EX-10.1






Exhibit 10.1




NETWORK APPLIANCE, INC.




AUTOMATIC STOCK OPTION AGREEMENT




RECITALS



A. The Corporation has implemented an automatic option grant program under the Plan pursuant
to which eligible non-employee members of the Board will automatically receive special option
grants at periodic intervals over their period of Board service in order to provide such
individuals with a meaningful incentive to continue to serve as members of the Board.



B. Optionee is an eligible non-employee Board member, and this Agreement is executed pursuant
to, and is intended to carry out the purposes of, the Plan in connection with the automatic grant
of an option to purchase shares of Common Stock under the Plan.



C. All capitalized terms in this Agreement shall have the meaning assigned to them in the
attached Appendix.




NOW, THEREFORE, it is hereby agreed as follows:



1. Grant of Option. The Corporation hereby grants to Optionee, as of the Grant Date,
a Non-Statutory Option to purchase up to the number of Option Shares specified in the Grant Notice.
The Option Shares shall be purchasable from time to time during the option term specified in
Paragraph 2 at the Exercise Price.



2. Option Term. This option shall have a term of ten (10) years measured from the
Grant Date and shall accordingly expire at the close of business on the Expiration Date, unless
sooner terminated in accordance with Paragraph 5, 6 or 7.




3. Limited Transferability.



(a) This option may be assigned in whole or in part during Optionee’s lifetime to one or more
members of Optionee’s family or to a trust established for the exclusive benefit of one or more
such family members, to the extent such assignment is in connection with the Optionee’s estate
plan, or to Optionee’s former spouse pursuant to a domestic relations order. The assigned portion
shall be exercisable only by the person or persons who acquire a proprietary interest in the option
pursuant to such assignment. The terms applicable to the assigned portion shall be the same as
those in effect for this option immediately prior to such assignment.



(b) Should Optionee die while holding this option, then this option shall be transferred in
accordance with Optionee’s will or the laws of inheritance. However, Optionee may designate one or
more persons as the beneficiary or beneficiaries of this option, and this option shall, in
accordance with such designation, automatically be transferred to such beneficiary or beneficiaries
upon Optionee’s death while holding this option. Such beneficiary or beneficiaries shall take the
transferred option subject to all the terms and conditions of this Agreement, including (without
limitation) the limited time period during which this option may, pursuant to Paragraph 5, be
exercised following Optionee’s death.




4. Exercisability/Vesting.



(a) This option shall be immediately exercisable for any or all of the Option Shares, whether
or not the Option Shares are at the time vested in accordance with the Vesting Schedule, and shall
remain so exercisable until the Expiration Date or sooner termination of the option term under
Paragraph 5, 6 or 7.



(b) Optionee shall, in accordance with the Vesting Schedule set forth in the Grant Notice,
vest in the Option Shares in one or more installments over his or her period of Board service.
Vesting in the Option Shares may be accelerated pursuant to the provisions of Paragraph 5, 6 or 7.
In no event, however, shall any additional Option Shares vest following Optionee’s cessation of
service as a Board member.



5. Cessation of Board Service. Should Optionee’s service as a Board member cease
while this option remains outstanding, then the option term specified in Paragraph 2 shall
terminate (and this option shall cease to be outstanding) prior to the Expiration Date in
accordance with the following provisions:



(a) Should Optionee cease to serve as a Board member for any reason (other than death or
Permanent Disability) while this option is outstanding, then the period during which this option
may be exercised shall be reduced to a twelve (12)-month period measured from the date of such
cessation of Board service, but in no event shall this option be exercisable at any time after the
Expiration Date. During such limited period of exercisability, this option may not be exercised in
the aggregate for more than the number of Option Shares (if any) in which Optionee is vested on the
date of his or her cessation of Board service. Upon the earlier of (i) the expiration of
such twelve (12)-month period or (ii) the specified Expiration Date, the option shall terminate and
cease to be exercisable with respect to any vested Option Shares for which the option has not been
exercised.



(b) Should Optionee die during the twelve (12)-month period following his or her cessation of
Board service and hold this option at the time of his or her death, then the personal
representative of Optionee’s estate or the person or persons to whom the option is transferred
pursuant to Optionee’s will or the laws of inheritance or the designated beneficiary or
beneficiaries of this option (as the case may be) shall have the right to exercise this option for
any or all of the Option Shares in which Optionee is vested at the time of Optionee’s cessation of
Board service (less any Option Shares purchased by Optionee after such cessation of Board service
but prior to death). Any such right to exercise this option shall terminate, and this option shall
accordingly cease to be exercisable for such vested Option Shares, upon the earlier of (i)
the expiration of the twelve (12)-month period measured from the date of Optionee’s cessation of
Board service or (ii) the specified Expiration Date.



(c) Should Optionee cease service as a Board member by reason of death or Permanent
Disability, then any Option Shares at the time subject to this option but not otherwise vested
shall vest in full so that this option may be exercised for any or all of the Option Shares as
fully vested shares of Common Stock at any time prior to the earlier of (i) the expiration
of the twelve (12)-month period measured from the date of Optionee’s cessation of Board service or
(ii) the specified Expiration Date, whereupon this option shall terminate and cease to be
outstanding.



(d) Upon Optionee’s cessation of Board service for any reason other than death or Permanent
Disability, this option shall immediately terminate and cease to be outstanding with respect to any
and all Option Shares in which Optionee is not otherwise at that time vested in accordance with the
normal Vesting Schedule or the special vesting acceleration provisions of Paragraphs 6 and 7 below.




6. Corporate Transaction.



(a) In the event of a Corporate Transaction effected during Optionee’s period of Board
service, any Option Shares at the time subject to this option but not otherwise vested shall
automatically vest so that this option shall, immediately prior to the specified effective date for
that Corporate Transaction, become exercisable for all of the Option Shares as fully vested shares
of Common Stock and may be exercised for any or all of those vested shares. Immediately following
the consummation of the Corporate Transaction, this option shall terminate and cease to be
outstanding, except to the extent assumed by the successor corporation or its parent company.



(b) If this option is assumed in connection with a Corporate Transaction, then this option
shall be appropriately adjusted, immediately after such Corporate Transaction, to apply to the
number and class of securities which would have been issuable to Optionee in consummation of such
Corporate Transaction had the option been exercised immediately prior to such Corporate
Transaction, and appropriate adjustments shall also be made to the Exercise Price, provided
the aggregate Exercise Price shall remain the same.



7. Change in Control. In the event of a Change in Control effected during Optionee’s
period of Board service, any Option Shares at the time subject to this option but not otherwise
vested shall automatically vest so that this option shall, immediately prior to the effective date
of that Change in Control, become exercisable for all of the Option Shares as fully vested shares
of Common Stock and may be exercised for any or all of those vested shares. This option shall
remain exercisable for such fully vested Option Shares until the earliest to occur of (i)
the specified Expiration Date or (ii) the sooner termination of this option in accordance with
Paragraph 5 or 6.



8. Adjustment in Option Shares. Should any change be made to the Common Stock by
reason of any stock split, stock dividend, recapitalization, combination of shares, exchange of
shares or other change affecting the outstanding Common Stock as a class without the Corporation’s
receipt of consideration, appropriate adjustments shall be made to (i) the total number and/or
class of securities subject to this option and (ii) the Exercise Price in order to reflect such
change and thereby preclude a dilution or enlargement of benefits hereunder.



9. Shareholder Rights. The holder of this option shall not have any shareholder
rights with respect to the Option Shares until such person shall have exercised the option, paid
the Exercise Price and become a holder of record of the purchased shares.




10. Manner of Exercising Option.



(a) In order to exercise this option with respect to all or any part of the Option Shares for
which this option is at the time exercisable, Optionee (or any other person or persons exercising
the option) must take the following actions:




(i) To the extent the option is exercised for vested Option Shares, execute
and deliver to the Corporation a Notice of Exercise for the Option Shares for which the
option is exercised. To the extent this option is exercised for unvested Option Shares,
execute and deliver to the Corporation a Purchase Agreement for those unvested Option
Shares.




(ii) Pay the aggregate Exercise Price for the purchased shares in one or more
of the following forms:



(A) cash or check made payable to the Corporation,



(B) shares of Common Stock held by Optionee (or any other person or
persons exercising the option) for the requisite period necessary to avoid a
charge to the Corporation’s earnings for financial reporting purposes and
valued at Fair Market Value on the Exercise Date, or



(C) to the extent the option is exercised for vested Option Shares,
through a special sale and remittance procedure pursuant to which Optionee
(or any other person or persons exercising the option) shall concurrently
provide irrevocable instructions (I) to a Corporation-designated brokerage
firm to effect the immediate sale of the purchased shares and remit to the
Corporation, out of the sale proceeds available on the settlement date,
sufficient funds to cover the aggregate Exercise Price payable for the
purchased shares plus all applicable Federal, state and local income and
employment taxes required to be withheld by the Corporation by reason of such
exercise and (II) to the Corporation to deliver the certificates for the
purchased shares directly to such brokerage firm in order to complete the
sale.




(iii) Furnish to the Corporation appropriate documentation that the person or
persons exercising the option (if other than Optionee) have the right to exercise this
option.



(b) Except to the extent the sale and remittance procedure is utilized in connection with the
option exercise, payment of the Exercise Price must accompany the Notice of Exercise (or the
Purchase Agreement) delivered to the Corporation in connection with the option exercise.



(c) As soon after the Exercise Date as practical, the Corporation shall issue to or on behalf
of Optionee (or any other person or persons exercising this option) a certificate for the purchased
Option Shares, with the appropriate legends affixed thereto. To the extent any such Option Shares
are unvested, the certificates for those Option Shares shall be endorsed with an appropriate legend
evidencing the Corporation’s repurchase rights and may be held in escrow with the Corporation until
such shares vest.




(d) In no event may this option be exercised for any fractional shares.



11. No Impairment of Rights. This Agreement shall not in any way affect the right of
the Corporation to adjust, reclassify, reorganize or otherwise make changes in its capital or
business structure or to merge, consolidate, dissolve, liquidate or sell or transfer all or any
part of its business or assets. In addition, this Agreement shall not in any way be construed or
interpreted so as to affect adversely or otherwise impair the right of the Corporation or the
shareholders to remove Optionee from the Board at any time in accordance with the provisions of
applicable law.




12. Compliance with Laws and Regulations.



(a) The exercise of this option and the issuance of the Option Shares upon such exercise shall
be subject to compliance by the Corporation and Optionee with all applicable requirements of law
relating thereto and with all applicable regulations of any stock exchange (or the Nasdaq National
Market, if applicable) on which the Common Stock may be listed for trading at the time of such
exercise and issuance.



(b) The inability of the Corporation to obtain approval from any regulatory body having
authority deemed by the Corporation to be necessary to the lawful issuance and sale of any Common
Stock pursuant to this option shall relieve the Corporation of any liability with respect to the
non-issuance or sale of the Common Stock as to which such approval shall not have been obtained.
The Corporation, however, shall use its best efforts to obtain all such approvals.



13. Successors and Assigns. Except to the extent otherwise provided in Paragraph 3 or
6, the provisions of this Agreement shall inure to the benefit of, and be binding upon, the
Corporation and its successors and assigns and Optionee, Optionee’s assigns, the legal
representatives, heirs and legatees of Optionee’s estate and any beneficiaries of this option
designated by Optionee.



14. Notices. Any notice required to be given or delivered to the Corporation under
the terms of this Agreement shall be in writing and addressed to the Corporation at its principal
corporate offices. Any notice required to be given or delivered to Optionee shall be in writing
and addressed to Optionee at the address indicated below Optionee’s signature line on the Grant
Notice. All notices shall be deemed effective upon personal delivery or upon deposit in the U.S.
mail, postage prepaid and properly addressed to the party to be notified.



15. Construction. This Agreement and the option evidenced hereby are made and granted
pursuant to the Plan and are in all respects limited by and subject to the terms of the Plan.



16. Governing Law. The interpretation, performance and enforcement of this Agreement
shall be governed by the laws of the State of California without resort to that State’s
conflict-of-laws rules.



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EXHIBIT I




NOTICE OF EXERCISE




I hereby notify Network Appliance, Inc. (the “Corporation”) that I elect to purchase
     shares of the Corporation’s Common Stock (the “Purchased Shares”) at the option
exercise price of $  per share (the “Exercise Price”) pursuant to that
certain option (the “Option”) granted to me under the Corporation’s 1999 Stock Option Plan on
     ,      .



Concurrently with the delivery of this Exercise Notice to the Corporation, I shall hereby pay
to the Corporation the Exercise Price for the Purchased Shares in accordance with the provisions of
my agreement with the Corporation (or other documents) evidencing the Option and shall deliver
whatever additional documents may be required by such agreement as a condition for exercise.
Alternatively, I may utilize the special broker-dealer sale and remittance procedure specified in
my agreement to effect payment of the Exercise Price for any Purchased Shares in which I am vested
at the time of exercise of the Option.



	 	 	 	 	 
	_________________________, ________
	 	 	 	 
	Date
	 	 	 	 
	 
	 	 	—	 
	   Optionee

	 
	 	 	—	 
	   Address: _____________________________

	 
	 	 	—	 
	Print name in exact manner
it is to appear on the
stock certificate:
	 	 	—	 
	Address to which certificate
is to be sent, if different
from address above:
	 	 	—	 
	 
	 	 	—	 
	Social Security Number:
	 	 	—	 
	 
	 	 	—	 







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APPENDIX





The following definitions shall be in effect under the Agreement:




A. Agreement shall mean this Automatic Stock Option Agreement.




B. Board shall mean the Corporation’s Board of Directors.



C. Change in Control shall mean a change in ownership or control of the Corporation
effected through either of the following transactions:




(i) the acquisition, directly or indirectly, by any person or related group
of persons (other than the Corporation or a person that directly or indirectly controls, is
controlled by, or is under common control with, the Corporation) of beneficial ownership
(within the meaning of Rule 13d-3 of the 1934 Act) of securities possessing more than fifty
percent (50%) of the total combined voting power of the Corporation’s outstanding securities
pursuant to a tender or exchange offer made directly to the Corporation’s shareholders, or




(ii) a change in the composition of the Board over a period of thirty-six
(36) consecutive months or less such that a majority of the Board members ceases, by reason
of one or more contested elections for Board membership, to be comprised of individuals who
either (A) have been Board members continuously since the beginning of such period or (B)
have been elected or nominated for election as Board members during such period by at least
a majority of the Board members described in clause (A) who were still in office at the time
the Board approved such election or nomination.




D. Common Stock shall mean shares of the Corporation’s common stock.




E. Code shall mean the Internal Revenue Code of 1986, as amended.



F. Corporate Transaction shall mean either of the following shareholder-approved
transactions to which the Corporation is a party:




(i) a merger or consolidation in which securities possessing more than fifty
percent (50%) of the total combined voting power of the Corporation’s outstanding securities
are transferred to a person or persons different from the persons holding those securities
immediately prior to such transaction, or




(ii) the sale, transfer or other disposition of all or substantially all of
the Corporation’s assets in complete liquidation or dissolution of the Corporation.



G. Corporation shall mean Network Appliance, Inc., a California corporation, and any
successor corporation to all or substantially all of the assets or voting stock of Network
Appliance, Inc. which shall by appropriate action adopt the Plan.



H. Exercise Date shall mean the date on which the option shall have been exercised in
accordance with Paragraph 10 of the Agreement.



I. Exercise Price shall mean the exercise price per share as specified in the Grant
Notice.



J. Expiration Date shall mean the date on which the option expires as specified in the
Grant Notice.



K. Fair Market Value per share of Common Stock on any relevant date shall be
determined in accordance with the following provisions:




(i) If the Common Stock is at the time traded on the Nasdaq National Market,
then the Fair Market Value shall be the closing selling price per share of Common Stock on
the date in question, as the price is reported by the National Association of Securities
Dealers on the Nasdaq National Market and published in The Wall Street Journal. If
there is no closing selling price for the Common Stock on the date in question, then the
Fair Market Value shall be the closing selling price on the last preceding date for which
such quotation exists.




(ii) If the Common Stock is at the time listed on any Stock Exchange, then
the Fair Market Value shall be the closing selling price per share of Common Stock on the
date in question on the Stock Exchange which serves as the primary market for the Common
Stock, as such price is officially quoted in the composite tape of transactions on such
exchange and published in The Wall Street Journal. If there is no closing selling
price for the Common Stock on the date in question, then the Fair Market Value shall be the
closing selling price on the last preceding date for which such quotation exists.



L. Grant Date shall mean the date of grant of the option as specified in the Grant
Notice.



M. Grant Notice shall mean the Notice of Grant of Automatic Stock Option accompanying
the Agreement, pursuant to which Optionee has been informed of the basic terms of the option
evidenced hereby.




N. 1934 Act shall mean the Securities Exchange Act of 1934, as amended.



O. Non-Statutory Option shall mean an option not intended to satisfy the requirements
of Code Section 422.




P. Notice of Exercise shall mean the notice of exercise in the form of Exhibit I.



Q. Option Shares shall mean the number of shares of Common Stock subject to the
option.



R. Optionee shall mean the person to whom the option is granted as specified in the
Grant Notice.



S. Permanent Disability shall mean the inability of Optionee to perform his or her
usual duties as a member of the Board by reason of any medically determinable physical or mental
impairment which is expected to result in death or has lasted or can be expected to last for a
continuous period of twelve (12) months or more.




T. Plan shall mean the Corporation’s 1999 Stock Option Plan.



U. Purchase Agreement shall mean the stock purchase agreement (in form and substance
satisfactory to the Corporation) which grants the Corporation the right to repurchase, at the
Exercise Price, any and all unvested Option Shares held by Optionee at the time of Optionee’s
cessation of Board service and which precludes the sale, transfer or other disposition of any
purchased Option Shares while those shares are unvested and subject to such repurchase right.



V. Stock Exchange shall mean the American Stock Exchange or the New York Stock
Exchange.



W. Vesting Schedule shall mean the vesting schedule specified in the Grant Notice,
pursuant to which the Option Shares will vest in one or more installments over the Optionee’s
period of Board service, subject to acceleration in accordance with the provisions of the
Agreement.




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