EXHIBIT
10.17


 


[DIRECTORS]


 


INTERNET SECURITY SYSTEMS, INC.


2005 STOCK INCENTIVE PLAN


 


NONQUALIFIED STOCK OPTION AGREEMENT


 


THIS OPTION AGREEMENT (the “Agreement”) is
entered 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”).


 


W  I  T  N  E
S  S  E  T  H:


 


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 Plan
granted the Option as provided herein;


 


NOW, THEREFORE,
the parties agree as follows:


 


1.                                      Grant of Option.


 


1.1          Option.  An option to purchase shares of the Company’s
Common Stock (the “Shares”) is
hereby granted to the Optionee (the “Option”).


 


1.2          Number of Shares.  The number of Shares that the Optionee can
purchase upon exercise of the Option and the dates upon which the Option can
first be exercised are set forth in the Grant Notice.


 


1.3          Option Exercise Price.  The price the Optionee must pay to exercise
the Option (the “Option Exercise Price”) is set
forth in the Grant Notice.


 


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


 


1.5          Type of Option.  The Option is intended to be a Nonqualified
Stock Option.  It is not intended to
qualify as an Incentive Stock Option within the meaning of Section 422 of the
Internal Revenue Code of 1986, as amended from time to time, or any successor
provision thereto.


 


1.6          Construction.  This Agreement shall be construed in
accordance and consistent with, and subject to, the provisions of the Plan (the
provisions of which are incorporated herein by reference) and, except as
otherwise expressly set forth herein, the capitalized terms used in this
Agreement 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’s
execution of the Grant Notice.  If the
Grant Notice is not executed by the Optionee, the Option may be canceled by the
Committee.


 


2.                                      Duration.


 


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


 


3.                                      Vesting.


 


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


 


4.                                      Manner of Exercise and Payment.


 


4.1          Delivery.  To exercise the Option, the Optionee must
deliver a completed copy of the Option Exercise Form,
attached hereto as Exhibit A, to
the address indicated on such Form or such other address designated by the
Company from time to time.  The Option
may 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 the
Option Exercise Form, the Company shall deliver certificates evidencing the
Shares to the Optionee, duly endorsed for transfer to the Optionee, free and
clear of all liens, security interests, pledges or other claims or charges.  Contemporaneously with the delivery of the
Option Exercise Form, Optionee shall tender the Option Exercise Price to the
Company, by cash, check, wire transfer or such other method of payment (e.g.,
delivery of, or attestation to, Shares already owned) as may be provided
pursuant to the Plan.


 


4.2          No Rights as Stockholder.  The Optionee shall not be deemed to be the
holder of, or to have any of the rights of a holder with respect to any Shares
subject to the Option until (i) the Option shall have been exercised pursuant
to the terms of this Agreement and the Optionee shall have paid the full
purchase price for the number of Shares in respect of which the Option was
exercised, (ii) the Company shall have issued and delivered the Shares to the
Optionee, and (iii) the Optionee’s name shall have been entered as a
stockholder of record of the Shares, whereupon the Optionee shall have full
voting and other ownership rights with respect to such Shares.


 


5.                                      Termination of Services.


 


5.1          Termination by Death.  In the event the Optionee dies while actively
performing services as a director for the Company, all outstanding unvested
Options shall immediately vest, and thereafter all vested Options shall remain
exercisable at any time prior to the end of the


 


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


 


5.2          Termination by Disability.  If the Optionee’s performance of services as
a director for the Company is terminated by reason of Disability, all
outstanding unvested Options shall immediately vest as of the date the
Committee determines the definition of Disability to have been satisfied by the
Optionee, and thereafter all vested Options shall remain exercisable at any
time prior to the end of the Exercise Term, or for one (1) year after the date
that the Committee determines the definition of Disability to have been
satisfied, whichever period is shorter.


 


5.3          Termination for Retirement.  If the Optionee’s performance of services as
a director of the Company ceases by reason of Retirement, all outstanding unvested
Options shall immediately vest, and thereafter all vested Options shall remain
exercisable 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.


 


5.4          Termination for Cause.  If the Optionee’s performance of services as
a director for the Company is terminated by the Company for Cause, all
outstanding unvested Options granted to the Optionee shall expire immediately,
and the Optionee’s right to exercise any then outstanding Options (whether or
not vested) shall terminate immediately upon the date that the Committee
determines is the Optionee’s date of termination.


 


5.5          Termination of Services for Other
Reasons.  If the Optionee’s
performance of services as a director for the Company is terminated by the
Company without Cause, or the Optionee voluntarily terminates his services as a
director, all outstanding unvested Options shall expire, and any Options vested
as of his date of termination shall remain exercisable at any time prior to the
end of the Exercise Term or for three (3) months after his date of termination,
whichever period is shorter.


 


5.6          Employment As Service.  For purposes of this Section and Section 10, service as a director with the Company includes
employment with the Company and with any Subsidiary of the Company.  A change from performing services as a
director of the Company to employment with the Company and any Subsidiary is
not a termination under this Agreement.


 


6.                                      Nontransferability.


 


The
Option shall not be transferable other than by will or by the laws of descent
and distribution, and during the lifetime of the Optionee, the Option shall be
exercisable only by the Optionee. 
Notwithstanding the foregoing, any portion or all of the Option which is
vested may be transferred, in whole or in part, without consideration, to a
Permitted Transferee.  Appropriate
evidence of any such transfer to the Permitted Transferees shall be delivered
to the Company on such forms as the Committee or Company shall prescribe and shall
comply with and indicate the Optionee’s (if during the lifetime of the
Optionee) and the Permitted Transferee’s agreement to abide by the Company’s
then 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 conditions
applicable to such Option prior to the transfer.


 


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7.                                      Securities Law Restrictions.


 


The
Option may not be exercised at any time unless, in the opinion of counsel for
the Company, the issuance and sale of the Shares issued upon such exercise is
exempt from registration under the Securities Act of 1933, as amended, or any
other 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 Shares
issuable upon the exercise of the Option; however, until the Shares have been registered under all
applicable laws, the Optionee shall represent, warrant and agree, as a
condition to the exercise of the Option, that the Shares are being purchased
for investment only and without a view to any sale or distribution of such
Shares and that such Shares shall not be transferred or disposed of in any
manner without registration under such laws, unless it is the opinion of
counsel for the Company that such a disposition is exempt from such
registration.  The Optionee acknowledges
that an appropriate legend giving notice of the foregoing restrictions shall
appear conspicuously on all certificates evidencing the Shares issued upon the
exercise of the Option.


 


8.                                      Limitation or Cancellation of Award.


 


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


 


9.                                      Effect of Change in Control.


 


9.1          Vesting; Termination of Options.  Upon the occurrence of a Change in Control,
all outstanding unvested Options shall become immediately and fully
exercisable, and shall remain exercisable as otherwise provided in this
Agreement.  The Committee, in its
discretion, may terminate the Option upon a Change in Control; provided,
however, that at least    days prior to the Change in Control (or, if
not feasible to provide    days notice, within a reasonable period
prior to the Change in Control), the Committee notifies the Optionee that the
Option will be terminated and provides the Optionee, either, at the election of
the Committee, (i) a cash payment equal to the difference between the Fair
Market Value of the vested Options (including Options that would become vested
upon 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 Change
in Control and to be paid no later than 3 business days after the Change in
Control, or (ii) the right to exercise all vested Options (including Options
that would become vested upon the Change in Control in accordance with this Section 9.1) immediately prior to the Change in Control.


 


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


 


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10.                               No Right to Continued Services.


 


Nothing
in this Agreement or the Plan shall be interpreted or construed to confer upon
the Optionee any right with respect to continuance of performance of services
as a director for the Company or any Subsidiary, nor shall this Agreement or
the Plan interfere in any way with the right of the Company or a subsidiary to
terminate the Optionee’s services as a director at any time.


 


11.                               Adjustments.


 


In the
event of a change in capitalization, the Committee may make appropriate
adjustments to the number and class of Shares or other stock or securities
subject to the Option and the purchase price for such Shares or other stock or
securities.  The Committee’s adjustment
shall be made in accordance with the provisions of Section 4.3
of the Plan and shall be effective and final, binding and conclusive for all
purposes of the Plan and this Agreement.


 


12.                               Withholding of Taxes.


 


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


 


13.                               Modification of Agreement.


 


Except
as provided in Section 9, this Agreement may be
modified, amended, suspended or terminated, and any terms or conditions may be
waived, only by a written instrument executed by the parties hereto.


 


14.                               Severability.


 


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


 


15.                               Governing Law.


 


The
validity, interpretation, construction and performance of this Agreement shall
be governed by the laws of the State of Delaware without giving effect to the
conflicts of laws principles thereof.


 


16.                               Successors in Interest.


 


This
Agreement shall inure to the benefit of and be binding upon each successor
corporation to the Company.  This
Agreement 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 the
Company under this Agreement shall be final, binding and conclusive upon the
Optionee’s heirs, executors, administrators and successors.


 


17.                               Resolution of Disputes.


 


Any
dispute or disagreement which may arise under, or as a result of, or in any way
relate to, the interpretation, construction or application of this Agreement
shall be determined by the Committee. 
Any determination made hereunder shall be final, binding and conclusive
on the Optionee and the Company for all purposes.


 


18.                               Exception From Code Section 409A.


 


The Agreement is intended to satisfy the requirements
for an exception from coverage under Code Section 409A.  The Agreement may be amended or interpreted
by the Committee as it determines necessary or appropriate to satisfy such
exception 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 Total
Option Exercise Price are set forth below:


 


 


	
  Number of
  Shares:

  	
                                  
  Shares

  
	
   

  	
   

  
	
  Option Exercise
  Price Per Share

  	
  $                     per Share

  
	
   

  	
   

  
	
  Total Option
  Exercise Price:

  	
  =   $                         .

  



 


 


The Total Option Exercise
Price is included with this Form.


 


 


	
   

  	
   

  	
  Date:

  	
   

  	
   

  
	
  Signature

  	
   

  	
   

  



 


 


Send or deliver this Form
with an original signature to:


 


Internet Security Systems, Inc.


6303 Barfield Road

Atlanta, Georgia 30328

Attn:                                              


 





















 


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 Security
Systems, Inc. (ISS) has granted you the following non-qualified option to
purchase 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 exercisable
in accordance with the following schedule: 
                                                                                              .  In no event shall the Option become vested
for Option Shares after Optionee’s cessation of Service, except as stated in
the 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 the
Expiration Date, which is                     
years from Grant Date.  At the Expiration
Date all outstanding unexercised (vested or unvested) Options shall be
cancelled.


 


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


 


DEFINITIONS:  All capitalized terms in this Notice shall
have the meaning assigned to them in this Notice or in the attached Stock
Option Agreement.


 


 


By your signature and the
signature on behalf of ISS below, you and ISS agree that this Option grant is
governed by the terms and conditions of this Notice, ISS’ 2005 Stock Incentive
Plan and the Nonqualified Stock Option Agreement.  The 2005 Stock Incentive Plan, applicable
prospectus and FAQ are available online at
http://                                                          
or from Human Resources.


 


 


	
   

  	
   

  
	
  Internet Security
  Systems, Inc.

  
	
   

  	
   

  
	
   

  
	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  
	
   

  
	
   

  	
   

  
	
  Date