**Exhibit 10.1**

 

**SEVERANCE TERMS AGREEMENT**

 

THIS SEVERANCETERMS AGREEMENT (the “Agreement”), made this 9th day of January2006, is entered into by Network Engines, Inc., a Delaware corporation with itsprincipal place of business at 25 Dan Road, Canton, Massachusetts 02021 (the “Company”),and Gregory A. Shortell, an individual residing at                                              (the “Employee”).

 

The Companyhas previously delivered, and the Employee has accepted, an Offer Letter datedNovember 22, 2005 (the “Offer Letter”) setting forth the general terms of theEmployee’s employment with the Company. The Company and the Employee each desire to replace the paragraph of theOffer Letter titled “Severance” with more thorough and specific terms regardingthe effect of termination of the Employee’s employment with the Company.  In consideration of the mutual covenants andpromises contained herein, and other good and valuable consideration, thereceipt and sufficiency of which are hereby acknowledged by the parties hereto,the parties agree as follows:

 

1.                                       Employmentat Will.  The Company hereby agreesto employ the Employee, and the Employee hereby accepts employment with theCompany, upon the terms set forth in the Offer Letter.  The Employee’s employment with the Companyshall be at-will, meaning that either party may terminate the employmentrelationship at any time, for any reason, with or without cause or noticesubject to the provisions set forth herein.

 

2.                                       Effectof Termination.

 

2.1                                 TerminationBy the Company for Cause or at the Election of the Employee Without Good Reason.  In the event the Employee’s employment isterminated for Cause, as defined in Section 3, or at the election of theEmployee for any reason other than Good Reason, as defined in Section 3, theCompany shall pay to the Employee the compensation and benefits otherwise dueand payable to him under the Offer Letter through the last day of his actualemployment by the Company.

 

2.2                                 Terminationfor Death or Disability.  If theEmployee’s employment is terminated by death or because of disability, asdefined in Section 3, the Company shall pay to the estate of the Employee or tothe Employee, as the case may be, the compensation that would otherwise bepayable to the Employee up to the end of the month in which the termination ofhis employment because of death or disability occurs.

 

2.3                                 TerminationBy the Company Without Cause or By the Employee for Good Reason.  If the Employee’s employment is terminated bythe Company without Cause, or is terminated by the Employee for Good Reason,the Company shall (i) pay the Employee, in accordance with the Company’sregular payroll practices, severance pay in the form of base salarycontinuation (exclusive of any bonus or incentive component) for a period ofsix (6) months following termination and (ii) continue to pay the Company’sshare of the premiums for 

 

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health and dental coverage forthe Employee (in accordance with the applicable benefit plans) to the extentthe Employee is, and continues to be, eligible and participating in such plans,subject in the each such case of clauses (i) and (ii) to the Employee’sexecution and, if applicable, non-revocation, of a severance agreement andrelease drafted by and satisfactory to counsel for the Company.

 

3.                                       Definitions.

 

3.1                                 Forthe purposes of this Agreement, “Cause” for termination shall be deemed toexist upon: (i) a good faith finding by the Board (A) of willful failure of theEmployee after written notice to perform his assigned duties for the Company,or (B) that the Employee has engaged in dishonesty, gross negligence ormisconduct, which dishonesty, gross negligence or misconduct has had a materialadverse effect on the Company; (ii) the conviction of the Employee of, or theentry of a pleading of guilty or nolo contendere by the Employee to, any crimeinvolving moral turpitude or any felony; or (iii) a breach by the Employee ofany material provision of any invention and non-disclosure agreement ornon-competition and non-solicitation agreement with the Company, which breachis not cured within ten days after written notice thereof.

 

3.2                                 Forthe purposes of this Agreement, “Good Reason” shall exist upon (i) mutualwritten agreement by the Employee and the Board that Good Reason exists; (ii)the relocation of the Company’s offices such that the Employee’s daily commuteis increased by at least 50 miles without the written consent of theEmployee; (iii) reduction of the Employee’s annual base salary without theprior consent of the Employee (other than in connection with, and substantiallyproportionate to, reductions by the Company of the annual base salary of morethan 75% of its officers); or (iv) any material breach by the Company or anysuccessor thereto of any agreement to which the Employee and the Company areparties, which breach is not cured within ten days of written notice thereof.

 

3.3                                 Forthe purposes of this Agreement, the term “disability” shall mean the inabilityof the Employee, with reasonable accommodation as may be required by state orfederal law, due to a physical or mental disability, for a period of ninety(90) days, whether or not consecutive, during any 365-day period to perform theservices contemplated under the Offer Letter. A determination of disability shall be made by a physician satisfactoryto both the Employee and the Company, providedthat if theEmployee and the Company do not agree on a physician, the Employee and theCompany shall each select a physician and these two together shall select athird physician, whose determination as to disability shall be binding on allparties.

 

4.                                       Notices.  All notices required or permitted under thisAgreement shall be in writing and shall be deemed effective upon personaldelivery or upon deposit in the United States Post Office, by registered orcertified mail, postage prepaid, addressed to the other party at the addressshown above, or at such other address or addresses as either party shalldesignate to the other in accordance with this Section 4.

 

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5.                                       EntireAgreement.  This Agreement, togetherwith the Offer Letter, constitutes the entire agreement between the parties andsupersedes all prior agreements and understandings, whether written or oral,relating to the subject matter of this Agreement.

 

6.                                       Amendment.  This Agreement may be amended or modifiedonly by a written instrument executed by both the Company and the Employee.

 

7.                                       GoverningLaw.  This Agreement shall beconstrued, interpreted and enforced as a sealed instrument under and inaccordance with the laws of the Commonwealth of Massachusetts, withoutreference to the conflicts of laws provisions thereof.  Any action, suit or other legal proceedingwhich is commenced to resolve any matter arising under or relating to anyprovision of this Agreement shall be commenced only in a court of theCommonwealth of Massachusetts (or, if appropriate, a federal court locatedwithin Massachusetts), and the Company and the Employee each consents to thejurisdiction of such a court.

 

8.                                       Successorsand Assigns.  This Agreement shall bebinding upon and inure to the benefit of both parties and their respectivesuccessors and assigns, including any corporation with which or into which theCompany may be merged or which may succeed to its assets or business, provided,however, that the obligations of the Employee are personal and shall not beassigned by him.

 

9.                                       Acknowledgment.  The Employee states and represents that hehas had an opportunity to fully discuss and review the terms of this Agreementwith an attorney. The Employee further states and represents that he hascarefully read this Agreement, understands the contents herein, freely andvoluntarily assents to all of the terms and conditions hereof, and signs hisname of his own free act.

 

10.                                 Miscellaneous.

 

10.1                           Nodelay or omission by the Company in exercising any right under this Agreementshall operate as a waiver of that or any other right.  A waiver or consent given by the Company onany one occasion shall be effective only in that instance and shall not beconstrued as a bar or waiver of any right on any other occasion.

 

10.2                           Thecaptions of the sections of this Agreement are for convenience of referenceonly and in no way define, limit or affect the scope or substance of anysection of this Agreement.

 

10.3                           Incase any provision of this Agreement shall be invalid, illegal or otherwiseunenforceable, the validity, legality and enforceability of the remainingprovisions shall in no way be affected or impaired thereby.

 

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IN WITNESS WHEREOF, the parties hereto haveexecuted this Severance Terms Agreement as of the day and year set forth above.

 
|   | NETWORK  ENGINES, INC.                    |
|--------|-------------------------------------------|
|   |                                      |
|   |                                      |
|   | By:                                       |  /s/Douglas G. Bryant |   |
|   |                                      |
|   |                                      |
|   | Title: Vice  President of Administration, |
|   | Chief  Financial Officer                  |
|   |                                      |
|   |                                      |
|   | EMPLOYEE                                  |
|   |                                      |
|   |                                      |
|   | /s/ Gregory  A. Shortell                  |   |
|   | Gregory A.  Shortell                      |
|        |                                           |  |  |  |

 

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