EXHIBIT
10.13


 


[EMPLOYEE]


 


 


INTERNET SECURITY SYSTEMS, INC.


2005 STOCK INCENTIVE PLAN


 


INCENTIVE 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 employee 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 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, and shall be so construed; provided, however, that nothing in this
Agreement shall be interpreted as a representation, guarantee or other
undertaking on the part of the Company that the Option is or will be determined
to be an Incentive Stock Option within the meaning of Section 422 of the
Code.  To the extent this Option does not
qualify and is not treated as an Incentive Stock Option, it will be treated as
a Nonqualified Stock Option.


 


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.  Notwithstanding the foregoing, if the
Optionee is a non-exempt employee for purposes of the Fair Labor Standards Act
of 1938 (“FLSA”), the Optionee may
not exercise any Option (even if the Option is otherwise vested) prior to the
date that is six (6) months after the Grant Date unless the Optionee’s
employment has terminated due to death, Disability, Retirement or unless a
Change in Control has occurred after the Grant Date.


 


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.


 


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5.                                      Termination of Employment.


 


5.1          Termination by Death.  In the event the Optionee dies while actively
employed by the Company, 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 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 employment with the Company
is terminated by reason of Disability, all outstanding unvested Options shall
expire as of the date the Committee determines the definition of Disability to
have been satisfied by the Optionee, 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 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 employment with the Company
is terminated by reason of Retirement, 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 one (1)
year after the date of Retirement, whichever period is shorter.


 


5.4          Termination for Cause.  If the Optionee’s employment with 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 of employment.


 


5.5          Termination of Employment for Other
Reasons.  If the Optionee’s
employment is terminated by the Company without Cause, or the Optionee
voluntarily terminates his employment, 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 of employment, whichever period is
shorter.


 


5.6          Employment with a Subsidiary.  For purposes of this Section and Section 10, employment with the Company includes employment
with any subsidiary of the Company.  A
change of employment between the Company and any subsidiary or between
subsidiaries is not a termination of employment 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.


 


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


 


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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.  Except as hereinafter provided, 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. 
However, notwithstanding the forgoing sentence, the vesting of an
outstanding unvested Option shall not so accelerate if and to the extent: (i)
such Option is, in connection with a Corporate Transaction (as defined in
Section 2.6(c) of the Plan and excluding Corporate Transactions which do not
constitute a Change in Control), either to be assumed by the successor
corporation (or parent thereof) or to be replaced with a comparable option to
purchase shares of the capital stock of the successor corporation (or parent
thereof), (ii) such Option is to be replaced with a cash incentive program of
the successor corporation which preserves the spread existing on the unvested
Option shares at the time of the Corporate Transaction and provides for
subsequent payout in accordance with the same vesting schedule applicable to
such Option, or (iii) the acceleration of such Option is subject to other
limitations imposed by the Committee at the time of the Option grant. The
determination of option comparability under clause (i) above shall be made by
the Committee as constituted prior to the Change in Control, and its
determination shall be final, binding and conclusive.  If
the successor company (or parent thereof) assumes the outstanding Option in
connection with a Corporate Transaction, and at the time of or within                following
such Corporate Transaction: (i) the Optionee is offered a Lesser Position (as
hereinafter defined) in replacement of the position held by him immediately
prior to the Corporate Transaction; or (ii) the Optionee’s service terminates
by reason of an Involuntary Termination (as hereinafter defined), then,
effective as of the date on which such Lesser Position is offered to the Optionee
or the effective date of such Involuntary Termination, respectively, the
vesting of the Option shall automatically accelerate in part so that, in
addition to the number of vested shares of Common Stock for which the Option is
exercisable at such time, the Option shall become exercisable with respect to                                     ,
but not exceeding the unvested portion of such Option grant. Following such
acceleration, to the extent the Optionee continues in service, the vesting
schedule for the Option shall continue under the original


 


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vesting plan, except for                                         .  In the event that both the offer of a Lesser
Position and a subsequent Involuntary Termination of an Optionee’s Service
occur within                     
following a Corporate Transaction, then acceleration shall occur only in
connection with the offer of such Lesser Position and no additional
acceleration shall occur in connection with such subsequent Involuntary
Termination.  Following an Involuntary
Termination that occurs within                     
following a Corporate Transaction, the Option shall remain exercisable for any
or all of the vested Shares until the earlier of: (i) the expiration of the
Exercise Term; or (ii) the expiration of the                     
period measured from the effective date of the Involuntary Termination.


 


“Involuntary Termination” shall mean the
termination of the Service of any individual which occurs by reason of: (i)
such individual’s involuntary dismissal or discharge by the Company for reasons
other than Cause, or (ii) such individual’s voluntary resignation following the
offer to such individual of a Lesser Position in replacement of the position
held by him immediately prior to the Corporate Transaction.


 


“Lesser Position” for an Optionee shall mean
a new position or a change in the Optionee’s position which, compared with such
individual’s position with the Company immediately prior to the Corporate Transaction,
(i) offers a lower level of compensation (including base salary, fringe
benefits and target bonuses under any corporate-performance based bonus or
incentive programs), (ii) materially reduces such individual’s duties or level
of responsibility, or (iii)
includes assignment to an office more than        
miles from the Company’s office at which the employee serves prior to the
Corporate Transaction.


 


9.2          Termination of Options.  The Committee, in its discretion, may
terminate the Option upon a Change in Control; provided, however, that at least
           prior to the
Change in Control (or, if not feasible to provide          
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 Section 9.1 above) 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 Section 9.1
above) immediately prior to the Change in Control.


 


9.3          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.


 


10.                               No Right to Continued Employment.


 


Nothing
in this Agreement or the Plan shall be interpreted or construed to confer upon
the Optionee any right with respect to continuance of employment by 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
employment at any time.


 


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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.


 


If the
Optionee makes a disposition, within the meaning of Section 424(c) of the Code
and regulations promulgated thereunder, of any Share or Shares issued to him
pursuant to his exercise of the Option within the two-year period commencing on
the day after the Grant Date or within the one-year period commencing on the
day after the date of transfer of such Share or Shares to the Optionee pursuant
to such exercise, the Optionee shall, within ten (10) days of such disposition,
notify the Company thereof, by delivery of written notice to the Company at its
principal executive office, and immediately deliver to the Company the amount
of Withholding Taxes.


 


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.


 


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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 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:                                              


 





















 


[EMPLOYEE]


 


	
   

  	
   

  	
  Internet
  Security Systems, Inc.

  ID: 58-2362189

  6303 Barfield Road

  Atlanta, GA 30328

  
	
   

  	
   

  	
   

  
	
  Notice
  of Grant of Stock Options and

  Option Agreement – Incentive Stock Option

  	
   

  	
  Plan:
  2005

  ID:

  



 


 


Internet Security
Systems, Inc. (ISS) has granted you the following incentive stock option to
purchase shares of its Common Stock (“Shares”):


 


	
  Optionee:

  	
   

  
	
  Grant
  Date:

  	
                                                                        

  
	
  Exercise
  Price:

  	
  $                  Per Share

  
	
  Number
  of Shares:

  	
                                  

  
	
  Expiration
  Date: 

  	
                                                                        

  



 


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.


 


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.


 


EMPLOYMENT
RELATIONSHIP:  ISS is an at-will
employer.  Nothing in this Notice, the
Stock Option Agreement, or in the 2005 Stock Incentive Plan, shall confer upon
you any right to continued employment 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, to terminate the employment
relationship at any time for any reason, with or without cause.


 


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 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