**Exhibit 10.2**

 

**NETWORK ENGINES, INC.**

**25 Dan Road**

**Canton, MA 02021-2817**

 

November 22, 2005

 

Confidential

 

Mr. Gregory A. Shortell

 

Dear Gregory:

 

On behalf of the Board of Directors ofNetwork Engines, Inc. (the “Company”), I am very pleased to offer you theposition of Chief Executive Officer and President of the Company.  This letter will memorialize our mutualunderstanding of the terms of your employment and, upon acceptance of theseterms as evidenced by your signature below, the Company will work to draft anemployment agreement to reflect these terms.

 

Although we have discussed these termspreviously, I wanted to highlight them here for your clarification andagreement:

 

Title – You will become the Chief ExecutiveOfficer and President of the Company and will report directly to the Board ofDirectors.  You will also be appointed asa Director of the Company for a period of approximately three years, inaccordance with the Company’s by-laws and current staggered board terms.

 

Salary – Your beginning salary will be$350,000 on an annualized basis.  Thisamount will be reviewed periodically but not less than once a year by the Board’scompensation committee.

 

Bonus – Your target bonus for the first yearof employment will be $175,000.  Youractual final bonus awarded will be directly tied to the achievement of overallcompany objectives as well as individual performance metrics, as determined bythe compensation committee.  Thecompensation committee will review these performance results with you after thefinal results of each fiscal quarter are known and will make all final seniorstaff bonus determinations.  However,despite Company performance in the first year of your employment, you will beawarded not less than 50% of your target bonus for that year.

 

Moving Expenses – The Company will reimburseyour actual out of pocket expenses directly related to moving activities,including travel expenses to the Boston area related to your housing search,subject to receipt of written documentation evidencing such expenses.  We expect that these expenses will not exceed$100,000.  In addition, the Company willreimburse the costs of your temporary housing in the Boston area prior to yourpermanent move.  We would expect thatsuch accommodations will last no more than 8 weeks.

 

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Stock Options – You will be awarded stockoptions to purchase 1,451,782 shares of common stock of the Company.  These options will be exercisable at theclosing price of the Company’s stock on the first day of your employment.  The options will be subject to the Company’snormal vesting program, which provides for 25% of the shares awarded to bevested on your first anniversary of employment and the balance of the award tobe equally vested over the subsequent 12 quarters of your employment.  Your stock options will be subject toacceleration of vesting, in accordance with the Company’s existing stock optionplan provisions, in connection with an Acquisition Event (as defined) involvingthe Company.

 

Severance – In the event you are asked to resignfrom the Company for reasons other than “cause” (as typically defined in suchagreements), you will be entitled to six months of salary (without bonus)payable in due course over the subsequent six months from the date oftermination, in accordance with Company payroll practices.

 

Additional Purchase Share Option – In theevent you decide that you would like to purchase shares of the Company’s commonstock, you may purchase up to $1 M worth of “restricted shares” at the closingprice of the Company’s common stock on the trading day just prior to your dateof purchase of the shares.  Such shareswill be restricted from resale for a period of one year from the date ofpurchase, but will otherwise be registered for resale, subject to applicableCompany trading policies.  Any suchpurchase must be in compliance with applicable Nasdaq rules and securitieslaws.

 

Gregory, I believe this covers all theconditions of your employment that we have discussed.  If you are in agreement and accept theseconditions, please sign this document below.

 
| Welcome aboard.                               |
|-----------------------------------------------|
|                                          |
| Sincerely,                                    |
|                                          |
| /s/ Robert M. Wadsworth                       |   |
|                                          |
| Robert M. Wadsworth                           |
| Director on Behalf of the Board of  Directors |
| Network Engines, Inc.                         |
|                                          |
|                                          |
| Accepted by                                   |
|                                          |
|                                          |
| /s/ Gregory A. Shortell                       |   |
| Gregory A. Shortell                           |
|                                               |  |  |

 

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