Exhibit 10.44
SONICWALL, INC.
MATTHEW MEDEIROS EMPLOYMENT
AGREEMENT
As Amended and Restated on the Effective
Date
This Agreement
is entered into as of the last date signed below (the
“Effective Date”) by and between SonicWALL, Inc. (the
“Company”) and Matthew Medeiros
(“Executive”) and amends and restates in its entirety
that certain Employment Agreement dated as of March 14, 2003 by and
between the Company and Executive, as amended July 29, 2004 (the
“Prior Employment Agreement”).
RECITALS
A. This Agreement is intended to strongly
encourage Executive to remain with the Company.
B. The Company’s Board of Directors
(the “Board”) believes that it is in the best interests
of the Company and its stockholders to continue to provide
Executive with an incentive to continue his employment and to
motivate Executive to maximize the value of the Company for the
benefit of its stockholders.
C. The Company and Executive wish to
restate the terms of Executive’s employment and replace in
its entirety the Prior Employment Agreement, in order to comply
with Section 409A of the Internal Revenue Code of 1986, as amended
(the “Code”), and any final regulations and official
guidance promulgated thereunder (“Section 409A”), as
set forth below.
AGREEMENT
1. Duties and
Scope of Employment .
(a) Positions;
Employment Commencement Date . Executive commenced
employment under this Agreement upon March 14, 2003 (the
“Employment Commencement Date”). Executive
shall continue to serve hereunder as President and Chief Executive
Officer, reporting to the Board. On the Employment
Commencement Date, Executive was appointed as a member of the
Board. The period of Executive’s employment
hereunder is referred to herein as the “Employment
Term.”
(b) Obligations
. During the Employment Term, Executive shall continue
to devote his full business efforts and time to the
Company. Subject to the prior formal approval of the
Board or its Compensation Committee, which shall not unreasonably
be withheld, Executive may join the Boards of Directors of two (2)
non-competitive companies. Upon joining such
non-competitive boards, Executive shall continue to devote the time
and energy necessary to carry out his duties as described
herein.
(c) Duties
. Executive shall have the customary duties of a
President and Chief Executive Officer and such duties as are
specified in the By-Laws of the Company.
2. At-Will
Employment . Executive and the Company understand
and acknowledge that Executive’s employment with the Company
constitutes “at-will” employment. Subject to
the Company’s obligation to provide severance benefits as
specified herein, Executive and the Company acknowledge that this
employment relationship may be terminated at any time, with or
without good cause or notice or for any or no cause, at the option
of either the Company or Executive.
3.
Compensation .
(a) Base Salary
. While employed by the Company, the Company shall pay
Executive as compensation for his services a base salary at the
annualized rate of Four Hundred and Fifty Thousand Dollars
($450,000) (the “Base Salary”). Such salary
shall be paid periodically in accordance with normal Company
payroll practices and subject to the usual, required
withholding. Executive’s Base Salary shall be
reviewed at least annually by the Compensation Committee of the
Board for possible adjustments in light of Executive’s
performance and competitive data. Such adjustment shall
not reduce Executive’s then-current Base Salary unless part
of a Company-wide pro rata reduction and in which the Base Salary
of all other executive officers of the Company are reduced pro rata
unless the Executive provides his prior consent.
(b) Bonuses
. During the Employment Term, the Company’s
annual incentive bonus plan shall provide Executive with an
on-target bonus opportunity equal to 100% of his Base Salary, with
a maximum payout of 200% of Base Salary. During the
Employment Term, Executive and the other officers, senior
management and key employees, shall be eligible to participate in
bonus plans based on milestones to be established by the Board or
its Compensation Committee in consultation with Executive on or
before the end of the first quarter of each year. The
bonus plans specified in this paragraph shall be referred to herein
as the “Annual Bonus Plan.”
(c) Stock Option
. Executive has received a Stock Option grant of Two
Million Four Hundred Thousand (2,400,000) shares of Company shares
(the “Stock Option”), pursuant to the Company’s
1998 Stock Option Plan (the “1998 Option Plan”) and
form of Agreement thereunder, modified as specified herein (the
“Option Agreement”), with a strike price equal to 100%
of the Fair Market Value (as such term is defined in the 1998
Option Plan) on the grant date. The Stock Option is now
fully vested. To the extent permitted by law, the Stock
Option shall qualify as an Incentive Stock Option under Section 422
of the Code. The Stock Option has a term of ten (10)
years (or shorter upon termination of continuous service to the
Company whether as an employee, director or consultant, subject to
the terms in this Agreement). Except as specified
otherwise herein, the Stock Option is in all respects subject to
the terms, definitions and provisions of the Company’s 1998
Stock Option Plan and the standard form of stock option agreement
thereunder, which documents are incorporated by
reference. If there is any conflict between this
Agreement and the 1998 Stock Option Plan or Stock Option, the terms
of this Agreement shall govern. Commencing in January of
2005 (or earlier at the sole discretion of the Compensation
Committee of the Board), Executive has been eligible to be
considered for future stock option and other equity compensation
grants.
(d) Employee Benefits
. During the Employment Term, Executive shall be
eligible to participate in the employee benefit plans maintained by
the Company that are applicable to other senior management to the
full extent provided for under those plans. Subject to
Executive’s insurability at standard rates, while he is
employed hereunder the Company shall reimburse Executive within
thirty (30) days following the premium due date on the premiums for
a $1,000,000 face value policy of term life insurance (the
“Term Life Insurance”) in addition to any group
coverage otherwise provided by the Company.
(e) Vacation . Executive
shall receive up to three weeks’ paid-time off
(“PTO”) per full year of employment,
subject to the Company’s PTO accrual policy.
(f) Golden Parachute Excise Tax –
Best Results . Payments and benefits under this
Agreement shall be made without regard to whether the deductibility
of such payments or benefits (or any other payments or benefits to
or for the Executive’s benefit) would be limited or precluded
by Section 280G of the Code and without regard to whether such
payments or benefits (or any other payments or benefits) would
subject the Executive to the federal excise tax levied on certain
“excess parachute payments” under Section 4999 of
the Code; provided, that if the total of all payments and benefits
to or for the Executive’s benefit, after deduction of all
state and federal taxes (including the tax set forth in
Section 4999 of the Code, if applicable) with respect to such
payments and benefits (the “total after-tax payments”),
would be increased by the limitation or elimination of any payment
or benefit under this Agreement, amounts payable and benefits
receivable under this Agreement shall be reduced to the extent, and
only to the extent, necessary to maximize the total after-tax
payments. Unless the Company and Executive otherwise
agree in writing, any determination required under this Section
3(f) will be made in writing by a national “Big Four”
accounting firm selected by the Company or such other person or
entity to which the parties mutually agree (the
“Accountants”), whose determination will be conclusive
and binding upon Employee and the Company for all
purposes. Any reduction in payments and/or benefits
required by this Section 3(f) shall occur in the following order:
(1) reduction of cash payments; and (2) reduction of other benefits
paid to Employee. In the event that acceleration of
vesting of equity awards is to be reduced, such acceleration of
vesting shall be cancelled in the reverse order of the date of
grant for Employee’s equity awards.
4. Eligibility for Severance
Benefits . Executive will be entitled to the
payments and benefits described in Section 5 only if: (a) either
(i) the Company or any successor terminates Executive’s
employment for a reason other than Cause, death or Disability, or
(ii) Executive voluntarily terminates employment with the Company
or any successor for Good Reason; and (b) Executive complies with
all of the terms of this Agreement.
(a) Prior to Ninety Days Before a
Change of Control or More Than One (1) Year After a Change of
Control . If, prior to ninety days before a Change
of Control or more than one (1) year after a Change of Control,
Executive’s employment with the Company terminates in
accordance with Section 4 above, then subject to Executive
executing and not revoking the form of release of claims in favor
of the Company substantially in the form attached hereto (the
“Release”) and not breaching the
terms of Section 12 hereof, Executive shall
receive (subject to Section 7 of this Agreement with regard to the
timing of payment, as applicable) (i) a lump-sum payment equal to
twelve (12) months salary, and (ii) an additional lump-sum payment
determined by averaging the target percentages achieved under the
Annual Bonus Plan with respect to any Company fiscal year quarters
already concluded in the year of termination (the “Severance
Target Bonus Percentage”) and multiplying the Severance
Target Bonus Percentage by 150% of Base Salary; provided, however,
that if Executive’s termination occurs in the first quarter
of a Company fiscal year, then the Severance Target Bonus
Percentage shall be equal to the target percentage achieved in the
most recently concluded fiscal year.
EXAMPLE 1 : Executive’s Base Salary is
$500,000. Executive is terminated without Cause prior to
90 days before a Change of Control in the third quarter of the
Company’s fiscal year. In the first quarter of
that year, Executive achieved a target percentage under the Annual
Bonus Plan equal to 150% of target. In the second
quarter, Executive achieved a target percentage under the Annual
Bonus Plan equal to 0% of target. Subject to Executive
satisfying the conditions for receiving a severance payment,
Executive will receive a lump-sum payment equal to $500,000 +
(.75)($750,000) = $1,062,500, less applicable
withholding.
EXAMPLE 2 : Executive’s Base Salary is
$500,000. Executive is terminated without Cause prior to
90 days before a Change of Control in the first quarter of the
Company’s fiscal year. In the most recently
concluded Company fiscal year, Executive achieved a target
percentage equal to 100% of target. Subject to Executive
satisfying the conditions for receiving a severance payment,
Executive will receive a lump-sum payment equal to $500,000 +
(1.0)($750,000) = $1,250,000, less applicable
withholding.
(b) Ninety Days Before a Change of
Control Through One (1) Year After Change Of Control
. If within the period commencing ninety days prior to a
Change of Control through one (1) year following a Change of
Control (the “Change of Control Period”),
Executive’s employment with the Company terminates in
accordance with Section 4 above, then subject to the
Executive’s executing and not revoking the Release and not
breaching the terms of Section 12 hereof, Executive shall
immediately receive (subject to Section 7 of this Agreement, as
applicable) (i) a lump sum payment equal to two (2) years’
Base Salary, (ii) accelerated vesting as to all Company stock
options and other Company equity compensation then held by
Executive, and (iii) a pro-rated bonus under the Annual Bonus Plan,
payable at the same time and to the same extent as other senior
Executives’ of the Company payments pursuant to the Annual
Bonus Plan, pro-rated according to the percentage of the applicable
fiscal year Executive is with the Company, calculated as
the number of days from the commencement of the fiscal year to the
termination date over 365.
(c) Accrued Wages, Paid Time Off,
Expenses, Option Vesting and Exercise and Benefits
. If Executive is entitled to severance benefits under
Section 5(a) or 5(b):
(i) The Company shall pay Executive (A) any
unpaid base salary due for the periods prior to the Termination
Date, (B) all accrued and unused paid time off (PTO) through the
Termination Date, and (C) following Executive’s submission of
profit and expense reports, the total unreimbursed amount of
expenses incurred by Executive in Executive’s duties of
employment with the Company that are reimbursable in accordance
with the Company’s then-existing policies. These
payments shall be made promptly upon Executive’s employment
termination with the period of time mandated by law;
(ii) Executive shall have one year from the
date of termination to exercise all vested and unexercised stock
options, including the vesting which has occurred as a result of
any acceleration provided by this Agreement (but in no event later
than the original term of the award);
(iii) The Company shall make a lump sum
payment to Executive equal to the life insurance premium payments
had Executive continued coverage under such life insurance plan of
the Company for the period of time equal to the number of months of
salary paid under Sections 5(a)(i) or 5(b)(i). Such
payment shall be made within thirty (30) days of the Termination
Date, subject to Section 7 of this Agreement; and
(iv) The Company shall reimburse Executive
(and Executive’s eligible dependents) for health, dental and
vision insurance premium payments so that Executive only pays the
same amount as an employed senior Company executive with
