SonicWALL, Inc. Retention and Severance Agreement For Executive Officers

1.1   Purpose .  The purpose of this Agreement is to provide specified compensation and benefits to the undersigned executive officer, ____________, (the “ Executive ”) of the Company in the event of a Termination Upon Change of Control or a Termination in Absence of Change of Control as an incentive to the Executive to remain in the employment of the Company and to be focused and motivated to work to maximize the value of the Company for the benefit of its stockholders.

1.2   At-Will Employment .  This Agreement does not affect the “at-will” nature of the Executive’s employment with the Company and, accordingly, the Company or the Executive may terminate the Executive’s employment at any time without notice and for any reason or no reason.  Subject to the terms of any applicable written employment agreement between Company and the Executive, this Agreement does not obligate the Company to continue to employ the Executive for any specific period of time, or in any specific role or geographic location.

1.3   Release of Claims and Timing of Payments .  Executive’s receipt of payments and benefits under this Agreement is conditioned upon Executive signing and not revoking an Agreement and Release of Claims in substantially the form attached hereto as Exhibit A (the “Release”) and subject to the Release becoming effective within sixty (60) days following the termination of employment (the “Release Period”); provided, however , that the Executive shall not be required to release any rights the Executive may have to be indemnified by the Company.  No severance will be paid or provided until the Release becomes effective.  No severance will be paid or provided unless the Release becomes effective during the Release Period.  In the event the termination occurs on or after November 1 of any year, any severance that would be considered Deferred Compensation Separation Benefits (as defined in Section 5.1) will be paid on the first payroll date to occur during the following calendar year, or such later time as required by the payment schedule applicable to each payment or benefit) or Section 5.1.  

1.4   Defined Terms .  Capitalized terms used in this Agreement and not defined in the text of this Agreement shall have the meanings set forth in Section 6, unless the context clearly requires a different meaning.

2.1   Prior Obligations .  (Subsections 2.1.1 through 2.1.4 hereinafter referred to as the “ Prior Obligations ”)

2.1.1   Accrued Salary and Vacation .  All salary and accrued vacation earned through the Termination Date, less applicable federal and state withholding.

2.1.2   Accrued Bonus Payment .  Lump sum payment of Executive’s target bonus for the Company’s prior fiscal year to the extent that any such bonus was earned and is unpaid on the Termination Date.

2.1.3   Expense Reimbursement .  Within ten (10) days of submission of proper expense reports by the Executive, the Company shall reimburse the Executive for all expenses incurred by the Executive, consistent with past practices, in connection with the business of the Company prior to the Executive’s termination of employment.

2.1.4   Employee Benefits .  Benefits, if any, under any 401(k) plan, nonqualified deferred compensation plan, employee stock purchase plan and other Company benefit plans under which the Executive may be entitled to benefits, payable pursuant to the terms of such plans.

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2.2   Additional Cash Severance Benefits .  Lump sum payment in an amount equal to twelve (12) months of Base Salary plus twelve (12) months of Target Bonus for the year of termination, less applicable federal and state withholding.

2.3   Acceleration of Equity Awards .

2.3.1   Acceleration Following Termination Upon Change of Control .  The vesting and exercisability of all outstanding, unvested Equity Awards shall be accelerated, such that (i) fifty (50%) percent of Executive’s outstanding Equity Awards vest and accelerate if Executive has been continuously employed by the Company for less than one year and (ii) one hundred (100%) percent of Executive’s outstanding Equity Awards accelerate if Executive has been continuously employed by the Company for one year or longer.  Executive shall be entitled to exercise vested Options for the period ending six (6) months following the Termination Date, but in no event later than the expiration date of the Options.

2.3.2   Acceleration Following Non-assumption Upon Change of Control .  If there is a Change of Control transaction in which outstanding Equity are not fully assumed by, or replaced with fully equivalent substitute options or restricted stock of, the Successor, then (1) the vesting and exercisability of all Equity Awards shall be accelerated as to 100% of the shares subject thereto and (2) the Company shall provide reasonable prior written notice to the Executive of (a) the date any unexercised Options will terminate and (b) the period during which the Executive may exercise the Options.  The Executive shall be entitled to exercise the Options within the period ending six (6) months following the Termination Date, but in no event later than the expiration date of the Options.

2.4   Extended Insurance Benefits .  If the Executive elects coverage under the Consolidated Budget Reconciliation Act of 1985 (“ COBRA ”), the Company shall reimburse the Executive for COBRA premiums paid by Executive to continue Company-paid health, dental and vision coverage at the same level of coverage as was provided to the Executive and any of Executive’s dependents immediately prior to the Termination Date for a period of twelve (12) months following the Termination Date.  The date of the “qualifying event” for the Executive and any dependents shall be the Termination Date.

3.1   Prior Obligations .  Payment of the Prior Obligations described in subsection 2.1 above.

3.2   Additional Cash Severance Benefits .  Six (6) months Base Salary and Target Bonus for the year of termination, payable in accordance with the Company’s normal payroll practice, less applicable federal and state withholding.

3.3   Equity Awards Following Termination in Absence of Change of Control .  The vesting of all outstanding, unvested Equity Awards shall cease on the Termination Date.  The Executive shall be entitled to exercise any Options within the period ending three (3) months following the Termination Date, but in no event later than the expiration date of the Options.

3.4   Extended Insurance Benefits .

3.4.1   Benefit Continuation .  If the Executive elects coverage under the Consolidated Budget Reconciliation Act of 1985 (“ COBRA ”), the Company shall reimburse the Executive for COBRA premiums paid by Executive to continue Company-paid health, dental and vision coverage at the same level of coverage as was provided to the Executive and any of Executive’s dependents immediately prior to the Termination Date for a period of six (6) months following the Termination Date.  The date of the “qualifying event” for the Executive and any dependents shall be the Termination Date.

3.4.2   Coverage Under Another Plan .  Notwithstanding the preceding provisions of this subsection 3.4, in the event the Executive becomes covered as a primary insured (that is, not as a beneficiary under a spouse’s or partner’s plan) under another employer’s group health plan during the period provided for herein, the Executive promptly shall inform the Company and the Company shall cease provision of continued group health insurance for the Executive and any dependents.

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4.1   Reduction of Benefits .  In the event that the severance and other benefits provided for in this Agreement or otherwise payable to Executive (a) constitute “parachute payments” within the meaning of Section 280G of the Internal Revenue Code of 1986, as amended (the “ Code ”) and (b) would be subject to the excise tax imposed by Section 4999 of the Code, then such severance and other benefits shall either (i) delivered in full, or (ii) delivered as to such lesser extent which would result in no portion of such severance and other benefits being subject to excise tax under Section 4999 of the Code, whichever of the foregoing amounts, taking into account the applicable federal, state and local income and employment taxes and the excise tax imposed by Section 4999, results in the receipt by Executive, on an after-tax basis, of the greatest amount of benefits, notwithstanding that all or some portion of such benefits may be taxable under Section 4999 of the Code.  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.

4.2   Determination by Independent Public Accountants .  Unless the Company and the Executive otherwise agree in writing, any determination required under this Section 4 shall 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.  For purposes of making the calculations required by this Section 4, the Accountants may rely on reasonable, good faith interpretations concerning the application of Sections 280G and 4999 of the Code.  The Company and the Executive shall furnish to the Accountants such information and documents as the Accountants may reasonably request in order to make the required determinations.  The Company shall bear all fees and expenses the Accountants may reasonably charge in connection with the services contemplated by this Section 4.

5.1   Notwithstanding anything to the contrary in this Agreement, if Executive is a “specified employee” within the meaning of Section 409A at the time of Executive’s termination, then, if required, the severance and benefits payable to Executive pursuant to this Agreement (other than due to death), if any, and any other severance payments or separation benefits which may be considered deferred compensation under Section 409A (together, the “Deferred Compensation Separation Benefits”), which otherwise are due to Executive on or within the six (6) month period following Executive’s termination shall accrue during such six (6) month period and shall become payable in a lump sum payment on the date six (6) months and one (1) day following the date of Executive’s termination of employment or the date of Executive’s death, if earlier.  All subsequent Deferred Compensation Separation Benefits, if any, shall be payable in accordance with the payment schedule applicable to each payment or benefit.

5.2   Any amount paid under this Agreement that qualifies as a payment made as a result of an involuntary separation from service pursuant to Section 1.409A-1(b)(9)(iii) of the Treasury Regulations that does not exceed the Section 409A Limit (as defined below) shall not constitute Deferred Compensation Separation Benefits for purposes of subsection 5.1 above.

5.3   The foregoing provisions are intended to comply with the requirements of Section 409A so that none of the severance payments and benefits to be provided hereunder shall be subject to the additional tax imposed under Section 409A, and any ambiguities herein shall be interpreted to so comply.  Executive and the Company agree to work together in good faith to consider amendments to this Agreement and to take such reasonable actions which are necessary, appropriate or desirable to avoid imposition of any additional tax or income recognition prior to actual payment to Executive under Section 409A.

6.1   Capitalized Terms Defined .  Capitalized terms used in this Agreement shall have the meanings set forth in this Section 6, unless the context clearly requires a different meaning.

6.2   “ Base Salary ” means the Executive’s base salary then in effect immediately preceding any Change of Control, or in the absence of Change of Control, immediately preceding the Termination Date.  For avoidance of doubt, Base Salary shall give effect to any salary reduction, whether or not voluntary.

6.3   “ Cause ” means:

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(a)   willful and material failure to follow the lawful written directions of the Board of Directors; provided that no termination for Cause shall occur unless the Executive: (i) has been provided with notice of the Company’s intention to terminate the Executive for Cause, and (ii) has had at least 30 days to cure or correct Executive’s behavior; or

(b)   engagement in gross misconduct which is materially detrimental to the Company; provided that no termination for Cause shall occur unless the Executive: (i) has been provided with notice of the Company’s intention to terminate the Executive for Cause, and (ii) has had at least 30 days to cure or correct his or her behavior; or

(c)   willful and repeated failure or refusal to comply in any material respect with the terms of the Company’s Assignment and Confidentiality Agreement, the Company’s insider trading policy, or any other reasonable policies of the Company where non-compliance would be materially detrimental to the Company; provided that no termination for Cause shall occur unless the Executive: (i) has been provided with notice of the Company’s intention to terminate the Executive for Cause, and (ii) has had at least 30 days to cure or correct his or her behavior;

(d)   an act or acts of dishonesty undertaken by Executive and intended to result in Executive’s substantial gain or personal enrichment at the expense of the Company; or

(e)   commission of any felony, fraud or other unlawful or criminal act involving moral turpitude which the Board of Directors reasonably believes would reflect adversely on the Company.

6.4   “ Change of Control ” means:

(a)   any “person” (as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the “ Exchange Act ”)), other than a trustee or other fiduciary holding securities of the Company under an employee benefit plan of the Company, becomes the “beneficial owner”