Sample Business Contracts

2000 Director Stock Option Plan - Network Engines Inc.

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                             NETWORK ENGINES, INC.

                        2000 DIRECTOR STOCK OPTION PLAN

1.  Purpose.

     The purpose of this 2000 Director Stock Option Plan (the "Plan") of Network
Engines, Inc. (the "Company") is to encourage ownership in the Company by non-
employee directors of the Company whose continued services are considered
essential to the Company's future progress and to provide them with a further
incentive to remain as directors of the Company.

2.  Administration.

     The Board of Directors (the "Board") shall supervise and administer the
Plan.  All questions concerning interpretation of the Plan or any options
granted under it shall be resolved by the Board and such resolution shall be
final and binding upon all persons having an interest in the Plan.  The Board
may, to the full extent permitted by or consistent with applicable laws or
regulations, delegate any or all of its powers under the Plan to a committee
appointed by the Board, and if a committee is so appointed, all references to
the Board in the Plan shall mean and relate to such committee.

3.  Participation in the Plan.

     Directors of the Company who are not employees of the Company or any
subsidiary of the Company ("non-employee directors") shall be eligible to
receive options under the Plan.

4.  Stock Subject to the Plan.

    (a) The maximum number of shares of the Company's Common Stock, par value
$.01 per share ("Common Stock"), which may be issued under the Plan shall be
500,000 shares, subject to adjustment as provided in Section 7.

    (b) If any outstanding option under the Plan for any reason expires or is
terminated without having been exercised in full, the shares covered by the
unexercised portion of such option shall again become available for issuance
pursuant to the Plan.

    (c) All options granted under the Plan shall be non-statutory options not
entitled to special tax treatment under Section 422 of the Internal Revenue Code
of 1986, as amended (the "Code").

    (d) Shares issued under the Plan may consist in whole or in part of
authorized but unissued shares or treasury shares.

5.  Terms, Conditions and Form of Options.

     Each option granted under the Plan shall be evidenced by a written
agreement in such form as the Board shall from time to time approve, which
agreements shall comply with and be subject to the following terms and

     (a)  (i)  Automatic Option Grant Dates.  Each date of grant of an option
pursuant to this Section 5(a) is hereinafter referred to as an "Option Grant
Date."  Options shall automatically be granted to all non-employee directors as
          (x)  each person who becomes a non-employee director after the
adoption of this Plan shall be granted an option to purchase 50,000 shares of
Common Stock on the date of his or her initial election to the Board; and

          (y)  each non-employee director shall be granted an option to purchase
15,000 shares of Common Stock on the date of each Annual Meeting of Stockholders
of the Company after the adoption of this Plan commencing with the Annual
Meeting of Stockholders to be held following the end of fiscal year 2000 to be
held in 2001 (other than a director who was initially elected to the Board at
any such Annual Meeting or, if previously elected, at any time after the prior
year's Annual Meeting of Stockholders), provided that he or she is serving as a
director immediately following the date of such Annual Meeting.

          (ii) Periodic Grants of Options. Subject to execution by the non-
employee director of an appropriate option agreement, the Board may grant
additional options to purchase a number of shares to be determined by the Board
in recognition of services provided by a non-employee director in his or her
capacity as a director, provided that such grants are in compliance with the
requirements of Rule 16b-3, as promulgated under the Securities Exchange Act of
1934, as amended from time to time.

     (b) Option Exercise Price. The option exercise price per share for each
option granted under the Plan shall equal (i) the closing price on any national
securities exchange on which the Common Stock is listed, (ii) the closing price
of the Common Stock on the Nasdaq National Market or (iii) the average of the
closing bid and asked prices in the over-the-counter market, whichever is
applicable, as published in The Wall Street Journal, on the Option Grant Date.
If no sales of Common Stock were made on the Option Grant Date, the price of the
Common Stock for purposes of clauses (i) and (ii) above shall be the reported
price for the next preceding day on which sales were made.

     (c) Transferability of Options. Except as the Board may otherwise determine
or provide in an option granted under the Plan, any option granted under the
Plan to an optionee shall not be transferable by the optionee other than by will
or the laws of descent and distribution or pursuant to a qualified domestic
relations order as defined by the Code or Title I of the Employee Retirement
Income Security Act, or the rules thereunder, and shall be exercisable during
the optionee's lifetime only by the optionee or the optionee's guardian or legal
representative. References to an optionee, to the extent relevant in the
context, shall include references to authorized transferees.


(d)  Vesting Period.

     (i)   General. Each option granted under the Plan pursuant to Section
5(a)(i)(x) above shall become exercisable (vest) in four equal annual
installments beginning on the first anniversary of such Option Grant Date. Each
option granted under the Plan pursuant to Section 5(a)(i)(y) above shall become
exercisable in full upon the earlier of one year from the Option Grant Date or
the date immediately preceding the next Annual Meeting of Stockholders. No
further vesting shall occur with respect to an option granted pursuant to
Section 5(a)(i)(x) or 5(a)(i)(y) after the optionee ceases to be a non-employee
director of the Company. Each option granted under the Plan pursuant to Section
5(a)(ii) above shall become exercisable on such terms as shall be determined by
the Board and set forth in the option agreement with the respective optionee.

     (ii)  Acceleration Upon Acquisition Event. Notwithstanding the foregoing,
each outstanding option granted under the Plan shall immediately become
exercisable in full upon the occurrence of an Acquisition Event (as defined in
Section 8) with respect to the Company.

     (iii) Right to Receive Restricted Stock. Notwithstanding the provisions
of Section 5(d)(i) above, the Board shall have the authority to grant options
(including options granted pursuant to Section 5(a)(i) above) which are
immediately exercisable subject to the Company's right to repurchase any
unvested shares of stock acquired by the optionee on exercise of an option in
the event such optionee's service as a director terminates for any reason.

     (e) Termination. Each option shall terminate, and may no longer be
exercised, on the earlier of (i) the date ten years after the Option Grant Date
of such option or (ii) the first anniversary of the date on which the optionee
ceases to serve as a director of the Company.

     (f) Exercise Procedure. An option may be exercised only by written notice
to the Company at its principal office accompanied by (i) payment in cash or by
certified or bank check of the full consideration for the shares as to which
they are exercised, (ii) delivery of outstanding shares of Common Stock (which
have been outstanding for at least six months) having a fair market value on the
last business day preceding the date of exercise equal to the option exercise
price, or (iii) an irrevocable undertaking by a creditworthy broker to deliver
promptly to the Company sufficient funds to pay the exercise price or delivery
of irrevocable instructions to a creditworthy broker to deliver promptly to the
Company cash or a check sufficient to pay the exercise price.

     (g) Exercise by Representative Following Death of Director. An optionee, by
written notice to the Company, may designate one or more persons (and from time
to time change such designation), including his or her legal representative,
who, by reason of the optionee's death, shall acquire the right to exercise all
or a portion of the option. If the person or persons so designated wish to
exercise any portion of the option, they must do so within the term of the
option as provided herein. Any exercise by a representative shall be subject to
the provisions of the Plan.


6.   Limitation of Rights.

     (a) No Right to Continue as a Director. Neither the Plan, nor the granting
of an option nor any other action taken pursuant to the Plan, shall constitute
or be evidence of any agreement or understanding, express or implied, that the
Company will retain the optionee as a director for any period of time.

     (b) No Stockholders' Rights for Options. An optionee shall have no rights
as a stockholder with respect to the shares covered by his or her option until
the date of the issuance to him or her of a stock certificate therefor, and no
adjustment will be made for dividends or other rights (except as provided in
Section 7) for which the record date is prior to the date such certificate is

     (c) Compliance with Securities Laws. Each option shall be subject to the
requirement that if, at any time, counsel to the Company shall determine that
the listing, registration or qualification of the shares subject to such option
upon any securities exchange or under any state or federal law, or the consent
or approval of any governmental or regulatory body, or the disclosure of non-
public information or the satisfaction of any other condition is necessary as a
condition of, or in connection with, the issuance or purchase of shares
thereunder, such option may not be exercised, in whole or in part, unless such
listing, registration, qualification, consent or approval, or satisfaction of
such condition shall have been effected or obtained on conditions acceptable to
the Board. Nothing herein shall be deemed to require the Company to apply for or
to obtain such listing, registration or qualification, or to satisfy such

7.  Adjustment Provisions for Mergers, Recapitalizations and Related

    If, through or as a result of any merger, consolidation, reorganization,
recapitalization, reclassification, stock dividend, stock split, reverse stock
split, or other similar transaction, (i) the outstanding shares of Common Stock
are exchanged for a different number or kind of securities of the Company or of
another entity, or (ii) additional shares or new or different shares or other
securities of the Company or of another entity are distributed with respect to
such shares of Common Stock, the Board shall make an appropriate and
proportionate adjustment in (w) the maximum number and kind of shares reserved
for issuance under the Plan, (x) the number and kind of shares or other
securities subject to then outstanding options under the Plan, (y) the price for
each share subject to any then outstanding options under the Plan (without
changing the aggregate purchase price for such options), and (z) the number and
kind of securities to be granted pursuant to Section 5(a)(i), to the end that
each option issued or to be issued shall be exercisable, for the same aggregate
exercise price, for such securities as such option holder would have held
immediately following such event if the option had been granted prior to such
event he had exercised such option immediately prior to such event.  No
fractional shares will be issued under the Plan on account of any such


8.  Acquisition Event.

    For purposes of the Plan, an "Acquisition Event" shall be deemed to have
occurred only if any of the following events occurs:  (i) any merger or
consolidation which results in the voting securities of the Company outstanding
immediately prior thereto representing immediately thereafter (either by
remaining outstanding or by being converted into voting securities of the
surviving or acquiring entity) less than 50% of the combined voting power of the
voting securities of the Company or such surviving or acquiring entity
outstanding immediately after such merger or consolidation; (ii) any sale of all
or substantially all of the assets of the Company; or (iii) the complete
liquidation of the Company.

9.  Termination and Amendment of the Plan.

    The Board may suspend or terminate the Plan or amend it in any respect

10. Notice.

    Any written notice to the Company required by any of the provisions of the
Plan shall be addressed to the Treasurer of the Company and shall become
effective when it is received.

11. Governing Law.

    The Plan and all determinations made and actions taken pursuant hereto
shall be governed by the internal laws of the State of Delaware (without regard
to any applicable conflicts of laws or principles).

12. Effective Date.

    The Plan shall take effect upon the closing of the Company's initial public
offering of Common Stock.

                              Adopted by the Board of Directors on
                              March 16, 2000.

                              Approved by the Stockholders on
                              ______________, 2000.