1994 Stock Option Plan - SonicWALL Inc.


                                SONICWALL, INC.
                            1994 STOCK OPTION PLAN
                                        
             Adopted December 20, 1994; as amended August 24, 1999

     1.   Purpose.
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          (a)  The purpose of the SonicWALL, Inc. 1994 Stock Option Plan (the
'Plan') is to provide a means whereby selected eligible employees and directors
of and consultants to SonicWAll, Inc., a California corporation (the 'Company')
and its Affiliates, as defined below, may be given an opportunity to purchase
common stock of the Company (the 'Common Stock'). The terms 'Affiliate' or
'Affiliates' as used in the Plan shall mean any parent corporation or subsidiary
corporation of the Company, as those terms are defined in Sections 424(e) and
(f) of the Internal Revenue Code of 1986, as amended (the 'Code').

          (b)  The Company, by means of the Plan, seeks to retain the services
of its current key employees, directors and consultants, and to secure and
retain the services of new key employees, corporate directors and consultants
necessary for the continued improvement of operations.

     2.   Stock Options. Stock options granted pursuant to the Plan may, at the
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discretion of the Board of Directors of the Company, be granted either as 'an
Incentive Stock Option ('ISO') or as a Nonstatutory Stock Option ('NSO'). An ISO
shall mean an option described in Section 422 of the Code. An NSO shall mean an
option not described in Sections 422, 422A(b), 423(b) or 424(b) of the Code. An
option designated as an NSO will not be treated as an ISO.

     3.   Administration.
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     (a)  Procedure. The Plan shall be administered by the Board of Directors
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(the 'Board'). The Board may appoint a committee (the 'Committee') consisting of
not less than two (2) members of the Board to administer the Plan, subject to
such terms and conditions as the Board may prescribe. Once appointed, the
Committee shall continue to serve until otherwise directed by the Board. From
time to time, the Board may increase the size of the Committee and appoint
additional members thereof, remove members (with or without cause) and appoint
new members in substitution therefor, fill vacancies, however caused, and remove
all members of the Committee and, thereafter, directly administer the Plan.

     Members of the Board or Committee who are either eligible for Options or
have been granted Options may vote on any matters affecting the administration
of the Plan or the grant of Options pursuant to the Plan, except that no such
member shall act upon the granting of an Option to himself, but any such member
may be counted in determining the existence of a quorum at any meeting of the
Board or the Committee during which action is taken with respect to the granting
of an Option to him or her.

 
     The Committee shall meet at such times and places and upon such notice as
the chairperson determines. A majority of the Committee shall constitute a
quorum. Any acts by the Committee may be taken at any meeting at which a quorum
is present and shall be by majority vote of those members entitled to vote.
Additionally, any acts reduced to writing or approved in writing by all of the
members of the Committee shall be valid acts of the Committee.

     (b)  Procedure After Registration Date. Notwithstanding subsection (a)
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above, after the date of registration of the Company's Common Stock on a
national securities exchange or the date of the first registration statement
filed by the Company pursuant to Section 12 of the Securities Exchange Act of
1934, as amended with respect to any class of the Company's equity securities,
the Plan shall be administered either by: (i) the full Board; or (ii) a
Committee of two (2) or more directors, each of whom is a Non-Employee Director.
After such date, the Board shall take all action necessary to administer the
Plan in accordance with the then effective provisions of Rule 16b-3 promulgated
under the Exchange Act, provided that any amendment to the Plan required for
compliance with such provisions shall be made consistent with the provisions of
Section 11 of the Plan, and said regulations.

     4.   Shares Subject to Plan and to Option.
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          (a)  Subject to the provisions of Section 10, below (relating to
adjustments upon changes in stock), the stock which may be sold pursuant to
options granted under the Plan shall not exceed in the aggregate 1,500,000
shares of the Company's authorized Common Stock and may be unissued shares,
reacquired shares, or shares bought on the market for the purpose of issuance
under the Plan. If any options granted under the Plan shall for any reason
terminate or expire without having been exercised in full, the stock not
purchased under such options shall be available again for the purpose of the
Plan.

          (b)  The option shall by its terms prohibit the exercise of all
options in excess of the amount as provided in Section 422A(b)(7) of the Code.
Should it be determined that any ISO granted under the Plan inadvertently
exceeds such maximum, such ISO grant shall be deemed to be a grant of an NSO to
the extent, but only to the extent, of such excess.

     5.   Eligibility. ISOs may be granted only to employees of the Company. No
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ISO may be granted to a person who, at the time of the grant, owns stock
possessing more than ten percent (10%) of the total combined voting power of all
classes of stock of the Company unless at the time such option is granted the
option price is at least one hundred ten percent (110%) of the fair market value
of the stock subject to the option and such option by its terms is not
exercisable after five (5) years from the date such ISO is granted. Directors of
the Company who are not also employees of the Company shall not be eligible for
ISOs, but are eligible for NSOs. Independent contractors shall be eligible for
NSOs. Any employee may hold more than one (1) option at any time.

     6.   Terms of Options. Options granted pursuant to the Plan need not be
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identical, but each option shall be granted within ten (10) years from the date
the Plan is adopted by the

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Board or approved by the shareholders, whichever is earlier, shall specify the
number of shares to which it pertains and shall be subject to the following
terms and conditions:

          (a)  The purchase price of each option shall be determined by the
administrator of the Plan at the time the option is granted, but shall in no
event be less than eighty-five percent (85%) in the case of an NSO, or one
hundred percent (100%) in the case of an ISO, of the fair market value of the
stock subject to the option on the date the option is granted. Fair market value
of the Common Stock shall be determined by the Committee, using such criteria as
it deems relevant; provided, however, that if there is a public market for the
Common Stock, the fair market value per Share shall be the average of the last
reported bid and asked prices of the Common Stock on the date of grant, as
reported in The Wall Street Journal (or, if not so reported, as otherwise 
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reported by the National Association of Securities Dealers Automated Quotation
(NASDAQ) System) or, in the event the Common Stock is listed on a national
securities exchange (within the meaning of Section 6 of the Exchange Act) or on
the NASDAQ National Market System (or any successor national market system), the
fair market value per Share shall be the closing price on such exchange on the
date of grant of the Option, as reported in The Wall Street Journal.
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          (b)  Except as otherwise set forth in Section 5, above, the term of
any ISO shall not be greater than ten (10) years from the date it was granted.

          (c)  An option by its terms, shall not be transferable otherwise than
by will or the laws of descent and distribution and may be exercisable, during
the lifetime of the option holder, only by the individual to whom the option is
granted.

          (d)  Each option shall become exercisable on an annual basis as to not
less than twenty percent (20%) of the total number of shares subject thereto.

          (e)  Upon the termination of a participant's employment, his rights to
exercise an option then held by him shall be only as follows:

               (i)  If a participant's employment is terminated by death or
disability, he or his estate, as the case may be, shall have the right for a
period of not less than six (6) months following the date of death or
disability, or for such longer period as the Board may fix, to exercise the
option to the extent the participant was entitled to exercise such option on 
the-date of his death or disability, or to the extent otherwise specified by the
Board, which may so specify, at a time that is subsequent to the date of his
death or disability, provided the actual date of exercise is in no event after
the expiration of the term of the option. A participant's estate shall mean his
legal representative or any person who acquires the right to exercise an option
by reason of the participant's death or disability.

               (ii) If a participant's employment is terminated for any reason
other than 'Death or Disability,' he may, within not less than three (3) months
following such termination (but in no event later than that date upon which the
option expires by reason of the lapse of time), or within such longer period as
the Board may fix, exercise the option to the

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extent such option was exercisable by the participant on the date of termination
of his employment, or to the extent otherwise specified by the Board, which may
so specify at a time that is subsequent to the date of the termination of his
employment, provided the date of exercise is in no event after the expiration of
the term of the option.

          (f)  Options may also contain such other provisions, which shall not
be inconsistent with any of the foregoing terms, as the Board shall deem
appropriate. No option, however, nor anything contained in the Plan, shall
confer upon any employee any, right to continue in the employ of the Company (or
affiliate) nor limit in any way the right of the Company (or affiliate) to
terminate his employment at any time.

          (g)  Subject to any required action by the Company's shareholders, if
the Company shall be the surviving corporation in any merger or consolidation,
each outstanding option shall pertain and apply to the securities to which a
holder of the number of shares subject to the option would have been entitled. A
dissolution or liquidation of the Company or a merger or consolidation in which
the Company is not the surviving corporation shall cause each outstanding option
to terminate, unless the surviving corporation in the case of a merger or
consolidation assumes outstanding options or replaces them with substitute
options having substantially similar terms and conditions.

     7.   Payments and Loans Upon Exercise.
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          (a)  The purchase price of stock sold pursuant to an option shall be
paid either in full in cash or by certified check at the time the option is
exercised or pursuant to any deferred payment arrangement that the Board in its
discretion may approve; provided, however, that any interest to be paid by an
optionee in connection with any such deferred payment arrangement shall be
charged at the applicable federal rate as defined in Section 1274(d) of the
Code.

          (b)  The Company may make loans or guarantee loans made by an
appropriate financial institution to individual optionees, including officers,
on such terms as may be approved by the Board for the purpose of financing the
exercise of options granted under the Plan and the payment of any taxes that may
be due by reason of such exercise.

          (c)  In addition, if and to the extent authorized by the Board,
optionees may make all or any portion of any payment due to the Company upon
exercise of an option by delivery of any property (including securities of the
Company) other than cash, so long as such property constitutes valid
consideration for the stock under applicable law.

          (d)  Where the Company has or will have a legal obligation to withhold
taxes relating to the exercise of any stock option, such option may not be
exercised, in whole or in part, unless such tax obligation is first satisfied in
a manner satisfactory to the Company.

     8.   Use of Proceeds from Stock. Proceeds from the sale of stock pursuant
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to options granted under the Plan shall be used for general corporate purposes.

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     9.   Stock Transfer Restrictions; Repurchase Provisions. Stock issued
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pursuant to the exercise of options granted under the Plan shall be subject to
those stock transfer restrictions and repurchase provisions which shall be set
forth in a Stock Restriction Agreement, substantially in the form attached
hereto as Exhibit A. Each individual shall be required to execute such Agreement
prior to receiving his shares.

     10.  Adjustments of and Changes in the Stock. Subject to the rights of the
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Company set forth in Section 6 above, in the event that the shares of Common
Stock of the Company, as presently constituted, shall be changed into or
exchanged for a different number or kind of shares of stock or other securities
of the Company or of another corporation (whether by reason of merger,
consolidation, recapitalization, reclassification, split-up, combination of
shares, or otherwise), or if the number of shares of Common Stock of the Company
shall be increased through the payment of a stock dividend, then there shall be
substituted for or added to each share of Common Stock of the Company
theretofore appropriated or thereafter subject or which may become subject to an
option under the Plan, the number and kind of shares of stock or other
securities into which each outstanding share of Common Stock of the Company
shall be so changed, or for which each such share shall be exchanged or to which
each such share shall be entitled, as the case may be.

     Outstanding options shall also be amended as to price and other terms if
necessary to reflect the foregoing events. In the event there shall be any other
change in the number or kind of the outstanding shares of Common Stock of the
Company, or of any stock or other securities into which such Common Stock of the
Company, or of any stock or other securities into which such Common Stock shall
have been changed, or for which it shall have been exchanged, then if the Board
of Directors shall, in its sole discretion, determine that such change equitably
requires an adjustment in any option theretofore granted or which may be granted
under the Plan, such adjustment shall be made in accordance with such
determination. No right to purchase fractional shares shall result from any
adjustment in options pursuant to this Section 10. In case of any such
adjustment, the shares subject to the option shall be rounded down to the
nearest whole share. Notice of any adjustment shall be given by the Company to
each holder of an option which shall have been so adjusted and such adjustment
(whether or not such notice is given) shall be effective and binding for all
purposes of the Plan.

     11.  Amendment of the Plan. The Board may at any time amend, alter,
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suspend or discontinue the Plan, but no amendment, alteration, suspension or
discontinuation shall be made that would impair the rights of any participant
under any grant theretofore made, without his or her consent. In addition, to
the extent necessary and desirable to comply with applicable laws, the Company
shall obtain shareholder approval of any Plan amendment in such a manner and to
such a degree required. No amendment or termination of the Plan shall adversely
affect options already granted, unless mutually agreed otherwise between the
participant and the Board, which agreement must be in writing and signed by the
participant and the Company.

     12.  Indemnification of Board (or Committee, if applicable). In addition
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to such other rights of indemnification as they may have as directors or as
members of the Committee, the

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members of the Board (or the Committee, if applicable) shall be indemnified by
the Company against the reasonable expenses, including attorneys, fees, actually
and necessarily incurred in connection with the defense of any action, suit or
proceeding, or in connection with any appeal therein, to which they or any of
them may be a party by reason of any action taken or failure to act under or in
connection with the Plan or any Option granted thereunder, and against all
amounts paid by them in settlement thereof (provided such settlement is approved
by independent legal counsel selected by the Company) or paid by them in
satisfaction of a judgment in any such action, suit or proceeding except in
relation to matters as of which it shall be adjudged in such action, suit or
proceeding that such Board (or Committee, if applicable) member is liable for
negligence or misconduct in the performance of his duties; provided that within
sixty days after institution of any such action, suit or proceeding a Board (or
Committee, if applicable) member shall in writing offer the Company the
opportunity, at its own expense, to handle and defend the same.

     13.  Shareholder Approval. The Plan shall be subject to approval by the
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affirmative vote of the holders of a majority of the outstanding capital stock
of the Company entitled to vote within twelve (12) months before or after the
Plan is adopted. Any Option granted before shareholder approval is obtained must
be rescinded if shareholder approval is not obtained within twelve (12) months
before or after the Plan is adopted. Shares issued upon the exercise of such
Options shall not be counted in determining whether such approval is obtained.

     14.  Termination or Suspension of the Plan. The Board at any time may
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suspend or terminate the Plan. The Plan, unless sooner terminated, shall
terminate at the end of ten (10) years from the date the Plan is adopted by the
Board or approved by the shareholders of the Company, whichever is earlier. An
option may not be granted under the Plan while the Plan is suspended or after it
is terminated. Rights and obligations under any option granted while the Plan is
in effect shall not be altered or impaired by suspension or termination of the
Plan, except with the consent of the person to whom the option was granted,
which may be obtained in any manner that the Board deems appropriate.

     15.  Listing, Qualification or Approval of Stock. All options granted
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under the Plan are subject to the requirement that if at any time the Board
shall determine in its discretion that the listing or qualification of the
shares of stock subject thereto on any securities exchange or under any
applicable law, or the consent or approval by any governmental regulatory body
or the shareholders of the Company, is necessary or desirable as a condition of
or in connection with the issuance of shares under the option, the option may
not be exercised in whole or in part, unless such listing, qualification,
consent or approval shall have been effected or obtained free of any condition
not acceptable to the Board.

     16.  Binding Effect of Conditions. The conditions and stipulations
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hereinabove contained or in any option granted pursuant to the Plan shall be and
constitute a covenant running with all of the shares of the Company owned by the
participant at any time, directly or indirectly whether the same have been
issued or not, and those shares of the Company owned by the participant shall
not be sold, assigned or transferred by any person save and except in

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accordance with the terms and conditions herein provided, and the participant
shall agree to use his best efforts to cause the officers of the Company to
refuse to record on the books of the Company any assignment or transfer made
or attempted to be made, except as provided in the Plan and to cause said
officers to refuse to cancel old certificates or to issue or deliver new
certificates therefor where the purchaser or assignee has acquired
certificates for the stock - represented thereby, except strictly in
accordance with the provisions of this Plan.

     17.  Miscellaneous. The use of any masculine pronoun or similar term is
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intended to be without legal significance as to gender.

     18.  Financial Reports.  The Company shall provide financial and other
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information regarding the Company, on an annual or more frequent basis, to each
individual holding an outstanding option under the Plan, as required pursuant to
Section 260.140.46.2 of Title 10, California Code of Regulations.