<PAGE>

                                                                    Exhibit 10.2

                              NETWORK ENGINES, INC.

                            1999 STOCK INCENTIVE PLAN
                            -------------------------

1.    Purpose
      -------

      The purpose of this 1999 Stock Incentive Plan (the "Plan") of Network
Engines, Inc., a Delaware corporation (the "Company"), is to advance the
interests of the Company's stockholders by enhancing the Company's ability to
attract, retain and motivate persons who make (or are expected to make)
important contributions to the Company by providing such persons with equity
ownership opportunities and performance-based incentives and thereby better
aligning the interests of such persons with those of the Company's stockholders.
Except where the context otherwise requires, the term "Company" shall include
any present or future subsidiary corporations of Network Engines, Inc. as
defined in Section 424(f) of the Internal Revenue Code of 1986, as amended, and
any regulations promulgated thereunder (the "Code").

2.    Eligibility
      -----------

      All of the Company's employees, officers, directors, consultants and
advisors are eligible to be granted options, restricted stock or other
stock-based awards (each, an "Award") under the Plan. Any person who has been
granted an Award under the Plan shall be deemed a "Participant."

3.    Administration, Delegation
      --------------------------

      (a) Administration by Board of Directors. The Plan will be administered by
          ------------------------------------
the Board of Directors of the Company (the "Board"). The Board shall have
authority to grant Awards and to adopt, amend and repeal such administrative
rules, guidelines and practices relating to the Plan as it shall deem advisable.
The Board may correct any defect, supply any omission or reconcile any
inconsistency in the Plan or any Award in the manner and to the extent it shall
deem expedient to carry the Plan into effect and it shall be the sole and final
judge of such expediency. All decisions by the Board shall be made in the
Board's sole discretion and shall be final and binding on all persons having or
claiming any interest in the Plan or in any Award. No director or person acting
pursuant to the authority delegated by the Board shall be liable for any action
or determination relating to or under the Plan made in good faith.
<PAGE>

      (b) Delegation to Executive Officers. To the extent permitted by
          --------------------------------
applicable law, the Board may delegate to one or more executive officers of the
Company the power to make Awards and exercise such other powers under the Plan
as the Board may determine, provided that the Board shall fix the maximum number
of shares subject to Awards and the maximum number of shares for any one
Participant to be made by such executive officers.

      (c) Appointment of Committees. To the extent permitted by applicable law,
          -------------------------
the Board may delegate any or all of its powers under the Plan to one or more
committees or subcommittees of the Board (a "Committee"). If and when the common
stock, $.01 par value per share, of the Company (the "Common Stock") is
registered under the Securities Exchange Act of 1934 (the "Exchange Act"), the
Board shall appoint one such Committee of not less than two members, each member
of which shall be an "outside director" within the meaning of Section 162(m) of
the Code and a "non-employee director" as defined in Rule 16b-3 promulgated
under the Exchange Act." All references in the Plan to the "Board" shall mean
the Board or a Committee of the Board or the executive officer referred to in
Section 3(b) to the extent that the Board's powers or authority under the Plan
have been delegated to such Committee or executive officer.

4.    Stock Available for Awards
      --------------------------

      (a) Number of Shares. Subject to adjustment under Section 4(c), Awards may
          ----------------
be made under the Plan for up to 1,899,161 shares of Common Stock. If any Award
expires or is terminated, surrendered or canceled without having been fully
exercised or is forfeited in whole or in part or results in any Common Stock not
being issued, the unused Common Stock covered by such Award shall again be
available for the grant of Awards under the Plan, subject, however, in the case
of Incentive Stock Options (as hereinafter defined), to any limitation required
under the Code. Shares issued under the Plan may consist in whole or in part of
authorized but unissued shares or treasury shares.

      (b) Per-Participant Limit. Subject to adjustment under Section 4(c), for
          ---------------------
Awards granted after the Common Stock is registered under the Exchange Act, the
maximum number of shares with respect to which an Award may be granted to any
Participant under the Plan shall be 500,000 per calendar year. The
per-participant limit described in this Section 4(b) shall be construed and
applied consistently with Section 162(m) of the Code.

      (c) Adjustment to Common Stock. In the event of any stock split, stock
          --------------------------

                                       2
<PAGE>

dividend, recapitalization, reorganization, merger, consolidation, combination,
exchange of shares, liquidation, spin-off or other similar change in
capitalization or event, or any distribution to holders of Common Stock other
than a normal cash dividend, (i) the number and class of securities available
under this Plan, (ii) the number and class of security and exercise price per
share subject to each outstanding Option, (iii) the repurchase price per
security subject to each outstanding Restricted Stock Award, and (iv) the terms
of each other outstanding stock-based Award shall be appropriately adjusted by
the Company (or substituted Awards may be made, if applicable) to the extent the
Board shall determine, in good faith, that such an adjustment (or substitution)
is necessary and appropriate. If this Section 4(c) applies and Section 8(e)(1)
also applies to any event, Section 8(e)(1) shall be applicable to such event,
and this Section 4(c) shall not be applicable.

5.    Stock Options
      -------------

      (a) General. The Board may grant options to purchase Common Stock (each,
          -------
an "Option") and determine the number of shares of Common Stock to be covered by
each Option, the exercise price of each Option and the conditions and
limitations applicable to the exercise of each Option, including conditions
relating to applicable federal or state securities laws, as it considers
necessary or advisable. An Option which is not intended to be an Incentive Stock
Option (as hereinafter defined) shall be designated a "Nonstatutory Stock
Option."

      (b) Incentive Stock Options. An Option that the Board intends to be an
          -----------------------
"incentive stock option" as defined in Section 422 of the Code (an "Incentive
Stock Option") shall only be granted to employees of the Company and shall be
subject to and shall be construed consistently with the requirements of Section
422 of the Code. The Company shall have no liability to a Participant, or any
other party, if an Option (or any part thereof) which is intended to be an
Incentive Stock Option is not an Incentive Stock Option.

      (c) Exercise Price. The Board shall establish the exercise price at the
          --------------
time each Option is granted and specify it in the applicable option agreement.

      (d) Duration of Options. Each Option shall be exercisable at such times
          -------------------
and subject to such terms and conditions as the Board may specify in the
applicable option agreement. No Option will be granted for a term in excess of
10 years.

      (e) Exercise of Option. Options may be exercised only by delivery to
          ------------------

                                       3
<PAGE>

the Company of a written notice of exercise signed by the proper person together
with payment in full as specified in Section 5(f) for the number of shares for
which the Option is exercised.

      (f) Payment Upon Exercise. Common Stock purchased upon the exercise of an
          ---------------------
Option granted under the Plan shall be paid for as follows:

            (i) in cash or by check, payable to the order of the Company;

            (ii) except as the Board may otherwise provide in an Option
Agreement, delivery of an irrevocable and unconditional undertaking by a
creditworthy broker to deliver promptly to the Company sufficient funds to pay
the exercise price, or delivery by the Participant to the Company of a copy of
irrevocable and unconditional instructions to a creditworthy broker to deliver
promptly to the Company cash or a check sufficient to pay the exercise price;

            (iii) to the extent permitted by the Board and explicitly provided
in an Option Agreement (A) by delivery of shares of Common Stock owned by the
Participant valued at their fair market value as determined by the Board in good
faith ("Fair Market Value"), which Common Stock was owned by the Participant
least six months prior to such delivery, or (B) by payment of such other lawful
consideration as the Board may determine; or

            (iv) any combination of the above permitted forms of payment.

6.    Restricted Stock
      ----------------

      (a) Grants. The Board may grant Awards entitling recipients to acquire
          ------
shares of Common Stock, subject to the right of the Company to repurchase all or
part of such shares at their issue price or other stated or formula price (or to
require forfeiture of such shares if issued at no cost) from the recipient in
the event that conditions specified by the Board in the applicable Award are not
satisfied prior to the end of the applicable restriction period or periods
established by the Board for such Award (each, "Restricted Stock Award").

      (b) Terms and Conditions. The Board shall determine the terms and
          --------------------
conditions of any such Restricted Stock Award, including the conditions for
repurchase (or forfeiture) and the issue price, if any. Any stock certificates
issued in respect of a Restricted Stock Award shall be registered in the name of
the Participant and, unless otherwise determined by the Board, deposited by the
Participant, together with a stock power endorsed in blank, with the Company (or
its designee). At the expiration of the applicable restriction periods, the


                                       4
<PAGE>

Company (or such designee) shall deliver the certificates no longer subject to
such restrictions to the Participant or if the Participant has died, to the
beneficiary designated, in a manner determined by the Board, by a Participant to
receive amounts due or exercise rights of the Participant in the event of the
Participant's death (the "Designated Beneficiary"). In the absence of an
effective designation by a Participant, Designated Beneficiary shall mean the
Participant's estate.

7.    Other Stock-Based Awards
      ------------------------

      The Board shall have the right to grant other Awards based upon the Common
Stock having such terms and conditions as the Board may determine, including the
grant of shares based upon certain conditions, the grant of securities
convertible into Common Stock and the grant of stock appreciation rights.

8.    General Provisions Applicable to Awards
      ---------------------------------------

      (a) Transferability of Awards. Except as the Board may otherwise determine
          -------------------------
or provide in an Award, Awards shall not be sold, assigned, transferred, pledged
or otherwise encumbered by the person to whom they are granted, either
voluntarily or by operation of law, except by will or the laws of descent and
distribution, and, during the life of the Participant, shall be exercisable only
by the Participant. References to a Participant, to the extent relevant in the
context, shall include references to authorized transferees.

      (b) Documentation. Each Award under the Plan shall be evidenced by a
          -------------
written instrument in such form as the Board shall determine. Each Award may
contain terms and conditions in addition to those set forth in the Plan.

      (c) Board Discretion. Except as otherwise provided by the Plan, each type
          ----------------
of Award may be made alone or in addition or in relation to any other type of
Award. The terms of each type of Award need not be identical, and the Board need
not treat Participants uniformly.

      (d) Termination of Status. The Board shall determine the effect on an
          ---------------------
Award of the disability, death, retirement, authorized leave of absence or other
change in the employment or other status of a Participant and the extent to
which, and the period during which, the Participant, the Participant's legal
representative, conservator, guardian or Designated Beneficiary may exercise
rights under the Award.


                                       5
<PAGE>

      (e) Acquisition Events
          ------------------

            (i) Consequences of Acquisition Events. Upon the occurrence of an
                ----------------------------------
Acquisition Event (as defined below), each outstanding Option or Award shall be
assumed or an equivalent option or award substituted by the successor
corporation or a parent or subsidiary of the successor corporation, provided
that any such Options substituted for Incentive Stock Options shall satisfy, in
the determination of the Board, the requirements of Section 424(a) of the Code,
unless the successor corporation refuses to assume or substitute for the Option
or Award, in which case (i) the Participant shall have the right to exercise the
Option in full, including with respect to shares of Common Stock as to which it
would not otherwise be exercisable, (ii) all Restricted Stock Awards then
outstanding shall become free of all restrictions prior to the consummation of
the Acquisition Event; and (iii) any other stock-based Awards outstanding shall
become exercisable, realizable or vested in full, or shall be free of all
conditions or restrictions, as applicable to each such Award, prior to the
consummation of the Acquisition Event. If an Option or Award is exercisable in
lieu of assumption or substitution in the event of an Acquisition Event, the
Board shall notify the Participant in writing or electronically that the Option
or Award shall be fully exercisable for a period of not less than forty-five
(45) days from the date of such notice, and the Option or Award shall terminate
upon the expiration of such period.

      Each Option or other Award assumed or substituted pursuant to the
immediately preceding paragraph shall include a provision to the effect that
such Option or Award shall become immediately exercisable (or vested) in full
if, on or prior to the first anniversary of the Acquisition Event, the
Participant terminates his or her employment for Good Reason or is terminated
without Cause by the surviving or acquiring corporation. "Good Reason" shall
mean any significant diminution in the optionee's title, authority, or
responsibilities from and after such Acquisition Event or any reduction in the
annual cash compensation payable to the Participant from and after such
Acquisition Event, or the relocation of the Company's place of business at which
the Participant is principally located to a location that is greater than 50
miles from the current site. "Cause" shall mean any willful misconduct by the
Participant which affects the business reputation of the Company or willful
failure by the Participant to perform his or her material responsibilities to
the Company (including, without limitation, breach by the Participant of any
provision of any employment, consulting, advisory, nondisclosure,
non-competition or other similar agreement between the Participant and the
Company). The Participant shall be considered to have been discharged for
"Cause" if the Company determines, within 30 days after the Participant's
resignation, that discharge for Cause was


                                       6
<PAGE>

warranted.

      An "Acquisition Event" shall mean: (a) any merger or consolidation which
results in the voting securities of the Company outstanding immediately prior
thereto representing immediately thereafter (either by remaining outstanding or
by being converted into voting securities of the surviving or acquiring entity)
less than 50% of the combined voting power of the voting securities of the
Company or such surviving or acquiring entity outstanding immediately after such
merger or consolidation; (b) any sale of all or substantially all of the assets
of the Company; or (c) the complete liquidation of the Company.

            (ii) Assumption of Options Upon Certain Events. The Board may grant
                 -----------------------------------------
Awards under the Plan in substitution for stock and stock-based awards held by
employees of another corporation who become employees of the Company as a result
of a merger or consolidation of the employing corporation with the Company or
the acquisition by the Company of property or stock of the employing
corporation. The substitute Awards shall be granted on such terms and conditions
as the Board considers appropriate in the circumstances.

      (f) Withholding. Each Participant shall pay to the Company, or make
          -----------
provision satisfactory to the Board for payment of, any taxes required by law to
be withheld in connection with Awards to such Participant no later than the date
of the event creating the tax liability. The Board may allow Participants to
satisfy such tax obligations in whole or in part in shares of Common Stock,
including shares retained from the Award creating the tax obligation, valued at
their Fair Market Value. The Company may, to the extent permitted by law, deduct
any such tax obligations from any payment of any kind otherwise due to a
Participant.

      (g) Amendment of Award. The Board may amend, modify or terminate any
          ------------------
outstanding Award, including but not limited to, substituting therefor another
Award of the some or a different type, changing the date of exercise or
realization, and converting an Incentive Stock Option to a Nonstatutory Stock
Option, provided that the Participant's consent to such action shall be required
unless the Board determines that the action, taking into account any related
action, would not materially and adversely affect the Participant.

      (h) Conditions on Delivery of Stock. The Company will not be obligated to
          -------------------------------
deliver any shares of Common Stock pursuant to the Plan or to remove
restrictions from shares previously delivered under the Plan until (i) all
conditions of the Award have been met or removed to the satisfaction of the
Company, (ii) in the opinion of the Company's counsel, all other legal matters
in connection


                                       7
<PAGE>

with the issuance and delivery of such shares have been satisfied, including any
applicable securities laws and any applicable stock exchange or stock market
rules and regulations, and (iii) the Participant has executed and delivered to
the Company such representations or agreements as the Company may consider
appropriate to satisfy the requirements of any applicable laws, rules or
regulations. The Company shall not be obligated to apply for or to obtain any
listing, registration or qualification with respect to any shares of Common
Stock issued pursuant to the Plan.

      (i) Acceleration. The Board may at any time provide that any Options shall
          ------------
become immediately exercisable in full or in part, that any Restricted Stock
Awards shall be free of all restrictions or that any other stock-based Awards
may become exercisable in full or in part or free of some or all restrictions or
conditions, or otherwise realizable in full or in part, as the case may be.

9.    Miscellaneous
      -------------

      (a) No Right To Employment or Other Status. No person shall have any claim
          --------------------------------------
or right to be granted an Award, and the grant of an Award shall not be
construed as giving a Participant the right to continued employment or any other
relationship with the Company. The Company expressly reserves the right at any
time to dismiss or otherwise terminate its relationship with a Participant free
from any liability or claim under the Plan, except as expressly provided in the
applicable Award.

      (b) No Rights As Stockholder. Subject to the provisions of the applicable
          ------------------------
Award, no Participant or Designated Beneficiary shall have any rights as a
stockholder with respect to any shares of Common Stock to be distributed with
respect to an Award until becoming the record holder of such shares.

      (c) Provision for Foreign Participants. The Board of Directors may,
          ----------------------------------
without amending the Plan, modify awards or options granted to participants who
are foreign nationals or employed outside the United States to recognize
differences in laws, rules, regulations or customs of such foreign jurisdictions
with respect to tax, securities, currency, employee benefit or other matters.

      (d) Effective Date and Term of Plan. The Plan shall become effective on
          -------------------------------
the date on which it is adopted by the Board, but no Award granted to a
Participant designated as subject to Section 162(m) by the Board shall become
exercisable, vested or realizable, as applicable to such Award, unless and until
the Plan has been approved by the Company's stockholders. No Awards shall be
granted under the Plan after the completion of ten years from the earlier of


                                       8
<PAGE>

(i) the date on which the Plan was adopted by the Board or (ii) the date the
Plan was approved by the Company's stockholders, but Awards previously granted
may extend beyond that date.

      (e) Amendment of Plan. The Board may amend, suspend or terminate the Plan
          -----------------
or any portion thereof at any time, provided that no Award granted to a
Participant designated as subject to Section 162(m) by the Board after the date
of such amendment shall become exercisable, realizable or vested, as applicable
to such Award (to the extent that such amendment to the Plan was required to
grant such Award to a particular Participant), unless and until such amendment
shall have been approved by the Company's stockholders.

      (f) Stockholder Approval. For purposes of this Plan, stockholder approval
          --------------------
shall mean approval by a vote of the stockholders in accordance with the
requirements of Section 162(m) of the Code.

      (g) Governing Law. The provisions of the Plan and all Awards made
          -------------
hereunder shall be governed by and interpreted in accordance with the laws of
the Commonwealth of Massachusetts, without regard to any applicable conflicts of
law.


                                       9