**EXHIBIT10.17**

 

**[DIRECTORS]**

 

**INTERNET SECURITY SYSTEMS, INC.**

**2005 STOCK INCENTIVE PLAN**

 

**NONQUALIFIED STOCK OPTION AGREEMENT**

 

**THIS OPTION AGREEMENT** (the “**Agreement**”) isentered into as of the date set forth in the accompanying Notice of Grant (“**Grant Notice**”), by and between**INTERNET SECURITY SYSTEMS, INC.**, a Delaware corporation (the “**Company**”),and the director designated in the Grant Notice (the “**Optionee**”).

 

**WITNESSETH:**

 

***WHEREAS*****,**the Internet Security Systems, Inc. 2005 Stock Incentive Plan (the “**Plan**”) was approved by the shareholders of the Company,effective May 24, 2005; and

 

***WHEREAS*****,**as of the date hereof, the Committee responsible for administration of the Plangranted the Option as provided herein;

 

***NOW, THEREFORE*****,**the parties agree as follows:

 

# **1.**                                      Grant of Option.

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## **1.1         **Option.  An option to purchase shares of the Company’sCommon Stock (the “**Shares**”) ishereby granted to the Optionee (the “**Option**”).

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## **1.2         **Number of Shares.  The number of Shares that the Optionee canpurchase upon exercise of the Option and the dates upon which the Option canfirst be exercised are set forth in the Grant Notice.

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## **1.3         **Option Exercise Price.  The price the Optionee must pay to exercisethe Option (the “**Option Exercise Price**”) is setforth in the Grant Notice.

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## **1.4         **Date of Grant.  The date the Option is granted (the “**Grant Date**”) is set forth in the Grant Notice.

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## **1.5         **Type of Option.  The Option is intended to be a NonqualifiedStock Option.  It is not intended toqualify as an Incentive Stock Option within the meaning of Section 422 of theInternal Revenue Code of 1986, as amended from time to time, or any successorprovision thereto.

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## **1.6         **Construction.  This Agreement shall be construed inaccordance and consistent with, and subject to, the provisions of the Plan (theprovisions of which are incorporated herein by reference) and, except asotherwise expressly set forth herein, the capitalized terms used in thisAgreement shall have the same definitions as set forth in the Plan.

 

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## **1.7         **Condition.  The Option is conditioned on the Optionee’sexecution of the Grant Notice.  If theGrant Notice is not executed by the Optionee, the Option may be canceled by theCommittee.

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# **2.**                                      Duration.

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TheOption shall be exercisable to the extent vested as provided below and in themanner provided herein for a period of                     (    ) years from the Grant Date (the “**Exercise Term**”); provided, however, thatthe Option may be earlier terminated as provided in **Section 1.7** and **Section 5**.

 

# **3.**                                      Vesting.

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TheOption shall vest, and may be exercised, with respect to the Shares, on orafter the dates set forth in the Grant Notice, subject to earlier vesting ofthe Option as provided in **Section 5** andsubject to earlier termination of the Option as provided in **Section 1.7** and **Section 5** or inthe Plan.  The right to purchase theShares as they become vested shall be cumulative and shall continue during theExercise Term unless sooner terminated as provided herein.

 

# **4.**                                      Manner of Exercise and Payment.

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## **4.1         **Delivery.  To exercise the Option, the Optionee mustdeliver a completed copy of the **Option Exercise Form**,attached hereto as **Exhibit A**, tothe address indicated on such Form or such other address designated by theCompany from time to time.  The Optionmay be exercised in whole or in part with respect to the vested Shares;provided, however, the Committee may establish a minimum number of Shares(e.g., 100) for which an Option may be exercised at a particular time.  Within thirty (30) days of delivery of theOption Exercise Form, the Company shall deliver certificates evidencing theShares to the Optionee, duly endorsed for transfer to the Optionee, free andclear of all liens, security interests, pledges or other claims or charges.  Contemporaneously with the delivery of theOption Exercise Form, Optionee shall tender the Option Exercise Price to theCompany, by cash, check, wire transfer or such other method of payment (e.g.,delivery of, or attestation to, Shares already owned) as may be providedpursuant to the Plan.

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## **4.2         **No Rights as Stockholder.  The Optionee shall not be deemed to be theholder of, or to have any of the rights of a holder with respect to any Sharessubject to the Option until (i) the Option shall have been exercised pursuantto the terms of this Agreement and the Optionee shall have paid the fullpurchase price for the number of Shares in respect of which the Option wasexercised, (ii) the Company shall have issued and delivered the Shares to theOptionee, and (iii) the Optionee’s name shall have been entered as astockholder of record of the Shares, whereupon the Optionee shall have fullvoting and other ownership rights with respect to such Shares.

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# **5.**                                      Termination of Services.

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## **5.1         **Termination by Death.  In the event the Optionee dies while activelyperforming services as a director for the Company, all outstanding unvestedOptions shall immediately vest, and thereafter all vested Options shall remainexercisable at any time prior to the end of the

 

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## Exercise Term, or for one (1) year after the date ofdeath, whichever period is shorter, by such person(s) as shall have been namedas the Optionee’s beneficiary, or in the absence of a designated beneficiary,by the executor or representative of the Optionee’s estate.

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## **5.2         **Termination by Disability.  If the Optionee’s performance of services asa director for the Company is terminated by reason of Disability, alloutstanding unvested Options shall immediately vest as of the date theCommittee determines the definition of Disability to have been satisfied by theOptionee, and thereafter all vested Options shall remain exercisable at anytime prior to the end of the Exercise Term, or for one (1) year after the datethat the Committee determines the definition of Disability to have beensatisfied, whichever period is shorter.

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## **5.3         **Termination for Retirement.  If the Optionee’s performance of services asa director of the Company ceases by reason of Retirement, all outstanding unvestedOptions shall immediately vest, and thereafter all vested Options shall remainexercisable at any time prior to the end of the Exercise Term, or for one (1)year after the date of Retirement, whichever period is shorter.

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## **5.4         **Termination for Cause.  If the Optionee’s performance of services asa director for the Company is terminated by the Company for Cause, alloutstanding unvested Options granted to the Optionee shall expire immediately,and the Optionee’s right to exercise any then outstanding Options (whether ornot vested) shall terminate immediately upon the date that the Committeedetermines is the Optionee’s date of termination.

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## **5.5         **Termination of Services for OtherReasons.  If the Optionee’sperformance of services as a director for the Company is terminated by theCompany without Cause, or the Optionee voluntarily terminates his services as adirector, all outstanding unvested Options shall expire, and any Options vestedas of his date of termination shall remain exercisable at any time prior to theend of the Exercise Term or for three (3) months after his date of termination,whichever period is shorter.

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## **5.6         **Employment As Service.  For purposes of this Section and **Section 10**, service as a director with the Company includesemployment with the Company and with any Subsidiary of the Company.  A change from performing services as adirector of the Company to employment with the Company and any Subsidiary isnot a termination under this Agreement.

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# **6.**                                      Nontransferability.

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TheOption shall not be transferable other than by will or by the laws of descentand distribution, and during the lifetime of the Optionee, the Option shall beexercisable only by the Optionee. Notwithstanding the foregoing, any portion or all of the Option which isvested may be transferred, in whole or in part, without consideration, to aPermitted Transferee.  Appropriateevidence of any such transfer to the Permitted Transferees shall be deliveredto the Company on such forms as the Committee or Company shall prescribe and shallcomply with and indicate the Optionee’s (if during the lifetime of theOptionee) and the Permitted Transferee’s agreement to abide by the Company’sthen current stock option transfer guidelines. If all or part of the Option is transferred to a Permitted Transferee,the Permitted Transferee shall remain subject to all terms and conditionsapplicable to such Option prior to the transfer.

 

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# **7.**                                      Securities Law Restrictions.

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TheOption may not be exercised at any time unless, in the opinion of counsel forthe Company, the issuance and sale of the Shares issued upon such exercise isexempt from registration under the Securities Act of 1933, as amended, or anyother applicable federal, state or foreign securities law, rule or regulation,or the Shares have been duly registered under such laws.  The Company intends to register the Sharesissuable upon the exercise of the Option; however, until the Shares have been registered under allapplicable laws, the Optionee shall represent, warrant and agree, as acondition to the exercise of the Option, that the Shares are being purchasedfor investment only and without a view to any sale or distribution of suchShares and that such Shares shall not be transferred or disposed of in anymanner without registration under such laws, unless it is the opinion ofcounsel for the Company that such a disposition is exempt from suchregistration.  The Optionee acknowledgesthat an appropriate legend giving notice of the foregoing restrictions shallappear conspicuously on all certificates evidencing the Shares issued upon theexercise of the Option.

 

# **8.**                                      Limitation or Cancellation of Award.

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If theOptionee engages in “Detrimental Activity” (as defined in the Plan), theCommittee may, notwithstanding any other provision in this Agreement to thecontrary, cancel, rescind, suspend, withhold or otherwise restrict or limit anyunexpired or unexercised Option as of the first date the Optionee engages inthe Detrimental Activity, unless sooner terminated by operation of another termof this Agreement, the Plan or any other agreement.

 

# **9.**                                      Effect of Change in Control.

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## **9.1         **Vesting; Termination of Options.  Upon the occurrence of a Change in Control,all outstanding unvested Options shall become immediately and fullyexercisable, and shall remain exercisable as otherwise provided in thisAgreement.  The Committee, in itsdiscretion, may terminate the Option upon a Change in Control; provided,however, that at least    days prior to the Change in Control (or, ifnot feasible to provide    days notice, within a reasonable periodprior to the Change in Control), the Committee notifies the Optionee that theOption will be terminated and provides the Optionee, either, at the election ofthe Committee, (i) a cash payment equal to the difference between the FairMarket Value of the vested Options (including Options that would become vestedupon the Change in Control in accordance with this **Section 9.1**)and the Exercise Price for such Options, computed as of the date of the Changein Control and to be paid no later than 3 business days after the Change inControl, or (ii) the right to exercise all vested Options (including Optionsthat would become vested upon the Change in Control in accordance with this **Section 9.1**) immediately prior to the Change in Control.

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## **9.2         **Liquidation/Dissolution.  Upon the effective date of the liquidation ordissolution of the Company without a successor, the Option shall terminate;provided that the Optionee shall, in such event, have the right immediatelyprior to such dissolution or liquidation, to exercise this Option in whole orin part whether or not previously vested.

 

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# **10.**                               No Right to Continued Services.

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Nothingin this Agreement or the Plan shall be interpreted or construed to confer uponthe Optionee any right with respect to continuance of performance of servicesas a director for the Company or any Subsidiary, nor shall this Agreement orthe Plan interfere in any way with the right of the Company or a subsidiary toterminate the Optionee’s services as a director at any time.

 

# **11.**                               Adjustments.

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In theevent of a change in capitalization, the Committee may make appropriateadjustments to the number and class of Shares or other stock or securitiessubject to the Option and the purchase price for such Shares or other stock orsecurities.  The Committee’s adjustmentshall be made in accordance with the provisions of **Section 4.3**of the Plan and shall be effective and final, binding and conclusive for allpurposes of the Plan and this Agreement.

 

# **12.**                               Withholding of Taxes.

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If theOptionee is entitled to receive Shares upon exercise of the Option, theOptionee shall pay an amount equal to the federal, state, local and foreign incometaxes and other amounts as may be required by law to be withheld (the “**Withholding Taxes**”), if any, to the Company in cash prior tothe issuance of such Shares.  Insatisfaction of the Withholding Taxes, the Optionee may make a written election(the “**Tax Election**”), to have withheld aportion of the Shares issuable to him or her upon exercise of the Option,having an aggregate Fair Market Value equal to the minimum required WithholdingTaxes, provided that, if the Optionee may be subject to liability under Section16(b) of the Exchange Act, the election must comply with the requirementsapplicable to Share transactions by such Optionee.

 

# **13.**                               Modification of Agreement.

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Exceptas provided in **Section 9**, this Agreement may bemodified, amended, suspended or terminated, and any terms or conditions may bewaived, only by a written instrument executed by the parties hereto.

 

# **14.**                               Severability.

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Shouldany provision of this Agreement be held by a court of competent jurisdiction tobe unenforceable or invalid for any reason, the remaining provisions of thisAgreement shall not be affected by such holding and shall continue in fullforce in accordance with their terms.

 

# **15.**                               Governing Law.

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Thevalidity, interpretation, construction and performance of this Agreement shallbe governed by the laws of the State of Delaware without giving effect to theconflicts of laws principles thereof.

 

# **16.**                               Successors in Interest.

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ThisAgreement shall inure to the benefit of and be binding upon each successorcorporation to the Company.  ThisAgreement shall inure to the benefit of the Optionee’s legal

 

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representatives. All obligations imposed upon the Optionee and all rights granted to theCompany under this Agreement shall be final, binding and conclusive upon theOptionee’s heirs, executors, administrators and successors.

 

# **17.**                               Resolution of Disputes.

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Anydispute or disagreement which may arise under, or as a result of, or in any wayrelate to, the interpretation, construction or application of this Agreementshall be determined by the Committee. Any determination made hereunder shall be final, binding and conclusiveon the Optionee and the Company for all purposes.

 

# **18.**                               Exception From Code Section 409A.

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The Agreement is intended to satisfy the requirementsfor an exception from coverage under Code Section 409A.  The Agreement may be amended or interpretedby the Committee as it determines necessary or appropriate to satisfy suchexception from Code Section 409A.

 

[EXHIBIT FOLLOWS]

 

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**EXHIBIT A**

 

**OPTION EXERCISE FORM**

 

I,                                                           ,do hereby exercise the Option with a Grant Date of                                           granted to me pursuant to the Option Agreement and the Grant Notice.  The Shares being purchased and the TotalOption Exercise Price are set forth below:

 

 
| Number of  Shares:               |                                   Shares |
|----------------------------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                             |                                                                                                                                                                                                     |
| Option Exercise  Price Per Share | $                     per Share                                                                 |
|                             |                                                                                                                                                                                                     |
| Total Option  Exercise Price:    | =   $                         .                                   |

 

 

The Total Option ExercisePrice is included with this Form.

 

 
|      |   | Date:  |   |   |
|-----------|--------|--------|--------|--------|
| Signature |   |   |

 

 

Send or deliver this Formwith an original signature to:

 

Internet Security Systems, Inc.

6303 Barfield RoadAtlanta, Georgia 30328Attn:                                              

 

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Rev 050715

[DIRECTOR]

 
| ** **                                                                         | ** ** | **Internet  Security Systems, Inc.**  ID: 58-2362189  6303 Barfield Road  Atlanta, GA 30328 |
|------------------------------------------------------------------------------------|------------|---------------------------------------------------------------------------------------------|
| ** **                                                                         | ** ** | ** **                                                                                  |
| **Notice  of Grant of Stock Options and****Option Agreement – Non-Qualified** | ** ** | **Plan:  2005****ID:**                                                                      |

 

 

Internet SecuritySystems, Inc. (ISS) has granted you the following non-qualified option topurchase shares of its Common Stock (“Shares”):

 
| **Optionee:**          | ** **                                                                                                                                     |
|------------------------|------------------------------------------------------------------------------------------------------------------------------------------------|
| **Grant  Date:**       | **                    , 20    ** |
| **Exercise  Price:**   | **$                  Per Share**                     |
| **Number  of Shares:** | **                      Shares**           |
| **Expiration  Date:**  | **                    , 20    ** |

 

 

VESTING SCHEDULE:  The Option shall vest and become exercisablein accordance with the following schedule:                                                                                               .  In no event shall the Option become vestedfor Option Shares after Optionee’s cessation of Service, except as stated inthe accompanying Nonqualified Stock Option Agreement in connection with death,Disability or Retirement of the Optionee or Change in Control of ISS.

 

OPTION TERM:  The term of the Option will expire on theExpiration Date, which is **                    **years from Grant Date.  At the ExpirationDate all outstanding unexercised (vested or unvested) Options shall becancelled.

 

CONTINUED SERVICE AS ADIRECTOR:  Nothing in this Notice, theStock Option Agreement, or in the 2005 Stock Incentive Plan, shall confer uponyou any right to continued service as a director for any period of specificduration or interfere with or otherwise restrict in any way the rights of ISSor you, which rights are hereby expressly reserved by each.

 

DEFINITIONS:  All capitalized terms in this Notice shallhave the meaning assigned to them in this Notice or in the attached StockOption Agreement.

 

 

By your signature and thesignature on behalf of ISS below, you and ISS agree that this Option grant isgoverned by the terms and conditions of this Notice, ISS’ 2005 Stock IncentivePlan and the Nonqualified Stock Option Agreement.  The 2005 Stock Incentive Plan, applicableprospectus and FAQ are available online athttp://                                                          or from Human Resources.

 

 
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| Internet Security  Systems, Inc. |
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