long-term portion of deferred revenues		35,381			23,518
Other liabilities		6,713			1,123
Commitments and contingencies
Stockholders’ equity:
Preferred stock at $.01 par value: 5,000 shares authorized, none issued and outstanding		—			—
Common stock at $.001 par value: 1,000,000 shares authorized; 252,201 and 238,156 shares issued at 2007 and 2006, respectively		252			238
Additional paid-in capital		2,038,010			1,655,530
Retained earnings		1,208,791			1,006,706
Accumulated other comprehensive income		5,751			4,180
		3,252,804			2,666,654
Less - common stock in treasury, at cost (64,841 and 59,465 shares in 2007 and 2006, respectively)		(1,414,479	)		(1,202,365	)
Total stockholders’ equity		1,838,325			1,464,289
	$	2,534,693		$	2,024,473

See accompanying notes.

F-3

CITRIX SYSTEMS, INC.

CONSOLIDATED STATEMENTS OF INCOME

	Year Ended December 31,
	2007			2006			2005
	(In thousands, except per share information)
Revenues:
Product licenses	$	577,144		$	488,487		$	409,435
License updates		484,669			405,756			331,102
Online services		213,744			148,795			99,097
Technical services		116,385			91,281			69,088
Total net revenues		1,391,942			1,134,319			908,722
Cost of revenues:
Cost of product license revenues		42,984			32,911			14,404
Cost of services revenues		65,027			46,585			26,929
Amortization of product related intangibles		29,596			19,202			16,766
Total cost of revenues		137,607			98,698			58,099
Gross margin		1,254,335			1,035,621			850,623
Operating expenses:
Research and development		205,103			155,331			108,751
Sales, marketing and support		590,409			480,343			394,153
General and administrative		229,229			178,669			125,425
Amortization of other intangible assets		17,387			16,934			11,622
In-process research and development		9,800			1,000			7,000
Total operating expenses		1,051,928			832,277			646,951
Income from operations		202,407			203,344			203,672
Interest income		49,704			41,210			23,614
Interest expense		(737	)		(927	)		(2,426	)
Other expense, net		(466	)		(546	)		(506	)
Income before income taxes		250,908			243,081			224,354
Income taxes		36,425			60,084			58,745
Net income	$	214,483		$	182,997		$	165,609
Earnings per share:
Basic	$	1.18		$	1.01		$	0.96
Diluted	$	1.14		$	0.97		$	0.93
Weighted average shares outstanding:
Basic		181,501			180,992			172,221
Diluted		187,380			187,725			177,771

See accompanying notes.

F-4

CITRIX SYSTEMS, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

AND COMPREHENSIVE INCOME

(In thousands)

	Common Stock					Additional Paid In Capital			Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Deferred Compensation			Common Stock in Treasury					Total Stockholders’ Equity			Total Comprehensive Income
	Shares		Amount															Shares		Amount
Balance at December 31, 2004	212,991		$	213		$	1,010,906		$	658,100		$	7,489		$	(7,196	)	(42,608	)	$	(732,679	)	$	936,833			—
Exercise of stock options	6,231			6			94,194			—			—			—		—			—			94,200			—
Common stock issued under employee stock purchase plan	449			—			7,392			—			—			—		—			—			7,392			—
Common stock issued for acquisitions	6,817			7			154,260			—			—			—		—			—			154,267			—
Tax benefit from employer stock plans	—			—			35,045			—			—			—		—			—			35,045			—
Stock-based compensation expense	85			—			21,623			—			—			(14,220	)	—			—			7,403			—
Stock repurchases	—			—			54,963			—			—			—		(7,357	)		(174,817	)		(119,854	)		—
Cash paid in advance for stock repurchase contracts	—			—			(54,496	)		—			—			—		—			—			(54,496	)		—
Unrealized loss on forward contracts and interest rate swaps, net of reclassification adjustments and net of taxes	—			—			—			—			(11,485	)		—		—			—			(11,485	)	$	(11,485	)
Charge for compensation expense on non-employee stock options	—			—			82			—			—			—		—			—			82			—
Unrealized loss on available-for-sale securities, net of tax	—			—			—			—			(467	)		—		—			—			(467	)		(467	)
Net income	—			—			—			165,609			—			—		—			—			165,609			165,609
Total comprehensive income																										$	153,657
Balance at December 31, 2005	226,573			226			1,323,969			823,709			(4,463	)		(21,417	)*	(49,965	)		(907,496	)		1,214,528	*		—
Shares issued under stock-based compensation plans	11,245			11			221,736			—			—			—		—			—			221,747			—
Stock-based compensation expense	—			—			60,713			—			—			—		—			—			60,713			—
Common stock issued under employee stock purchase plan	339			—			8,909			—			—			—		—			—			8,909			—
Common stock issued related to acquisitions	(1	)		—			290			—			—			—		—			—			290			—
Tax benefit from employer stock plans	—			—			40,600			—			—			—		—			—			40,600			—
Write-off of deferred compensation	—			—			(21,417	)		—			—			21,417		—			—			—			—
Stock repurchases	—			—			57,074			—			—			—		(9,501	)		(294,891	)		(237,817	)		—
Cash paid in advance for stock repurchase contracts	—			—			(36,344	)		—			—			—		—			—			(36,344	)		—
Donated treasury shares	—			—			—			—			—			—		1			22			22			—
Unrealized gain on forward contracts net of reclassification adjustments and net of taxes	—			—			—			—			8,406			—		—			—			8,406		$	8,406
Unrealized gain on available-for-sale securities, net of tax	—			—			—			—			237			—		—			—			237			237
Net income	—			—			—			182,997			—			—		—			—			182,997			182,997
Total comprehensive income																										$	191,640
Balance at December 31, 2006	238,156			238	*		1,655,530			1,006,706			4,180			—		(59,465	)		(1,202,365	)		1,464,289	*		—
Impact of adoption of FIN No. 48 on accumulated retained earnings on January 1, 2007	—			—			—			(12,398	)		—			—		—			—			(12,398	)		—
Shares issued under stock-based compensation plans	6,788			7			113,002			—			—			—		—			—			113,009			—
Stock-based compensation expense	—			—			64,666			—			—			—		—			—			64,666			—
Common stock issued under employee stock purchase plan	198			—			5,386			—			—			—		—			—			5,386			—
Tax benefit from employer stock plans	—			—			15,529			—			—			—		—			—			15,529			—
Common stock issued related to acquisitions	7,059			7			232,268			—			—			—		—			—			232,275			—
Stock repurchases	—			—			40,000			—			—			—		(5,376	)		(212,114	)		(172,114	)		—
Tender offer	—			—			(515	)		—			—			—		—			—			(515	)		—
Cash paid in advance for stock repurchase contracts	—			—			(87,856	)		—			—			—		—			—			(87,856	)		—
Unrealized gain on forward contracts net of reclassification adjustments and net of taxes	—			—			—			—			1,521			—		—			—			1,521		$	1,521
Unrealized gain on available-for-sale securities, net of tax	—			—			—			—			50			—		—			—			50			50
Net income	—			—			—			214,483			—			—		—			—			214,483			214,483
Total comprehensive income																										$	216,054
Balance at December 31, 2007	252,201		$	252		$	2,038,010		$	1,208,791		$	5,751		$	—		(64,841	)	$	(1,414,479	)	$	1,838,325

* Amounts do not add due to rounding.

See accompanying notes.

F-5

CITRIX SYSTEMS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

	Year Ended December 31,
	2007			2006			2005
	(In thousands)
Operating activities
Net income	$	214,483		$	182,997		$	165,609
Adjustments to reconcile net income to net cash provided by operating activities:
Amortization of intangible assets		46,983			36,136			28,388
Depreciation and amortization of property and equipment		38,214			27,447			21,970
Stock-based compensation expense		65,491			61,596			7,403
In-process research and development		9,800			1,000			7,000
Provision for doubtful accounts		2,578			1,978			146
Provision for product returns		3,517			4,608			5,954
Provision for inventory reserves		3,351			3,584			383
Deferred income tax benefit		(634	)		(4,351	)		(14,771	)
Tax effect of stock-based compensation		15,529			40,600			35,045
Excess tax benefit from exercise of stock options		(17,753	)		(51,915	)		—
Other non-cash items		2,231			478			158
Total adjustments to reconcile net income to net cash provided by operating activities		169,307			121,161			91,676
Changes in operating assets and liabilities, net of effects of acquisitions:
Accounts receivable		(22,805	)		(68,271	)		(28,424	)
Inventories		(6,316	)		(5,869	)		(1,707	)
Prepaid expenses and other current assets		(24,841	)		(10,092	)		2,482
Other assets		(7,166	)		(2,868	)		234
Deferred tax assets, net		62,892			11,617			5,541
Accounts payable		9,502			9,554			12,052
Accrued expenses		16,230			10,660			(5,333	)
Income tax payable		(11,892	)		10,562			(868	)
Deferred revenues		86,815			69,599			54,864
Other liabilities		(62,091	)		(334	)		(2,983	)
Total changes in operating assets and liabilities, net of effects of acquisitions		40,328			24,558			35,858
Net cash provided by operating activities		424,118			328,716			293,143
Investing activities
Purchases of available for-sale investments		(639,414	)		(709,565	)		(183,245	)
Proceeds from sales of available-for-sale investments		153,759			170,503			396,580
Proceeds from maturities of available-for-sale investments		305,278			215,318			141,652
Purchases of property and equipment		(85,919	)		(52,051	)		(26,377	)
Cash paid for acquisitions, net of cash acquired		(148,055	)		(61,462	)		(168,347	)
Cash paid for licensing agreements		(3,250	)		—			—
Net cash (used in) provided by investing activities		(417,601	)		(437,257	)		160,263
Financing activities
Proceeds from issuance of common stock		118,395			230,656			101,592
Excess tax benefit from exercise of stock options		17,753			51,915			—
Stock repurchases, net		(259,970	)		(274,161	)		(174,350	)
Proceeds from term loan and revolving credit facility		—			—			175,000
Payments on debt		(8,000	)		(34,850	)		(144,000	)
Cash paid for financing fees		—			—			(1,098	)
Net cash used in financing activities		(131,822	)		(26,440	)		(42,856	)
Change in cash and cash equivalents		(125,305	)		(134,981	)		410,550
Cash and cash equivalents at beginning of year		349,054			484,035			73,485
Cash and cash equivalents at end of year	$	223,749		$	349,054		$	484,035
Supplemental Cash Flow Information
Non-cash investing activity — (Decrease) increase in restricted cash equivalents and investments	$	(80	)	$	87		$	(85,323	)
Non-cash financing activity — Fair value of stock issued in connection with acquisitions	$	232,275		$	290		$	154,267
Cash paid for income taxes	$	43,064		$	2,330		$	33,755
Cash paid for interest	$	247		$	432		$	927

See accompanying notes.

F-6

CITRIX SYSTEMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. ORGANIZATION

Citrix Systems, Inc. (“Citrix” or the “Company”), is a Delaware corporation founded on April 17, 1989. The Company designs, develops and markets technology solutions that allow applications to be delivered, supported, and shared on-demand with high performance, enhanced security, and improved total cost of ownership. The Company markets and licenses its products through multiple channels such as value-added resellers, channel distributors, system integrators, independent software vendors, its Websites and original equipment manufacturers.

Stock Option Investigation

On November 30, 2006, the Company’s Audit Committee commenced a voluntary, independent investigation of the Company’s historical stock option granting practices and related accounting during the period from January 1996 through December 2006. In addition to the grants management evaluated as part of the Audit Committee’s investigation, it also evaluated all grants (consisting of two employee new hire grants) in December 1995, which was the month the Company completed its initial public offering, and all grants to non-employee directors. This voluntary investigation was not in response to any governmental investigation, stockholder lawsuit, whistleblower complaint or inquiries from media organizations. The Company’s Annual Report on Form 10-K for the year ended December 31, 2006, which was filed on September 7, 2007, contains a description of the Audit Committee’s investigation, management’s related review, the conclusions of the Audit Committee and management and the restatement of the Company’s consolidated balance sheet as of December 31, 2005 and the related consolidated statements of income, stockholders’ equity and comprehensive income and cash flows for the years ended December 31, 2005 and 2004, and each of the quarters in the 2006 and 2005 fiscal years, to reflect additional stock-based compensation expense and related income tax effects for stock option awards granted since December 1995.

2. SIGNIFICANT ACCOUNTING POLICIES

Consolidation Policy

The consolidated financial statements of the Company include the accounts of its wholly-owned subsidiaries in the Americas, Europe, the Middle East and Africa (“EMEA”), Asia-Pacific and the Online Services division. All significant transactions and balances between the Company and its subsidiaries have been eliminated in consolidation.

Cash and Cash Equivalents

Cash and cash equivalents at December 31, 2007 and 2006 consist of marketable securities, which are primarily commercial paper, agency securities, money market funds, corporate securities and municipal securities with initial or remaining contractual maturities when purchased of three months or less. The Company minimizes its credit risk associated with cash and cash equivalents by investing primarily in investment grade, highly liquid instruments.

Restricted Cash Equivalents and Investments

Restricted cash equivalents and investments at December 31, 2007 and 2006 are primarily comprised of $62.8 million in investment securities and cash equivalents pledged as collateral for specified obligations under the Company’s synthetic lease arrangement. The Company maintains the ability to manage the composition of the restricted cash equivalents and investments within certain limits and to withdraw and use excess investment earnings from the restricted collateral for operating purposes. For further information, see Note 10.

Investments

Short-term and long-term investments at December 31, 2007 and 2006 primarily consist of corporate securities, agency securities, municipal securities, commercial paper, and government securities. Investments classified as available-for-sale are stated at fair value with unrealized gains and losses, net of taxes, reported in accumulated other comprehensive income. Investments classified as held-to-maturity are stated at amortized cost. In accordance with Statement of Financial Accounting Standards (“SFAS”) No. 95, Statement of Cash Flows, the Company classifies available-for-sale securities, including its investments in auction rate securities that are available to meet the Company’s current operational needs, as short-term. The Company does not recognize changes in the fair value of its investments in income unless a decline in value is considered other-than-temporary in accordance with the Financial Accounting Standards Board (the “FASB”) Staff Position 115-1, The Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments.

The Company minimizes its credit risk associated with investments by investing primarily in investment grade, highly liquid securities. The Company’s policy is designed to limit exposure to any one issuer depending on credit quality. Periodic evaluations of

F-7

CITRIX SYSTEMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

the relative credit standing of those issuers are considered in the Company’s investment strategy. The Company uses information provided by third parties to adjust the carrying value of certain of its investments and derivative instruments to fair value at the end of each period. Fair values are based on valuation models that use market quotes and, for certain investments, assumptions as to the creditworthiness of the entities issuing those underlying instruments.

Accounts Receivable

The Company’s accounts receivable are due primarily from value-added resellers, distributors and end customers. Collateral is not required. Product returns are provided for in the consolidated financial statements and have historically been within management’s expectations. The Company also maintains allowances for doubtful accounts for estimated losses resulting from the inability of the Company’s customers to make payments. The Company periodically reviews these estimated allowances, including an analysis of the customers’ payment history and creditworthiness. The allowance for doubtful accounts was $2.9 million and $2.4 million as of December 31, 2007 and 2006, respectively. If the financial condition of a significant distributor or customer were to deteriorate, the Company’s operating results could be adversely affected. No distributor or end-customer accounted for more than 10% of gross accounts receivable at December 31, 2007 or 2006.

Inventory

Inventories are stated at the lower of cost or market on a first-in, first out basis and primarily consist of finished goods. As of December 31, 2007 and 2006, the provision to reduce obsolete or excess inventories to market was $8.5 million and $5.2 million, respectively.

Property and Equipment

Property and equipment is stated at cost. Depreciation is computed using the straight-line method over the estimated useful lives of the assets, which is generally three years for computer equipment, software, office equipment and furniture, the lesser of the lease term or five years for leasehold improvements, which is the estimated useful life, seven years for the Company’s enterprise resource planning system and 40 years for buildings. Depreciation expense was $38.2 million, $27.4 million and $22.0 million for 2007, 2006 and 2005, respectively.

During 2007 and 2006, the Company retired $6.8 million and $3.3 million, respectively, in property and equipment that were no longer in use. At the time of retirement, the remaining net book value of these assets was immaterial and no asset retirement obligations were associated with them.

Property and equipment consist of the following:

	December 31,
	2007			2006
	(In thousands)
Buildings	$	17,781		$	17,781
Computer equipment		116,632			86,001
Software		90,105			68,185
Equipment and furniture		27,224			21,453
Leasehold improvements		64,188			46,532
Land		9,062			9,062
		324,992			249,014
Less accumulated depreciation and amortization		(190,085	)		(156,434	)
	$	134,907		$	92,580

Long-Lived Assets

The Company reviews for impairment of long-lived assets and certain identifiable intangible assets to be held and used whenever events or changes in circumstances indicate that the carrying amount of such assets may not be fully recoverable. Determination of recoverability is based on an estimate of undiscounted future cash flows resulting from the use of the asset and its eventual disposition. Measurement of an impairment loss is based on the fair value of the asset compared to its carrying value. Long-lived assets and certain identifiable intangible assets to be disposed of are reported at the lower of carrying amount or fair value less costs to sell. During 2007, 2006 and 2005, the Company did not recognize any impairment charges associated with its long-lived or intangible assets.

F-8

CITRIX SYSTEMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Goodwill

The Company accounts for goodwill in accordance with SFAS No. 142, Goodwill and Other Intangible Assets. SFAS No. 142, requires that goodwill and certain intangible assets are not amortized, but are subject to an annual impairment test. At December 31, 2007 and 2006, the Company had $888.5 million and $631.7 million of goodwill, respectively. There was no impairment of goodwill as a result of the annual impairment tests completed during the fourth quarters of 2007 and 2006. Excluding goodwill, the Company has no intangible assets deemed to have indefinite lives. Substantially all of the Company’s goodwill at December 31, 2007 and December 31, 2006 was associated with the Americas and Online Services reportable segments. See Note 3 for acquisitions and Note 12 for segment information.

Intangible Assets

The Company has intangible assets with finite lives that are recorded at cost, less accumulated amortization. Amortization is recognized on a straight-line basis over the estimated useful lives of the respective assets, generally three to seven years, except for patents, which are amortized over the lesser of their remaining life or ten years. In accordance with SFAS No. 86, Accounting for the Costs of Computer Software to be Sold, Leased or Otherwise Marketed, the Company records acquired core and product technology at net realizable value and reviews this technology for impairment on a periodic basis by comparing the estimated net realizable value to the unamortized cost of the technology. There has been no impairment of these assets for any of the periods presented.

Intangible assets consist of the following (in thousands):

	December 31, 2007
	Gross Carrying Amount		Accumulated Amortization		Weighted Average Life
Core and product technologies	$	260,937	$	83,633	6.06 years
Other		154,724		55,713	6.19 years
Total	$	415,661	$	139,346	6.11 years
	December 31, 2006
	Gross Carrying Amount		Accumulated Amortization		Weighted Average Life
Core and product technologies	$	137,071	$	55,301	5.58 years
Other		85,754		37,062	5.29 years
Total	$	222,825	$	92,363	5.47 years

Other intangible assets consist primarily of customer relationships, trade names, covenants not to compete and patents. Amortization of product related intangible assets includes amortization of core and product technologies and patents and is reported as a cost of revenues in the accompanying consolidated statements of income. Amortization of other intangible assets includes amortization of customer relationships, trade names and covenants not to compete and is reported as an operating expense in the accompanying consolidated statements of income.

Estimated future annual amortization expense is as follows (in thousands):

Year ending December 31,
2008	$	62,335
2009		55,143
2010		48,771
2011		38,061
2012		22,844

During 2006, the Company retired approximately $56.8 million of fully amortized intangible assets that were no longer in use from its books.

Software Development Costs

SFAS No. 86, Accounting for the Costs of Computer Software to be Sold, Leased, or Otherwise Marketed, requires certain software development costs to be capitalized upon the establishment of technological feasibility. The establishment of technological feasibility and the ongoing assessment of the recoverability of these costs requires considerable judgment by

F-9

CITRIX SYSTEMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

feasibility and the ongoing assessment of the recoverability of these costs requires considerable judgment by management with respect to certain external factors such as anticipated future revenue, estimated economic life, and changes in software and hardware technologies. Software development costs incurred subsequent to achieving technological feasibility have not been significant and substantially all software development costs have been expensed as incurred.

The Company accounts for software developed for internal use pursuant to the American Institute of Certified Public Accountants Statement of Position (“SOP”) No. 98-1, Accounting for the Costs of Computer Software Developed or Obtained for Internal Use. Pursuant to SOP No. 98-1, the Company capitalizes external direct costs of materials and services used in the project and internal costs such as payroll and benefits of those employees directly associated with the development of internal use software and software developed related to its online service offerings. The amount of costs capitalized in 2007 and 2006 relating to internal use software was $26.3 million and $18.7 million, respectively. These costs are being amortized over the estimated useful life of the software, which is generally three to seven years, and are included in property and equipment in the accompanying consolidated balance sheets.

Revenue Recognition

The Company markets and licenses products primarily through multiple channels such as value-added resellers, channel distributors, system integrators, independent software vendors, its Websites and original equipment manufacturers. The Company’s product licenses are generally perpetual. The Company also separately sells license updates and services, which may include product training, technical support and consulting services, as well as online services.

The Company’s software products are purchased by medium and small-sized businesses, with a minimal number of locations, and larger business enterprises with more complex multiserver environments that deploy the Company’s software products on a departmental or enterprise-wide basis. Products may be delivered indirectly by channel distributors or original equipment manufacturers or directly to the end-user by the Company via packaged product or download from the Company’s Website. The Company’s appliance products are integrated with software that is essential to the functionality of the equipment. The Company provides license updates for appliances, which include unspecified software upgrades and enhancements through its maintenance contracts. Accordingly, for these appliances, the Company accounts for revenue in accordance with SOP No. 97-2, “Software Revenue Recognition, (as amended by SOP 98-4 and SOP 98-9)” and all related interpretations, as described in detail below. The Company’s online services are purchased by small and medium sized businesses, as well as individuals and are centrally hosted on the Company’s Websites.

Revenue is recognized when it is earned. The Company’s software revenue recognition policies are in compliance with SOP 97-2 and related amendments and interpretations. In addition, the Company’s online services are considered service arrangements in accordance with EITF Issue No. 00-3, Application of AICPA Statement of Position 97-2, Software Revenue Recognition, to Arrangements That Include the Right to Use Software Stored on Another Entity’s Hardware. In addition, because we provide our applications as a service, we follow the provisions of Securities and Exchange Commission Staff Accounting Bulletin (“SAB”) No. 104, Revenue Recognition.

The Company recognizes revenue when all of the following criteria are met: persuasive evidence of the arrangement exists; delivery has occurred and the Company has no remaining obligations; the fee is fixed or determinable; and collectability is probable. The Company defines these four criteria as follows:

• Persuasive evidence of the arrangement exists. The Company recognizes revenue on packaged products and appliances upon shipment to distributors and resellers. For packaged product and appliance sales, it is the Company’s customary practice to require a purchase order from distributors and resellers who have previously negotiated a master packaged product distribution or resale agreement. For electronic and paper license arrangements, the Company typically requires a purchase order from the distributor, reseller or end-user (depending on the arrangement) and an executed product license agreement from the end-user. For technical support, product training and consulting services, the Company requires a purchase order and an executed agreement. For online services, the Company requires the customer or the reseller to electronically accept the terms of an online services agreement or execute a contract.

• Delivery has occurred and the Company has no remaining obligations. For product license and appliance sales, the Company’s standard delivery method is free-on-board shipping point. Consequently, it considers delivery of packaged products and appliances to have occurred when the products are shipped pursuant to an agreement and purchase order. The Company considers delivery of licenses under electronic licensing agreements to have occurred when the related products are shipped and the end-user has been electronically provided the software activation keys that allow the end-user to take immediate possession of the product. For online services, delivery begins when the login id and password have been provided to the customer. For product training and consulting services, the Company fulfills its obligation when the services are performed. For license updates, technical support and online services, the Company assumes that its obligation is satisfied ratably over the respective terms of the agreements, which are typically 12 to 24 months.

F-10

CITRIX SYSTEMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

• The fee is fixed or determinable. In the normal course of business, the Company does not provide customers the right to a refund of any portion of their license fees or extended payment terms. The Company sells license updates and services, which includes technical support, product training and consulting services separately and it determines vendor specific objective evidence (“VSOE”) of fair value by the price charged for each of these items when sold separately or based on applicable renewal rates. For online services, the fee is considered fixed or determinable if it is not subject to refund or adjustment.

• Collectability is probable. The Company determines collectability on a customer-by-customer basis and generally does not require collateral. The Company typically sells product licenses and license updates to distributors or resellers for whom there are histories of successful collection. New customers are subject to a credit review process that evaluates their financial position and ultimately their ability to pay. Customers are also subject to an ongoing credit review process. If the Company determines from the outset of an arrangement that collectability is not probable, revenue recognition is deferred until customer payment is received and the other parameters of revenue recognition described above have been achieved. Management’s judgment is required in assessing the probability of collection, which is generally based on evaluation of customer specific information, historical experience and economic market conditions.

Net revenues include the following categories: Product Licenses, License Updates, Online Services and Technical Services. Product Licenses primarily represent fees related to the licensing of the Company’s software and appliance products. These revenues are reflected net of sales allowances, cooperative advertising agreements and provisions for stock balancing return rights. License Updates consist of fees related to the Subscription Advantage program that are recognized ratably over the term of the contract, which is typically 12-24 months. Subscription Advantage is a renewable program that provides subscribers with immediate access to software upgrades, enhancements and maintenance releases when and if they become available during the term of the contract. Online Services revenues consist primarily of fees related to online service agreements and are recognized ratably over the contract term. Technical Services revenues are comprised of fees from technical support services which are recognized ratably over the contract term as well as revenues from product training and certification, and consulting services revenue related to implementation of the Company’s products, which is recognized as the services are provided.

The Company licenses most of its software products bundled with a one year contract for license updates that provide the end-user with free enhancements and upgrades to the licensed product on a when and if available basis. Customers may also elect to purchase subscriptions for license updates, when not bundled with the initial product release or purchase. Technical support, product training or consulting services may be purchased separately by the customer. Online services are sold separately. The Company allocates revenue to license updates and any other undelivered elements of the arrangement based on VSOE of fair value of each element and such amounts are deferred until the applicable delivery criteria and other revenue recognition criteria described above have been met. The balance of the revenue, net of any discounts inherent in the arrangement, is recognized at the outset of the arrangement using the residual method as the product licenses are delivered. If management cannot objectively determine the fair value of each undelivered element based on the VSOE of fair value, revenue recognition is deferred until all elements are delivered, all services have been performed, or until fair value can be objectively determined.

In the normal course of business, the Company is not obligated to accept product returns from its distributors under any other conditions, unless the product item is defective in manufacture, but it does provide most of its distributors with stock balancing and price protection rights. Stock balancing rights permit distributors to return products to the Company up to the forty-fifth day of the fiscal quarter, subject to ordering an equal dollar amount of its other products prior to the last day of the same fiscal quarter. Price protection rights require that the Company grants retroactive price adjustments for inventories of its products held by distributors or resellers if it lowers its prices for such products. Product items returned to the Company under the stock balancing program must be in new, unused and unopened condition. The Company establishes provisions for estimated returns for stock balancing and price protection rights, as well as other sales allowances, concurrently with the recognition of revenue. The provisions are established based upon consideration of a variety of factors, including, among other things, recent and historical return rates for both, specific products and distributors, estimated distributor inventory levels by product, the impact of any new product releases and projected economic conditions. Actual product returns for stock balancing and price protection provisions incurred are, however, dependent upon future events, including the amount of stock balancing activity by distributors and the level of distributor inventories at the time of any price adjustments. The Company continually monitors the factors that influence the pricing of its products and distributor inventory levels and makes adjustments to these provisions when it believes actual returns and other allowances could differ from established reserves. The Company’s ability to recognize revenue upon shipment to distributors is predicated on its ability to reliably estimate future stock balancing returns. If actual experience or changes in market condition impairs the Company’s ability to estimate returns, it would be required to defer the recognition of revenue until the delivery of the product to the end-user. Allowances for estimated product returns amounted to approximately $1.7 million at both December 31, 2007 and December 31, 2006. The Company has not reduced and has no current plans to reduce its prices for inventory currently

F-11

CITRIX SYSTEMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

held by distributors. Accordingly, there were no reserves required for price protection at December 31, 2007 and 2006. The Company also records estimated reductions to revenue for customer programs and incentive offerings including volume-based incentives. If market conditions were to decline, the Company could take actions to increase its customer incentive offerings, which could result in an incremental reduction to revenue at the time the incentive is offered.

Product Concentration

The Company derives a substantial portion of its revenues from its XenApp product (formerly its Presentation Server product) and anticipates that this product and future derivative products and product lines based upon this technology will continue to constitute a majority of its revenue. The Company could experience declines in demand for products, whether as a result of general economic conditions, new competitive product releases, price competition, lack of success of its strategic partners, technological change or other factors.

Cost of Revenues

Cost of product license revenues consists primarily of hardware, product media and duplication, manuals, packaging materials, shipping expense, server capacity costs and royalties. In addition, the Company is a party to licensing agreements with various entities, which give the Company the right to use certain software code in its products or in the development of future products in exchange for the payment of fixed fees or amounts based upon the sales of the related product. The licensing agreements generally have terms ranging from one to five years, and generally include renewal options. However, some agreements may be perpetual unless expressly terminated. Royalties and other costs related to these agreements are included in cost of revenues. Cost of services revenue consists primarily of compensation and other personnel-related costs of providing technical support and consulting, as well as the Company’s online services. Also included in cost of revenues is amortization of product related intangible assets which includes acquired core and product technology and associated patents.

Foreign Currency

The functional currency of each of the Company’s wholly-owned foreign subsidiaries is the U.S. dollar. Monetary assets and liabilities of the subsidiaries are remeasured into U.S. dollars at year-end exchange rates, and revenues and expenses are remeasured at average rates prevailing during the year. Remeasurement and foreign currency transaction gains (losses) of approximately $0.6 million, $(0.2) million and $(0.4) million for the years ended December 31, 2007, 2006, and 2005, respectively, are included in other expense, net, in the accompanying consolidated statements of income.

Derivatives and Hedging Activities

In accordance with SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities, and its related interpretations and amendments, the Company records derivatives as either assets or liabilities on the balance sheet and measures those instruments at fair value. For derivatives that are designated as and qualify as effective cash flow hedges, the portion of gain or loss on the derivative instrument effective at offsetting changes in the hedged item is reported as a component of accumulated other comprehensive income (loss) and reclassified into earnings as operating expense, net when the hedged transaction affects earnings. For derivative instruments that are designated as and qualify as effective fair value hedges, the gain or loss on the derivative instrument as well as the offsetting gain or loss on the hedged item attributable to the hedged risk is recognized in current earnings as interest income (expense) during the period of the change in fair values. Derivatives not designated as hedging instruments are adjusted to fair value through earnings as other expense, net, in the period the changes in fair value occur. The application of the provisions of SFAS No. 133 could impact the volatility of earnings.

The Company formally documents all relationships between hedging instruments and hedged items, as well as its risk-management objective and strategy for undertaking various hedge transactions. This process includes attributing all derivatives that are designated as cash flow hedges to floating rate assets or liabilities or forecasted transactions and attributing all derivatives that are designated as fair value hedges to fixed rate assets or liabilities. The Company also formally assesses, both at the inception of the hedge and on an ongoing basis, whether each derivative is highly effective in offsetting changes in cash flows or fair value of the hedged item. Fluctuations in the value of the derivative instruments are generally offset by changes in the hedged item; however, if it is determined that a derivative is not highly effective as a hedge or if a derivative ceases to be a highly effective hedge, the Company will discontinue hedge accounting prospectively for the affected derivative.

Advertising Costs

The Company expenses advertising costs as incurred. The Company has advertising agreements with, and purchases advertising from, online media providers to advertise its online services products. The Company also has cooperative advertising agreements with certain distributors and resellers whereby the Company will reimburse distributors and resellers for qualified advertising of Citrix products. Reimbursement is made once the distributor, reseller or provider provides substantiation of

F-12

CITRIX SYSTEMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Company estimates the impact of these expenses and recognizes them at the time of product sales as a reduction of net revenue or as a component of sales, marketing and support expenses in the accompanying consolidated statements of income. The total costs the Company recognized related to advertising was approximately $64.0 million, $54.2 million and $38.8 million, during the years ended December 31, 2007, 2006 and 2005, respectively.

Income Taxes

On January 1, 2007, the Company adopted the provisions of FASB Interpretation (“FIN”) No. 48, Accounting for Uncertainty in Income Taxes. As a result of the implementation of FIN No. 48, the Company recognized approximately a $12.4 million increase in the liability for unrecognized tax benefits, which was accounted for as a reduction to the January 1, 2007 balance of retained earnings.

The Company and one or more of its subsidiaries is subject to United States, (“U.S.”) federal income taxes in the U.S., as well as income taxes of multiple state and foreign jurisdictions. With few exceptions, the Company is no longer subject to U.S. federal, state and local, or non- U.S. income tax examinations by tax authorities for years prior to 2004. The Internal Revenue Service commenced an examination of the Company’s U.S. federal income tax returns for 2004 and 2005 in the third quarter of 2006.

The Company is required to estimate its income taxes in each of the jurisdictions in which it operates as part of the process of preparing its consolidated financial statements. SFAS No. 109, Accounting for Income Taxes, requires a valuation allowance to reduce the deferred tax assets reported if, based on the weight of the evidence, it is more likely than not that some portion or all of the deferred tax assets will not be realized. The Company reviews deferred tax assets periodically for recoverability and makes estimates and judgments regarding the expected geographic sources of taxable income, gains from investments, as well as tax planning strategies in assessing the need for a valuation allowance.

In the ordinary course of global business, there are transactions for which the ultimate tax outcome is uncertain, thus judgment is required in determining the worldwide provision for income taxes. The Company provides for income taxes on transactions based on its estimate of the probable liability. The Company adjusts its provision as appropriate for changes that impact its underlying judgments. Changes that impact provision estimates include such items as jurisdictional interpretations on tax filing positions based on the results of tax audits and general tax authority rulings. Due to the evolving nature of tax rules combined with the large number of jurisdictions in which the Company operates, it is possible that its estimates of its tax liability and the realizability of its deferred tax assets could change in the future, which may result in additional tax liabilities and adversely affect the Company’s results of operations, financial condition and cash flows.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Significant estimates made by management include the provision for doubtful accounts receivable, the provision to reduce obsolete or excess inventory to market, the provision for estimated returns for stock balancing and price protection rights, as well as sales allowances, the assumptions used in the valuation of stock-based awards, the valuation of the Company’s goodwill, net realizable value of core and product technology, the provision for vacant facility costs, the provision for income taxes and the amortization and depreciation periods for intangible and long-lived assets. While the Company believes that such estimates are fair when considered in conjunction with the consolidated financial position and results of operations taken as a whole, the actual amounts of such estimates, when known, will vary from these estimates.

Accounting for Stock-Based Compensation

The Company has various stock-based compensation plans for its employees and outside directors. Effective January 1, 2006, the Company adopted the fair value recognition provisions of SFAS No. 123R, Share-Based Payment, and related interpretations using the modified-prospective transition method. Under that method, compensation cost recognized in 2006 includes (a) compensation cost for all stock-based awards granted prior to, but not yet vested as of January 1, 2006 based on the grant date fair value estimated in accordance with the original provisions of SFAS No. 123 and (b) compensation cost for all stock-based awards granted on or subsequent to January 1, 2006, based on the grant-date fair value estimated in accordance with the provisions of SFAS No. 123R. Results for prior periods have not been restated due to the adoption of SFAS No. 123R. Prior to January 1, 2006, the Company accounted for its stock-based compensation plans under the recognition and measurement provisions of Accounting Principles Board (“APB”) Opinion No. 25, Accounting for Stock Issued to Employees, and related interpretations, as permitted by SFAS No. 123, Accounting for Stock-Based Compensation. The Company did not recognize compensation cost related to stock options granted to its employees and non-employee directors that had an exercise price equal to or above the market value of the underlying common stock on the date of grant in its consolidated statements of income prior to January 1, 2006. See Note 6 for further information regarding the Company’s stock-based compensation plans.

F-13

CITRIX SYSTEMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Earnings per Share

Basic earnings per share is calculated by dividing income available to stockholders by the weighted-average number of common shares outstanding during each period. Diluted earnings per share is computed using the weighted average number of common and dilutive common share equivalents outstanding during the period. Dilutive common share equivalents consist of shares issuable upon the exercise of certain stock options (calculated using the treasury stock method). Certain shares under the Company’s stock-based compensation programs were excluded from the computation of diluted earnings per share due to their anti-dilutive effect for the respective periods in which they were outstanding. The reconciliation of the numerator and denominator of the earnings per share calculation is presented in Note 14.

Reclassifications

Certain reclassifications of the prior years’ financial statements have been made to conform to the current year’s presentation.

3. ACQUISITIONS

2007 Acquisitions

Ardence Delaware Inc.

On January 5, 2007, the Company acquired all of the issued and outstanding capital stock of Ardence Delaware Inc. (the “Ardence Acquisition” or “Ardence”), a leading provider of solutions that allow information technology administrators to set up and configure PCs, servers, and Web servers in real time from a centrally managed source. The Ardence Acquisition strengthens the Company’s application delivery capabilities with more robust streaming and provisioning technologies and increased security and reliability. The total consideration for the Ardence Acquisition was $51.7 million comprised of cash paid of $50.3 million and acquisition related costs of approximately $1.4 million. As part of the Ardence Acquisition, the Company assumed approximately 0.1 million non-vested stock-based awards and approximately 0.1 million stock options upon the closing of the transaction. The sources of funds for consideration paid in the transaction consisted of available cash and investments.

XenSource, Inc

In October 19, 2007, the Company completed its acquisition of all of the issued and outstanding capital stock of XenSource, Inc. (the “XenSource Acquisition” or “XenSource”), a privately held leader in enterprise-grade virtual infrastructure solutions. The acquisition positions the Company in adjacent server and desktop virtualization markets that will allow it to extend its leadership in the broader Application Delivery Infrastructure market by adding key enabling technologies that make the end-to-end computing environment more flexible, dynamic and responsive to business change. The total consideration for the XenSource Acquisition was approximately, $328.5 million, comprised of approximately 7.1 million shares of the Company’s common stock valued at $232.3 million, $92.5 million in cash and approximately $3.7 million in direct transaction costs. In addition, in connection with the XenSource Acquisition the Company issued approximately 1.3 million unvested shares of its common stock and assumed approximately 3.3 million stock options each of which will be exercisable for the right to receive one share of the Company’s common stock upon vesting. The sources of funds for cash consideration paid in the transaction consisted of available cash and investments. For more information regarding the XenSource Acquisition see Note 16.

Revenues from products acquired in the Ardence Acquisition and the XenSource Acquisition (collectively, the 2007 Acquisitions are primarily included in the Company’s Product License revenue. The 2007 Acquisitions results of operations have been included in the Company’s consolidated results of operations beginning after the date of the respective acquisitions.

Purchase Accounting for the 2007 Acquisitions

Under the purchase method of accounting, the purchase prices for the 2007 Acquisitions were allocated to the acquired companies’ net tangible and intangible assets based on their estimated fair values as of the date of the completion of the acquisitions. The allocation of the total purchase prices are summarized below (in thousands):

	Ardence				XenSource
	Purchase Price Allocation			Asset Life	Purchase Price Allocation			Asset Life
Current assets	$	6,326			$	19,177
Property and equipment		917		Various		1,224		Various
In-process research and development		1,200				8,600
Other assets		—				112
Intangible assets		22,160		1-7 years		146,440		2-8 years
Goodwill		43,187		Indefinite		214,299		Indefinite
Assets acquired		73,790				389,852
Current liabilities assumed		(10,851	)			(4,179	)
Long-term liabilities assumed		(2,673	)			—
Deferred tax liabilities, non-current		(8,577	)			(57,214	)
Net assets acquired, including direct transaction costs	$	51,689			$	328,459

F-14

CITRIX SYSTEMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Current assets acquired in connection with the 2007 Acquisitions consisted mainly of accounts receivable. Current liabilities acquired in the acquisition of Ardence consisted primarily of short-term debt, other accrued expenses and long-term liabilities consisted primarily of facilities related costs. Approximately $184.5 million, $62.0 million and $11.0 million of goodwill related to the 2007 Acquisitions was assigned to the Company’s Americas, EMEA and Asia-Pacific segments, respectively and is not deductible for tax purposes. See Note 12 for segment information.

Identifiable intangible assets purchased in the 2007 Acquisitions, in thousands, and their weighted average lives are as follows:

	Ardence		Weighted Average Life	XenSource		Weighted Average Life
Covenants not to compete	$	—	—	$	3,160	2.0 years
Trade names		60	1.0 years		15,900	7.0 years
Customer relationships		4,800	6.4 years		32,380	8.0 years
Core and product technologies		17,300	5.3 years		95,000	7.0 years
Total	$	22,160		$	146,440

2007 Acquisitions Pro Forma Financial Results

The results of operations of the 2007 Acquisitions were included in the Company’s results of operations beginning after their respective acquisition dates. The following unaudited pro forma information combines the consolidated results of operations of Citrix and the companies that it acquired in 2007 as if the acquisitions had occurred at the beginning of fiscal year 2006 (in thousands, except per share data):

	December 31,
	2007		2006
Revenues	$	1,394,461	$	1,149,845
Income from operations		126,142		102,806
Net income		164,232		115,164
Per share - basic		0.88		0.61
Per share - diluted		0.84		0.59

2006 Acquisitions

During 2006, the Company acquired all of the issued and outstanding capital stock of two privately held companies, Reflectent Software, Inc., a provider of solutions to monitor the real-time performance of client-server, Web and desktop applications from an end-user perspective, and Orbital Data Corporation, a provider of solutions that optimize the delivery of applications over wide area networks (the “2006 Acquisitions”). The 2006 Acquisitions strengthen the Company’s Citrix Delivery Center products which are designed to offer comprehensive solutions across all dimensions of application delivery. The total consideration for the 2006 Acquisitions was $68.0 million comprised of cash paid of $65.1 million and other costs related primarily to estimated direct transaction costs of $2.9 million, including approximately $0.3 million related to stock-based awards that were granted and vested upon consummation of the acquisitions. As part of the 2006 Acquisitions, the Company assumed approximately 0.4 million non-vested stock-based awards upon the closing of the transaction. Revenues from the acquired products are primarily included in the Company’s Product License revenue and Technical Services revenue. The sources of funds for consideration paid in these transactions consisted of available cash and investments. In connection with the 2006 Acquisitions, the Company allocated $43.7 million to goodwill, $17.3 million to core and product technology and $3.6 million to other intangible assets. The Company assigned all of the goodwill to its Americas segment.

F-15

CITRIX SYSTEMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

2005 Acquisitions

During 2005, the Company acquired all of the issued and outstanding capital stock of two privately held companies, NetScaler, Inc. and Teros, Inc. (the “2005 Acquisitions”) for a total of $172.8 million in cash, 6.6 million shares of the Company’s common stock valued at $154.8 million and estimated direct transaction costs of $6.2 million. The Company also assumed $20.6 million in non-vested stock-based compensation upon the closing of the NetScaler transaction that was accounted for in accordance with FASB Interpretation No. 44, Accounting for Certain Transactions Involving Stock Compensation (an Interpretation of APB Opinion No. 25) and was recorded as deferred compensation in the accompanying 2005 consolidated balance sheet. The assumed awards had an excess of fair value over intrinsic value of $0.5 million, which is reflected in the total consideration for the transaction. In addition, in 2006, the Company received an immaterial number of shares related to non-tendering payees of the 2005 Acquisitions. The 2005 Acquisitions further extend the Company’s Citrix Delivery Center products, which are designed to offer comprehensive solutions across all dimensions of application delivery. Revenues from the acquired products are primarily included in the Company’s Product License revenue and Technical Services revenue in the accompanying consolidated statements of income. In connection with the 2005 Acquisitions, the Company allocated $230.0 million to goodwill, $40.2 million to core technology and $35.8 million to other intangible assets. The Company assigned all of the goodwill to its Americas segment.

In-process Research and Development

The fair values used in determining the purchase price allocation for certain intangible assets for the Company’s acquisitions were based on estimated discounted future cash flows, royalty rates and historical data, among other information. Purchased in-process research and development (“IPR&D”) of $9.8 million, $1.0 million and $7.0 million was expensed immediately upon the closing of the 2007 Acquisitions, 2006 Acquisitions and 2005 Acquisitions, respectively, in accordance with FASB Interpretation No. 4, Applicability of FASB Statement No. 2 to Business Combinations Accounted for by the Purchase Method, due to the fact that it pertained to technology that was not currently technologically feasible, meaning it had not reached the working model stage, did not contain all of the major functions planned for the product, was not ready for initial customer testing and had no alternative future use. The fair value assigned to IPR&D was determined using the income approach, which includes estimating the revenue and expenses associated with a project’s sales cycle and by estimating the amount of after-tax cash flows attributable to the projects. The future cash flows were discounted to present value utilizing an appropriate risk-adjusted rate of return, which ranged from 19% to 36%. The rate of return included a factor that takes into account the uncertainty surrounding the successful development of the IPR&D.

4. CASH AND INVESTMENTS

Cash and cash equivalents and investments consist of the following:

	December 31,
	2007		2006
	(In thousands)
Cash and cash equivalents:
Cash	$	160,592	$	28,761
Commercial paper		48,294		145,238
Agency securities		25,690		19,586
Money market funds		25,522		166,097
Corporate securities		1,424		2,769
Municipal securities		—		2,854
Total	$	261,522	$	365,305
Reported as:
Cash and cash equivalents	$	223,749	$	349,054
Restricted cash equivalents and investments	$	37,773	$	16,251
Short-term investments:
Corporate securities	$	198,419	$	100,197
Municipal securities		83,027		11,150
Agency securities		53,334		55,709
Commercial paper		37,729		28,785
Total	$	372,509	$	195,841
Reported as:
Short-term investments	$	356,085	$	152,652
Restricted cash equivalents and investments	$	16,424	$	43,189
Long-term investments:
Corporate securities	$	119,636	$	159,879
Agency securities		88,203		76,774
Municipal securities		11,444		1,375
Government securities (1)		6,422		6,191
Other		2,509		1,831
Total	$	228,214	$	246,050
Reported as:
Long-term investments	$	218,676	$	241,675
Restricted cash equivalents and investments	$	9,538	$	4,375

⁽¹⁾ Includes investments issued by the United States government.

F-16

CITRIX SYSTEMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The Company’s investments are classified as available-for-sale and are recorded at fair value. Gross realized gains and losses on sales of securities during 2007, 2006 and 2005 were not material. At December 31, 2007, the average original contractual maturity of the Company’s short-term available-for-sale investments was approximately 15 months. The Company’s long-term available-for-sale investments at December 31, 2007 included $218.7 million of investments with original contractual maturities ranging from one to 37 years. The average remaining maturities of the Company’s short-term and long-term available-for-sale investments, including restricted investments, at December 31, 2007 were approximately five months and 13 years, respectively. In addition, included in short-term available-for-sale investments were auction rate securities of $57.6 million that generally reset every 28 days. The Company also owns $2.5 million in equity investments not due at a single maturity date classified as long-term investments at December 31, 2007.

The Company had an investment in an instrument with an aggregate face value of $32.0 million that includes structured credit risk features related to certain referenced entities. Under the terms of this debt instrument, the Company assumed the default risk, above a certain threshold, of a portfolio of specific referenced issuers in exchange for a fixed yield that is added to the London Interbank Offered Rate (“LIBOR”)-based yield on the debt instrument. In the event of default by any of the underlying referenced issuers above specified amounts, the Company would pay the counterparty an amount equivalent to its loss, not to exceed the face value of the instrument. The primary risk associated with this instrument is the default risk of the underlying issuers. The credit rating of this instrument was equivalent to the likelihood of an event of default under a “AA” rated individual security. The purpose of this instrument was to provide additional yield on certain of the Company’s available-for-sale investments. The instrument matured in February 2008. There were no credit events for the underlying referenced entities resulting in losses to the Company. The Company separately accounted for changes in the fair value of the investment and as of December 31, 2007 and 2006 there was no material change in fair value.

The change in net unrealized securities gains (losses) recognized in other comprehensive income includes unrealized gains (losses) that arose from changes in market value of specifically identified securities that were held during the period and gains (losses) that were previously unrealized, but have been recognized in current period net income due to sales or maturities of available-for-sale securities. This reclassification has no effect on total comprehensive income or stockholders’ equity and was immaterial for all periods presented. The unrealized gain (loss) associated with each individual category of cash and investments was not significant for either of the periods presented.

In February 2008, the Company held approximately $45.5 million in triple-A rated municipal auction rate securities whose underlying assets are generally student loans which are substantially backed by the federal government. The market for municipal auction rate securities in our portfolio began experiencing auction failures on February 13, 2008. For the securities that experienced a failure the issuer will pay interest at a failure rate on the regular auction date , which is every 28 days for the investments in our portfolio. The securities will not be liquid until the auctions are successful or the issuers are able to refinance, call and/or restructure their obligations to a different interest rate mode. In the event the Company needs to access the funds related to the affected securities, it may not be able to do so without a potential loss of principal unless future auctions on these securities are successful. If the issuers are unable to successfully close future auctions or refinance their obligations and their credit ratings deteriorate, the Company may be required to adjust the carrying value of these securities and recognize an impairment charge for an other-than-temporary decline in the fair values. Based on the Company’s available cash and other investments, it does not currently anticipate that the lack of liquidity caused by the failed auctions of these securities will have a material adverse effect on its operating cash flows or financial position.

F-17

CITRIX SYSTEMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

5. ACCRUED EXPENSES

Accrued expenses consist of the following:

	December 31,
	2007		2006
	(In thousands)
Accrued compensation and employee benefits	$	62,944	$	47,425
Accrued taxes		62,003		44,102
Other		66,436		54,137
	$	191,383	$	145,664

6. EMPLOYEE STOCK-BASED COMPENSATION AND BENEFIT PLANS

Plans

The Company’s stock-based compensation program is a broad based, long-term retention program that is intended to attract and reward talented employees and align stockholder and employee interests. As of December 31, 2007, the Company had two stock-based compensation plans under which it was granting stock options, shares of non-vested stock and non-vested stock units. The Company is currently granting stock-based awards from its 2005 Equity Incentive Plan (as amended, the “2005 Plan”) and its 2005 Employee Stock Purchase Plan (the “2005 ESPP”). Upon certain of the Company’s acquisitions, it assumed several plans from the acquired companies. The Company’s Board of Directors has provided that no new awards will be granted under the Company’s acquired stock plans or its superseded and expired stock plans (including the Amended and Restated 1995 Stock Plan, Second Amended and Restated 2000 Director and Officer Stock Option and Incentive Plan, Second Amended and Restated 1995 Non-Employee Director Stock Option Plan and Third Amended and Restated 1995 Employee Stock Purchase Plan. Awards previously granted under the Company’s superseded and expired stock plans that are still outstanding, however, typically expire ten years from the date of grant and will continue to be subject to all the terms and conditions of such plans, as applicable.

Under the terms of the 2005 Plan, the Company is authorized to grant incentive stock options (“ISOs”), non-qualified stock options (“NSOs”), non-vested stock, non-vested stock units, stock appreciation rights (“SARs”), performance units and to make stock-based awards to full and part-time employees of the Company and its subsidiaries or affiliates, where legally eligible to participate, as well as consultants and non-employee directors of the Company. Currently, the 2005 Plan provides for the issuance of a maximum of 20,900,000 shares of common stock of which 5,400,000 was authorized by the Company’s Board of Directors in February 2007 and its stockholders in October 2007. Under the 2005 Plan, ISOs must be granted at exercise prices no less than fair market value on the date of grant, except for ISOs granted to employees who own more than 10% of the Company’s combined voting power, for which the exercise prices must be no less than 110% of the market value at the date of grant. NSOs and SARs must be granted at no less than market value on the date of grant, or in the case of SARs in tandem with options, at the exercise price of the related option. Non-vested stock awards may be granted for such consideration in cash, other property or services, or a combination thereof, as determined by the Company’s Compensation Committee of its Board of Directors. All stock-based awards are exercisable upon vesting. The Company’s policy is to recognize compensation cost for awards with only service conditions and a graded vesting schedule on a straight line basis over the requisite service period for the entire award. As of December 31, 2007, there were 38,231,365 shares of common stock reserved for issuance pursuant to the Company’s stock-based compensation plans and the Company had authorization under its 2005 Plan to grant 8,771,717 additional stock-based awards.

Under the 2005 ESPP, all full-time and certain part-time employees of the Company are eligible to purchase common stock of the Company twice per year at the end of a six month payment period (a “Payment Period”). During each Payment Period, eligible employees who so elect may authorize payroll deductions in an amount no less than 1% nor greater than 10% of his or her base pay for each payroll period in the Payment Period. At the end of each Payment Period, the accumulated deductions are used to purchase shares of common stock from the Company up to a maximum of 12,000 shares for any one employee during a Payment Period. Shares are purchased at a price equal to 85% of the fair market value of the Company’s common stock on the last business day of a Payment Period. Employees who, after exercising their rights to purchase shares of common stock under the 2005 ESPP, would own shares of 5% or more of the voting power of the Company’s common stock, are ineligible to participate under the 2005 ESPP. The 2005 ESPP provides for the issuance of a maximum of 10,000,000 shares of common stock. As of December 31, 2007, 537,091 shares had been issued under the 2005 ESPP. The Company recorded stock-based compensation costs related to the 2005 ESPP of $0.8 million and $1.8 million for the years ended December 31, 2007 and 2006, respectively.

F-18

CITRIX SYSTEMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Pro Forma Information Under SFAS No. 123 for Periods Prior to January 1, 2006

The following table illustrates the effect on net earnings and earnings per share if the Company had applied the fair value recognition provisions of SFAS No. 123 to stock-based awards in 2005 (in thousands, except per share information):

	2005
Net income:
As reported	$	165,609
Add: Total stock-based employee compensation included in net income as reported, net of related tax effects		5,767
Deduct: Total stock-based employee compensation expense determined under fair value based method for all awards, net of related tax effects		(38,475	)
Pro forma	$	132,901
Basic earnings per share:
As reported	$	0.96
Pro forma	$	0.77
Diluted earnings per share:
As reported	$	0.93
Pro forma	$	0.75

For purposes of the pro forma calculations, the fair value of each option was estimated on the date of the grant using the Black-Scholes option-pricing model, assuming no expected dividends, and the following assumptions:

	Stock Options granted during 2005
Expected volatility factor	0.31 - 0.35
Approximate risk free interest rate	3.7% - 4.4%
Expected term (in years)	3.32

The Company estimated the expected volatility factor based upon implied and historical data. The approximate risk free interest rate was based on the implied yield available on U.S. Treasury zero-coupon issues with remaining terms equivalent to the Company’s expected term. The expected term of the Company’s stock options was based on the historical exercise patterns considering changes in vesting periods and contractual terms. The weighted average fair value of stock options granted during 2005 was $9.18. The total intrinsic value of stock options exercised during 2005 was $62.9 million. Forfeitures were recognized as they occurred.

Expense Information under SFAS No. 123R

As required by SFAS No. 123R, the Company estimates forfeitures of employee stock options and recognizes compensation costs only for those awards expected to vest. Forfeiture rates are determined based on historical experience. The Company also considers whether there have been any significant changes in facts and circumstances that would affect its forfeiture rate quarterly. Estimated forfeitures are adjusted to actual forfeiture experience as needed. The Company recorded stock-based compensation costs, related deferred tax assets and tax benefits of $65.5 million, $15.6 million and $26.6 million, respectively, in 2007 and $61.6 million, $9.6 million and $57.1 million, respectively, in 2006.

The detail of the total stock-based compensation recognized by income statement classification is as follows (in thousands):

Income Statement Classifications	2007		2006
Cost of services revenues	$	1,479	$	2,100
Research and development		21,719		18,209
Sales, marketing and support		24,365		24,095
General and administrative		17,928		17,192
Total	$	65,491	$	61,596

F-19

CITRIX SYSTEMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Extensions of Expired Stock Options

As a result of the Company’s failure to file its periodic reports with the SEC on a timely basis, including its Annual Report on Form 10-K for the year ended December 31, 2006 and its Quarterly Reports on Form 10-Q for the quarters ended March 31, 2007 and June 30, 2007, and the Company’s determination that previously filed financial statements should no longer be relied upon, the Company voluntarily suspended the exercise of employee stock options beginning on March 14, 2007 through September 7, 2007. The Company extended the 90-day post-termination exercise period for certain former employees whose options would have expired during the voluntary suspension to allow for a 30-day period to exercise in-the-money options after the Company became current with its SEC filings. This modification resulted in a compensation charge of approximately $3.7 million that was recorded in 2007 and is included in the table above. The Company also agreed to extend the exercise period for current employees whose options expired during the voluntary suspension to allow for a 30-day period to exercise in-the-money options after the Company became current with its SEC filings. This modification resulted in a $0.7 million compensation charge that was recorded in 2007 and is included in the table above.

Tender Offer to Amend Exercise Prices

On September 11, 2007, the Company filed an Offer to Amend on Schedule TO with the SEC and commenced an offer (the “Offer”) to amend certain outstanding and restated options that had been granted to employees with exercise prices per share that were less than the fair market value per share used for financial accounting purposes, which options are referred to as discounted options.

The terms of the Offer provided that current employees, who are not Section 16 officers of the Company, could elect to have discounted options amended to increase their exercise price per share to be equal to the fair market value used for financial reporting purposes and to receive a cash payment with respect to such amended options equal to the difference between the amended exercise price and the original exercise price of each discounted option, less applicable withholding taxes. During the election period, which was from September 11, 2007 through October 8, 2007, the Company had received elections from eligible employees agreeing to amend and increase to fair value the exercise price with respect to 551,408 options. Under the terms of the Offer, the Company made cash payments in January 2008 totaling approximately $1.4 million to the individuals who elected to amend their discounted options. In 2007, the Company recognized an incremental expense of approximately $0.9 million representing the incremental fair value of the options following the modification to increase the exercise price and to settle the difference in cash. In addition, the Company recorded the remaining portion of the cash payment of $0.5 million as a charge to stockholders’ equity, as the payment represents a cash settlement of a portion of the original award that had been previously expensed.

Stock Options

As part of the Company’s 2007 Acquisitions, it assumed 3,389,668 options, to purchase shares of its common stock, all of which have a five year life and vest over three years at a rate of 33.3% of the shares underlying the option one year from date of grant and at a rate of 2.78% monthly thereafter. All other options granted during the year were granted pursuant to the Company’s 2005 Plan. Options granted pursuant to the 2005 Plan typically have a five year life and vest over three years at a rate of 33.3% of the shares underlying the option one year from date of grant and at a rate of 2.78% monthly thereafter. A summary of the status and activity of the Company’s fixed option awards is as follows:

Options	Number of Options		Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Life (in years)	Aggregate Intrinsic Value (in thousands)
Outstanding at December 31, 2006	26,878,390		$	29.55	3.74
Granted	8,303,443			24.35
Exercised	(5,352,521	)		21.11
Forfeited or expired	(1,054,054	)		28.36
Outstanding at December 31, 2007	28,775,258			29.56	3.38	$	347,253
Vested or expected to vest at December 31, 2007	26,772,552			29.79	3.31	$	322,470
Exercisable at December 31, 2007	17,856,526			31.71	2.74	$	207,372

For the year ended December 31, 2007, the Company recognized stock-based compensation expense of $54.6 million related to options including the amounts recognized in conjunction with the extension of expired stock options and the Tender Offer, and for the year ended December 31, 2006, it recognized $56.1 million related to stock options. As of December 31, 2007, there was $160.5 million of total unrecognized compensation cost related to stock options. That cost is expected to be recognized

F-20

CITRIX SYSTEMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

over a weighted-average period of 2.35 years. The total intrinsic value of stock options exercised during 2007 and 2006 was $92.8 million and $180.0 million, respectively.

Stock Option Valuation Information under SFAS No. 123R

The Company estimates the fair value of each stock option on the date of grant using the Black-Scholes option-pricing model, applying the following assumptions and amortizing that value to expense over the option’s vesting period using the ratable approach:

	Stock Options granted during
	2007	2006
Expected volatility factor	0.33 - 0.37	0.30 - 0.37
Approximate risk free interest rate	3.6% - 4.7%	4.5% - 4.9%
Expected term (in years)	3.37 - 3.38	3.00 - 3.34
Expected dividend yield	0%	0%

For purposes of determining the expected volatility factor, the Company considered implied volatility in two-year market-traded options of the Company’s common stock based on third party volatility quotes in accordance with the provisions of SAB No. 107. The Company’s decision to use implied volatility was based upon the availability of actively traded options on the Company’s common stock and its assessment that implied volatility is more representative of future stock price trends than historical volatility. The approximate risk free interest rate was based on the implied yield available on U.S. Treasury zero-coupon issues with remaining terms equivalent to the Company’s expected term on its options. The expected term of the Company’s stock options was based on the historical employee exercise patterns. The Company also analyzed its historical pattern of option exercises based on certain demographic characteristics and determined that there were no meaningful differences in option exercise activity based on the demographic characteristics. The Company does not intend to pay dividends on its common stock in the foreseeable future. Accordingly, the Company used a dividend yield of zero in its option pricing model. The weighted average fair value of stock options granted during 2007 from the 2005 Plan was $11.71.

The Company estimated the fair value of the stock options assumed in the 2007 Acquisitions on the date of grant using the Black-Scholes option-pricing model, applying the following assumptions:

Expected volatility factor	0.37
Approximate risk free interest rate	3.8% - 3.9%
Expected term (in years)	2.00 - 2.75
Expected dividend yield	0%

The expected term of the Company’s stock options was based on the historical employee exercise patterns of discounted options. For purposes of determining the expected volatility factor, the Company considered implied volatility in two-year market-traded options of the Company’s common stock based on third party volatility quotes, which is consistent with the expected term for these options. The approximate risk free interest rate was based on the implied yield available on U.S. Treasury zero-coupon issues with remaining terms equivalent to the Company’s expected term on its options. The weighted average fair value of stock options assumed in conjunction with the 2007 Acquisitions was $35.52.

Non-vested Stock

Shares of non-vested stock assumed in conjunction with the Company’s XenSource Acquisition vest 50% on the first anniversary of the grant date and 50% on the second anniversary of the grant date based on service. In 2006, the Company awarded shares of non-vested stock pursuant to the 2005 Plan to a certain senior member of management that vested upon achieving certain employee retention goals in 2007 and 2006. The retention goals were achieved, and the shares were awarded. As part of the Company’s 2005 Acquisitions, it assumed 25,179 shares of non-vested stock held by certain employees of the acquired companies. The non-vested stock assumed vested monthly based on service through October 2007 dependent upon the remaining vesting period of such non-vested stock at the time of the acquisition. As part of an overall retention program, the Company also granted 60,000 shares of non-vested stock to certain employees retained from the 2005 Acquisitions. Of the non-vested stock granted, 45,000 shares vested 50% on the first anniversary of the grant date and 50% on the second anniversary of the grant date, and the remaining 15,000 non-vested shares granted vested 50% on the first anniversary of the grant date and 50% eighteen months from the grant date. All remaining shares of non-vest stock granted in conjunction with the 2005 Acquisitions either vested or expired in 2007 and are reflected in the table below. The following table summarizes the Company’s non-vested stock activity as of December 31, 2007:

	Number of Shares		Weighted- Average Fair Value at Grant Date
Non-vested at December 31, 2006	39,924		$	30.03
Granted	1,284,139			39.65
Vested	(36,326	)		29.85
Forfeited	(3,598	)		26.17
Non-vested at December 31, 2007	1,284,139			39.65

F-21

CITRIX SYSTEMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the years ended December 31, 2007 and 2006, the Company recognized stock-based compensation expense of $3.9 million and $1.4 million, respectively, related to non-vested stock. As of December 31, 2007, there was $39.3 million of total unrecognized compensation cost related to non-vested stock. That cost is expected to be recognized over a weighted-average period of 2.80 years.

Non-vested Stock Units

The Company assumed 159,342 non-vested stock units in conjunction with its 2007 Acquisitions the majority of which vest over three years based on service at a rate of 33.3% on each anniversary date. In addition, as part of its 2007 Acquisitions, the Company also granted 26,183 non-vested stock units from its 2005 Plan, of which the majority vest based on service at a rate of 50% on the first anniversary of the grant date and 50% on the second anniversary of the grant date. As part of the 2006 Acquisitions, the Company assumed 175,717 non-vested stock units, of which the majority vest based on service at a rate of 50% on the first anniversary of the grant date and 50% on the second anniversary of the grant date. The Company assumed $2.8 million of non-vested stock units in conjunction with its 2005 Acquisitions. The non-vested stock units vested 33.33% at nine, twelve and eighteen months from the date of grant. The number of shares that were issued on each vesting date was dependent upon the Company’s stock price over the five consecutive trading days prior to the vesting date; provided, however that the number of shares issued pursuant to the non-vested stock units did not exceed 280,000 shares. All remaining non-vested stock units granted in conjunction with the 2005 Acquisitions vested in 2007 and are reflected in the table below.

During 2007 and 2006, the Company awarded certain senior members of management non-vested stock units from the 2005 Plan. The number of non-vested stock units underlying each award is determined based on achievement of a specific corporate operating income goal. If the performance goal is less than 90% attained, then no non-vested stock units will be issued pursuant to the authorized award. For performance at and above 90%, the number of non-vested stock units issued will be based on a graduated slope, with the maximum number of non-vested stock units issuable pursuant to the award capped at 125% of the base number of non-vested stock units set forth in the executive’s award agreement. If the performance goal is met, the non-vested stock units will vest 33.33% on each anniversary subsequent to the date of the award. Each non-vested stock unit, upon vesting, will represent the right to receive one share of the Company’s common stock. If the performance goals are not met, no compensation cost will be recognized and any previously recognized compensation cost will be reversed. During 2007 and 2006, the goal was achieved within in the range of the graduated slope and there was no material adjustment to compensation costs related to non-vested stock units granted to executives. In addition, during 2007, the Company awarded 25,000 non-vested stock units to a certain senior member of management with performance goals related to building the executive management team. The performance goals were met during 2007 and the award will vest based on service at a rate of 33.33% on each anniversary date. The Company also awards non-vested stock units to its non-employee directors annually. These units vest monthly in equal installments based on service and, upon vesting, each stock unit will represent the right to receive one share of the Company’s common stock.

The following table summarizes the Company’s non-vested stock unit activity as of December 31, 2007:

	Number of Shares		Weighted- Average Fair Value at Grant Date
Non-vested at December 31, 2006	240,295		$	34.54
Granted	640,920			36.77
Vested	(147,861	)		35.20
Forfeited	(48,962	)		32.79
Non-vested at December 31, 2007	684,392			37.00

F-22

CITRIX SYSTEMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

For the years ended December 31, 2007 and 2006, the Company recognized stock-based compensation expense of $7.0 million and $4.1 million, respectively, related to non-vested stock units. As of December 31, 2007, there was $17.8 million of total unrecognized compensation cost related to non-vested stock units. That cost is expected to be recognized over a weighted-average period of 2.15 years.

Benefit Plan

The Company maintains a 401(k) benefit plan (the “Plan”) allowing eligible U.S.-based employees to contribute up to 60% of their annual compensation, limited to an annual maximum amount as set periodically by the Internal Revenue Service. The Company, at its discretion, may contribute up to $0.50 of each dollar of employee contribution. The Company’s total matching contribution to an employee is typically made at 3% of the employee’s annual compensation. The Company’s matching contributions were $5.9 million, $3.7 million and $2.8 million in 2007, 2006 and 2005, respectively. The Company’s contributions vest over a four-year period at 25% per year.

7. CAPITAL STOCK

Stock Repurchase Programs

The Company’s Board of Directors authorized an ongoing stock repurchase program with a total repurchase authority granted to the Company of $1.8 billion, of which $300 million was authorized in January 2008. The Company may use the approved dollar authority to repurchase stock at any time until the approved amounts are exhausted. The objective of the Company’s stock repurchase program is to improve stockholders’ returns. At December 31, 2007, approximately $33.5 million was available to repurchase common stock pursuant to the stock repurchase program. All shares repurchased are recorded as treasury stock. A significant portion of the funds used to repurchase stock was provided by proceeds from employee stock option exercises and the related tax benefit.

The Company is authorized to make open market purchases of its common stock using general corporate funds. Additionally, the Company entered into structured stock repurchase arrangements with large financial institutions using general corporate funds in order to lower the average cost to acquire shares. These programs include terms that require the Company to make up-front payments to the counterparty financial institution and result in the receipt of stock during or at the end of the term of the agreement or the receipt of either stock or cash at the maturity of the agreement, depending on market conditions.

The Company made up-front payments of $110.0 million, $114.4 million and $52.2 million to certain financial institutions, net of cash and premiums received, related to its structured repurchase agreements during 2007, 2006 and 2005, respectively. In addition, during 2007, 2006 and 2005, the Company received cash and premiums of approximately $40.0 million $41.8 million and $31.1 million, respectively from expired prepaid programs based upon the terms of the respective agreements. The Company took delivery of 1,655,089 shares at an average price of $35.34, 4,307,112 shares at an average price of $30.76 and 2,302,217 shares at an average price of $22.02 from its structured repurchase agreements during 2007, 2006 and 2005, respectively. As of December 31, 2007, the Company had prepaid notional amounts of approximately $87.9 million remaining under its structured stock repurchase programs, which expire on various dates through September 2008. Due to the fact that the total shares to be received under structured repurchase arrangements is not determinable until the contracts mature, the above price per share amounts exclude the remaining shares to be received subject to these agreements.

During 2007, the Company expended approximately $150.0 million on open market purchases and repurchased 3,720,800 shares of outstanding common stock at an average price of $40.31; during 2006, it expended approximately $159.8 million and repurchased 5,193,410 shares of outstanding common stock at an average price of $30.77; and during 2005, it expended approximately $122.2 million and repurchased 5,054,400 shares of outstanding common stock at an average price of $24.18.

Preferred Stock

The Company is authorized to issue 5,000,000 shares of preferred stock, $0.01 par value per share. The Company has no present plans to issue such shares.

8. LONG-TERM DEBT

Credit Facility

Effective on August 9, 2005, the Company entered into a revolving credit facility (the “Credit Facility”) with a group of financial institutions (the “Lenders”). Effective September 27, 2006, the Company entered into an amendment and restatement of its Credit Facility (the “Amendment”). The Amendment decreased the overall range of interest rates the Company must pay on amounts outstanding on the Credit Facility and lowered the facility fee. In addition, the Amendment extended the term of the Credit Facility.

F-23

CITRIX SYSTEMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The Credit Facility, as amended, allows the Company to increase the revolving credit commitment up to a maximum aggregate revolving credit commitment of $175.0 million. The Credit Facility, as amended, currently provides for a revolving line of credit that will expire on September 27, 2011 in the aggregate amount of $100.0 million, subject to continued covenant compliance. A portion of the revolving line of credit (i) in the aggregate amount of $25.0 million may be available for issuances of letters of credit and (ii) in the aggregate amount of $15.0 million may be available for swing line loans. The Credit Facility currently bears interest at LIBOR plus 0.32% and adjusts in the range of 0.32% to 0.80% above LIBOR based on the level of the Company’s total debt and its adjusted earnings before interest, taxes, depreciation and amortization (“EBITDA”) as defined in the agreement. In addition, the Company is required to pay a quarterly facility fee ranging from 0.08% to 0.20% based on the aggregate amount available under the Credit Facility, as amended, and the level of the Company’s total debt and its adjusted EBITDA. Borrowings under the Credit Facility, as amended, are guaranteed by the Company and certain of the Company’s United States and foreign subsidiaries, which guarantees are secured by a pledge of shares of certain foreign subsidiaries. During 2005, the Company borrowed and repaid $75.0 million under the Credit Facility. As of December 31, 2007, there were no amounts outstanding under the Credit Facility, as amended.

Term Loan

Effective on August 9, 2005, a subsidiary of the Company entered into a term loan facility (the “Term Loan”) with the Lenders. The Term Loan provided for an eighteen-month single-draw term loan facility in the aggregate amount of $100.0 million. The Term Loan bore interest at a rate of LIBOR plus 0.5% and adjusted in the range of 0.5% to 1.25% above LIBOR based on the level of the subsidiary’s total debt and its adjusted EBITDA, as defined in the agreement. Borrowings under the Term Loan were guaranteed by the Company and certain of its United States-domiciled and foreign-domiciled subsidiaries, which guarantees were secured by a pledge of shares of certain foreign subsidiaries. In addition, the Company was required to pay a quarterly facility fee ranging from 0.125% to 0.25% based on the aggregate amount of the Term Loan and the level of the Company’s total debt and its adjusted EBITDA. The Term Loan was paid in full in February 2006.

Interest Expense

Interest expense on the Company’s borrowings in 2007 and 2006 was not material. The Credit Facility, as amended, contains customary default provisions, and the Company must comply with various financial and non-financial covenants. The financial covenants consist of a minimum interest coverage ratio and a maximum consolidated leverage ratio. The primary non-financial covenants limit the Company’s ability to pay dividends (other than pursuant to the Dividend Reinvestment Plan executed under the American Jobs Creation Act), conduct certain mergers or acquisitions, make certain investments and loans, incur future indebtedness or liens, alter the Company’s capital structure or sell stock or assets, subject to certain limits.

9. FAIR VALUES OF FINANCIAL INSTRUMENTS

The carrying value of cash and cash equivalents, accounts receivable, accounts payable and accrued expenses approximate their fair value due to the short maturity of these items. The Company’s investments classified as available-for-sale securities, including restricted investments, are carried at fair value on the accompanying consolidated balance sheets based primarily on quoted market prices for such financial instruments. The aggregate fair value of the Company’s available-for-sale investments was $598.2 million and $440.1 million at December 31, 2007 and 2006, respectively.

10. COMMITMENTS AND CONTINGENCIES

Leases

The Company leases certain office space and equipment under various operating leases. In addition to rent, the leases require the Company to pay for taxes, insurance, maintenance and other operating expenses. Certain of these leases contain stated escalation clauses while others contain renewal options. The Company recognizes rent expense on a straight-line basis over the term of the lease, excluding renewal periods, unless renewal of the lease is reasonably assured.

Rental expense for the years ended December 31, 2007, 2006 and 2005 totaled approximately $33.5 million, $24.9 million and $21.2 million, respectively. Sublease income for the years ended December 31, 2007, 2006 and 2005 was approximately $0.8 million, $0.7 million and $0.8 million, respectively. Lease commitments under non-cancelable operating leases with initial or remaining terms in excess of one year and sublease income associated with non-cancelable subleases, including estimated future payments under the Company’s synthetic lease arrangement, are as follows:

	Operating Leases		Sublease Income
	(In thousands)
Years ending December 31,
2008	$	42,269	$	813
2009		36,145		257
2010		29,726		—
2011		24,900		—
2012		20,825		—
Thereafter		53,371		—
	$	207,236	$	1,070

F-24

CITRIX SYSTEMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Off-Balance Sheet Arrangement

During 2002, the Company became a party to a synthetic lease arrangement totaling approximately $61.0 million for its corporate headquarters office space in Fort Lauderdale, Florida. The synthetic lease represents a form of off-balance sheet financing under which an unrelated third-party lessor funded 100% of the costs of acquiring the property and leases the asset to the Company. The synthetic lease qualifies as an operating lease for accounting purposes and as a financing lease for tax purposes. The Company does not include the property or the related lease debt as an asset or a liability in its consolidated balance sheets. Consequently, payments made pursuant to the lease are recorded as operating expenses in the Company’s consolidated statements of income. The Company entered into the synthetic lease in order to lease its headquarters properties under more favorable terms than under its previous lease arrangements.

The initial term of the synthetic lease is seven years. Upon approval by the lessor, the Company can renew the lease twice for additional two-year periods. The lease payments vary based on LIBOR plus a margin. At any time during the lease term, the Company has the option to sublease the property and upon a thirty-day written notice, the Company has the option to purchase the property for an amount representing the original property cost and transaction fees of approximately $61.0 million plus any lease breakage costs and outstanding amounts owed. Upon at least 180 days notice prior to the termination of the initial lease term, the Company has the option to remarket the property for sale to a third party. If the Company chooses not to purchase the property at the end of the lease term, it has guaranteed a residual value to the lessor of approximately $51.9 million and possession of the buildings will be returned to the lessor. On a periodic basis, the Company evaluates the property for indicators of impairment. If an evaluation were to indicate that fair value of the property had declined below $51.9 million, the Company would be responsible for the difference under its residual value guarantee, which could have a material adverse effect on the Company’s results of operations and financial condition.

The synthetic lease includes certain financial covenants including a requirement for the Company to maintain a pledged balance of approximately $62.8 million in cash and/or investment securities as collateral. This amount is included in restricted cash equivalents and investments in the accompanying consolidated balance sheets. The Company maintains the ability to manage the composition of the restricted investments within certain limits and to withdraw and use excess investment earnings from the restricted collateral for operating purposes. Additionally, the Company must maintain a minimum cash and investment balance of $100.0 million, excluding the Company’s collateralized investments, equity investments and outstanding debt as of the end of each fiscal quarter. As of December 31, 2007, the Company had approximately $696.9 million in cash and investments in excess of this required level. The synthetic lease includes non-financial covenants, including the maintenance of the property and adequate insurance, prompt delivery of financial statements to the administrative agent of the lessor and prompt payment of taxes associated with the property. As of December 31, 2007, the Company was in compliance with all material provisions of the arrangement.

In January 2003, the FASB issued FASB Interpretation (“FIN”) No. 46, Consolidation of Variable Interest Entities, which addresses the consolidation of variable interest entities in which an enterprise absorbs a majority of the entity’s expected losses, receives a majority of the entity’s expected residual returns, or both, as a result of ownership, contractual or other financial interests in the entity. In December 2003, the FASB issued FIN No. 46 (revised). FIN No. 46 (revised) was effective immediately for certain disclosure requirements and variable interest entities referred to as special-purpose entities for periods ending after December 15, 2003 and for all types of entities for financial statements for periods ending after March 15, 2004. The Company determined that it was not required to consolidate the lessor, the leased facility or the related debt upon the adoption of FIN No. 46 (revised). Accordingly, there was no impact on its financial position, results of operations or cash flows from adoption. However, if the lessor were to change its ownership of the property or significantly change its ownership of other properties that it currently holds, the Company could be required to consolidate the entity, the leased facility and the debt in a future period.

F-25

CITRIX SYSTEMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Office Leases

During 2002 and 2001, the Company took actions to consolidate certain of its offices, including the exit of certain leased office space and the abandonment of certain leasehold improvements. During the third quarter of 2006, the Company entered into an agreement, which assigned the operating lease and all remaining liabilities related to one of the closed offices to a third party. Lease obligations related to the remaining existing operating lease continues to 2018 with a total remaining obligation at December 31, 2007 of approximately $8.3 million, of which $1.3 million was accrued as of December 31, 2007, and is reflected in accrued expenses and other liabilities in the accompanying consolidated balance sheets. In calculating this accrual, the Company made estimates, based on market information, including the estimated vacancy periods and sublease rates and opportunities. The Company periodically re-evaluates its estimates and if actual circumstances prove to be materially worse than management has estimated, the total charges for these vacant facilities could be significantly higher.

Legal Matters

Due to the nature of its business, the Company is subject to patent infringement claims. In 2006, the Company was sued in the United States District Court for the Northern District of Ohio for alleged patent infringement by its Online Services division’s GoToMyPC service and in the United States District Court for the Southern District of Florida for alleged patent infringement by its Online Services division’s GoToMyPC and GoToMeeting services. The complaints name Citrix Systems, Inc. and Citrix Online LLC, a wholly-owned subsidiary of Citrix Systems, Inc., as defendants and seek unspecified damages and other relief. In January 2007, a similar suit naming Citrix Systems, Inc. was filed in the United States District Court of the Eastern District of Texas. In response, the Company filed answers denying infringement and alleging, among other things, that the asserted claims of these patents are invalid. With respect to the Northern District of Ohio case, on November 2, 2006, the court held a hearing for the purpose of construing disputed terms of the claims of the patent-in-suit, and on March 13, 2007, the court issued a claim construction ruling. On March 21, 2007, the Company moved for leave to amend its answer in that case to assert an affirmative defense and counterclaim of inequitable conduct, which is a complete defense. On August 28, 2007, the court granted the Company’s motion. On December 7, 2007, the Company filed motions for summary judgment in the Northern District of Ohio case, seeking judgment that the asserted patent is invalid and that it has not infringed the patent, as well as judgments on other, non-dispositive issues. On the same day, the Company filed a request with the United States Patent and Trademark Office seeking inter partes reexamination of the patent in suit, and it subsequently filed a request with the court in the Northern District of Ohio seeking a stay of the litigation pending the Patent Office’s determination of its reexamination request. The court has all of these motions under advisement. The Patent Office has not yet ruled on the Company’s reexamination request. Trial in the Northern District of Ohio case currently is scheduled to begin March 24, 2008. Trial in the Southern District of Florida case currently is scheduled to begin April 28, 2008, and trial in the Eastern District of Texas case currently is scheduled to begin June 15, 2009. In addition, the United States Patent and Trademark Office has decided to reexamine the patent at issue in the Southern District of Florida case. The Company believes that it has meritorious defenses to the allegations made in each of the complaints and intends to vigorously defend these lawsuits; however, it is unable to currently determine the ultimate outcome of these matters or the potential exposure to loss, if any.

On March 6, 2007, a purported stockholder derivative action entitled Sheet Metal Workers Local 28 Pension Fund v. Roger W. Roberts et al. (C.A. No. 07-60316), was filed in the US District Court for the Southern District of Florida against certain of the Company’s current and former directors and officers, and against the Company as a nominal defendant. The lawsuit asserts, among other things, that certain stock option grants made by the Company were dated and accounted for inappropriately. The lawsuit seeks the recovery of monetary damages and other relief for damage allegedly caused to the Company. An amended complaint, which changed the plaintiff in the action, named additional defendants and included additional allegations concerning the Company’s stock option granting practices, was filed on January 15, 2008 under the caption Rappaport v. Roberts, et al. (CA No. 07-60316).

The Company also received a demand letter dated March 15, 2007 from a purported stockholder with respect to certain stock option grants made to its current and former directors and officers during the years 1996 through 2003. That demand letter asserted, among other things, that certain stock option grants made by the Company were dated and accounted for inappropriately. The demand letter sought, among other things, the commencement by the Company’s Board of Directors of an action against its directors and officers from 1996 forward for alleged breaches of fiduciary duties in connection with the granting of the options. A special committee of independent directors was appointed to review and consider the assertions contained in the demand letter. The special committee has completed its work and has determined that it would not be in the best interests of the Company to pursue the claims referred to in the demand letter.

In July 2007, two additional purported stockholder derivative actions entitled Ekas v. Citrix, et al. (Case No. 07-16114-11) and Crouse v. Citrix, et al. (Case No. 07-16249-03) were filed in the Circuit Court for Broward County, Florida state court against certain of the Company’s current and former directors and officers, and against the Company as a nominal defendant. These actions assert, among other things, that certain stock option grants made by the Company were dated and accounted for inappropriately. As with the Sheet Metal Workers’ action, both the Ekas and Crouse actions seek the recovery of monetary damages and other relief for damages allegedly caused to the Company. Neither the purported stockholder derivative actions nor the demand letter described above seeks to recover amounts from the Company. An amended complaint in the Ekas action, which contains additional allegations concerning our stock option granting practices, was filed on December 14, 2007.

F-26

CITRIX SYSTEMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Neither the purported stockholder derivative actions nor the demand letter described above seeks to recover amounts from the Company.

During the course of our stock option investigation, the Company has periodically discussed the results of this investigation with the staff of the Securities and Exchange Commission. On January 30, 2008, the Company received a letter from the SEC Staff stating that the Staff has completed its investigation as to the Company and does not intend to recommend any enforcement action by the SEC against the Company.

In addition, the Company is a defendant in various matters of litigation generally arising out of the normal course of business. Although it is difficult to predict the ultimate outcome of these cases, management believes, based on discussions with counsel, that any ultimate outcome would not materially affect the Company’s financial position, results of operations or cash flows.

Guarantees

FIN No. 45, Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others, requires certain guarantees to be recorded at fair value and requires a guarantor to make disclosures, even when the likelihood of making any payments under the guarantee is remote. For those guarantees and indemnifications that do not fall within the initial recognition and measurement requirements of FIN No. 45, the Company must continue to monitor the conditions that are subject to the guarantees and indemnifications, as required under existing generally accepted accounting principles, to identify if a loss has been incurred. If the Company determines that it is probable that a loss has been incurred, any such estimable loss would be recognized. The initial recognition and measurement requirements do not apply to the provisions contained in the majority of the Company’s software license agreements that indemnify licensees of the Company’s software from damages and costs resulting from claims alleging that the Company’s software infringes the intellectual property rights of a third party. The Company has not made payments pursuant to these provisions. The Company has not identified any losses that are probable under these provisions and, accordingly, the Company has not recorded a liability related to these indemnification provisions.

Purchase Obligations

The Company has agreements with suppliers to purchase inventory and estimates that its non-cancelable obligations under these agreements for the fiscal year ended December 31, 2008 to be approximately $11.1 million.

Liabilities Related to Internal Revenue Code Section 409A

Because virtually all holders of stock options granted by the Company were not involved in or aware of the incorrect pricing of certain options, the Company has taken and intends to take further actions to address certain adverse tax consequences that may be incurred by the holders of such incorrectly priced options. The primary adverse tax consequence is that the re-measured options vesting after December 31, 2004 subject the option holder to a penalty tax under Section 409A of the IRC (and, as applicable, similar excise taxes under state laws). As a result during 2007, the Company has recorded $3.4 million, net of income tax, in liabilities related to the anticipated payment by the Company of payroll and excise taxes on behalf of the Company’s employees for options that were exercised during open tax years under the related statutes.

11. INCOME TAXES

The United States and foreign components of income before income taxes are as follows:

	2007		2006		2005
	(In thousands)
United States	$	46,475	$	65,363	$	59,141
Foreign		204,433		177,718		165,213
Total	$	250,908	$	243,081	$	224,354

The components of the provision for income taxes are as follows:

	2007			2006			2005
	(In thousands)
Current:
Federal	$	7,692		$	46,073		$	52,181
Foreign		28,512			14,176			16,118
State		855			4,186			5,217
Total current		37,059			64,435			73,516
Deferred		(634	)		(4,351	)		(14,771	)
Total provision	$	36,425		$	60,084		$	58,745

F-27

CITRIX SYSTEMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The significant components of the Company’s deferred tax assets and liabilities consisted of the following:

	December 31,
	2007			2006
	(In thousands)
Deferred tax assets:
Accruals and reserves	$	19,323		$	12,363
Depreciation and amortization		6,030			3,856
Deferred revenue		5,583			4,581
Tax credits		7,998			36,077
Net operating losses		55,844			52,756
Other		5,918			1,288
Stock option compensation		23,316			17,199
Valuation allowance		—			(1,332	)
Total deferred tax assets		124,012			126,788
Deferred tax liabilities:
Acquired technology		(79,555	)		(27,572	)
Prepaid expenses		(7,261	)		(4,830	)
Total deferred tax liabilities		(86,816	)		(32,402	)
Total net deferred tax assets	$	37,196		$	94,386

SFAS No. 109, Accounting for Income Taxes, requires a valuation allowance to reduce the deferred tax assets reported if it is not more likely than not that some portion or all of the deferred tax assets will be realized. At December 31, 2007, the Company determined that no valuation allowance relating to deferred tax assets for foreign tax credit carryovers was necessary.

During the years ended December 31, 2007, 2006, and 2005, the Company recognized net tax benefits related to the exercise of employee stock options in the amount of $15.5 million, $40.6 million, and $35.0 million, respectively. These benefits were recorded to additional paid-in capital. At December 31, 2007, the Company does not have any U.S. net operating loss carryforwards remaining that result from stock options. The Company records the benefit of the net operating loss carryforwards generated from the exercise of employee stock options in the period that the net operating loss carryforwards are utilized.

At December 31, 2007, the Company had $142.9 million of remaining net operating loss carryforwards from acquisitions. The utilization of these net operating loss carryforwards are limited in any one year pursuant to Internal Revenue Code Section 382 and begin to expire in 2020.

At December 31, 2007, the Company had research and development tax credit carryforwards of approximately $7.0 million that expire beginning in 2021. Additionally, the Company has other general business credits at December 31, 2007 of approximately $0.9 million that expire 2025.

A reconciliation of the Company’s effective tax rate to the statutory federal rate is as follows:

	Year Ended December 31,
	2007		2006		2005
Federal statutory taxes	35.0	%	35.0	%	35.0	%
State income taxes, net of federal tax benefit	4.1		3.8		4.4
Foreign operations	(21.4	)	(20.9	)	(19.5	)
Permanent differences	3.0		5.4		2.2
Tax credits	(3.2	)	(2.0	)	(2.4	)
American Jobs Creation Act dividend	—		—		6.9
Stock option compensation	1.4		3.4		—
Change in FIN No. 48 accrual	(3.8	)	—		—
Other	(0.1	)	—		(0.4	)
Change in valuation allowance	(0.5	)	—		—
	14.5	%	24.7	%	26.2	%

F-28

CITRIX SYSTEMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The Company and one or more of its subsidiaries is subject to United States, (“U.S.”) federal income taxes in the U.S., as well as income taxes of multiple state and foreign jurisdictions. With few exceptions, the Company is no longer subject to U.S. federal, state and local, or non- U.S. income tax examinations by tax authorities for years prior to 2004. The Internal Revenue Service commenced an examination of the Company’s U.S. federal income tax returns for 2004 and 2005 in the third quarter of 2006.

The Company adopted the provisions of FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes, on January 1, 2007. As a result of the implementation of Interpretation 48, the Company recognized an approximate $12.4 million increase in the liability for unrecognized tax benefits, which was accounted for as a reduction to the January 1, 2007 balance of retained earnings. A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows (in thousands):

Balance at January 1, 2007	$	36,895
Additions (reductions) based on tax positions related to the current year		1,355
Additions (reductions) for tax positions of prior years		—
Reductions for tax positions of prior years		—
Reductions related to the expiration of statutes of limitations		(10,967	)
Settlements		—
Balance at December 31, 2007	$	27,283

We do not expect our unrecognized tax benefits to change significantly over the next 12 months.

Included in the balance at December 31, 2007, are $0.2 million of tax positions for which the ultimate deductibility is highly certain but for which there is uncertainty about the timing of such deductibility. Because of the impact of deferred tax accounting, other that interest and penalties, the disallowance of the shorter deductibility period would not affect the annual effective tax rate but would accelerate the payment of cash to the taxing authority to an earlier period.

The Company recognizes interest accrued related to unrecognized tax benefits and penalties in income tax expense. During the year ended December 31, 2007, the Company did not recognize any expense related to interest and penalties. The Company has approximately $0.1 million for the payment of interest and penalties accrued at December 31, 2007.

On October 22, 2004, the American Jobs Creation Act (“AJCA”) was signed into law. The AJCA provides for an 85% dividends received deduction on dividend distributions of foreign earnings to a U.S. taxpayer, if certain conditions are met. During the second quarter of fiscal 2005, the Company completed its evaluation of the effects of the repatriation provision of the AJCA, and the Company’s Chief Executive Officer and Board of Directors approved its DRP under the AJCA. On September 27, 2005, the Company repatriated approximately $503 million of certain foreign earnings, of which $500 million qualified for the 85% dividends received deduction. During 2005, the Company recorded an estimated tax provision of approximately $24.4 million related to the repatriation. Additionally, during 2005, the Company recorded the reversal of approximately $8.8 million for income taxes on certain foreign earnings for which a deferred tax liability had been previously recorded. Other than the one-time repatriation provision under the AJCA, the Company does not expect to remit earnings from its foreign subsidiaries.

12. GEOGRAPHIC INFORMATION AND SIGNIFICANT CUSTOMERS

The Company operates in a single industry segment consisting of the design, development and marketing of technology solutions that allow applications to be delivered, supported and shared on-demand. The Company’s revenues are derived from sales of its Citrix Delivery Center products and related technical services in the Americas, EMEA and Asia-Pacific regions and from its online services sold by its Online Services division. These three geographic regions and the Online Services division constitute the Company’s four reportable segments.

F-29

CITRIX SYSTEMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The Company does not engage in intercompany revenue transfers between segments. The Company’s chief operating decision maker (“CODM”) evaluates the Company’s performance based primarily on profitability in the geographic locations in which the Company operates and separately evaluates the performance of its Online Services division. Segment profit for each segment includes certain sales, marketing, general and administrative expenses directly attributable to the segment, including research and development costs in the Online Services division and excludes certain expenses that are managed outside the reportable segments. Costs excluded from segment profit primarily consist of certain research and development costs associated with the Company’s application delivery infrastructure products, stock-based compensation costs, amortization of core and product technology, amortization of other intangible assets, interest, corporate expenses and income taxes, as well as charges for in-process research and development. Corporate expenses are comprised primarily of corporate marketing costs, stock-based compensation costs, operations and certain general and administrative expenses, which are separately managed. Accounting policies of the Company’s segments are the same as its consolidated accounting policies.

International revenues (sales outside of the United States) accounted for approximately 44.5%, 47.4% and 50.0% of the Company’s net revenues for the year ended December 31, 2007, 2006, and 2005, respectively. Net revenues and segment profit for 2007, 2006 and 2005 classified by the Company’s reportable segments, are presented below.

	2007			2006			2005
	(In thousands)
Net revenues:
Americas (1)	$	614,181		$	499,278		$	397,233
EMEA (2)		447,201			391,650			334,900
Asia-Pacific		116,816			94,596			77,492
Online Services division		213,744			148,795			99,097
Consolidated	$	1,391,942		$	1,134,319		$	908,722
Segment profit (loss):
Americas	$	295,213		$	252,996		$	208,946
EMEA		289,590			253,956			201,712
Asia-Pacific		30,543			31,887			22,295
Online Services division		65,032			36,084			19,641
Unallocated expenses (3):
Amortization of intangibles		(46,983	)		(36,136	)		(28,388	)
In-process research and development		(9,800	)		(1,000	)		(7,000	)
Research and development		(183,816	)		(140,570	)		(97,355	)
Net interest and other income		48,501			39,737			20,682
Other corporate expenses		(237,372	)		(193,873	)		(116,179	)
Consolidated income before income taxes	$	250,908		$	243,081		$	224,354

(1) The Americas segment is comprised of the United States, Canada and Latin America.

(2) Defined as Europe, the Middle East and Africa.

(3) Represents expenses presented to management only on a consolidated basis and not allocated to the geographic operating segments.

Identifiable assets classified by the Company’s reportable segments are shown below. Long-lived assets consist of property and equipment, net, and are shown below.

	December 31,
	2007		2006
	(In thousands)
Identifiable assets:
Americas	$	1,811,922	$	1,549,050
EMEA		411,465		207,012
Asia-Pacific		83,395		55,015
Online Services division		227,911		213,396
Total identifiable assets	$	2,534,693	$	2,024,473

F-30

CITRIX SYSTEMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

	December 31,
	2007		2006
	(In thousands)
Long-lived assets, net:
United States	$	97,238	$	58,303
United Kingdom		28,782		28,126
Other foreign countries		8,887		6,151
Total long-lived assets, net	$	134,907	$	92,580

The increase in identifiable assets in the Americas segment is primarily due to an increase the goodwill, intangible assets and other assets associated with the Company’s 2007 Acquisitions. The increase in identifiable assets in the EMEA segment is primarily due to an increase in short-term and long-term investments and to a lesser extent goodwill associated with the Company’s 2007 Acquisitions. See Note 3 for additional information regarding the Company’s acquisitions.

Export revenue represents shipments of finished goods and services from the United States to international customers, primarily in Latin America and Canada. Shipments from the United States to international customers for 2007, 2006 and 2005 were $55.9 million, $50.9 million and $42.4 million, respectively.

There were no individual end-users that represented greater than 10% of net sales for any of the years presented. The Company had net revenue attributed to an individual distributor in excess of 10% of net sales as follows. The revenue contributed by the distributor below is primarily recorded in the Americas segment.

	Year Ended December 31,
	2007		2006		2005
Distributor A	10	%	10	%	10	%

In addition to evaluating the Company’s profitability by geography, including the Company’s Online Services division, its CODM also evaluates revenues by product groupings. Accordingly, the following table presents revenues for Product licenses, License updates and product related Technical services by product grouping for the Company’s Application Virtualization products, Application Networking products and other products and Online services revenues for the Online Services division’s products, for the years ended:

	December 31,
	2007		2006		2005
	(In thousands)
Net revenues:
Application Virtualization revenues	$	998,188	$	871,656	$	776,793
Online Services division revenues		213,744		148,795		99,097
Application Networking revenues		155,385		109,209		30,680
Other		24,625		4,659		2,152
Total net revenue	$	1,391,942	$	1,134,319	$	908,722

13. DERIVATIVE FINANCIAL INSTRUMENTS

As of December 31, 2007 and December 31, 2006, the Company had $11.7 million and $7.4 million of derivative assets, respectively, and $5.9 million and $2.8 million of derivative liabilities, respectively, representing the fair values of the Company’s outstanding derivative instruments, which are recorded in other current assets, other assets, accrued expenses and other liabilities in the accompanying condensed consolidated balance sheets. As of December 31, 2007, the Company’s derivative assets and liabilities primarily resulted from cash flow hedges related to its forecasted operating expenses transacted in local currencies. The change in the derivative component in accumulated other comprehensive income includes unrealized gains or losses that arose from changes in market value of derivatives that were held during the period, and gains or losses that were previously unrealized, but have been

F-31

CITRIX SYSTEMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

recognized in current period net income due to termination or maturities of derivative contracts. This reclassification has no effect on total comprehensive income or stockholders’ equity. The following table presents these components of accumulated other comprehensive income, net of tax for the Company’s derivative instruments (in thousands):

	For the Year Ended December 31,
	2007			2006		2005
Unrealized gains (losses) on derivative instruments	$	9,144		$	6,395	$	(10,230	)
Reclassification of realized (losses) gains		(7,623	)		2,011		(1,255	)
Net change in other comprehensive income due to derivative instruments	$	1,521		$	8,406	$	(11,485	)

The total cumulative unrealized gain on derivative instruments was $5.5 million and $3.9 million at December 31, 2007 and 2006, respectively, and is included in accumulated other comprehensive income in the accompanying consolidated balance sheets. A substantial amount of the net unrealized gain as of December 31, 2007 is expected to be recognized in income over the next twelve months at the same time the hedged item is recognized in income.

Cash Flow Hedges. At December 31, 2007 and 2006, the Company had in place foreign currency forward sale contracts with a notional amount of $104.3 million and $56.0 million, respectively, and foreign currency forward purchase contracts with a notional amount of $311.1 million and $220.0 million, respectively. The fair value of these contracts at December 31, 2007 and 2006 were assets of $11.7 million and $7.4 million, respectively and liabilities of $5.9 million and $2.8 million, respectively. A substantial portion of the Company’s overseas expenses are and will continue to be transacted in local currencies. To protect against fluctuations in operating expenses and the volatility of future cash flows caused by changes in currency exchange rates, the Company has established a program that uses foreign exchange forward contracts to hedge its exposure to these potential changes. The terms of these instruments, and the hedged transactions to which they relate, generally do not exceed 12 months. Currencies hedged are Euros, British pounds sterling, Australian dollars, Swiss francs, Indian rupees, Japanese yen, Singapore dollars, Hong Kong dollars, Canadian dollars, Danish krone and Swedish krona. There was no material ineffectiveness of the Company’s foreign currency forward contracts for 2007, 2006 or 2005.

Fair Value Hedges. From time to time, the Company uses interest rate swap instruments to hedge against the changes in fair value of certain of its available-for-sale securities due to changes in interest rates. Each of the instruments swap the fixed rate interest on the underlying investments for a variable rate based on LIBOR plus a specified margin. Changes in the fair value of the swap instruments are recorded in earnings along with related designated changes in the value of the underlying investments. There were no material fair value hedges outstanding as of December 31, 2007 or 2006. There was no material ineffectiveness of the Company’s interest rate swaps for the period that they were held during 2005.

Derivatives not Designated as Hedges. From time to time, the Company utilizes certain derivative instruments that either do not qualify or are not designated for hedge accounting treatment under SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities, and its related interpretations. Accordingly, changes in the fair value of these contracts, if any, are recorded in other expense, net.

14. EARNINGS PER SHARE

The following table sets forth the computation of basic and diluted earnings per share:

	Year Ended December 31,
	2007		2006		2005
	(In thousands, except per share information)
Numerator:
Net income	$	214,483	$	182,997	$	165,609
Denominator:
Denominator for basic earnings per share — weighted average shares		181,501		180,992		172,221
Effect of dilutive securities:
Employee stock awards		5,879		6,733		5,550
Denominator for diluted earnings per share — adjusted weighted-average shares		187,380		187,725		177,771
Basic earnings per share	$	1.18	$	1.01	$	0.96
Diluted earnings per share	$	1.14	$	0.97	$	0.93
Antidilutive weighted average shares		17,096		17,892		26,134

F-32

CITRIX SYSTEMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

15. RECENT ACCOUNTING PRONOUNCEMENTS

In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements, which defines fair value, establishes guidelines for measuring fair value and expands disclosures regarding fair value measurements. SFAS No. 157 does not require any new fair value measurements but rather eliminates inconsistencies in guidance found in various prior accounting pronouncements. SFAS No. 157 is effective for fiscal years beginning after November 15, 2007. Earlier adoption is permitted, provided the company has not yet issued financial statements, including for interim periods, for that fiscal year. The Company does not expect that the adoption of SFAS No. 157 will have a material impact on the Company’s consolidated financial position, results of operations or cash flows.

In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities. SFAS No. 159 permits companies to choose to measure certain financial instruments and certain other items at fair value. The standard requires that unrealized gains and losses on items for which the fair value option has been elected be reported in earnings. SFAS No. 159 is effective for the Company beginning in the first quarter of fiscal year 2008, although earlier adoption is permitted. The adoption of SFAS No. 159 will not have a material impact on the Company’s consolidated financial statements.

In December 2007, the FASB issued SFAS No. 141R, Business Combinations, SFAS No. 141R will require, among other things, the expensing of direct transaction costs, including deal costs and restructuring costs as incurred, acquired IPR&D assets to be capitalized, certain contingent assets and liabilities to be recognized at fair value and earn-out arrangements, including contingent consideration, may be required to be measured at fair value until settled, with changes in fair value recognized each period into earnings. In addition, material adjustments made to the initial acquisition purchase accounting will be required to be recorded back to the acquisition date. This will cause companies to revise previously reported results when reporting comparative financial information in subsequent filings. SFAS No. 141R is effective for the Company on a prospective basis for transactions occurring in 2009 and earlier adoption is not permitted. SFAS No 141R may have a material impact on the Company’s consolidated financial position, results of operations and cash flows if it enters into material business combinations after the standard’s effective date.

In December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statements, SFAS No. 160 will change the accounting for and reporting of minority interests. Under the new standard, minority interests, will be referred to as noncontrolling interests and will be reported as equity in the parent company’s consolidated financial statements. Transactions between the parent company and the noncontrolling interests will be treated as transactions between shareholders provided that the transactions do not create a change in control. Gains and losses will be recognized in earnings for transactions between the parent company and the noncontrolling interests, unless control is achieved or lost. SFAS No. 160 requires retrospective adoption of the presentation and disclosure requirements for existing minority interests. All other requirements of SFAS No. 160 shall be applied prospectively. SFAS No. 160 is effective for the Company beginning in the first quarter of fiscal year 2009 and earlier adoption is not permitted. SFAS No. 160 may have a material impact on the Company’s consolidated financial position, results of operations and cash flows if it enters into material transactions or acquires a noncontrolling interest after the standard’s effective date.

16. RELATED PARTY TRANSACTIONS

The Sevin Rosen Funds, a venture capital firm, was a stockholder in XenSource. Stephen Dow, a member of the Company’s Board of Directors, is a general partner of the Sevin Rosen Funds and did not directly hold any interest in XenSource. Although the Sevin Rosen Funds were represented on the Board of Directors of XenSource, Mr. Dow was not a director of XenSource. The Company’s acquisition of XenSource provided a return to all the partners of the Sevin Rosen Funds, including Mr. Dow. The allocation of XenSource purchase price to Mr. Dow through the general partner entities of the Sevin Rosen Funds related to the acquisition of XenSource will be approximately $1.9 million if and when the Sevin Rosen funds distribute each allocations to its general partner entities. Mr. Dow has been on the Company’s Board of Directors since 1989 and currently owns 278,564 shares of the Company’s common stock. Mr. Dow did not attend the meeting at which the Company’s Board approved the transaction and recused himself from the vote to approve the transaction. Consistent with the Company’s policies and the charter of the Nominating and Corporate Governance Committee of the Company’s Board of Directors, the acquisition of XenSource was reviewed and approved by the Nominating and Corporate Governance Committee. There were no material relationships among the Company and XenSource or any of their respective affiliates or any of the parties to the agreement to acquire XenSource and related agreements, other than in respect of such agreements themselves and as disclosed herein.

F-33

CITRIX SYSTEMS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

SUPPLEMENTAL FINANCIAL INFORMATION

QUARTERLY FINANCIAL INFORMATION (UNAUDITED)

	First Quarter		Second Quarter		Third Quarter		Fourth Quarter		Total Year
	(In thousands, except per share amounts)
2007
Net revenues	$	308,088	$	334,364	$	349,931	$	399,559	$	1,391,942
Gross margin		278,674		302,500		313,925		359,236		1,254,335
Income from operations		38,231		54,734		59,984		49,458		202,407
Net income		37,633		53,390		60,695		62,765		214,483
Basic earnings per common share		0.21		0.30		0.34		0.34		1.18
Diluted earnings per common share		0.20		0.29		0.33		0.33		1.14

	First Quarter		Second Quarter		Third Quarter		Fourth Quarter		Total Year
	(In thousands, except per share amounts)
2006
Net revenues	$	259,998	$	275,468	$	277,851	$	321,002	$	1,134,319
Gross margin		237,869		251,227		253,507		293,018		1,035,621
Income from operations		48,974		49,341		45,067		59,962		203,344
Net income		41,463		44,971		43,660		52,903		182,997
Basic earnings per common share		0.23		0.25		0.24		0.29		1.01
Diluted earnings per common share		0.22		0.23		0.23		0.29		0.97

The sum of the quarterly earnings per share amounts do not add to the annual earnings per share amount due to the weighting of common and common equivalent shares outstanding during each of the respective periods.

F-34

CITRIX SYSTEMS, INC.

SCHEDULE II

VALUATION AND QUALIFYING ACCOUNTS

	Beginning of Period		Charged to Costs and Expenses		Charged to Other Accounts			Deductions			Balance at End of Period
	(In thousands)
2007
Deducted from asset accounts:
Allowance for doubtful accounts	$	2,370	$	2,578	$	23	(3)	$	2,080	(2)	$	2,891
Allowance for returns		1,667		3,517		289	(1)(3)		3,803	(4)		1,670
Allowance for inventory obsolescence		5,220		3,351		—			88			8,483
Valuation allowance for deferred tax assets		1,332		—		—			1,332			—
2006
Deducted from asset accounts:
Allowance for doubtful accounts	$	2,050	$	1,978	$	79	(3)	$	1,737	(2)	$	2,370
Allowance for returns		2,332		—		4,608	(1)(3)		5,273	(4)		1,667
Allowance for inventory obsolescence		563		3,584		1,339	(3)(5)		266			5,220
Valuation allowance for deferred tax assets		1,332		—		—			—			1,332
2005
Deducted from asset accounts:
Allowance for doubtful accounts	$	2,643	$	146	$	708	(3)	$	1,447	(2)	$	2,050
Allowance for returns		2,273		—		6,669	(1)(3)		6,610	(4)		2,332
Allowance for inventory obsolescence		133		383		323	(3)		276			563
Valuation allowance for deferred tax assets		1,332		—		—			—			1,332

(1) Netted against revenues.

(2) Uncollectible accounts written off, net of recoveries.

(3) Additions from acquisitions.

(4) Credits issued for stock-balancing rights.

(5) Reclassifications from other accounts.

F-35

EXHIBIT INDEX

Exhibit No.		Description
2.1	(16)	Agreement and Plan of Merger dated as of June 1, 2005 by and among Citrix Systems, Inc., NCAR Acquisition Corporation, NCAR LLC, NetScaler, Inc. and Guarev Garg as stockholder representative
2.2	(17)	Amendment No. 1 to Agreement and Plan of Merger dated as of June 1, 2005 by and among Citrix Systems, Inc., NCAR Acquisition Corporation, NCAR LLC, NetScaler, Inc. and Guarev Garg as stockholder representative, dated as of June 24, 2005
2.3	(30)	Agreement and Plan of Merger, dated as of August 4, 2006, by and among Citrix Systems, Inc., Banyan Acquisition Corporation, Orbital Data Corporation and John Jaggers as the stockholder representative
2.4	(34)	Agreement and Plan of Merger and Reorganization, dated as of August 14, 2007, by and among Citrix Systems, Inc., PVA Acquisition Corporation, PVA Acquisition LLC, XenSource, Inc. and John G. Connors as stockholder representative
2.5	(35)	Amendment No. 1 to Agreement and Plan of Merger and Reorganization dated as of August 14, 2007 by and among Citrix Systems, Inc. PVA Acquisition Corporation, PVA Acquisition LLC, XenSource, Inc. and John G. Connors as stockholder representative, dated September 20, 2007
3.1	(1)	Amended and Restated Certificate of Incorporation of the Company
3.2		Certificate of Amendment of Amended and Restated Certificate of Incorporation
3.3	(38)	Amended and Restated By-laws of the Company
4.1	(2)	Specimen certificate representing the Common Stock
10.1*	(4)	Fourth Amended and Restated 1995 Stock Plan
10.2*		Second Amended and Restated 1995 Non-Employee Director Stock Option Plan
10.3*		Third Amended and Restated 1995 Employee Stock Purchase Plan
10.4*	(3)	Second Amended and Restated 2000 Director and Officer Stock Option and Incentive Plan
10.5*	(5)	2000 Director and Officer Stock Option and Incentive Plan, Non-Qualified Stock Option Agreement
10.6*	(6)	2000 Director and Officer Stock Option and Incentive Plan, Incentive Stock Option Agreement
10.7*	(7)	Amended and Restated 2000 Stock Incentive Plan of Net6 Inc. (a subsidiary of Citrix Systems, Inc.)
10.8*	(8)	Amended and Restated 2003 Stock Incentive Plan of Net6 Inc. (a subsidiary of Citrix Systems, Inc.)
10.9	(9)	Microsoft Master Source Code Agreement by and between the Company and Microsoft dated December 16, 2004
10.10	(10)	License Form by and between the Company and Microsoft Corporation dated December 16, 2004 (with certain information omitted pursuant to a request for confidential treatment and filed separately with the Securities and Exchange Commission)

10.11		Participation Agreement dated as of April 23, 2002, by and among Citrix Systems, Inc., Citrix Capital Corp., Selco Service Corporation and Key Corporate Capital, Inc. (the “Participation Agreement”) (with certain information omitted pursuant to a grant of confidential treatment and filed separately with the Securities and Exchange Commission)
10.12		Amendment No. 1 to Participation Agreement dated as of June 17, 2002 (with certain information omitted pursuant to a grant of confidential treatment and filed separately with the Securities and Exchange Commission)
10.13		Master Lease dated as of April 23, 2002 by and between Citrix Systems, Inc. and Selco Service Corporation (with certain information omitted pursuant to a grant for confidential treatment and filed separately with the Securities and Exchange Commission)
10.14*	(11)	2005 Executive Bonus Plan
10.15*	(23)	2006 Executive Bonus Plan
10.16*	(12)	2005 Equity Incentive Plan
10.17*	(25)	Amendment to Citrix Systems, Inc. 2005 Equity Incentive Plan
10.18*	(13)	2005 Employee Stock Purchase Plan
10.19*	(14)	2005 Equity Incentive Plan Incentive Stock Option Master Agreement (Domestic)
10.20*	(15)	2005 Equity Incentive Plan Non-Qualified Stock Option Master Agreement (Domestic)
10.21*	(26)	Citrix Systems, Inc. 2005 Equity Incentive Plan Non-Qualified Stock Option Master Agreement (Domestic)
10.22*	(27)	Citrix Systems, Inc. 2005 Equity Incentive Plan Stock Option Master Agreement (French)
10.23*	(22)	Form of Restricted Stock Unit Agreement under the Citrix Systems, Inc. 2005 Equity Incentive Plan
10.24*		Form of Executive Restricted Stock Unit Agreement under the Citrix Systems, Inc. 2005 Equity Incentive Plan (Time Based Vesting)
10.25*	(24)	Form of Restricted Stock Unit Agreement for Non-Employee Directors under the Citrix Systems, Inc. 2005 Equity Incentive Plan
10.26*	(18)	Change in Control Agreement dated as of August 4, 2005 by and between Citrix Systems, Inc. and Mark B. Templeton
10.27*	(19)	Change in Control Agreement dated as of August 4, 2005 by and between Citrix Systems, Inc. and each of David J. Henshall, David R. Freidman and John C. Burris
10.28*	(28)	Change in Control Agreement, dated as of August 4, 2006, by and between Citrix Systems, Inc. and Brett M. Caine
10.29	(29)	Amended and Restated Credit Agreement dated as of September 27, 2006 among Citrix Systems, Inc., Citrix Systems International GmbH, JPMorgan Chase Bank N.A., and certain other financial institutions
10.30	(20)	Term Loan Agreement dated as of August 9, 2005 by and among Citrix Systems, Inc., Citrix Systems International GMBH, JPMorgan Chase Bank, N.A., J.P. Morgan Securities Inc. and certain other financial institutions
10.31*	(21)	NetScaler, Inc. 1997 Stock Plan
10.32	(31)	Type # 3 License Form by and between the Company and Microsoft Corporation dated September 5, 2007 (with certain information omitted pursuant to a request for confidential treatment and filed with the Securities and Exchange Commission)
10.33*	(32)	Citrix Inc. Executive Bonus Plan
10.34*	(33)	Second Amendment to Citrix Systems, Inc. 2005 Equity Incentive Plan
10.35*	(36)	Employment Agreement dated as of August 14, 2007 by and between Citrix Systems, Inc. and Peter Levine
10.36*	(37)	XenSource, Inc. 2005 Stock Plan

21.1	List of Subsidiaries
23.1	Consent of Ernst & Young LLP
24.1	Power of Attorney (Included in signature page)
31.1	Rule 13a-14(a) / 15d-14(a) Certifications
31.2	Rule 13a-14(a) / 15d-14(a) Certifications
32.1	Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

* Indicates a management contract or any compensatory plan, contract or arrangement.

(1) Incorporated herein by reference to Exhibit 3.2 to the Company’s Registration Statement on Form S-1 (File No. 33-98542), as amended.

(2) Incorporated herein by reference to Exhibit 4.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2000 (File No. 000-27084).

(3) Incorporated by reference herein to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2003.

(4) Incorporated by reference herein to Exhibit 10.1 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2003.

(5) Incorporated by reference herein to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2004.

(6) Incorporated by reference herein to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2004.

(7) Incorporated by reference herein to Exhibit 10.7 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2004.

(8) Incorporated by reference herein to Exhibit 10.8 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2004.

(9) Incorporated by reference herein to Exhibit 10.11 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2004.

(10) Incorporated by reference herein to Exhibit 10.12 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2004.

(11) Incorporated herein by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K dated as of February 10, 2005.

(12) Incorporated by reference herein to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2005.

(13) Incorporated by reference herein to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2005.

(14) Incorporated by reference herein to Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2005.

(15) Incorporated by reference herein to Exhibit 10.4 to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2005.

(16) Incorporated by reference herein to Exhibit 2.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2005.

(17) Incorporated by reference herein to Exhibit 2.2 to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2005.

(18) Incorporated by reference herein to Exhibit 10.5 to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2005.

(19) Incorporated by reference herein to Exhibit 10.6 to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2005.

(20) Incorporated by reference herein to Exhibit 10.4 to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2005.

(21) Incorporated by reference herein to Exhibit 10.5 to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2005.

(22) Incorporated by reference herein to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2006.

(23) Incorporated by reference herein to Exhibit 10.1 to the Company’s Current Report on Form 8-K dated as of April 18, 2006.

(24) Incorporated by reference herein to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2006.

(25) Incorporated by reference herein to Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2006

(26) Incorporated by reference herein to Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2006.

(27) Incorporated by reference herein to Exhibit 10.4 to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2006.

(28) Incorporated by reference herein to Exhibit 10.5 to the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2006.

(29) Incorporated by reference herein to Exhibit 10.1 to the Company’s Current Report on Form 8-K dated as of September 27, 2006.

(30) Incorporated by reference herein to Exhibit 2.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2006.

(31) Incorporated by reference herein to Exhibit 10.31 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2006.

(32) Incorporated by reference herein to Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2007.

(33) Incorporated by reference herein to Exhibit 10.1 to the Company’s Current Report on Form 8-K dated as of October 19, 2007.

(34) Incorporated by reference herein to Exhibit 2.5 to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2007.

(35) Incorporated by reference herein to Exhibit 2.6 to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2007.

(36) Incorporated by reference herein to Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2007.

(37) Incorporated by reference herein to Exhibit 10.4 to the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2007.

(38) Incorporated by reference herein to Exhibit 3.1 to the Company’s Current Report on Form 8-K dated as of December 12, 2007.

EX-3.2

EXHIBIT 3.2

CERTIFICATE OF AMENDMENT

OF

AMENDED AND RESTATED

CERTIFICATE OF INCORPORATION

OF

CITRIX SYSTEMS, INC.

Citrix Systems, Inc. (the “Corporation”), a corporation organized and existing under and by virtue of the General Corporation Law of the State of Delaware, DOES HEREBY CERTIFY:

FIRST:	That the Board of Directors of the Corporation adopted resolutions proposing and declaring advisable the following amendments to the Amended and Restated Certificate of Incorporation of the Corporation:
	RESOLVED:	That the first paragraph of Article FOURTH of the Corporation’s Amended and Restated Certificate of Incorporation as amended to date shall be amended to read in its entirety as follows:
		“FOURTH. The total number of shares of all classes of capital stock which the Corporation shall have authority to issue is 1,005,000,000 shares, consisting of 1,000,000,000 shares of Common Stock with a par value of $.001 per share (the “Common Stock”) and 5,000,000 shares of Preferred Stock with a par value of $.01 per share (the “Preferred Stock”).”
SECOND:	The foregoing amendment to this Amended and Restated Certificate of Incorporation of the Corporation was duly adopted by vote of the stockholders of the Corporation in accordance with the applicable provisions of Sections 242 of the General Corporation Law of the State of Delaware.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

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IN WITNESS WHEREOF, the Corporation has caused this Certificate of Amendment to be executed by John P. Cunningham, its Chief Financial Officer this 15th day of June, 2000.

CITRIX SYSTEMS, INC.
By:	/s/ JOHN P. CUNNINGHAM
	John P. Cunningham Chief Financial Officer

EX-10.2

EXHIBIT 10.2

CITRIX SYSTEMS, INC.

SECOND AMENDED AND RESTATED

1995 NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN

1. PURPOSE. This Non-Qualified Stock Option Plan, to be known as the Second Amended and Restated 1995 Non-Employee Director Stock Option Plan (hereinafter, this “Plan”), is effective as of January 1, 2002 and is intended to promote the interests of Citrix Systems, Inc. (hereinafter, the Company”) by providing an inducement to obtain and retain the services of qualified persons who are not employees or officers of the Company to serve as members of its Board of Directors (the “Board”).

2. AVAILABLE SHARES. The total number of shares of Common Stock, par value $0.001 per share, of the Company (the “Common Stock”) for which options may be granted under this Plan shall not exceed 3,600,000 shares (reflecting all adjustments under Section 10 of the Plan through January 31, 2002), subject to further adjustment in accordance with paragraph 10 of this Plan. Shares subject to this Plan are uthorized but unissued shares or shares that were once issued and subsequently reacquired by the Company. If any options granted under this Plan are surrendered before exercise or lapse without exercise, in whole or in part, the shares reserved therefor shall continue to be available under this Plan.

3. ADMINISTRATION. This Plan shall be administered by the Board or by a committee appointed by the Board (the “Committee”). In the event the Board fails to appoint or refrains from appointing a Committee, the Board shall have all power and authority to administer this Plan. In such event, the word “Committee” wherever used herein shall be deemed to mean the Board. The Committee shall, subject to the provisions of the Plan, have the power to construe this Plan, to determine all questions hereunder, and to adopt and amend such rules and regulations for the administration of this Plan as it may deem desirable. No member of the Board or the Committee shall be liable for any action or determination made in good faith with respect to this Plan or any option granted under it.

4. AUTOMATIC GRANT OF OPTIONS. Subject to the availability of shares under this Plan,

(a) each person who first becomes a member of the Board after the effective date of an initial public offering of the Company’s Common Stock and who is not an employee or officer of the Company (a “Non-Employee Director”) shall be automatically granted on the date such person becomes a member of the Board (the “Initial Grant Date”), without further action by the Board, an option to purchase 60,000 shares of the Common Stock (reflecting all adjustments under Section 10 of the Plan through January 31, 2002) (the “Initial Grant”), and

(b) each person who is a Non-Employee Director on the date of the Company’s Annual Meeting of Stockholders (during the term of this Plan) shall be automatically granted on the first day of the month immediately following such Annual Meeting of Stockholders (the “Annual Grant Date”) an option to

2

purchase 20,000 shares of Common Stock (reflecting all adjustments under Section 10 of the Plan through January 31, 2002) (each, an “Annual Grant”); PROVIDED, HOWEVER:

(i) that solely with respect to the Annual Grants following the Company’s 2002 Annual Meeting of Stockholders, to equitably adjust calendar year 2002 grants, each 2002 Annual Grant shall be increased or decreased, depending on whether the anniversary of an incumbent Non-Employee Director’s grant pursuant to Section 4(a) of the Amended and Restated 1995 Non-Employee Director Stock Option Plan (each an “Old Initial Grant Date”) precedes or follows the 2002 Annual Grant Date, as the case may be, by a number as is obtained by multiplying 55 by the number of days that the anniversary in 2002 of the Old Initial Grant Date precedes or follows the 2002 Annual Grant Date (for avoidance of doubt, the Annual Grant on the 2002 Annual Grant Date shall constitute all stock option grants to which any Non-Employee Director may otherwise be entitled under the Plan in 2002); and

(ii) that no Annual Grant shall be granted to any Non-Employee Director in the same calendar year that such person received his or her Initial Grant.

The options to be granted under this paragraph 4 shall be the only options ever to be granted at any time to such member under this Plan.

5. OPTION PRICE. The purchase price of the stock covered by an option granted pursuant to this Plan shall be 100% of the fair market value of such shares on the day the option is granted. The option price will be subject to adjustment in accordance with the provisions of paragraph 10 of this Plan. For purposes of this Plan, if, at the time an option is granted under the Plan, the Company’s Common Stock is publicly traded, “fair market value” shall be determined as of the date of grant or, if the prices or quotes discussed in this sentence are unavailable for such date, the last business day for which the prices or quotes discussed in this sentence are available prior to the date such option is granted and shall mean (i) the average (on that date) of the high and low prices of the Common Stock on the principal national securities exchange on which the Common Stock is traded, if the Common Stock is then traded on a national securities exchange; or (ii) the last reported sale price (on that date) of the Common Stock on the Nasdaq Stock Market, if the Common Stock is not then traded on a national securities exchange; or (iii) the closing bid price (or average of bid prices) last quoted (on that date) by an established quotation service for over-the-counter securities, if the Common Stock is not reported on the Nasdaq Stock Market. However, if the Common Stock is not publicly traded at the time an option is granted under the Plan, “fair market value” shall be deemed to be the fair value of the Common Stock as determined by the Committee after taking into consideration all factors which it deems appropriate, including, without limitation, recent sale and offer prices of the Common Stock in private transactions negotiated at arm’s length.

6. PERIOD OF OPTION. Unless sooner terminated in accordance with the provisions of paragraph 8 of this Plan, an option granted hereunder shall expire on the date which is ten (10) years after the date of grant of the option.

3

7. VESTING OF SHARES AND NON-TRANSFERABILITY OF OPTIONS. Options granted under this Plan shall not be exercisable until they become vested.

(a) VESTING OF SHARES

(i) Options granted under Section 4(a) of this Plan shall vest in the optionee and thus become exercisable as follows, provided that the optionee has continuously served as a member of the Board through such vesting date:

Percentage of Option Shares for which Option Will be Exercisable	Date of Vesting
0%	Less than one year from the date of grant
33% (1/3)	One year from the date of grant
an additional 2.8%	Monthly thereafter, until fully exercisable

(ii) Options granted under Section 4(b) of this Plan shall vest in the optionee and thus become exercisable at a rate of 8.33% per month until fully exercisable, provided that the optionee has continuously served as a member of the Board through such vesting date.

The number of shares as to which options may be exercised shall be cumulative, so that once the option shall become exercisable as to any shares it shall continue to be exercisable as to said shares, until expiration or termination of the option as provided in this Plan.

(b) NON-TRANSFERABILITY. Any option granted pursuant to this Plan shall not be assignable or transferable other than by will or the laws of descent and distribution or pursuant to a domestic relations order and shall be exercisable during the optionee’s lifetime only by him or her.

8. TERMINATION OF OPTION RIGHTS.

(a) Except as otherwise specified in the agreement relating to an option, in the event an optionee ceases to be a member of the Board for any reason other than death or permanent disability, any then unexercised portion of options granted to such optionee shall, to the extent not then vested, immediately terminate and become void; any portion of an option which is then vested but has not been exercised at the time the optionee so ceases to be a member of the Board may be exercised, to the extent it is then vested, by the optionee within 90 days of the date the optionee ceased to be a member of the Board; and all options shall terminate after such 90 days have expired.

4

(b) In the event that an optionee ceases to be a member of the Board by reason of his or her death or permanent disability, any option granted to such optionee shall be immediately and automatically accelerated and become fully vested and all unexercised options shall be exercisable by the optionee (or by the optionee’s personal representative, heir or legatee, in the event of death) until the scheduled expiration date of the option.

9. EXERCISE OF OPTION. Subject to the terms and conditions of this Plan and the option agreements, an option granted hereunder shall, to the extent then exercisable, be exercisable in whole or in part by giving written notice to the Company by mail or in person addressed to Citrix Systems, Inc., at its principal executive offices, stating the number of shares with respect to which the option is being exercised, accompanied by payment in full for such shares. Payment may be (a) in United States dollars in cash or by check, (b) in whole or in part in shares of the Common Stock of the Company already owned by the person or persons exercising the option or shares subject to the option being exercised (subject to such restrictions and guidelines as the Board may adopt from time to time), valued at fair market value determined in accordance with the provisions of paragraph 5 or (c) consistent with applicable law, through the delivery of an assignment to the Company of a sufficient amount of the proceeds from the sale of the Common Stock acquired upon exercise of the option and an authorization to the broker or selling agent to pay that amount to the Company, which sale shall be at the participant’s direction at the time of exercise. There shall be no such exercise at any one time as to fewer than one hundred (100) shares or all of the remaining shares then purchasable by the person or persons exercising the option, if fewer than one hundred (100) shares. The Company’s transfer agent shall, on behalf of the Company, prepare a certificate or certificates representing such shares acquired pursuant to exercise of the option, shall register the optionee as the owner of such shares on the books of the Company and shall cause the fully executed certificate(s) representing such shares to be delivered to the optionee as soon as practicable after payment of the option price in full. The holder of an option shall not have any rights of a stockholder with respect to the shares covered by the option, except to the extent that one or more certificates for such shares shall be delivered to him or her upon the due exercise of the option.

10. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION AND OTHER EVENTS. Upon the occurrence of any of the following events, an optionee’s rights with respect to options granted to him or her hereunder shall be adjusted as hereinafter provided:

(a) STOCK DIVIDENDS AND STOCK SPLITS. If the shares of Common Stock shall be subdivided or combined into a greater or smaller number of shares or if the Company shall issue any shares of Common Stock as a stock dividend on its outstanding Common Stock, the number of shares of Common Stock deliverable upon the exercise of options shall be appropriately increased or decreased roportionately, and appropriate adjustments shall be made in the purchase price per share to reflect such subdivision, combination or stock dividend.

(b) RECAPITALIZATION ADJUSTMENTS. If the Company is to be consolidated with or acquired by another entity in a merger, sale of all or substantially all of the Company’s assets or otherwise, each option granted under this Plan which is outstanding but unvested as of the effective date of such event

5

shall become exercisable in full thirty (30) days prior to the effective date of such event. In the event of a reorganization, recapitalization, merger, consolidation, or any other change in the corporate structure or shares of the Company, to the extent permitted by Rule 16b-3 under the Securities Exchange Act of 1934, adjustments in the number and kind of shares authorized by this Plan and in the number and kind of shares covered by, and in the option price of outstanding options under this Plan necessary to maintain the proportionate interest of the optionee and preserve, without exceeding, the value of such option, shall be made. Notwithstanding the foregoing, no such adjustment shall be made which would, within the meaning of any applicable provisions of the Internal Revenue Code of 1986, as amended, constitute a modification, extension or renewal of any option or a grant of additional benefits to the holder of an option.

(c) ISSUANCES OF SECURITIES. Except as expressly provided herein, no issuance by the Company of shares of stock of any class, or securities convertible into shares of stock of any class, shall affect, and no adjustment by reason thereof shall be made with respect to, the number or price of shares subject to options. No adjustments shall be made for dividends paid in cash or in property other than securities of the Company.

(d) ADJUSTMENTS. Upon the happening of any of the foregoing events, the class and aggregate number of shares set forth in paragraph 2 of this Plan that are subject to options which previously have been or subsequently may be granted under this Plan shall also be appropriately adjusted to reflect such events. The Board shall determine the specific adjustments to be made under this paragraph 10 and its determination shall be conclusive.

11. RESTRICTIONS ON ISSUANCE OF SHARES. Notwithstanding the provisions of paragraphs 4 and 9 of this Plan, the Company shall have no obligation to deliver any certificate or certificates upon exercise of an option until one of the following conditions shall be satisfied:

(a) The issuance of shares with respect to which the option has been exercised is at the time of the issue of such shares effectively registered under applicable Federal and state securities laws as now in force or hereafter amended; or

(b) Counsel for the Company shall have given an opinion that the issuance of such shares is exempt from registration under Federal and state securities laws as now in force or hereafter amended; and the Company has complied with all applicable laws and regulations with respect thereto, including without limitation all regulations required by any stock exchange upon which the Company’s outstanding Common Stock is then listed.

12. LEGEND ON CERTIFICATES. The certificates representing shares issued pursuant to the exercise of an option granted hereunder shall carry such appropriate legend, and such written instructions shall be given to the Company’s transfer agent, as may be deemed necessary or advisable by counsel to the Company in order to comply with the requirements of the Securities Act of 1933 or any state securities laws.

6

13. REPRESENTATION OF OPTIONEE. If requested by the Company, the optionee shall deliver to the Company written representations and warranties upon exercise of the option that are necessary to show compliance with Federal and state securities laws, including representations and warranties to the effect that a purchase of shares under the option is made for investment and not with a view to their distribution (as that term is used in the Securities Act of 1933).

14. OPTION AGREEMENT. Each option granted under the provisions of this Plan shall be evidenced by an option agreement, which agreement shall be duly executed and delivered on behalf of the Company and by the optionee to whom such option is granted. The option agreement shall contain such terms, provisions and conditions not inconsistent with this Plan as may be determined by the officer executing it.

15. TERMINATION AND AMENDMENT OF PLAN. Options may no longer be granted under this Plan after September 28, 2005, and this Plan shall terminate when all options granted or to be granted hereunder are no longer outstanding. The Board may at any time terminate this Plan or make such modification or amendment thereof as it deems advisable; PROVIDED, HOWEVER, that the Board may not, without approval by the affirmative vote of the holders of a majority of the shares of Common Stock present in person or by proxy and voting on such matter at a meeting, (a) increase the maximum number of shares for which options may be granted under this Plan (except by adjustment pursuant to Section 10), (b) materially modify the requirements as to eligibility to participate in this Plan, (c) materially increase benefits accruing to option holders under this Plan or (d) amend this Plan in any manner which would cause Rule 16b-3 under the Securities Exchange Act (or any successor or amended provision thereof) to become inapplicable to this Plan; and PROVIDED FURTHER that the provisions of this Plan specified in Rule 16b-3(c)(2)(ii)(A) (or any successor or amended provision thereof) under the Securities Exchange Act of 1934 (including without limitation, provisions as to eligibility, amount, price and timing of awards) may not be amended more than once every six months, other than to comport with changes in the Internal Revenue Code, the Employee Retirement Income Security Act, or the rules thereunder. Termination or any modification or amendment of this Plan shall not, without consent of a participant, affect his or her rights under an option previously granted to him or her.

16. WITHHOLDING OF INCOME TAXES. Upon the exercise of an option, the Company, in accordance with Section 3402(a) of the Internal Revenue Code, may require the optionee to pay withholding taxes in respect of amounts considered to be compensation includable in the optionee’s gross income.

17. COMPLIANCE WITH REGULATIONS. It is the Company’s intent that the Plan comply in all respects with Rule 16b-3 under the Securities Exchange Act of 1934 (or any successor or amended provision thereof) and any applicable Securities and Exchange Commission interpretations thereof. If any provision of this Plan is deemed not to be in compliance with Rule 16b-3, the provision shall be null and void.

7

18. GOVERNING LAW. The validity and construction of this Plan and the instruments evidencing options shall be governed by the laws of the State of Delaware, without giving effect to the principles of conflicts of law thereof.

Date Approved by Board of Directors of the Company: September 28, 1995

Date Approved by Stockholders of the Company: October 16, 1995

Date Amended and Restated by Board of Directors of the Company: July 26, 2001

Date of Second Amendment and Restatement by Board of Directors of the Company: January 31, 2002

EX-10.3

EXHIBIT 10.3

CITRIX SYSTEMS, INC.

THIRD AMENDED AND RESTATED

1995 EMPLOYEE STOCK PURCHASE PLAN

ARTICLE 1 - PURPOSE.

This Third Amended and Restated 1995 Employee Stock Purchase Plan (the “Plan”) is effective as of July 1, 2002, and is intended to encourage stock ownership by all eligible employees of Citrix Systems, Inc. (the “Company”), a Delaware corporation, and its participating subsidiaries (as defined in Article 17) so that they may share in the growth of the Company by acquiring or increasing their proprietary interest in the Company. The Plan is designed to encourage eligible employees to remain in the employ of the Company and its participating subsidiaries. The Plan is intended to constitute an “employee stock purchase plan” within the meaning of Section 423(b) of the Internal Revenue Code of 1986, as amended (the Code”).

ARTICLE 2 - ADMINISTRATION OF THE PLAN.

The Plan may be administered by a committee appointed by the Board of Directors of the Company (the “Committee”). The Committee shall consist of not less than two members of the Company’s Board of Directors. The Board of Directors may from time to time remove members from, or add members to, the Committee. Vacancies on the Committee, howsoever caused, shall be filled by the Board of Directors. The Committee may select one of its members as Chairman, and shall hold meetings at such times and places as it may determine. Acts by a majority of the Committee, or acts reduced to or approved in writing by a majority of the members of the Committee, shall be the valid acts of the Committee.

The interpretation and construction by the Committee of any provisionsof the Plan or of any option granted under it shall be final, unless otherwise determined by the Board of Directors. The Committee may from time to time adopt such rules and regulations for carrying out the Plan as it may deem best, provided that any such rules and regulations shall be applied on a uniform basis to all employees under the Plan. No member of the Board of Directors or the Committee shall be liable for any action or determination made in good faith with respect to the Plan or any option granted under it.

In the event the Board of Directors fails to appoint or refrains from appointing a Committee, the Board of Directors shall have all power and authority to administer the Plan. In such event, the word “Committee” wherever used herein shall be deemed to mean the Board of Directors.

Each member of the Committee shall be a “disinterested director” — i.e., except as otherwise permitted under Section 16(b) of the Securities Exchange Act of 1934 (the “Exchange Act”) and paragraph (c)(2)(i) of Rule 16b-3 thereunder, no member of the Committee shall be granted, nor shall have been

granted, “equity securities” (within the meaning of 17 C.F.R. section 240.16a-1(d)) pursuant to the Plan or any other plan of the Company or its “affiliates” (as defined in the Exchange Act) at any time during the period commencing with the date which is one year after date on which his service on the Committee ceases. Notwithstanding the preceding sentence, (i) the grant or award of such an equity security to a member of the Committee prior to the date of the effectiveness of the Company’s initial registration statement under Section 12 of the Exchange Act shall not cause the Committee member to fail to be “disinterested,” and (ii) a member of the Committee may receive stock options under the Citrix Systems, Inc. 1995 Non-Employee Director Stock Option Plan.

ARTICLE 3 - ELIGIBLE EMPLOYEES.

All employees of the Company or any of its participating subsidiaries whose customary employment is more than twenty (20) hours per week and for more than five (5) months in any calendar year shall be eligible to receive options under the Plan to purchase common stock of the Company, and all eligible employees shall have the same rights and privileges hereunder. Persons who are eligible employees on the first business day of any Payment Period (as defined in Article 5) shall receive their options as of such day. Persons who become eligible employees after any date on which options are granted under the Plan shall be granted options on the first day of the next succeeding Payment Period on which options are granted to eligible employees under the Plan. Directors who are not employees of the Company shall not be eligible to receive options under this Plan. In no event, however, may an employee be granted an option if such employee, immediately after the option was granted, would be treated as owning stock possessing five percent (5%) or more of the total combined voting power or value of all classes of stock of the Company or of any parent corporation or subsidiary corporation, as the terms “parent corporation” and “subsidiary corporation” are defined in Section 424(e) and (f) of the Code. For purposes of determining stock ownership under this paragraph, the rules of Section 424(d) of the Code shall apply, and stock which the employee may purchase under outstanding options shall be treated as stock owned by the employee.

ARTICLE 4 - STOCK SUBJECT TO THE PLAN.

The stock subject to the options under the Plan shall be shares of the Company’s authorized but unissued common stock, par value $0.001 per share (the “Common Stock”), or shares of Common Stock reacquired by the Company, including shares purchased in the open market. The aggregate number of shares which may be issued pursuant to the Plan is 9,000,000 (as adjusted for stock splits that occurred prior to the second amendment and restatement of the Plan), subject to adjustment as provided in Article 12. If any option granted under the Plan shall expire or terminate for any reason without having been exercised in full or shall cease for any reason to be exercisable in whole or in part, the unpurchased shares subject thereto shall again be available under the Plan.

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ARTICLE 5 - PAYMENT PERIOD AND STOCK OPTIONS.

The payment periods during which payroll deductions will be accumulated under the Plan , shall consist of periods commencing on July 16 and January 16 and ending on February 1 and August 1 of each calendar year, respectively (each, a “Payment Period” and collectively, the “Payment Periods”); provided that the initial Payment Period shall commence on July 1, 2002, and end on February 1, 2003.

Twice each year, on the first business day of each Payment Period, the Company will grant to each eligible employee who is then a participant in the Plan an option to purchase on the last day of such Payment Period, at the Option Price hereinafter provided for, a maximum of 12,000 shares (as adjusted for stock splits that occurred prior to the second amendment and restatement of the Plan), on condition that such employee remains eligible to participate in the Plan throughout the remainder of such Payment Period. The participant shall be entitled to exercise the option so granted only to the extent of the participant’s accumulated payroll deductions on the 15th day of the month immediately preceding the last day of a Payment Period (each, a “Payroll Cut-off Date”). Any payroll deductions accumulated between a Payroll Cut-off Date and the end of the Payment Period to which such Payroll Cut-off Date applies shall be applied to the Payment Period that commenced immediately after such Payroll Cut-off Date. If a participant’s accumulated payroll deductions on a Payroll Cut-off Date would enable a participant to purchase more than 12,000 shares except for the 12,000 share limitation, the excess of the amount of the accumulated payroll deductions over the aggregate purchase price of the 12,000 shares shall be promptly refunded to such participant by the Company, without interest. The Option Price per share for each Payment Period shall be the lesser of (i) 85% of the fair market value of the Common Stock on the first business day of the Payment Period and (ii) 85% of the fair market value of the Common Stock on the last business day of the Payment Period, in either event rounded up to the nearest whole cent. The foregoing limitation on the number of shares subject to option and the Option Price shall be subject to adjustment as provided in Article 12.

For purposes of the Plan, “fair market value of the Common Stock” on any business day shall mean (i) the average (on that date) of the high and low prices of the Common Stock on the principal national securities exchange on which the Common Stock is traded, if the Common Stock is then traded on a national securities exchange; or (ii) the last reported sale price (on that date) of the Common Stock on the Nasdaq Stock Market, if the Common Stock is not then traded on a national securities exchange; or (iii) the average of the closing bid and asked prices last quoted (on that date) by an established quotation service for over-the-counter securities, if the Common Stock is not reported on the Nasdaq Stock Market; or (iv) if the Common Stock is not publicly traded, the fair market value of the Common Stock as determined by the Committee after taking into consideration all factors which it deems appropriate, including, without limitation, recent sale and offer prices of the Common Stock in private transactions negotiated at arm’s length.

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For purposes of the Plan, the term “business day” means a day on which there is trading on the Nasdaq Stock Market or the aforementioned national securities exchange, whichever is applicable pursuant to the preceding paragraph.

No employee shall be granted an option which permits the employee’s right to purchase stock under the Plan, and under all other Section 423(b) employee stock purchase plans of the Company and any parent or subsidiary corporations, to accrue at a rate which exceeds $25,000 of fair market value of such stock (determined on the date or dates that options on such stock were granted) for each calendar year in which such option is outstanding at any time. The purpose of the limitation in the preceding sentence is to comply with Section 423(b)(8) of the Code. If the participant’s accumulated payroll deductions on the last day of the Payment Period with respect to such Payment Period would otherwise enable the participant to purchase Common Stock in excess of the Section 423(b)(8) limitation described in this paragraph, the excess of the amount of the accumulated payroll deductions over the aggregate purchase price of the shares actually purchased shall be promptly refunded to the participant by the Company, without interest.

ARTICLE 6 - EXERCISE OF OPTION.

Each eligible employee who continues to be a participant in the Plan on the last day of a Payment Period shall be deemed to have exercised his or her option on such date and shall be deemed to have purchased from the Company such number of full shares of Common Stock reserved for the purpose of the Plan as the participant’s accumulated payroll deductions on the applicable Payroll Cut-off Date will pay for at the Option Price, subject to the 12,000 share limit of the option and the Section 423(b)(8) limitation described in Article 5. If the individual is not a participant on the last day of a Payment Period, then he or she shall not be entitled to exercise his or her option. Only full shares of Common Stock may be purchased under the Plan. With respect to any Payment Period, unused payroll deductions remaining in a participant’s account by reason of the inability to purchase a fractional share shall be applied to the most recently commenced Payment Period.

ARTICLE 7 - AUTHORIZATION FOR ENTERING THE PLAN.

An employee may elect to enter the Plan by filling out, signing and delivering to the Company an authorization:

A. Stating the percentage to be deducted regularly from the employee’s pay;

B. Authorizing the purchase of stock for the employee in each Payment Period in accordance with the terms of the Plan; and

C. Specifying the exact name or names in which stock purchased for the employee is to be issued as provided under Article 11 hereof.

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Such authorization must be received by the Company at least ten business days before the first day of the next succeeding Payment Period and shall take effect only if the employee is an eligible employee on the first business day of such Payment Period.

Unless a participant files a new authorization or withdraws from the Plan, the deductions and purchases under the authorization the participant has on file under the Plan will continue from one Payment Period to succeeding Payment Periods as long as the Plan remains in effect.

The Company will accumulate and hold for each participant’s account the amounts deducted from his or her pay. No interest will be paid on these amounts.

ARTICLE 8 - MAXIMUM AMOUNT OF PAYROLL DEDUCTIONS.

An employee may authorize payroll deductions in an amount (expressed as a whole percentage) not less than one percent (1%) but not more than ten percent (10%) of the employee’s total compensation, including base pay or salary and any overtime, bonuses or commissions.

ARTICLE 9 - CHANGE IN PAYROLL DEDUCTIONS.

Deductions may not be increased or decreased between the commencement of a Payment Period and the Payroll Cut-off Date applicable to such Payment Period. However, a participant may withdraw in full from the Plan at any time, except, with respect to withdrawal from a Payment Period, on the last day of such Payment Period.

ARTICLE 10 - WITHDRAWAL FROM THE PLAN.

An employee may withdraw from the Plan (in whole but not in part) at any time, except, with respect to withdrawal from a Payment Period, on the last day of such Payment Period, by delivering a withdrawal notice to the Company, in which case the Company will promptly refund the entire balance of the employee’s deductions not previously used to purchase stock under the Plan.

To re-enter the Plan, an employee who has previously withdrawn must file a new authorization at least ten business days before the first day of the next Payment Period in which he or she wishes to participate. The employee’s re-entry into the Plan becomes effective at the beginning of such Payment Period, provided that he or she is an eligible employee on the first business day of such Payment Period.

ARTICLE 11 - ISSUANCE OF STOCK.

Certificates for stock issued to participants shall be delivered as soon as practicable after each Payment Period by the Company’s transfer agent.

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Stock purchased under the Plan shall be issued only in the name of the participant, or if the participant’s authorization so specifies, in the name of the participant and another person of legal age as joint tenants with rights of survivorship.

ARTICLE 12 - ADJUSTMENTS.

Upon the happening of any of the following described events, a participant’s rights under options granted under the Plan shall be adjusted as hereinafter provided:

A. In the event that the shares of Common Stock shall be subdivided or combined into a greater or smaller number of shares or if, upon a reorganization, split-up, liquidation, recapitalization or the like of the Company, the shares of Common Stock shall be exchanged for other securities of the Company, each participant shall be entitled, subject to the conditions herein stated, to purchase such number of shares of Common Stock or amount of other securities of the Company as were exchangeable for the number of shares of Common Stock that such participant would have been entitled to purchase except for such action, and appropriate adjustments shall be made in the purchase price per share to reflect such subdivision, combination or exchange; and

B. In the event the Company shall issue any of its shares as a stock dividend upon or with respect to the shares of stock of the class which shall at the time be subject to option hereunder, each participant upon exercising such an option shall be entitled to receive (for the purchase price paid upon such exercise) the shares as to which the participant is exercising his or her option and, in addition thereto (at no additional cost), such number of shares of the class or classes in which such stock dividend or dividends were declared or paid, and such amount of cash in lieu of fractional shares, as is equal to the number of shares thereof and the amount of cash in lieu of fractional shares, respectively, which the participant would have received if the participant had been the holder of the shares as to which the participant is exercising his or her option at all times between the date of the granting of such option and the date of its exercise.

Upon the happening of any of the foregoing events, the class and aggregate number of shares set forth in Article 4 hereof which are subject to options which have been or may be granted under the Plan and the limitations set forth in the second paragraph of Article 5 shall also be appropriately adjusted to reflect the events specified in paragraphs A. and B. above. Notwithstanding the foregoing, any adjustments made pursuant to paragraphs A. or B. shall be made only after the Committee, based on advice of counsel for the Company, determines whether such adjustments would constitute a “modification” (as that term is defined in Section 424 of the Code). If the Committee determines that such adjustments would constitute a modification, it may refrain from making such adjustments.

If the Company is to be consolidated with or acquired by another entity in a merger, a sale of all or substantially all of the Company’s assets or otherwise (an “Acquisition”), the Committee shall, with respect to options then outstanding under the Plan, either (i) make appropriate provision for the exchange of such options on an equitable basis for the consideration payablewith respect to the outstanding shares of the

6

Company’s Common Stock in connection with the Acquisition, or (ii) terminate all outstanding options in exchange for a cash payment equal to the excess of the fair market value of the shares subject to the options (determined as of the date of the Acquisition) over the Option Price thereof (determined with reference only to the first business day of the applicable Payment Period).

The Committee shall determine the adjustments to be made under this Article 12, and its determination shall be conclusive.

ARTICLE 13 - NO TRANSFER OR ASSIGNMENT OF EMPLOYEE’S RIGHTS.

An employee’s rights under the Plan are the employee’s alone and may not be transferred or assigned to, or availed of by, any other person other than by will or the laws of descent and distribution. Any option granted under the Plan to an employee may be exercised, during the employee’s lifetime, only by the employee.

ARTICLE 14 - TERMINATION OF EMPLOYEE’S RIGHTS.

Whenever a participant ceases to be an eligible employee because of retirement, voluntary or involuntary termination, resignation, layoff, discharge, death or for any other reason, his or her rights under the Plan shall immediately terminate, and the Company shall promptly refund, without interest, the entire balance of his or her payroll deduction account under the Plan. Notwithstanding the foregoing, eligible employment shall be treated as continuing intact while a participant is on military leave, sick leave or other bona fide leave of absence, for up to 90 days, or for so long as the participant’s right to re-employment is guaranteed either by statute or by contract, if longer than 90 days.

If a participant’s payroll deductions are interrupted by any legal process, a withdrawal notice will be considered as having been received from the participant on the day the interruption occurs.

ARTICLE 15 - TERMINATION AND AMENDMENTS TO PLAN.

Unless terminated sooner as provided below, the Plan shall terminate on September 29, 2005. The Plan may be terminated at any time by the Company’s Board of Directors but such termination shall not affect options then outstanding under the Plan. It will terminate in any case when all or substantially all of the unissued shares of stock reserved for the purposes of the Plan have been purchased. If at any time shares of stock reserved for the purpose of the Plan remain available for purchase but not in sufficient number to satisfy all then unfilled purchase requirements, the available shares shall be apportioned among participants in proportion to the amount of payroll deductions accumulated on behalf of each participant that would otherwise be used to purchase stock, and the Plan shall terminate. Upon such termination or any other termination of the Plan, all payroll deductions not used to purchase stock will be refunded, without interest.

7

The Committee or the Board of Directors may from time to time adopt amendments to the Plan provided that, without the approval of the stockholders of the Company, no amendment may (i) materially increase the number of shares that may be issued under the Plan; (ii) change the class of employees eligible to receive options under the Plan, if such action would be treated as the adoption of a new plan for purposes of Section 423(b) of the Code; or (iii) cause Rule 16b-3 under the Securities Exchange Act of 1934 to become inapplicable to the Plan.

ARTICLE 16 - LIMITS ON SALE OF STOCK PURCHASED UNDER THE PLAN.

The Plan is intended to provide shares of Common Stock for investment and not for resale. The Company does not, however, intend to restrict or influence any employee in the conduct of his or her own affairs. An employee may, therefore, sell stock purchased under the Plan at any time the employee chooses, subject to compliance with any policies of the Company, applicable federal or state securities laws and subject to any restrictions imposed under Article 21 to ensure that tax withholding obligations are satisfied. THE EMPLOYEE ASSUMES THE RISK OF ANY MARKET FLUCTUATIONS IN THE PRICE OF THE STOCK.

ARTICLE 17 - PARTICIPATING SUBSIDIARIES.

The term “participating subsidiary” shall mean any present or future subsidiary of the Company, as that term is defined in Section 424(f) of the Code, which is designated from time to time by the Board of Directors to participate in the Plan. The Board of Directors shall have the power to make such designation before or after the Plan is approved by the stockholders.

ARTICLE 18 - OPTIONEES NOT STOCKHOLDERS.

Neither the granting of an option to an employee nor the deductions from his or her pay shall constitute such employee a stockholder of the shares covered by an option until such shares have been actually purchased by the employee.

ARTICLE 19 - APPLICATION OF FUNDS.

The proceeds received by the Company from the sale of Common Stock pursuant to options granted under the Plan will be used for general corporate purposes.

ARTICLE 20 - NOTICE TO COMPANY OF DISQUALIFYING DISPOSITION.

By electing to participate in the Plan, each participant agrees to notify the Company in writing immediately after the participant transfers Common Stock acquired under the Plan, if such transfer occurs within two years after the first business day of the Payment Period in which such Common Stock was acquired. Each participant further agrees to provide any information about such a transfer as may be requested by the Company or any subsidiary corporation in order to assist it in complying with the tax laws. Such dispositions generally are treated as “disqualifying dispositions” under Sections 421 and 424 of the Code, which have certain tax consequences to participants and to the Company and its participating subsidiaries.

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ARTICLE 21 - WITHHOLDING OF ADDITIONAL INCOME TAXES.

By electing to participate in the Plan, each participant acknowledges that the Company and its participating subsidiaries are required to withhold taxes with respect to the amounts deducted from the participant’s compensation and accumulated for the benefit of the participant under the Plan, and each participant agrees that the Company and its participating subsidiaries may deduct additional amounts from the participant’s compensation, when amounts are added to the participant’s account, used to purchase Common Stock or refunded, in order to satisfy such withholding obligations. Each participant further acknowledges that when Common Stock is purchased under the Plan the Company and its participating subsidiaries may be required to withhold taxes with respect to all or a portion of the difference between the fair market value of the Common Stock purchased and its purchase price, and each participant agrees that such taxes may be withheld from compensation otherwise payable to such participant. It is intended that tax withholding will be accomplished in such a manner that the full amount of payroll deductions elected by the participant under Article 7 will be used to purchase Common Stock. However, if amounts sufficient to satisfy applicable tax withholding obligations have not been withheld from compensation otherwise payable to any participant, then, notwithstanding any other provision of the Plan, the Company may withhold such taxes from the participant’s accumulated payroll deductions and apply the net amount to the purchase of Common Stock, unless the participant pays to the Company, prior to the exercise date, an amount sufficient to satisfy such withholding obligations. Each participant further acknowledges that the Company and its participating subsidiaries may be required to withhold taxes in connection with the disposition of stock acquired under the Plan and agrees that the Company or any participating subsidiary may take whatever action it considers appropriate to satisfy such withholding requirements, including deducting from compensation otherwise payable to such participant an amount sufficient to satisfy such withholding requirements or conditioning any disposition of Common Stock by the participant upon the payment to the Company or such subsidiary of an amount sufficient to satisfy such withholding requirements.

ARTICLE 22 - GOVERNMENTAL REGULATIONS.

The Company’s obligation to sell and deliver shares of Common Stock under the Plan is subject to the approval of any governmental authority required in connection with the authorization, issuance or sale of such shares.

Government regulations may impose reporting or other obligations on the Company with respect to the Plan. For example, the Company may be required to identify shares of Common Stock issued under the Plan on its stock ownership records and send tax information statements to employees and former employees who transfer title to such shares.

ARTICLE 23 - GOVERNING LAW.

The validity and construction of the Plan shall be governed by the laws of the State of Delaware, without giving effect to the principles of conflicts of law thereof.

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ARTICLE 24 - APPROVAL OF BOARD OF DIRECTORS AND STOCKHOLDERS OF THE COMPANY.

The Plan was adopted by the Board of Directors on September 28, 1995 and was approved by the stockholders of the Company as of October 16, 1995.

The Plan was amended and restated by the Board of Directors on June 14, 2000 to, effective January 1, 2001, a) delete a requirement in Article 3 that employees have completed one year of employment to be eligible to participate in the Plan and b) increase the maximum amount of payroll deductions in Article 8 from 5% to 10% of such employee’s total compensation.

No stockholder approval was required.

The Plan was further amended and restated by the Board of Directors on January 31, 2002 to, effective July 1, 2002, change the Payment Periods to periods commencing on July 16 and January 16 of each year and ending on February 1 and August 1 of each year.

No stockholder approval was required.

The Plan was further amended by the Board of Directors on June 27, 2002 to, effective July 1, 2002, revise the definition of the Option Price so that the Option Price per share is rounded up to the nearest whole cent.

No stockholder approval was required.

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EX-10.11

EXHIBIT 10.11

WHEREVER CONFIDENTIAL INFORMATION IS OMITTED HEREIN (SUCH OMISSIONS ARE DENOTED BY AN ASTERISK), SUCH CONFIDENTIAL INFORMATION HAS BEEN SUBMITTED SEPARATELY TO THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT.

EXECUTION COPY

PARTICIPATION AGREEMENT

DATED AS OF APRIL 23, 2002

AMONG

CITRIX SYSTEMS, INC.,

AS LESSEE,

CITRIX CAPITAL CORP., AS GUARANTOR,

SELCO SERVICE CORPORATION,

AS LESSOR,

KEY CORPORATE CAPITAL INC.

AS LENDER,

AND

KEY CORPORATE CAPITAL INC.,

AS COLLATERAL AGENT AND ADMINISTRATIVE AGENT

LEASE FINANCING OF CORPORATE HEADQUARTERS FACILITY LOCATED

IN FT. LAUDERDALE, FLORIDA AND OTHER PROPERTIES FROM TIME TO TIME

TABLE OF CONTENTS

	Page
ARTICLE I DEFINITIONS; INTERPRETATION	2
Section 1.1. Definitions; Interpretation	2
ARTICLE II DOCUMENTATION DATE	2
Section 2.1. Documentation Date	2
ARTICLE III FUNDING OF ADVANCES	4
Section 3.1. Advances	4
Section 3.2. Lessor’s Commitments	4
Section 3.3. Lender’ Commitments	4
Section 3.4. Procedures for the Advances	5
Section 3.5. Currency of Advances and Payments	5
ARTICLE IV YIELD; INTEREST; FEES	5
Section 4.1. Calculation of Basic Rent	5
Section 4.2. Interest on the Loans	5
Section 4.3. Yield	6
Section 4.4. Computation of Interest and Yield; Duration of Interest Periods	6
Section 4.5. Reductions in Commitments and Prepayments	7
Section 4.6. Fees	7
Section 4.7. Place and Manner of Payments	8
ARTICLE V CERTAIN INTENTIONS OF THE PARTIES	8
Section 5.1. Intent	8
Section 5.2. Amounts Due Under the Lease	8
ARTICLE VI CONDITIONS TO CLOSING DATES	9
Section 6.1. Closing Date	9
ARTICLE VII DISTRIBUTIONS	12
Section 7.1. Basic Rent	12
Section 7.2. Purchase Payments by the Lessee	12
Section 7.3. Payment of Maximum Recourse Amount	13
Section 7.4. Sales Proceeds of Remarketing of Properties	13
Section 7.5. Distribution of Payments After an Event of Default	13
Section 7.6. Casualty and Condemnation Amounts	14
Section 7.7. Supplemental Rent	14
Section 7.8. Other Payments	15
Section 7.9. Order of Application	15
Section 7.10. Payments to Payment Account	15
Section 7.11. Other Payments or Prepayments	15
Section 7.12. Sharing of Payments	15

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TABLE OF CONTENTS

(CONTINUED)

ARTICLE VIII REPRESENTATIONS	16
Section 8.1. Representations of the Obligors	16
Section 8.2. Representations of the Participants	20
ARTICLE IX PAYMENT OF CERTAIN EXPENSES	21
Section 9.1. Payment of Costs and Expenses	21
Section 9.2. Brokers’ Fees and Stamp Taxes	22
ARTICLE X LESSEE COVENANTS	22
Section 10.1. Covenants of Lessee	22
ARTICLE XI LESSEE DIRECTIONS; CERTAIN RIGHTS OF LESSEE	24
Section 11.1. Lessee Directions	24
Section 11.2. Extension of Maturity Date and Expiration Date	24
ARTICLE XII TRANSFERS OF PARTICIPANTS’ INTERESTS	25
Section 12.1. Assignments by Participants	25
Section 12.2. Participations	26
Section 12.3. Pledge Under Regulation A	26
Section 12.4. Acknowledgment of Assignment of Lease and Rent	27
ARTICLE XIII INDEMNIFICATION	27
Section 13.1. Indemnification	27
Section 13.2. Nonconformance Payment	29
Section 13.3. Environmental Indemnity	30
Section 13.4. Proceedings in Respect of Claims	31
Section 13.5. General Tax Indemnity	32
Section 13.6. Indemnity Payments in Addition to Lease Obligations	37
Section 13.7. Increased Costs, etc	37
Section 13.8. Funding Losses	39
Section 13.9. Capital Adequacy	39
ARTICLE XIV CERTAIN COVENANTS AND AGREEMENTS	41
Section 14.1. Collateral	41
Section 14.2. Certain Events of Default	41
Section 14.3. Accounting Change	41
ARTICLE XV THE ADMINISTRATIVE AGENT	41
Section 15.1. Appointment	41
Section 15.2. Delegation of Duties	42
Section 15.3. Exculpatory Provisions	42
Section 15.4. Reliance by Administrative Agent	42
Section 15.5. Notice of Default	43
Section 15.6. Non-Reliance on Administrative Agent and Other Participants	43
Section 15.7. Administrative Agent in Its Individual Capacity	44
Section 15.8. Successor Administrative Agent	44

ii

TABLE OF CONTENTS

(CONTINUED)

ARTICLE XVI MISCELLANEOUS	44
Section 16.1. Survival of Agreements	44
Section 16.2. No Broker, etc	45
Section 16.3. Notices	45
Section 16.4. Counterparts	45
Section 16.5. Amendments; Termination; Supplement; Waiver	45
Section 16.6. Headings, etc	47
Section 16.7. Parties in Interest	47
Section 16.8. GOVERNING LAW	47
Section 16.9. Severability	47
Section 16.10.Liability Limited	47
Section 16.11.Further Assurances	48
Section 16.12.SUBMISSION TO JURISDICTION	48
Section 16.13.Setoff	48
Section 16.14.WAIVER OF JURY TRIAL	49
Section 16.15.Termination	49
Section 16.16.Confidentiality Concerning Lessee’s and Guarantor’s Proprietary Information	49
Section 16.17.Proprietary Information	50
SCHEDULES
SCHEDULE I    Commitments
SCHEDULE II    Notice Information, Wire Instructions, and Funding Offices
SCHEDULE III    Litigation
SCHEDULE IV    Existing Leases
EXHIBITS
EXHIBIT A    Form of Funding Request
EXHIBIT B    Basis for Calculation of Minimum Net Cash Covenant

iii

PARTICIPATION AGREEMENT

THIS PARTICIPATION AGREEMENT (this “PARTICIPATION AGREEMENT”), dated as of April 23, 2002, is entered into by and among CITRIX SYSTEMS, INC., Delaware corporation (the “COMPANY”), as the Lessee (in such capacity, the “LESSEE”), CITRIX CAPITAL CORP., a Nevada corporation, as Guarantor, (the “GUARANTOR”), SELCO SERVICE CORPORATION, an Ohio corporation, as the Lessor (the “LESSOR”), and KEY CORPORATE CAPITAL INC. a Michigan corporation, as Lender (the “LENDER”), as administrative agent for the Participants (together with its permitted successors and assigns in such capacity, the “ADMINISTRATIVE AGENT”), and as collateral agent (the “COLLATERAL AGENT”).

W I T N E S S E T H:

WHEREAS, the Company wishes to obtain the use of Land and Improvements located in Ft. Lauderdale, Florida and from time to time the use of Land and Improvements located throughout the United States;

WHEREAS, the Participants, acting through the Lessor, are willing to acquire the Properties;

WHEREAS, the Lessee will lease from the Lessor the Lessor’s interests in each Property pursuant to the Lease entered into contemporaneously herewith between the Lessor and the Lessee;

WHEREAS, to secure the financing contemplated hereby: (a) the Lessor will have the benefit of a first priority Lien on all of the right, title and interest of the Lessee in each Property, (b) the Lender will have the benefit of (i) a Lien on the Lessor’s right, title and interest in each Property and (ii) an assignment of certain of the Lessor’s rights against the Lessee under the Lease and (c) the Participants will have the benefit of a first priority Lien on the Collateral.

WHEREAS, the Guarantor will execute and deliver the Guaranty pursuant to which the Guarantor fully guarantees all obligations of the Lessee

NOW, THEREFORE, in consideration of the mutual agreements contained in this Participation Agreement and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

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Participation Agreement

ARTICLE I

DEFINITIONS; INTERPRETATION

SECTION 1.1.Definitions; Interpretation. Unless the context shall otherwise require, capitalized terms used and not defined herein shall have the meanings assigned thereto in Appendix A hereto for all purposes hereof (as such Appendix A may be amended, supplemented, amended and restated or otherwise modified from time to time, “APPENDIX A”); and the rules of interpretation set forth in Appendix A shall apply to this Participation Agreement.

ARTICLE II

DOCUMENTATION DATE

SECTION 2.1 Documentation Date. The Documentation Date (the “DOCUMENTATION DATE”) for the transactions contemplated by this Participation Agreement shall be deemed to have occurred as of the date of this Participation Agreement, subject to satisfaction of the following conditions precedent:

(a) Participation Agreement. This Participation Agreement shall have been duly authorized, executed and delivered by the parties hereto.

(b) Lease. The Lease shall have been duly authorized, executed and delivered by the Lessor and the Lessee.

(c) Lease Supplement. The base form of the Lease Supplement shall have been approved by the Lessee and the Lessor and such form is attached to the Lease as Exhibit I.

(d) Loan Agreement. The Loan Agreement shall have been duly authorized, executed and delivered by the parties thereto.

(e) Pledge Agreement. The Pledge Agreement shall have been duly authorized, executed and delivered by the parties thereto.

(f) Guaranty. The Guaranty shall have been duly authorized, executed and delivered by the parties thereto.

(g) Assignment of Lease and Rent. The Assignment of Lease and Rent (attached hereto as Exhibit A) shall have been duly authorized, executed and delivered by the Lessor, as assignor, to the Administrative Agent, as assignees.

(h) Fee Letter. The Fee Letter shall have been duly authorized, executed and delivered by the parties thereto.

(i) Documents of Lessee. Each Participant and the Administrative Agent shall have received the following:

(i) Incumbency Certificate. An incumbency certificate for each of the Guarantor and the Lessee, which shall identify by name and title and bear the signature of the officers of the Guarantor and the Lessee authorized to sign the Operative

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Documents to which the Guarantor and the Lessee is or shall be a party, which certificates shall be duly authorized by officers of the Guarantor and Lessee, respectively, upon which certificate the Participants and the Administrative Agent shall be entitled to rely until informed of any change in writing by the Lessee, as applicable.

(ii) Corporate Documents. A copy of the certificate of incorporation and by-laws of each of the Guarantor and Lessee, together with all amendments thereto, certified to be true and complete as of a recent date by the appropriate Governmental Authority.

(iii) Resolutions; Corporate Action. Copies of resolutions or corporate actions of the Guarantor and the Lessee approving the transactions contemplated by the Operative Documents, and authorizing the execution and delivery by the Guarantor and the Lessee of each Operative Document to which it is or shall be a party, certified by an authorized officer of the Guarantor and the Lessee as of the Documentation Date to be true and correct and in force and effect as of such date.

(iv) Good Standing. A certificate of good standing, existence or its equivalent for each of the Guarantor and the Lessee, certified as of a recent date by the appropriate Governmental Authority.

(j) Opinion of Counsel to the Guarantor and the Lessee. Each Participant shall have received an opinion of counsel for the Guarantor and the Lessee, dated the Documentation Date and addressed to each Participant, in form and substance reasonably satisfactory to the Administrative Agent.

(k) Representations and Warranties. On the Documentation Date, the representations and warranties of the Lessee and the Guarantor set forth in the Operative Documents (or in certificates delivered pursuant thereto) executed by either thereof shall be true and correct in all material respects as though made on and as of such date, except to the extent such representations or warranties relate solely to an earlier date, in which case such representations and warranties shall have been true and correct in all respects on and as of such earlier date.

All documents and instruments required to be delivered pursuant to this Section 2.1 shall be or deemed to be delivered at the offices of Bingham Dana in New York, New York, or at such other location as may be determined by the Administrative Agent, the Participants and the Lessee.

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ARTICLE III

FUNDING OF ADVANCES

SECTION 3.1 Advances.

(a) Advances. Subject to the conditions and terms hereof, the Lessor shall take the following actions at the written request of the Lessee:

subject to the terms hereof, the Lessor shall make Advances in Dollars (out of funds provided by the Lessor and the Lenders) directly to the Lessee or to any Person at the express direction of the Lessee for the purpose of: (a) financing the payment of Transaction Expenses through the applicable Closing Date incurred in connection with the acquisition of each Property, and (b) financing the payment of the Acquisition Costs; provided, that the Lessor shall not be required to make any Advance if, after giving effect thereto, the aggregate amount of all such Advances would exceed the aggregate Commitments of Lessor and the Lender.

(b) Limitation on Advances. No Advance shall be made if, after giving effect thereto, the aggregate outstanding Loans and Lessor Amounts would exceed the aggregate Commitment of the Participants. No Advance shall be made after the Closing Date for the Florida Property. Any amounts repaid under the terms of the Operative Documents may not be reborrowed.

(c) Acknowledgment of Advances. Each of the Guarantor and the Lessee hereby acknowledges and agrees, for the benefit of each Participant and the Administrative Agent, that: (i) each Advance made hereunder, is made for the benefit of, and at the request of the Lessee, (ii) the entire amount of each Advance made hereunder is allocable to the acquisition of Land and Improvements thereon and the financing of fees described in Section 4.6(b) and shall constitute part of the Lease Balance, and (iii) the Lessee shall pay in full on the Expiration Date all of its obligations under the Lease which obligations are intended to equal the aggregate outstanding amount of Advances made by the Lessor (or deemed made) hereunder less any amount repaid to the Participants, subject to the limitations on recourse set forth in Article XX of the Lease.

SECTION 3.2 Lessor’s Commitments. Subject to the conditions and terms hereof, the Lessor shall make available to the Lessee, at the request of the Lessee on the Closing Date for the Florida Property an amount (the “LESSOR AMOUNT”) in immediately available funds equal to the Lessor Percentage of such Advance requested on such date. The Lessor shall not be obligated to make available the Lessor Amount if the requested Lessor Amount would exceed the Lessor’s Commitment.

SECTION 3.3 Lender’s Commitments. Subject to the conditions and terms hereof the Lender shall make Loans to the Lessor at the request of the Lessee on the Closing Date for the Florida Property in an aggregate amount in immediately available funds equal to the Loan Percentage of the Advance requested on such date. No Lender shall be obligated to make any Loan if, after giving effect to the proposed Loan, the aggregate outstanding amount of such Loans made by such Lender would exceed such Lender’s applicable Commitment.

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SECTION 3.4 Procedures for the Advances.

(a) General Procedures. With respect to each funding of an Advance, the Lessee shall give the Administrative Agent and the Lessor prior written notice pursuant to a Funding Request substantially in the form of Exhibit A hereto (a “FUNDING REQUEST”) which Funding Request shall be delivered to the Administrative Agent not later than 12:00 noon, New York time, three (3) Business Days prior to the proposed Closing Date, specifying: (i) the proposed Closing Date, (ii) the amount requested for the Advance, (iii) the allocation of the Advance requested thereunder (including any portion of such Advance to be made for the purpose of paying Transaction Expenses) for Acquisition Costs and (iv) each Person to receive funds pursuant to such Funding Request. The Lessor shall calculate the amounts of the Lessor Amounts, Loans required to fund the requested Advance. Each Advance funded hereunder shall be funded pro rata by each of the Participants in proportion to their respective Commitments. Each Funding Request delivered by the Lessee shall be irrevocable and binding. (b) Use of Proceeds of the Advances. Each Advance will be made to finance the acquisition of Parcels of Land and Improvements thereon and to pay Transaction Expenses.

(b) Alternate Rates. In the event that the Lessor is unable to obtain a LIBO Rate for any Interest Period, the Lessor and the Lender shall make available Lessor Amounts and Loans, as the case may be, as Base Rate Loans and Lessor Amounts. Such Lessor Amounts and Loans shall be maintained until the earliest practicable date on which the Lessor and the Lender shall be able to obtain a LIBO Rate for such Lessor Amount and Loans, at which time such Base Rate Loans and Lessor Amounts shall convert to LIBO Rate Loans and Lessor Amounts.

SECTION 3.5 Currency of Advances and Payments. The Dollar shall be currency of each Advance. All payments of Basic Rent and Supplemental Rent shall be made in Dollars.

ARTICLE IV

YIELD; INTEREST; FEES

SECTION 4.1 Calculation of Basic Rent. Basic Rent shall be payable from time to time on each Basic Rent Payment Date in an amount equal to the sum of (a) all interest then due on the Loan, as calculated in accordance with Section 4.2 and (b) all Yield then due on the Lessor Amounts, as calculated in accordance with Section 4.3.

SECTION 4.2 Interest on the Loans.

(a) The Loans shall accrue interest during each Interest Period at a rate per annum equal to the then applicable Interest Rate for such Loan. The Loan shall, to the extent commercially possible, be made and continued as a LIBO Loan.

(b) If all or a portion of (i) the principal amount of the Loans, (ii) any interest payable on the Loans or (iii) any other amount payable to the Lenders hereunder (whether in respect of interest, fees or other amounts) shall not be paid when due (whether at the stated maturity thereof, by acceleration or otherwise), then such overdue amount shall bear interest, payable on demand, at a rate per annum which is equal to the Overdue Rate (or if no rate is applicable, whether in respect of interest, fees or other amounts,

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then the lesser of (A) the sum of (i) ***% plus the Base Rate or (B) the highest rate permitted by Applicable Law (if any)).

(c) All interest on the Loans and all other amounts due with respect to the Loans shall be distributed by the Administrative Agent to the Lender in accordance with Article VII.

(d) During the Basic Term, accrued interest on the Loans shall be due and payable (i) on each Basic Rent Payment Date, (ii) on the date of any payment or prepayment, in whole or in part, of any Loan, on the Loan so paid or prepaid and (iii) on the Maturity Date.

(e) The outstanding aggregate principal amount of Loans, if not sooner repaid in accordance with the provision of the Operative Documents, shall be repaid in full on the Maturity Date.

SECTION 4.3 Yield. The amount of the Lessor Amounts outstanding from time to time shall accrue yield (“YIELD”) at a rate per annum equal to the Yield Rate. All Lessor Amounts shall, to the extent commercially possible, be made and continued as LIBO Lessor Amounts.

(a) If all or a portion of (i) any Lessor Amount, (ii) any Yield payable on any Lessor Amount, or (iii) any other amount payable to the Lessor hereunder (whether in respect of interest, fees or other amounts) shall not be paid when due (whether at the stated maturity thereof, by acceleration or otherwise), then such overdue amount shall bear interest, payable on demand, at a rate per annum which is equal to the Overdue Rate (or if no rate is applicable, whether in respect of interest, fees or other amounts, then the lesser of (A) the sum of (i) ***% plus the Base Rate or (B) the highest rate permitted by Applicable Law (if any)).

(b) All Yield on the Lessor Amounts and all other amounts due with respect to the Lessor Amounts shall be distributed by the Administrative Agent in accordance with Article VII.

(c) During the Basic Term, accrued Yield shall be due and payable (i) on each Basic Rent Payment Date, (ii) on the date of any payment or prepayment, in whole or in part, of any Lessor Amount, on the Lessor Amount so paid or prepaid and (iii) on the Maturity Date.

SECTION 4.4 Computation of Interest and Yield; Duration of Interest Periods.

(a) Interest on the Loans shall be calculated as set forth in the Loan Agreement. Yield on the Lessor Amounts shall be calculated on the basis of a 360-day year for the actual days elapsed at all times that the Yield Rate is determined by reference to the LIBO Rate or the Base Rate (when determined by reference to the Federal Funds Rate) and a 365- or 366-day year basis where the Base Rate in determined by reference to the Prime Rate. Any change in the Interest Rate or Yield Rate resulting from a change in the Base Rate or LIBO Rate shall become effective as of the opening of business on the day on which such change becomes effective. Each determination of the Interest Rate or Yield Rate by the Administrative Agent pursuant to any provision of this Participation Agreement or any other Operative Document shall be binding on the Lessee and the Participants in the absence of demonstrable error.

(b) During the Basic Term, Lessee may designate by written notice to the Administrative Agent, from time to time, (a) the duration of the Interest Period next commencing, as a period of one month, three months or six months, which notice shall be given (except with respect to the initial Advance)

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at least ten (10) days prior to the commencement of such Interest Period. Any Interest Period so designated by Lessee shall remain in effect for the entire Interest Period specified in Lessee’s notice to the Administrative Agent (provided such Interest Period commences at least ten days after the Administrative Agent’s receipt of such notice) and for all subsequent Interest Periods until a new designation becomes effective in accordance with the provisions set forth in this Section 4.4(b). Notwithstanding the foregoing, however: (1) Lessee shall not be entitled to designate the duration of an Interest Period that would cause an Interest Period to extend beyond the Maturity Date; (2) changes in the Interest Period shall become effective only upon the commencement of a new Interest Period; (3) if Lessee fails to designate the duration of any Interest Period consistent with the foregoing requirements, or if an Event of Default shall have occurred and be continuing on the third Business Day preceding the commencement of any Interest Period, the duration of such Interest Period shall be deemed to be one month and (4) the Lessee may not have more than three (3) concurrent Interest Periods in effect at anytime during the Basic Term.

SECTION 4.5 Prepayments.

(a) The Lessee shall have the right to prepay an amount equal to the Loans and Lessor Amounts in whole or in part from time to time pursuant to the exercise of purchase options permitted under the Lease. The application of each such prepayment with respect to Lease Balance shall be determined by the Lessee and the Lessor.

(b) If the Advance with respect to the acquisition of the Florida Property is in an amount greater than the Acquisition Cost for the Florida Property, then not later than sixty (60) days from the Closing Date the Lessee may prepay an amount equal to the difference between the amount of such Advance and the Acquisition Cost of the Florida Property. Any amounts prepaid pursuant to this Section 4.5(b) shall be applied to pay the Loans and the Lessor Amounts in proportion to the then effective Loan Percentage and the Lessor Percentage.

(c) Mandatory Prepayments.

(i) If at any time the sum of the aggregate amount of outstanding Loans and Lessor Amounts shall exceed the Aggregate Commitment Amount, the Lessee shall immediately make payment on the Loans or Lessor Amounts in an amount sufficient to eliminate such excess. Payments required to be made hereunder shall be applied to Base Rate Loans or Base Rate Lessor Amounts and then to LIBO Loans or Lessor Amounts in direct order of their Interest Period maturities.

(ii) All amounts payable by the Lessee pursuant to Article XV, XVI, XVIII or XX of the Master Lease shall be used to prepay the Loans and shall be applied to the Loans and the Lessor Amounts in the manner set forth in Article VII.

(d) Notice. The Lessee will provide notice to the Lessor and the Administrative Agent (which shall promptly notify the Lenders) of any proposed prepayment by 12:00 noon (New York City time) at least three (3) Business Days prior to the date of such prepayment.

SECTION 4.6 Fees. The Lessee agrees to pay the fees set forth in the Fee Letter.

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SECTION 4.7 Place and Manner of Payments. Except as otherwise specifically provided herein, all payments to be made by the Lessee to the Lessor hereunder shall be made to the Administrative Agent (as assignee of the Lessor pursuant to the Assignment of Lease and Rent) in Dollars in immediately available funds, without offset, deduction, counterclaim or withholding of any kind, to the Payment Account not later than 1:00 p.m. (New York City time) on the date when due. Payments received after such time shall be deemed to have been received on the next succeeding Business Day. The Lessee shall, at the time it makes any payment under any Operative Document, specify to the Lessor the Loan and Lessor Amounts, fees or other amounts payable by the Lessee hereunder to which such payment is to be applied (and in the event that it fails so to specify, following receipt of notice from the Lessor of such failure, or if such application would be inconsistent with the terms hereof, the Lessor shall distribute such payment to the Participants in accordance with the provisions of the Operative Documents in respect of obligations owing by the Lessee. The Administrative Agent will distribute such payments to the Participants in accordance with Article VII if any such payment is received prior to 1:00 p.m. (New York City time) on a Business Day in like funds as received prior to the end of such Business Day, and otherwise the Administrative Agent will distribute such payment to the Participants on the next succeeding Business Day. Whenever any payment hereunder shall be stated to be due on a day which is not a Business Day, the due date thereof shall be extended to the next succeeding Business Day (subject to accrual of interest (at the applicable Base Rate or LIBO Rate) and fees for the period of such extension).

ARTICLE V

CERTAIN INTENTIONS OF THE PARTIES

SECTION 5.1 Intent. Is the intent of the parties that: (a) the Lease constitutes an operating lease from the Lessor to the Lessee for purposes of the Lessee’s financial reporting, (b) the Lease, the other Operative Documents and other transactions contemplated hereby will result in the Lessee being recognized as the owner of the Properties for Federal and state Tax and bankruptcy purposes, (c) the obligations of the Lessee to pay Basic Rent and any part of the Lease Balance shall be treated as payments of interest and principal, respectively, for Federal and state Tax and bankruptcy purposes and (d) the Lease and the Security Documents grant to the Lessor a lien on the Lessee’s interest in each Property and the Collateral. Each of the parties hereto agrees that it will not, nor will it permit any Affiliate to at any time, take any action or fail to take any action with respect to the preparation or filing of any Tax return, including an amended Tax return, to the extent that such action or such failure to take action would be inconsistent with the intention of the parties expressed in this Section 5.1. Specifically, without limiting the generality of the foregoing, the parties hereto intend and agree that in the event of any insolvency or receivership proceedings or a petition under the United States bankruptcy laws or any other applicable insolvency laws or statute of the United States of America or any State or Commonwealth thereof affecting the Lessee or any Participant or any collection actions, the transactions evidenced by the Operative Documents shall be regarded as loans made by the Participants to the Lessee.

SECTION 5.2 Amounts Due Under the Lease. Anything else herein or elsewhere to the contrary notwithstanding, it is the intention of the Lessee, the Lessor and the Lender that: (i) the amount and timing of installments of Basic Rent due and payable from time to time from the Lessee under the Lease shall be equal to the aggregate payments due and payable as interest on the Loans and Yield on the Lessor Amounts

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on each Basic Rent Payment Date; (ii) if the Lessee elects the Purchase Option in full, then the Loan, the Lessor Amounts, all accrued and unpaid interest, Yield and Fees thereon and all other obligations of the Lessee owing to the Lessor and the Lender shall be due and payable in full by the Lessee as provided in the Lease; (iii) if the Lessee properly elects the Remarketing Option, the maximum amount the Lessee shall be required to pay to the Lessor is the Maximum Recourse Amount; and (iv) upon a Lease Event of Default, the amounts then due and payable by the Lessee under the Lease shall be the Lease Balance and such other amounts as are expressly provided for in the Operative Documents.

ARTICLE VI

CONDITIONS TO CLOSING DATES

SECTION 6.1 Closing Date. The occurrence of an Advance on each Closing Date and the obligation of the Participants to perform their respective obligations, if any, on such date shall be subject to the satisfaction or waiver by the Lessor of the following conditions precedent set forth in this section on or before such date:

(a) Documentation Date. The conditions with respect to the occurrence of the Documentation Date shall have been satisfied or waived.

(b) Lease; Lease Supplement. Each of the Lease and a Lease Supplement with respect to Property or Properties to be acquired shall have been duly authorized, executed and delivered by the Lessor and the Lessee.

(c) Assignment of Lease and Rent. An Assignment of Lease and Rent shall have been duly authorized, executed and delivered by the parties thereto with respect to the Property being acquired on such Closing Date.

(d) Lessor Financing Statements. The Lessee shall have delivered to the Administrative Agent all Lessor Financing Statements relating to the Property being acquired on such Closing Date as the Administrative Agent or any Participant may reasonably request in order to perfect the interests of the Administrative Agent and the Participants under the Security Documents and in any fixtures or personal property constituting part of the Property.

(e) Recordation of Lease Supplement, Assignment of Lease and Rent, Lessor Financing Statements. Each of the Participants shall have received evidence or a commitment reasonably satisfactory to it that each of (i) the applicable Lease Supplement, (ii) the applicable Assignment of Lease and Rent and (iii) the applicable Lessor Financing Statements described in clause (d) above, and had been, or are being, recorded in a manner sufficient to properly perfect each of their interests therein.

(f) Evidence of Insurance. The Lessor and the Administrative Agent shall have received evidence reasonably satisfactory to them that the insurance maintained by the Lessee satisfies the requirements set forth in Section XIII of the Lease, setting forth the respective coverage, limits of liability, carrier and period of coverage with respect to the Property being acquired on such Closing Date.

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(g) Environmental Audit. Not earlier than one month and not later than ten (10) days prior to such Closing Date the Lessor shall have received an Environmental Audit dated no earlier than one month prior to such Closing Date with respect to the Property being acquired on such Closing Date in form and substance reasonably satisfactory to the Lessor.

(h) Deed; Title Insurance. The Lessor shall have received a deed for the Property in appropriate form for the jurisdiction in which the Property is located. The Lessee shall have delivered to the Lessor a commitment from the Title Company to deliver an ALTA extended leasehold and mortgagee title insurance policy covering the applicable Property in favor of the Lessor and the Lender confirming title in Lessor, subject only to Permitted Liens, such policy in an amount not less than the Acquisition Cost and to be reasonably satisfactory to the Lender and the Lessor with such customary endorsements issued by the title company as a routine matter, if reasonably requested by the Lessor or any Lender.

(i) Taxes. All taxes, fees and other charges in connection with the execution, delivery, recording, filing and registration of the Operative Documents shall have been paid or provisions for such payment shall have been made by the Lessee to the reasonable satisfaction of the Lessor and the Lender.

(j) Funding Request. The Lessor shall have received a fully executed counterpart of the applicable Funding Request in accordance with Section 3.4.

(k) Fees. All fees due and payable by the Lessee at the time of any Advance pursuant to the Operative Documents shall have been paid, or will be paid from the proceeds of such Advance; provided that such fees shall not result in the Lessor Percentage being less than 10% of the Property Cost.

(l) Representations and Warranties. The representations and warranties of the Lessee and the Guarantor herein and in each of the other Operative Documents shall be true and correct in all material respects as though made on and as of such date, except to the extent such representations or warranties relate solely to an earlier date, in which case such representations and warranties shall have been true and correct in all material respects on and as of such earlier date.

(m) No Event of Default. There shall not have occurred and be continuing any Event of Default.

(n) Appraisal. The Lessor and Administrative Agent shall have received an Appraisal of the applicable Property, in form and substance reasonably satisfactory to the Participants.

(o) Notes. Each Note evidencing a Loan by a Lender shall have been executed by the Lessor and delivered to the appropriate Lender.

(p) Authorized Officer’s Certificates. Each Participant shall have received an Authorized Officer’s Certificate of the Guarantor and the Lessee, dated as of the Closing Date, stating that (a) to such Authorized Officer’s knowledge each and every representation and warranty of the Guarantor or the Lessee, as applicable, contained in each Operative Document to which it is a party is true and correct in all material

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respects on and as of the Closing Date; (b) to such Authorized Officer’s knowledge no Unmatured Default or Event of Default has occurred and is continuing under any Operative Document to which the Guarantor or the Lessee is a party, as applicable; (c) to such Authorized Officer’s knowledge each Operative Document to which the Guarantor or the Lessee, as applicable, is a party is in full force and effect; and (d) the Lessee have duly performed and complied with all conditions contained herein or in any other Operative Document required to be performed or complied with by it on or prior to the respective Closing Date.

(q) Delivery of Financial Statements. The Lessor and Administrative Agent shall have received printed or electronic copies of the financial statements described in Section 8.1(d).

(r) Opinion of Local Counsel. The Lessor and the Administrative Agent shall have received an opinion of counsel with respect to enforceability of the Operative Documents entered into on such Closing Date, in form and substance reasonably satisfactory to the Lessor and Administrative Agent. Each Lender shall be authorized to rely on each such opinion.

(s) Litigation. Except as disclosed in writing to the Lessor and the Administrative Agent, there shall not be any actions, suits or proceedings pending or, to the knowledge of the Lessee threatened, with respect to the Lessee, the Properties, the Operative Documents or the transactions contemplated by the Operative Documents: (i) to set aside, restrain, enjoin or prevent the full performance of this Participation Agreement, the other Operative Documents or the transactions contemplated hereby or thereby or (ii) that question or challenge the validity of the Operative Documents or the rights or remedies of the Lessor or the other Participants with respect to the Lessee, the Properties or the Collateral under the Operative Documents.

(t) Governmental Approvals. All necessary Governmental Actions required by any Applicable Law for the purpose of authorizing the Lessor to acquire a leasehold interest in the applicable Property shall have been obtained or made and be in full force and effect.

(u) Collateral; Perfection Opinion. The Lessee shall have deposited, or shall have caused to be deposited by Guarantor and Lessee’s other Subsidiaries, with the Collateral Agent sufficient Collateral and the Lessor and the Lender shall have received an opinion of counsel from the jurisdiction wherein the Collateral is located as to the perfection of the Collateral Agent’s security interest in such Collateral and the creation of such security interest in form and substance satisfactory to the Administrative Agent.

(v) Existing Leases. With respect to the Florida Property, the Lessee shall have delivered to the Lessor and the Administrative Agent true and complete copies of each of the leases (including all amendments thereof, supplements thereto and waivers applicable thereto) conveying possessory rights in the Florida Property in effect as of the Closing Date therefor and each such lease is identified on Schedule IV hereto.

(w) Transaction Expenses. All Transaction Expenses due and payable shall have been paid or shall be paid out of the proceeds of the Advance made on each Closing Date.

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(x) If necessary to effect a conveyance of the Property on the Closing Date, the Lessor and the Lessee shall have executed and delivered an Assignment of Purchase Contract in form and substance satisfactory to them.

All documents and instruments required to be delivered pursuant to this Section 6.1 shall be or deemed to be delivered at the New York offices of Bingham Dana LLP, or at such other location as may be determined by the Administrative Agent, the Lessor, the Lender and the Lessee.

ARTICLE VII

DISTRIBUTIONS

SECTION 7.1 Basic Rent. Payment of Basic Rent (and any payment of interest on overdue installments of Basic Rent) received by the Administrative Agent shall be distributed by the Administrative Agent, pari passu to the Lender for application to the interest due on the Loans and to the Lessor to pay the Yield then due on the Lessor Amounts (including, in each case, any overdue interest or Yield to the Lender or the Lessor).

SECTION 7.2 Purchase Payments by the Lessee. Payment of the Lease Balance received by the Administrative Agent as a result of:

(a) the purchase of any Property in connection with the exercise of the Purchase Option under Section 18.1 of the Lease or compliance with the obligation to pay the amounts specified in Section 20.1(k) of the Lease, or

(b) failure to fulfill one or more of the Return Conditions pursuant to Article XX of the Lease, or

(c) the payment of the Lease Balance in accordance with Section 15.1 of the Lease, or

d) the payment of the Lease Balance from the proceeds of any Casualty or Condemnation pursuant to Section 14.1 of the Lease, shall be distributed by the Administrative Agent in the following order of priority:

first, so much of such payment or amount as shall be required to reimburse the Administrative Agent and the Participants for any tax, cost or expense (including costs of legal expense) incurred by the Administrative Agent or any Participant as a direct result of conveying title to the Property to Lessee or its designee (to the extent the Lessee is obligated to pay or reimburse such items pursuant to the Operative Documents and it is not previously reimbursed and to the extent incurred in connection with any duties as the Administrative Agent, Lessor or as a Lender), shall be distributed to such Person for its own account;

second, to the Lenders for application to repay in full all outstanding Loans with respect to the Property being purchased and all accrued interest thereon;

third, to the Lessor, for application to repay outstanding Lessor Amounts and all accrued Yield thereon;

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fourth, so much of such payment or amount as shall be required to reimburse the Administrative Agent and Participants for any tax, cost, expense (including remarketing expense) incurred by the Administrative Agent or any Participant; and

fifth, the balance, if any, of such payment or amounts remaining after satisfaction of all the Lessee’s liabilities under the respective Operative Documents shall be promptly distributed to, or as directed by, the Lessee.

SECTION 7.3 Payment of Maximum Recourse Amount. Payment to the Administrative Agent of the Maximum Recourse Amount pursuant to Section 20.1(j) of the Lease upon the exercise of the Remarketing Option shall be distributed as follows:

first, to the Lenders for application to repay in full all outstanding Loans and all accrued interest thereon;

second; to the Lessor.

SECTION 7.4 Sales Proceeds of Remarketing of Properties. Any payments received by the Administrative Agent as proceeds from the sale of any Property sold pursuant to the exercise of the Remarketing Option pursuant to Article XX of the Lease, together with any payment made as a result of an appraisal pursuant to Section 13.2 of this Participation Agreement, shall be distributed by the Lessor, after payment in full of the Loans by payment of the Maximum Recourse Amount plus any unpaid interest, in the funds so received in the following order of priority:

first, so much of such payments as shall be required to reimburse the Lessee for Permitted Remarketing Costs shall be distributed to the Lessee;

second, to the Lenders for application to pay in full the outstanding Loans plus any unpaid interest;

third, to the Lessor for application to pay in full the outstanding Lessor Amount plus any unpaid Yield;

fourth, so much of such payment or amount as shall be required to reimburse the Administrative Agent, and Participants for any tax, cost, expense (including remarketing expense) incurred by the Administrative Agent or any Participant; and

fifth, any excess to the Lessee.

SECTION 7.5 Distribution of Payments After an Event of Default.

(a) The proceeds derived from the sale of any Property as a result of the exercise of remedies after the occurrence of a Lease Event of Default, shall be distributed by the Administrative Agent as follows:

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first, so much of such payment or amount as shall be required to reimburse the Administrative Agent and Participants for any tax, cost, expense (including remarketing expenses) incurred by the Administrative Agent or any Participant;

second, so much of such payments or amounts as shall be required to pay the Lenders and the Lessor the amounts payable to them pursuant to any expense reimbursement or indemnification provisions of the Operative Documents shall be distributed to the Lenders and the Lessor without priority of one over the other in accordance with the amount of such payment or payments payable to each such Person;

third, to the Lenders to pay in full any outstanding Loans plus unpaid interest;

fourth, to the Lessor to pay in full any outstanding Lessor Amounts plus any unpaid Yield; and

fifth, any excess to the Lessee.

(b) All payments received and amounts realized by the Administrative Agent in connection with any Casualty or Condemnation during the continuance of a Lease Event of Default shall be distributed by the Administrative Agent as follows:

(i) in the event that the Required Participants elect to pay all or a portion of such amounts to the Lessee for the repair of damage caused by such Casualty or Condemnation in accordance with Section 14.1(a) of the Lease, then such amounts shall be distributed to the Lessee, and

(ii) in the event that the Required Participants elect or are required to apply all or a portion of such amounts to the purchase price of the applicable Property in accordance with Section 14.1(a) and Article XV of the Lease, then such amounts shall be distributed in accordance with clause (a) hereof.

SECTION 7.6 Casualty and Condemnation Amounts. Any amounts payable to the Administrative Agent as a result of a Casualty or Condemnation pursuant to Section 14.1 of the Lease and the Assignment of Lease and Rent shall be distributed as follows:

(a) all amounts payable to the Lessee for the repair of damage caused by such Casualty or Condemnation in accordance with Section 14.1(a) of the Lease shall be distributed to the Lessee, and

(b) all amounts that are to be applied towards the payment of the Lease Balance shall be distributed by the Administrative Agent first, to the Lender to repay the outstanding Loans and unpaid interest thereon and then to the Lessor to repay the outstanding Lessor Amounts and unpaid Yield thereon; provided, however, if any such payment relates to the termination of the transaction contemplated hereby or the liquidation or disposition of the applicable Property, such payment shall be distributed by the Lessor as provided in Section 7.5.

SECTION 7.7 Supplemental Rent. All payments of Supplemental Rent received by the Administrative Agent (excluding any amounts payable pursuant to the preceding provisions of this Article VII) shall be

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distributed promptly by the Administrative Agent upon receipt thereof to the Persons entitled thereto pursuant to the Operative Documents.

SECTION 7.8 Other Payments. Any payment received by the Administrative Agent for which no provision as to the application thereof is made in the Operative Documents or any payment is received pursuant to the purchase provisions of Section 18.1 of the Lease or elsewhere in this Article VII shall be distributed first, to the Lender to repay the outstanding Loans and unpaid interest thereon and then to the Lessor to repay the outstanding Lessor Amounts and unpaid Yield thereon; provided, however, if any such payment relates to the termination of the transactions contemplated hereby or the liquidation or disposition of the Property, such payment shall be distributed by the Lessor as provided in Section 7.5.

(a) Except as otherwise provided in the preceding provisions of this Article VII, all payments received and amounts realized by any Participant under the Lease or otherwise with respect to any Property to the extent received or realized at any time after indefeasible payment in full of all outstanding Loans and Lessor Amounts and all other amounts due and owing to the Administrative Agent or the Participants, shall be distributed forthwith by the Administrative Agent in the order of priority set forth in Section 7.5 or Section 7.6, as applicable.

(b) Except as otherwise provided in Section 7.1 and Section 7.2, any payment received by any Participant for which provision as to the application thereof is made in an Operative Document but not elsewhere in this Article VII shall be distributed forthwith by such Participant to the Person and for the purpose for which such payment was made in accordance with the terms of such Operative Document.

SECTION 7.9 Order of Application. To the extent any payment distributed to any Participant pursuant to Section 7.2, Section 7.3, Section 7.4, Section 7.5, or Section 7.6 is insufficient to pay in full the Participant Balance of any Participant plus all accrued interest and Yield (as applicable) thereon, then each such payment shall first be applied to accrued interest or Yield and then to principal on the Loans or the Lessor Amounts, as applicable.

SECTION 7.10 Payments to Payment Account. Except as otherwise expressly provided, all payments made pursuant to the Operative Documents shall be made to the Payment Account maintained at the Administrative Agent.

SECTION 7.11 Other Payments or Prepayments. Unless otherwise expressly provided herein, any payment or prepayment of principal of any Loan or Lessor Amount shall be allocated first, pro rata among the Lenders, without priority of one over the other, in accordance with their outstanding Loan Balance until the Loan Balance is paid in full and second, to the Lessor to be applied to the then outstanding Lessor Amounts.

SECTION 7.12 Sharing of Payments. Participants agree among themselves that, in the event that a Participant shall obtain payment in respect of any Loan or Lessor Amount or any other obligation owing to such Participant under the Operative Documents through the exercise of a right of setoff, banker’s lien or counterclaim, or pursuant to a secured claim under Section 506 of Title 11 of the United States Code or other security or interest arising from, or in lieu of, such secured claim, received by such Participant under any applicable bankruptcy, insolvency or other similar law or otherwise, or by any other means

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in excess of its pro rata share of such payment as provided for in this Participation Agreement, such Participant shall pay such excess amount to the Lenders to be distributed by the Lenders, as shall be equitable to the end that each Participant shares such payment in accordance with its respective ratable share as provided for in this Participation Agreement. The Participants further agree among themselves that if payment to a Participant obtained by such Participant through the exercise of a right of setoff, banker’s lien, counterclaim or other event as aforesaid shall be rescinded or must otherwise be restored, the Participant which shall have shared the benefit of such payment shall, return its share of that benefit (together with its share of any accrued interest payable with respect thereto) to the Participant whose payment shall have been rescinded or otherwise restored. The Lessee agrees that a Participant so purchasing such a participation may, to the fullest extent permitted by law, exercise all rights of payment, including setoff, banker’s lien or counterclaim, with respect to such participation as fully as if such Participant were a holder of such Loan or Lessor Amount or other obligation in the amount of such participation. Except as otherwise expressly provided herein, if a Participant shall fail to remit to any other Participant an amount payable by such Participant to the other Participant pursuant to the Operative Documents on the date when such amount is due, such payments shall be made together with interest thereon (at no additional expense to the Lessee) from the date such amount is due until the date such amount is paid to such other Participant at a rate per annum equal to the Federal Funds Effective Rate. If under any applicable bankruptcy, insolvency or other similar law, a Participant receives a secured claim in lieu of a setoff to which this Section 7.12 applies, such Participant shall, to the extent practicable, exercise its rights in respect of such secured claim in a manner consistent with the rights of the other Participant under this Section 7.12 to share in the benefits of any recovery on such secured claim.

ARTICLE VIII

REPRESENTATIONS

SECTION 8.1 Representations of the Obligors. Each of the Guarantor and the Lessee represents and warrants as of the date hereof and as of each Closing Date to the Administrative Agent and each Participant as follows:

(a) Corporate Existence and Standing. The Guarantor and the Lessee are each duly organized, validly existing and in good standing under the laws of its jurisdiction of organization and is in good standing and has all requisite authority to conduct its business in each jurisdiction in which its business is conducted, except where failure to have such good standing or authority would not result in the Lessee or the Guarantor being unable to perform in any material respect their respective obligations under the Operative Documents. The Lessee has all requisite authority to conduct its business in each State where a Property is located.

(b) Authorization and Validity. Each of the Guarantor and the Lessee have the requisite power and authority to execute and deliver the Operative Documents to which it is or will be a party and to perform its obligations thereunder. The execution and delivery by the Guarantor and the Lessee, of the Operative Documents to which it is or will be a party and the performance of its obligations thereunder have been duly authorized by proper proceedings, and assuming due authorization, execution and delivery by the other parties thereto, the Operative Documents constitute, or, when executed, will constitute, legal,

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valid and binding obligations of the Guarantor and the Lessee enforceable against such Persons in accordance with their terms, except as enforceability may be limited by (i) bankruptcy, insolvency or similar laws affecting the enforcement of creditors’ rights generally and (ii) general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law).

(c) No Conflict; Government Consent. The execution, delivery and performance by each of the Guarantor and the Lessee of the Operative Documents to which it is or will be a party will not violate any law, rule, regulation, order, writ, judgment, injunction, decree or award binding on it, or conflict with any organizational document or agreement of it, or require any government approval except where such violation, conflict or lack of approval would not result in the Guarantor or the Lessee being unable to perform in any material respect their respective obligations under the Operative Documents or result in the creation or imposition of any Lien, other than a Permitted Lien, on any of its material Properties pursuant to the terms of any such agreement.

(d) Financial Statements. The September 30, 2001 quarterly and December 31, 2001 annual consolidated financial statements of the Lessee and its consolidated Subsidiaries were prepared in accordance with GAAP in effect on the date such statements were prepared and fairly present the consolidated financial condition and operations of the Lessee and its Subsidiaries at such date and the consolidated results of their operations for the period then ended. Since September 30, 2001 there has been no change in the business, property, financial condition or results of operations of the Lessee which under Applicable Law were required to be disclosed, but which were not disclosed. The Lessee is not in default with respect to any material indebtedness which the Lessee has presently outstanding.

(e) Taxes. Each of the Lessee and its consolidated Subsidiaries have filed all United States federal tax return and all other tax returns or reports which are required to be filed and have paid all taxes due pursuant to said returns or pursuant to any assessment received by the Lessee or any of its Subsidiaries, except such taxes, if any, as are being contested in good faith and as to which adequate reserves have been provided. No tax liens have been filed and no claims are being asserted with respect to any such taxes which could result in a tax lien against the Lessee, other than tax liens or claims which would not in the aggregate exceed $2,000,000. The charges, accruals and reserves on the books of the Lessee and its Subsidiaries in respect of any taxes or other governmental charges are adequate in all respects. The Lessee has no knowledge of any pending but unassessed tax liability which could result in a tax liability to the Lessee other than a pending but unassessed tax liability which would not in the aggregate exceed $2,000,000.

(f) Litigation and Contingent Obligations. Except as disclosed in the Lessee’s most recent Form 10-K or 10-Q filed with the SEC or otherwise disclosed to the Administrative Agent in writing, there is no litigation, arbitration, governmental investigation, proceeding or inquiry pending or, to the knowledge of an officer of the Lessee, threatened against or affecting the Lessee or any of its Subsidiaries (including, without limitation, any such action involving Environmental Laws) which, in either case, could result in a liability against the Lessee, other than such litigation, arbitration, governmental investigation, proceeding or inquiry which would not exceed $2,500,000.

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(g) ERISA. Each of the Lessee’s Single or Multiemployer Plans, if any, has been maintained in material compliance with its terms and with the requirements of applicable requirements of law, and has been maintained, where required, in good standing with applicable governmental authorities. The Lessee has not incurred any obligation in connection with the termination of or withdrawal from any such plan. The present values of the accrued benefit liabilities (whether or not vested) under each such plan, if any, determined as of the end of the Lessee most recently ended fiscal year on the basis of reasonable actuarial assumptions, each of which is reasonable, did not exceed the current value of the assets of such plan allocable to such benefit liabilities.

(h) Regulations U and X. Margin stock (as defined in Regulation U) constitutes less than 25% of those assets of the Lessee and its Subsidiaries which are subject to any limitation on sale, pledge, or other restriction hereunder. The Guarantor is not engaged principally, and does not as one of its important activities engage, in the business of extending credit for the purpose of purchasing or carrying margin stock (within the meaning of Regulations U or X of the Board of Governors of the Federal Reserve System), and no part of the proceeds of any extension of credit under this Participation Agreement will be used to purchase or carry any such margin stock or to extend credit to others for the purpose of purchasing or carrying any such margin stock other than the purchase of margin stock from time to time in connection with transactions (i) authorized by the board of directors of the Lessee, (ii) either (A) authorized by the board of directors or other governing body of the Person which stock is being acquired or (B) involving less than 5% of the stock of any Person and (iii) which would not cause the Lessee to fail to be in compliance with the following sentence. Neither the Guarantor nor any Person acting on their behalf has taken or will take any action which will cause this Agreement or any of the Notes to violate any of said Regulations U or X, or any other regulation of the Board of Governors of the Federal Reserve System or to violate the Securities Exchange Act of 1934, in each case as now in effect or as the same may hereafter be in effect.

(i) Environmental Matters. The Lessee and each Property are in compliance in all material respects with all Environmental Laws other than those Environmental Laws with which noncompliance would result in an environmental liability not in excess of $2,500,000. To the knowledge of the Guarantor and the Lessee there are no Hazardous Materials located on or under any Property, except as disclosed in the Environmental Audit.

(j) Investment Company Act. Neither the Guarantor nor the Lessee is an “investment company” nor a company “controlled” by an “investment company”, within the meaning of the Investment Company Act of 1940, as amended.

k) Full Disclosure; Appraisal Data.

(i) To the knowledge of the Guarantor and the Lessee, all information heretofore furnished by the Guarantor and the Lessee to the Administrative Agent or any Participant for purposes of or in connection with this Participation Agreement or any of the other Operative Documents or any transaction contemplated hereby or thereby, taken as a whole is, and all such information hereafter furnished by the Guarantor and the Lessee to the Administrative Agent or any Participant, taken as a whole, will be, true and accurate in all material respects on the date as of which such information is stated or certified.

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(i) The information provided by the Guarantor and the Lessee to the Appraiser used for forming the basis for the conclusions set forth in the Appraisal delivered on Closing Date was, at the time of delivery, true and correct in all respects and neither the Guarantor nor the Lessee omitted any information known to either the Guarantor or the Lessee, at the time of delivery to the Appraiser, necessary to make such information not misleading.

(l) No Proceedings with Respect to the Properties. Each of the Guarantor and the Lessee represent that except as disclosed in Schedule III, there is no action, suit or proceeding (including any proceeding with respect to a condemnation or under any Environmental Law) pending or, to the best of its knowledge, threatened with respect to the Guarantor, the Lessee or any Property which adversely affects the use, operation, title to or Fair Market Sales Value of any Property.

(m) Separate Parcel. Each Parcel of Land is comprised of one or more separate parcels for all real estate tax and assessment purposes.

(n) Utilities. Upon the acquisition of each Property, all water, sewer, electric, gas, telephone and drainage facilities and all other utilities required for the applicable Property’s intended use will be installed and such Property will be connected pursuant to Necessary Permits (including any that may be required under applicable Environmental Laws).

(o) Licenses, Approvals, Necessary Permits, etc. All Necessary Permits, easements and rights-of-way, including proof and dedication of public rights of way, which are necessary and required for the use of the Properties as contemplated by the Lease have either been obtained from the appropriate Governmental Authorities having jurisdiction or from private parties, as the case may be, or will be obtained from the appropriate Governmental Authorities having jurisdiction or from private parties, as the case may be, prior to commencing any such construction, use or operation for which such license, approval, authorization, consent or permit is required.

(p) Title. Upon recording of the deed with respect to each Property in the applicable real estate records, the Lessor will have a valid fee interest in and to such Property, subject only to Permitted Liens.

(q) Perfection of Liens. (i) The Security Documents create a valid and enforceable Lien on each Property and the Collateral in favor of the Lessor, and (ii) upon the filing of the Lessor Financing Statements with the applicable Secretary of State and in the applicable real estate records, the Lessor will have a first priority perfected Lien (subject to Permitted Liens) on the Property (to the extent that the Property is of a type in which a perfected security interest can be obtained by such filing). No other filing, recording, registration or notice to any Governmental Authority will be necessary to establish, perfect and give record notice of the Lien on the Property in favor of the Lessor except for the filing of the Lessor Financing Statements described in the preceding sentence.

(r) Insolvency. Neither the Guarantor nor the Lessee is entering into the Operative Documents with the actual intent to hinder, delay or defraud its current or future creditors, nor does the

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Guarantor or the Lessee intend to or believe that it will incur, as a result of entering into this Participation Agreement and the transactions contemplated hereby, debts beyond its ability to repay. Neither the Guarantor nor the Lessee are, as of the date of this Participation Agreement, “insolvent” as that term is defined in 11 U.S.C. Section 101(34) nor will the consummation of the transactions contemplated by this Participation Agreement render the Lessee insolvent (giving effect to the fair valuation of its assets).

(s) Location Chief Executive Office and Principal Place of Business, etc. The respective chief executive offices and principal places of business of the Guarantor and the Lessee are at the addresses set forth on Schedule II hereto as its “Chief Executive Office and Principal Place of Business.” Each of the Guarantor and the Lessee keeps or will keep its company records concerning the Properties and the Operative Documents at its respective chief executive office or, after thirty (30) days prior notice to the Administrative Agent, at such other reasonable office specified in such notice.

(t) No Casualty. No fire or other casualty with respect to the Property being acquired has occurred that has not been remedied.

u) Flood Hazard Areas. The Guarantor and the Lessee represent that, no portion of any Property is located in an area identified as a special flood hazard area by the Federal Emergency Management Agency or other applicable agency, except as otherwise disclosed to the Lessor on the Survey or otherwise in writing.

(v) Offering of Notes. Neither the Guarantor nor the Lessee nor anyone acting on behalf of the Guarantor or the Lessee has (A)(i) offered, transferred, pledged, sold or otherwise disposed of any Note, or any interest in any Note to, (ii) solicited any offer to buy or accepted a transfer, pledge or other disposition of any Note, or any interest in any Note or from, or (iii) otherwise approached or negotiated with respect to any Note, or any interest in any Note or with, any person in any manner, (B) made any general solicitation by means of general advertising or in any other manner, or (C) taken any other action which would constitute a public distribution of the Notes under the Securities Act, any of which would render the disposition of any Note a violation of Section 5 of the Securities Act or any state securities laws, or require registration or qualification pursuant thereto or require registration of Guarantor or Lessee under the Investment Company Act of 1940, as amended, nor will Lessee act, nor has Guarantor or Lessee authorized or will it authorize any person to act, in such manner with respect to any Note.

SECTION 8.2 Representations of the Participants. Each of the Lessor and the Participants represents and warrants as to itself only, as of the date hereof and as of each Closing Date, to the Lessee and the other Participants that:

(a) Corporate Existence and Standing. It is duly organized, validly existing and in good standing under the laws of its jurisdiction of organization and is in good standing and has all requisite authority to conduct its business in each jurisdiction in which its business is conducted, except where failure to have such good standing or authority would not have a material adverse effect on it.

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(b) Authorization and Validity. It has the power and authority to execute and deliver the Operative Documents to which it is or will be a party and to perform its obligations thereunder. The execution and delivery by the Lessor and the Lender of the Operative Documents to which it is or will be a party and the performance of its obligations thereunder have been duly authorized by proper proceedings, and the Operative Documents constitute, or, when executed, will constitute, legal, valid and binding obligations of the Lessor and the Lender, enforceable against such Persons in accordance with their terms, except as enforceability may be limited by (i) bankruptcy, insolvency or similar laws affecting the enforcement of creditors’ rights generally and (ii) general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law).

(c) No Conflict; Government Consent. The execution, delivery and performance by it of the Operative Documents to which it is or will be a party will not violate any law, rule, regulation, order, writ, judgment, injunction, decree or award binding on it, or conflict with any organizational document or material agreement of it, or require any government approval except where such violation, conflict or lack of approval would not have a material adverse effect on it.

(d) Litigation and Contingent Obligations. Except as disclosed to the Lessee in writing, there is no litigation, arbitration, governmental investigation, proceeding or inquiry pending or, to the knowledge of an officer of such Participant, threatened against or affecting such Participant.

(e) Investment Company Act. It is not an “investment company” or a company “controlled” by an “investment company”, within the meaning of the Investment Company Act of 1940, as amended.

(f) ERISA. It is not and will not be making its Loans or funding its Lessor Amounts hereunder, and is not performing its obligations under the Operative Documents, with the assets of an “employee benefit plan” (as defined in Section 3(3) of ERISA) which is subject to Title I of ERISA, or “plan” (as defined in Section 4975(e)(1) of the Code).

(g) Non-Recourse Debt. The Lessor represents and warrants that it is not funding nor will it in the future fund the Lessor Amounts with proceeds of non-recourse debt.

(h) Advance Percentage. The Lessor represents and warrants that, with respect to the amounts advanced hereunder by the Participants to acquire the Florida Property, the Lessor has advanced as equity at least ten percent (10%) of such amounts, net of any fees paid to the Lessor and its Affiliates.

ARTICLE IX

PAYMENT OF CERTAIN EXPENSES

SECTION 9.1 Payment of Costs and Expenses.

(a) The Lessee shall pay, or cause to be paid, from time to time all Transaction Expenses in respect of the Documentation Date, and each Closing Date, from the proceeds of Advances or otherwise (it being understood that such Transaction Expenses shall, subject to satisfaction of the applicable conditions set forth in Section 6.1, be paid through the making of Advances).

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(b) The Lessee shall pay or cause to be paid from the proceeds of Advances when due (i) the fees described in Section 4.6, (ii) all costs and expenses (including reasonable attorneys’ fees and legal expenses of one special counsel) incurred by the Administrative Agent or any Participant in entering into any future amendments or supplements with respect to any of the Operative Documents, whether or not such amendments or supplements are ultimately entered into, or giving of waivers of consents hereto or thereto, (iii) all costs and expenses (including reasonable attorneys’ fees and legal expenses) incurred by the Administrative Agent or any Participant in connection with any purchase of any Property by the Lessee, or any other Person pursuant to Articles XVIII and XXI of the Lease and (iv) all costs and expenses (including reasonable attorneys’ fees and legal expenses) incurred by any of the other parties hereto in respect of (x) the enforcement of any of their rights or remedies against the Lessee under any of the Operative Documents or (y) the negotiation of any restructuring or “work-out” with the Lessee whether or not consummated, of any obligations of the Lessee under the Operative Documents.

SECTION 9.2 Brokers’ Fees and Stamp Taxes. The Lessee shall pay during the Basic Term, cause to be paid, from the proceeds of the Advances or otherwise any brokers’ fees (other than any broker’s fees payable solely as a result of any Participant’s breach of the representation set out in Section 16.2) and any and all stamp, transfer and other similar taxes, fees and excises, if any, including any interest and penalties, which are payable in connection with the transactions contemplated by this Participation Agreement and the other Operative Documents.

ARTICLE X

LESSEE COVENANTS

SECTION 10.1 Covenants of Lessee. The Lessee, on behalf of itself and its Subsidiaries, hereby agrees for the benefit of the Participants that until all of the Lessee’s obligations hereunder and under the other Operative Documents have been paid and performed in full, the Lessee will and will cause each of its Subsidiaries to perform the obligations set forth herein as follows:

(a) Existence; Conduct of Business. Lessee will do or cause to be done all things necessary to preserve, renew and maintain in full force and effect (i) its legal existence, and (ii) its respective rights, licenses, permits, privileges and franchises related to the Lease or each Property except for those which, taken as a whole, would not adversely affect its ability to perform its obligations under the Operative Documents.

(b) Compliance with Laws, Etc. Lessee will comply with all laws, rules, regulations and requirements of any Governmental Authority applicable to its business and properties, including without limitation, all Environmental Laws and ERISA, except where the failure to do so, either individually or in the aggregate, would not reasonably be expected to adversely affect its ability to perform its obligations under the Operative Documents or where the same are currently being contested in good faith by appropriate proceedings. If at any time an event or condition shall have occurred and be continuing which

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results or has resulted in any Property being in violation of any Environmental Law, or a notice, complaint, order or finding of violation or non-compliance with any Environmental Law shall have been received by Lessee or Guarantor with respect to any Property, Lessee shall, at its option, (a) promptly commence and diligently perform all remedial work, at Lessee’s own cost and expense, necessary or desirable to bring such Property into full compliance with Environmental Laws by not later than the earlier of (i) twelve months after the date of discovery of such event or condition, and (ii) the end of the initial term in accordance with Section 8.3 of the Lease, or (b) purchase the applicable Property at a purchase price equal to the Lease Balance and in the manner set forth in Article XX of the Lease.

(c) Books and Records. Lessee will, and will cause each of its Subsidiaries to, keep complete and accurate books and records of its transactions in conformance with GAAP (including the establishment of appropriate reserves).

(d) Maintenance of Properties and Licenses; Insurance (other than of the Property). Lessee will, and will cause each of its Subsidiaries to, (a) keep and maintain good and marketable title to all property and licenses and keep and maintain all property and licenses material to the conduct of its business in good working order and condition, ordinary wear and tear excepted, except where the failure to do so, either individually or the aggregate, would not, taken as a whole, adversely affect the Lessees or the Guarantor’s ability to perform its obligations under the Operative Documents and (b) maintain with financially sound and reputable insurance companies, insurance with respect to its properties and business, and the properties and business of its Subsidiaries (other than the Properties), against loss or damage of the kinds customarily insured against by companies in the same or similar businesses operating in the same or similar locations.

(e) Perfection of Liens. Throughout the Basic Term the Lessee shall take all necessary action to ensure that (i) the Lessor has a valid and enforceable first priority perfected Lien on each Property and the Collateral Agent has a valid and enforceable first priority perfected Lien on the Collateral; (ii) no filing, recording, registration or notice to anyGovernmental Authority will be necessary to establish, perfect and give record of the Lien on each Property in favor of Lessor except for such filings made on the Closing Date or as required pursuant to any change in Applicable Law and (iii) each Property is free and clear of all Liens other than Permitted Liens.

(f) Financial Statements. Lessee will deliver to the Administrative Agent, as soon as available and in any event within fifty-five (55) days after the end of each fiscal quarter, its quarterly report on Form 10-Q. Lessee will deliver to the Administrative Agent, as soon as available and in any event within one hundred (100) days of the end of the Lessee’s fiscal year, its annual report on Form 10-K.

(g) Compliance Certificate. At the time of delivery of each of the financial statements as required in Section 10.1(f) hereof, the Guarantor shall deliver to the Lessor, a certificate of a financial officer of the Lessee demonstrating compliance with the financial covenant contained in Section 10.1(h) hereof as calculated as provided in Exhibit B hereto.

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(h) Minimum Net Cash Covenant. The Lessee and its consolidated Subsidiaries will maintain an aggregate Minimum Net Cash of not less than $100,000,000 as of the end of each fiscal quarter.

(i) Mergers, Consolidations and Sales of Assets. The Lessee shall not merge into or consolidate with any other Person, or permit any other Person to merge into or consolidate with the Lessee or any of its material Subsidiaries, or liquidate, wind up or dissolve itself (or suffer any liquidation or dissolution), or sell, transfer, lease or otherwise dispose of (in one transaction or in a series of transactions) all or substantially all of its assets, in each case whether now owned or hereafter acquired, or enter into any agreement to do any of the foregoing at any future time; provided, however, that the Lessee or any of its Subsidiaries may consolidate or merge with any other Person if (i) the entity surviving the merger shall have a net worth at least equal to the Lessee or such material subsidiary immediately prior to such consolidation or merger and such net worth shall be at least $1.00 and (ii) no Lease Event of Default has occurred and is continuing or would occur as a result of such merger or consolidation.

(j) Payment of Taxes. The Lessee will, and will cause each of its Subsidiaries to pay, before the same become delinquent, all taxes, assessments and governmental charges imposed upon it or upon its property except (i) to the extent being diligently contested in good faith by appropriate proceedings and for which adequate reserves, if any, in accordance with GAAP shall have been set aside on its books, or (ii) to the extent such failure to timely pay would not result in a tax liability in excess of $2,000,000.

(k) Notices. The Lessee will provide written notice to the Lessor and the Administrative Agent, promptly upon its having knowledge of any Unmatured Default or any Event of Default.

(l) Prohibited Transactions. The Lessee will not engage in any transaction which is prohibited by ERISA.

ARTICLE XI

LESSEE DIRECTIONS; CERTAIN RIGHTS OF LESSEE

SECTION 11.1 Lessee Directions. The Lessor and the Lender hereby agree that, so long as no Lease Default or Lease Event of Default exists, the Lessee shall have the exclusive right to exercise any right of the Lessor as borrower under the Loan Agreement upon not less than three (3) Business Days’ prior written notice from the Lessee to the Lessor, unless the Lessor objects to such exercise within two (2) Business Days of receipt of such notice.

SECTION 11.2 Extension of Maturity Date and Expiration Date. The Lessee may direct a written request to the Lessor and Administrative Agent (with a copy to each Participant) not later than three hundred sixty-four (364) days prior to the end of the Basic Term that the Expiration Date of the Lease be extended for an additional period of two (2) years (an “EXTENSION TERM”) and concurrently therewith request (with a copy to each Participant) that the Lessor direct a written request to the Lender that the Maturity Date be extended to the last day of such Extension Term. The Lessee may direct a written request to the Lessor and the Administrative Agent (with a copy to each Participant) not later than

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three hundred sixty-four (364) days prior to the end of the first Extension Term that the Expiration Date of the Lease be extended for an additional period of two (2) years and concurrently therewith request (with a copy to each Participant) that the Lessor direct a written request to the Lender that the Maturity Date be extended to the last day of such Extension Term. Each Participant may grant or deny its consent to any such extension in its sole discretion by notifying the Lessor in writing (with a copy to the Lessee) and may condition its consent on adjustment of the Interest Rate or Yield Rate, as appropriate, and receipt of such financial information, appraisals or other documentation as may be reasonably requested by such Participant; provided, however, that any Participant that fails to respond to such request within thirty (30) days after its receipt thereof shall be deemed to have rejected such request. Notwithstanding the foregoing, if any Participant (including, but not limited to, a Lender) declines to consent to the extension of the Maturity Date for which Lender’s consent is requested by Lessee in accordance with this Section 11.2, Lessee shall have the right, but not the obligation, to arrange for the acquisition of such Participant’s interest by a third party that is not an Affiliate of the Lessee, and to terminate such Participant’s rights to receive further payments under the Operative Documents, arranging the payment to such Participant of, a termination payment equal to such Participant’s Lessor Percentage of the outstanding Loans or Lessor Amounts (or both, if such Participant is both a Lessor and a Lender), as applicable, and all other costs and fees which such Participant would receive if the Lessee had paid the Purchase Price for all of the Properties remaining subject to the Lease as of the Expiration Date. Upon payment of such termination fee, either Lessee or Lessee’s designee making such payment, shall be assigned the terminated Participant’s interest in the Operative Documents, including, without limitation, the right to receive all further payments which such Participant is entitled to receive under the Operative Documents from the Expiration Date until the extended Maturity Date. Upon (x) the Lessor’s receipt of the written consent of each Lender to any requested extension of the Maturity Date and (y) the Lessor’s consent to any requested extension of the Maturity Date, the Expiration Date shall automatically be extended to the date of the Maturity Date (after giving effect to such extension).

ARTICLE XII

TRANSFERS OF PARTICIPANTS’ INTERESTS

SECTION 12.1 Assignments by Participants.

(a) Assignments by Lender. Any Lender may at any time during the Lease Term without the consent of the Lessee, sell, assign or transfer all or part of its rights and obligations under the Loans and this Participation Agreement to an Eligible Transferee.

(b) Assignments by Lessor. So long as such assignment will not result in the transactions contemplated hereby being treated as a capital lease under GAAP or require consolidation onto Lessee’s balance sheet, the Lessor may sell, assign or transfer all or part of its rights and obligations hereunder without the consent of the Lessee and any such sale, assignment or transfer shall be made only to (A) any Affiliate of any Lender, (B) a financial institution, insurance company or other institutional investor with a net worth or, in the case of a bank or lending institution, combined capital surplus, on a consolidated basis at the time of the assignment of at least $15,000,000 determined in accordance with GAAP, (C) a trust established by any entity described in subparts (A) or (B) hereof, or (D) if Lessee so requests, and no Lease Event of Default has occurred and is continuing, Lessee (but not less than all of Lessor’s rights

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and obligations shall be sold, assigned or transferred to Lessee, if so requested); provided, however, that any consent of the Lessee otherwise required under this clause (b) shall not be required if any Lease Event of Default shall have occurred and be continuing.

(c) Effectiveness of Assignments. Upon delivery to the Lessee, the Lessor and the Administrative Agent of an assignment and assumption agreement pursuant to which the obligations and rights being assigned are accepted and assumed subject to the terms hereof, which agreement shall be in form and substance reasonably satisfactory to the Lessee and the Administrative Agent (an “ASSIGNMENT AGREEMENT”), and the receipt of any applicable consents required hereunder in connection therewith, from and after the effective date specified in each Assignment Agreement, the assignee thereunder shall be a party hereto and, to the extent of the interest assigned by such Assignment Agreement, have the rights and obligations of a Participant under this Participation Agreement and the other Operative Documents, and the assigning Participant shall, to the extent of the interest assigned by such Assignment Agreement, release and be released from its rights and obligations under this Participation Agreement and the other Operative Documents. In no event shall the Lessee (i) be responsible for any adverse tax consequence to any Person resulting from any transfer in accordance with this Section 12.1, unless such transfer arises after an Event of Default, or (ii) have any greater indemnity obligations than it would have had in the absence of such transfer.

(d) Amendment of Pledge Agreement. The Lessee and Guarantor agree to execute and deliver such amendments hereto and to the Pledge Agreement and Control Agreement and to enter into an additional control agreement, each as are reasonably necessary to allow the Initial Participant to hold at a United States office thereof Collateral with a valuation of not less than 103% of the principal amount of the Loans funded by such Initial Participant.

SECTION 12.2 Participations. Participants may, at any time, sell to one or more financial institutions (each, a “SUB-PARTICIPANT”) participating interests in all or a portion of its rights and obligations under this Participation Agreement, its Notes or its Lessor Amounts; provided, however, that (a) no participation contemplated in this Section 12.2 shall relieve the applicable Participant from any of its obligations hereunder or under the other Operative Documents; (b) the Participant shall remain solely responsible for the performance of its obligations hereunder and under the other Operative Documents; (c) the Lessee and the other parties hereto shall continue to deal solely and directly with the Participant in connection with their respective obligations hereunder and under the other Operative Documents; and (d) the Lessee shall not be required to pay any amount under this Participation Agreement that is greater than the amount which it would have been required to pay had no participating interest been sold.

SECTION 12.3 Pledge Under Regulation A. Anything in this Article XII to the contrary notwithstanding, each Participant may without the consent of the Lessee assign and pledge all or any portion of its Notes or Lessor Amounts, as applicable, held by it to any Federal Reserve Bank or to the United States Treasury as collateral security pursuant to Regulation A of the Board of Governors of the Federal Reserve System and any operating circular issued by the Federal Reserve System and/or the Federal Reserve Bank or otherwise.

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SECTION 12.4 Acknowledgment of Assignment of Lease and Rent. Lessee hereby acknowledges that the right of the Lessor to receive Rent and certain other rights under the Lease (other than the right to receive certain Excepted Payments) will be transferred by the Lessor to the Collateral Agent pursuant to each Assignment of Lease and Rent; provided, however, that all Rent shall be paid to the Lessor for distribution as set forth in Article VII.

ARTICLE XIII

INDEMNIFICATION

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(14 pages of confidential information omitted pursuant to the request for

confidential treatment)

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ARTICLE XIV

CERTAIN COVENANTS AND AGREEMENTS

SECTION 14.1 Collateral.

(a) During the Basic Term, if the marked-to-market value of the securities and other financial assets held in the Collateral Account by the Collateral Agent under the Pledge Agreement, as determined as of the Business Day on or immediately preceding each 15th and last day of the month (the “VALUATION DATE”), shall be less than 103% of the Lease Balance then outstanding (any such day of determination, a “DEFICIENCY DATE”), and the Lessee has been given notice of such deficiency by the Lessor or the Collateral Agent pursuant to the terms and conditions of the Pledge Agreement, then, on the second Business Day following Lessee’s receipt of such written notice, so long as such request is received prior to 12:00 noon on such day, otherwise on the third Business Day thereafter, the Lessee shall deposit, orshall cause the Guarantor to deposit with the Collateral Agent such additional Collateral (“DEFICIENCY COLLATERAL”)so as to cause the value of the marked-to-market securities held in the Collateral Account pursuant to the terms and conditions of the Pledge Agreement, and after giving effect to the deposit of such Deficiency Collateral, to be equal to or in excess of 103.0% of the then outstanding Lease Balance (“SUFFICIENT COLLATERAL”).

(b) During the Basic Term, if on any Valuation Date, the marked-to-market value of the securities and other financial assets held in the Collateral Account held by the Collateral Agent under the Pledge Agreement shall exceed 103.0% of the then outstanding Lease Balance, and provided that no Unmatured Default or Event of Default has occurred and is continuing, then the Lessee may request in writing to the Lessor that it cause the Collateral Agent to release to the Lessee such excess securities in an amount such that after giving effect to such release, the marked-to-market value of the securities remaining in the Collateral Account held by the Collateral Agent subject to the terms and conditions of the Pledge Agreement shall equal or exceed 103.0% of the then outstanding Lease Balance (for the purposes of this subsection (b), such released Collateral, “SURPLUS COLLATERAL”). Upon receipt of such notice, and subject to the terms and conditions of the Pledge Agreement, the Lessor shall cause the Collateral Agent to release such Surplus Collateral to the Lessee on the Business Day following receipt of such written request so long as such request is received prior to 12:00 noon on such day, otherwise on the second Business Day thereafter; provided, however, that after giving effect to suchrelease, no Unmatured Default or Event of Default shall occur, and provided further, that no release of Surplus Collateral shall in any way affect the obligations of the Lessee pursuant to Section 14.1(a).

SECTION 14.2 Certain Events of Default. In the event that circumstances give rise to the occurrence of a Lease Event of Default under Section 16.1(d), (e) or (f) of the Lease, each Participant agrees that such Participant will exercise its discretion in making any determination as to the occurrence of such a Lease Event of Default in a commercially reasonable manner taking into account the then effective credit policies and procedures of such Participant.

SECTION 14.3 Accounting Change. Each of the Lessee, the Lessor, the Lender and the Administrative Agent hereby agree that if, due to any change in any accounting rule as in effect as of the date of the Participation Agreement, the Lessor may not continue to act as Lessor under the Operative Documents without adversely affecting the operating lease treatment of the Lease, then the parties hereto agree to use reasonable commercial efforts to implement a structure which would allow the Lessee to continue to treat the Lease as an operating lease for accounting purposes. If the parties hereto are unable to agree on such a structure then the Lessee may elect to purchase all the Properties pursuant to its Early Purchase Option contained in Section 18.1 of the Lease.

ARTICLE XV

THE ADMINISTRATIVE AGENT

SECTION 15.1 Appointment. Each Participant hereby irrevocably designates and appoints the Administrative Agent as the agent of such Participant under this Participation Agreement and the other Operative Documents, and each such Participant irrevocably authorizes the Administrative Agent, in such capacity, to take such action on its behalf under the provisions of this Participation Agreement and the

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other Operative Documents and to exercise such powers and perform such duties as are expressly delegated to the Administrative Agent by the terms of this Participation Agreement and the other Operative Documents, together with such other powers as are reasonably incidental thereto. Notwithstanding any provision to the contrary elsewhere in this Participation Agreement, the Administrative Agent shall not have any duties or responsibilities, except those expressly set forth herein and in the other Operative Documents, or any fiduciary relationship with any Participant or any other party to the Operative Documents, and no implied covenants, functions, responsibilities, duties, obligations or liabilities shall be read into this Participation Agreement or any other Operative Document or otherwise exist against the Administrative Agent.

SECTION 15.2 Delegation of Duties. The Administrative Agent may execute any of its duties under this Participation Agreement and the other Operative Documents by or through agents or attorneys-in-fact and shall be entitled to advice of counsel concerning all matters pertaining to such duties. The administrative Agent shall not be responsible for the negligence or misconduct of its agents or attorneys in fact selected by it with reasonable care and diligence.

SECTION 15.3 Exculpatory Provisions. Neither the Administrative Agent (in its capacity as such) nor any of its officers, directors, employees, agents, attorneys-in-fact or Affiliates shall be (a) liable for any action lawfully taken or omitted to be taken by it or such Person under or in connection with this Participation Agreement or any other Operative Document, except for its or such Person’s own willful misconduct or gross negligence (or negligence in the handling of funds) or (b) responsible in any manner to any of the Participants or any other party to the Operative Documents for any recitals, statements, representations or warranties made by any Obligor or the Lessor or any officer of any Obligor or the Lessor contained in this Participation Agreement or any other Operative Document or in any certificate, report, statement or other document referred to or provided for in, or received by the Administrative Agent under or in connection with, this Participation Agreement or any other Operative Document, or for the value, validity, effectiveness, genuineness, enforceability or sufficiency of this Participation Agreement or any other Operative Document or for any failure of any Obligor or the Lessor to perform its obligations hereunder or thereunder. The Administrative Agent shall not be under any obligation to any Participant or any other party to the Operative Documents to ascertain or to inquire as to the observance or performance of any of the agreements contained in, or conditions of, this Participation Agreement or any other Operative Document, or to inspect the properties, books or records of any Obligor or the Lessor.

SECTION 15.4 Reliance by Administrative Agent. The Administrative Agent shall be entitled to rely, and shall be fully protected in relying, upon any Note, writing, resolution, notice, consent, certificate, affidavit, letter, facsimile message, statement, order or other document or other written communication believed by it to be genuine and correct and to have been signed, sent or made by the proper Person or Persons and upon advice and statements of legal counsel (including, without limitation, counsel to the Lessee), independent accountants and other experts selected by the Administrative Agent. The Administrative Agent may deem and treat the payee of any Note as the owner thereof for all purposes unless a written notice of assignment, negotiation or transfer thereof shall have been delivered to the Administrative Agent in accordance with Section 12.1(c). The Administrative Agent shall be fully justified in failing or refusing to take any action under this Participation Agreement or any other Operative

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Document unless it shall first receive the advice or concurrence of the Required Participants, or it shall first be indemnified to its satisfaction by the applicable Participants against any and all liability and expense which may be incurred by it by reason of taking or continuing to take any such action. The Administrative Agent shall in all cases be fully protected in acting, or in refraining from acting, under this Participation Agreement and the other Operative Documents in accordance with a request of the Required Participants, and such request and any action taken or failure to act pursuant thereto shall be binding upon all the Participants and all future holders of the applicable Notes or Lessor Amounts.

SECTION 15.5 Notice of Default. The Administrative Agent shall not be deemed to have knowledge or notice of the occurrence of any Unmatured Default, or Lease Event of Default unless the Administrative Agent has received notice from a Participant or the Lessor referring to this Participation Agreement, describing such Unmatured Default or Event of Default and stating that such notice is a “notice of default.” In the event that the Administrative Agent receives such a notice, the Administrative Agent shall promptly give notice thereof to the Participants, the Lessor and the Lessee. The Administrative Agent shall take such action with respect to such Unmatured Default or Event of Default as shall be directed by the Required Participants; provided, however, that unless and until the Administrative Agent shall have received such directions, the Administrative Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to such Default or Event of Default as it shall deem advisable in the best interests of the Participants.

SECTION 15.6 Non-Reliance on Administrative Agent and Other Participants. Each Participant expressly acknowledges that neither the Administrative Agent nor the Lease Arranger, nor any of their respective officers, directors, employees, agents, attorneys-in-fact or Affiliates, has made any representations or warranties to it and that no act by the Administrative Agent or the Lease Arranger hereinafter taken, including any review of the affairs of any Obligor or the Lessor, shall be deemed to constitute any representation or warranty by the Administrative Agent or the Lease Arranger to any Participant. Each Participant represents to the Administrative Agent and the Lease Arranger that it has, independently and without reliance upon the Administrative Agent, the Lease Arranger or any other Participant, and based on such documents and information as it has deemed appropriate, made its own appraisal of and investigation into the business, operations, property, financial and other condition and creditworthiness of the Lessee and the Lessor and made its own decision to enter into this Participation Agreement. Each Participant also represents that it will, independently and without reliance upon the Administrative Agent, the Lease Arranger or any other Participant, and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit analysis, appraisals and decisions in taking or not taking action under this Participation Agreement and the other Operative Documents, and to make such investigation as it deems necessary to inform itself as to the business, operations, property, financial and other condition and creditworthiness of the Lessee and the Lessor. Except for notices, reports and other documents expressly required to be furnished to the Participants by the Administrative Agent hereunder, neither the Administrative Agent nor the Lease Arranger shall have any duty or responsibility to provide any Participant with any credit or other information concerning the business, operations, property, condition (financial or otherwise), prospects or creditworthiness of the Lessee or the Lessor which may come into the possession of the Administrative Agent, the

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Lease Arranger or any of their respective officers, directors, employees, agents, attorneys-in-fact or Affiliates.

SECTION 15.7 Administrative Agent in Its Individual Capacity. Each Participant acknowledges that Key Corporate Capital Inc. is acting as Administrative Agent hereunder. Key Corporate Capital Inc. and its Affiliates may make loans to, for the account of, acquire equity interests in and generally engage in any kind of financial advisory, underwriting or other business with the Lessee, the Lessor and their respective Affiliates as though it was not the Administrative Agent hereunder and under the other Operative Documents and without notice to or consent of the Participants. Each Participant acknowledges that, pursuant to such activities, Key Corporate Capital Inc. or its Affiliates may receive information regarding the Lessee, the Lessor or their respective Affiliates (including information that may be subject to confidentiality obligations in favor of the Lessee, the Lessor or such Affiliates) and acknowledges that such Persons shall be under no obligation to provide such information to them.

SECTION 15.8 Successor Administrative Agent. The Administrative Agent may resign at any time by giving written notice thereof to the Participants and the Lessee and may be removed at any time with or without cause by the Required Participants by giving thirty (30) days’ prior written notice to the Administrative Agent and the Lessee. Upon any such resignation or removal, the Required Participants shall have the right to appoint a successor Administrative Agent. If no successor Administrative Agent shall have been so appointed by the Required Participants, and shall have accepted such appointment, within thirty (30) days after the retiring Administrative Agent’s giving of notice of resignation or the Required Participants’ removal of the retiring Administrative Agent, then the retiring Administrative Agent may, on behalf of the Participants, appoint a successor Administrative Agent, which shall be a Qualified Financial Institution or be otherwise acceptable to the Lessee and the Required Participants. Upon the acceptance of any appointment as Administrative Agent hereunder by a successor Administrative Agent, such successor Administrative Agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring Administrative Agent, and the retiring Administrative Agent shall be discharged from its duties and obligations under this Participation Agreement. After any retiring Administrative Agent’s resignation or removal hereunder as Administrative Agent, the provisions of this Article XV shall inure to its benefit as to any actions taken or omitted to be taken by it while it was Administrative Agent under this Agreement. Notwithstanding the foregoing, so long as no Unmatured Default, or Lease Event of Default shall have occurred and be continuing, then no successor Administrative Agent shall be appointed under this Section 15.8 without the prior written consent of the Lessee, which consent shall not be unreasonably withheld or delayed.

ARTICLE XVI

MISCELLANEOUS

SECTION 16.1 Survival of Agreements. The representations, warranties, covenants, indemnities and agreements of the parties provided for in the Operative Documents, and the parties’ obligations under any and all thereof, shall survive the execution and delivery of this Participation Agreement, the transfer of any or all of the Properties to the Lessor, the construction of any improvements, any disposition of any interest of the Lessor or any Participant in any Property and the payment of the Notes and any disposition thereof and shall be and continue in effect notwithstanding any investigation made by any party and the fact that any party may waive compliance with any of the other terms, provisions or conditions of any of the Operative Documents.

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SECTION 16.2 No Broker, etc. Each of the parties hereto represents to the others that it has not retained or employed any broker, finder or financial adviser to act on its behalf in connection with this Participation Agreement or the transactions contemplated herein or in the other Operative Documents, nor has it authorized any broker, finder or financial adviser retained or employed by any other Person so to act (except for Lessee’s retention of Ernst & Young LLP as its financial advisor). Any party who is in breach of this representation shall indemnify and hold the other parties harmless from and against any liability arising out of such breach of this representation.

SECTION 16.3 Notices. Unless otherwise specifically provided herein, all notices, consents, directions, approvals, instructions, requests and other communications required or permitted by the terms hereof to be given to any Person shall be given in writing by United States mail, by nationally recognized courier service or by facsimile transmission to the Person designated in Schedule II hereto and any such notice shall become effective five (5) Business Days after being deposited in the mail, certified or registered return receipt requested with appropriate postage prepaid or one Business Day after delivery to a nationally recognized courier service specifying overnight delivery and shall be directed to the address of such Person as indicated on Schedule II or receipt of confirmation of facsimile transmission, as the case may be. From time to time any party may designate a new address for purposes of notice hereunder by written notice to each of the other parties hereto in accordance with this Section.

SECTION 16.4 Counterparts. This Participation Agreement may be executed by the parties hereto in separate counterparts, each of which when so executed and delivered shall be an original, but all such counterparts shall together constitute but one and the same instrument.

SECTION 16.5 Amendments; Termination; Supplement; Waiver. (a) The provisions of this Participation Agreement may from time to time be amended, modified or waived, provided, however, that such amendment, modification or waiver is in writing and consented to by the Required Participants, and the Lessee or, if such amendment adversely affects its interests, the Administrative Agent or the Lease Arranger.

(b) Neither any Operative Document nor any of the terms thereof may be terminated (except upon payment in full of the Lease Balance and accrued Basic Rent and all other amounts due and owing by the Lessees under the Operative Documents, or effective exercise and consummation of the Remarketing Option in accordance with Article XX of the Lease and payment in full of all amounts due in accordance therewith), amended, supplemented, waived or modified without the written agreement or consent of the Required Participants (regardless of whether the Lender and the Lessor are parties thereto); provided, however, that:

(i) no such termination, amendment, supplement, waiver or modification shall without written agreement or consent of each Lender, change the definition of “Required Lender” or modify or waive any requirement under any Operative Document that any particular action be taken by all Lenders, no such termination, amendment, supplement, waiver or modification shall without written agreement or consent of

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each Lender, modify or waive any requirement under any Operative Document that any particular action be taken by all Lenders, and no such termination, amendment, supplement, waiver or modification shall without written agreement or consent of the Lessor modify or waive any requirement under any Operative Document that any particular action be taken by or consented to by the Lessor;

(ii) no such termination, amendment, supplement, waiver or modification shall without written agreement or consent of each Participant (A) modify any of the provisions of this Section 16.5, change the definition of “Required Participants” or modify or waive any requirement under any Operative Document that any particular action be taken by all Participants or (B) extend the Maturity Date or Expiration Date;

(iii) no such termination, amendment, supplement, waiver or modification shall without written agreement or consent of each Participant amend, modify, waive or supplement any of the provisions of Section 2.4, 2.5 or 2.6 of any Loan Agreement or Article VII of this Participation Agreement;

(iv) no such termination, amendment, supplement, waiver or modification shall without written agreement or consent of each affected Participant (A) modify, postpone, reduce or forgive, in whole or in part, any payment of Rent (other than pursuant to the terms of any Operative Document), any Loan or Lessor Amount, the Lease Balance, Maximum Recourse Amount, amounts due pursuant to Article XX of the Lease, interest or Yield or, subject to clause (iv) above, any other amount payable under the Lease or this Participation Agreement or (B) modify the definition or method of calculation of Rent (other than pursuant to the terms of any Operative Document), Loans or Lessor Amounts, Lease Balance, Maximum Recourse Amount, Commitment Fees, Nonconformance Amount, Participant Balance or any other definition which would affect the amounts to be advanced or which are payable under the Operative Documents;

(v) no such termination, amendment, supplement, waiver or modification shall without written agreement or consent of each affected Participant reduce, modify, amend or waive any Commitment Fees, other fees or indemnities in favor of any Participant, including without limitation amounts payable pursuant to Article XIII (except that any Person may consent to any reduction, modification, amendment or waiver of any Commitment Fee or other fee or indemnity payable to it);

(vi) no such termination, amendment, supplement, waiver or modification shall without written agreement or consent of each Participant (A) release the Lessee from its Obligations under the Operative Documents or permit any assignment of the Lease by the Lessee releasing the Lessee from its Obligations under the Operative Documents or changing the absolute and unconditional character of such obligations, in each case, except as expressly permitted by the Operative Documents, (B) except as expressly permitted or required under the Operative Documents, release any Property from the Lien of the applicable Lessor Mortgage or release or terminate any Lessor Financing Statements covering the applicable Property;

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(vii) no such termination, amendment, supplement, waiver or modification shall, without the written agreement or consent of the Lessor, be made to the Lease or the definition of “Loan Agreement Default”;

(viii) no such termination, amendment, supplement, waiver or modification that would increase the obligations of the Lessee thereunder or deprive the Lessee of any of its rights thereunder or alter the rights of the Lessee to their detriment shall be effective against the Lessee, as the case may be, without the written agreement or consent of the Lessee, as applicable; and

(ix) no such termination, amendment, supplement, waiver or modification shall be made to any provision of Article XVI without the written agreement or consent of the Administrative Agent.

SECTION 16.6 Headings, etc. The Table of Contents and headings of the various Articles and Sections of this Participation Agreement are for convenience of reference only and shall not modify, define, expand or limit any of the terms or provisions hereof.

SECTION 16.7 Parties in Interest. Except as expressly provided herein, none of the provisions of this Participation Agreement is intended for the benefit of any Person except the parties hereto. The Lessee shall not assign or transfer any of its rights or obligations under the Operative Documents except in accordance with the terms and conditions thereof.

SECTION 16.8 GOVERNING LAW. THIS PARTICIPATION AGREEMENT SHALL IN ALL RESPECTS BE GOVERNED BY THE LAW OF THE STATE OF NEW YORK (EXCLUDING ANY CONFLICT-OF-LAW OR CHOICE-OF-LAW RULES WHICH MIGHT LEAD TO THE APPLICATION OF THE INTERNAL LAWS OF ANY OTHER JURISDICTION) AS TO ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE.

SECTION 16.9 Severability. Any provision of this Participation Agreement that is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.

SECTION 16.10 Liability Limited. (a) The parties hereto agree that except as specifically set forth herein or in any other Operative Document, the Lessor shall have no personal liability whatsoever to any other Participant, the Lessee or their respective successors and assigns for any claim or obligation based on or in respect hereof or any of the other Operative Documents (including, without limitation, the repayment of the Loans) or arising in any way from the transactions contemplated hereby or thereby and recourse, if any, shall be solely had against the Lessor’s interest in any Property or from payments (other than payments due to the Lessor with respect to indemnities, reimbursement of expenses or fees, in each case payable to the Lessor for its own account) received from the Lessee (it being acknowledged and agreed by each party hereto that all such personal liability of the Lessor is expressly waived and released as a condition of, and as consideration for, the execution and delivery of the Operative Documents by the Lessor); provided,

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however, that the Lessor shall be liable (a) for its own willful misconduct or gross negligence, (b) breach of any of its representations, warranties or covenants under the Operative Documents, or (c) for any Tax based on or measured by any fees, commission or compensation received by it for acting as the Lessor as contemplated by the Operative Documents. It is understood and agreed that the Lessor shall have no personal liability under any of the Operative Documents as a result of acting pursuant to and consistent with any of the Operative Documents.

(b) No Participant shall have any obligation to the other Participant or to the Lessee with respect to transactions contemplated by the Operative Documents, except those obligations of such Participant expressly set forth in the Operative Documents or except as set forth in the instruments delivered in connection therewith, and no Participant shall be liable for performance by any other party hereto of such other party’s obligations under the Operative Documents except as otherwise so set forth.

SECTION 16.11 Further Assurances. The parties hereto shall promptly cause to be taken, executed, acknowledged or delivered, at the sole expense of the Lessee, all such further acts, conveyances, documents and assurances as the other parties may from time to time reasonably request in order to carry out and preserve the security interests and liens (and the priority thereof) intended to be created pursuant to this Participation Agreement, the other Operative Documents, and the transactions thereunder (including, without limitation, the preparation, execution and filing of any and all Uniform Commercial Code financing statements and other filings or registrations which the parties hereto may from time to time request to be filed or effected); provided, however, that the Lessee shall not be required to pay expenses pursuant to this Section to the extent arising from a breach or alleged breach by any Lender or the Lessor of any agreement entered into in connection with the assignment or participation of any Loan or Lessor Amount. The Lessee, at its own expense and without need of any prior request from any other party, shall take such action as may be necessary (including any action specified in the preceding sentence), or as so requested, in order to maintain and protect all security interests provided for hereunder or under any other Operative Document.

SECTION 16.12 SUBMISSION TO JURISDICTION. THE LESSEE HEREBY SUBMITS TO THE NONEXCLUSIVE JURISDICTION OF THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK FOR PURPOSES OF ALL LEGAL PROCEEDINGS ARISING OUT OF OR RELATING TO THIS PARTICIPATION AGREEMENT OR ANY OF THE OTHER OPERATIVE DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED HEREBY. THE LESSEE IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE TO THE LAYING OF THE VENUE OF ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT AND ANY CLAIM THAT ANY SUCH PROCEEDING BROUGHT IN SUCH A COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.

SECTION 16.13 Setoff. The Lenders and the Lessor shall, upon the occurrence of any Lease Event of Default, have the right to appropriate and, subject to Section 4.7, and Section 13.1 hereof, apply to the payment of the Lessee’s obligations under the Lease as security for the payment of such obligations, any and all balances, credits, deposits, accounts or moneys of the Lessee then or thereafter maintained

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Participation Agreement

with the Lender, the Lessor or the Collateral Agent. The rights of the Lenders and the Lessor under this Section are in addition to other rights and remedies (including other rights of setoff under applicable law or otherwise) which such Person may have.

SECTION 16.14 WAIVER OF JURY TRIAL. THE PARTIES HERETO VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHTS THEY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS PARTICIPATION AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF ANY OF THE PARTIES HERETO. THE PARTIES HERETO HEREBY AGREE THAT THEY WILL NOT SEEK TO CONSOLIDATE ANY SUCH LITIGATION WITH ANY OTHER LITIGATION IN WHICH A JURY TRIAL HAS NOT OR CANNOT BE WAIVED. THE PROVISIONS OF THIS SECTION 16.14 HAVE BEEN FULLY NEGOTIATED BY THE PARTIES HERETO AND SHALL BE SUBJECT TO NO EXCEPTIONS. EACH OBLIGOR ACKNOWLEDGES AND AGREES THAT IT HAS RECEIVED FULL AND SUFFICIENT CONSIDERATION FOR THIS PROVISION (AND EACH OTHER PROVISION OF EACH OTHER OPERATIVE DOCUMENT TO WHICH IT IS A PARTY) AND THAT THIS PROVISION IS A MATERIAL INDUCEMENT FOR EACH OF THE LESSOR AND THE LENDER ENTERING INTO THIS PARTICIPATION AGREEMENT AND EACH SUCH OTHER OPERATIVE DOCUMENT.

SECTION 16.15 Termination. This Agreement shall terminate on the first date on which all obligations of Lessee under the Operative Documents shall have been indefeasibly paid or otherwise satisfied or excused, Lessor shall have ceased to have any rights in the Properties and each party hereto shall have fully performed its obligations hereunder to the other parties hereto. Following any sale of the Property by Lessor pursuant to the Lease and the payment to any Participant of all amounts payable to such Participant hereunder, such Participant will execute and deliver such a quitclaim and release (in recordable form) to Lessee or any purchaser designated by Lessee.

SECTION 16.16 Confidentiality Concerning Lessee’s and Guarantor’s Proprietary Information. Each Participant agrees to use reasonable precautions to keep confidential any “proprietary information” of Lessee or Guarantor that such Participant may receive from Lessee or Guarantor or otherwise discover with respect to Lessee or Guarantor or their respective businesses as a result of such Participant’s involvement with the transactions contemplated in the Operative Documents, except for disclosures: (i) specifically and previously authorized in writing by Lessee, (ii) to any assignee of the Participant as to any interest hereunder so long as such assignee has agreed in writing to use its reasonable efforts to keep such information confidential in accordance with the terms of this Section; (iii) to legal counsel, accountants, auditors, environmental consultants and other professional advisors to the Participant so long as the Participant shall inform such persons in writing (if practicable) of the confidential nature of such information and shall direct them to treat such information confidentially; (iv) to regulatory officials having jurisdiction over the Participant; (v) as required by legal process; and (vi) of information which have previously become publicly available through the actions or inactions of a person other than the Participant not, to the Participant’s knowledge, in breach of an obligation of confidentiality to Lessee or Guarantor.

49

Participation Agreement

SECTION 16.17 Proprietary Information. For purposes of the Operative Documents, “PROPRIETARY INFORMATION” means Lessee’s and Guarantor’s respective intellectual property, trade secrets and other confidential information of value to Lessee and Guarantor, respectively, about, among other things, their respective manufacturing processes, products, marketing and corporate strategies, but in no event will “proprietary information” include any disclosure of substances and materials (and their chemical composition) which are or previously have been present in, on or under the Property at the time of any inspections by Lessor, nor will “proprietary information” include any additional disclosures reasonably required to permit Lessor to determine whether the presence of such substances and materials has constituted a violation of Environmental Laws or any of the Operative Documents.

50

Participation Agreement

IN WITNESS WHEREOF, the parties hereto have caused this Participation Agreement to be duly executed by their respective officers thereunto duly authorized as of the day and year first above written.

CITRIX SYSTEMS, INC., as Lessee
By:	/s/ David Urbani
Name: David Urbani
Title: Vice President of Finance

Participation Agreement

CITRIX CAPITAL CORP., as Guarantor
By:	/s/ Monte L. Miller
Name: Monte L. Miller
Title: Secretary

Participation Agreement

SELCO SERVICE CORPORATION, as Lessor
By:	/s/ Donald C. Davis
Name: Donald C. Davis
Title: Vice President

Participation Agreement

KEY CORPORATE CAPITAL INC. as Administrative Agent, Collateral Agent and Lender
By:	/s/ Thomas A. Crandell
Name: Thomas A. Crandell
Title: Senior Vice President

Participation Agreement

SCHEDULE I

TO PARTICIPATION AGREEMENT

COMMITMENTS

PARTICIPANT	LOAN COMMITMENT	LESSOR COMMITMENT
Key Corporate Capital Inc.	$54,363,700
SELCO Service Corporation		$6,636,300

Loan Percentage: 89.121

Lessor Percentage: 10.879

Schedule-I

SCHEDULE II

TO PARTICIPATION AGREEMENT

NOTICE INFORMATION, WIRE INSTRUCTIONS AND FUNDING OFFICES

**********************************************************************

**********************************************************************

**********************************************************************

**********************************************************************

schedule II

SCHEDULE III

LITIGATION

NONE.

Schedule III

SCHEDULE IV

EXISTING LEASES

*******************************************************************************

*******************************************************************************

EXHIBIT A

FORM OF FUNDING REQUEST

TO: SELCO Service Corporation

54 State Street

Albany, New York 12207

Attn: Donald Davis

Reference is hereby made to the Participation Agreement dated as of April 23, 2002 (as such agreement may be amended, supplemented, amended and restated and other modified from time to time, the “Participation Agreement”), among Citrix Systems, Inc. (the “Lessee”), as Lessee, Citrix Capital Corp, as Guarantor, SELCO Service Corporation, as Lessor, Key Corporate Capital Inc., as Lender, Administrative Agent and Collateral Agent. Capitalized terms not otherwise defined herein are used herein as defined in Appendix A to the Participation Agreement.

The Lessee hereby requests the making of an Advance in the amount of

$                    on April 22, 2002 (the “Requested Funding Date”).

In connection with such requested Advance, the Lessee hereby represents and warrants to you as follows:

The Advance will be allocated as follows:

(a) $                    of the Advance shall be used for Land Acquisition Costs with respect to the Land described on Schedule I to Lease Supplement No. 1;

(b) $                    of the Advance shall be used for Improvements Acquisition Costs with respect to the Improvements located on the Land described on Schedule II to Lease Supplement No. 1; and

(c) $                    of the Advance shall be used to pay or reimburse the Lessee for Transaction Expenses paid or payable by the Lessee in connection with the Operative Documents.

Tranches, Interest Periods.

The Lessee hereby requests that the Advance be allocated into         tranche(s). The Lessee hereby requests that the Interest Rates and Interest Periods listed below be applicable to each tranche, respectively:

TRANCHE	INTEREST RATE	INTEREST PERIOD
Tranche 1	__month LIBOR	__ month(s)
Tranche 2 (if applicable)	__month LIBOR	__ month(s)
Tranche 3 (if applicable)	__month LIBOR	__ month(s)

Exhibit A-1

Participation Agreement

Representations and Warranties

(d) On and as of the Requested Funding Date, the representations and warranties of each of the Lessee and the Guarantor contained in the Participation Agreement and in each of the other Operative Documents are true and correct in all material respects as though made on and as of such date, except to the extent such representations or warranties relate solely to an earlier date, in which case such representations and warranties were true and correct on and as of such earlier date;

(e) On and as of the Requested Funding Date, there are no actions, suits or proceedings pending or, to the knowledge of the Lessee or Guarantor, threatened in writing (i) to set aside, restrain, enjoin or prevent the full performance of the Participation Agreement, the other Operative Documents or the transactions contemplated thereby, or (ii) that question or challenge the validity of the Operative Documents or the rights or remedies of the Lessor or any other Participant with respect to the Lessee or Guarantor or the Facility or Collateral under the Operative Documents;

(f) On and as of the Requested Funding Date, no Unmatured Default or Event of Default has occurred and is continuing, and no Unmatured Default or Event of Default will have occurred after giving effect to the making of the Advance requested hereby; and

(g) All of the applicable conditions precedent to this Advance under Article VI of the Participation Agreement have been satisfied in all material respects.

Please wire transfer the proceeds of the Advance requested hereby to the account of the Lessee described on Schedule I hereto.

[the remainder of this page has been intentionally left blank]

EXHIBIT A-2

The Lessee has caused this Funding Request to be executed and delivered by its duly authorized Responsible Officer this __th day of ____, 2002.

CITRIX SYSTEMS, INC.

By

Name:

Title:

Schedule I

wiring instructions for the Lessee

EXHIBIT B

Basis for Calculation of Minimum Net Cash Covenant

Compliance - Calculations
		Qtr. ending
Unencumbered Cash & Equivalents		$	x
Plus	Unencumbered Short Term Investments	$	x
Plus	Unencumbered Long Term Investments	$	x
	Total Liquid Assets	$	x
Less	Equity Investments (Others)	$	x
Less	Subordinated Debt	$	x
Net Cash		$	x
Required Cash         Must be greater than:    $100,000,000

PASS/FAIL?

APPENDIX A

TO PARTICIPATION AGREEMENT

DEFINITIONS AND INTERPRETATION

A. Interpretation. In each Operative Document, unless a clear contrary intention appears:

(i) the singular number includes the plural number and vice versa;

(ii) reference to any Person includes such Person’s successors and assigns but, if applicable, only if such successors and assigns are permitted by the Operative Documents, and reference to a Person in a particular capacity excludes such Person in any other capacity or individually;

(iii) reference to any gender includes each other gender;

(iv) reference to any agreement (including any Operative Document), document or instrument means such agreement, document or instrument as amended or modified and in effect from time to time in accordance with the terms thereof and, if applicable, the terms of the other OperativeDocuments and reference to any promissory note includes any promissory note which is an extension or renewal thereof or a substitute or replacement therefor;

(v) reference to any Applicable Law means such Applicable Law as amended, modified, codified, replaced or reenacted, in whole or in part, and in effect from time to time, including rules and regulations promulgated thereunder and reference to any section or other provision of any Applicable Law means that provision of such Applicable Law from time to time in effect and constituting the substantive amendment, modification, codification, replacement or reenactment of such section or other provision;

(vi) reference in any Operative Document to any Article, Section, Appendix, Schedule or Exhibit means such Article or Section thereof or Appendix, Schedule or Exhibit thereto;

(vii) “hereunder”, “hereof”, “hereto” and words of similar import shall be deemed references to an Operative Document as a whole and not to any particular Article, Section or other provision thereof;

(viii) “including” (and with correlative meaning “include”) means including without limiting the generality of any description preceding such term;

(ix) with respect to any rights and obligations of the parties under the Operative Documents, all such rights and obligations shall be construed to the extent permitted by Applicable Law.

Appendix A

B. Computation of Time Periods. For purposes of computation of periods of time under the Operative Documents, the word “from” means “from and including” and the words “to” and “until” each mean “to but excluding”.

C. Accounting Terms and Determinations. Unless otherwise specified in any Operative Document, all terms of an accounting character used therein shall be interpreted, all accounting determinations thereunder shall be made, and all financial statements required to be delivered thereunder shall, in respect of the Guarantor, be prepared, in accordance with GAAP, applied on a basis consistent (except for changes concurred in by the Guarantor’s independent public accountants or otherwise required by a change in GAAP) with the most recent audited consolidated financial statements of the Guarantor and its consolidated Subsidiaries delivered to the Participants on or prior to the Closing Date.

D. Conflict in Operative Documents. If there is any conflict between any Operative Documents, such Operative Document shall be interpreted and construed, if possible, so as to avoid or minimize such conflict but, to the extent (and only to the extent) of such conflict, the Participation Agreement shall prevail and control.

E. Legal Representation of the Parties. The Operative Documents were negotiated by the parties with the benefit of legal representation and any rule of construction or interpretation otherwise requiring the Operative Document to be construed or interpreted against any party shall not apply to any construction or interpretation hereof or thereof.

F. Defined Terms. Unless a clear contrary intention appears, terms defined herein have the respective indicated meanings when used in each Operative Document.

“Acquisition Cost” means with respect to each Property the sum of the Land Acquisition Cost, the cost of acquiring any and all Improvements thereon and, other approved costs to be funded by an Advance and all Transaction Expenses associated therewith.

“Administrative Agent” means Key Corporate Capital Inc., a Michigan corporation.

“Advance” means the advance of funds by the Lessor to the Lessee in accordance with Article III of the Participation Agreement.

“Affiliate” means, with respect to any Person, any other Person directly or indirectly controlling or controlled by or under direct or indirect common ownership or control with such Person. For purposes of this definition, “control” when used with respect to any Person means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract, trust arrangement or otherwise; and the terms “controlling” and “controlled” have meanings correlative to the foregoing.

“After Tax Basis” means, with respect to any payment to be received, the amount of such payment increased so that, after deduction of the amount of all federal, state and local income taxes required to be paid by the recipient (less any federal, state and local income tax savings, credits, deductions or other quantifiable federal, state and local income tax benefits realized and the present value of any federal, state and local income tax savings projected to be realized by the recipient as a result of such payment) with respect to the receipt by the recipient of such amounts, such increased payment (as so reduced) is equal to the payment otherwise required to be made.

2

Appendix A

“Aggregate Commitment Amount” means $61,000,000.00.

“Applicable Law” means all existing applicable laws, rules, regulations (including Environmental Laws), statutes, treaties, codes, ordinances, permits, certificates, orders and licenses of and interpretations by, any Governmental Authority, and applicable judgments, decrees, injunctions, writs, orders or like action of any court, administrative, judicial or quasi-judicial tribunal or agency of competent jurisdiction (including those pertaining to health, safety or the environment (including, without limitation, wetlands) and those pertaining to the construction, use or occupancy of the Property or the use of the Equipment).

“Applicable Margin” means (i) with respect to any Loan, ***% and (ii) with respect to any Lessor Amount, ***%.

“Appraisal” means, with respect to each Property, an appraisal of such Property by the Appraiser, in form and substance satisfactory to the Participants, which complies in all material respects with all of the provisions of the Financial Institutions Reform, Recovery and Enforcement Act of 1989, as amended, the rules and regulations adopted pursuant thereto, and all other Applicable Law addressed to the Lenders, the Lessor and the Lessee. The Appraisal, with respect to each Property will appraise: (i) the Fair Market Sales Value of the Land and (ii) the Improvements on such Land as of the Acquisition Date, (iii) the economic useful life of the Property, (iv) the Fair Market Sales Value of the Land and Improvements as of the Basic Term Expiration Date.

“Appraiser” means Clovus, McLemore & Dulce or any other reputable appraiser selected by the Lessor and consented to by the Lessee.

“Appurtenant Rights” means, with respect to any Parcel of Land, (i) all agreements, easements, rights of way or use, rights of ingress or egress, privileges, appurtenances, tenements, hereditaments and other rights and benefits at any time belonging or pertaining to such Land or the Improvements thereon, including, without limitation, the use of any streets, ways, alleys, vaults or strips of land adjoining, abutting, adjacent or contiguous to such Land and (ii) all permits, licenses and rights, whether or not of record, appurtenant to such Land.

“Assignment Agreement” is defined in Section 12.1(c) of the Participation Agreement.

“Assignment of Lease and Rent” means each Assignment of Lease, and Rent, Security Agreement and Financing Statement dated as of the date of each applicable Funding Date, from the Lessor, as assignor, to the Lender, as assignees, as the same may be amended, supplemented, amended and restated or otherwise modified from time to time.

“Assignment of Purchase Agreement” means each agreement pursuant to which the Lessor agrees to acquire a Property in order to lease such Property to the Lessee.

3

Appendix A

“Authorized Officer” means any of the Chief Executive Officer, the President, the Chief Financial Officer, any Senior Vice President, any Vice President, the Controller, the Treasurer or any Assistant Treasurer of the Lessee.

“Authorized Officer’s Certificate” means, with respect to the Guarantor or Lessee a certificate signed by any Authorized Officer of such Person, which certificate shall certify as true and correct the subject matter being certified to in such certificate.

“Base Rate” means for any day the higher of (i) the Federal Funds Rate plus the Applicable Margin or (ii) the Prime Rate of the Administrative Agent.

“Base Rate Loan(s)/Lessor Amount(s)” means a Loan or Lessor Amount, as the case may be, bearing interest at the Base Rate.

“Basic Rent” means, as determined as of any Basic Rent Payment Date, the amounts payable pursuant to Section 4.1 of the Participation Agreement (including any such amounts to be paid with the proceeds of Loans and Lessor Yield Amounts).

“Basic Rent Payment Date” means (i) with respect to Interest Periods which are three (3) months or less, the last day of each Interest Period then in effect and (ii) with respect to Interest Periods which are longer than three (3) months, the day which is three (3) months from the first day of any such Interest Period, and the day which is three (3) months thereafter. Notwithstanding the foregoing, if Lessee or its designee purchases Lessor’s interest in any Property pursuant to the Purchase Option, any accrued unpaid Basic Rent allocable to such Property shall be due on the date of purchase in addition to the Purchase Price due Lessor under the Lease

“Basic Term” is defined in Section 2.3 of the Lease.

“Break Costs” means an amount equal to the amount, if any, required to compensate any Participant for any additional losses (including, without limitation, any loss, cost or expense incurred by reason of the liquidation or reemployment of deposits or funds acquired by such Participant to fund its obligations under the Operative Documents) it may reasonably incur as a result of (v) the Lessee’s payment of Rent other than on a Basic Rent Payment Date for any reason, (w) any Advance not being made on the date specified therefor in the applicable Funding Request (other than as a result of a breach by such Participant, as the case may be, of its obligation under Section 3.1, 3.2 or 3.3, as the case may be, of the Participation Agreement to make Advances to the Lessee or make Lessor Amounts or Loans available to the Lessor), (x) the Lessee’s payment of the Lease Balance, or a portion thereof, on any date other than a Basic Rent Payment Date. A statement as to the amount of such loss, cost or expense, prepared in good faith and in reasonable detail and submitted by such Participant, as the case may be, to the Lessee, shall be presumed correct and binding on the Lessee absent demonstrable error.

“Business Day” means a day other than a Saturday, Sunday or other day on which commercial banks in New York, New York or Cleveland, Ohio are authorized or required by law to close, except that, when used in connection with a LIBO Rate Loan or LIBO Rate Lessor Amount, such day shall also be a day on which dealings between banks are carried on in Dollar deposits in London, England and New York, New York.

4

Appendix A

“Casualty” means any damage or destruction of all or any portion of any Property as a result of a fire, flood, earthquake or other casualty or catastrophe.

“Certifying Party” is defined in Section 22.1 of the Lease.

“Claims” means any and all obligations, liabilities, losses, actions, suits, judgments, penalties, fines, claims, demands, settlements, costs and expenses (including, without limitation, reasonable legal fees and expenses) of any nature whatsoever.

“Closing Date” means with respect to each Property the date on which each of the conditions precedent set forth in Section 6.1 of the Participation Agreement have been satisfied or waived by the applicable parties set forth therein.

“Code” means the Internal Revenue Code of 1986, as amended, reformed or otherwise modified from time to time.

“Collateral” has the meaning attributed to it in the Pledge Agreement.

“Collateral Account” means the Deposit account.

“Collateral Agent” means Key Corporate Capital Inc., a Michigan corporation.

“Commitment” means (i) as to any Lender, its Loan Commitment and (ii) as to the Lessor, the Lessor Commitment.

“Condemnation” means, with respect to each Property, any condemnation, requisition, confiscation, seizure or other taking or sale of the use, access, occupancy, easement rights or title to any Property or any part thereof, wholly or partially (temporarily or permanently), by or on Payment Account of any actual or threatened eminent domain proceeding or other taking of action by any Person having the power of eminent domain, including an action by a Governmental Authority to change the grade of, or widen the streets adjacent to, any Property or alter the pedestrian or vehicular traffic flow to any Property so as to result in change in access to any Property (such that there is a material adverse effect on the operation of such Property), or by or on Payment Account of an eviction by paramount title or any transfer made in lieu of any such proceeding or action. A “Condemnation” shall be deemed to have occurred on the earliest of the dates that use, occupancy or title vests in the condemning authority.

“Contingent Payments” means amounts payable to the Administrative Agent, the Lease Arranger or any Participant pursuant to Article XIII of the Participation Agreement.

“Control Agreement” is defined in Section 2.1 of the Pledge Agreement.

“Controlled Group” means all members of a controlled group of corporations and all trades or businesses (whether or not incorporated) under common control which, together with the Lessee, are treated as a single employer under Section 414 of the Code.

“Deficiency Collateral” is defined in Section 14.1 of the Participation Agreement.

5

Appendix A

“Deficiency Date” is defined in Section 14.1 of the Participation Agreement.

“Documentation Date” is defined in Section 2.1 of the Participation Agreement.

“Deposit Account” is defined in the Pledge Agreement.

“Depositary” is defined in the second recital of the Pledge Agreement.

“Dollars” and “$” mean dollars, the lawful currency of the United States of America.

“Eligible Transferee” means a Person which either (a) is a Lender or an Affiliate of a Lender, (b) a financial institution with a credit rating substantially similar to that of the assigning Lender, but in no event lower; an S&P unsecured debt rating of at least BBB+ or a Moody’s unsecured debt rating of at least Baa3, (c) a trust established by an entity described in clauses (a) or (b) hereof or (d) is consented to as an Eligible Transferee by the Administrative Agent and, so long as no Event of Default shall have occurred and be continuing, by Lessee, which consents in each case will not be unreasonably withheld; provided that no Person organized outside the United States may be an Eligible Transferee if Lessee would be required to pay withholding taxes on interest or principal owed to such Person.

“End of the Term Report” is defined in Section 13.2(a) of the Participation Agreement.

“Environmental Audit” means, with respect to each Property, a Phase One environmental site assessment (the scope and performance of which meets or exceeds the then most current ASTM Standard Practice E1527 for Environmental Site Assessments: Phase One Environmental Site Assessment Process) of such Property.

“Environmental Laws” means all applicable federal, state or local statutes, laws, ordinances, codes, rules and regulations (including consent decrees and administrative orders directed to the Lessee or any of its Subsidiaries) relating to or imposing liabilities or standards of conduct concerning protection of health or the use, handling, storage, recycling, disposal, discharge, transport, treatment or generation of Hazardous Materials and in effect in any and all jurisdictions in which the Lessee or its Subsidiaries are conducting or at any time have conducted business, or where any property of the Lessee or any of its Subsidiaries is located, or where any Hazardous Material generated by or disposed of by the Lessee or any of its Subsidiaries is located.

“Environmental Violation” means, with respect to each Property, any activity, occurrence or condition that violates or results in non-compliance with any Environmental Law.

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended from time to time, and any rule or regulation issued thereunder.

“ERISA Group” means, with respect to the Lessee, Lessee and all members of the same controlled group of corporations and all trades or businesses (whether or not incorporated) as Lessee which, within the meaning of Section 414(b) of the Internal Revenue Code, and the regulations promulgated and rulings

6

Appendix A

issued thereunder, are under common control with the Lessee, within the meaning of Section 414(c) of the Internal Revenue Code, and the regulations promulgated and rulings issued thereunder.

“Event of Loss” means the occurrence of a Significant Condemnation or a Significant Casualty.

“Excess Casualty/Condemnation Proceeds” means with respect to any Property, (i), in the event of a Casualty or Condemnation that is an Event of Loss where the applicable Property is not repaired or restored, at any time the excess, if any, of (x) the aggregate of all awards, compensation or insurance proceeds paid in connection with a Casualty or Condemnation minus (y) the sum of the Lease Balance then outstanding, all accrued and unpaid Basic Rent and all accrued and unpaid Contingent Payments and (ii) in the event of a Casualty or Condemnation where the applicable Property is repaired or restored, the excess, if any, of all awards, compensation or insurance proceeds paid in connection with the Casualty or Condemnation minus the actual cost of such repairs and restoration.

“Excess Sales Proceeds” means the excess, if any, of (x) the aggregate of all proceeds received by the Lessor in connection with the Lessee’s exercise of the Remarketing Option under Article XX of the Lease, less all fees, costs and expenses of the Lessor in connection with the exercise of its rights and remedies thereunder, minus (y) the outstanding Lease Balance.

“Excess Wear and Tear” means (i) use of any Property contrary to the limitations imposed by the Lease, or (ii) the failure to maintain, to repair, to restore, to rebuild or to replace any Property, and in the condition required under the Lease, or (iii) any reduction in Fair Market Sales Value of any Property attributable to any grant, release, dedication, transfer, annexation or amendment made by the Lessee without the written consent of the Lessor or as required by any Governmental Authority.

“Expiration Date” means the earliest of (a) the Maturity Date, (b) any date on which the Lease shall have been terminated in accordance with the provisions of the Lease or any of the other Operative Documents, subject, however, to the extension of the Maturity Date in accordance with the terms and conditions of the Participation Agreement.

“Extension Term” is defined in Section 11.1 of the Participation Agreement.

“Fair Market Sales Value” means, with respect to any Property, the amount, which in any event shall not be less than zero, that would be paid in cash in an arm’s-length transaction between an informed and willing purchaser and an informed and willing seller, neither of whom is under any compulsion to purchase or sell, respectively, for the ownership of the applicable Property. For purposes of each Appraisal delivered in connection with the Closing Date, the Fair Market Sales Value of such Property shall be determined based on the assumption that such Property are in the condition and state of repair required under Section 9.1 of the Lease and the Lessee is in compliance with the other requirements of the Operative Documents relating to the condition of such Property.

“Federal Funds Rate” means, for any day or period, as applicable, the rate per annum (rounded upwards, if necessary, to the nearest 1/100th of 1%) at which Federal funds in the amount equal to the principal amount of the related Loans or Lessor Amounts are offered in the

7

Appendix A

interbank market to Key Bank, N.A., as of 11:00 a.m., New York time, on such day for such day or for such period, as applicable.

“Fee Letter” means that certain letter agreement, dated as of April 23, 2002, between the Lease Arranger and the Lessee.

“Financial Officer” means with respect to any Person the chief financial officer, the principal accounting officer, any vice-president or assistant vice-president with accounting or financial responsibilities, or the treasurer or any assistant treasurer.

“Fixtures” means all fixtures relating to the Improvements, including all components thereof, located in or on the Improvements, together with all replacements, modifications, alterations and additions thereto.

“Florida Property” means the Land and Improvements subjected to the Lease pursuant to Lease Supplement No. 1.

“Funding Office” means the office of each Participant identified on Schedule II to the Participation Agreement as its Funding Office.

“Funding Request” is defined in Section 3.4(a) of the Participation Agreement.

“GAAP” means generally accepted accounting principles as in effect in the United States of America from time to time.

“Governmental Action” means all permits, authorizations, registrations, consents, approvals, waivers, exceptions, variances, orders, judgments, written interpretations, decrees, licenses, exemptions, publications, filings, notices to and declarations of or with, or required by, any Governmental Authority, or required by any Applicable Law, and shall include, without limitation, all such environmental and operating permits and licenses that are required for the use, occupancy, zoning and operation of any Property as provided in the Lease.

“Governmental Authority” means any nation or government, any state or other political subdivision thereof and any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government, and having jurisdiction over the Property or, any Obligor or the Operative Documents, as applicable.

“Guarantor” means Citrix Capital Corp., a Nevada corporation.

“Gross Remarketing Proceeds” is defined in Section 20.1(m) of the Lease.

“Hazardous Activity” means any activity, process, procedure or undertaking that (a) directly or indirectly (i) produces, generates or creates any Hazardous Material; (ii) causes or results in the Release of any Hazardous Material into the environment (including air, water vapor, surface water, groundwater, drinking water, land (including surface or subsurface), plant, aquatic and animal life); or (iii) involves the containment or storage of any Hazardous Material; and (b) is regulated as hazardous waste treatment, storage or disposal within the meaning of any Environmental Law.

8

Appendix A

“Hazardous Material” means (a) any “hazardous substance,” as defined by the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended, and (b) any “hazardous waste,” as defined by the Resource Conservation and Recovery Act, as amended and (c) any pollutant or contaminant or hazardous, dangerous or toxic chemical, material waste or substance within the meaning of any applicable Environmental Law, all as amended or hereafter amended.

“Impositions” means any and all liabilities, losses, expenses and costs of any kind whatsoever for fees, taxes, levies, imposts, duties, charges, assessments or withholdings of any nature whatsoever imposed by any Governmental Authority (“Taxes”), including, without limitation, (i) real and personal property taxes, including personal property taxes on any Property covered by the Lease that is classified by Governmental Authorities as personal property, and real estate or ad valorem taxes in the nature of property taxes; (ii) sales taxes, use taxes and other similar taxes (including rent taxes and intangibles taxes); (iii) any excise taxes; (iv) real estate transfer taxes, conveyance taxes, mortgage taxes, intangible taxes, stamp taxes and documentary recording taxes and fees; (v) taxes that are, or are in the nature of, franchise, income, value added, privilege and doing business taxes, license and registration fees; and (vi) assessments on any Property, including all assessments for public improvements or benefits (whether or not such improvements are commenced or completed during the Basic Term), and in each case all interest, additions to tax and penalties thereon, which at any time may be levied, assessed or imposed by any Federal, state or local authority upon or with respect to (a) any Tax Indemnitee, any Property or any part thereof or interest therein, or the Lessee or any sublessee or user of any Property; (b) the financing, refinancing, demolition, construction, substitution, subleasing, assignment, control, condition, occupancy, servicing, maintenance, repair, ownership, possession, purchase, rental, lease, activity conducted on, delivery, insuring, use, operation, improvement, transfer, return or other disposition of any Property or any part thereof or interest therein; (c) the Notes or interest therein or transfer thereof; (d) the rentals, receipts or earnings arising from the Properties or any part thereof or interest therein; (e) the Operative Documents or any payment made or accrued pursuant thereto; (f) the income or other proceeds received with respect to the Properties or any part thereof or interest therein upon the sale or disposition thereof; (g) any contract relating to the construction, acquisition or delivery of the Improvements or any part thereof or interest therein; (h) the issuance of the Notes; or (i) otherwise in connection with the transactions contemplated by the Operative Documents. Impositions for any given tax year shall exclude assessment installments that are not due and payable during such tax year.

Notwithstanding anything in the first paragraph of this definition (except as provided in the final paragraph of this definition), the term “Impositions” shall not mean or include:

(i) Taxes that are imposed by any Governmental Authority and that are based upon or measured by or with respect to the gross or net income or gross or net receipts or that are minimum taxes, income or capital gains taxes, withholding taxes or taxes on, measured by or with respect to or in the nature of capital, net worth, excess profits, items of tax preference, capital stock, franchise, gift, succession, estate, business privilege or doing business taxes or any similar taxes or taxes in lieu thereof (collectively, “Income Taxes”) and any interest, additions to tax, penalties or other charges in respect thereof and any withholding tax imposed as a collection device for, in lieu of, or otherwise related to the foregoing without regard to whether such tax is required to be collected by Lessee and without regard to whether Lessee would be

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liable for such withholding tax in the event it failed to so withhold; provided that this clause (i) shall not be interpreted to prevent a payment from being made on an After Tax Basis if such payment is otherwise required to be so made and provided, further, that Taxes described in this lause (i) shall not include Taxes that are, or are in the nature of, ales, use, rental, transfer or property taxes;

(ii) any Tax to the extent, but only to such extent, it relates to any act, event or omission that occurs, or relates to a period, after the termination of the Lease and the payment of all Obligations;

(iii) any Tax for so long as, but only for so long as, it is being contested in accordance with the provisions of Section 13.5(b) of the Participation Agreement, provided that the foregoing shall not limit any Lessee’s obligation under Section 13.5(b) of the Participation Agreement to advance to such Tax Indemnitee amounts with respect to Taxes that are being contested in accordance with Section 13.5(b) of the Participation Agreement or any expenses incurred by such Tax Indemnitee in connection with such contest;

(iv) any interest, additions to tax or penalties imposed on a Tax Indemnitee as a result of a Tax Indemnitee’s failure to file any return or other documents timely and as prescribed by applicable law; provided that this clause (iv) shall not apply (x) if such interest or penalties arise as a result of a position taken (or requested to be taken) by the Lessee in a contest controlled by the Lessee under Section 13.5(b) of the Participation Agreement, provided that this exclusion shall not apply and Lessor will indemnify if the Tax Indemnitee would not have been subject to that tax if it had not participated in the transaction contemplated by the Lease, or (y) if such failure is attributable to a failure by the Lessee to fulfill its obligations under Section 13.5(e) of the Participation Agreement with respect to any such return;

(v) any Taxes or impositions imposed upon a Tax Indemnitee with respect to any voluntary transfer, sale, financing or other voluntary or involuntary disposition of any interest in any Property or any part thereof, or any interest therein or any interest or obligation under the Operative Documents or from any sale, assignment, transfer or other disposition of any interest in a Tax Indemnitee or any Affiliate thereof (other than any transfer, sale or other disposition (1) pursuant to the terms of the Operative Documents in connection with the exercise by the Lessee of its purchase option or any termination option or other purchase of any Property by the Lessee, (2) after the occurrence of a Lease Event of Default, (3) in connection with a Casualty or Condemnation affecting any Property, or (4) in connection with any sublease, modification or addition to any Property by the Lessee);

(vi) Taxes imposed on or with respect to or payable by any Tax Indemnitee based on, measured by or imposed with respect to any fees or rents received by such Tax Indemnitee;

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(vii) any Taxes imposed against or payable by a Tax Indemnitee resulting from, or that would not have been imposed but for, the gross negligence or willful misconduct of such Tax Indemnitee, any successor indemnitee or any officer or Affiliate of a Tax Indemnitee;

(viii) Taxes imposed on or payable by a Tax Indemnitee to the extent such Taxes result from or would not have been imposed but for, a breach by the Tax Indemnitee or any Affiliate thereof of any representations, warranties or covenants set forth in the Operative Documents (unless such breach is directly caused by any Obligor’s breach of its representations, warranties or covenants set forth in the Operative Documents);

(ix) Taxes to the extent resulting from such Tax Indemnitee’s failure to comply with the provisions of Section 13.5(b) of the Participation Agreement, which failure precludes or materially adversely affects the ability to conduct a contest pursuant to Section 13.5(b) of the Participation Agreement (unless such failure is caused by any Obligor’s breach of its obligations under the Operative Documents);

(x) Taxes which are included in the Property Cost if and to the extent actually paid;

(xi) Taxes that would have been imposed in the absence of the transactions contemplated by the Operative Documents and Taxes imposed on or with respect to or payable as a result of activities of a Tax Indemnitee or Affiliate thereof unrelated to the transactions contemplated by the Operative Documents (unless specifically requested or authorized by any Obligor or the Operative Documents); (xii) Taxes imposed on or with respect to or payable by a Tax Indemnitee resulting from, or that would not have been imposed but for the existence of, any Lessor Lien created by or through such Tax Indemnitee or an Affiliate thereof, unless caused by acts or omissions of any Obligor;

(xiii) Any Tax imposed against or payable by a Tax Indemnitee to the extent that the amount of such Tax exceeds the amount of such Tax that would have been imposed against or payable by such Tax Indemnitee (or, if less, that would have been subject to indemnification under Section 13.5 of the Participation Agreement) if such Tax Indemnitee were not a direct or indirect successor, transferee or assign of one of the original Tax Indemnities; provided, however, that this exclusion (xiii) shall not apply if such direct or indirect successor, transferee or assign acquired its interest as a result of a transfer permitted under the Operative Documents pursuant to and while a Lease Event of Default shall have occurred and is continuing;

(xiv) Taxes imposed on or with respect to or payable by a Tax Indemnitee that would not have been imposed but for an amendment, supplement, modification, consent or waiver to any Operative Document not initiated, requested or consented to by an Obligor unless such amendment, supplement, modification, consent or waiver (A) arises due to, or in connection with there having occurred, a Lease Event of Default

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or (B) is required by the terms of the Operative Documents or is executed in connection with any amendment to the Operative Documents required by law;

(xv) Taxes in the nature of intangibles, stamp, documentary or similar Taxes (other than any such Taxes that are payable in connection with the transactions contemplated by the Operative Documents);

(xvi) Any Tax imposed by its express terms in lieu of or in substitution for a Tax not subject to indemnity pursuant to the provisions of Section 13.5 of the Participation Agreement; and

(xvii) any Income Taxes imposed by any Governmental Authority on an Indemnitee on account of the transactions contemplated by the Operative Documents being treated as a loan as described in the succeeding paragraph.

Notwithstanding the foregoing, the exclusions from the definition of Impositions set forth in clauses (i), (ii), (v), (vi), (xi), (xv), and (xvi) (to the extent that any such tax is imposed by its express terms in lieu of or in substitution for a Tax set forth in clauses (i), (ii), (v), (vi), (xi), (xv), and (xvi)) above shall not apply (but the other exclusions shall apply) to any Taxes or any increase in Taxes imposed on a Tax Indemnitee net of any decrease in taxes realized by such Tax Indemnitee, to the extent that the imposition of such Taxes or such tax increase (and, if applicable, such decrease in taxes) would not have occurred if on the Closing Date the Lessor had advanced funds to the Company in the form of a loan secured by the Property in an amount equal to the Advance funded on the Closing Date, with debt service for such loans equal to the Basic Rent payable on each Basic Rent Payment Date and a principal balance at the maturity of such loan in an amount equal to the Lease Balance at the end of the term of the Lease.

“Improvements” means all equipment, buildings, structures, Fixtures and other improvements of every kind existing at any time and from time to time and constructed or installed or otherwise purchased, with amounts advanced by the Participants pursuant to the Participation Agreement, on or under the Land, together with any and all appurtenances to such buildings, structures or improvements, including sidewalks, utility pipes, conduits and lines, drainage facilities, parking areas and roadways, and including all Modifications and other additions to or changes in the Improvements at any time.

“Indemnitee” means each of the Lessor, the Lenders, the Administrative Agent, their respective Affiliates and their respective successors, assigns, directors, shareholders, partners, officers, employees and agents.

“Initial Participant” means Allied Irish Banks, P.L.C.

“Insurance Requirements” means all terms and conditions of any insurance policies required by Article XIII of the Lease to be in effect.

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“Interest Period” means, with respect to any Loan or Lessor Amount outstanding during the Basic Term:

(i) each period commencing on the day after the last day of the preceding Interest Period applicable to such Loan or Lessor Amount and ending on the date occurring one, three, six or twelve months thereafter, as selected by the Lessee.

The foregoing provisions relating to Interest Periods are subject to the following:

(ii) if any Interest Period would otherwise end on a day that is not a Business Day, such Interest Period shall be extended to the next succeeding Business Day unless the result of such extension would be to carry such Interest Period into another calendar month in which event such Interest Period shall end on the immediately preceding Business Day and any Interest Period that would otherwise extend beyond the Maturity Date shall end on the Maturity Date.

“Interest Rate” means with respect to Loans, (i) that are LIBO Rate Loans/Lessor Amounts, the LIBO Rate plus the Applicable Margin for the Loans and (ii) that are Base Rate Loans/Lessor Amounts, the Base Rate plus the Applicable Margin for the Loans.

“Land” means each parcel of real property described on Schedule I to any Lease Supplement, and all Appurtenant Rights attached thereto.

“Land Acquisition Cost” means, as described in each respective Appraisal given with respect to each Parcel of Land, the purchase price paid and the related closing costs paid by the Lessor to acquire title such Parcel of Land.

“Lease” means the Master Lease and all Lease Supplements.

“Lease Balance” means the sum of (i) the Property Cost (ii) any Transaction Expenses, and (iii) any other amounts due and owing by the Lessee under any of the Operative Documents, including, without limitation, accrued and unpaid Rent, contingent payments and Break Costs, minus any payments of Rent, actually received by the Lessor.

“Lease Event of Default” means a “Lease Event of Default” as defined in Section 16.1 of the Lease.

“Lease Supplement” means each Lease Supplement substantially in the form of Exhibit I to the Lease.

“Lender” means any Participant having a Loan Commitment, as set forth on Schedule I to the Participation Agreement, and any other Person that may from time to time hold Loans.

“Lessee” means Citrix Systems, Inc., as lessee under the Lease.

“Lessor” means SELCO Service Corporation, an Ohio corporation.

“Lessor Amount” is defined at Section 3.2 of the Participation Agreement.

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“Lessor Commitment” means the Commitment of the Lessor in the amount set forth on Schedule I of the Participation Agreement, as such Schedule may be amended, supplemented, amended and restated or otherwise modified from time to time.

“Lessor Financing Statements” means UCC financing statements appropriately completed and executed for filing in the applicable jurisdiction in order to protect the Lessor’s security interest in any Property under the applicable Security Documents and the applicable Lessor Mortgage.

“Lessor Lien” means any Lien, true lease or sublease or disposition of title arising as a result of (a) any claim against the Administrative Agent or any Participant, whether or not resulting from the transactions contemplated by the Operative Documents, (b) any act or omission of the Administrative Agent or any Participant which is not required or permitted by the Operative Documents or is in violation of any of the terms of the Operative Documents, (c) any claim against the Administrative Agent or any Participant, with respect to Taxes or Transaction Expenses against which the Lessee is not required to indemnify the Administrative Agent or any Participant, in its individual capacity, pursuant to Article IX of the Participation Agreement or (d) any claim against the Lessor arising out of any transfer by the Lessor of all or any portion of the interest of the Lessor in the Property or the Operative Documents other than the transfer of title to or possession of the Property by the Lessor pursuant to and in accordance with the Lease, the Loan Agreement or the Participation Agreement or pursuant to the exercise of the remedies set forth in Section 16.2 of the Lease.

“Lessor Percentage” means the percentage set forth on Schedule I to the Participation Agreement as the “Lessor Percentage”.

“LIBO Rate” means, the rate per annum determined by the Administrative Agent on the basis of the offered rate for Dollar loans in the London interbank market, subject to adjustments for reserves as provided in Section 13.7 of the Participation Agreement, of amounts equal or comparable to the principal amount of the Loans or Lessor Amount requested for a period comparable to such Interest Period, which rate appears on the Bloomberg Screen Page as of 11:00 a.m., London time, two (2) Business Days prior to the first day of each such Interest Period, provided that (i) if more than one such offered rate appears on the Bloomberg Screen Rate, the “London Interbank Offered Rate” will be the arithmetic average (rounded upwards, if necessary, to the next higher 1/100th of 1%) of such offered rates); (ii) if no rate can be obtained from the Bloomberg Screen, then the rate will be determined by reference to Reuters Service and (iii) if no such rates can be obtained, the LIBO Rate for such Interest Period will be the rate per annum, determined by the Administrative Agent two (2) Business Days prior to the first day of each such Interest Period, as the rate for Dollar loans offered to leading banks in the London interbank market for a period comparable to such Interest Period in an amount comparable to the principal amount of the Loan or Lessor Amount.

“Lien” means any lien (statutory or other), mortgage, pledge, hypothecation, assignment, security interest, encumbrance or preference, priority or other security agreement or any interest in property to secure payment of a debt or performance of an obligation (including, without limitation, the interest of a vendor or lessor under any conditional sale, Capitalized Lease or other title retention agreement).

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“Loan Agreement Default” means any event, act or condition which with notice or lapse of time, or both, would constitute a Loan Agreement Event of Default.

“Loan Agreement Event of Default” is defined in Article V of the Loan Agreement.

“Loan Agreement” means the Loan Agreement, dated the date of the Participation Agreement, among the Lender and the Lessor. “Loan Commitment” means with respect to any Lender during the Basic Term, such Lender’s Commitment in the amount set forth on Schedule I to the Loan Agreement under the heading “Loan Commitment”, as such Schedule I may be amended, supplemented, amended and restated or otherwise modified from time to time.

“Loan Commitment Termination Date” means with respect to the Basic Term, the Maturity Date.

“Loan Documents” means the Loan Agreement and the Notes.

“Loan Percentage” means the percentage set forth on Schedule I to the Participation Agreement as the “Loan Percentage”.

“Loans” means the Loans made under the Loan Agreement.

“Marketing Period” means the period commencing on the date the Lessee gives notice of its election of the Remarketing Period and ending on the earlier of (a) the date on which the Property is sold to a purchaser in accordance with Article XX of the Lease and (b) the Expiration Date.

“Maturity Date” means the seventh (7th) anniversary of the Documentation Date, unless such Maturity Date is extended pursuant to Section 11.2 of the Participation Agreement, in which case, the “Maturity Date” shall mean the last day of the Extension Term.

“Maximum Recourse Amount” means with respect to each Property, as of any date of determination, the percentage of Lease Balance set forth in the Lease Supplement for such Property.

“Minimum Net Cash” mans the sum of Unencumbered Cash and equivalents, short-term investments and long-term investments less Other Investments and Subordinated Indebtedness.

“Modifications” is defined in Section 10.1 of the Lease.

“Moody’s” means Moody’s Investors Service, Inc, a Delaware corporation, and if such corporation shall be dissolved or liquidated or shall no longer perform the functions of a securities rating agency, “Moody’s” shall be deemed to refer to any other nationally recognized securities rating agency (other than S&P) designated by the Lessor and approved by the Lessee.

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“Multiemployer Plan” means a “multiemployer plan” within the meaning of Section 4001(a)(3) of ERISA to which the Lessee or any member of the Controlled Group is obligated to make contributions.

“Necessary Permits” means, collectively, all licenses, permits, orders, approvals, consents and other authorizations from any Governmental Authority then required for the construction, use and occupancy of the Properties.

“Net Proceeds” means all amounts received by the Lessor in connection with any Casualty or Condemnation or any sale of the Property pursuant to the Lessor’s exercise of remedies under Section 16.2 of the Lease or the Lessee’s exercise of the Remarketing Option under Article XX of the Lease, and all interest earned thereon, less any Impositions arising in connection with such amounts, if any, and less the expense of claiming and collecting such amounts, including all costs and expenses in connection therewith for which the Lessor or any Participant is entitled to be reimbursed pursuant to the Lease.

“Nonconformance Amount” is defined in Section 13.2(b) of the Participation Agreement.

“Notes” is defined in Section 2.2 of the Loan Agreement.

“Obligations” means all obligations (monetary or otherwise) of the Lessee arising under or in connection with any of the Operative Documents.

“Obligor” means the Guarantor and the Lessee.

“Operative Documents” means the following:

(a) the Participation Agreement;

(b) the Lease and each Lease Supplement;

(c) the Pledge Agreement;

(d) the Loan Agreement;

(e) each Note;

(f) each Assignment of Lease and Rent;

(g) each Lessor Financing Statement;

(h) each Assignment of Purchase Agreement;

(i) the Fee Letter;

(j) the Control Agreement; and

(k) each other document, agreement, certificate or instrument delivered in connection with the foregoing (including any amendment or other modification to any of the foregoing).

“Other Investments” means those long-term investments representing strategic investments in equity securities which are represented in “long-term investments” as set forth in the Guarantor’s most recent annual report on Form 10-K.

“Overdue Rate” means, with respect to any Loan or Lessor Amount, the Base Rate or LIBOR then in effect for such Loan or Lessor Amount, as the case may be, plus the Applicable Margin plus two percent (2%), or the highest rate permitted by Applicable Law (if any), whichever is less. In the event that the

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Overdue Rate collected by any Participant is in violation of any usury or similar law, then the Overdue Rate shall be reduced to the extent necessary to cause the Overdue Rate to comply with any usury or similar law.

“Parcel of Land” means one or more legal parcels of Land leased or acquired by Lessor and leased to Lessee pursuant to the Master Lease.

“Part” means any part or component of any Property (excluding parts and components that were not financed with Advances and are not Required Modifications, to the extent that such parts and components may be removed by the Lessee pursuant to the provisions of Sections 10.1 and 11.2 of the Lease).

“Participant Balance” means as of any date of determination: (a) with respect to any Lender, an amount equal to its outstanding Loans, (b) with respect to the Lessor, an amount equal to the aggregate outstanding Lessor Amounts.

“Participants” means, collectively, the Lender and the Lessor, and their respective successors and assigns.

“Participation Agreement” means the Participation Agreement, dated as of April 23, 2002, among the Lessee, the Guarantor, the Lessor, the Lenders, the Administrative Agent, and the Collateral Agent, as the same may be amended, supplemented, amended and restated or otherwise modified from time to time.

“Payment Account” means the account maintained by the Administrative Agent and designated in writing to the Lessee as the account into which payments under the Operative Documents are to be made.

“PBGC” means the Pension Benefit Guaranty Corporation, or any successor thereto.

“Permitted Liens” means any of the following:

(a) the respective rights and interests of the parties to the Operative Documents as provided in the Operative Documents (including all Liens in favor of the Participants created under the Security Documents);

(b) Lessor Liens;

(c) Liens for Taxes that either are not yet due or are being contested in accordance with the provisions of Section 12.1 of the Lease;

(d) Liens arising by operation of law, materialmen’s, mechanics’, workers’, repairmen’s, employees’, carriers’, warehousemen’s and other like Liens relating to the construction of the Improvements or in connection with any Modifications or arising in the ordinary course of business for amounts that either are not more than 60 days past due or are being diligently contested in good faith by appropriate proceedings, so long as such proceedings satisfy the conditions for the continuation of proceedings to contest Taxes set forth in Section 12.1 of the Lease;

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(e) Liens of any of the types referred to in clauses (c) and (d) above that have been bonded for not less than the full amount in dispute (or as to which other security arrangements satisfactory to the Lessor have been made), which bonding (or arrangements) shall comply with Applicable Law, and has effectively stayed any execution or enforcement of such Liens;

(f) Liens arising out of judgments or awards with respect to which appeals or other proceedings for review are being prosecuted in good faith and for the payment of which adequate reserves have been provided as required by GAAP or other appropriate provisions have been made, so long as such proceedings have the effect of staying the execution of such judgments or awards and satisfy the conditions for the continuation of proceedings to contest set forth in Section 12.1 of the Lease;

(g) easements, rights of way and other encumbrances on title to real property permitted pursuant to Section 12.2 of the Lease;

(h) Liens described on the title insurance policy delivered with respect to any Property pursuant to Section 6.1 (u) of the Participation Agreement other than Liens described in clause (e) or (g) above that are not removed within forty (40) days of their origination and Liens existing prior to the Closing Date which the title insurer has agreed to remove as exceptions to the title insurance policy;

(i) subleases that are permitted under Article VI of the Lease; and

(j) Liens created with the consent of the Lessor.

“Permitted Remarketing Costs” means the following costs, to the extent incurred by the Lessee during the Marketing Period: (a) the fees and expenses of an environmental consultant in connection with the preparation of the Environmental Audit described in Section 20.1(b) of the Lease, (b) the costs incurred by the Lessee in obtaining required governmental and regulatory consents and approvals and the making of filings as required under Section 20.1(i) of the Lease, (c) the fees and expenses of an Appraiser in connection with the preparation of the End of the Term Report pursuant to Section 13.2(a) of the Participation Agreement, (d) any reasonable legal costs incurred by the Lessee in satisfying its obligations to convey any Property to a third party purchaser pursuant to Section 20.2(a) and 20.2(b) of the Lease and (e) any other fees, costs and expenses incurred by the Lessee in connection with the sale of any Property.

“Permitted Transfer” shall have its meaning described in Section 6.4 of the Lease.

“Person” means any natural person, corporation, firm, joint venture, partnership, association, enterprise, limited liability company, trust or other entity or organization, or any government or political subdivision or any agency, department or instrumentality thereof.

“Placement Agent” means Key Global Advisors, Ltd.

“Plan” means an employee pension benefit plan which is covered by Title IV of ERISA or subject to the minimum funding standards under Section 412 of the Code as to which the Guarantor or any member of the Controlled Group may have any liability.

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“Property” means, with respect to each Parcel of Land, all Improvements on such Parcel of Land and the Lessor’s interest in such Land, and the benefits, if any, conferred upon the owner of the Land by Permitted Liens (other than the Lessor Liens and the Lessor’s rights under the Operative Documents) and any permits, licenses, franchises, certificates and other intangible rights related to the Land and Improvements.

“Property Cost” means, at any date of determination, the aggregate amount of the Advances made by the Participants on or prior to such date with respect to the acquisition of the Properties.

“Purchase Notice” means an irrevocable written notice by the Lessee delivered to the Lessor pursuant to Section 18.1 of the Lease, notifying the Lessor of the Lessee’s intention to exercise its option pursuant to such Section, and specifying the proposed purchase date therefor.

“Purchase Option” means the Lessee’s option to purchase any Property in accordance with the provisions of Section 18.1 of the Lease.

“Purchase Price” is defined in Section 18.1 of the Lease.

“Regulation U” means Regulation U of the Board of Governors of the Federal Reserve System as from time to time in effect and any successor or other regulation or official interpretation of said Board of Governors relating to the extension of credit by banks for the purpose of purchasing or carrying margin stocks applicable to member banks of the Federal Reserve System.

“Release” means any release, pumping, pouring, emptying, injecting, escaping, leaching, dumping, seepage, spill, leak, flow, discharge, disposal or emission of a Hazardous Material.

“Remarketing Option” is defined in Section 20.1 of the Lease.

“Rent” means, collectively, the Basic Rent and the Supplemental Rent, in each case payable under the Lease.

“Reportable Event” means a reportable event as defined in Section 4043 of ERISA and the regulations issued under such section, with respect to a Single Employer Plan, excluding, however, such events as to which the PBGC by regulation waived the requirement of Section 4043(a) of ERISA that it be notified within 30 days of the occurrence of such event, provided, however, that failure to meet the minimum funding standard of Section 412 of the Code and of Section 302 of ERISA shall be a Reportable Event regardless of the issuance of any such waiver of the notice requirement in accordance with either Section 4043(a) of ERISA or Section 412(d) of the Code.

“Required Lenders” means, at any time, Lenders (but not less than two (2), unless there is only one (1) Lender) holding, in the aggregate, Loans representing at least 51% of the then aggregate outstanding principal amount of the Loans (or, if no Loans are then outstanding, Lenders having Loan Commitments which, in the aggregate, represent 51% of more of the aggregate Loan Commitments).

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“Required Modification” is defined in clause (i) of Section 10.1 of the Lease.

“Required Participants” means, at any time, Participants (including not less than two (2) Lenders, unless there is only one (1) Lender) holding, in the aggregate, Loans and Lessor Amounts representing at least 51% of the then outstanding Lease Balance (or, if no Loans or Lessor Amounts are then outstanding, Participants having Commitments which, in the aggregate, represent 51% or more of the aggregate Commitments).

“Return Conditions” is defined in Section 20.1 of the Lease.

“S&P” means Standard & Poor’s Ratings Group and any successor thereto that is a nationally-recognized rating agency.

“Scheduled Payment Date” means each Basic Rent Payment Date.

“SEC” means the Securities & Exchange Commission.

“SEC Filing” means a report or statement filed with the SEC pursuant to Sections 13, 14, or 15(d) of the Securities Exchange Act of 1934, as amended.

“Security Documents” means, collectively, the Pledge Agreement, each Lessor Mortgage, each Lessor Financing Statements and all other documents, agreements and instruments executed and delivered in order to establish, preserve, protect and perfect the Lien of the Lessor in the collateral.

“Significant Casualty” means, with respect to each Property, a Casualty that in the reasonable, good faith judgment of the Lessor, (i) renders any Property unsuitable for continued use as intended in the Lease, or (ii) is so substantial in nature that restoration of the applicable Property to the condition required under the Lease on or prior to the end of the Basic Lease Term would be impracticable or impossible.

“Significant Condemnation” means (a) a Condemnation that involves a taking of Lessor’s entire title to all or substantially all of any Property, or (b) a Condemnation that in the reasonable, good faith judgment of the Lessor either (i) renders any Property unsuitable for continued use as intended by the Lease or (ii) is such that restoration of any Property to substantially its condition as existed immediately prior to such Condemnation would be impracticable or impossible prior to the end of the Basic Lease Term to effect.

“Single Employer Plan” means a Plan that is not a Multiemployer Plan.

“Subordinated Indebtedness” means, as of any date, all indebtedness which is expressly subordinate and junior in right and priority of payment to any advances and other indebtedness of the Lessee in accordance with GAAP.

“Subsidiary” of a Person means (a) any corporation more than 50% of the outstanding securities having ordinary voting power of which shall at the time be owned directly or indirectly, by such Person or by one or more of its Subsidiaries or by such Person and one or more of its Subsidiaries, or (b) any partnership, association, joint venture, limited liability company, trust or similar business organization more than 50%

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Appendix A

of the ownership interests having ordinary voting power of which shall at the time be so owned. Unless otherwise expressly provided, all references herein to a “Subsidiary” shall mean a direct or indirect Subsidiary of the Guarantor.

“Sufficient Collateral” is defined in Section 14.1 of the Participation Agreement.

“Supplemental Rent” means all amounts, liabilities and obligations (other than Basic Rent) which the Lessee assumes or agrees to pay to the Lessor or any other Person under the Lease, or under any of the other Operative Documents, including, without limitation, Contingent Payments, Commitment Fees, Break Costs, the Maximum Recourse Amount, and payments pursuant to Sections 15.2 of the Lease and Articles XVIII and XX of the Lease.

“Surplus Collateral” is defined in Section 14.1 of the Participation Agreement.

“Tax Indemnitee” means the Lenders, the Lessor and, the Administrative Agent.

“Taxes” is defined in the definition of Impositions.

“Termination Date” is defined in Section 15.2 of the Lease.

“Termination Notice” is defined in Section 15.1 of the Lease.

“Transaction Expenses” means all costs, expenses and Impositions incurred in connection with the preparation, execution and delivery of the Operative Documents and the transactions contemplated by the Operative Documents including without limitation:

(a) fees and expenses payable pursuant to the Fee Letter;

(b) the reasonable fees, out-of-pocket expenses and disbursements of any law firm or other external counsel for the Lessee in negotiating the terms of the Operative Documents, the Purchase Agreement and the other transaction documents to be delivered in connection with the Documentation Date, preparing for, and rendering opinions in connection with, the transactions contemplated to occur on the Documentation Date and in rendering other services in connection with the Documentation Date customary for counsel representing parties to transactions of the types involved in the transactions contemplated by the Operative Documents;

(c) any and all Taxes and fees incurred in recording, registering or filing any Operative Document or any other transaction document, any deed, declaration, mortgage, security agreement, notice or financing statement with any public office, registry or governmental agency in connection with the transactions contemplated by the Operative Documents;

(d) all necessary fees and expenses in connection with the transactions contemplated by the Participation Agreement;

(e) fees of the Appraiser and Independent Insurance Consultant, if any; and

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Appendix A

(f) the initial and annual fees of the Administrative Agent.

“Unencumbered Cash” means any of the Guarantor’s cash or cash equivalents not encumbered by a Lien.

“Unfunded Liabilities” means the amount (if any) by which the present value of all vested nonforfeitable benefits under all Single Employer Plans exceeds the fair market value of all such Plan assets allocable to such benefits, all determined as of the then most recent valuation date for such Plans.

“Uniform Commercial Code” and “UCC” means the Uniform Commercial Code as in effect in any applicable jurisdiction.

“Unmatured Default” means any event or condition which but for the lapse of time or the giving of notice, or both, would constitute a Lease Event of Default.

“Valuation Date” is defined in Section 14.1 of the Participation Agreement.

“Voting Stock” means capital stock of any class or classes (however designated) having ordinary voting power for the election of directors of the Lessee.

“Yield” is defined in Section 4.3(a) of the Participation Agreement.

“Yield Rate” means at any date (a) with respect to any Lessor Amount that is LIBO Rate Lessor Amount, the LIBO Rate plus the Applicable Margin for Lessor Amounts and (b) with respect to any Lessor Amount that is a Base Rate Lessor Amount, the Base Rate plus the Applicable Margin for Lessor Amounts.

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EX-10.12

EXHIBIT 10.12

WHEREVER CONFIDENTIAL INFORMATION IS OMITTED HEREIN (SUCH OMISSIONS ARE DENOTED BY AN ASTERISK), SUCH CONFIDENTIAL INFORMATION HAS BEEN SUBMITTED SEPARATELY TO THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT.

AMENDMENT NO. 1 TO PARTICIPATION AGREEMENT

CITRIX SYSTEMS, INC.

as Lessee,

CITRIX CAPITAL CORP.,

as Guarantor.

SELCO SERVICE CORPORATION,

as Lessor,

KEY CORPORATE CAPITAL INC.,

as Lender, Collateral Agent and Administrative Agent

AMENDMENT NO. 1 TO PARTICIPATION AGREEMENT

THIS AMENDMENT NO. 1 TO PARTICIPATION AGREEMENT, dated as of June 17, 2002 (this “Amendment”) is entered into by and between CITRIX SYSTEMS, INC., a Delaware corporation, as Lessee, CITRIX CAPITAL CORP., a Nevada corporation, as Guarantor, SELCO SERVICE CORPORATION, an Ohio corporation, as Lessor and KEY CORPORATE CAPITAL INC., a Michigan corporation, as Lender, Administrative Agent and Collateral Agent.

WITNESSETH:

WHEREAS, Lessee, Guarantor, Lessor, Lender, Collateral Agent, and Administrative Agent have heretofore entered into the Participation Agreement dated as of April 23, 2002 (as amended, modified or supplemented from time to time, the “Participation Agreement”);

NOW, THEREFORE, in consideration mutual terms and conditions herein contained, the parties hereto agree as follows:

ARTICLE I

DEFINITIONS

SECTION 1.1. Use of Defined Terms: Rules of Usage. Unless otherwise defined or the context otherwise requires, terms for which meanings are provided in Appendix A to the Participation Agreement shall have such meanings when used in this Amendment. The rules of usage set forth in Appendix A to the Participation Agreement shall apply to this Amendment.

ARTICLE II

AMENDMENT

SECTION 2.1. Amendment to Participation Agreement.

The following Section 14.4 is hereby added to the Participation Agreement in its entirety.

“SECTION 14.4. Certain Collateral.

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ARTICLE III

CONDITIONS PRECEDENT

SECTION 3.1. Conditions to Effectiveness. This Amendment shall become effective as of June 17, 2002 (the “Effective Date”) when the parties hereto shall have received counterparts hereof executed on behalf of the parties hereto.

ARTICLE IV

MISCELLANEOUS PROVISIONS

SECTION 4.1. Ratification of and References to the Participation Agreement. This Amendment shall be deemed to be an amendment to the Participation Agreement, and the Participation Agreement, as amended hereby, is hereby ratified, approved and confirmed in each and every respect. All references to the Participation Agreement in any Operative Document or any other document, instrument, agreement or writing shall hereafter be deemed to refer to the Participation Agreement as amended hereby.

SECTION 4.2. Counterparts. This Amendment may be executed by the parties hereto separate counterparts, each of which when so executed and delivered shall be an original, but all such counterparts shall together constitute but one and the same instrument.

SECTION 4.3. Captions. Section captions used in this Amendment are inserted for convenience of reference only and shall not affect the construction of this Amendment or any provisions hereof.

SECTION 4.4. Governing Law: Entire Agreement. THIS AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED UNDER THE LAWS OF DELAWARE WITHOUT REGARD TO CONFLICT OF LAW PRINCIPLES. This Amendment and the other Operative Documents executed in connection herewith constitute the entire understanding among the parties hereto with respect to the subject matter hereof and supersede any prior agreements, written or oral, with respect thereto.

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Amendment No. 1 to Participation Agreement

IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed by their respective officers thereunto duly authorized as of the day and year first above written.

CITRIX SYSTEMS, INC., as Lessee
By:	/s/ David Urbani
Name: David Urbani
Title: Vice President of Finance

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Amendment No. 1 to Participation Agreement
CITRIX CAPITAL CORP., as Guarantor
By:	/s/ Monte L. Miller
Name: Monte L. Miller
Title:Secretary

5

Amendment No. 1 to Participation Agreement
SELCO SERVICE CORPORATION, as Lessor
By:	/s/ Rick J. Remiker
Name: Rick J. Remiker

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Amendment No. 1 to Participation Agreement
KEY CORPORATE CAPITAL INC., as Collateral Agent and Administrative Agent
By:	/s/ Michael J. Jackson
Name: Michael J. Jackson
Title:Senior Vice President

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EX-10.13

EXHIBIT 10.13

WHEREVER CONFIDENTIAL INFORMATION IS OMITTED HEREIN (SUCH OMISSIONS ARE DENOTED BY AN ASTERISK), SUCH CONFIDENTIAL INFORMATION HAS BEEN SUBMITTED SEPARATELY TO THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT.

MASTER LEASE

THIS DOCUMENT SECURES FUTURE ADVANCES

Dated as of April 23, 2002

between

CITRIX SYSTEMS, INC.,

as the Lessee,

and

SELCO SERVICE CORPORATION

as the Lessor.

Lease Financing of Various Properties

This Lease is subject to a lien in favor of the Lenders created pursuant to the Loan Agreement. This Lease has been executed in several counterparts. To the extent, if any, that this Lease constitutes chattel paper (as such term is defined in the Uniform Commercial Code as in effect in any applicable jurisdiction), no lien on this Lease may be created through the transfer or possession of any counterpart other than the original counterpart containing the receipt therefor executed by the Administrative Agent, on or following the signature page hereof.

This counterpart is [not] the original counterpart.

STATE OF FLORIDA DOCUMENTARY STAMP TAX IN THE AMOUNT REQUIRED BY LAW HAS BEEN PAID ON THE MORTGAGE DEED SECURITY AGREEMENT, FIXTURE FILING AND LEASE SUPPLEMENT NO. 1 BY CITRIX SYSTEMS, INC. TO SELCO SERVICE CORPORATION DATED APRIL 23, 2002, RECORDED IN THE PUBLIC RECORDS OF BROWARD COUNTY, FLORIDA.

MASTER LEASE

THIS DOCUMENT SECURES FUTURE ADVANCES

THIS MASTER LEASE (this “Lease”), dated as of April 23, 2002, between CITRIX SYSTEMS, INC., a Delaware corporation, as Lessee (together with its permitted successors and assigns, the “Lessee”), and SELCO SERVICE CORPORATION, an Ohio corporation, as Lessor (in such capacity, the “Lessor”).

W I T N E S S E T H:

WHEREAS, pursuant to the Participation Agreement dated as of the date hereof (as amended, modified, restated or supplemented from time to time, the “Participation Agreement”), among the Lessee, Citrix Capital Corp., as Guarantor, the Lessor, the Lenders described therein, Key Corporate Capital Inc., as Administrative Agent, and the other parties named therein, the Lessor has agreed to acquire title to certain Properties and the Lenders and the Lessor have agreed to finance such acquisition;

WHEREAS, the Lessor desires to lease to the Lessee, and the Lessee desires to lease from the Lessor, such Properties; and

WHEREAS, such Properties will be subject to the terms of this Lease.

NOW, THEREFORE, in consideration of the foregoing, and of other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

ARTICLE I

DEFINITIONS

SECTION 1.1. Definitions; Interpretation.

Capitalized terms used but not otherwise defined in this Lease have the respective meanings specified in Appendix A to the Participation Agreement, and the rules of interpretation set forth in such Appendix A shall apply to this Lease.

ARTICLE II

LEASE

SECTION 2.1. Acceptance and Lease of the Properties. Subject to the conditions set forth in the Participation Agreement, including without limitation the satisfaction or waiver of the conditions set forth in Article VI thereof, the Lessor hereby covenants and agrees to acquire each Property. Subject to the terms and conditions contained in this Lease, the Lessor agrees that it shall, commencing on the first day of the Basic Term with respect to a Property, demise and lease to the Lessee hereunder and under the Lease Supplements for the Basic Term the Lessor’s interest in such Property, and the Lessee hereby agrees, expressly for the direct benefit of the Lessor, to lease from the Lessor for the Basic Term, the Lessor’s interest in such Property.

SECTION 2.2. Acceptance Procedure. The Lessee hereby agrees that the Lessor’s acquisition of each title to each Property shall, without further act, constitute the acceptance by the Lessee of each Property for all purposes of this Lease and the other Operative Documents on the terms set forth herein and therein, and that each Property, shall be deemed to be included in the leasehold estate of this Lease and shall be subject to the terms and conditions of this Lease as of the first day of the Basic Term therefore. Each Property shall be made subject to this Lease pursuant to a Lease Supplement in substantially the form of Exhibit I hereto with such changes as are appropriate under Applicable Law for the jurisdiction in which such Property is located.

SECTION 2.3. Basic Term. The Basic Term (the “Basic Term”) of this Lease with respect to each Property shall begin on the Closing Date therefore and shall end on the Expiration Date.

SECTION 2.4. Title. Each Property is leased to the Lessee without any representation or warranty, express or implied, by the Lessor and subject to the rights of parties in possession, the existing state of title (including, without limitation, all Liens other than Lessor Liens or any Liens arising in respect of the Security Documents) and all Applicable Law. The Lessee shall in no event have any recourse against the Lessor for any defect in or exception to title to any Property other than resulting from Lessor Liens or any Liens arising in respect of the Security Documents.

ARTICLE III

PAYMENT OF RENT

SECTION 3.1. Rent. (a) (a) During the Basic Term for each Property, the Lessee shall pay Basic Rent for such Property to the Administrative Agent, for the benefit of the Lessor, on each Basic Rent Payment Date, on the date required under Section 20.1(k) in connection with the Lessee’s exercise of the Remarketing Option and on any date on which this Lease shall terminate with respect to such Property. The Lessor shall provide the Lessee with a telephonic (facsimile) or electronic invoice with respect to the amount of Basic Rent due on any applicable Basic Rent Payment Date; provided, however,

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that: (i) the Lessor shall have no liability to the Lessee if it fails to provide any invoice, (ii) the failure to provide any invoice shall not affect the rights of the Lessor hereunder in any manner whatsoever and (iii) the failure to provide any invoice shall not extend the due date of any payment of Basic Rent.

(b) The Lessee’s inability or failure to take possession of all or any portion of the Property upon the Closing Date shall not delay or otherwise affect the Lessee’s obligation to pay Rent for such Property in accordance with the terms of this Lease.

SECTION 3.2. Payment of Rent. Rent shall be paid absolutely net to the Administrative Agent entitled thereto, so that this Lease shall yield to such Person the full amount thereof, without setoff, deduction or reduction.

SECTION 3.3. Supplemental Rent. The Lessee shall pay to the Lessor or any other Person entitled thereto any and all Supplemental Rent promptly as the same shall become due and payable, and if the Lessee fails to pay any Supplemental Rent, the Lessor and such other Persons shall have all rights, powers and remedies provided for herein or by law or equity or otherwise. Subject to the exception set forth in Section 3.1(a) above, the Lessee shall pay to the Lessor, as Supplemental Rent, among other things, on demand, to the extent permitted by Applicable Law, interest at the applicable Overdue Rate on any installment of Basic Rent not paid when due for the period for which the same shall be overdue and on any payment of Supplemental Rent not paid when due or demanded by the Lessor for the period from the due date or the date of any such demand, as the case may be, until the same shall be paid. The expiration or other termination of the Lessee’s obligations to pay Basic Rent hereunder shall not limit or modify the obligations of the Lessee with respect to Supplemental Rent. Unless expressly provided otherwise in this Lease, in the event of any failure on the part of the Lessee to pay and discharge any Supplemental Rent as and when due, the Lessee shall also promptly pay and discharge any fine, penalty, interest or cost which may be assessed or added under any agreement to which Lessee is a party or which is authorized in writing by the Lessee with a third party for nonpayment or late payment of such Supplemental Rent, all of which shall also constitute Supplemental Rent.

SECTION 3.4. Method of Payment. Each payment of Rent payable by the Lessee under this Lease or any other Operative Document shall be made by the Lessee to the Payment Account maintained by the Administrative Agent as assignee of the Lessor under the Assignment of Lease and Rent (or, if all Loans and all other amounts owing to the Lenders under the Operative Documents have been paid in full and all Commitments of the Lenders have been permanently terminated, to the Lessor) prior to 1:00 p.m., New York City time, to the account specified by the Administrative Agent in immediately available funds on the date when such payment shall be due. Payments received after 1:00 p.m., New York City time, on the date due shall for the purpose of Section 16.1 hereof be deemed received on such day; provided, however, that for the purposes of the second sentence of Section 3.3 hereof, such payments shall be deemed received on the next succeeding Business Day and, unless the Lenders and the Lessor, as applicable, are able to invest or employ such funds on the date received, subject to interest at the Overdue Rate as provided in such Section 3.3.

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ARTICLE IV

QUIET ENJOYMENT; RIGHT TO INSPECT

SECTION 4.1. Quiet Enjoyment. Subject to Sections 2.4 and 4.2, and subject to the rights of the Lessor contained in Article XV and the other terms of the Operative Documents to which the Lessee is a party, the Lessee shall peaceably and quietly have, hold and enjoy each Property for its Basic Term, free of any claim or other action by the Lessor or anyone claiming by, through or under the Lessor (other than the Lessee) with respect to any matters arising from and after the Closing Date for such Property. Such right of quiet enjoyment is independent of, and shall not affect the Lessor’s rights otherwise to initiate legal action to enforce the obligations of the Lessee under this Lease. If any Lessor Lien interferes with Lessee’s use or operation of the Properties, Lessor shall promptly remove or modify the applicable Lessor Lien as necessary to remove such interferences, and any failure by Lessor to do so shall render Lessor liable to Lessee for any monetary damage proximately caused thereby.

SECTION 4.2. Right to Inspect. During the Basic Term, the Lessee shall upon reasonable notice from the Lessor, permit the Lessor and its authorized representatives, agents and permitees (each an “Inspecting Party”) to inspect each Property during normal business hours at such Inspecting Party’s expense, provided that such inspections shall not unreasonably interfere with the Lessee’s business operations at the Property and shall be subject to Lessee’s reasonable security and health and safety requirements and policies. So long as no Event of Default has occurred and is continuing, the Inspecting Party shall give Lessee in five (5) Business Days advance written notice before entering upon any Property for an inspection thereof. Each Inspecting Party shall hold in confidence any trade secrets of the Lessee obtained in the course of any inspection and, at the request of the Lessee, shall execute commercially reasonable confidentiality agreements with respect thereto.

ARTICLE V

NET LEASE, ETC.

SECTION 5.1. Net Lease. This Lease shall constitute a net lease. Any present or future law to the contrary notwithstanding, this Lease shall not terminate, nor shall the Lessee be entitled to any abatement, suspension, deferment, reduction, setoff, counterclaim, or defense with respect to the Rent, nor shall the obligations of the Lessee hereunder be affected (except as expressly herein permitted and by performance of the obligations in connection therewith) by reason of: (i) any defect in the condition, merchantability, design, construction, quality or fitness for use of any Property or any part thereof, or the failure of any Property to comply with all Applicable Law, including any inability to occupy or use the Property or any part thereof by reason of such non-compliance; (ii) any damage to, removal, abandonment, salvage, loss, contamination of or Release from, scrapping or destruction of or any requisition or taking of any Property or any part thereof, (iii) any restriction, prevention or curtailment of or interference with the construction on or any use of any Property or any part thereof including eviction; (iv) any defect in title to or rights to any Property or any Lien on such title or rights or on any Property (other than Permitted Liens); (v) any change, waiver, extension, indulgence or other action or omission or breach in respect of any

4

obligation or liability of or by the Administrative Agent or any Participant; (vi) any bankruptcy, insolvency, reorganization, composition, adjustment, dissolution, liquidation or other like proceedings relating to any Obligor, any Participant or any other Person, or any action taken with respect to this Lease by any trustee or receiver of any Obligor, any Participant or any other Person, or by any court, in any such proceeding; (vii) any claim that the Lessee has or might have against any Person, including without limitation any Participant or any vendor, manufacturer, contractor of or for any Property; (viii) any failure on the part of the Lessor or any other Lessor to perform or comply with any of the terms of this Lease (other than performance by the Lessor of its obligations set forth in Section 2.1 hereof), of any other Operative Document or of any other agreement; (ix) any invalidity or unenforceability or illegality or disaffirmance of this Lease against or by the Lessee or any provision hereof or any of the other Operative Documents or any provision of any thereof, (x) the impossibility or illegality of performance by the Lessee, the Lessor or both; (xi) any action by any court, administrative agency or other Governmental Authority; or (xii) any other cause or circumstances whether similar or dissimilar to the foregoing and whether or not the Lessee shall have notice or knowledge of any of the foregoing; and any provisions of Applicable Law which are contrary to the foregoing are hereby waived to the fullest extent permitted by law. The Lessee’s agreement in the preceding sentence shall not affect any claim, or right (other than the right to offset Basic Rent) the Lessee may have against the Lessor or any Participant pursuant to the Operative Documents or otherwise. The parties intend that the obligations of the Lessee hereunder shall be covenants and agreements that are separate and independent from any obligations of the Lessor hereunder or under any other Operative Documents and the obligations of the Lessee shall continue unaffected unless such obligations shall have been modified or terminated in accordance with an express provision of this Lease.

SECTION 5.2. No Termination or Abatement. The Lessee shall remain obligated under this Lease in accordance with its terms and shall not take any action to terminate, rescind or avoid this Lease (except as provided herein), notwithstanding any action for bankruptcy, insolvency, reorganization, liquidation, dissolution, or other proceeding affecting the Lessor or any Participant, or any action with respect to this Lease which may be taken by any trustee, receiver or liquidation of the Lessor or any Participant or by any court with respect to the Lessor or any Participant. The Lessee hereby waives all right to terminate or surrender this Lease (except as provided herein) or except as a consequence of a reduction in the Lease Balance as a result of Casualty or Condemnation proceeds pursuant to the terms of Section 14.1(a) of this Lease, or as a result of a purchase of any or all of the Properties pursuant to Section 18.1 of this Lease, to avail itself of any abatement, suspension, deferment, reduction, setoff, counterclaim or defense with respect to the Lease Balance. The Lessee shall remain obligated under this Lease in accordance with its terms and the Lessee hereby waives to the fullest extent permitted by law any and all rights now or hereafter conferred by statute or otherwise to modify or to avoid strict compliance with its obligations under this Lease and the Operative Documents. Notwithstanding any such statute or otherwise, the Lessee shall be bound by all of the terms and conditions contained in this Lease.

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ARTICLE VI

ASSIGNMENT AND SUBLEASING BY LESSEE

SECTION 6.1. General. THE LESSEE SHALL NOT, WITHOUT THE PRIOR WRITTEN CONSENT OF THE ADMINISTRATIVE AGENT AND EACH PARTICIPANT, TRANSFER, ASSIGN OR ENCUMBER THIS LEASE OR ANY OF ITS RIGHTS OR OBLIGATIONS HEREUNDER OR SUBLEASE ANY PROPERTY OR ANY PART THEREOF EXCEPT AS PERMITTED BY SECTION 6.2 OR 6.3, AND ANY SUCH TRANSFER, ASSIGNMENT, ENCUMBRANCE OR SUBLEASE THAT IS NOT SO PERMITTED SHALL BE NULL AND VOID. ALL OF THE LEASES OF THE PROPERTY LISTED ON SCHEDULE IV TO THE PARTICIPATION AGREEMENT, ARE SUBORDINATE TO THIS LEASE AS SUBLEASES OF THE LESSEE’S INTEREST IN THE PROPERTY, AND LESSOR HEREBY CONSENTS TO SUCH SUBLEASES AS PERMITTED SUBLEASES OF THE PROPERTY.

SECTION 6.2. Subletting. After the Closing Date for any Property, the Lessee may sublease such Property or any portion thereof to any Person; provided, however, that: (a) no such sublease or other relinquishment of possession of any Property shall in any way discharge or diminish any of the obligations of the Lessee to the Lessor and the other Participants under this Lease and the other Operative Documents and the Lessee shall remain directly and primarily liable under this Lease and the other Operative Documents to which it is a party; (b) each sublease of any Property shall expressly be made subject to and subordinated to this Lease and to the rights of the Lessor hereunder; (c) such sublease shall expressly provide for the immediate surrender of the applicable Property to the Lessor after notice from the Lessor to such sublessee of the occurrence of a Lease Event of Default and a request for such surrender; and (d) such sublease shall expressly provide for automatic termination at or prior to the earlier of (i) the Expiration Date and (ii) the termination of this Lease pursuant to a Lease Event of Default unless the Lessee shall have exercised its Purchase Option and purchased the Property pursuant to Section 18.1. On the Closing Date for certain Properties, such Properties may be subject to existing subleases the terms of which may extend beyond the Expiration Date. The Lessee shall, prior to the Closing Date for any such Property, fully disclose the existence of such subleases to each Participant, provide true and correct copies of such subleases to the Lessor and Administrative Agent and represent that such subleases are on reasonable commercial terms. The Lessee shall collaterally assign all such subleases to the Lessor and shall use reasonable commercial efforts to obtain from each such sublessee agreements to subordinate such sublease to this Lease.

SECTION 6.3. Permitted Transfers. Notwithstanding the foregoing provisions of Section 6.1, Lessee may, without the necessity of obtaining the consent of Lessor, assign this Lease or sublease the Property (or a part thereof) to any person, firm or corporation (hereinafter a “Permitted Transferee”): (i) that is owned by or controlled by the Lessee, or (ii) that is owned either directly or indirectly by or is controlled by the principal shareholder or shareholders of Lessee (or if Lessee becomes a limited liability company or partnership by its members or partners), or (iii) that arises in connection with a spin off of the division or business of Lessee located at the Property to the shareholders of Lessee or its parent, or (iv) that has acquired all or

6

substantially all of the assets or business of Lessee at the Property, or its shares, or membership or partnership interests, whether by purchase or merger; provided in each case that the following conditions are met: (a) a Lease Event of Default shall not have occurred and be continuing at the time of the assignment or transfer; (b) Guarantor shall expressly agree in writing to guarantee the obligations of the Permitted Transferee under the Operative Documents on the same terms and conditions as contained in the Guaranty, such agreement shall be in form and substance satisfactory to the Lessor; (c) if the transfer is by assignment, the Permitted Transferee shall furnish to Lessor prior to the effective date of the assignment a written instrument reasonably satisfactory to Lessor in which assignee agrees to assume and be bound by all the conditions, obligations and agreements of Lessee contained in this Lease and the other Operative Documents, together with opinions of counsel in form and substance reasonably satisfactory to the Lessor and Administrative Agent; and (d) the use or uses of any Person to whom this Lease is transferred to shall be such that they do not impair the value or utility of the Properties. The Lessee shall notify the Lessor promptly, and in any event not less than thirty (30) days prior to the date of any such proposed permitted transfer, and shall provide the Lessor and the Lenders with the terms of such permitted transfer.

ARTICLE VII

LESSEE ACKNOWLEDGMENTS

SECTION 7.1. Condition of the Property. THE LESSEE ACKNOWLEDGES AND AGREES THAT IT IS LEASING EACH PROPERTY “AS IS” WITHOUT REPRESENTATION, WARRANTY OR COVENANT (EXPRESS OR IMPLIED) BY THE ADMINISTRATIVE AGENT OR ANY ARTICIPANT AND IN EACH CASE SUBJECT TO (A) THE EXISTING STATE OF TITLE (EXCLUDING LESSOR LIENS AND LIENS ARISING UNDER THE SECURITY DOCUMENT), (B) THE RIGHTS OF ANY PARTIES IN POSSESSION THEREOF, (C) ANY STATE OF FACTS WHICH AN ACCURATE SURVEY OR PHYSICAL INSPECTION MIGHT SHOW, AND (D) VIOLATIONS OF APPLICABLE LAW WHICH MAY EXIST ON THE DATE HEREOF OR ON THE ACQUISITION DATE. NEITHER THE ADMINISTRATIVE AGENT NOR ANY PARTICIPANT HAS MADE OR SHALL BE DEEMED TO HAVE MADE ANY REPRESENTATION, WARRANTY OR COVENANT (EXPRESS OR IMPLIED) OR SHALL BE DEEMED TO HAVE ANY LIABILITY WHATSOEVER AS TO THE TITLE (OTHER THAN FOR LESSOR LIENS ATTRIBUTABLE TO THE ADMINISTRATIVE AGENT OR SUCH PARTICIPANT, AS THE CASE MAY BE AND LIENS ARISING UNDER THE SECURITY DOCUMENTS, VALUE, HABITABILITY, USE, CONDITION, DESIGN, OPERATION, OR FITNESS FOR USE OF THE PROPERTY (OR ANY PART THEREOF), OR ANY OTHER REPRESENTATION, WARRANTY OR COVENANT (EXCEPT SECTION 4.1 HEREOF) WHATSOEVER, EXPRESS OR IMPLIED, WITH RESPECT TO EACH PROPERTY (OR ANY PART THEREOF) AND NEITHER THE LESSOR NOR ANY OTHER PARTICIPANT SHALL BE LIABLE FOR ANY LATENT, HIDDEN, OR PATENT DEFECT THEREIN (OTHER THAN FOR LESSOR LIENS ATTRIBUTABLE TO THE LESSOR OR SUCH OTHER PARTICIPANT AND LIENS ARISING UNDER THE SECURITY DOCUMENTS)

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OR THE FAILURE OF THE PROPERTY, OR ANY PART THEREOF, TO COMPLY WITH ANY APPLICABLE LAW.

SECTION 7.2. Risk of Loss. Subject to the terms of Section 14.1 of this Lease, during the Basic Term with respect to any Property the risk of loss of or decrease in the enjoyment and beneficial use of such Property as a result of the damage or destruction thereof by fire, the elements, casualties, thefts, riots, wars or otherwise is assumed by the Lessee, and except for loss or damages arising from the gross negligence or willful misconduct of, or breach of this Lease by the Lessor, the Administrative Agent, any Participant or their respective agents, employees or contractors, neither the Lessor, the Administrative Agent nor any Participant shall in any event be answerable or accountable to Lessee therefor.

SECTION 7.3. No Obligation of Lessor to Repair, etc. The Lessor shall under no circumstances be required to build any improvements on any Property, make any repairs, replacements, alterations or renewals of any nature or description to any Property, make any expenditure whatsoever in connection with this Lease (other than for Advances made in accordance with and pursuant to the terms of the Participation Agreement) or maintain any Property in any way. The Lessee waives any right to (i) require the Lessor to maintain, repair, or rebuild all or any part of any Property or (ii) make repairs at the expense of the Lessor pursuant to any Applicable Law, Insurance Requirement, contract, agreement, or covenant, condition or restriction in effect at any time during the Basic Term.

SECTION 7.4. No Liability of Participants, etc. Nothing contained in this Lease shall be construed as constituting the consent or request of the Lessor or any other Participant, expressed or implied, to or for the performance by any contractor, mechanic, laborer, materialman, supplier or vendor of any labor or services or for the furnishing of any materials for any construction, alteration, addition, repair or demolition of or to any Property or any part thereof. NOTICE IS HEREBY GIVEN THAT NEITHER THE LESSOR, THE ADMINISTRATIVE AGENT NOR ANY PARTICIPANT IS OR SHALL BE LIABLE FOR ANY LABOR, SERVICES OR MATERIALS FURNISHED OR TO BE FURNISHED TO THE LESSEE OR TO ANYONE HOLDING ANY INTEREST IN ANY PROPERTY OR ANY PART THEREOF THROUGH OR UNDER THE LESSEE AND THAT NO MECHANIC’S OR OTHER LIENS FOR ANY SUCH LABOR, SERVICES OR MATERIALS SHALL ATTACH TO OR AFFECT THE INTEREST OF THE LESSOR OR ANY LENDER IN AND TO ANY PROPERTY.

ARTICLE VIII

POSSESSION AND USE OF EACH PROPERTY, ETC.

SECTION 8.1. Utility Charges. The Lessee shall pay or cause to be paid all charges for electricity, power, gas, oil, water, telephone, sanitary sewer service and all other rents and utilities used in or on each Property during the Basic Term. The Lessee shall be entitled to receive any credit or refund with respect to any utility charge paid by the Lessee and the amount of any credit or refund received by the Lessor on account of any utility charges paid by the Lessee, net of the costs and expenses reasonably incurred by the Lessor in obtaining such credit or refund, shall be promptly paid over to the Lessee.

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SECTION 8.2. Possession, Use and Operation of each Property. Each Property shall be used, operated and maintained in a manner consistent with this Lease and the standards applied by the Lessee for other facilities similar to the Property owned or leased by Affiliates of the Lessee and consistent with the use assumptions set forth in the Appraisal for such Property. The Lessee shall pay, or cause to be paid, all charges and costs required in connection with the use of each Property as contemplated by this Lease. The Lessee shall not commit or permit any waste or abandonment of any Property or any part thereof.

SECTION 8.3. Compliance with Applicable Laws and Insurance Requirements; Necessary Permits, etc. Subject to the terms of Article XII relating to permitted contests, the Lessee, at its sole cost and expense, shall:

(a) comply in all material respects with: (i) all Applicable Law (including all Environmental Laws) and (ii) all applicable Insurance Requirements relating to the Property, including the use, construction, operation, maintenance, repair and restoration thereof and the remarketing thereof pursuant to Article XX, whether or not compliance therewith shall require structural or extraordinary changes in such Property or interfere with the use and enjoyment of such Property, and

(b) procure, maintain and comply in all material respects with all Necessary Permits, and notify the Lessor within ten (10) days of a senior officer of the Lessee having knowledge of any actual or pending termination or revocation of any Necessary Permit.

Notwithstanding the preceding sentence, the Lessee shall be deemed to be in compliance with all Environmental Laws for purposes of this Lease, notwithstanding any Environmental Violations, if the severity of such Environmental Violations is less than the Federal, State or Local standards requiring remediation or removal or, if such standards are exceeded, remediation or removal is proceeding in accordance with all applicable Hazardous Materials Laws and will be completed no later than the Expiration Date.

SECTION 8.4. Lessee’s Right to Enforce Warranties.

(a) So long as no Lease Event of Default has occurred that is continuing (unless the enforcement of any such warranty or claim is necessary to cure, in whole or in part, any such Lease Event of Default), the Lessor agrees to authorize the Lessee (directly or through agents) at the Lessee’s expense to assert during the Basic Term, all of the Lessor’s rights (if any) under any applicable warranty and any other claim that the Lessor, or the Lessee may have against any dealer, vendor, manufacturer, contractor or subcontractor or the previous Property owner with respect to any Property.

(b) So long as no Lease Event of Default has occurred that is continuing (unless the enforcement of any such warranty or claim is necessary to cure, in whole or in part, any such Lease Event of Default), the Lessor agrees, at the Lessee’s expense, to cooperate with the Lessee and take all other action necessary as specifically requested by the Lessee to enable the Lessee to enforce all of Lessee’s rights (if any) under this Section 8.4, such rights of enforcement to be exclusive to the Lessee. During the Basic Term (except during the continuance of a Lease Event of Default), the Lessor will not amend, modify or

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waive, or take any action under, any applicable warranty and any other claim that the Lessee may have under this Section 8.4 without the Lessee’s prior written consent. The Lessee agrees at its expense to diligently assert all of its rights under such warranties and any other claims that the Lessee may have against such vendor, manufacture, contractor or subcontractor or the previous Property owner with respect to any Property or any portion thereof.

ARTICLE IX

MAINTENANCE AND REPAIR; REPLACEMENT OF PARTS

SECTION 9.1. Maintenance and Repair. (a) Subject to the provisions of Article XIV, the Lessee, at its sole cost and expense, shall maintain each Property in good condition (ordinary wear and tear excepted) and make all necessary repairs thereto, of every kind and nature whatsoever, whether interior or exterior, ordinary or extraordinary, structural or nonstructural or foreseen or unforeseen, in each case as required by all Applicable Law and Insurance Requirements and in no event less than prudent industry standards for property similar to such Property and the standards applied by the Lessee in the operation and maintenance of facilities similar to such Property owned or leased by Affiliates of the Lessee.

(b) Additional maintenance and return requirements with respect to a Property may be set forth in the Lease Supplement relating thereto.

ARTICLE X

MODIFICATIONS, ETC.

SECTION 10.1. Modifications, Substitutions and Replacements. During the Basic Term, the Lessee, at its sole cost and expense, may at any time and from time to time make alterations, renovations, improvements and additions to any Property or any part thereof (collectively, “Modifications”); provided, however, that:

(a) except for any Modification required to be made pursuant to any Applicable Law or Insurance Requirements (a “Required Modification”), no Modification shall cause the Fair Market Sales Value of such Property, determined as a whole after the completion of such Modifications, to be below the then current Lease Balance for such Property;

(b) such Modifications shall be (and shall be done in a manner) consistent in all respects with the Plans and Specifications for applicable Property;

(c) such Modifications shall comply with Articles VIII and IX.; and

(d) promptly after the completion of any Modification which cost in excess of $2,500,000 to complete, the Lessee shall give written notice thereof, together with a description of the Modification, to the Lessor and the Administrative Agent.

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All Modifications shall remain part of the applicable Property and title thereto shall immediately vest in the Lessor; provided, however, that Modifications that (x) are not Required Modifications, (y) were not financed by the Participants and (z) can be removed without causing (A) material damage to the Property, or (B) cause a diminution in the Fair Market Sales Value of such Property determined as a whole after the completion of such Modifications, below the then current Lease Balance for such Property shall be the property of the Lessee, any sublessee, or other third party and may be removed by the Lessee, any sublessee, or third party during the Basic Term and up to thirty (30) days after the expiration or earlier termination of this Lease and shall not be subject to this Lease. The Lessee may place upon each Property any trade fixtures, machinery, equipment, inventory or other property belonging to the Lessee, such sublessees or third parties and may remove the same subject to the limitation of Section 11.2; provided, further, however, that the Lessee shall keep and maintain at the Property and shall not remove from the Property any equipment or parts financed or otherwise paid for by the Participants pursuant to the Participation Agreement.

ARTICLE XI

DISCHARGE OF LIENS;

CONDITION UPON RETURN

SECTION 11.1. Lessee’s Obligation to Discharge Liens. The Lessee agrees that except as otherwise provided herein and subject to the terms of Article XII relating to permitted contests, the Lessee shall not directly or indirectly create or allow to remain, and shall promptly discharge at its sole cost and expense, any Lien (other than any Permitted Lien), defect, attachment, levy, title retention agreement or claim upon any Property or any Lien, attachment, levy or claim with respect to the Rent or with respect to any amounts held by any Participant pursuant to the Operative Documents, other than Permitted Liens and Liens on trade fixtures (unless attached to or incorporated in the Property as a fixture), machinery, equipment, inventory, accounts (as defined in the UCC) general intangibles and other personal property belonging to Lessee, any sublessees or third parties to the extent such property is not financed or otherwise paid for by the Participants pursuant to the Participation Agreement.

SECTION 11.2. Condition upon Return to Lessor. The Lessee shall, upon the expiration or earlier termination of this Lease (other than as a result of the Lessee’s purchase of the Property from the Lessor as provided herein), vacate and surrender each Property to the Lessor in its then-current, “AS IS” condition, without any express or implied warranty subject to the Lessee’s obligations under Sections 8.3, Article IX, 10.1, 11.1, 14.1, 14.2 and Article XX. Title to all improvements, furnishings, furniture, fixtures and any personal property of the Lessee which were not funded by the Lessor and the Lenders pursuant to the Participation Agreement, located on or about any Property whether or not affixed to the realty, shall, subject to the following sentence, be and remain the property of the Lessee throughout the Basic Term, and at any time during the Basic Term and within thirty (30) days following the expiration or earlier termination of this Lease, may be removed by the Lessee or, at the Lessee’s election surrendered with the Property, in which event title to such surrendered property shall, if the Lessor so elects, be deemed transferred to the Lessor. Notwithstanding the foregoing, Lessee shall not remove any fixture constituting part of any Property which is required by Applicable Law or which cannot be removed without causing (y)

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damage to the Property which is not promptly repaired by the Lessee or (z) any diminution to the Fair Market Sales Value or remaining useful life of the applicable Property.

ARTICLE XII

PERMITTED CONTESTS;

GRANTS AND RELEASES OF EASEMENTS;

WARRANTY OF TITLE

SECTION 12.1. Permitted Contests in Respect of Applicable Law Other Than Impositions. Except to the extent otherwise provided in Section 13.5(b) of the Participation Agreement regarding Taxes and other Impositions, if, to the extent and for so long as (a) a test, challenge, appeal or proceeding for review of any Applicable Law relating to any Property shall be prosecuted diligently and in good faith in appropriate proceedings by the Lessee or (b) compliance with such Applicable Law shall have been excused or exempted by a valid nonconforming use, variance permit, waiver, extension or forbearance, the Lessee shall not be required to comply with such Applicable Law but only if and so long as any such test, challenge, appeal, proceeding, waiver, extension, forbearance or noncompliance shall not, in the reasonable opinion of the Lessor and the Administrative Agent, involve (A) any risk of criminal liability being imposed on the Lessor, any Participant or the Administrative Agent or (B) any risk of (1) foreclosure, forfeiture or loss of such Property, or a diminution of the Fair Market Sales Value of such Property, or (2) the nonpayment of Rent or (C) any risk of (1) the sale of, or the creation of any Lien (other than a Permitted Lien) on, any part of such Property, (2) civil liability being imposed on the Lessor, any Participant, the Administrative Agent or such Property, or (3) enjoinment of, or interference with, the use, possession or disposition of such Property in manner which would cause a diminution in the Fair Market Sales Value of such Property. The Lessor, at the Lessee’s sole cost and expense, shall execute and deliver to the Lessee such authorizations and other documents as may reasonably be required in connection with any such permitted contest.

The Lessor will not be required to join in any proceedings pursuant to this Section 12.1 unless a provision of any Applicable Law requires that such proceedings be brought by or in the name of the Lessor; and in that event the Lessor will join in the proceedings or permit them or any part thereof to be brought in its name if and so long as (i) the Lessee has not elected the Remarketing Option and (ii) the Lessee pays all related expenses and indemnities of the Administrative Agent and the Participants with respect to such proceedings.

SECTION 12.2. Grants and Releases of Easements; Lessor’s Waivers. Provided that no Lease Event of Default shall have occurred and be continuing, from time to time upon request of the Lessee and subject to the Lessee’s prompt reimbursement of the Lessor’s costs and expenses, the Lessor (as holder of record title in the applicable Property) shall execute such documents reasonably satisfactory in form (which have been prepared at Lessee’s expense) to effect any of the actions set forth in clauses (a), (b), (c), (d), (e) and (f) of the following sentence, if in the Lessee’s reasonable and good faith opinion such action by the Lessor is necessary or appropriate to effect such intended actions. Provided that no Lease Event of Default shall have

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occurred and be continuing and subject to the provisions of Articles VII, IX and X and Section 8.3, the Lessor hereby consents in each instance to the following actions by the Lessee as the Lessor’s agent, and the Lessor hereby appoints the Lessee as the Lessor’s attorney-in-fact, with full authority in the place and stead of the Lessor to take such action or actions from time to time during the Basic Term, but at the Lessee’s sole cost and expense: (a) the granting of easements, licenses, rights-of-way and other rights and privileges in the nature of easements reasonably necessary or desirable for the use, repair, or maintenance of any Property as herein provided or that do not adversely affect the Fair Market Sales Value of such Property; (b) the release of existing easements or other rights in the nature of easements which are for the benefit of any Property; (c) the dedication or transfer of unimproved portions of any Property for road, highway or other public or common purposes; (d) the execution of amendments to any existing covenants and restrictions; (e) the filing and processing of any and all permit applications, authorizations, entitlements, agreements with any government or regulatory agency or amendments thereof, or other documents reasonably required or beneficial for construction or Modification of the Improvements, or amendments to Permitted Liens or governmental permits or approvals affecting any Property; and (f) the execution, processing and filing of tract or parcel maps (and certificates of compliance for any lot line adjustments) subdividing the Land into lots or parcels or reconfiguring existing lots or parcels; provided, however, that in each case (i) such grant, release, dedication, transfer or amendment does not adversely affect the Fair Market Sales Value of the applicable Property, (ii) such grant, release, dedication, transfer or amendment that in the Lessee’s judgment is reasonably necessary or beneficial in connection with the use, maintenance, alteration or improvement of the applicable Property, (iii) such grant, release, dedication, transfer or amendment will not cause applicable Property or any portion thereof to fail to comply with the provisions of this Lease or any other Operative Documents and all Applicable Law (including, without limitation, all applicable zoning, planning, building and subdivision ordinances, all applicable restrictive covenants and all applicable architectural approval requirements); (iv) any and all governmental consents or approvals required prior to such grant, release, dedication, transfer, annexation or amendment have been obtained, and any and all filings required prior to such action have been made; (v) the Lessee shall remain obligated under this Lease and under any instrument executed by the Lessee consenting to the assignment of the Lessor’s interests in this Lease as security for indebtedness, in each such case in accordance with their terms, substantially as though such grant, release, dedication, transfer or amendment had not been effected and (vi) the Lessee shall pay and perform any obligations of the Lessor under such grant, release, dedication, transfer or amendment. The Lessor acknowledges the Lessee’s right to finance and to secure under the Uniform Commercial Code, inventory, furnishings, furniture, equipment, machinery, leasehold improvements and other personal property located at each Property, and the Lessor agrees to execute Lessor waiver forms and release of Lessor Liens in favor of any purchase money seller, lessor or lender which has financed or may finance in the future such items. Without limiting the effectiveness of the foregoing, provided that no Lease Event of Default shall have occurred and be continuing, the Lessor shall, upon the request of the Lessee, and at the Lessee’s sole cost and expense, execute and deliver any instruments necessary or appropriate to confirm any such grant, release, dedication, transfer, annexation or amendment to any Person permitted under this Section 12.2 including landlord waivers with respect to any of the foregoing.

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ARTICLE XIII

INSURANCE

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ARTICLE XIV

CASUALTY AND CONDEMNATION; ENVIRONMENTAL MATTERS

SECTION 14.1. Casualty and Condemnation.

(a) Subject to the provisions of this Article XIV, if all or a portion of any Property is damaged or destroyed in whole or in part by a Casualty or if the use, access, occupancy, easement rights or title to any Property or any part thereof, is the subject of a Condemnation, or title to any Property is found to be defective then

(i) in the case of a Casualty affecting any Property that is not an Event of Loss, any insurance proceeds payable with respect to such Casualty shall be paid directly to the Lessee (or if received by the Lessor, shall be paid over to the Lessee) for the sole purpose of reconstruction, refurbishment and repair of the

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Property; provided, however, that in the event that either (x) such reconstruction, refurbishment or repair cannot be completed prior to the end of the Basic Term or (y) the Lessee shall elect not to use such proceeds for the reconstruction, refurbishment or repair of the applicable Property, then all such insurance proceeds payable with respect to such Casualty shall be paid to the Lessor to be applied towards the payment of the Lease Balance in accordance with Section 7.6 of the Participation Agreement,

(ii) in the case of a Condemnation of any part of any Property that is not an Event of Loss, any ward or compensation relating thereto shall be paid directly to the Lessee (or if received by the Lessor, shall be paid over to the Lessee) for the sole purpose of restoration of the Property; provided, however, that if such restoration cannot be completed prior to the end of the Basic Term, then such award or compensation shall be paid to the Lessor to be applied in the Lessor’s and the Participants’ reasonable discretion to the partial restoration of the applicable Property or towards the payment of the Lease Balance in accordance with Section 7.6 of the Participation Agreement,

(iii) in the case of any Casualty or Condemnation affecting any Property that is an Event of Loss, such proceeds, award or compensation shall be paid to the Lessor to be applied in the Lessor’s and the Lenders’ reasonable discretion to the restoration of the applicable Property or toward the payment of the Lease Balance on the Termination Date in accordance with Article XV, and

(iv) in the case where a defect in title results in compensation from a title insurance policy and no Lease Event of Default shall have occurred and be continuing then such insurance proceeds shall be paid to the Lessee and shall be used to cure such defect in title;

provided, however, that, in each case, if a Lease Event of Default shall have occurred and be continuing, such award, compensation or insurance proceeds shall be paid directly to the Lessor or, if received by the Lessee, shall be held in trust for the Lessor and the Lenders, and shall be paid by the Lessee to the Payment Account to be distributed in accordance with Article VII of the Participation Agreement. All amounts held by the Lessor or the Lenders when a Lease Event of Default exists hereunder on account of any award, compensation or insurance proceeds either paid directly to the Lessor, any Lender or the Administrative Agent or turned over to the Lessor, any Lender or the Administrative Agent shall at the option of the Lessor either be (i) paid to the Lessee for the repair of damage caused by such Casualty or Condemnation in accordance with clause (d) of this Section 14.1 or to cure any defect in title to any applicable Property, or (ii) applied to the repayment of the Lease Balance on the Termination Date with respect to such Property in accordance with Article VII of the Participation Agreement.

(b) The Lessee may appear in any proceeding or action to negotiate, prosecute, adjust or appeal any claim for any award, compensation or insurance payment on account of any such Casualty or Condemnation and shall pay all expenses thereof. At the Lessee’s reasonable request, and at the

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Lessee’s sole cost and expense, the Lessor and the Lenders shall participate in any such proceeding, action, negotiation, prosecution or adjustment. The Lessor and the Lessee agree that this Lease shall control the rights of the Lessor and the Lessee in and to any such award, compensation or insurance payment.

(c) If the Lessor or the Lessee shall receive notice of a Casualty or of an actual, pending or threatened Condemnation of any Property or any interest therein, the Lessor or the Lessee, as the case may be, shall give notice thereof to the other and to the Administrative Agent promptly after the receipt of such notice.

(d) If pursuant to this Section 14.1 and Section 15.1, this Lease shall continue in full force and effect following a Casualty or Condemnation with respect to a Property, the Lessee shall, at its sole cost and expense (and, without limitation, if any award, compensation or insurance payment is not sufficient to restore such Property in accordance with this clause (d), the Lessee shall pay the shortfall), promptly and diligently repair any damage to the applicable Property caused by such Casualty or Condemnation in conformity with the requirements of Sections 8.3 and 9.1, to restore the applicable Property to at least the same condition, operative value and useful life as existed immediately prior to such Casualty or Condemnation. In such event, title to such Property shall remain with the Lessor subject to the terms of this Lease. Upon completion of such restoration, the Lessee shall furnish to the Lessor (which, in turn, shall furnish to the Administrative Agent) an architect’s certificate of substantial completion and an Authorized Officer’s Certificate confirming that such restoration has been completed pursuant to this Lease.

(e) In no event shall a Casualty or Condemnation affect the Lessee’s obligations to pay Rent pursuant to Section 3.1 or to perform its obligations and pay any amounts due on the Expiration Date or pursuant to Articles XVIII and XXI.

(f) Any Excess Casualty/Condemnation Proceeds received by the Administrative Agent or any Participant in respect of a Casualty or Condemnation shall be turned over to the Lessee (i) where the Property is repaired, upon payment in full of all repair costs for such Property and (ii) where the Property is not repaired, upon the payment in full of the Lease Balance allocable to such Property.

SECTION 14.2. Environmental Matters. Promptly upon a senior officer of Lessee obtaining knowledge of the existence of an Environmental Violation with respect to any Property the cost to Lessee for the remediation of which the Lessee determines in its reasonable good faith judgement would exceed $2,500,000, the Lessee shall notify the Lessor in writing of such Environmental Violation. The Lessee shall, without cost or expense to Lessor or any Participant, promptly and diligently commence or cause to be commenced any response, clean up, remedial or other action required by Applicable Law to remove, clean up or remediate each Environmental Violation in accordance with the terms of Section 8.3 (including the last sentence thereof). The Lessee shall, upon completion of remedial action by the Lessee for Environmental Violations described in the first sentence of Section 14.2, cause to be prepared by an environmental consultant reasonably acceptable to the Lessor a report describing such Environmental Violation and the actions taken by the Lessee (or its agents) in response to such

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Environmental Violation, and a statement by the consultant that such Environmental Violation has been remedied in compliance with all applicable Environmental Laws. Each Environmental Violation shall be remedied prior to the Expiration Date unless the Property has been purchased by the Lessee in accordance with Section 18.1. Nothing in this Article XIV shall reduce or limit the Lessee’s obligations under Sections 13.1, 13.2 or 13.3 of the Participation Agreement.

SECTION 14.3. Notice of Environmental Matters. Promptly, but in any event within thirty (30) Business Days from the date a senior officer of the Lessee obtains knowledge thereof pursuant to written notice from any Governmental Authority, the Lessee shall provide to the Lessor written notice of any pending or threatened claim, action or proceeding involving any Environmental Laws or any Release on or in connection with any Property. All such notices shall describe in reasonable detail the nature of the claim, action or proceeding and the Lessee’s proposed response thereto. In addition, the Lessee shall provide to the Lessor, within thirty (30) Business Days of receipt, copies of all written communications with any Governmental Authority relating to any such Environmental Violation in connection with any Property. The Lessee shall also promptly provide such detailed reports of any such environmental claims. In the event that the Lessor receives written notice of any pending or threatened claim, action or proceeding involving any Environmental Laws or any Release on or in connection with any Property, the Lessor shall promptly give notice thereof to the Lessee. For purposes of this paragraph, “actual knowledge” of the Lessee shall mean the actual knowledge of the Lessee’s senior officer responsible for day to day operations of such Property.

ARTICLE XV

TERMINATION OF LEASE

SECTION 15.1. Mandatory Termination upon Certain Events. If any of the following events occurs with respect to any Property:

(i) a Significant Condemnation, or

(ii) a Significant Casualty

and the Lessor shall have given written notice (a “Termination Notice”) to the Lessee that as a consequence of the occurrence of such an event, (x) the Lease Supplement relating to such Property is to be terminated and (y) this Lease is to be terminated with respect to such Property, then, the Lessee shall be obligated to purchase the Lessor’s interest in the affected Property on or prior to the date occurring one-hundred eighty (180) days after the date of Lessor’s notice of termination by paying the Lessor an amount equal to the Lease Balance allocable to such affected Property; provided that Lessee shall be permitted to reparcelize or adjust the lot lines of the affected Property to the extent necessary to permit this Lease to continue in effect with respect to the remainder of the affected Property not damaged or taken by the applicable Significant Casualty or Significant Condemnation.

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SECTION 15.2. Termination Procedures. On the date of the payment by the Lessee of the Lease Balance allocable to the affected Property (or if less than the entire Property is affected, such portion of the Lease Balance as is allocable to the affected portion of the Property as is necessary for the Fair Market Sales Value of the remaining Property to be equal to the remaining Lease Balance) and other amounts required to be paid pursuant to Section 15.1 (such date, the “Termination Date”), this Lease shall terminate with respect to such Property (or such affected portion thereof) and, concurrent with the Lessor’s receipt of such payment, the Lessor shall transfer to the Lessee (or its designee) all of the Lessor’s interest in the such Property (or such affected portion thereof) in accordance with the procedures set forth in Section 21.1, provided that such transfer shall include an assignment of all of Lessor’s right, title and interest in any net Proceeds with respect to such Property not previously received by Lessor. In the event of termination pursuant to clause (i) of Section 15.1, the Lessor shall convey to the Lessee any Net Proceeds with respect to the Condemnation giving rise to the termination of this Lease with respect to such Property (or the affected portion thereof).

ARTICLE XVI

LEASE EVENTS OF DEFAULT

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ARTICLE XVII

LESSOR’S RIGHT TO CURE

SECTION 17.1. The Lessor’s Right to Cure the Lessee’s Lease Defaults. The Lessor, without waiving or releasing any obligation or Lease Event of Default, may (but shall be under no obligation to) remedy any Lease Event of Default for the account and at the sole cost and expense of the Lessee, including the failure by the Lessee to maintain the insurance required by Article XIII, and may, to the fullest extent permitted by law, and notwithstanding any right of quiet enjoyment in favor of the Lessee, enter upon any Property for such purpose and take all such action thereon as may be necessary or appropriate therefor. No such entry shall be deemed an eviction of the Lessee. All reasonable out-of-pocket costs and expenses so incurred (including fees and expenses of counsel), together with interest thereon at the Overdue Rate from the date on which such sums or expenses are paid by the Lessor, shall be paid by the Lessee to the Lessor as Supplemental Rent.

ARTICLE XVIII

PURCHASE PROVISIONS

SECTION 18.1. Purchase of the Property. Subject to the conditions contained herein, the Lessee shall have the irrevocable option on any Business Day to purchase any or all of the Properties subject to this Lease at a price (the “Purchase Price”) equal to that portion of the Lease Balance allocable to the applicable Property or Properties on the date of such purchase, plus Break Costs (if any). The Lessee’s exercise of its option pursuant to this Section 18.1 shall be subject to the condition that the Lessee shall have delivered a Purchase Notice to the Lessor not less than thirty (30) days prior to such purchase, specifying the date of such purchase:

If the Lessee exercises its option pursuant to this Section 18.1 then, upon the Lessor’s receipt of all amounts due in connection therewith, the Lessor shall transfer to the Lessee

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or its designee all of the Lessor’s right, title and interest in and to the applicable Properties in accordance with the procedures set forth in Section 21.1(a), such transfer to be effective as of the date specified in the Purchase Notice. The Lessee may designate, in a notice given to the Lessor not less than thirty (30) days prior to the closing of such purchase (time being of the essence), the transferee or transferees to whom the conveyance shall be made (if other than to the Lessee), in which case such conveyance shall (subject to the terms and conditions set forth herein) be made to such designee; provided, however, that such designation of a transferee or transferees shall not cause the Lessee to be released, fully or partially, from any of its obligations under this Lease, including, without limitation, the obligation to pay to the Lessor that portion of the Lease Balance allocable to the applicable Properties on the date specified in the applicable Purchase Notice. Notwithstanding anything herein to the contrary, the Lessee may only exercise the Purchase Option for less than all of the Property located in Fort Lauderdale, Florida (commonly known as Cambridge I and Cambridge II) so long as, after giving effect to such purchase, the aggregate Fair Market Sales Value (as determined by an Appraisal) of such remaining Property subject to this Lease would be at least equal to 90% of the remaining Lease Balance for such Property. Property (or portions thereof) remaining subject to this Lease after any such purchase shall constitute one or more legal parcels and separate tax lots and have in effect all subdivision approvals required by Applicable Law. In the event the Lessee exercises the Purchase Option with respect to less than an entire Property, the Lessee must establish prior to the purchase date, to the reasonable satisfaction of the Lessor and Administrative Agent, that the requirements of the immediately preceding sentence have been fulfilled. The Lessee shall have the right to elect by written notice to the Lessor and the Administrative Agent to have all or part of the Purchase Price paid by liquidation of the Collateral so long as, in the case of a purchase of less than all the Properties, sufficient Collateral remains subject to the Pledge Agreement. In addition, the Lessee may effect any such purchase by assumption of the Loans relating to the portion of the Lease Balance to be paid and paying to the Lessor the related Lessor Amount.

ARTICLE XIX

EXTENSION OF EXPIRATION DATE

SECTION 19.1. Extension of Expiration Date. The Lessee may extend the Expiration Date subject to, and in accordance with, the terms and conditions of Section 11.1 of the Participation Agreement.

ARTICLE XX

REMARKETING OPTION

SECTION 20.1. Option to Remarket. Subject to the fulfillment of each of the conditions set forth in this Section 20.1 and in Section 20.2 (such conditions, collectively, the “Return Conditions”), the Lessee shall have the option (the “Remarketing Option”) to market all (but not less than all) of the Property subject to this Lease on behalf of the Lessor.

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The Lessee’s effective exercise and consummation of the Remarketing Option shall be subject to the due and timely fulfillment of each of the following provisions as to the Property as of the dates set forth below:

(a) Not later than one hundred eighty (180) days prior to the scheduled Basic Term Expiration Date, the Lessee shall give to the Lessor written notice of the Lessee’s exercise of the Remarketing Option. Failure by the Lessee to give timely notice shall be deemed to be an election by the Lessee, without further act thereby, of its Purchase Option for each Property.

(b) Not later than ninety (90) days prior to the scheduled Basic Term Expiration Date, the Lessee shall deliver to the Lessor an Environmental Audit for each Property. Such Environmental Audit shall be prepared by an environmental consultant selected by the Lessee, with the approval of the Lessor not to be unreasonably withheld and shall conclude that the environmental status of the Property complies with Applicable Law. If any such Environmental Audit indicates any exceptions that are required to be remediated under any Applicable Law, the Lessee shall have also delivered prior to the scheduled Basic Term Expiration Date a Phase Two environmental assessment by an environmental consultant selected by the Lessee and approved by the Lessor and a written statement by such environmental consultant indicating that all such exceptions have been remedied in compliance with Applicable Law.

(c) No Lease Event of Default shall have occurred and be continuing that shall not have been cured on or prior to the Expiration Date.

(d) All Modifications, restoration, rebuilding and remediation of each Property required under this Lease shall have been completed prior to the date on which the Lessor receives notice of the Lessee’s intention to exercise the Remarketing Option, and, on or prior to the Expiration Date, each Property shall be in good repair (ordinary wear and tear excepted).

(e) Each Property shall be free and clear of all Liens (including Permitted Liens) other than Lessor Liens and the Liens of the Security Documents (which shall be removed upon closing and the receipt by the Lessor of the Lease Balance). The Lessee shall not have been excused pursuant to Section 12.1 from complying with any Applicable Law that involved the extension of the ultimate imposition of such Applicable Law beyond the scheduled Basic Term Expiration Date.

(f) The Lessee shall permit inspection of each Property and any maintenance records relating to the Property by the Participants, the Administrative Agent and any prospective purchasers, and shall allow the Participants, the Administrative Agent and any prospective purchaser reasonable access to such Property for the purpose of inspecting the same.

(g) During the Marketing Period, the Lessee shall, as nonexclusive agent for the Lessor, use reasonable commercial efforts to sell the Lessor’s interest in each Property for not less than the Fair Market Sales Value, and shall use reasonable commercial efforts to procure bids from one or more bona fide prospective purchasers. No such purchaser shall be an Obligor or an Affiliate of any Obligor, but the Lessor and the other Participants may submit one or more bids for Property. The Lessee shall deliver to the Lessor

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and the other Participants all bids for Property received from prospective purchasers within five (5) days of the Lessee’s receipt of each such bid.

(h) The Lessee shall use reasonable efforts to obtain at its cost and expense, all required governmental and regulatory consents and approvals and shall have made all filings as required by Applicable Law in order to carry out and complete the transfer of each Property. As to the Lessor, any such sale shall be made on an “as is, with all faults” basis without representation or warranty by the Lessor other than the absence of Lessor Liens and Liens arising under the Security Documents.

(i) The Lessee shall pay directly, and not from the sale proceeds, all prorations and credits, whether incurred by the Lessor or the Lessee, including without limitation, the cost of all environmental reports, appraisals required under Section 13.2 of the Participation Agreement and the Lessee’s attorneys’ fees, provided, however, upon the sale of Property the Lessee shall be reimbursed for such expenses by the Lessor.

(j) The Lessee shall pay to the Lessor on or prior to the scheduled Basic Term Expiration Date (or in the case of Supplemental Rent, to the Person entitled thereto) an amount equal to the Maximum Recourse Amount plus all accrued and unpaid Rent and all other amounts hereunder which have accrued or will accrue prior to or as of the scheduled Basic Term Expiration Date, in the type of funds specified in Section 3.4 hereof.

(k) The Lessee shall pay to the Lessor on or prior to the scheduled Basic Term Expiration Date the amounts, if any, required to be paid pursuant to Section 13.2 of the Participation Agreement.

(l) The gross proceeds (the “Gross Remarketing Proceeds”) of the sale of the Property (less any closing costs or commissions related to the sale of the Property) shall be paid directly to the Lessor and shall be distributed by the Lessor to the Administrative Agent for distribution in accordance with Section 7.4 of the Participation Agreement.

(m) All Necessary Permits shall be in effect and shall on the scheduled Basic Term Expiration Date be assigned or transferred to the Lessor to the extent assignable or transferable.

SECTION 20.2. Conveyance upon Remarketing. If the Lessee elects the Remarketing Option then the Lessee shall, in addition to making the payment required pursuant to Section 20.1(k) above, at its own cost and expense (which costs and expenses shall be reimbursed by the Lessor upon a sale of the Property), do each of the following:

(a) on or prior to the Expiration Date, execute and deliver to the Lessor (or the Lessor’s designee) or, if the Lessor has accepted any bid for Property, to the applicable purchaser of the Property, the following: (i) instruments of transfer covering all of the Lessee’s right, title and interest in, to and under the Property, containing representations and warranties of grantor to the Lessor (or such other Person) solely regarding the absence of Liens (other than Lessor Liens and the Liens of the Security Documents), (ii) a bills of sale conveying to the Lessor (or such other Person) all of the Lessee’s interest “AS IS” in all equipment and

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other personal property constituting part of the Property and (iii) an assignment of all of the Lessee’s interest in the Property (which shall include an assignment of all of the Lessee’s right, title and interest in and to all Necessary Permits (to the extent assignable) and all awards, compensation and insurance proceeds payable in connection with any Casualty or Condemnation affecting the Property and an assignment of all subleases relating to the Property), in each case in recordable form and otherwise in conformity with local custom and free and clear of any Liens attributable to the Obligors;

(b) on or prior to the Expiration Date, execute and deliver to the Lessor and the Lessor’s title insurance company an affidavit as to the absence of any Liens (other than Lessor Liens and the Liens of the Security Documents), and shall execute and deliver to the Lessor a statement of termination of this Lease;

(c) on or prior to the Expiration Date, vacate the Property and transfer possession of the Property to the Lessor (or its designee) or, if the Lessor has accepted any bid for the Property, to the applicable purchaser of the Property, by surrendering the same into the possession of the Lessor or such Person, as the case may be, in the condition required by Section 20.1, free and clear of all Liens (other than Lessor Liens and the Liens of the Security Documents), in good condition (as modified by Modifications permitted by this Lease), ordinary wear and tear excepted, and in compliance with Applicable Law (including Environmental Laws); and

(d) for a period of up to six (6) months after the Expiration Date, cooperate reasonably with the Lessor and/or any Person designated by the Lessor to receive the Property, which cooperation shall include reasonable efforts with respect to the following, all of which the Lessee shall do on or before the Expiration Date for the Property or as soon thereafter as is reasonably practicable: providing copies of all books and records regarding the maintenance and ownership of the Property and all know-how, data and technical information relating thereto, providing a current copy of the applicable Plans and Specifications, granting or assigning all assignable licenses necessary for the maintenance and operation of the Property and cooperating reasonably in seeking and obtaining all necessary Governmental Action. The obligations of the Lessee under this paragraph shall survive the expiration or termination of this Lease for six (6) months only.

If one or more of the Return Conditions shall not be fulfilled as of the applicable date for such fulfillment, then the Remarketing Option shall be null and void (whether or not it has been theretofore exercised by the Lessee), in which event all of the Lessee’s rights under this Article XX shall immediately terminate and the Lessee shall purchase from the Lessor, and the Lessor shall convey to the Lessee, on the Expiration Date all of the Lessor’s interest in the Properties for an amount equal to the Lease Balance.

SECTION 20.3. Acceptance of Bids. The Lessor in its sole discretion shall decide whether to accept any bid obtained by the Lessee for the purchase of the Properties, and the Lessee shall not have any right, power or authority to bind the Lessor or the Participants in connection with any proposed sale of such Property; provided, however, that the Lessor shall accept any all-cash bid from a bona fide purchaser (other than a prospective purchaser that is an Obligor or an Affiliate of an Obligor) that is in an amount that

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exceeds the difference between (x) the Lease Balance plus all Permitted Remarketing Costs (provided, however, with respect to Permitted Remarketing Costs the Lessee agrees that it shall not incur expenses in excess of $100,000, without the written permission of the Lessor) and (y) the Maximum Recourse Amount. The Lessor shall have the right, but shall be under no duty, to solicit bids, to inquire into the efforts of the Lessee to obtain bids or otherwise to take action in connection with any such sale.

SECTION 20.4. Certain Obligations Continue. During the Marketing Period, the obligation of the Lessee to pay Rent with respect to the Properties (including the installment of Rent due on the Expiration Date) shall continue undiminished until payment in full of the Maximum Recourse Amount and all accrued and unpaid Basic Rent and Supplemental Rent due to the Lessor with respect to the Properties under the Operative Documents to which the Lessee is a party.

ARTICLE XXI

PROCEDURES RELATING TO PURCHASE

SECTION 21.1. Provisions Relating to the Exercise of Purchase Option or Obligation. In connection with any termination of this Lease with respect to any Property pursuant to the terms of Article XV or upon the Lessor’s receipt of the Lease Balance and all accrued and unpaid Basic Rent and other amounts due and owing under the Operative Documents pursuant to the Lessor’s exercise of remedies under Section 16.2, or in connection with the Lessee’s purchase of the Property in accordance with Section 18.1, then, upon the date on which this Lease is to terminate and upon tender by the Lessee of the amounts set forth in Article XV, Article XVI or Section 18.1, as applicable:

(a) the Lessor shall execute and deliver (or cause to be executed and delivered to the Lessee’s designee) at the Lessee’s cost and expense, to escrow for closing pursuant to the terms hereof: (i) escrow instructions; (ii) a deed to the Lessee or its designee (unless the Property has been sold to a third party) and other instruments of transfer with covenants against grantor’s acts with respect to the Property, (iii) an assignment of the Lessor’s entire interest in the Property (which shall include an assignment of all of the Lessor’s right, title and interest in and to any Net Proceeds with respect to the Property not previously received by the Lessor and an assignment of leases with respect to the Property, if any), (iv) a release of the Lessor Liens and the Lessor Mortgage, and (v) such other additional affidavits and instruments, in each case in recordable form and otherwise in conformity with local custom and free and clear of the Liens arising in connection with the Security Documents and any Lessor Liens;

(b) any Property shall be conveyed to the Lessee “AS IS” and in their then present physical condition; and

(c) the Lessor shall execute and deliver to Lessee and the Lessee’s title insurance company an affidavit as to the Lessor’s title and Lessor Liens and shall execute and deliver to Lessee a statement of termination of this Lease.

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ARTICLE XXII

ESTOPPEL CERTIFICATES; ACCEPTANCE OF SURRENDER;

NO MERGER OF TITLE

SECTION 22.1. Estoppel Certificates. At any time and from time to time upon not less than thirty (30) Business Days’ prior request by the Lessor or the Lessee (the “Requesting Party”), the other party (whichever party shall have received such request, the “Certifying Party”) shall furnish to the Requesting Party a certificate signed by an individual having the office of vice president or higher in the Certifying Party certifying that this Lease is in full force and effect (or that this Lease is in full force and effect as modified and setting forth the modifications); the dates to which the Basic Rent and Supplemental Rent have been paid; to the best knowledge of the signer of such certificate, whether or not the Requesting Party is in default under any of its obligations hereunder (and, if so, the nature of such alleged default); and such other matters under this Lease as the Requesting Party may reasonably request. Any such certificate furnished pursuant to this Article XXII may be relied upon by the Requesting Party, and any existing or prospective mortgagee, purchaser or lender, and any accountant or auditor, of, from or to the Requesting Party (or any Affiliate thereof).

SECTION 22.2. Acceptance of Surrender. No surrender to the Lessor of this Lease or of any Property or of any part thereof or of any interest therein shall be valid or effective unless agreed to and accepted in writing by the Lessor and, prior to the repayment in full in cash of all outstanding Loans and the termination of the Commitments of the Lenders, and no act by the Lessor or any Lender or any representative or agent of the Lessor or any Lender, other than a written acceptance, shall constitute an acceptance of any such surrender.

SECTION 22.3. No Merger of Title. There shall be no merger of this Lease or of the leasehold estate created hereby by reason of the fact that the same Person may acquire, own or hold, directly or indirectly, in whole or in part, (a) this Lease or the leasehold estate created hereby or any interest in this Lease or such leasehold estate, (b) the fee interest in any Property, except as may expressly be stated in a written instrument duly executed and delivered by the appropriate Person or (c) a beneficial interest in the Lessor.

ARTICLE XXIII

POWER OF SALE

SECTION 23.1. Power of Sale and Foreclosure. In the event that a court of competent jurisdiction rules that this Lease constitutes a mortgage, deed of trust or other secured financing with respect to any Property, then Lessor and the Lessee agree that (i) the Lessee hereby grants a Lien to the Lessor for the benefit of the Lessor and the Lenders to secure all Lessor Amounts and Loans advanced by the Participants for the construction and installation of the Property (corresponding to the Lease Balance), together with interest thereon, and all other amounts payable under the Operative Documents in connection therewith, against such Property WITH POWER OF SALE, to the extent permitted by law, and that, upon the occurrence of any Lease Event of Default, the Lessor shall have the power and authority, to the extent provided by law,

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after proper notice and lapse of such time as may be required by law, to sell all or any part of the Property at the time and place of sale fixed by the Lessor in such notice of sale, either as a whole, or in parts and in such order as the Lessor may elect, at auction to the highest bidder for cash in lawful money of the United States payable at the time of sale; accordingly, it is acknowledged that A POWER OF SALE HAS BEEN GRANTED IN THIS INSTRUMENT; A POWER OF SALE MAY ALLOW THE LESSOR TO TAKE SUCH PROPERTY AND SELL IT WITHOUT GOING TO COURT IN A FORECLOSURE ACTION UPON THE OCCURRENCE AND CONTINUANCE OF A LEASE EVENT OF DEFAULT, and (ii) upon the occurrence of any Lease Event of Default, the Lessor, in lieu of or in addition to exercising any power of sale hereinabove given, may proceed by a suit or suits in equity or at law, whether for a foreclosure hereunder, or for the sale of the Property, or against the Lessee on a recourse basis for the Property Cost, or for the specific performance of any covenant or agreement herein contained or in aid of the execution of any power herein granted, or for the appointment of a receiver pending any foreclosure hereunder or the sale of any Property, or for the enforcement of any other appropriate legal or equitable remedy.

SECTION 23.2. Security for Obligations. The security interest and mortgage and/or deed of trust created under this Article XXIII secures the payment and performance of all Obligations now or hereafter existing under this Lease, the Participation Agreement and each other Operative Document to which the Lessee is or may become a party, whether for Basic Rent, Supplemental Rent (including obligations with respect to the payment of Lease Balance and Maximum Recourse Amount) costs, fees, expenses or otherwise.

ARTICLE XXIV

INTENT OF THE PARTIES

SECTION 24.1. Nature of Transaction. It is the intent of the parties that: (i) the Lease constitutes an operating lease from Lessor to the Lessee for purposes of the Lessee’s financial reporting, (ii) the Lease and other transactions contemplated by the Operative Documents will result in the Lessee being recognized as the owner of each Property for Federal and state income tax and bankruptcy purposes, (iii) the Lessor and the Lender will be deemed to have financed the Lessee in an amount equal to the Lease Balance and the obligations of the Lessee to pay Basic Rent and any part of the Lease Balance shall be treated as payments of interest and principal, respectively, for Federal and state income tax and bankruptcy purposes and (iv) the Lease and the Security Documents grant to the Lessor a Lien on the Lessee’s interest in the Properties. Each of the parties hereto agrees that Lessee shall be entitled to all tax benefits available to the owner of the Properties and neither party will, nor will it permit any Affiliate to at any time, take any action or fail to take any action with respect to the preparation or filing of any income tax return, including an amended income tax return, to the extent that such action or such failure to take action would be inconsistent with the intention of the parties expressed in this Section 25.1. The parties hereto intend and agree that in the event of any insolvency or receivership proceedings or a petition under the United States Bankruptcy laws or any State or Commonwealth thereof affecting Lessee, Lessor or any Participant, or any collection actions pursuant thereto or otherwise, the transactions evidenced by the Operative Documents shall be regarded as loans made by the Participants to the Lessee.

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ARTICLE XXV

MISCELLANEOUS

SECTION 25.1. Survival; Severability; Etc. Anything contained in this Lease to the contrary notwithstanding, all claims against and liabilities of the Lessee or the Lessor arising from events commencing prior to the expiration or earlier termination of this Lease shall survive such expiration or earlier termination for a period of one year except as to indemnification which shall continue to survive. If any term or provision of this Lease or any application thereof shall be declared invalid or unenforceable, the remainder of this Lease and any other application of such term or provision shall not be affected thereby. If any right or option of the Lessee provided in this Lease, including any right or option described in Article XIV, XV, XVIII or XX, would, in the absence of the limitation imposed by this sentence, be invalid or unenforceable as being in violation of the rule against perpetuities or any other rule of law relating to the vesting of an interest in or the suspension of the power of alienation of property, then such right or option shall be exercisable only during the period which shall end twenty-one (21) years after the date of death of the last survivor of the descendants of Franklin D. Roosevelt, the former President of the United States, Henry Ford, the deceased automobile manufacturer, and John D. Rockefeller, the founder of the Standard Oil Company, known to be alive on the date of the execution, acknowledgment and delivery of this Lease.

SECTION 25.2. Amendments and Modifications. Subject to the requirements, restrictions and conditions set forth in the Participation Agreement, neither this Lease nor any provision hereof may be amended, waived, discharged or terminated except by an instrument in writing in recordable form signed by the Lessor and the Lessee.

SECTION 25.3. No Waiver. No failure by the Lessor, any Participant or the Lessee to insist upon the strict performance of any term hereof or to exercise any right, power or remedy upon a default hereunder, and no acceptance of full or partial payment of Rent during the continuance of any such default, shall constitute a waiver of any such default or of any such term. To the fullest extent permitted by law, no waiver of any default shall affect or alter this Lease, and this Lease shall continue in full force and effect with respect to any other then existing or subsequent default.

SECTION 25.4. Notices. All notices, demands, requests, consents, approvals and other communications hereunder shall be in writing and directed to the address described in, and deemed received in accordance with the provisions of, Section 15.3 of the Participation Agreement.

SECTION 25.5. Successors and Assigns. All the terms and provisions of this Lease shall inure to the benefit of the parties hereto and their respective successors and permitted assigns.

SECTION 25.6. Headings and Table of Contents. The headings and table of contents in this Lease are for convenience of reference only and shall not limit or otherwise affect the meaning hereof.

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SECTION 25.7. Counterparts. This Lease may be executed in any number of counterparts, each of which shall be an original, but all of which shall together constitute one and the same instrument.

SECTION 25.8. GOVERNING LAW. THIS LEASE SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO CONFLICTS OF LAW PRINCIPLES, EXCEPT AS TO MATTERS RELATING TO THE CREATION OF THE LEASEHOLD ESTATES HEREUNDER AND THE EXERCISE OF RIGHTS AND REMEDIES WITH RESPECT THERETO, WHICH SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE IN WHICH THE ESTATES ARE LOCATED. WITHOUT LIMITING THE FOREGOING, IN THE EVENT THAT THIS LEASE IS DEEMED TO CONSTITUTE A FINANCING WHICH IS THE INTENTION OF THE PARTIES, THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES, SHALL GOVERN THE CREATION, TERMS AND PROVISIONS OF THE INDEBTEDNESS EVIDENCED HEREBY, BUT THE LIEN CREATED HEREBY AND THE CREATION AND THE ENFORCEMENT OF SAID LIEN SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATES IN WHICH SUCH ESTATES ARE LOCATED.

SECTION 25.9. Liability Limited. The parties hereto agree that except as specifically set forth in this Lease or in any other Operative Document, the Lessor shall have no personal liability whatsoever to any Obligor or any other Participant or their respective successors and assigns for any claim or obligation based on or in respect of this Lease or any of the other Operative Documents or arising in any way from the transactions contemplated hereby or thereby and recourse, if any, shall be solely had against the Lessor’s interest in any Property and the Collateral or from payments (other than payments of Yield and payments due to the Lessor with respect to indemnities, reimbursement of expenses or fees, in each case payable to the Lessor for its own account) received from the Obligors (it being acknowledged and agreed by each party hereto that all such personal liability of the Lessor is expressly waived and released as a condition of, and as consideration for, the delivery by the Lessor of each Operative Document to which it is a party); provided, however, that the Lessor shall be liable for (a) its own willful misconduct or gross negligence, (b) breach of any of its representations, warranties or covenants under the Operative Documents, or (c) any Tax based on or measured by any fees, commission or compensation received by it for acting as the Lessor as contemplated by the Operative Documents.

SECTION 25.10. Original Lease. The single executed original of this Lease marked “THIS COUNTERPART IS THE ORIGINAL EXECUTED COUNTERPART” on the signature page thereof and containing the receipt thereof of the Administrative Agent therefor on or following the signature page thereof shall be the Original Executed Counterpart of this Lease (the “Original Executed Counterpart”). To the extent that this Lease constitutes chattel paper, as such term is defined in the Uniform Commercial Code as in effect in any applicable jurisdiction, no security interest in this Lease may be created through the transfer or possession of any counterpart other than the Original Executed Counterpart.

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SECTION 25.11. Naming and Signage. So long as no Lease Event of Default has occurred as is continuing, the Lessee shall have the sole and exclusive right, at any time and from time to time, to select the name or names of any Property, and the sole and exclusive right to determine not to use any name in connection with any Property, as well as all rights in respect of signage for or in connection with any Property, provided, however, that neither the name of the Property nor any signage shall include any reference to the Lessor, or any Participant. The Lessor shall not have any right or interest with respect to any such name or names used at any time by the Lessee, or any trade name, trademark service mark or other intellectual property of any type of the Lessee. The Lessor shall cooperate with the Lessee, at the Lessee’s sole cost and expense, to effectuate the Lessee’s sign rights hereunder.

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IN WITNESS WHEREOF, the parties have caused this Lease be duly executed and delivered as of the date first above written.

CITRIX SYSTEMS, INC., as Lessee
By:	/s/ David Urbani
Name:	David Urbani
Title:	Vice President of Finance

SELCO SERVICE CORPORATION, as Lessor
By:	/s/ Doanld C. Davis
Name:	Donald C. Davis
Title:	Vice President

THIS COUNTERPART IS THE ORIGINAL EXECUTED COUNTERPART.

Receipt of this original counterpart of the foregoing Lease is hereby acknowledged as of the date hereof.

KEY CORPORATE CAPITAL INC. as the Administrative Agent
By:	/s/ Thomas A. Crandell
Name:	Thomas A. Crandell
Title:	Senior Vice President

EXHIBIT I

Form of Lease Supplement

NOTE TO CLERK:

BASED UPON THE SCHEDULED

BASIC RENT TO BE PAID IN THE

AMOUNT OF $9,607,500.00

PURSUANT TO THE MASTER

LEASE HEREINAFTER

DESCRIBED DOCUMENTARY

STAMP TAX IN THE AMOUNT

OF $33,626.25 HAS BEEN PAID

ON THIS MORTGAGE. NO NON-

RECURRING INTANGIBLE TAX

HAS BEEN PAID OR IS DUE ON

THIS MORTGAGE BECAUSE IT

IS A LEASEHOLD MORTGAGE

CONSTITUTING A MORTGAGE

OF PERSONAL PROPERTY

UNDER AURORA GROUP, LTD.

V. DEPT. OF REVENUE, 487 SO.

2D 1132 (FLA. 3D DCA 1986).

This instrument prepared by,

recording requested by,

and when recorded, please return to:

BINGHAM DANA LLP

399 Park Avenue

New York, New York 10022

Attention: Joseph F. Voyticky, Esq.

MORTGAGE DEED SECURITY AGREEMENT, FIXTURE FILING AND

LEASE SUPPLEMENT NO. 1

(AND MEMORANDUM OF LEASE SUPPLEMENT,

MEMORANDUM OF LEASE AND

MEMORANDUM OF OPTION TO PURCHASE)

THIS MORTGAGE DEED SECURITY AGREEMENT, FIXTURE FILING AND LEASE SUPPLEMENT NO. 1 (And Memorandum of Lease Supplement, Memorandum of Lease and Memorandum of Option to Purchase) (this “Lease Supplement”) dated as of April 23, 2002, between CITRIX SYSTEMS, INC., a Delaware corporation, having an address at 6400 NW 6th Way, Ft. Lauderdale, Florida 33309, as the lessee and as mortgagor (the “Lessee”), and SELCO SERVICE CORPORATION, an Ohio corporation, having an addressat 66 South Pearl Street, Albany, New York 12207, as the lessor and as mortgagee for the benefit of the Participants (the “Lessor).

W I T N E S S E T H:

WHEREAS, the Lessor is the record owner of the land described on Schedule I attached hereto and made a part hereof (such land, together with any Appurtenant Rights thereto, the “Subject Land”) and is the owner of all Improvements on the Subject Land, together with all Improvements which hereafter may be constructed on the Subject Land (the “Subject Improvements” and, together with the Subject Land, the “Subject Property”);

WHEREAS, the Lessor and the Lessee are parties to that certain Master Lease, dated as of April 23, 2002 (as amended, modified, restated or supplemented from time to time, the “Lease”);

WHEREAS, the Lessor wishes to lease the Subject Property to the Lessee and the Lessee wishes to lease the Subject Property from the Lessor;

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree to enter into this Lease Supplement No. 1, as follows:

SECTION 1. Certain Terms. Capitalized terms used but not otherwise defined in this Lease Supplement have the meanings specified in Appendix A (as amended, supplemented, amended and restated or otherwise modified from time to time, “Appendix A”) to the Participation Agreement, dated as of April 23, 2002, among the Lessor, the Lessee, Citrix Capital Corp., as guarantor, and Key Corporate Capital Inc., as lender, collateral agent and administrative agent (as amended, supplemented, amended and restated or otherwise modified from time to time, the “Participation Agreement”), and the rules of interpretation specified in such Appendix A shall apply to this Lease Supplement.

SECTION 2. Nature of Transaction. (a) The parties hereto intend that (i) for financial accounting purposes with respect to the Lessee, Lessor will be treated as the owner and lessor of the Subject Property and the Lessee will be treated as the lessee of the Subject Property, and (ii) for all other purposes, including federal and all state and local income tax purposes, (A) the Lease will be treated as a financing arrangement, (B) the Lessor and the Lenders will be deemed lenders making loans to the Lessee in an amount equal to the sum of the Lessor Amounts and the outstanding principal amount of the Loans, which Loans and Lessor Amounts are secured by the Subject Property, and (C) the Lessee will be entitled to all tax benefits ordinarily available to an owner of properties like the Subject Property for such tax purposes.

(b) It is the intent of the parties hereto that this Lease Supplement (i) grants a security interest in, and mortgage on, the Subject Property to the Lessor, as secured party for the benefit of the Participants, to secure the Lessee’s performance and payment of all amounts due and owing under the Lease and the other Operative Documents, and (ii) constitutes a financing statement as a fixture filing in Broward County, Florida.

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SECTION 3. Subject Property; Notice of Lease. Attached hereto as Schedule I is the description of the Subject Land as of the date hereof. Effective upon the execution and delivery of this Lease Supplement by the Lessor and the Lessee, the Subject Property shall be subject to the terms and provisions of the Lease, as affected hereby. The Lease is incorporated by reference herein as if set forth herein in its entirety. Subject to the terms and conditions of the Lease, as affected hereby, the Lessor hereby leases the Subject Property to the Lessee for the Lease Term (as defined below) of this Lease Supplement, and the Lessee expressly for the direct benefit of the Lessor hereby leases the Subject Property from the Lessor for the Lease Term.

SECTION 4. Lease Term; Option to Purchase; Remarketing Option. The term of the lease for the Subject Property (the “Lease Term”) shall begin on the date hereof and shall end on the Maturity Date, unless the Lease Term with respect to the Subject Property is renewed or earlier terminated in accordance with the provisions of the Lease and the other Operative Documents. For and in consideration of good and valuable consideration paid by the Lessee to the Lessor as described in the Lease, the Lessor hereby grants to the Lessee the right to purchase the Subject Property or to market and sell the Subject Property during the Lease Term of the Subject Property on the terms set forth in the Lease.

SECTION 5. Liens and Security Interests. (a) (a) Specifically, without limiting the generality of Section 2, the Lessor and the Lessee intend and agree that in the event of any insolvency or receivership proceedings or a petition under the United States bankruptcy laws or any other applicable insolvency laws or statutes of the United States of America or any State or Commonwealth thereof affecting the Lessee, the Lessor, the Lenders or any collection actions, the transactions evidenced by the Operative Documents shall be regarded as loans made by the Lenders and the Lessor as unrelated third party lenders to the Lessee secured by the Subject Property, and the Lessee hereby grants its interest in the Subject Property to the Lessor, for the benefit of the Participants, to secure all Lessor Amounts and Loans advanced by the Participants for the acquisition of the Subject Property, together with Yield or interest thereon, as applicable, and all other amounts payable under the Operative Documents in connection therewith, effective on the date hereof.

(b) Specifically, but without limiting the generality of Section 2, the Lessor and the Lessee further intend and agree that, for the purpose of securing the above-described obligations of the Lessee to the Lessor and the Lenders, (i) the Lease and this Lease Supplement shall also be a security agreement and financing statement within the meaning

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of Article 9 of the Uniform Commercial Code of the State of New York (“NYUCC”) and a real property mortgage (and with respect to the Subject Property shall be a mortgage under the law of the State of Florida); (ii) the conveyance provided for hereby and in the Lease shall be a grant by the Lessee to the Lessor of, and the Lessee as debtor and mortgagor does hereby grant to the Lessor as secured party and mortgagor, for the benefit of the Participants, a mortgage lien on, and security interest in, all of the right, title and interest of the Lessee in and to the Subject Property, and all proceeds of the conversion, voluntary or involuntary, of the foregoing into cash, investments, securities or other property (all such proceeds being the “Article 9 Collateral”), and the Lessee hereby grants its interest in the Subject Property and the Article 9 Collateral to the Lessor, for the benefit of the Participants, to secure all Loans and Lessor Amounts advanced by the Participants for the acquisition of the Subject Property, together with Yield or interest thereon, and all other amounts payable under the Operative Documents in connection therewith; (iii) the possession by the Lessor or any of its agents of notes and such other items of the Article 9 Collateral as constitute instruments, money, negotiable documents or chattel paper of Lessee shall be deemed to be “possession by the secured party” for purposes of perfecting the security interest pursuant to Article 9 of the Uniform Commercial Code of the State of New York and Section 9-305 of the NYUCC; and (iv) notifications to Persons holding such property, and acknowledgments, receipts or confirmations from financial intermediaries, bankers or agents (as applicable) of the Lessee shall be deemed to have been given for the purpose of perfecting such security interest under Applicable Law. The Lessor and the Lessee shall, to the extent consistent with the Lease and this Lease Supplement, take such actions and execute, deliver, file and record such other documents, financing statements (which the Lessee is authorized to file with or without the Lessee’s signature), mortgages and deeds of trust as may be necessary to ensure that the security interest in the Subject Property granted by the Lessee in accordance with this Section shall be a perfected security interest (subject only to Permitted Liens) and will be maintained as such throughout the Lease Term.

SECTION 6. Mortgage. Without limiting any other remedies set forth herein, the Lessee hereby grants bargains, sells, assigns, mortgages, transfers, remises, releases, hypothecates, deposits, pledges, sets over, confirms, conveys and warrants its interest in the Subject Property (including the fee simple estate therein) to the Lessor, for the benefit of the Participants, to secure all Loans and Lessor Amounts advanced by the Participants for the acquisition of the Subject Property, together with Yield or interest thereon, and all other amounts payable under the Operative Documents in connection therewith, and that, upon the occurrence and during the continuance of a Lease Event of Default, the Lessor, may proceed by a suit or suits in equity

4

or at law, whether for a foreclosure hereunder or against the Lessee on a recourse basis for the Lease Balance, or for the specific performance of any covenant or agreement contained herein or in the Lease or any other Lease Supplement or in aid of the execution of any power granted herein or in the Lease or in any other Lease Supplement, or for the appointment of a receiver pending any foreclosure hereunder or under any other Lease Supplement, or for the enforcement of any other appropriate legal or equitable remedy. Lessee shall have all rights with respect to the Subject Property available to a mortgagor under the laws of the jurisdiction in which the Subject Property is located.

SECTION 7. Lessor Grant. (a) The Lessor hereby grants to the Lessee a security interest in and a lien against all of the Lessor’s right, title and interest in and to the Subject Property and all rents, additional rents, issues, income, revenues, distributions, royalties and profits now or in the future payable in respect of the Subject Property to the Lessor to secure (i) the Lessor’s obligations hereunder in respect of the due and punctual transfer by the Lessor to the Lessee of all the Lessor’s right, title and interest in and to the Subject Property when required by and in accordance with the Lease at any time during the Lease Term as set forth therein, and (ii) if the Lessor shall then be the subject of any bankruptcy, insolvency or similar proceeding, the satisfaction of the Lessee’s right to damages and other claims arising out of the rejection of the Lease or unilateral termination of such obligation to transfer to the Lessee all of the Lessor’s right, title and interest in and to the Subject Property. The Lessor hereby acknowledges and agrees that the amount secured under this Section 7 is not less than the purchase price of the options hereinafter referred to and not more than the fair market value of the Subject Property.

(b) During the existence of a Lessor Default (as defined below), the provisions of this Section 7 shall control all relative rights of the parties to the Lease and the Lessee shall have the power and authority, to the extent provided by law, to exercise any or all of the rights and powers and pursue any and all of the remedies provided under the Operative Documents or by Applicable Law in respect of the obligations secured in accordance with clause (a) above (including specific performance of any covenant or agreement contained in the Lease or any other Operative Document in aid of the execution of any power granted in the Lease or any other Operative Document, or for the enforcement of any other appropriate legal or equitable remedy). The following shall constitute a Lessor default (“Lessor Default”): (i) the Lessee shall have exercised any of its purchase options in the Lease for all or any portion of the Subject Property in accordance with the terms thereof and shall have tendered in full all amounts to be paid by the Lessee in connection therewith and all of the

5

Lessor’s right, title and interest in and to all or any portion of the Subject Property shall not have been transferred to the Lessee in accordance with the Lease, or (ii) voluntary or involuntary bankruptcy proceedings with respect to the Lessor or the Lender shall have been commenced, or (iii) the Lessor or the Lender shall have become insolvent, or (iv) a receiver of Lessor’s or the Lender’s interest in the Subject Property shall have been appointed.

(c) The Lessee covenants and agrees that it will not assign, transfer, mortgage, pledge, hypothecate, or encumber the lien created in clause (a). Any such attempted assignment, transfer, mortgage, pledge, hypothecation, or encumbrance shall be null and void except in conjunction with a permitted transfer of the Lease.

SECTION 8. Ratification. Except as specifically modified hereby with respect to the Subject Property, the terms and provisions of the Lease are hereby ratified and confirmed and remain in full force and effect. In the event of any conflict between the terms of the Lease and the terms of this Lease Supplement, the terms of the Lease shall control.

SECTION 9. GOVERNING LAW. THE LEASE AND THIS LEASE SUPPLEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO CONFLICTS OF LAW PRINCIPLES, EXCEPT AS TO MATTERS RELATING TO THE CREATION OF THE LEASEHOLD ESTATES THEREUNDER AND THE EXERCISE OF RIGHTS AND REMEDIES WITH RESPECT THERETO, WHICH SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF FLORIDA. WITHOUT LIMITING THE FOREGOING, IN THE EVENT THAT THE LEASE AND THIS LEASE SUPPLEMENT ARE DEEMED TO CONSTITUTE A FINANCING, WHICH IS THE INTENTION OF THE PARTIES, THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO CONFLICTS OF LAW PRINCIPLES, SHALL GOVERN THE CREATION, TERMS AND PROVISIONS OF THE INDEBTEDNESS EVIDENCED THEREBY, BUT THE LIEN CREATED THEREBY AND HEREBY ON THE SUBJECT PROPERTY AND THE CREATION AND THE ENFORCEMENT OF SAID LIEN SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF FLORIDA. THIS SECTION 9 SUPERSEDES IN ITS ENTIRETY SECTION 25.8 OF THE LEASE WITH RESPECT TO THE SUBJECT PROPERTY.

SECTION 10. Counterpart Execution. This Lease Supplement is executed under seal and may be executed in any number of counterparts and by each of the parties hereto inseparate counterparts, all such counterparts together constituting but one and the same instrument.

6

SECTION 11. Lessor’s Liability Limited. To the extent that this instrument constitutes a mortgage or other security instrument, as is the intent of the parties pursuant to Section 5 hereof, this instrument is given to secure not only existing financing, but also future advances made by the Participants pursuant to or as provided in the Participation Agreement, for the matters described in Section 5, whether such advances are obligatory or to be made at the option of the Participants or otherwise, to the same extent as if such future advances were made on the date of execution of this instrument, although there may be no advance made at the time of execution hereof, and although there may be no financing outstanding at the time any advance is made. To the fullest extent permitted by law, the lien of this instrument shall be valid as to all such amounts, including all future advances, from the time this instrument is recorded. Nothing contained herein shall be deemed an obligation to make future advances to the Lessee.

SECTION 12. Maximum Recourse Amount. The Maximum Recourse Amount for the Subject Property is 85% of the initial Lease Balance.

7

IN WITNESS WHEREOF, each of the parties hereto has caused this Lease Supplement No. 1 to be duly executed by an officer thereunto duly authorized as of the date and year first above written.

CITRIX SYSTEMS, INC.,

as the Lessee

By:

Name:

Title:

Witnesses:

Name:

Name:

SELCO SERVICE CORPORATION,

as the Lessor

By:

Name:

Title:

Witnesses:

Name:

Name:

State of _________ )

______________) Section

County of _______ )

Then personally appeared the above-named                     , the                      of CITRIX SYSTEMS, INC., a Delaware corporation, and acknowledged the foregoing to be the free act and deed of said corporation, before me. He/She is personally known to me or has produced                      as identification.

	Notary Public
	Name:
[Notarial Seal]	My commission expires:

State of _________ )

______________) Section

County of _______ )

Then personally appeared the above-named                     , the                     for SELCO SERVICE CORPORATION, an Ohio corporation, and acknowledged the foregoing to be the free act and deed of said corporation, before me. He/She is personally known to me or has produced                      as identification.

	Notary Public
	Name:
[Notarial Seal]	My commission expires:

SCHEDULE I

Legal Description of the Land

TABLE OF CONTENTS

	Page
ARTICLE I    DEFINITIONS	1
SECTION 1.1.     Definitions; Interpretation	1
ARTICLE II     LEASE	2
SECTION 2.1.     Acceptance and Lease of the Properties	2
SECTION 2.2.     Acceptance Procedure	2
SECTION 2.3.     Basic Term	2
SECTION 2.4.     Title	2
ARTICLE III     PAYMENT OF RENT	2
SECTION 3.1.     Rent. (a)	2
SECTION 3.2.     Payment of Rent	3
SECTION 3.3.     Supplemental Rent	3
SECTION 3.4.    Method of Payment	3
ARTICLE IV    QUIET ENJOYMENT; RIGHT TO INSPECT	4
SECTION 4.1.    Quiet Enjoyment	4
SECTION 4.2.     Right to Inspect	4
ARTICLE V     NET LEASE, ETC	4
SECTION 5.1.     Net Lease	4
SECTION 5.2.     No Termination or Abatement	5
ARTICLE VI     ASSIGNMENT AND SUBLEASING BY LESSEE	6
SECTION 6.1.     General	6
SECTION 6.2.     Subletting	6
SECTION 6.3.     Permitted Transfers	6
ARTICLE VII     LESSEE ACKNOWLEDGMENTS	7
SECTION 7.1.     Condition of the Property	7
SECTION 7.2.     Risk of Loss	8
SECTION 7.3.     No Obligation of Lessor to Repair, etc	8
SECTION 7.4.     No Liability of Participants, etc	8
ARTICLE VIII     POSSESSION AND USE OF EACH PROPERTY, ETC	8
SECTION 8.1.     Utility Charge	8
SECTION 8.2.     Possession, Use and Operation of each Property	9
SECTION 8.3.     Compliance with Applicable Laws and Insurance Requirements; Necessary Permits, etc	9
SECTION 8.4.     Lessee’s Right to Enforce Warranties	9

i

ARTICLE IX     MAINTENANCE AND REPAIR; REPLACEMENT OF PARTS	10
SECTION 9.1.     Maintenance and Repair	10
ARTICLE X     MODIFICATIONS, ETC	10
SECTION 10.1.     Modifications, Substitutions and Replacements	10
ARTICLE XI     DISCHARGE OF LIENS; CONDITION UPON RETURN	11
SECTION 11.1.     Lessee’s Obligation to Discharge Liens	11
SECTION 11.2.     Condition upon Return to Lessor	11
ARTICLE XII     PERMITTED CONTESTS; GRANTS AND RELEASES OF EASEMENTS; WARRANTY OF TITLE	12
SECTION 12.1.     Permitted Contests in Respect of Applicable Law Other Than Impositions	12
SECTION 12.2.     Grants and Releases of Easements; Lessor’s Waivers	12
ARTICLE XIII     INSURANCE	14
SECTION 13.1.     Required Insurance	14
SECTION 13.2.     Deductibles; Insurance Providers; Coverage and Endorsements; Confirmation of Insurance, etc	14
ARTICLE XIV     CASUALTY AND CONDEMNATION; ENVIRONMENTAL MATTERS	17
SECTION 14.1.     Casualty and Condemnation	17
SECTION 14.2.     Environmental Matters	19
SECTION 14.3.     Notice of Environmental Matters	20
ARTICLE XV     TERMINATION OF LEASE	20
SECTION 15.1.     Mandatory Termination upon Certain Events	20
SECTION 15.2.     Termination Procedures	21
ARTICLE XVI     LEASE EVENTS OF DEFAULT	21
SECTION 16.1.     Lease Events of Default	20
SECTION 16.2.     Remedies	22
SECTION 16.3.     Waiver of Certain Rights	26
ARTICLE XVII     LESSOR’S RIGHT TO CURE	26
SECTION 17.1.     The Lessor’s Right to Cure the Lessee’s Lease Defaults	26
ARTICLE XVIII     PURCHASE PROVISIONS	26
SECTION 18.1.     Purchase of the Property	26
ARTICLE XIX     EXTENSION OF EXPIRATION DATE	27
SECTION 19.1.     Extension of Expiration Date	27
ARTICLE XX     REMARKETING OPTION	27

ii

SECTION 20.1.     Option to Remarket	27
SECTION 20.2.     Conveyance upon Remarketing	29
SECTION 20.3.     Acceptance of Bids.	30
SECTION 20.4.     Certain Obligations Continue	31
ARTICLE XXI     PROCEDURES RELATING TO PURCHASE	31
SECTION 21.1.     Provisions Relating to the Exercise of Purchase Option or Obligation	31
ARTICLE XXII     ESTOPPEL CERTIFICATES; ACCEPTANCE OF SURRENDER; NO MERGER OF TITLE	32
SECTION 22.1.     Estoppel Certificates	32
SECTION 22.2.     Acceptance of Surrender	32
SECTION 22.3.     No Merger of Title	32
ARTICLE XXIII    POWER OF SALE	32
SECTION 23.1.     Power of Sale and Foreclosure	32
SECTION 23.2.     Security for Obligations	33
ARTICLE XXIV     INTENT OF THE PARTIES	33
SECTION 24.1.     Nature of Transaction	33
ARTICLE XXV     MISCELLANEOUS	34
SECTION 25.1.     Survival; Severability; Etc	34
SECTION 25.2.     Amendments and Modifications	34
SECTION 25.3.     No Waiver	34
SECTION 25.4.     Notices	34
SECTION 25.5.     Successors and Assigns	34
SECTION 25.6.     Headings and Table of Contents.	34
SECTION 25.7.     Counterparts	35
SECTION 25.8.     GOVERNING LAW	35
SECTION 25.9.     Liability Limited	35
SECTION 25.10.     Original Lease	35
SECTION 25.11.     Naming and Signage	36

EXHIBITS

Exhibit I - - Form of Lease Supplement

iii

EX-10.24

Exhibit 10.24

RESTRICTED STOCK UNIT AGREEMENT

UNDER THE CITRIX SYSTEMS, INC.

2005 EQUITY INCENTIVE PLAN

Name of Awardee: [Name]

Award Date: October 1, 2007

Number of Restricted Stock Units: [Number of shares]

Pursuant to the Citrix Systems, Inc. 2005 Equity Incentive Plan (the “Plan”), Citrix Systems, Inc. (the “Company”) hereby grants an Award (as defined in the Plan) of Restricted Stock Units (as defined in the Plan) to the awardee named above (the “Awardee”). Upon execution of this agreement, the Awardee shall receive the number of Restricted Stock Units specified above, subject to the restrictions and conditions set forth herein and in the Plan.

1. Vesting.

No portion of this Award may be received until such portion shall have vested. Except as otherwise provided herein, the Restricted Stock Units shall vest in accordance with Schedule 1 hereto, provided in each case that the Awardee is then, and since the Award Date has continuously been, employed by the Company or its Affiliates.

2. Issuance of Stock.

(a) Subject to determination of attainment levels by the Compensation Committee, each vested Restricted Stock Unit entitles Awardee to receive one share of the Company’s Common Stock, par value $.001 per share (the “Stock”), upon issuance on each Vesting Date for such Restricted Stock Unit.

(b) As soon as practicable after the Vesting Date, the Awardee’s name shall be entered as the stockholder of record on the books and records of the Company with respect to the Shares of Stock underlying the Restricted Stock Units issued in accordance with Section 3(a) and upon compliance to the satisfaction of the Committee with all requirements under applicable laws or regulations in connection with such issuance and with the requirements hereof and of the Plan. The determination of the Committee as to such compliance shall be final and binding on Awardee.

(c) Until such time as shares of Stock have been issued to Awardee pursuant to Section 3(b) above, and except as set forth in Section 3(d) below regarding dividends and dividend equivalents, Awardee shall not have any rights as a holder of the shares of Stock underlying this Award including but not limited to voting rights.

(d) If on any date the Company shall pay any dividend on shares of Stock of the Company, the number of Restricted Stock Units credited to Awardee shall, as of such date, be increased by an amount determined by the following formula:

W = (X multiplied by Y) divided by Z, where:

W = the number of additional Restricted Stock Units to be credited to Awardee on such dividend payment date;

X = the aggregate number of Restricted Stock Units (whether vested or unvested) credited to Awardee as of the record date of the dividend;

Y = the cash dividend per share amount; and

Z = the Fair Market Value per share of Stock (as determined under the Plan) on the dividend payment date.

In the case of a dividend paid on Stock in the form of Stock, including without limitation a distribution of Stock by reason of a stock dividend, stock split or otherwise, the number of Restricted Stock Units credited to Awardee shall be increased by a number equal to the product of (i) the aggregate number of Restricted Stock Units that have been awarded to Awardee through the related dividend record date, and (ii) the number of shares of Stock (including any fraction thereof) payable as dividend on one share of Stock. In the case of a dividend payable in property other than shares of Stock or cash, the per share of Stock value of such dividend shall be determined in good faith by the Board of Directors of the Company and shall be converted to additional Restricted Stock Units based on the formula above. Any additional Restricted Stock Units shall be subject to the vesting and restrictions of this Agreement in the same manner and for so long as the Restricted Stock Units granted pursuant to this Agreement to which they relate remain subject to such vesting and restrictions, and shall be promptly forfeited to the Company if and when such Restricted Stock Units are so forfeited.

3. Termination of Employment. If Awardee’s employment by the Company or any of its Affiliates (as defined in the Plan) is voluntarily or involuntarily terminated for any reason (including death or disability), Awardee’s right in any Restricted Stock Units that are not vested shall automatically terminate upon the effective date of such termination of employment with the Company and its Affiliates and such Restricted Stock Units shall be canceled as provided within the terms of the Plan and shall be of no further force and effect. In the event of such termination, the Company, as soon as practicable following the effective date of termination shall issue shares of Stock to Awardee (or Awardee’s designated beneficiary or estate executor in the event of Awardee’s death) with respect to any Restricted Stock Units which, as of the effective date of termination, have vested but for which shares of Stock had not yet been issued to Awardee.

4. Incorporation of Plan. Notwithstanding anything herein to the contrary, this Award shall be subject to and governed by all the terms and conditions of the Plan. Capitalized terms in this Agreement shall have the meaning specified in the Plan, unless a different meaning is specified herein.

5. Transferability. This Agreement is personal to Awardee, is non-assignable and is not transferable in any manner, by operation of law or otherwise, other than by will or the laws of descent and distribution. This Award is available, during Awardee’s lifetime, only to Awardee, and thereafter, only to Awardee’s designated beneficiary.

6. Tax Withholding and Sale of Shares of Stock Pursuant to Rule 10b5-1. Awardee shall, not later than the date on which the Award becomes a taxable event for Federal income tax purposes, pay to the Company any Federal, state, and local taxes required by law to be withheld on account of such taxable event. To satisfy in full such minimum tax withholding obligation, Awardee hereby authorizes the Company to withhold from shares of Stock to be issued hereunder that number of shares of Stock that would satisfy the minimum required tax withholding amount due and to sell such shares of Stock through a broker of the Company’s choosing (i.e., “sell to cover”). As of the date hereof, I certify that (a) I am currently unaware of any material, non-public information with respect to the Company, and (b) this Agreement is entered into in good faith and not as part of a plan or scheme to evade the prohibitions of Rule 10b5-1 of the Securities Exchange Act of 1934, as amended, or any other securities laws. While this Agreement is in effect, I agree (i) not to enter into or alter any corresponding or hedging transaction or position with respect to the securities covered by this Agreement (including, without limitation, with respect to any securities convertible or exchangeable into shares of Stock) and (ii) not to attempt to exercise any influence over how, when or whether to effect the withholding and sale of shares of Stock pursuant to this Section 7.

7. Tax Consequences. The Company makes no representation or warranty as to the tax treatment to the Awardee of Awardee’s receipt of the Award or vesting of Restricted Stock Units or upon Awardee’s sale or other disposition of the Stock. The Awardee should rely on his or her own tax advisors for such advice.

2

8. Miscellaneous.

(a) Notice hereunder shall be given to the Company at its principal place of business, and shall be given to the Awardee at the address set forth below, or in either case at such other address as one party may subsequently furnish to the other party in writing.

(b) This Agreement does not confer upon the Awardee any rights with respect to continuation of employment by the Company or any of its subsidiaries.

(c) The Committee may amend the terms of this Agreement, prospectively or retroactively, provided that the Agreement as amended is consistent with the terms of the Plan, but no such amendment shall impair the Awardee’s rights under this Agreement without the Awardee’s consent.

(d) This Agreement shall be construed and enforced in accordance with the laws of the State of Delaware, without regard to the conflict of laws principles thereof.

(e) This Agreement shall be binding upon and inure to the benefit of any successor or assign of the Company and any executor, administrator, trustee, guardian or other legal representative of the Awardee.

(f) This Agreement may be executed in one or more counterparts, all of which together shall constitute but one instrument. This Agreement and the Plan together constitute the entire agreement between the parties relative to the subject matter hereof, and supersede all proposals written or oral relating to the subject matter hereof.

[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK.]

3

In witness whereof, the parties have executed this Agreement as a sealed instrument as of the date first written above.

CITRIX SYSTEMS, INC.
By:	David Henshall
Title:	Chief Financial Officer

The foregoing Agreement is hereby accepted and the terms and conditions thereof hereby agreed to by the undersigned.

Date:______________________________	Awardee’s Name:______________________________
	[Printed Name]

Schedule 1

Number of Shares issued	Vesting Date
[xxx] (33.4%)
[xxx] (33.3%)
[xxx] (33.3%)

EX-21.1

EXHIBIT 21.1

SUBSIDIARIES

	Subsidiary	State of Incorporation
1	Ardence, Inc.	Massachusetts
2	Ardence Delaware, Inc.	Delaware
3	Ardence Europe S.A.R.L.	France
4	Citrix Application Networking, LLC	Delaware
5	Citrix Cayman Investments, Ltd.	Cayman Islands
6	Citrix Development Corp.	Delaware
7	Citrix Gateways, Inc.	Delaware
8	Citrix Offshore Investments, Ltd. *	Cayman Islands
9	Citrix Online LLC	Delaware
10	Citrix Sistemas de Argentina, S.R.L.	Argentina
11	Citrix Sistemas de Chile Limitada	Chile
12	Citrix Sistemas de Mexico S. de RL de CV	Mexico
13	Citrix Sistemas do Brasil Ltda.	Brazil
14	Citrix Systems (Research & Development) Ltd.	United Kingdom
15	Citrix Systems Asia Pacific Pty Ltd.*	Australia
16	Citrix Systems Australasia R&D Pty, Ltd.	Australia
17	Citrix Systems Belgium S.A.R.L.*	Belgium
18	Citrix Systems Canada, Inc.	Ontario
19	Citrix Capital & Finance S.A.R.L.	Luxembourg
20	Citrix Systems Denmark ApS*	Denmark
21	Citrix Systems Finland Oy*	Finland
22	Citrix Systems France SARL*	France
23	Citrix Systems GmbH*	Austria
24	Citrix Systems GmbH*	Germany
25	Citrix Systems Holding LLC	Delaware
26	Citrix Systems Hong Kong Limited*	Hong Kong
27	Citrix Systems India Private Limited*	India
28	Citrix Systems International GmbH	Switzerland
29	Citrix Systems Ireland Ltd*	Ireland
30	Citrix Systems Italia S.r.L.*	Italy
31	Citrix Systems Japan Kabushiki Kaisha*	Japan
32	Citrix Systems Netherlands, B.V.*	Netherlands
33	Citrix Systems Norway AS.*	Norway
34	Citrix Systems Overseas Holding GmbH	Switzerland
35	Citrix Systems Poland Sp. Zo.o*	Poland
36	Citrix Systems RoW	Switzerland
37	Citrix Systems Singapore Pte Ltd.*	Singapore
38	Citrix Systems South Africa (Pty) Ltd.*	South Africa
39	Citrix Systems Spain, SL*	Spain
40	Citrix Systems Sweden AB*	Sweden
41	Citrix Systems Switzerland GmbH	Switzerland
42	Citrix Systems UK Limited*	United Kingdom
43	Citrix Overseas Holdings B.V.	Netherlands
44	Peninsula Investment Corp.	Delaware
45	Teros, Inc.	Delaware
46	Netscaler UK Ltd**	United Kingdom
47	Netscaler Japan Kabushiki Kaisha**	Japan
48	Citrix R&D India Pvt. Ltd.**	India
49	Citrix Systems R&D OOO	Russia
50	Orbital Data Corporation	Delaware
51	Reflectent Software, Inc.	Delaware
52	Redwood Software Europe Limited	Ireland
53	Citrix Holanda B.V.	Netherlands
54	Citrix Systems Korea Limited	Korea
55	Jibe Networks, Inc.	California
56	Quicktree, Inc.	California
57	ThinGenius Limited	Scotland
58	XenSource, Inc.	Delaware
59	XenSource UK Limited	United Kingdom

60 Citrix Online UK Limited United Kingdom

* Wholly-owned subsidiaries of Citrix Systems International GmbH

** Wholly-owned subsidiaries of Citrix Application Networking LLC

EX-23.1

EXHIBIT 23.1

Consent of Independent Registered Public Accounting Firm

We consent to the incorporation by reference in the Registration Statements listed below of our reports dated February 25, 2008, with respect to the consolidated financial statements and schedule of Citrix Systems, Inc., and the effectiveness of internal control over financial reporting of Citrix Systems, Inc., included in this Annual Report (Form 10-K) for the year ended December 31, 2007.

• Registration Statement No. 333-61520 on Form S-8, dated May 23, 2001

• Registration Statement No. 333-121420 on Form S-8, dated December 17, 2004

• Registration Statement No. 333-125297 on Form S-8, dated May 27, 2005

• Registration Statement No. 333-127991 on Form S-8, dated August 31, 2005

• Registration Statement No. 333-132820 on Form S-8, dated March 29, 2006

• Registration Statement No. 333-135519 on Form S-8, dated June 30, 2006

• Registration Statement No. 333-135521 on Form S-8, dated June 30, 2006

• Registration Statement No. 333-136731 on Form S-8, dated August 18, 2006

• Registration Statement No. 333-147419 on Form S-8, dated November 15, 2007

• Registration Statement No. 333-147421 on Form S-8, dated November 15, 2007

/s/ Ernst & Young LLP

Certified Public Accountants

Fort Lauderdale, Florida

February 25, 2008

EX-31.1

EXHIBIT 31.1

CERTIFICATIONS

I, Mark B. Templeton, certify that:

1. I have reviewed this annual report on Form 10-K of Citrix Systems, 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 the registrant’s board of directors (or persons performing the equivalent functions):

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.

By:	/s/ MARK B. TEMPLETON
	Mark B. Templeton
	President and Chief Executive Officer (Principal Executive Officer)

Date: February 27, 2008

EX-31.2

EXHIBIT 31.2

CERTIFICATIONS

I, David J. Henshall, certify that:

1. I have reviewed this annual report on Form 10-K of Citrix Systems, 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 the registrant’s board of directors (or persons performing the equivalent functions):

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.

By:	/s/ DAVID J. HENSHALL
	David J. Henshall
	Chief Financial Officer (Principal Financial Officer)

Date: February 27, 2008

EX-32.1

EXHIBIT 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of Citrix Systems, Inc. (the “Company”) on Form 10-K for the period ending December 31, 2007 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), we, Mark B. Templeton, Chief Executive Officer of the Company, and David J. Henshall, 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, to our knowledge, 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.

/s/ MARK B. TEMPLETON

Mark B. Templeton

Chief Executive Officer

/s/ DAVID J. HENSHALL

David J. Henshall

Chief Financial Officer

February 27, 2008