exv10w1






Exhibit 10.1




Sourcefire

9770 Patuxent Woods Drive

Columbia, MD 21046

410-423-1900




August 22, 2008




Via: Electronic Mail




Mr. Thomas M. McDonough




Dear Tom:



This letter relates to the Sourcefire, Inc. Executive Retention Plan (the “Plan”) that we,
Sourcefire, Inc. have adopted.



Through this letter, you are being offered the opportunity to become a participant in the Plan and
thereby to be eligible to receive the voluntary severance benefits described below in the event of
your “qualifying termination.” A copy of the Plan is attached to this letter. You should read it
carefully and become comfortable with its terms and conditions, and those set forth below. In
order to commence participation in the Plan, you must execute this letter and return it to the
Company. By executing this letter, you will be establishing a “Participation Agreement” within the
meaning of the Plan, and you will thereby be acknowledging and agreeing to the following
provisions:





	 	•	 	that you have received and reviewed a copy of the Plan;
	 
	 	•	 	that terms not defined in this letter but beginning with initial capital letters
shall have the meaning assigned to them in the Plan;
	 
	 	•	 	that your participation in the Plan requires that you agree irrevocably and
voluntarily to the terms of the Plan and the terms set forth below; and
	 
	 	•	 	that you have had the opportunity to carefully evaluate this opportunity, and desire
to participate in the Plan according to the terms and conditions set forth herein.




Subject to the foregoing, we invite you to become a “Participant” in the Plan. Your participation
in the Plan will be effective upon your signing and returning this letter agreement to the
Company within thirty (30) days of your receipt of this letter agreement. Capitalized terms used
in this participation agreement but not otherwise defined will have the meaning set forth in the
Plan.




 









 








Mr. Thomas M. McDonough

August 22, 2008

Page 2 of 5



NOW, THEREFORE, you and the Company (hereinafter referred to as “the parties”) hereby AGREE
as follows:




     1. If while the Plan and this Participation Agreement are in effect, you become entitled to a
Retention Benefit in accordance with 4.2 of the Plan as a result of your Qualifying Termination,
then the following will be applicable.



          (a) Salary Continuation Benefits. Your cash Retention Benefits will be paid in the
form of salary continuation, at the time and the manner provided in Section 4.3(a) of the Plan.
The Benefit Period used to determine the amount and duration of your salary continuation benefits
will be six (6) months. Your salary continuation benefits will be determined based on your Base
Salary, as provided in Section 4.3(a) of the Plan.




          (b) COBRA Subsidy. You and your COBRA qualifying beneficiaries will be entitled to
COBRA continuation coverage at the active employee rates in effect on your Termination Date for the
duration of your Benefit Period. Thereafter, you will be entitled to continuation coverage at your
own expense at the COBRA premium rates then in effect and only to the extent you and/or your COBRA
qualifying beneficiaries remain eligible for COBRA coverage at that time.




          (c) Acceleration of Equity Awards. Your outstanding and unvested stock options will
accelerate and become vested, and the restrictions applicable to your outstanding restricted stock
award(s) will lapse and become vested, as follows: (i) the vesting of your outstanding and
unvested stock options will accelerate and become vested by twenty-five percent (25%) of the total
shares originally subject to such stock options; and (ii) the restrictions applicable to your
outstanding restricted stock award(s) will lapse and become vested by twenty-five percent (25%) of
the total shares originally subject to such restricted stock award(s); provided, however, that in
the event that as of your Date of Termination there are not a sufficient number of unvested options
(with respect to such stock options) or shares subject to restrictions (with respect to such
restricted stock award(s)) to allow for the accelerations and lapses described above, either in
full or in part, then, then such number of unvested option shares shall vest (with respect to such
stock options) or restrictions shall lapse (with respect to such restricted stock award(s)), as
necessary to give effect to the vesting acceleration and restriction lapses described in this
subsection 1(c), up to the number of then unvested shares subject to each such stock option, or the
number of then restricted shares subject to such restricted stock award(s), as the case may be.




          (d) Definition and Interpretation of Good Reason. As provided by Section 6.2 of the
Plan, the definition of “Good
Reason” found in Section 2.10 of the Plan shall be deleted in its entirety and replaced with
the following:





“‘Good Reason’ shall mean (i) a material decrease in the Participant’s
Base Salary, (ii) a material reduction or material adverse change in the
Participant’s authority, duties, title or, job responsibilities, or
reporting structure, (iii) a geographic relocation of the Participant
without his or her consent more than thirty (30) miles from the current
location of his or her



 









 





Mr. Thomas M. McDonough

August 22, 2008

Page 3 of 5





office as of the date hereof), or (iv) a willful and
continued material breach by the Company of this Agreement or the
‘Assignment of Inventions, Non-Disclosure, Non-Solicitation and
Non-Competition Agreement’ that has a material adverse effect on the
Participant; provided, however, that any proposed Termination of Employment
by the Participant shall be presumed to be other than for Good Reason,
unless the Participant first provides written notice to the Company within
ninety (90) days following the effective date of such event, and the Company
has been provided a period of at least thirty (30) days after receipt of the
Participant’s notice during which to cure, rescind or otherwise remedy the
actions, events, or circumstances described in such notice. The
Participant’s Termination of Employment shall not be considered to be for
Good Reason unless it occurs no more than one hundred and twenty (120) days
following the initial occurrence of the purported Good Reason event(s) as
described above”.


Notwithstanding any contrary provision in the Plan or this Participation Agreement, the parties
acknowledge and agree that the reassignment of managerial authority over the Company’s Information
Technology and Operations Department from you to the Company’s Chief Financial Officer shall not
constitute Good Reason.




     2. Loss of Eligibility. Even if you are otherwise eligible to receive the Retention
Benefits described in Paragraph 1 above, you will forfeit your entitlement to those benefits to the
extent described below in the following circumstances.




	 	•	 	Failure to Provide an Effective Release. As a condition of receiving
any Retention Benefits pursuant to the Plan and this Participation Agreement, you
must execute and not revoke a Release supplied by the Company. Payments of
Retention Benefits will not commence until your Release has become effective and
irrevocable.
	 
	 	•	 	Alternative Employment. If, subsequent to the commencement of Retention
Benefits, you secure alternative employment, your right to Company-subsidized
COBRA premiums will end but, subject to the terms of the Plan and your Notice of
Eligibility, you will remain eligible to receive salary continuation benefits.
	 
	 	•	 	Violation of Certain Obligations. If, subsequent to the commencement of
Retention Benefits, you violate the continuing non-disclosure, non-competition, or
non-solicitation provisions applicable to you under an agreement with the Company,
your right to continuing salary continuation benefits and Company-subsidized COBRA
premiums will end, and the Company will be entitled to recover any prior payments
made to you and to exercise any other rights and remedies it may have under the
terms of the applicable agreement.
	 
	 	•	 	Non-Qualifying Termination. If your employment with the Company ends in
circumstances that are not a Qualifying Termination (for example, you are




 









 











Mr. Thomas M. McDonough

August 22, 2008

Page 4 of 5





terminated by the Company for Cause or you voluntarily resign without Good Reason),
you will not be entitled to receive any Retention Benefits under the Plan.



     3. Waiver of Other Benefits; Non-Duplication. As a condition of and in consideration
of your becoming eligible to receive the Retention Benefits provided under the terms and conditions
of the Plan and this Participation Agreement, you agree to waive any and all rights, benefits, and
privileges to severance or similar benefits that you might otherwise be entitled to receive under
any other oral or written plan, employment agreement or arrangement (including, without limitation,
your existing Employment Agreement, dated August 9, 2002 with an effective date of September 9,
2002). You understand that this waiver is irrevocable, and that this Participation Agreement and
the Plan set forth the entire agreement between us with respect to any subject matter covered
herein. Notwithstanding the foregoing, if you are a participant in the Sourcefire, Inc. Executive
Change in Control Severance Plan (the “Executive Plan”) and you become eligible to receive
severance benefits thereunder as a result of your “qualifying termination” (as defined in the
Executive Plan), your waiver will not preclude your receipt of such severance benefits, but you
will forfeit any Retention Benefits you might otherwise be entitled to receive under the Plan as a
result of your Termination. In no event will you be entitled to receive benefits under both the
Plan and the Executive Plan as a result of your Termination.



     4. Tax Compliance. You understand and acknowledge that you are ultimately liable and
responsible for all taxes owed in connection with any Retention Benefits you may receive under the
Plan, regardless of any action the Company takes with respect to any tax withholding obligations
that arise in connection with these benefits. The Company makes no representation or undertaking
regarding the treatment of any tax withholding in connection with your Retention Benefits. While
the Company intends to operate the Plan in a manner that avoids the limitations imposed by Section
409A of the Internal Revenue Code, the Company makes no representation that the Plan will, in fact,
avoid these limitations or will comply with Section 409A to the extent it becomes applicable. The
Company makes no undertaking to prevent Section 409A from applying to this Plan or any Retention
Benefits made under it or to mitigate the effects of such provision on any payments made pursuant
to this Plan. You are encouraged to consult a tax adviser regarding the potential tax and other
implications of participation in the Plan in light of
your own personal circumstances. You understand and acknowledge that the Company in the
exercise of its sole discretion and without your consent, may amend or modify this letter agreement
and the Plan in any manner and delay the payment of amounts pursuant to this letter agreement and
the Plan to the minimum extent necessary to meet the requirements of Section 409A as amplified by
any Treasury regulations or guidance from the Internal Revenue Service as the Company deems
appropriate or advisable.



     5. Severability of Provisions. If any provision of the Plan, or of this Participation
Agreement, is determined to be unlawful, invalid or unenforceable, such provision shall be deemed
severed from the Plan or this Participation Agreement, respectively, but every other provision of
the Plan or of this Participation Agreement shall remain in full force and effect. In substitution
for any provision of the Plan or this Participation Agreement being held unlawful,



 









 





Mr. Thomas M. McDonough

August 22, 2008

Page 5 of 5



invalid or
unenforceable, there shall be substituted a provision of similar import reflecting the original
intent of the parties hereto to the fullest extent permissible under law.




     6. Acknowledgment. You recognize and agree that your execution of this Participation
Agreement results in your enrollment and participation in the Plan, that you agree to be bound by
the terms and conditions of the Plan and this Participation Agreement, and that you understand that
this Participation Agreement may not be amended or modified except pursuant to Section 6.2 of the
Plan.



     7. Amendment of Assignment of Inventions, Non-Disclosure, Non-Solicitation and
Non-Competition Agreement. In accordance with Section 12.6 of that certain Assignment of
Inventions, Non-Disclosure, Non-Solicitation and Non-Competition Agreement dated August 9, 2002
(the “Non-Disclosure Agreement”), Sourcefire and you hereby agree to amend and modify Section 5 of
the Non-Disclosure Agreement by striking the clause “with the exception of John McCurdy and John
Czupak” in its entirety. Except as amended hereby, the terms and conditions of the Non-Disclosure
Agreement shall remain in effect and Sourcefire and you hereby affirm and agree to be bound by the
terms and conditions thereof.



     8. Entire Agreement. This Participation Agreement, the participation agreement under
the Sourcefire, Inc. Executive Change in Control Severance Plan, the participation agreement under
the Sourcefire, Inc. 2008 Executive Annual Incentive Plan, the Non-Disclosure Agreement, and your
various employee stock option agreements and restricted stock agreements with Sourcefire contain
the entire understanding of you and Sourcefire with respect to your employment by Sourcefire and
supersede any and all prior understandings, written or oral, between you and Sourcefire, including
that certain Employment Agreement, dated August 9, 2002 with an effective date of September 9,
2002.



EFFECTIVE AS OF AUGUST 22, 2008




	 	 	 	 	 
	 	SOURCEFIRE, INC., a Delaware corporation

 	 
	 	By:  	/s/ John Burris
 	 
	 	 	Title: Chief Executive Officer  	 
	 	 	                  “Company” 	 
	 


	 	 	 	 	 
	 	Accepted and Agreed this 25th day of August, 2008.



THOMAS M. MCDONOUGH

 	 
	 	SIGNED:  	/s/ Thomas M. McDonough
 	 
	 	 	             “Participant”