<PAGE>
As filed with the Securities and Exchange Commission on May 19, 2000
Registration No. 333-34286
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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AMENDMENT No. 1
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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NETWORK ENGINES, INC.
(Exact name of registrant as specified in its charter)
Delaware 3572 04-3064173
(State or other (Primary Standard (I.R.S. Employer
jurisdiction of Industrial
incorporation or Classification Code Identification Number)
organization) Number)
25 Dan Road, Canton, Massachusetts 02021-2817
(781) 828-6767
(Address Including Zip Code, and Telephone Number Including Area Code, of
Registrant's Principal Executive Offices)
-----------
Lawrence A. Genovesi
Network Engines, Inc.
Chairman of the Board, President, Chief Executive Officer and Chief Technology
Officer
25 Dan Road, Canton, Massachusetts 02021-2817
(781) 828-6767
(Name, Address Including Zip Code and Telephone Number Including Area Code, of
Agent for Service)
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Copies to:
Philip P. Rossetti, Esq. Michael A. Conza, Esq.
Hale and Dorr LLP Testa, Hurwitz & Thibeault, LLP
60 State Street, Boston, Massachusetts 125 High Street, Boston, Massachusetts
02109 02110
Telephone: (617) 526-6000 Telephone: (617) 248-7000
Telecopy: (617) 526-5000 Telecopy: (617) 248-7100
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Approximate date of commencement of proposed sale to the public: As soon as
practicable after the effective date hereof.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act,
check the following box. [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration number of the earlier effective registration statement for the
same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration number of the earlier effective registration statement for the
same offering. [_]
If delivery of the Prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
CALCULATION OF REGISTRATION FEE
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<TABLE>
<CAPTION>
Proposed
Maximum Proposed Maximum Amount of
Title of Each Class of Amount to be Offering Price Aggregate Registration
Securities to be Registered Registered Per Share(1) Offering Price(1) Fee(2)
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<S> <C> <C> <C> <C>
Common Stock, $.01 par value per share.. 7,187,500 $13.00 $93,437,500 $24,668(3)
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</TABLE>
(1) Estimated solely for the purpose of calculating the amount of the
registration fee pursuant to Rule 457(o) under the Securities Act of 1933,
as amended.
(2) Calculated pursuant to Rule 457(a) based on an estimate of the proposed
maximum aggregate offering price including the amount attributable to the
underwriters' overallotment option.
(3) $22,770 of the registration fee was previously paid at the time of the
initial filing of this Registration Statement.
-----------
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
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<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+We will amend and complete the information in this prospectus. Although we +
+are permitted by U.S. federal securities laws to offer these securities using +
+this prospectus, we may not sell them or accept your offer to buy them until +
+the documentation filed with the SEC relating to these securities has been +
+declared effective by the SEC. This prospectus is not an offer to sell these +
+securities or our solicitation of your offer to buy these securities in any +
+jurisdiction where that would not be permitted or legal. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION--May 19, 2000
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Prospectus
, 2000
[LOGO OF NETWORK ENGINES]
6,250,000 Shares of Common Stock
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<TABLE>
<S> <C>
Network Engines, The Offering:
Inc.:
. We are offering to
. We develop, market the public
and provide 6,250,000 shares
integrated and of our common
powerful server stock.
appliances that
enable . The underwriters
organizations to have an option to
provide purchase up to
information and 937,500 additional
applications over shares from us to
the Internet. cover over-
allotments.
Proposed Symbol &
Market: . This is our
initial public
. We have applied offering and we
for quotation on anticipate that
the Nasdaq the initial public
National Market offering price
under the symbol will be between
"NENG." $11.00 and $13.00
per share.
. Closing: ,
2000.
</TABLE>
--------------------------------------------
<TABLE>
<CAPTION>
Per
Share Total
-------------------------------------------
<S> <C> <C>
Public offering price: $ $
Underwriting fees:
Proceeds to Network Engines:
-------------------------------------------
</TABLE>
This investment involves risk. See "Risk Factors" beginning on page 5.
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Neither the SEC nor any state securities commission has determined whether this
prospectus is truthful or complete. Nor have they made, nor will they make, any
determination as to whether anyone should buy these securities. Any
representation to the contrary is a criminal offense.
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Donaldson, Lufkin & Jenrette
Dain Rauscher Wessels
Robertson Stephens
DLJdirect Inc.
<PAGE>
[The inside front cover includes a depiction of groupings of varying numbers
of our WebEngine Roadster server appliances which are connected by gold colored
lines to a gold circle. In turn, inside the gold circle is a depiction of an
Internet browser which can be used to manage the groupings of server appliances
through the Internet. In the upper right-hand corner of the graphic, the
following text appears:
Integrated Remote Management
. Lights Out Control
. Single-location, Browser-based Interface
. Rules-based Notification Levels
. Limits Need for On-site Technicians
Beneath the graphic is the following text:
Internet Server Appliances
. Powerful Web Content Servers
. Choices of Appliances to Meet Specific Customer Needs
. Clustered to Deliver High Performance
. Can be Placed in Multiple Locations to Reduce Network Delay
Above the graphic is our logo.]
<PAGE>
You should rely only on the information contained in this prospectus. We
have not authorized anyone to provide you with information different from that
contained in this prospectus. We are offering to sell, and seeking offers to
buy, shares of common stock only in jurisdictions where offers and sales are
permitted. The information contained in this prospectus is accurate only as of
the date of this prospectus, regardless of the time of delivery of the
prospectus or any sale of the common stock.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
Prospectus Summary................. 1
Risk Factors....................... 5
Forward-Looking Statements and
Industry Data..................... 19
Use of Proceeds.................... 20
Dividend Policy.................... 20
Capitalization..................... 21
Dilution........................... 22
Selected Financial Data............ 23
Management's Discussion and
Analysis of Results of Operations
and Financial Conditions.......... 26
</TABLE>
<TABLE>
<CAPTION>
Page
<S> <C>
Business......................... 37
Management....................... 51
Related Party Transactions....... 60
Principal Stockholders........... 64
Description of Capital Stock..... 66
Shares Eligible For Future Sale.. 70
Underwriting..................... 73
Legal Matters.................... 75
Experts.......................... 76
Where You Can Find Additional
Information..................... 76
Index To Financial Statements.... F-1
</TABLE>
We have applied for a trademark registration for "Network Engines," and our
trademarks, among others, include "WebEngine Roadster NT," "WebEngine Roadster
LX," "WebEngine Viper NT," "WebEngine Viper LX," "AdminEngine" and
"CommerceEngine." This prospectus also contains other trademarks, servicemarks
and tradenames that are the property of other parties.
i
<PAGE>
PROSPECTUS SUMMARY
You should read the following summary together with the more detailed
information regarding our company and the common stock we are offering and the
financial statements and related notes to those statements that appear
elsewhere in this prospectus.
Network Engines, Inc.
We develop, market and provide integrated and powerful server appliances
that enable organizations to provide information and applications over the
Internet. Server appliances are a new category of computer network
infrastructure devices that deliver specific functionality through a
combination of pre-packaged hardware and software. Unlike general-purpose
servers, our server appliances are high-powered, compact products that use
either Windows or Linux operating systems and support a range of applications
and are available with varying amounts of computing power. Our server
appliances are scalable, which means that our server appliances can be used as
standalone devices or can be easily and quickly connected in groups, or
clusters, of up to 256 units to meet different management and performance
requirements. Our server appliances are designed to meet the complex needs and
requirements of e-commerce and Internet-based organizations, including "dot
com" companies, web hosting providers, application service providers and
Internet service providers.
We offer a broad range of server appliance products that enable our
customers to create Internet content delivery systems with a wide range of
power at a reduced total cost of ownership. Our server appliances are easy to
install and configure and are designed to meet our customers' needs by
combining specific application functionality within small physical packaging.
In addition, our server appliance products contain integrated hardware and
software features that allow multiple units or groups of units to be managed
from a single location with "lights out" management. Lights out management is
the management of the appliance remotely without the assistance of any on-site
technicians.
The openness and accessibility of the Internet enable large and small
organizations to enter this competitive environment by creating Internet sites
and establishing their own network infrastructures. New and emerging
organizations hoping to grow, and well-financed organizations hoping to
increase market share, typically seek to reduce "time-to-revenue," the length
of time between developing their online ideas and the availability of their web
sites to their potential customers. The increase in Internet traffic and demand
for greater bandwidth has resulted in more utilization of remote server
facilities, including co-location facilities, to house servers for Internet-
related businesses.
Traditionally, organizations have built their Internet solutions with
general-purpose servers, requiring extensive time and technical resources. To
extend the power and features of a general-purpose server, organizations must
integrate numerous discrete hardware and software elements, including operating
systems, applications, security systems, load balancers and management tools.
This approach is not well-suited for use in remote server facilities because it
typically creates large, complex systems that require substantial facility
space. In addition, few vendors, if any, provide the ability to manage these
systems remotely without any on-site technicians. When organizations use
general-purpose servers to handle Internet traffic, they typically face a
higher total cost of ownership because equipment costs, facility costs and
operating expenses for general-purpose servers are high and time-to-revenue is
increased.
1
<PAGE>
Server appliances were developed to address the shortcomings of general-
purpose servers. International Data Corporation estimates that the worldwide
market for server appliances will grow to $8.0 billion in 2003 from
approximately $214.6 million in 1999, a compounded annual growth rate of 147%.
As market acceptance of server appliances grows, we expect that users will
increasingly demand products that meet specific functional requirements and
reduce total cost of ownership factors, including time-to-revenue, packaging
density, installation and management functionality.
We have assembled a research and development team of highly-skilled
engineers with significant experience in high-density packaging, server design,
embedded management, networking and software. We believe that this team will
allow us to build upon our current technology platforms and expand the features
and functionality of our suite of server appliances. In addition, we have
formed strategic relationships with technology vendors that will enhance our
total product offerings. We sell our products through a direct sales
organization and through a network of channels that includes systems
integrators, distributors and licensed manufacturers. In fiscal 1999, we had
net revenues of $6.0 million and a net loss of $5.8 million. For the six months
ended March 31, 2000, we had net revenues of $10.5 million and a net loss of
$5.8 million.
Our objective is to become the leading global provider of Internet server
appliances. We intend to increase market acceptance of server appliances for
Internet-based applications by providing and expanding our range of specific-
purpose server appliances that can be easily grouped to increase application
power and can be easily integrated into managed clusters.
--------------------
Our principal executive offices are located at 25 Dan Road, Canton,
Massachusetts 02021-2817 and our telephone number is (781) 828-6767. Our World
Wide Web site address is www.networkengines.com. The information on our web
site is not incorporated by reference into this prospectus.
2
<PAGE>
The Offering
<TABLE>
<C> <S>
Common stock offered................................ 6,250,000 shares
Common stock to be outstanding after this offering.. 32,673,629 shares
Use of proceeds..................................... For research and
development, sales and
marketing including
international expansion,
potential acquisitions of
businesses, technologies
or products and general
corporate purposes. See
"Use of Proceeds."
Proposed Nasdaq National Market symbol.............. NENG
</TABLE>
The number of shares that will be outstanding after the offering is based on
the number of shares outstanding as of April 30, 2000 and excludes:
. 3,721,615 shares of common stock issuable upon exercise of stock options
outstanding as of April 30, 2000, with a weighted average exercise price
of $1.54 per share, of which options to purchase 56,505 shares were then
exercisable;
. 1,882,851 shares of common stock reserved for issuance upon exercise of
warrants outstanding as of April 30, 2000, with a weighted average
exercise price of $0.35 per share; and
. 4,506,035 shares of common stock reserved for future grant under our
stock plans.
See "Capitalization," "Management--Benefit Plans" and "Description of
Capital Stock."
Assumptions That Apply To This Prospectus
Unless we indicate otherwise, all information in this prospectus is based on
the following:
. conversion of all outstanding shares of preferred stock into shares of
common stock effective upon the closing of this offering;
. no exercise by the underwriters of their over-allotment option; and
. a 2.5-for-1 stock split which will be effected prior to this offering.
3
<PAGE>
Summary Financial Data
(in thousands, except per share data)
The following summary financial data should be read in conjunction with our
financial statements and related notes and with "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and other financial
data. The statement of operations data for the years ended September 30, 1998
and 1999 is derived from audited financial statements included elsewhere in
this prospectus. The statement of operations data for the three months ended
December 31, 1998, March 31, 1999, June 30, 1999, September 30, 1999, December
31, 1999 and March 31, 2000 and the balance sheet data as of March 31, 2000 are
derived from our unaudited financial statements.
Unaudited pro forma basic and diluted net loss per share have been
calculated assuming the conversion of all outstanding shares of our series A,
series B, series C and series D preferred stock into shares of common stock, as
if the shares had converted immediately upon issuance.
<TABLE>
<CAPTION>
Year Ended Three Months Ended
September 30, ---------------------------------------------------------------------
---------------- December 31, March 31, June 30, September 30, December 31, March 31,
1998 1999 1998 1999 1999 1999 1999 2000
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Statement of Operations
Data:
Net revenues............ $ 1,102 $ 6,031 $ 223 $ 893 $ 908 $ 4,007 $ 4,415 $ 6,051
Gross profit (loss)..... (489) 1,298 (162) 10 (96) 1,546 1,802 1,859
Loss from operations.... (3,625) (5,247) (1,240) (1,325) (1,757) (925) (1,616) (4,501)
Net loss................ (4,199) (5,830) (2,170) (1,000) (1,753) (907) (1,586) (4,221)
Net loss attributable to
common stockholders.... (4,199) (6,053) (2,170) (1,009) (1,763) (1,111) (2,396) (7,670)
Pro forma net loss per
common share--basic and
diluted................ $ (0.63) $ (0.20)
======= =======
Shares used in computing
pro forma basic and
diluted net loss per
common share........... 9,242 20,597
</TABLE>
The pro forma balance sheet data reflects the conversion of all outstanding
shares of redeemable convertible preferred stock into common stock upon
completion of this offering. The pro forma as adjusted balance sheet data
further adjusts the pro forma data to give effect to the sale of 6,250,000
shares of common stock offered hereby at the assumed initial public offering
price of $12.00 per share, less underwriting discounts and commissions and
estimated offering expenses.
<TABLE>
<CAPTION>
As of March 31, 2000
----------------------------
Pro Pro Forma
Actual Forma As Adjusted
<S> <C> <C> <C>
Balance Sheet Data:
Cash, cash equivalents and restricted cash......... $17,172 $17,172 $85,922
Working capital.................................... 20,497 20,497 89,247
Total assets....................................... 29,979 29,979 98,729
Long-term debt, less current portion............... 109 109 109
Redeemable convertible preferred stock............. 41,976 -- --
Total stockholders' equity (deficit)............... (18,898) 23,078 91,828
</TABLE>
4
<PAGE>
RISK FACTORS
An investment in our common stock involves a high degree of risk. You should
consider the following risks and the other information in this prospectus
before deciding to invest in our common stock. Our business and results of
operations could be seriously harmed by any of the following risks. The trading
price of our common stock could decline due to any of these risks, and you may
lose part or all of your investment.
Risks Related to Our Financial Results
You may have difficulty evaluating our business and operating results because
we began selling our current products in June 1999, February 2000 and the third
quarter of fiscal 2000.
We are an early-stage company in the new and rapidly evolving market for
server appliances. Because of our limited operating history in the server
appliance market, it is difficult to discern trends that may emerge and affect
our business. We did not begin shipping our current products until quite
recently. We began shipping our WebEngine Blazer and AdminEngine in June 1999
and February 2000, respectively. We began shipping our WebEngine Roadster and
WebEngine Viper products in the third quarter of fiscal 2000. Our limited
historical financial performance may make it difficult for you to evaluate the
success of our business to date and to assess its future viability.
We have a history of losses and may experience losses in the future, which
could result in the market price of our common stock declining.
Since our inception, we have incurred significant net losses, including net
losses of $4.2 million in 1998, $5.8 million in 1999 and $5.8 million for the
six months ended March 31, 2000 and we expect to have net losses in the future.
In addition, we had an accumulated deficit of $17.2 million as of March 31,
2000. We believe that our future growth depends upon the success of our new
product development and sales and marketing efforts, which will require us to
incur significant product development, sales and marketing and administrative
expenses. As a result, we will need to generate significant revenues to achieve
profitability. We cannot be certain that we will achieve profitability in the
future or, if we achieve profitability, that we will be able to sustain it. If
we do not achieve and maintain profitability, the market price for our common
stock may decline, perhaps substantially.
We anticipate that our expenses will increase substantially in the next 12
months as we:
. increase our direct sales and marketing activities;
. develop our technology, expand our existing product lines and create and
market additional server appliance products;
. make additional investments to develop our brand;
. develop strategic alliances with third-party technology vendors;
. expand our distribution and reseller channels; and
. implement additional internal systems, develop additional infrastructure
and hire additional management to keep pace with our growth.
5
<PAGE>
Any failure to significantly increase our revenues and control costs as we
implement our product and distribution strategies would also harm our ability
to achieve and maintain profitability and could negatively impact the market
price of our common stock.
We may not be able to sustain our current revenue growth rates, which could
cause our stock price to decline.
Although our revenues grew in 1998, grew rapidly in 1999 and have grown
rapidly to date in 2000, we do not believe that we will maintain this rate of
revenue growth. This is because we started from a small base of revenue and it
is difficult to achieve high percentage increases over a larger revenue base.
In addition, growing competition, the incremental manner in which customers
implement server appliances and our inexperience in selling our products could
also affect our revenue growth. Any significant decrease in our rate of revenue
growth after this offering could result in a decrease in our stock price.
We derive a substantial portion of our revenues from a small number of
customers, and our revenues may decline significantly if any major customer
cancels or delays a purchase of our products.
A relatively small number of customers accounted for a significant portion
of our net revenues. In the fiscal year ended September 30, 1999, sales to
InterVu, International Business Machines, or IBM, and Microsoft (WebTV)
accounted for 46%, 28% and 14% of net revenues, respectively. In the six months
ended March 31, 2000, sales to IBM, Microsoft (WebTV) and Tellme Networks,
accounted for 26%, 18% and 14% of net revenues, respectively. None of our
customers, including our licensed manufacturers and OEMs, is obligated to
purchase any quantity of our products in the future. If any of our large
customers stop purchasing from us or delay future purchases, our revenues and
profitability may be adversely affected, our reputation in the industry may
suffer and our ability to predict cash flow accurately may decrease. Revenues
from a relatively small number of our licensed manufacturer, OEM and direct
sales customers may account for a significant portion of our net revenues.
Accordingly, unless and until we diversify and expand our customer base, our
future success will depend upon the timing and size of future purchase orders,
if any, from our largest customers and, in particular:
. the success of our licensed manufacturer and OEM customers in marketing
our products;
. the product requirements of our direct sales customers; and
. the financial and operational success of our licensed manufacturer, OEM
and direct sales customers.
In addition, because we have a small number of customers, some of which are
significantly larger than we are, these customers may have increased bargaining
power to seek lower prices and better terms.
Our quarterly revenues and operating results may fluctuate; any resulting
failure to meet market expectations may cause the price of our common stock to
decline.
Our quarterly revenues and operating results are difficult to predict and
may fluctuate significantly from quarter to quarter because our current
products are relatively new and the future growth of the market for our
products is uncertain. Four of our current server appliance products
6
<PAGE>
were released in the last year, with two released in the current fiscal
quarter. If our quarterly revenues or operating results fall below the
expectations of investors or public market research analysts, the price of our
common stock could decline substantially. Factors that are likely to cause
quarterly fluctuations in our operating results include:
. shifts in the timing of product releases;
. delays or cancellations of orders by a few customers from our currently
limited customer base;
. the timing of large orders;
. temporary shortages in supply from vendors;
. fluctuations in production or demand;
. changes in our pricing policies or those of our competitors;
. our ability to expand our operations and the amount and timing of
expansion-related and infrastructure expenditures;
. political instability, or natural disasters, in the countries in which
we operate or in which we seek to expand;
. technical difficulties and information system outages; and
. global economic conditions.
A large proportion of our expenses, including those related to research and
development, sales and marketing, general and administrative functions and
amortization of deferred compensation, are essentially fixed in the short term.
As a result, if our net sales are less than forecasted, our quarterly operating
results are likely to be adversely affected.
If sales of our new or enhanced products are lower than expected, our revenues
and operating results will be adversely affected.
If our customers do not continue to purchase our new and enhanced products,
our revenues and operating results will be adversely affected. Factors that may
affect the market acceptance of our products, some of which are beyond our
control, include the following:
. the growth and changing requirements of the server appliance market;
. the performance, quality, price and total cost of ownership of our
products;
. the availability, price, quality and performance of competing products
and technologies; and
. the successful development of our relationships with licensed
manufacturers, OEMs and existing and potential channel partners.
We may not succeed in developing and marketing new types of server appliance
products, or do so in a timely manner, and our operating results may decline as
a result.
We have recently released our AdminEngine product and are developing
additional types of server appliance products. Developing new products that
meet the needs of the server appliance market requires significant additional
expense and development resources. If we fail to successfully develop and
market new products, our operating results will suffer.
7
<PAGE>
If the commodification of products and competition in the server appliance
market increases, then the average unit price of our products may decrease and
our operating results may suffer.
Products in the server appliance market may be subject to potential
commodification as the industry matures and other businesses introduce
competing products. The average unit price of our products may also decrease in
response to changes in product mix, competitive pricing pressures, or new
product introductions by us or our competitors. If we are unable to offset a
decrease in our average selling prices by increasing our sales volumes, our
revenues will decline. Changes in the mix of sales of our products, including
the mix of higher margin sales of products sold in smaller quantities and
somewhat lower margin sales of products sold in larger quantities, could
adversely affect our operating results for future quarters. To maintain our
gross margins, we also must continue to reduce the manufacturing cost of our
products. Our efforts to produce higher margin products, continue to improve
our products and produce new products may make it difficult to reduce our
manufacturing cost per product. Further, our current reliance on our single
manufacturer, SCI Systems, may not allow us to reduce our cost per product.
Risks Related to Growth of the Internet and the Server Appliance Market
If server appliances are not increasingly adopted as a means to deliver
information and conduct commerce over the Internet, the market for our products
will not grow and the market price for our common stock could decline as a
result of lower revenues or reduced investor expectations.
We expect that substantially all of our revenues will continue to come from
sales of our current and future server appliance products. As a result, we
depend on the growing use of server appliances as a means to deliver
information and conduct commerce over the Internet. The market for server
appliance products, particularly those using the Internet to deliver
information and process commercial transactions, has only recently begun to
develop and is evolving rapidly. Because this market is new, we cannot predict
its potential size or future growth rate. Our revenues may not continue to grow
and the market price for our common stock could decline if the server appliance
market does not grow rapidly.
We believe that our expectations for the growth of the server appliance
market may not be fulfilled if customers continue to use general-purpose
servers. The role of our server appliances could, for example, be limited if
general-purpose servers become better at performing functions currently being
performed by our specific-purpose server appliances or are offered at a lower
cost. This could force us to lower the prices of our products or result in
fewer sales of our products.
If the market for server appliance products does not grow because medium to
large Internet service providers and application service providers in our
target market are not receptive to them, our revenues may not grow.
Large Internet service providers and application service providers that
offer hosting services may not be as receptive to our products as other
organizations because they currently rely on, and their buying programs are
more likely to be based on, established, proprietary operating systems and
general-purpose servers. In addition, we expect that Internet service providers
that specialize in providing Internet access and non-hosting services to
consumers will not be substantial purchasers of
8
<PAGE>
our products. Consolidation has recently begun to occur in the Internet service
provider and application service provider market, with many large Internet
service providers and application service providers acquiring smaller and
regional companies. Continued consolidation in this market could result in some
of our customers being absorbed into larger organizations. This consolidation
may increase the number of larger corporations that may not be as receptive to
our products and, as a result, our revenues would not grow and may even
decrease.
Potential increases or changes in governmental regulation of Internet
communication and commerce could discourage the growth of the Internet, which
could decrease the demand for our products.
Due to concerns arising from the increasing use of the Internet, a number of
laws and regulations have been, and may be, adopted covering issues including
user privacy, taxation, pricing, acceptable content and quality of products and
services. Legislative changes could dampen the growth in use of the Internet
generally and decrease the acceptance of the Internet as a communications and
commercial medium. Further, due to the global nature of the Internet, it is
possible that multiple federal, state or foreign jurisdictions might attempt to
regulate Internet transmissions or levy sales or other taxes relating to
Internet-based activities. Moreover, the applicability to the Internet of
existing laws, including laws governing property ownership, libel and personal
privacy, is uncertain. We cannot assess the possible negative impact of any
future regulation of the Internet on our business.
Risks Related to Our Product Manufacturing
Our dependence on sole source and limited source suppliers for key components
makes us susceptible to supply shortages that could prevent us from shipping
customer orders on time, if at all, and could result in lost sales or
customers.
We depend upon single source and limited source suppliers for our industry-
standard processors and power supplies and our custom-printed circuit boards,
chassis and sheet metal parts. We also depend on limited sources to supply
several other industry-standard components. We have in the past experienced,
and may in the future experience, shortages of, or difficulties in acquiring,
components needed to produce our products. In particular, there have also been
recent industry-wide shortages and delays in the production of commodities,
including high-performance processor boards, memory chips and disk drives.
Shortages have been of limited duration and have not yet caused delays in
production of our products. However, shortages in supply of these key
components for an extended time would cause delays in the production of our
products, prevent us from satisfying our contractual obligations and meeting
customer expectations, and result in lost sales or customers. If we are unable
to buy components we need or if we are unable to buy components at acceptable
prices, we will not be able to manufacture and deliver our products on a timely
or cost-effective basis to our customers.
We rely on a single contract manufacturer to produce our products and, if our
manufacturer fails to meet our requirements, we will be unable to meet customer
requirements and our customer relationships would suffer.
We do not have a written agreement with SCI Systems that guarantees
production levels or manufacturing prices and we may not be able to enter into
a written agreement with SCI Systems in
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<PAGE>
the future. SCI Systems may not have additional facilities available when we
need them. Commencing volume production or expanding production to another
facility owned by SCI Systems may be expensive and time-consuming. In addition,
commencement of the manufacturing of our products at a second SCI Systems
manufacturing site or any additional sites we may need in the future may cause
transitional problems, including delays and quality control issues, that could
cause us to lose sales and impair our ability to achieve profitability. We may
need to find new outside manufacturers to manufacture our products in higher
volume and at lower costs to meet increased demand and competition. If we are
required or choose to change outside manufacturers, we may lose sales and
customer relationships may suffer.
If we do not accurately forecast our component requirements, our manufacturing
may be interrupted and delivery of products may be delayed.
We use rolling forecasts based on anticipated product orders to determine
our component requirements. Lead times for materials and components that we
order vary significantly and depend on factors including specific supplier
requirements, contract terms and current market demand for those components. In
addition, a variety of factors, including the timing of product releases,
potential delays or cancellations of orders and the timing of large orders,
make it difficult to predict product orders. As a result, our component
requirement forecasts may not be accurate. If we overestimate our component
requirements, we may have excess inventory, which would increase our costs. If
we underestimate our component requirements, we may have inadequate inventory,
which could interrupt our manufacturing and delay delivery of our products to
our customers. Any of these occurrences would negatively impact our business
and operating results.
10
<PAGE>
Risks Related to Our Marketing and Sales Efforts
We need to expand our direct sales channel and build our indirect sales channel
of system integrators and resellers to distribute our products and, if we fail
to do so, our growth could be limited.
In order to increase market awareness and sales of our products, we will
need to substantially expand our direct sales programs and build our network of
system integrators and resellers, both domestically and internationally. If we
fail in this endeavor, our growth will be limited. To date, we have relied
primarily on our direct sales force to generate demand for our products. We
have recently expanded our direct sales force and plan to hire additional sales
personnel. Competition for qualified sales people is intense, and we might not
be able to hire the quality and number of sales people we require. We have
limited experience working with systems integrators and resellers. We expect we
will need to expend significant resources to enlist systems integrators and
resellers and educate them regarding our products.
We may incur significant costs to promote our brand that may not result in the
desired brand recognition by customers or increased sales.
In the fast growing market for server appliances, we believe we need to
establish a strong brand to compete successfully. In order to attract and
retain customers, we believe that our brand must be recognized and viewed
favorably by our customers and end users. Although we intend to advertise and
promote our brand, these strategies may fail. If we are unable to design and
implement effective marketing campaigns or otherwise fail to promote and
maintain our brand, our sales could decline. Our business may also suffer if we
incur excessive expenses promoting and maintaining our brand but fail to
achieve the expected or desired increase in revenues.
If we are unable to expand our customer service and support organization, we
may not be able to retain our existing customers and attract new customers.
We currently have a small customer service and support organization and will
need to increase our staff to support new customers and the expanding needs of
our existing customers. Hiring customer service and support personnel is very
competitive in our industry due to the limited number of people available with
the necessary technical skills and understanding of server appliance products.
If we are unable to expand our customer service and support organization, we
may not be able to retain our existing customers and attract new customers. In
addition, we may be required to pay higher compensation and benefits to hire
these people than we expect. In this event, the cost of expanding our customer
service and support organization may have a negative impact on margins and
operating results.
Risks Related to Competition Within Our Industry
If we are not able to effectively compete against providers of general-purpose
servers or specific-purpose servers, our revenues will not increase and may
decrease.
In the market for server appliances, we face significant competition from
larger companies who market general-purpose or specific-purpose servers and
have greater financial resources and name recognition than we do. Many of these
companies have larger and more established service organizations to support
these products. These and other large competitors may be able to leverage
11
<PAGE>
their existing resources, including their service organizations, and provide a
wider offering of products and higher levels of support on a more cost-
effective basis than we can. In addition, competing companies may be able to
undertake more extensive promotional activities, adopt more aggressive pricing
policies and offer more attractive terms to their customers than we can. If
these large competitors provide lower cost server appliances with greater
functionality or support than our products, or if some of their products are
comparable to ours and are offered as part of a range of products that is
broader than ours, our products could become undesirable. Even if the
functionality of competing products is equivalent to ours, we face a
substantial risk that a significant number of customers would elect to pay a
premium for similar functionality rather than purchase products from a less-
established vendor. Increased competition may negatively affect our business
and future operating results by leading to price reductions, higher selling
expenses or a reduction in our market share.
Our revenues could be reduced if general-purpose server manufacturers make
acquisitions in order to join their extensive distribution capabilities with
our smaller competitors' products.
Compaq, Dell, Hewlett-Packard, IBM, Sun Microsystems and other server
manufacturers may not only develop their own server appliance solutions, but
they may also acquire or establish cooperative relationships with our other
current competitors, including smaller private companies. Because general-
purpose server manufacturers have significant financial and organizational
resources available, they may be able to quickly penetrate the server appliance
market by leveraging the technology and expertise of smaller companies and
utilizing their own extensive distribution channels. For example, Whistle, a
server appliance company, was recently acquired by IBM. We expect that the
server appliance industry will experience consolidation. It is possible that
new competitors or alliances among competitors may emerge and rapidly acquire
significant market share through consolidation.
We may sell fewer products if other vendors' products are no longer compatible
with ours or other vendors bundle their products with those of our competitors
and sell them at lower prices.
Our ability to sell our products depends in part on the compatibility of our
products with other vendors' software and hardware products. Developers of
these products may change their products so that they will no longer be
compatible with our products. These other vendors may also decide to bundle
their products with other server appliances for promotional purposes and
discount the sales price of the bundle. If that were to happen, our business
and future operating results could suffer if we were no longer able to offer
commercially viable products.
Server appliance products are subject to rapid technological change due to
changing operating system software and network hardware and software
configurations, and our sales will suffer if our products are rendered obsolete
by new technologies.
The server appliance market is characterized by rapid technological change,
frequent new product introductions and enhancements, potentially short product
life cycles, changes in customer demands and evolving industry standards. Our
products could be rendered obsolete if products based on new technologies are
introduced or new industry standards emerge.
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<PAGE>
New products and product enhancements can require long development and
testing periods, which requires us to hire and retain increasingly scarce,
technically competent personnel. Significant delays in new product releases or
significant problems in installing or implementing new products could seriously
damage our business. We have on occasion experienced delays in the scheduled
introduction of new and enhanced products and cannot be certain that we will
avoid similar delays in the future.
Our future success depends upon our ability to enhance existing products,
develop and introduce new products, satisfy customer requirements and achieve
market acceptance. We cannot be certain that we will successfully identify new
product opportunities and develop and bring new products to market in a timely
and cost-effective manner.
Risks Related to Our Products' Dependence on Intellectual Property
and Our Use of Our Brand
Our reliance upon contractual provisions and domestic trademark laws to protect
our proprietary rights may not be sufficient to protect our intellectual
property from others who may sell similar products.
Our products are differentiated from those of our competitors by our
internally developed software and hardware and the manner in which they are
integrated into our products. If we fail to protect our intellectual property,
other vendors could sell products with features similar to ours, and this could
reduce demand for our products. We believe that the steps we have taken to
safeguard our intellectual property afford only limited protection. Others may
develop technologies that are similar or superior to our technology or design
around the copyrights and trade secrets we own. Despite the precautions we have
taken, laws and contractual restrictions may not be sufficient to prevent
misappropriation of our technology or deter others from developing similar
technologies.
In addition, the laws of the countries in which we decide to market our
services and solutions may offer little or no effective protection of our
proprietary technology. Reverse engineering, unauthorized copying or other
misappropriation of our proprietary technology could enable third-parties to
benefit from our technology without paying us for it, which would significantly
harm our business.
We have invested substantial resources in developing our products and our
brand, and our operating results would suffer if we were subject to a
protracted infringement claim or one with a significant damages award.
Substantial litigation regarding intellectual property rights and brand
names exists in our industry. We expect that server appliance products may be
increasingly subject to third-party infringement claims as the number of
competitors in our industry segment grows and the functionality of products in
different industry segments overlaps. We are not aware that our products employ
technology that infringes any proprietary rights of third parties. However,
third parties may claim that we infringe their intellectual property rights.
Any claims, with or without merit, could:
. be time-consuming to defend;
. result in costly litigation;
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<PAGE>
. divert our management's attention and resources;
. cause product shipment delays; or
. require us to enter into royalty or licensing agreements.
Royalty or licensing agreements may not be available on terms acceptable to
us, if at all. A successful claim of product infringement against us or our
failure or inability to license the infringed or similar technology could
adversely affect our business because we would not be able to sell the impacted
product without redeveloping it or incurring significant additional expenses.
Other Risks Related to Our Business
Failure to manage our growth successfully could lead to inefficiencies in
conducting our business, increased expenses and slower growth.
In the past year, our operations have expanded greatly. Our growth has
placed, and will continue to place, a significant strain on our management and
operating and financial systems, as well as sales and marketing and
administrative resources. As of April 30, 2000, we had a total of
141 employees, an increase from a total of 33 employees as of December 31,
1998. Additional growth will further strain these resources. If we cannot
manage our expanding operations, we may not be able to continue to grow or we
may grow at a slower rate. To manage any future growth effectively, we must
continue to improve our financial and accounting systems, inventory and
production controls, reporting and procedures, integrate new personnel and
manage expanded operations. If we fail to do so, the quality of our products
and our ability to respond to our customers' needs and retain key personnel
would cause our business to suffer. Also, we may fail to add capacity in a
cost-effective manner or allow our operating costs to escalate faster than
planned.
If we fail to recruit and retain a significant number of qualified technical
personnel and sales and marketing personnel, we may not be able to develop and
introduce our products on a timely basis.
We require the services of a substantial number of qualified technical
personnel. The market for this personnel is characterized by intense
competition, as well as a high level of employee mobility, which makes it
particularly difficult to attract and retain the qualified technical personnel
we require. We have experienced, and we expect to continue to experience,
difficulty in hiring and retaining highly-skilled employees with appropriate
technical qualifications. If we are unable to recruit and retain a sufficient
number of technical personnel, we may not be able to complete development of,
or upgrade or enhance, our products in a timely manner.
The expansion of our sales and marketing department will also require the
hiring and retention of personnel for whom there is also a high demand. If we
are unable to recruit and retain a sufficient number of sales and marketing
personnel, we may not be able to increase market awareness of our products and
generate sales of our products as quickly as we would like. Moreover, we may
only be able to expand our staff of technical personnel and sales and marketing
personnel by providing individuals with compensation packages that are higher
than expected.
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If we cannot manage and expand our international operations profitably, our
revenues may not increase and our business and results of operations would be
adversely affected.
We currently conduct limited business activity outside of North America.
However, we expect international revenue to account for a more significant
percentage of our total revenue in the future. We believe that we must continue
to expand our international sales and fulfillment activities in order to be
successful. There are certain risks inherent in conducting international
operations, including:
. added fulfillment complexities in operations, including multiple
languages, multiple currencies, multiple bills of materials and multiple
stock-keeping units;
. exposure to currency fluctuations;
. longer payment cycles;
. greater difficulties in accounts receivable collections;
. the complexity of ensuring compliance with multiple U.S. and foreign
regulatory requirements, particularly differing laws on intellectual
property rights and export control; and
. labor practices, difficulties in staffing and managing foreign
operations, political instability and potentially adverse tax
consequences.
As we attempt to expand our international sales, any of these factors may
have an adverse effect on our international operations and, consequently, on
our business and results of operations.
If we are unable to find suitable acquisition candidates, our growth could be
impeded.
A component of our business strategy is the acquisition of, or investment
in, complementary businesses, technologies or products. Our ability to identify
and invest in suitable acquisition and investment candidates on acceptable
terms is crucial to this strategy. We may not be able to identify, acquire or
make investments in promising acquisition candidates on acceptable terms.
Moreover, in pursuing acquisition and investment opportunities, we may be in
competition with other companies having similar growth and investment
strategies. Competition for these acquisitions or investment targets could
result in increased acquisition or investment prices and a diminished pool of
businesses, technologies, services or products available for acquisition or
investment. An inability to find suitable acquisition or investment candidates
at reasonable prices could slow our growth rate.
Our acquisition strategy could have an adverse effect on our existing business,
customer satisfaction and operating results.
Acquisitions involve a number of risks, including:
. adverse effects on our reported operating results due to accounting
charges associated with the acquisitions;
. difficulties in management and integration of the acquired business;
. increased expenses, including compensation expense resulting from newly-
hired employees;
. diversion of management resources and attention; and
. potential disputes with sellers of acquired businesses, technologies,
services or products.
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<PAGE>
Our future success is dependent on the services of our founder and other key
personnel, and those persons' knowledge of our business and technical expertise
would be difficult to replace.
Our products and technologies are complex and we are substantially dependent
upon the continued service of our existing engineering personnel, and
especially Lawrence A. Genovesi, our President, Chief Executive Officer and
Chief Technology Officer. We do not have employment agreements with any of our
officers. The loss of any of our key employees could adversely affect our
business and slow our product development processes or sales and marketing
efforts. Although we maintain a key person life insurance policy on Mr.
Genovesi, the amount of this insurance may be inadequate to compensate us for
his loss.
If our products fail to perform properly and conform to our specifications, our
customers may demand refunds or assert claims for damages and our reputation
and operating results may suffer.
Because our server appliance products are complex, they could contain errors
or bugs that can be detected at any point in a product's life cycle. In the
past we have discovered errors in some of our products and have experienced
delays in the shipment of our products during the period required to correct
these errors or we have had to replace defective products that were already
shipped. These delays and replacements have principally related to new product
releases. Errors in our products may be found in the future and any of these
errors could be significant. Detection of any significant errors may result in:
. the loss of or delay in market acceptance and sales of our products;
. diversion of development resources;
. injury to our reputation; or
. increased maintenance and warranty costs.
These problems could harm our business and future operating results. Product
errors or delays could be material, including any product errors or delays
associated with the introduction of new products or the versions of our
products that support Windows or Linux operating systems. If our products fail
to conform to warranted specifications, customers could demand a refund for the
purchase price or assert claims for damages.
Moreover, because our products are used in connection with critical
distributed computing systems services, we may receive significant liability
claims if our products do not work properly. Our agreements with customers
typically contain provisions intended to limit our exposure to liability
claims. However, these limitations may not preclude all potential claims.
Liability claims could require us to spend significant time and money in
litigation or to pay significant damages. Any claims for damages, whether or
not successful, could seriously damage our reputation and our business.
We may need additional capital that may not be available to us and, if raised,
may dilute your ownership interest in us.
We may need to raise additional funds to develop or enhance our services and
solutions, to fund expansion, to respond to competitive pressures or to acquire
complementary products, businesses or
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<PAGE>
technologies. Additional financing may not be available on terms that are
acceptable to us. If we raise additional funds through the issuance of equity
or convertible debt securities, the percentage ownership of our stockholders
would be reduced and these securities might have rights, preferences and
privileges senior to those of our current stockholders. If adequate funds are
not available on acceptable terms, our ability to fund our expansion, take
advantage of unanticipated opportunities, develop or enhance products or
services, or otherwise respond to competitive pressures would be significantly
limited.
Risks Related to this Offering
Our directors, executive officers and existing stockholders will continue to
control us after this offering and could delay or prevent a change in control.
After this offering, our directors, executive officers and existing
stockholders and their affiliates will together control approximately 80.9% of
our outstanding common stock. As a result, these stockholders, if they act
together, will be able to control all matters requiring approval of a majority
of our stockholders, including the election and removal of directors and any
merger, sale of assets and other significant corporate transactions. This
control could:
. delay or prevent a change in control of Network Engines;
. deprive our stockholders of an opportunity to receive a premium for
their common stock as part of a sale of Network Engines or its assets;
and
. affect the market price of our common stock.
We have anti-takeover defenses that could delay or prevent an acquisition and
could adversely affect the price of our common stock.
After this offering, the board of directors will have the authority to issue
up to 5,000,000 shares of preferred stock and, without any further vote or
action on the part of the stockholders, will have the authority to determine
the price, rights, preferences, privileges and restrictions of the preferred
stock. This preferred stock, if issued, might have preference over the rights
of the holders of common stock and could adversely affect the price of our
common stock. The issuance of this preferred stock may make it more difficult
for a third party to acquire us or to acquire a majority of our outstanding
voting stock. We currently have no plans to issue preferred stock.
In addition, provisions of our second amended and restated certificate of
incorporation, second amended and restated by-laws and equity compensation
plans may deter an unsolicited offer to purchase Network Engines. These
provisions, coupled with the provisions of the Delaware General Corporation
Law, may delay or impede a merger, tender offer or proxy contest involving
Network Engines. For example, our board of directors will be divided into three
classes, only one of which will be elected at each annual meeting. These
factors may further delay or prevent a change of control of our business. See
"Description of Capital Stock--Delaware Law and Certain Charter and By-Law
Provisions; Anti-Takeover Effects."
The potential volatility of our stock price could result in substantial losses
for investors.
The trading price of our common stock is likely to be volatile. The stock
market in general, and the market for technology and Internet-related companies
in particular, has experienced extreme
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<PAGE>
volatility. This volatility has often been unrelated to the operating
performance of particular companies. An active public market for our common
stock may not develop or continue after this offering. Investors may not be
able to sell their common stock at or above our initial public offering price.
Prices for the common stock will be determined in the marketplace and may be
influenced by many factors, including variations in our financial results,
changes in earnings estimates by industry research analysts, investors'
perceptions of us and general economic, industry and market conditions.
Future sales by existing stockholders could depress the market price of our
common stock.
Sales of a substantial number of shares of our common stock in the public
market after this offering could depress the market price of our common stock
and could impair our ability to raise capital through the sale of additional
equity securities. See "Shares Eligible for Future Sale."
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<PAGE>
FORWARD-LOOKING STATEMENTS AND INDUSTRY DATA
This prospectus contains forward-looking statements that involve substantial
risks and uncertainties. In some cases you can identify these statements by
forward-looking words including "anticipate," "believe," "could," "estimate,"
"expect," "intend," "may," "should," "will," and "would" or similar words. You
should read statements that contain these words carefully because they discuss
our future expectations, contain projections of our future results of
operations or of our financial position or state other "forward-looking"
information. We believe that it is important to communicate our future
expectations to our investors. However, there may be events in the future that
we are not able to accurately predict or control. The factors listed above in
the section captioned "Risk Factors," as well as any cautionary language in
this prospectus, provide examples of risks, uncertainties and events that may
cause our actual results to differ materially from the expectations we describe
in our forward-looking statements. Before you invest in our common stock, you
should be aware that the occurrence of the events described in these risk
factors and elsewhere in this prospectus could have an adverse effect on our
business, results of operations and financial position.
This prospectus contains industry data related to our business and the
server appliance industry, which we believe is reasonable under the
circumstances. This industry data includes projections that are based on a
number of assumptions. If these assumptions turn out to be incorrect, actual
results may differ from the projections based on these assumptions. The failure
of the server appliance market to grow at these projected rates may have a
material adverse effect on our business, results of operations and financial
condition, and the market price of our common stock.
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<PAGE>
USE OF PROCEEDS
We expect the net proceeds from our sale of 6,250,000 shares of common
stock will be approximately $68.8 million, at an assumed initial public
offering price of $12.00 per share less underwriting discounts and commissions
and estimated offering expenses. If the underwriters' over-allotment option is
exercised in full, we estimate that our net proceeds will be approximately
$79.2 million.
The principal purposes of this offering are to establish a public market
for our common stock, increase visibility in the marketplace, facilitate our
future access to public capital markets, provide liquidity to existing
stockholders and obtain additional working capital.
We have no current specific plan for the proceeds of this offering, but
expect to use the proceeds for research and development, sales and marketing
including international expansion, potential acquisitions of businesses,
technologies or products and general corporate purposes. No specific
acquisitions are currently planned and no portion of the net proceeds has been
allocated for any acquisition. Pending our use of the net proceeds, we intend
to invest the net proceeds in investment grade, interest-bearing securities.
DIVIDEND POLICY
We have never paid or declared any cash dividends on our common stock or
other securities and do not anticipate paying cash dividends in the
foreseeable future. We currently intend to retain all of our future earnings,
if any, for use in the operation and expansion of our business.
Under the terms of our existing credit agreement, we are prohibited from
paying any cash dividends without the prior written consent of our lender.
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CAPITALIZATION
The following table sets forth our cash position and total capitalization
as of March 31, 2000
. on an actual basis;
. on a pro forma basis to give effect to the conversion of all outstanding
shares of our preferred stock into shares of common stock upon the
closing of this offering; and
. on a pro forma as adjusted basis to reflect the sale in this offering of
6,250,000 shares of common stock at an assumed initial public offering
price of $12.00 per share, less underwriting discounts and commissions
and estimated offering expenses payable by us.
This table should be read in conjunction with our financial statements and
notes thereto, which can be found at the end of this prospectus.
<TABLE>
<CAPTION>
As of March 31, 2000
-----------------------------
Pro Pro Forma
Actual Forma As Adjusted
(in thousands)
<S> <C> <C> <C>
Cash, cash equivalents and restricted cash....... $17,172 $17,172 $85,922
======= ======= =======
Current portion of long-term debt................ $ 66 $ 66 $ 66
======= ======= =======
Long-term debt, less current portion............. $ 109 $ 109 $ 109
Redeemable convertible preferred stock:
Series D Convertible Preferred Stock, $.01 par
value; 3,581,554 shares, no shares and no
shares authorized, issued and outstanding,
actual, pro forma and pro forma as adjusted,
respectively.................................. 28,152 -- --
Series C Convertible Preferred Stock, $.01 par
value; 1,123,549 shares, no shares and no
shares authorized, issued and outstanding,
actual, pro forma and pro forma as adjusted,
respectively.................................. 9,949 -- --
Series B Convertible Preferred Stock, $.01 par
value; 357,142 shares, no shares and no shares
authorized, issued and outstanding, actual,
pro forma and pro forma as adjusted,
respectively.................................. 2,750 -- --
Series A Convertible Preferred Stock, $.01 par
value; 185,250 shares, no shares and no shares
authorized, issued and outstanding, actual,
pro forma and pro forma as adjusted,
respectively.................................. 1,125 -- --
------- ------- -------
Total redeemable convertible preferred
stock....................................... 41,976 -- --
Stockholders' equity (deficit):
Common stock, $.01 par value; 60,000,000 shares
authorized and 4,902,035 shares issued and
outstanding, actual; 60,000,000 shares
authorized and 26,350,477 shares issued and
outstanding, pro forma; 100,000,000 shares
authorized and 32,600,477 shares issued and
outstanding pro forma as adjusted............. 49 264 326
Additional paid-in capital..................... 10,191 51,952 120,640
Accumulated deficit............................ (17,241) (17,241) (17,241)
Note receivable from stockholder............... (92) (92) (92)
Deferred stock compensation.................... (11,805) (11,805) (11,805)
------- ------- -------
Total stockholders' equity (deficit)......... (18,898) 23,078 91,828
------- ------- -------
Total capitalization....................... $23,187 $23,187 $91,937
======= ======= =======
</TABLE>
This information excludes 3,501,017 shares of common stock issuable upon
exercise of options outstanding as of March 31, 2000 at a weighted average
exercise price of $0.99 per share, 1,882,851 shares of common stock issuable
upon exercise of warrants outstanding as of March 31, 2000 at a weighted
average exercise price of $0.35 per share, 3,549,785 shares of common stock
reserved for future grant under our 1999 stock incentive plan, 750,000 shares
of common stock reserved for issuance under our 2000 employee stock purchase
plan and 500,000 shares of common stock reserved for issuance under our 2000
director stock option plan.
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DILUTION
Our pro forma net tangible book value as of March 31, 2000, was $23.1
million, or approximately $0.88 per share. Pro forma net tangible book value
per share represents the pro forma stockholders' equity divided by the pro
forma number of shares of common stock outstanding, giving effect to the
conversion of all outstanding shares of preferred stock. After giving effect to
the sale of the 6,250,000 shares of common stock being offered at an assumed
initial public offering price of $12.00 per share less underwriting discounts
and commissions and estimated offering expenses payable by us, our pro forma
net tangible book value at March 31, 2000, would have been $91.8 million, or
approximately $2.82 per share. This represents an immediate increase in pro
forma net tangible book value of $1.94 per share to existing stockholders and
an immediate dilution in net tangible book value of $9.18 per share to new
investors in common stock in this offering. The following table illustrates
this dilution on a per share basis:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share................... $12.00
Pro forma net tangible book value per shares as of March 31,
2000........................................................... $0.88
Increase attributable to new investors.......................... 1.94
Pro forma net tangible book value per share after offering........ 2.82
------
Dilution per share to new investors............................... $ 9.18
======
</TABLE>
The following table sets forth, on a pro forma basis as of March 31, 2000,
the differences between the number of shares of common stock purchased, the
total consideration paid and the average price per share paid by existing
stockholders and by the new investors purchasing shares of common stock in this
offering, before deducting underwriting discounts and commissions and estimated
offering expenses payable by us, at the assumed initial public offering price
of $12.00 per share.
<TABLE>
<CAPTION>
Shares Purchased Total Consideration Average
------------------ -------------------- Price Per
Number Percent Amount Percent Share
<S> <C> <C> <C> <C> <C>
Existing stockholders......... 26,350,477 81% $ 38,380,000 34% $1.46
New public investors.......... 6,250,000 19 75,000,000 66 12.00
---------- --- ------------ ---
Total....................... 32,600,477 100% $113,380,000 100%
========== === ============ ===
</TABLE>
The foregoing discussion excludes any shares to be issued in connection with
the over-allotment option and excludes any shares of common stock issuable upon
the exercise of options or warrants. As of March 31, 2000, there were 3,501,017
shares of common stock issuable upon exercise of options outstanding at a
weighted average exercise price of $0.99 per share, 1,882,851 shares of common
stock issuable upon exercise of warrants outstanding at a weighted average
exercise price of $0.35 per share, 3,549,785 shares of common stock reserved
for future grant under our 1999 stock incentive plan, 750,000 shares of common
stock reserved for issuance under our 2000 employee stock purchase plan and
500,000 shares of common stock reserved for issuance under our 2000 director
stock option plan. To the extent that any shares are issued upon exercise of
options or warrants that were outstanding at March 31, 2000 or granted after
that date, or reserved for future issuance under our stock plans, there may be
further dilution to new investors.
22
<PAGE>
SELECTED FINANCIAL DATA
The following selected financial data should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and our financial statements and related notes included elsewhere
in this prospectus. The statement of operations data for the fiscal years ended
September 30, 1997, 1998 and 1999 and the balance sheet data as of September
30, 1998 and 1999 are derived from our financial statements audited by
PricewaterhouseCoopers LLP, independent accountants, included elsewhere in this
prospectus. The statement of operations data for the years ended September 30,
1995 and 1996 and the balance sheet data as of September 30, 1995, 1996 and
1997 are derived from our audited financial statements not included elsewhere
in this prospectus. The statement of operations data for the three months ended
December 31, 1998, March 31, 1999, June 30, 1999, September 30, 1999, December
31, 1999 and March 31, 2000, the statement of operations data for the six
months ended March 31, 1999 and 2000 and the balance sheet data as of March 31,
2000 are derived from our unaudited financial statements. The unaudited
financial statements have been prepared on the same basis as our audited
financial statements and, in our opinion, include all adjustments, consisting
only of normal recurring adjustments, which we consider necessary for a fair
presentation of our results of operations and financial position for these
periods. These historical results are not necessarily indicative of results to
be expected for any future period.
Unaudited pro forma basic and diluted net loss per share have been
calculated assuming the conversion of all outstanding shares of preferred stock
into shares of common stock, as if the shares had converted immediately upon
issuance. Accordingly, accretion of preferred stock to redemption value has not
been included in the calculation of unaudited pro forma basic and diluted net
loss per share.
23
<PAGE>
Selected Financial Data
(in thousands, except per share data)
<TABLE>
<CAPTION>
Six Months Ended
Fiscal Year Ended September 30, March 31,
----------------------------------------- -----------------
1995 1996 1997 1998 1999 1999 2000
<S> <C> <C> <C> <C> <C> <C> <C>
Statement of Operations
Data:
Net revenues............ $ 661 $1,515 $ 609 $ 1,102 $ 6,031 $ 1,116 $ 10,466
Cost of revenues........ 335 718 465 1,591 4,733 1,268 6,805
------ ------ ------- ------- ------- ------- --------
Gross profit (loss).... 326 797 144 (489) 1,298 (152) 3,661
Operating expenses:
Research and
development........... 92 169 395 923 2,564 867 3,084
Sales and marketing.... 98 233 477 1,593 2,920 1,147 4,627
General and
administrative........ 257 268 396 620 934 389 1,191
Stock compensation..... -- -- -- -- 127 10 876
------ ------ ------- ------- ------- ------- --------
Total operating
expenses............ 447 670 1,268 3,136 6,545 2,413 9,778
Income (loss) from
operations............. (121) 127 (1,124) (3,625) (5,247) (2,565) (6,117)
Interest income
(expense), net......... (27) (69) (33) (574) (897) (919) 310
------ ------ ------- ------- ------- ------- --------
Income (loss) before
extraordinary item..... (148) 58 (1,157) (4,199) (6,144) (3,484) (5,807)
Extraordinary gain on
extinguishment of
debt................... -- -- -- -- 314 314 --
------ ------ ------- ------- ------- ------- --------
Net income (loss)....... (148) 58 (1,157) (4,199) (5,830) (3,170) (5,807)
Accretion of redeemable
convertible preferred
stock.................. -- -- -- -- (223) -- (4,259)
------ ------ ------- ------- ------- ------- --------
Net income (loss)
attributable to common
stockholders........... $ (148) $ 58 $(1,157) $(4,199) $(6,053) $(3,170) $(10,066)
====== ====== ======= ======= ======= ======= ========
Income (loss) per common
share before
extraordinary item--
basic and diluted...... $(0.06) $ 0.02 $ (0.36) $ (1.31) $ (1.92) $ (0.96) $ (2.86)
Extraordinary item per
common share--basic and
diluted................ -- -- -- -- 0.09 -- --
------ ------ ------- ------- ------- ------- --------
Net income (loss) per
common share--basic and
diluted................ $(0.06) $ 0.02 $ (0.36) $ (1.31) $ (1.83) $ (0.96) $ (2.86)
====== ====== ======= ======= ======= ======= ========
Shares used in computing
basic and diluted net
income (loss) per
common share........... 2,675 3,025 3,177 3,200 3,312 3,285 3,525
Pro forma net loss per
common share--basic and
diluted (unaudited).... $ (0.63) $ (0.37)
======= ========
Shares used in computing
basic and diluted pro
forma net loss per
common share
(unaudited)............ 9,242 15,887
</TABLE>
<TABLE>
<CAPTION>
As of September 30, As of
----------------------------------- March 31,
1995 1996 1997 1998 1999 2000
<S> <C> <C> <C> <C> <C> <C>
Balance Sheet Data:
Cash, cash equivalents and
restricted cash............... $ 11 $ 32 $ 16 $ 113 $ 1,535 $ 17,172
Working capital (deficit)...... (8) 205 (97) (3,937) 1,897 20,497
Total assets................... 313 804 699 1,730 5,864 29,979
Long-term debt, less current
portion....................... 61 82 58 69 158 109
Redeemable convertible
preferred stock............... -- -- 1,000 1,000 12,467 41,976
Total stockholders' equity
(deficit)..................... (45) 227 (953) (4,554) (9,897) (18,898)
</TABLE>
24
<PAGE>
<TABLE>
<CAPTION>
Three Months Ended
-----------------------------------------------------------------------
December 31, March 31, June 30, September 30, December 31, March 31,
1998 1999 1999 1999 1999 2000
(in thousands)
<S> <C> <C> <C> <C> <C> <C>
Net revenues............ $ 223 $ 893 $ 908 $4,007 $ 4,415 $ 6,051
Cost of revenues........ 385 883 1,004 2,461 2,613 4,192
------- ------- ------- ------ ------- -------
Gross profit (loss).... (162) 10 (96) 1,546 1,802 1,859
Operating expenses:
Research and
development........... 317 550 640 1,057 1,174 1,910
Sales and marketing.... 558 589 778 995 1,615 3,012
General and
administrative........ 203 186 206 339 432 759
Stock compensation..... -- 10 37 80 197 679
------- ------- ------- ------ ------- -------
Total operating
expenses............ 1,078 1,335 1,661 2,471 3,418 6,360
Loss from operations.... (1,240) (1,325) (1,757) (925) (1,616) (4,501)
Interest income
(expense), net......... (930) 11 4 18 30 280
------- ------- ------- ------ ------- -------
Loss before
extraordinary item..... (2,170) (1,314) (1,753) (907) (1,586) (4,221)
Extraordinary gain on
extinguishment of
debt................... -- 314 -- -- -- --
------- ------- ------- ------ ------- -------
Net loss................ $(2,170) $(1,000) $(1,753) $ (907) $(1,586) $(4,221)
======= ======= ======= ====== ======= =======
As a Percentage of Net
Revenues:
Net revenues............ 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of revenues........ 172.6 98.9 110.6 61.4 59.2 69.3
------- ------- ------- ------ ------- -------
Gross profit (loss).... (72.6) 1.1 (10.6) 38.6 40.8 30.7
Operating expenses:
Research and
development........... 142.2 61.6 70.5 26.4 26.6 31.6
Sales and marketing.... 250.2 66.0 85.7 24.8 36.6 49.8
General and
administrative........ 91.0 20.8 22.7 8.5 9.8 12.5
Stock compensation..... -- 1.1 4.0 2.0 4.4 11.2
------- ------- ------- ------ ------- -------
Total operating
expenses............ 483.4 149.5 182.9 61.7 77.4 105.1
------- ------- ------- ------ ------- -------
Loss from operations.... (556.0) (148.4) (193.5) (23.1) (36.6) (74.4)
Interest income
(expense), net......... (417.1) 1.2 0.4 0.5 0.7 4.6
------- ------- ------- ------ ------- -------
Loss before
extraordinary item..... (973.1) (147.2) (193.1) (22.6) (35.9) (69.8)
Extraordinary gain on
extinguishment of
debt................... -- 35.2 -- -- -- --
------- ------- ------- ------ ------- -------
Net loss................ (973.1)% (112.0)% (193.1)% (22.6)% (35.9)% (69.8)%
======= ======= ======= ====== ======= =======
</TABLE>
25
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL
CONDITIONS
You should read the following discussion and analysis of our financial
condition and results of operations in conjunction with our financial
statements and related notes included elsewhere in this prospectus.
Overview
We develop, market and provide integrated and powerful server appliances
that enable organizations to provide information and applications over the
Internet. We were incorporated in 1989 as PowerStation Technologies, Inc. to
provide systems integration and consulting services. In fiscal 1994, we
transitioned our business by becoming a developer of fault-tolerant high-
density general-purpose computers, our P6000 product line. In September 1997,
we changed our name to Network Engines, Inc. and began expending substantial
research and development efforts to leverage our legacy general-purpose
computer technology into server appliance products. Research and development
expenses increased significantly from $395,000 to $923,000 to $2.6 million in
fiscal 1997, 1998 and 1999, respectively.
In June 1999, we introduced our WebEngine Blazer product, which is our first
generation of server appliances. Since July 1999, substantially all of our
revenue has been attributable to the WebEngine Blazer product as we
discontinued development and sales of the P6000 product line upon the
introduction of our server appliances. Additionally, we introduced our
AdminEngine server appliance in February 2000 and our WebEngine Roadster and
WebEngine Viper server appliances in the third quarter of fiscal 2000 and
expect to introduce our CommerceEngine server appliance in the fourth quarter
of fiscal 2000.
Since we began focusing on server appliances in 1998, we have incurred
substantial costs to develop our technology and products, to recruit and train
personnel for our engineering, sales and marketing and technical support
departments, and to establish an administrative organization. As a result, we
had an accumulated deficit of $17.2 million as of March 31, 2000. We anticipate
that our operating expenses will increase substantially in the future as we
increase our sales and marketing operations, develop new channels, fund greater
levels of research and development, expand our technical support and improve
our operational and financial systems. Accordingly, we will need to generate
significant revenues to achieve profitability. In addition, our limited
operating history in the server appliance market makes it difficult for us to
predict future operating results, and, accordingly, there can be no assurances
that we will sustain revenue growth or achieve profitability in future
quarters.
We derive revenues from the sale of our products to customers and from
license fees. License fees are generated by granting customers a right to
manufacture specific configurations of our product and to distribute that
product under their name. For direct sales and sales to resellers, we recognize
revenues upon delivery, provided evidence of an arrangement has been received,
no obligations remain outstanding and collectibility is reasonably assured. For
the license agreements, we recognize license revenues upon sell through to the
licensee's customers.
26
<PAGE>
We have strategic relationships with IBM and Micronpc.com that allow them to
manufacture our WebEngine Blazer hardware design. Until these partners were
able to manufacture the licensed product for themselves, we were manufacturing
the product for them and charging them a higher unit sales price for this
service than we would have received in license fees had they manufactured the
product. As of March 31, 2000, we expect that substantially all future revenue
from IBM and Micronpc.com will be license revenues. Accordingly, the revenue
per unit for these customers will decrease. However, since these licensees will
be manufacturing the units, we will not incur any substantial cost of revenues
and our gross profit as a percentage of revenue will be high for license
revenues. There are no minimum license fee commitments under either of these
agreements.
We sell our products through a direct sales force, through systems
integrators acting as resellers, and to OEMs and licensed manufacturers.
Substantially all of our sales to date have been to customers in the United
States. We intend to expand our reseller channel in the United States and to
establish an international indirect channel.
Gross profit represents net revenues recognized less the cost of revenues.
Cost of revenues includes cost of materials, manufacturing costs, manufacturing
personnel expenses, obsolescence charges, packaging, license fees and shipping
and warranty costs. Our gross profit will be affected primarily by the mix of
product revenues versus license revenues, the timing and size of customer
orders, and new product introductions by us and our competitors.
Research and development expenses consist primarily of salaries and related
expenses for personnel engaged in research and development, fees paid to
consultants and outside service providers, material costs for prototype and
test units and other expenses related to the design, development, testing and
enhancements of our products. We expense all of our research and development
costs as they are incurred. We believe that a significant level of investment
in product research and development is required to remain competitive.
Accordingly, we expect to continue to devote substantial resources to product
research and development. As a result, we expect research and development
expenses will increase in absolute dollars but will continue to fluctuate as a
percentage of net revenues.
Sales and marketing expenses consist primarily of salaries, commissions and
related expenses for personnel engaged in sales, marketing and customer support
functions, as well as costs associated with trade shows, public relations and
marketing materials. We intend to expand our sales and marketing operations and
efforts substantially, both domestically and internationally, in order to
increase market awareness and to generate sales of our products. Accordingly,
we expect our sales and marketing expenses to increase in absolute dollars but
continue to fluctuate as a percentage of net revenues.
General and administrative expenses consist primarily of salaries and other
related costs for executive, finance, accounting, information technology,
facilities and human resources personnel, as well as accounting, legal, other
professional fees and allowance for doubtful accounts. We expect these expenses
to increase in absolute dollars but continue to fluctuate as a percentage of
net revenues as we add administrative personnel and incur additional costs
related to the growth of our business, expansion of our information
infrastructure and our operation as a public company.
27
<PAGE>
As of March 31, 2000, we recorded deferred stock compensation on our balance
sheet of $12.9 million in connection with stock option and restricted stock
grants to our employees and directors that were granted between February 1,
1999 and March 31, 2000. This amount represents the difference between the
exercise price and the deemed fair value of our common stock for financial
reporting purposes at the date of grant. We will amortize this stock
compensation over the vesting period of the related options. During the six
months ended March 31, 2000, we amortized $876,000 of stock compensation.
During the remainder of fiscal 2000 and 2001, we expect to amortize stock
compensation of:
<TABLE>
<CAPTION>
Expected Amortization of
Fiscal Quarter Ending Stock Compensation
- --------------------- ------------------------
(in thousands)
<S> <C>
June 30, 2000.......................................... $906
September 30, 2000..................................... 921
December 31, 2000...................................... 921
March 31, 2001......................................... 911
June 30, 2001.......................................... 861
September 30, 2001..................................... 861
</TABLE>
We then expect aggregate per quarter stock compensation amortization of
approximately $840,000 during fiscal 2002, between $759,000 and $838,000 in
fiscal 2003 and between $34,000 and $669,000 during fiscal 2004. The amount of
stock compensation expense to be recorded in future periods could decrease if
options for accrued but unvested compensation are forfeited.
As of March 31, 2000, we had net operating loss carryforwards for both
federal and state income tax purposes of approximately $8.9 million available
to offset future taxable income. These net operating loss carryforwards expire
beginning in 2019 and 2004, respectively. We have not recognized any benefit
from the future use of loss carryforwards for these periods because of the
uncertainty surrounding their realization.
Our net loss attributable to common stockholders includes accretion charges
to increase the carrying amount of our redeemable convertible preferred stock
to the amount we would be required to pay if the preferred stock were to be
redeemed. All preferred stock will automatically convert to common stock as a
result of this offering. As a result, there will not be any accretion charges
in the future related to our currently outstanding redeemable convertible
preferred stock.
We had 141 employees as of April 30, 2000, a substantial increase from 48 as
of September 30, 1999 and 33 as of December 31, 1998. This rapid growth has
placed significant demands on our management and operational resources. In
order to manage our growth effectively, we must implement and improve our
operational systems, procedures and controls on a timely basis. If our total
revenues do not increase relative to our operating expenses, our management
systems do not expand to meet increasing demands, we fail to attract,
assimilate and retain qualified personnel or our management otherwise fails to
manage our expansion effectively, we could experience a decline in our revenues
and operating results.
28
<PAGE>
Results of Operations
In light of the significant change in our business related to the
introduction of our server appliance products, we have presented a comparison
of results for (1) the three months ended March 31, 2000 versus the three
months ended December 31, 1999; (2) the three months ended December 31, 1999
versus the three months ended September 30, 1999 and (3) the three months ended
September 30, 1999 versus the three months ended June 30, 1999. We have also
presented a comparison of results for each of the fiscal years ended September
30, 1997, 1998 and 1999.
Three Months Ended March 31, 2000 and Three Months Ended December 31, 1999
Net Revenues
Net revenues increased to $6.1 million for the three months ended March 31,
2000 from $4.4 million for the three months ended December 31, 1999. This
increase was due primarily to increased sales volumes of our WebEngine Blazer
product and, to a lesser extent, to an increased average sales price of the
WebEngine Blazer attributable to the sale of configurations with faster
processing power and more memory.
Gross Profit
Gross profit increased to $1.9 million for the three months ended March 31,
2000 from $1.8 million for the three months ended December 31, 1999. Gross
profit as a percentage of net revenues decreased to 30.7% for the three months
ended March 31, 2000 from 40.8% for the three months ended December 31, 1999.
The decrease in gross profit was primarily due to a decrease in product sales
to IBM that was only partially offset by license revenue from IBM. For the
three months ended December 31, 1999, product sales to IBM accounted for 53% of
net revenues versus license revenue from IBM accounting for less than 10% of
net revenues for the three months ended March 31, 2000.
Operating Expenses
Research and Development. Research and development expenses increased to
$1.9 million for the three months ended March 31, 2000 from $1.2 million for
the three months ended December 31, 1999. This increase in research and
development expenses was due primarily to an increase in compensation costs as
research and development personnel increased during the period from 35
employees to 42 employees and, to a lesser extent, to higher expenses related
to prototype and test units and consultant expenses.
Sales and Marketing. Sales and marketing expenses increased to $3.0 million
for the three months ended March 31, 2000 from $1.6 million for the three
months ended December 31, 1999. This increase in sales and marketing expenses
was due primarily to an increase in compensation costs as sales, marketing and
customer support personnel during the period increased from 33 employees to 48
employees, increased commission expense attributable to higher net revenues
and, to a lesser extent, due to increased spending on marketing programs,
increased travel expenses associated with increased sales personnel and higher
costs attributable to evaluation units.
29
<PAGE>
General and Administrative. General and administrative expense increased to
$759,000 for the three months ended March 31, 2000 from $432,000 for the three
months ended December 31, 1999. This increase in general and administrative
expenses was due primarily to an increase in compensation costs as general and
administrative personnel during the period increased from ten employees to 17
employees, increased legal fees and higher corporate recruiting costs.
Stock Compensation. For the three months ended March 31, 2000, we recorded
deferred stock compensation of $8.1 million relating to stock options and
restricted stock granted to employees and directors versus $3.2 million
recorded for the three months ended December 31, 1999. These amounts are being
amortized over the vesting periods of the granted options. Stock-based
compensation increased to $679,000 for the three months ended March 31, 2000
from $197,000 for the three months ended December 31, 1999.
Three Months Ended December 31, 1999 and Three Months Ended September 30, 1999
Net Revenues
Net revenues increased to $4.4 million for the three months ended December
31, 1999 from $4.0 million for the three months ended September 30, 1999. The
increase was primarily due to increased sales volumes of our WebEngine Blazer
product.
Gross Profit
Gross profit increased to $1.8 million for the three months ended December
31, 1999 from $1.5 million for the three months ended September 30, 1999. Gross
profit as a percentage of net revenues increased to 40.8% for the three months
ended December 31, 1999 from 38.6% for the three months ended September 30,
1999. The increase in gross profit was primarily due to increased sales volume
of our WebEngine Blazer product.
Operating Expenses
Research and Development. Research and development expenses increased to
$1.2 million for the three months ended December 31, 1999 from $1.1 million for
the three months ended September 30, 1999. The increase in research and
development expenses was primarily due to an increase in compensation and
recruiting costs as research and development personnel during the period
increased from 16 employees to 35 employees. This increase was partially offset
by a decrease in consultant expenses and a decrease in costs related to
prototype and test units.
Sales and Marketing. Sales and marketing expenses increased to $1.6 million
for the three months ended December 31, 1999 from $1.0 million for the three
months ended September 30, 1999. The increase in sales and marketing expenses
was primarily due to an increase in compensation and recruiting costs related
to an increase in sales, marketing and customer support personnel during the
period from 18 employees to 33 employees.
General and Administrative. General and administrative expense increased to
$432,000 for the three months ended December 31, 1999 from $339,000 for the
three months ended September 30,
30
<PAGE>
1999. The increase in general and administrative expenses was primarily due to
an increase in compensation and recruiting costs related to an increase in
general and administrative personnel during the period from seven employees to
ten employees.
Stock Compensation. For the three months ended December 31, 1999, we
recorded deferred stock compensation of $3.2 million relating to stock options
and restricted stock granted to employees and directors versus $708,000
recorded for the three months ended September 30, 1999. These amounts are being
amortized over the vesting periods of the granted options. Stock-based
compensation increased to $197,000 for the three months ended December 31, 1999
from $80,000 for the three months ended September 30, 1999.
Three Months Ended September 30, 1999 and Three Months Ended June 30, 1999
Net Revenues
Net revenues increased to $4.0 million for the three months ended September
30, 1999 from $908,000 for the three months ended June 30, 1999. The increase
in net revenues was primarily due to the June introduction of our WebEngine
Blazer product that accounted for substantially all of the net revenues for the
three months ended September 30, 1999.
Gross Profit (Loss)
Gross profit (loss) increased to $1.5 million for the three months ended
September 30, 1999 from ($96,000) for the three months ended June 30, 1999.
Gross profit (loss) as a percentage of net revenues increased to 38.6% for the
three months ended September 30, 1999 from (10.6%) for the three months ended
June 30, 1999. The increase in gross profit was primarily due to increased
sales related to the introduction of our WebEngine Blazer product.
Operating Expenses
Research and Development. Research and development expenses increased to
$1.1 million for the three months ended September 30, 1999 from $640,000 for
the three months ended June 30, 1999. This increase in research and development
expenses was due to an increase in compensation and recruiting expenses related
to an increase in research and development personnel during the period from
nine employees to 15 employees, increased prototype and test unit costs and an
increase in consultant expenses.
Sales and Marketing. Sales and marketing expenses increased to $1.0 million
for the three months ended September 30, 1999 from $778,000 for the three
months ended June 30, 1999. This increase in sales and marketing expenses was
due to an increase in sales commissions associated with our increased net
revenues and increased compensation costs attributable to an increase in sales,
marketing and customer support personnel during the period from 14 employees to
18 employees.
General and Administrative. General and administrative expense increased to
$339,000 for the three months ended September 30, 1999 from $206,000 for the
three months ended June 30, 1999.
31
<PAGE>
This increase in general and administrative expenses was due primarily to
increased legal and accounting fees and, to a lesser extent, due to increased
facilities costs and increased costs related to the expansion of our
information systems infrastructure.
Stock Compensation. For the three months ended September 30, 1999, we
recorded deferred stock compensation of $708,000 relating to stock options
granted to employees versus $368,000 recorded for the three months ended June
30, 1999. These amounts are being amortized over the vesting periods of the
granted options. Stock-based compensation increased to $80,000 for the three
months ended September 30, 1999 from $37,000 for the three months ended June
30, 1999.
Fiscal 1997, 1998 and 1999
Net Revenues
Net revenues increased from $609,000 in fiscal 1997 to $1.1 million in
fiscal 1998 and to $6.0 million in fiscal 1999. The increase in net revenues
from fiscal 1997 to 1998 was primarily due to both increased unit sales of our
P6000 product and an increase in the average unit sales price attributable to
units shipping with a greater number of processors in fiscal 1998. The increase
in net revenues from fiscal 1998 to 1999 was primarily due to the June 1999
introduction of our WebEngine Blazer server appliance that accounted for $4.1
million of fiscal 1999 net revenues.
Gross Profit (Loss)
Gross profit (loss) decreased from a $144,000 gross profit in fiscal 1997 to
($489,000) in fiscal 1998 and then increased to a $1.3 million gross profit in
fiscal 1999. Gross profit (loss) as a percentage of net revenues decreased from
23.6% in fiscal 1997 to (44.4%) in fiscal 1998 and then increased to 21.5% in
fiscal 1999. The decrease in gross profit from fiscal 1997 to 1998 was
primarily due to higher discounting on P6000 sales, increased obsolescence
charges related to the P6000 product line and increased manufacturing
compensation costs. The increase in gross profit from fiscal 1998 to 1999 was
primarily due to increased sales volume related to the June 1999 introduction
of our WebEngine Blazer that was partially offset by increased obsolescence
charges related to the P6000 product line and increased manufacturing
compensation costs.
Operating Expenses
Research and Development. Research and development expenses were $395,000,
$923,000 and $2.6 million in fiscal 1997, 1998 and 1999, respectively,
representing 64.9%, 83.8% and 42.5% of net revenues in the respective periods.
The dollar increases for each of the periods were primarily due to increases in
personnel, consultants and material costs for prototype and test units and were
attributable to development efforts related to our server appliances.
Sales and Marketing. Sales and marketing expenses were $477,000, $1.6
million and $2.9 million in fiscal 1997, 1998 and 1999, respectively,
representing 78.3%, 144.6% and 48.4% of net revenues in the respective periods.
The dollar increases for each of the periods were primarily due to increased
personnel in our direct sales and marketing organization, higher sales
commissions associated with increased net revenues and increased marketing
activities.
32
<PAGE>
General and Administrative. General and administrative expenses were
$396,000, $620,000 and $934,000 in fiscal 1997, 1998 and 1999, respectively,
representing 65.0%, 56.3% and 15.5% of net revenues in the respective periods.
The dollar increases for each of the periods were primarily due to increases in
personnel, professional fees and increases in our allowance for doubtful
accounts associated with increased revenues.
Stock Compensation. During fiscal 1999 we recorded deferred stock-based
compensation of $1.6 million related to stock options granted to employees and
directors. We had no deferred stock-based compensation relating to stock option
grants in fiscal 1997 and 1998. We recorded $127,000 of stock-based
compensation expense in operating expenses in fiscal 1999. There was no stock-
based compensation expense recorded in operating expenses during fiscal 1997
and 1998.
Extraordinary Gain
The extraordinary gain on extinguishment of debt realized in fiscal 1999 was
due to the forgiveness of all interest expense on the notes payable upon the
conversion of that debt into series B and series C redeemable convertible
preferred stock.
As a result of our limited history with our server appliance products, we
cannot forecast operating expenses based on historical results. Accordingly, we
may incur expenses, in part, based on future revenue projections. Most of our
expenses are fixed in nature, and we may not be able to quickly reduce spending
if revenues are lower than we have projected. Our ability to forecast our
quarterly sales accurately is limited, which makes it difficult to predict the
quarterly revenues that we will recognize. We expect that our business,
operating results and financial condition would be harmed if revenues did not
meet projections. Investors should not rely on the results of one quarter as an
indication of future performance.
We expect that our revenues and operating results may vary significantly
from quarter to quarter, and we anticipate that our expenses will increase
substantially for at least the next two fiscal years as we:
. increase our sales and marketing activities, including expanding our
North American direct sales force, establish an international presence
and commence our initial advertising campaign;
. expand our indirect channels, both domestically and internationally;
. develop our technology, expand our product lines and create and market
new products; and
. pursue strategic relationships and acquisitions.
33
<PAGE>
Liquidity and Capital Resources
Since our fiscal 1997, we have financed our operations primarily through the
sale of equity securities, borrowings and the sale of our products. As of March
31, 2000, we have raised approximately $37.3 million, net of offering costs,
from the issuance of preferred stock. As of March 31, 2000, we had $16.8
million in cash and cash equivalents.
In April 2000, we amended an equipment line of credit agreement to provide
for an additional $2.0 million of equipment financing and a $4.0 million
working capital revolving line of credit. The additional equipment financing is
separated into two consecutive six-month borrowing periods of $1.0 million
beginning on the date of the amendment. Interest at the rate of prime plus
1.25% is payable monthly. Any outstanding balances at the end of each of the
two borrowing periods will be repaid in 36 equal monthly installments. The
revolving line of credit matures in April 2001 and bears interest at prime plus
1%.
Cash used in operating activities was $768,000, $3.4 million, $5.1 million
and $7.6 million in fiscal 1997, 1998, 1999 and for the six months ended March
31, 2000, respectively. Cash used in fiscal 1997 was primarily due to a net
loss of $1.2 million and an increase in inventories, offset in part by decrease
in accounts receivable and increases in accrued expenses and depreciation,
inventory reserves and provision for doubtful accounts expenses. Cash used in
fiscal 1998 was primarily due to a net loss of $4.2 million and increases in
accounts receivable and inventories, offset in part by increases in accounts
payable and accrued expenses and charges for depreciation, inventory reserves
and amortization of discount on notes payable. Cash used in fiscal 1999 was
primarily due to a net loss of $5.8 million and increases in accounts
receivable and inventories, offset in part by increases in accounts payable and
accrued expenses and charges for depreciation, inventory reserves and
amortization of discount on notes payable. Cash used for the six months ended
March 31, 2000 was primarily due to a net loss of $5.8 million and increases in
accounts receivable, inventories and prepaid expenses, offset in part by an
increases in accounts payable, accrued expenses and deferred revenue and
charges for depreciation, inventory reserves and stock-based compensation.
Cash used in investing activities was $185,000, $343,000, $723,000 and $2.4
million in fiscal 1997, 1998, 1999 and for the six months ended March 31, 2000,
respectively. Cash used in investing activities was primarily for purchases of
property and equipment and, for the six months ended March 31, 2000, providing
a $279,000 letter of credit as a security deposit on our new leased facilities
in Canton, Massachusetts and the use of $276,000 as we commenced leasehold
improvements in the new Canton facility. As of this date, we expect to spend
approximately $1.3 million on additional leasehold improvements and
approximately $1.0 million on furniture and equipment related to our new Canton
facility.
Cash provided by financing activities was $937,000, $3.8 million, $7.2
million and $25.4 million in fiscal 1997, 1998, 1999 and for the six months
ended March 31, 2000, respectively. Cash provided by financing activities
consisted primarily of proceeds from private sales of preferred stock and
bridge loans from stockholders and, for the six months ended March 31, 2000,
the exercise of stock options and warrants. These bridge loans were subsequent
to our sale of series A preferred stock in fiscal 1997 and eventually converted
into a combination of series B and series C preferred stock in fiscal 1999.
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We intend to continue to invest heavily in the development of new products
and enhancements to our existing products. Our future liquidity and capital
requirements will depend upon numerous factors, including:
. the costs and timing of expansion of sales and marketing activities;
. the costs and timing of expansion of product development efforts and the
success of these development efforts;
. the extent to which our existing and new products gain market
acceptance;
. the level and timing of license revenues;
. the costs involved in maintaining and enforcing intellectual property
rights;
. market developments;
. the costs and timing of expanding and improving our facilities;
. available borrowings under line of credit arrangements; and
. other factors.
We believe that the net proceeds from this offering, together with cash on
hand, cash equivalents and borrowings, will be sufficient to meet our debt
service, operating and capital requirements for at least the next 12 months.
After that, we may need to raise additional funds. We may seek to raise
additional funds through additional borrowings, public or private equity
financings or from other sources. There can be no assurance that additional
financing will be available at all or, if available, will be on terms
acceptable to us.
Recent Accounting Pronouncements
In June 1998, the Financial Accounting Standard Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities" ("SFAS 133"). SFAS 133 establishes accounting and
reporting standards requiring that every derivative instrument be recorded in
the balance sheet as either an asset or liability measured at its fair value.
SFAS 133, as amended by Statement of Financial Accounting Standards No. 137,
"Accounting for Derivative Instruments and Hedging Activities--Deferral of the
Effective Date of FASB Statement No. 133," is effective for fiscal years
beginning after June 15, 2000. SFAS 133 will be effective for our fiscal year
ended September 30, 2001. We believe the adoption of this statement will not
have a significant impact on our financial position, results of operations or
cash flows.
In December 1999, the Securities and Exchange Commission released Staff
Accounting Bulletin No. 101, "Revenue Recognition in Financial Statements"
("SAB 101"). This bulletin summarizes certain views of the staff of the
Securities and Exchange Commission on applying generally accepted accounting
principles to revenue recognition in financial statements. The staff of the
Securities and Exchange Commission believes that revenue is realized or
realizable and earned when all of the following criteria are met: persuasive
evidence of an arrangement exists; delivery has occurred or services have been
rendered; the seller's price to the buyer is fixed or determinable; and
collectibility is reasonably assured. We do not expect the application of SAB
101 to have a material impact on our financial position or results of
operations.
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In March 2000, the Financial Accounting Standard Board issued FASB
Interpretation No. 44, "Accounting for Certain Transactions Involving Stock
Compensation--an interpretation of APB Opinion No. 25" ("FIN 44"). FIN 44
clarifies the application of APB Opinion No. 25 and among other issues
clarifies the following: the definition of an employee for purposes of applying
APB Opinion No. 25; the criteria for determining whether a plan qualifies as a
noncompensatory plan; the accounting consequence of various modifications to
the terms of previously fixed stock options or awards; and the accounting for
an exchange of stock compensation awards in a business combination. FIN 44 will
become effective July 1, 2000, but certain conclusions in FIN 44 cover specific
events that occurred after either December 15, 1998 or January 12, 2000. We do
not expect the application of FIN 44 to have a material impact on our financial
position or results of operations.
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BUSINESS
Overview
We develop, market and provide integrated and powerful server appliances
that allow organizations to provide information and applications over the
Internet. Server appliances are a new category of computer network
infrastructure devices that deliver specific functionality through a
combination of pre-packaged hardware and software. Unlike general-purpose
servers, our server appliances are high-powered, compact products that can be
used with either Windows or Linux operating systems and a range of
applications and computing power. Our customers may select the number and type
of each server that they need, utilize them separately or combine them into
groups, or clusters, and locate them geographically as needed. Our servers can
be managed from a single location without the support of on-site technicians.
Our server appliances are designed to meet the complex needs and requirements
of e-commerce and Internet-based organizations, including dot com companies,
web hosting providers, application service providers and Internet service
providers. Our server appliances are easy to install and configure and are
designed to meet our customers' needs by combining specific application
functionality within small physical packaging.
Industry Background
The emergence of the Internet as a global communications medium for e-
commerce and information delivery is now well-accepted. The openness and
accessibility of the Internet enable large and small organizations, either new
or established, to enter this competitive environment by creating Internet
sites and establishing their own network infrastructures. New and emerging
organizations hoping to grow, and well-financed organizations hoping to
increase market share, typically seek to reduce time-to-revenue.
Organizations seek to appeal to a wide range of users and to generate large
volumes of activity at their web sites, resulting in significant Internet
traffic. The growth and complexity in Internet use and functionality,
including streaming media, dynamic content and e-commerce transactions, have
led to increased demand for greater bandwidth and processing power. The
increase in Internet traffic and demand for greater bandwidth has resulted in
more utilization of remote server facilities, including co-location
facilities, to house servers for Internet-related businesses. Co-location
facilities, which provide strategically located secure data center space with
high-speed network connections to the Internet, can improve network
performance to end users by reducing the distance between end users and
Internet servers.
Traditionally, organizations have built their Internet solutions with
general-purpose servers. This method requires extensive time and technical
resources and capabilities which increases overall cost of ownership,
including time and cost of implementation. To extend the power and features of
a general-purpose server, organizations must integrate numerous discrete
hardware and software elements, including operating systems, applications,
security systems, load balancers and management tools, which increases overall
costs and time-to-revenue. This approach is not well-suited for use in remote
server facilities because it typically creates large, complex systems that
require substantial facility space. In addition, most vendors' offerings
include limited management and few vendors, if any, provide remote lights out
management capabilities, which increases the need
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for dedicated attention of on-site information technology professionals. When
organizations use general-purpose servers to handle Internet traffic, they
typically face a higher total cost of ownership since equipment, facility costs
and operating expenses are high and time-to-revenue is increased.
To address the shortcomings of general-purpose servers, many organizations
are seeking well-designed solutions for Internet applications that meet a
common set of requirements. These organizations include e-commerce and
Internet-based businesses, including dot com companies, web hosting providers,
application service providers and Internet service providers. Their
requirements include:
. pre-packaged functionality to reduce or eliminate the need for custom
integration by the end user;
. high-density physical packaging that provides high-performance server
hardware in small, rack-mounted devices to minimize the costs of co-
location space rental;
. an integrated management system that enables administrators to
extensively control their server appliances remotely, even in the case
of system failure; and
. built-in clustering capability that enables users to easily scale the
power and functionality of their solution as user demand grows and
evolves.
The server appliance, which is a combination of computing hardware and
software that is designed to deliver a single application function, was
developed to address the shortcomings of general-purpose servers. International
Data Corporation estimates that the worldwide market for server appliances will
grow to $8.0 billion in 2003 from approximately $214.6 million in 1999, a
compounded annual growth rate of 147%. As market acceptance of server
appliances grows, we expect that users will increasingly demand products that
meet specific functional requirements and reduce total cost of ownership,
including time-to-revenue, packaging density, installation and management
functionality. In addition, specific customer preferences for operating
systems, applications and computing power play important roles in customer
selection of server appliances. Therefore, server appliance vendors who offer a
choice in these areas will have a broader market opportunity.
The Network Engines Solution
We develop, market and provide a selection of server appliances that enable
organizations to provide information and applications over the Internet to meet
the requirements of e-commerce and Internet-based organizations. Our server
appliances are high-powered, compact products with a choice of operating
systems, applications and computing power. Key elements of our solution
include:
High Performance in a Small Package. Our products integrate high performance
components in a small package enabling our customers to minimize hosting or co-
location costs for servers. All of our products today are 1.75 inches in
height, also known as one rack unit, which is typically one-half to one-third
the height of the leading, currently available general-purpose servers with the
same processing power. This is important because our customers typically use
multiple server appliances
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and must pay for the amount of rack space the servers require. Our server
appliances minimize the space requirements for our customers without loss of
computing power, thereby reducing the rental costs for rack space at co-
location facilities.
Ease of Installation and Use. Each of our server appliances is pre-
configured and is capable of performing its assigned application when it is
unpacked and connected. The typical installation consists of the user entering
one or sometimes a few configuration parameters, including the network address,
either through the front-panel liquid crystal display or an Internet browser.
Customers do not need to integrate other hardware, operating systems,
applications or management software. Each appliance has built-in management for
installation, configuration and error reporting, as well as application
management capabilities specific to the appliance type. With these features, we
believe our servers enable our customers to decrease time-to-revenue and lower
cost of ownership.
Integrated Remote Management. Our server appliances contain integrated
hardware and software components that allow lights out management capable of
monitoring and operating our server appliances even if a server's operating
system is not functioning. Each of our server appliances is designed with a
dedicated embedded processor and extensive, embedded software for system
management and communications. Customers can monitor and control our appliances
in dispersed, remote locations using an Internet connection and an Internet
browser. In addition, our management system enables customers to develop rules-
based decision-making, whereby errors or performance conditions in a remote
cluster can trigger actions ranging from simple notification to a complex
series of automatic responses. This remote management capability enables
customers to customize and centralize system administration and scale their
Internet solutions without hiring a proportionate number of technicians.
Dynamic Scalability. Our solution is scalable because our customers can
increase the power and capacity of their server clusters simply by adding more
servers. Our server appliances can be easily connected to form a group, or
cluster, or to augment an existing cluster, to meet both varied and rapidly
changing management and performance requirements, thereby reducing costs. The
scalability of our solution is dynamic because the performance of individual
networking applications operating on our servers can be increased rapidly and
without interruption by increasing the number of server appliances in a cluster
of our servers devoted to that application. Our proprietary connection
technology automatically recognizes new Network Engines' appliances and assigns
addresses without interruption, instantly establishing communication with, and
control of, any of our server appliances that are added to a working cluster.
Selection of Operating Systems, Applications and Computing Power. We offer
customers appliances with a choice of operating systems, a range of
applications and varying degrees of computing power and functionality. Our
customers have differing requirements for operating systems, either Windows or
Linux, applications and computing power. By offering these choices, our
products appeal to a broad range of customers.
The Network Engines Strategy
Our objective is to become a leading global provider of Internet server
appliances for medium- to large-sized organizations that use Internet-based
applications. The key elements of our strategy include:
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Broaden Our Server Appliance Product Line. We believe that each medium- to
large-scale Internet server appliance customer has specific application and
appliance requirements that result in the need for a variety of server
appliances. To increase our appeal to the server appliance market, we are
seeking to broaden our product line beyond our current web content and e-
commerce appliances to include products designed specifically for streaming
content, storage, database management, system security and other purposes. In
addition, we intend to continue to meet the evolving needs of our customers by
offering a product line with varying levels of performance and a choice of
operating systems.
Continue Hardware and Software Innovation. With our technology expertise, we
seek to continue to develop hardware and software innovations for the server
appliance market. Utilizing our software expertise, we intend to ensure that
our products have intuitive user interfaces and that they may be easily
installed, configured and remotely managed. We also intend to continue to
enhance the performance of our hardware platforms and their remote
manageability, while maintaining our leadership in compact packaging. In
addition, we intend to continue to enhance the combinations of hardware and
software in our server appliances to address the evolving needs of the
Internet.
Expand Research and Development. We will continue our research and
development efforts, including the hiring of qualified technical personnel, in
an effort to enhance existing products and develop new products. In order to
offer our customers the best possible products and to accommodate their future
software and hardware choices and their legacy technology equipment, we will
also seek to continue to develop relationships with key technology vendors that
enhance our total product offerings. With our expanded research and development
capabilities, we intend either to integrate new technologies into our products
or to enhance the management and interoperability of our products within our
customers' installations.
Build Multi-tier Distribution Capability. We sell our products through a
direct sales force, through systems integrators acting as resellers, and to
OEMs and licensed manufacturers. We intend to expand and utilize a direct sales
organization to build our relationships with large end-user customers and to
maintain a good understanding of their changing and expanding market
requirements. In addition, we intend to continue building relationships with
network systems integrators to provide our products more effectively to this
and other market segments. We are expanding our distribution network to include
several international equipment distributors and an Internet-based channel
fulfillment program. A key element of our distribution strategy is to continue
to license our technology and sell our products to significant licensed
manufacturers and OEMs and to seek additional licensed manufacturer and OEM
relationships. For example, we have licensing relationships with IBM and
Micronpc.com and an OEM relationship with VA Linux. We believe these
relationships will assist us in establishing market presence and increasing our
product sales.
Establish Strong Brand Identity. We seek to establish company name
recognition and identification in our targeted market to enhance our sales
efforts. We intend to employ an aggressive public relations campaign and
creative marketing strategies to build market awareness of our products. We
intend to continue to incorporate innovative hardware designs with easy-to-use,
stylish web management interfaces to reinforce our brand name and establish a
strong competitive advantage.
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Invest in Businesses, Products and Technologies. We intend to pursue
strategic acquisitions of, or investments in, businesses, products and
technologies that will provide us with additional industry expertise, enhance
our range of product offerings, expand our development and production capacity,
broaden our client base and expand our geographical presence.
Products
Network Engines' Internet Appliance Architecture is our approach to building
high-performance, high-density appliances for use by e-commerce and Internet-
based organizations, including dot com companies, web hosting providers,
application service providers and Internet service providers. This architecture
enables us to combine the hardware and software needed to install, manage,
optimize and expand our customers' Internet-based applications.
Inherent in our architecture is the concept that simple, comprehensive
management of customer installations is as important as ease of set up. All of
our products can be managed from any location using a standard web browser or
industry-standard network protocol-compliant application, enabling network
managers to operate more efficiently without sacrificing site performance and
availability. All of our products are designed within this Internet Appliance
Architecture framework. Each of our server appliances has the following common
characteristics:
. it is a complete, integrated, standalone specific-purpose server
appliance;
. it can be easily installed, requiring simple configuration information
to be entered through the front-panel liquid crystal display or an
Internet browser;
. it can be grouped in a load-balanced cluster with additional appliances
of its own type to increase the power of the solution;
. it includes hardware and software that enable centralized management and
allow the addition of the appliance to a cluster; and
. its management functionality can be extended by the addition of our
management appliance, AdminEngine, to its cluster.
We currently offer WebEngine, CommerceEngine and AdminEngine server
appliances.
WebEngine Product Offerings
The WebEngine family of products includes the WebEngine Roadster NT,
WebEngine Roadster LX, WebEngine Viper NT, WebEngine Viper LX and WebEngine
Blazer. Each WebEngine server appliance may be easily and rapidly deployed to
handle Internet-based information. Each member of the WebEngine family has
distinct features developed to provide a customized solution for the range of
organizations that provide information over the Internet, from entry-level
home-based businesses to large-scale, rapid-growth Internet businesses.
We have committed significant research and development resources to offer
our WebEngine products with either Windows or Linux operating systems in the NT
and LX versions of the Roadster and Viper. This choice accommodates customer
preferences for operating systems and applications. The software in each of the
NT and LX products is as follows:
. the NT products incorporate Microsoft Windows NT Server version 4.0,
Microsoft Internet Information Server, our customized management
software, Microsoft Index Server and Microsoft Management Console; and
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. the LX products incorporate Linux software, including Red Hat version
6.1, the Apache web server version 1.3.9, our customized management
software, and software for file transfer protocol access, a domain name
server and a variety of e-mail servers.
WebEngine Roadster and WebEngine Viper. The WebEngine Roadster and Viper
products incorporate Intel processing components in a rack mountable device
that is one rack unit in height. The Roadster and Viper products can be used as
standalone servers, if a customer needs to dedicate an affordable server
appliance to individual web sites or end users. These products can also be
grouped into a cluster of servers containing up to 256 of our appliances. Setup
is easy and management of the Roadsters and Vipers can be handled through the
front-panel liquid crystal display or an Internet browser.
The WebEngine Roadster NT and LX products are our entry-priced server
appliances. The WebEngine Viper NT and LX products have either one or two Intel
Pentium III processors, allowing for higher performance and speed. We commenced
commercial shipment of the WebEngine Roadster and WebEngine Viper in the third
quarter of fiscal 2000. We charge between $2,000 and $5,000 per unit for our
WebEngine Roadster appliances and between $4,000 and $15,000 per unit for our
WebEngine Viper appliances, depending upon specific product configurations.
WebEngine Blazer. The WebEngine Blazer uses the same hardware platform as
the Viper products. Blazers are available without an operating system to allow
for complete customer configuration or they may be ordered with Windows or
Linux operating systems already installed. Like our other products, the Blazer
includes a backup management network connection and an industry-standard
network connection to give our customers a powerful hardware platform with our
standard management features that can be easily expanded. We commenced
commercial shipment of the WebEngine Blazer in June 1999. We charge between
$4,000 and $15,000 per unit for our WebEngine Blazer appliances, depending upon
specific product configurations.
AdminEngine
The AdminEngine enables the management of up to 256 Network Engines
appliances that are grouped in a cluster, from any location, through any
standard web browser or standards-based network management application.
AdminEngine enables a customer to quickly and easily solve a variety of
problems that otherwise would require a technician to travel to the customer's
server room, which is often located in a remote facility. Using an Internet
browser, customers can restart any Network Engines server from a network drive,
reset it for a local restart, and power it up or down. AdminEngine also allows
our customers to closely monitor performance of their appliances and to
establish rules that will enable our servers to notify the customer of unusual
events. We commenced commercial shipment of the AdminEngine in February 2000.
We charge approximately $5,000 per unit for our AdminEngine, depending upon
specific product configurations.
CommerceEngine
We expect to commence commercial shipment of the CommerceEngine in the
fourth quarter of fiscal 2000. The CommerceEngine is our server appliance that
customers can use to increase their ability to process secure Internet
commercial transactions. The CommerceEngine incorporates a
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hardware-based secure transaction processor in a rack-mountable device that is
one rack unit in height and includes specialized secure transaction processing
software. CommerceEngine is based on industry standards and is compatible with
a wide variety of encryption tools, as well as communications and security
protocols. CommerceEngine gives our customers the performance benefits of
hardware-based secure transaction processing, without complicated installation
and configuration and it can be scaled by adding additional CommerceEngines and
WebEngine appliances. The manageability of the CommerceEngine can be increased
by grouping multiple units in a cluster with our AdminEngine. We expect to
charge between $4,000 and $18,000 per unit for our CommerceEngine, depending
upon specific product configurations.
Technology
A key benefit of our server appliances is the integration of hardware and
software technologies to provide a complete solution for our users. Our server
appliance hardware and software technology is integrated with many industry-
standard technologies to create server appliance solutions.
Hardware Platforms
We have made significant investments in the development of hardware
platforms that combine very high-density packaging of industry-standard
components with management features for clustered server appliances.
High-density packaging. We believe that we have been a leader in the
development of server hardware utilizing standard Intel Pentium III processors
in a rack mountable device that is one rack unit in height. We have developed
significant expertise in cooling and monitoring temperatures to maintain
operating conditions within specifications for the included components.
Management. The processing board of each of our server appliances contains
hardware and software dedicated to the management of that particular appliance
and contributes to our ability to achieve lights out management. This
management section of the processing board is connected to our management
appliance by a network connection, as well as a backup management connection,
known as a cluster management bus. Although our management appliance normally
uses the principal network connection to communicate with each of our
appliances, it is able to switch to the cluster management bus when
communications through the network connection are not available.
Software
We have made significant investments in the development of our software
applications that are integrated with our hardware platforms to provide:
. substantial management capability of our server appliances in each
appliance independently or using our AdminEngine to manage a cluster of
appliances;
. support for both Windows and Linux operating systems; and
. an intuitive user interface for ease of installation, configuration and
management.
Our software is incorporated at three levels: standard appliance management
software in all of our WebEngine and CommerceEngine products; specific
appliance management software in each of our WebEngine and CommerceEngine
products; and AdminEngine software in our AdminEngine management server
appliance.
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Standard Appliance Management. Each of our WebEngine and CommerceEngine
products includes software that allows the appliance to be managed as a
standalone device. In addition, each of these server appliances includes
software to enable enhanced management communications using our AdminEngine if
that appliance is added to a cluster of our appliances that are managed
together. This built-in software reports on hardware conditions, including
temperatures, voltage measurements, fan rotation and similar operating
conditions. It also provides performance statistics, including numbers of
transactions, processor utilization, disk and memory utilization and related
measurements. This software reports on the presence and working condition of
application and system software components. Each server appliance incorporates
software that can execute management instructions. For example, the software
can restart the operating system or reset the power supply.
Specific Appliance Management. Management software is also included in each
appliance for normal application management functions, depending on the level
of management provided by the application builder. For example, Roadster NT and
Viper NT provide a simple interface to the management features of Microsoft's
Internet Information Server. Roadster LX and Viper LX include proprietary
software for the creation and management of web site partitions--functionality
that is not included with the Apache application.
AdminEngine Application. Our AdminEngine appliance application incorporates
several key items of technology:
. Internet Browser interface. AdminEngine utilizes any standard browser
software for presentation of its Java-based user interface. The
AdminEngine interface was designed for easy navigation from screen to
screen and the ability to present an easy-to-understand top-level
interface that can also present detailed technical information to the
more experienced administrator.
. Rules-based decision-making. AdminEngine enables users to develop a set
of rules for management actions based on the information reported to
AdminEngine from other appliances in the cluster. Rules may be based on
error or performance conditions, and actions can range from simple
notification to a complex series of management responses.
. Cluster management bus control. AdminEngine manages the connections
between appliances grouped in a cluster using a cluster management bus,
which does not rely on a normal network connection. This device
automatically recognizes new appliances when they are first connected
and assigns addresses for future reference. It subsequently uses the
cluster management bus software and associated application logic to
communicate with appliances if they are no longer responding on the
network.
. External appliance interface. The AdminEngine provides a standard point
of control for products developed by our third-party technology
providers to be managed as part of a cluster of our appliances.
Customers
Our customers include companies with e-commerce web sites and high-traffic
Internet web sites, as well as web hosting providers, including application
service providers and Internet service providers. These customers include
providers of streaming video service, web content services, television-based
web services, e-commerce, web portals and emerging web technologies. Customers
also include OEMs and parties that are licensed to build products based on our
product designs. In
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the fiscal year ended September 30, 1999, sales to InterVu, IBM and Microsoft
(WebTV) accounted for 46%, 28% and 14% of net revenues, respectively. For the
six months ended March 31, 2000, sales to each of IBM, Microsoft (WebTV) and
Tellme Networks accounted for 26%, 18% and 14% of our net revenues,
respectively.
Our customers include:
<TABLE>
<S> <C> <C>
Akamba Infobank Computer NetScaler
Arlan & Associates InfoLibria Network Storage Solutions
Audiotalk Networks Information Technology NovaWiz
BeVocal Systems Rearden Steel
Bluedog.com Intertainer Register.com
Comet Systems Intervu Responsys.com
CyberIQ Systems iVillage.com Revit Technology
Data Transit IVion Network Screaming Media
International Lucent Technologies Tellme Networks
Digital Impact Mi8 Ticketmaster Online-City
e-Media Microsoft (WebTV) Search
Enosus Systems Mission Critical TssiMicrosage
FastForward Networks Motorola Visualize Video
iBEAM Broadcasting Natex Communications VocaLoca
IBM NetCreations
</TABLE>
Sales
We sell our products through a direct sales organization and through a
network of channels that includes systems integrators, distributors and
licensed manufacturers. We are continuing to expand our relationships with
channel partners and establish an Internet channel. As of April 30, 2000, we
employed 38 people in sales.
Direct Sales
Our direct sales organization sells to large users of Internet-based
applications and dot com companies and focuses on organizations who require
multiple numbers of our server appliances to meet the demands of their
applications. We have regional sales managers and technical sales engineers
that are located in and serve strategic metropolitan areas, including Atlanta,
Boston, Dallas, Los Angeles, New York, Philadelphia, San Francisco and
Washington D.C. Our sales managers and sales engineers work in teams to analyze
our prospective customers' requirements and propose solutions that meet their
needs. Our sales teams maintain close relationships with our customers after
our products have been installed to ensure our customers remain satisfied. Our
sales managers are compensated with a base salary and commissions which are
based on their attainment of sales quotas. In addition to a base salary, our
sales engineers receive bonus payments based on the sales revenues generated by
their assigned customers.
Channel Sales
Our indirect sales efforts in the United States are primarily focused on
enhancing our network of domestic systems integrators and resellers with
significant experience with networking applications. We are also focusing on
developing additional indirect sales channels as we initiate sales activities
outside the United States, primarily in Europe and Asia.
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Licensing and OEM Relationships
We have established strategic OEM and licensed manufacturer relationships
under which our products, manufactured either by us or another company, are
branded and sold under another company's label, including relationships with
IBM, Micronpc.com and VA Linux. We will continue to seek additional licensing
relationships to broaden our sales capacity.
Marketing
Our marketing objectives include building market awareness and acceptance
of Network Engines and our products, as well as generating qualified customer
leads. We attend trade shows, send out direct mail, and provide information
about our company and our products on our web site. We also conduct public
relations activities utilizing the services of Beaupre & Co., a division of
Brodeur Worldwide. Our executives speak at industry events and provide
briefings to industry analysts and trade press. We have begun advertising in
local and trade publications to promote our products to our target markets.
Our marketing goals include the following:
. to plan and build an integrated program addressing both internal and
external audiences, including prospects, customers, business and trade
press, industry analysts and investors;
. to position us as a leader in providing a wide range of server
appliances for the Internet;
. to design and implement media and tactical programs that communicate
effectively with our target audiences; and
. to clearly and consistently communicate our positioning in our marketing
programs.
As of April 30, 2000, we employed 11 people in marketing.
Support Services
We believe that our ability to consistently provide high-quality customer
service and support will be a key factor in attracting and retaining
customers. We provide support for our products through technical sales
engineers who are located in our sales offices and through our customer
support staff based in our Canton, Massachusetts facility. Our support
activities include direct support to our customers through our web site, which
offers technical information designed to assist in answering frequently asked
questions and in problem diagnosis and resolution. We also provide telephone
support via a help desk, e-mail support, and remote control support that
provides direct access from our support personnel to our customers' systems
for diagnosis and problem resolution. We have also recently engaged the
services of IBM as a subcontractor to provide on-site support in U.S.
locations where we do not have our own service personnel. Our service
arrangement with IBM, which provides next-day, on-site customer support visits
and after-hours phone-in help desk support, is expected to be operational by
the second half of fiscal 2000.
We provide a warranty program for all of our products, which is typically
one year in duration for all parts replacement. Our standard terms and
conditions provide that a customer may return a defective product for repair
or replacement during the warranty period. In addition, during the warranty
period, it has been our practice to send our customers a replacement unit in
advance of their returning a unit experiencing problems. The customer then
swaps units, returning the damaged unit to our depot repair facility in
Canton, Massachusetts. We plan to add additional repair facilities as we
46
<PAGE>
build our distribution capability to be able to provide this level of service
on a worldwide basis. As of April 30, 2000, we employed five people in support
services.
Manufacturing
We use contract manufacturers to produce most of our products. We also have
our own manufacturing employees and manufacturing facilities to build
prototypes and initial units of our new server appliance hardware products. Our
in-house capability is also currently used to perform final assembly, testing
and quality assurance processes, although many of these activities will be
transferred to our manufacturer, SCI Systems. SCI Systems currently utilizes
two of their facilities to build our server appliances--one in Hookset, New
Hampshire and the other in Augusta, Maine.
Some of our sub-assemblies, including chassis, central processing unit
motherboards, and power supplies, are manufactured to our specifications while
other sub-assemblies, for example disk drives, are commodity items. This
approach allows us to maintain design control in areas where we add significant
value and to benefit from market economies with respect to commodity items.
Our contract manufacturing strategy allows us to:
. reduce our capital expenditures;
. conserve the working capital that would be required to fund inventory;
. adjust manufacturing volumes more quickly to meet changes in demand; and
. operate with reduced space dedicated to manufacturing operations.
Research & Development
We believe that our future success depends on our ability to build upon our
current technology platforms, expand the features and functionality of our
suite of server appliances, and develop additional products that maintain our
technological advantages. We have assembled a team of highly skilled engineers
with significant industry experience in high-density packaging, server design,
embedded management, networking, software, quality assurance and technical
documentation. As of April 30, 2000, we employed 46 people in this group.
We will continue to integrate our own hardware and software designs with
industry-standard components, including operating systems and processor
technologies. We also intend to combine technology from other industry sources
into our server appliances where appropriate in order to meet functionality and
time-to-market objectives. We currently have new server appliances and new
hardware platforms under development that are intended to increase the choices
of server appliances we offer to our customers. Included in this development
activity are server appliances for network attached storage, for Internet
caching, for load balancing and for streaming video. These research and
development activities for our server appliances range from feasibility studies
to active development efforts. It is possible that we may choose to abandon any
or all of these activities without bringing them to market.
Our product development expenses for fiscal 1998, 1999 and the six months
ended March 31, 2000, were $923,000, $2.6 million and $3.1 million,
respectively. We expect our product development expenses to increase as we hire
additional research and development personnel to develop new products and
enhance our existing products.
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<PAGE>
Strategic Relationships
We have developed, and will continue to seek to develop, relationships with
key technology vendors that enhance our product offerings. We believe the use
of industry standard technologies, wherever possible, can reduce the cost of
our development activities and the cost of our products to our customers. We
also believe that the integration of non-standard technologies from these key
vendors can allow us to bring products to market more quickly and to reduce the
costs that would result from developing the capability ourselves. In addition,
we believe that extending the management capabilities of our products to
provide management of some of these key vendors products will assist us in
meeting the needs of our customers to manage their Internet systems that
include products from other vendors.
Competition
Our markets are new, rapidly evolving and highly competitive, and we expect
this competition to persist and intensify in the future. We face competition
primarily from server vendors that provide solutions for network computing
systems.
Our principal competitors are general-purpose server manufacturers,
including Compaq, Dell, Hewlett-Packard, IBM and Sun Microsystems. These
competitors have begun manufacturing special versions of their general-purpose
server products for sale as server appliances. We also compete with server
appliance vendors such as Cobalt, Network Appliance and CacheFlow. These other
competitors are expanding their product lines to include several types of
server appliances. In addition, we compete with computer companies that
specialize in building very compact rack-mounted server products, but who do
not typically include software in their offerings. Examples of these
competitors are TruSolutions, Penguin Computing and Qsol.com.
We believe that we compete favorably on factors that are important to our
target market, including packaging density, ease of installation and
configuration, clustering capability to build large configurations of our
server appliances, management capabilities for co-located servers and a wide
range of appliance choices.
We expect competition in the server appliance market to increase
significantly as more companies enter the market and current competitors expand
their product lines. Many of these potential competitors may have significant
competitive advantages, including greater name recognition, more resources to
apply to the development, marketing and sales of their products, and more
established sales channels.
Intellectual Property
We have invested significantly in the development of proprietary technology
for our products and our operations frequently incorporate proprietary and
confidential information. We rely upon a combination of copyright and trademark
laws and non-disclosure and other intellectual property contractual
arrangements to protect our proprietary rights. We protect our software,
documentation and other written materials under trade secret and copyright
laws, which only provide limited protection. We do not hold any patents and
currently have no patent applications pending. We also enter into
confidentiality or license agreements with our employees, consultants and
corporate partners, and control access to and distribution of our software,
documentation and other proprietary information.
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Despite our efforts to protect our proprietary rights, unauthorized parties
may attempt to copy or otherwise obtain and use our products or technology.
Monitoring unauthorized use of our products is difficult, and we cannot be
certain that the steps we have taken will prevent misappropriation of our
technology, particularly in foreign countries where the laws may not protect
our proprietary rights as fully as in the United States. In addition, our
competitors might independently develop similar technology or duplicate our
product or circumvent any patents or our other intellectual property rights.
Due to rapid technological change in our market, we believe the various legal
protections available for our intellectual property are of limited value.
Instead, we seek to establish and maintain a technology leadership position by
leveraging technological and creative skills of our personnel, new product
developments and enhancements to existing products.
Employees
Our success in recruiting, hiring and training large numbers of full-time
and skilled employees and, if the need arises, obtaining large numbers of
temporary employees during periods of increased product demand, is critical to
our ability to produce high quality products on a timely basis. As of April 30,
2000, we had 141 employees. In addition, we may hire temporary employees during
the year depending on market acceptance of our products. We believe that the
demographics surrounding our headquarters, and our reputation and compensation
package, should allow us to continue to attract and retain qualified employees.
We are committed to training our employees and we believe that we maintain
good employee relations.
Facilities
We recently moved our corporate headquarters to a facility in Canton,
Massachusetts, consisting of approximately 52,000 square feet of manufacturing
and office space. In August 2000, we plan to expand our corporate headquarters
into an additional 23,000 square feet located at the Canton facility. We
believe that the Canton facility and additional or alternative available spaces
will be adequate to meet our requirements for the foreseeable future. In
addition, we have regional sales office facilities in the following strategic
metropolitan areas: Los Angeles, New York, San Francisco and Washington, D.C.
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<PAGE>
Legal Proceedings
On December 29, 1999, a former employee, George Flate, commenced a lawsuit
against us, a current officer and director and a former officer and director in
Suffolk Superior Court, a Massachusetts state court. Mr. Flate alleges that he
was unlawfully terminated as Vice President of OEM Sales in an effort to
deprive him of commission payments. He is seeking undisclosed damages based on
two contractual claims relating to his employment, although we anticipate he
will claim damages in the multi-million dollar range. Specifically, he is
alleging a breach of the implied covenant of good faith and fair dealing
against Network Engines and a claim of intentional interference with
contractual relations against the current and former officers of the company
named in the lawsuit. Both of these claims are based on Mr. Flate's allegations
that he is entitled to commissions from several transactions that were
negotiated after Mr. Flate was no longer with the company. Mr. Flate was
employed by Network Engines for approximately one year. Currently, the matter
is in the early stages of discovery. Although we believe these claims are
without merit and we intend to vigorously defend against each claim asserted in
the complaint, an adverse resolution of either of these claims could require
the payment of substantial monetary damages. Moreover, our defense against
these claims might result in the expenditure of significant financial and
managerial resources.
We are, from time to time, a party to other litigation arising in the normal
course of our business. Management believes that none of these other actions,
individually or in the aggregate, will have a material adverse effect on our
financial position or results of operations.
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<PAGE>
MANAGEMENT
Executive Officers and Directors
Our executive officers and directors, and their ages and positions as of
April 30, 2000, are as follows:
<TABLE>
<CAPTION>
Name Age Position
<C> <C> <S>
Lawrence A. Genovesi....... 42 Chairman of the Board of Directors, President,
Chief Executive Officer and Chief Technology
Officer
Douglas G. Bryant.......... 43 Vice President of Administration, Chief
Financial Officer, Treasurer and Secretary
Timothy J. Dalton.......... 48 Vice President of Manufacturing
William B. Elliott......... 55 Vice President of Marketing
Rene E. Thibault........... 49 Vice President of Sales
Robert F. Wambach.......... 39 Vice President of Engineering
John A. Blaeser(2)......... 58 Director
Lawrence Kernan(1)(2)...... 46 Director
Dennis A. Kirshy(1)........ 57 Director
Frank M. Polestra.......... 74 Director
Michael H. Shanahan(1)(2).. 43 Director
Robert M. Wadsworth(1)(2).. 40 Director
</TABLE>
- ---------------------
(1) Member of the compensation committee
(2) Member of the audit committee
Set forth below is certain information regarding the professional experience
for each of the above-named persons.
Lawrence A. Genovesi is our founder and has served as our Chairman of the
Board, President, Chief Executive Officer and Chief Technology Officer since
October 1989. Mr. Genovesi also founded and served as Chief Executive Officer
of New England Interconnection Devices, Inc., a contract manufacturer, from May
1985 to July 1988. From October 1982 to January 1983, Mr. Genovesi served as
Vice President of Engineering for Microsystems International, Inc., a computer
manufacturer. From June 1981 to December 1982, Mr. Genovesi served as Director
of Engineering for CPU Systems Corp., a computer manufacturer and reseller.
Douglas G. Bryant has served as our Secretary and Vice President of
Administration since March 2000, our Treasurer since January 1998 and our Chief
Financial Officer since September 1997. Prior to joining Network Engines, Mr.
Bryant served as Chief Financial Officer of CrossComm Corporation, a
manufacturer of internetworking products including routers and switches, from
July 1996 to June 1997, and as Corporate Controller from September 1989 to June
1996.
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Timothy J. Dalton has served as Vice President of Manufacturing since
November 1997. From November 1996 to November 1997, Mr. Dalton served as
Operations Manager of Axil Computer Corporation, a privately-held designer and
manufacturer of eight-way SMP servers. From January 1994 to July 1996, Mr.
Dalton served as Director of Manufacturing Engineering of Concurrent Computer
Corporation, a designer and manufacturer of Real Time Fault Tolerant servers
for the financial and telecommunications industries.
William B. Elliott has served as Vice President of Marketing since December
1997. Previously, Mr. Elliott served as Vice President of Operations for
Dynaflo, Inc. from May 1997 to December 1997. From October 1996 to May 1997,
Mr. Elliott served as Vice President of Sales and Marketing for Anysoft, Inc.,
a producer of utility software that enhances the interchange of information
between legacy and modern Windows-based applications. Mr. Elliott served as
Vice President of Telecommunications at Stratus Computer from November 1993 to
April 1996, and as Vice President of International Sales for Stratus'
telecommunications division from October 1990 to November 1993.
Rene E. Thibault has been Vice President of Sales since July 1999. Prior to
joining Network Engines, Mr. Thibault served as Vice President of Sales and
Marketing for Voice Request Corporation, a developer of speech-enabled call
routing systems, from January 1997 to June 1999. From October 1995 to December
1996, Mr. Thibault served as Vice President of Sales for Centigram
Communications Corporation, a manufacturer of multimedia messaging and personal
assistant servers. Mr. Thibault also served as Director of Sales for Centigram
from September 1990 to September 1995.
Robert F. Wambach has served as Vice President of Engineering since May
1999. Prior to joining Network Engines, Mr. Wambach served as Senior Director
of VPN Programs at Shiva Corporation, a manufacturer of hardware and software
to enable the connectivity of enterprise networks, which was ultimately
acquired by a subsidiary of Intel and renamed Intel Network Systems, from
February 1999 to May 1999, Senior Director of Platform Engineering from June
1998 to February 1999, and Director of Hardware Engineering from June 1997 to
June 1998. Mr. Wambach held various engineering management positions with
Fujitsu-Nexion (formerly Nexion) from May 1993 to June 1997.
John A. Blaeser has been a director of Network Engines since October 1999.
Since January 1996, Mr. Blaeser has served as President, Chief Executive
Officer and Chairman of the Board of Concord Communications Inc., a maker of e-
business management solutions. Mr. Blaeser served as Managing General Partner
of EG&G Venture Partners from January 1990 to December 1995.
Lawrence Kernan has served as a Director of Network Engines since October
1999. Mr. Kernan has been a Principal of MDT Advisers, Inc., an investment and
venture capital firm, since December 1991. Mr. Kernan has also served as a
director of Keurig, Inc., a manufacturer of coffee brewing equipment, as
Chairman of the Board of Directors, since April 1995. Mr. Kernan has previously
served as a director at First American Financial Corporation, ADS Technologies,
Inc., Cobotyx, Inc. and Visage, Inc.
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<PAGE>
Dennis A. Kirshy has served as a Director of Network Engines since July
1997. Mr. Kirshy is a private investor and has advised and invested in small
technology companies in the networking, internetworking and computer industries
since February 1993. Mr. Kirshy is also a director of several privately-held
companies in the networking and computer peripherals arena.
Frank M. Polestra has served as a Director of Network Engines since May
1997. Mr. Polestra has been Managing Director of Ascent Venture Management,
Inc., a manager of venture funds and investor in early-stage companies in the
Northeastern United States, since March 1999. Mr. Polestra is a Managing Member
or General Partner of each of the general partners of Ascent Venture Partners,
L.P., Ascent Venture Partners II, L.P. and Ascent Venture Partners III, L.P.
Mr. Polestra is also a partner of Le Serre. Prior to his position with Ascent
Venture Management, Mr. Polestra was President, Director and General Partner of
Pioneer Capital Corporation, a venture capital management firm, from 1981 to
1999. Mr. Polestra is also a director of several privately-held companies.
Michael H. Shanahan has served as a Director of Network Engines since
January 1999. Mr. Shanahan has served as General Partner of Egan-Managed
Capital, L.P., a venture capital firm managing a portfolio of investments in
technology companies, since co-founding that firm in February 1997. From April
1982 to February 1997, Mr. Shanahan was a Partner with Eastech Management
Company, a manager of venture capital funds with investments in technology
companies. Mr. Shanahan is also a director of several privately-held companies.
Robert M. Wadsworth has served as a Director of Network Engines since
December 1999. He has been a Managing Director of HarbourVest Partners, LLC, a
global private equity firm investing in Internet and information technology
companies on a worldwide basis, since January 1997. Mr. Wadsworth has also been
a General Partner of Hancock Venture Partners, the predecessor organization to
HarbourVest, since December 1988. Mr. Wadsworth is also a member of the board
of directors of the following companies: Banyan Systems, Inc., Blue Sky
Software Corporation, Cardiff Software, Inc., Communication Systems Technology,
Inc., Concord Communications, Inc., Nuera Communications, Inc., Oasis
Technology Ltd., Outsourcing Services Group, Polaris Service, Inc.,
Switchboard.com, Inc., Tally Systems Corporation and Trintech Group Limited.
Election of Directors
Upon the closing of this offering, the board of directors will be divided
into three classes, each of whose members will serve for a staggered three-year
term. Dennis A. Kirshy and Michael H. Shanahan will serve in the class whose
term expires in 2001; Lawrence Kernan and Frank M. Polestra will serve in the
class whose term expires in 2002; and Lawrence A. Genovesi, John A. Blaeser and
Robert M. Wadsworth will serve in the class whose term expires in 2003. Upon
the expiration of the term of a class of directors, directors for that class
will be elected for three-year terms at the annual meeting of stockholders.
Each officer serves at the discretion of the board of directors and holds
office until his or her successor is elected and qualified or until his or her
earlier resignation or removal. A voting agreement among us and several of our
stockholders provides for the nomination and election of directors by certain
of our 5% stockholders. Messrs. Genovesi, Blaeser, Kernan, Kirshy, Polestra,
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Shanahan and Wadsworth were elected to the board of directors pursuant to the
voting agreement. The voting agreement terminates upon the closing of this
offering.
Compensation of Directors
We intend to grant stock options on an annual basis under our director plan
and may grant other equity awards from time-to-time to our non-employee
directors pursuant to our 1999 plan or director plan.
Board Committees
The board of directors has established a compensation committee and an audit
committee. The compensation committee, which consists of Messrs. Kernan,
Kirshy, Shanahan and Wadsworth, reviews executive salaries, administers any
bonus, incentive compensation and stock option plans, and approves the salaries
and other benefits of our executive officers. In addition, the compensation
committee consults with our management regarding pension and other benefit
plans and our compensation policies and practices. The audit committee, which
consists of Messrs. Blaeser, Kernan, Shanahan and Wadsworth, reviews the
professional services provided by our independent accountants, the independence
of our accountants from our management, our annual financial statements and our
system of internal accounting controls. The audit committee also reviews other
matters related to our accounting, auditing and financial reporting practices
and procedures that the committee find appropriate or may be brought to its
attention.
Compensation Committee Interlocks and Insider Participation
Prior to the formation of a compensation committee, the board of directors
as a whole made decisions concerning the compensation of executive officers.
Mr. Genovesi, an executive officer, was a member of our board of directors when
it performed the functions generally performed by a compensation committee,
including determining the compensation of executive officers. However, Mr.
Genovesi did not participate in any discussions regarding his compensation. For
a description of transactions between us and certain of our directors, Messrs.
Genovesi, Kernan, Kirshy, Polestra, Shanahan and Wadsworth, and entities
affiliated with our directors, see "Related Party Transactions" below.
Executive Compensation
The following table sets forth, for the fiscal year ended September 30,
1999, the cash compensation paid and shares underlying options granted to our:
. Chief Executive Officer; and
. five other most highly compensated executive officers who received, or
would have received, annual compensation in excess of $100,000, referred
to collectively as the named executive officers.
54
<PAGE>
Summary Compensation Table
<TABLE>
<CAPTION>
Long-term
Compensation
Awards
------------
Annual
Compensation (1) Shares
---------------- Underlying
Name and Principal Position Salary Bonus Options (2)
<S> <C> <C> <C>
Lawrence A. Genovesi........................... $146,154 -- --
Chief Executive Officer
Douglas G. Bryant.............................. 111,538 -- 149,850
Chief Financial Officer
William B. Elliott............................. 111,538 -- 127,500
Vice President of Marketing
Timothy J. Dalton.............................. 111,538 -- 121,500
Vice President of Manufacturing
Rene E. Thibault............................... 34,039 $18,750(4) 348,000
Vice President of Sales (3)
Robert F. Wambach.............................. 43,269 -- 261,000
Vice President of Engineering (5)
</TABLE>
- ---------------------
(1) In accordance with the rules of the Securities and Exchange Commission,
the compensation set forth in the table does not include medical, group
life or other benefits which are available to all of our salaried
employees, and certain perquisites and other benefits, securities or
property which do not exceed the lesser of $50,000 or 10% of the person's
salary and bonus shown in the table.
(2) We did not award any stock appreciation rights or make any long-term
incentive payments during fiscal 1999 to the named executive officers.
Options granted to the named executive officers were granted at fair
market value as determined by the board of directors based on all factors
available to the board of directors on the grant date.
(3) Mr. Thibault joined us in July 1999. On an annualized basis, Mr. Thibault
would have earned a salary of $150,000 and an incentive-based compensation
target of $75,000.
(4) Comprised of commissions paid based on revenue generated.
(5) Mr. Wambach joined us in April 1999. On an annualized basis, Mr. Wambach
would have earned a salary of $125,000.
In the table above, columns required by the regulations of the Securities
and Exchange Commission have been omitted where no information was required to
be disclosed under those columns.
Option Grants in the Last Fiscal Year
The following table sets forth grants of stock options made under our 1999
stock incentive plan for the year ended September 30, 1999 to each individual
named in the Summary Compensation Table. We have never granted any stock
appreciation rights.
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<PAGE>
The amounts shown as potential realizable value represent hypothetical gains
that could be achieved for the respective options if exercised at the end of
the option term. These amounts represent certain assumed rates of appreciation
in the value of our common stock. The 5% and 10% assumed annual rates of
compounded stock price appreciation are mandated by rules by the Securities and
Exchange Commission. These estimates do not represent our estimate or
projection of the future price of our common stock and may not necessarily be
achieved. The potential realizable value is calculated based on the ten year
term of the option at its time of grant on the assumption that the share value
appreciates from the assumed initial public offering price of $12.00 at the
indicated compounded annual rate and that the option is exercised and sold on
the last day of its term for the appreciated stock price. Actual gains, if any,
on stock option exercises depend on the future performance of our common stock.
The percentage of total options granted to our employees in the last fiscal
year is based on options to purchase an aggregate of 1,593,975 shares of common
stock granted during fiscal 1999.
<TABLE>
<CAPTION>
Individual Grants
-------------------------------------------
Potential Realizable
Value at Assumed
Annual Rates of
Number of % of Total Stock Price
Securities Options Exercise Appreciation for
Underlying Granted To of Base Option Term
Options Employees in Price Expiration ----------------------
Name Granted Fiscal Year ($/Sh) Date 5% 10%
<S> <C> <C> <C> <C> <C> <C>
Lawrence A. Genovesi.... -- -- % $ -- -- $ -- $ --
Douglas G. Bryant....... 149,850 9.4 0.133 2/24/09 2,909,103 4,644,093
William B. Elliott...... 127,500 8.0 0.133 2/24/09 2,475,213 3,951,430
Timothy J. Dalton....... 121,500 7.6 0.133 2/24/09 2,358,729 3,765,477
Rene E. Thibault........ 348,000 21.8 0.133 7/22/09 6,755,865 10,785,070
Robert F. Wambach....... 261,000 16.4 0.133 5/26/09 5,066,899 8,088,810
</TABLE>
Fiscal Year-End Option Values
The following table sets forth information for each of the named executive
officers with respect to the value of options outstanding as of September 30,
1999. There was no public trading market for our common stock as of September
30, 1999. Accordingly, these values have been calculated based on the assumed
initial public offering price of $12.00, less the aggregate exercise price.
<TABLE>
<CAPTION>
Number of Securities
Underlying Value of Unexercised
Shares Unexercised Options In-The-Money Options
Acquired at September 30, 1999 at September 30, 1999
on Value --------------------- ---------------------
Name Exercise Realized Vested Unvested Vested Unvested
<S> <C> <C> <C> <C> <C> <C>
Lawrence A. Genovesi.... -- -- -- -- $ -- $ --
Douglas G. Bryant....... -- -- 48,627 212,372 579,964 2,523,905
William B. Elliott...... -- -- 39,375 178,125 469,613 2,116,788
Timothy J. Dalton....... -- -- 22,967 151,032 273,926 1,794,024
Rene E. Thibault........ -- -- -- 348,000 -- 4,129,600
Robert F. Wambach....... -- -- -- 261,000 -- 3,097,200
</TABLE>
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<PAGE>
Benefit Plans
1999 Stock Incentive Plan. Our 1999 stock incentive plan, as amended, was
originally adopted by our board of directors in October 1999 and approved by
our stockholders in November 1999. Up to 8,047,902 shares of our common stock
currently may be issued pursuant to options or awards granted under the 1999
plan. The number of shares that may be issued pursuant to the 1999 plan will be
increased annually beginning on October 1, 2000 by the lesser of:
. 4,000,000 shares;
. 5% of the outstanding shares on the date of the increase; or
. a lesser amount determined by the board of directors.
Share increases may not exceed an aggregate of 12,000,000 shares during the
term of the 1999 plan.
The 1999 plan provides for the grant of incentive stock options intended to
qualify under Section 422 of the Internal Revenue Code, nonstatutory stock
options, restricted stock awards and other stock-based awards. Our officers,
employees, directors, consultants and advisors are eligible to receive awards
under the 1999 plan. The granting of awards under the 1999 plan is
discretionary. Under present law, however, incentive stock options may be
granted only to employees. Under the 1999 plan, no participant may receive any
award for more than 1,250,000 shares in any calendar year.
We may grant options at an exercise price less than, equal to or greater
than the fair market value of our common stock on the date of grant. Under
present law, incentive stock options and options intended to qualify as
performance-based compensation under Section 162(m) of the Internal Revenue
Code may not be granted at an exercise price less than the fair market value of
the common stock on the date of grant or less than 110% of the fair market
value in the case of incentive stock options granted to optionees holding more
than 10% of the voting power of Network Engines. The 1999 plan permits our
board of directors to determine how optionees may pay the exercise price of
their options, including by cash, check or, in connection with a "cashless
exercise," through a broker, by surrender to us of shares of common stock, by
delivery to us of a promissory note, or by any combination of the permitted
forms of payments.
Our board of directors administers the 1999 plan. Our board of directors has
the authority to adopt, amend and repeal the administrative rules, guidelines
and practices relating to the plan and to interpret its provisions. It may
delegate authority under the 1999 plan to one or more committees of the board
of directors and, subject to certain limitations, to one or more of our
executive officers. Subject to any applicable limitations contained in the 1999
plan, our board of directors or a committee of the board of directors or
executive officer to whom our board of directors delegates authority, as the
case may be, selects the recipients of awards and determines:
. the number of shares of common stock covered by options and the dates
when the options become exercisable;
. the exercise price of options;
. the duration of options; and
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<PAGE>
. the number of shares of common stock subject to any restricted stock or
other stock-based awards and the terms and conditions of the awards,
including the conditions for repurchase, issue price and repurchase
price.
Typically, for each option granted, 25% of the shares become exercisable on
the first anniversary of the option grant and the remainder become exercisable
in 12 equal installments at the rate of 6.25% of the shares each three-month
period following the first anniversary of the option grant.
The plan provides that in the event of a merger, liquidation or other
acquisition event, each outstanding option or restricted stock award shall be
assumed or an equivalent option or award substituted by the successor
corporation, as determined by our board of directors, unless the successor
corporation refuses to assume or substitute for the option or award, in which
case those options or awards shall become fully vested and free of restrictions
prior to the consummation of the acquisition event.
No award may be granted under the 1999 plan after October 21, 2009, but the
vesting and effectiveness of options and awards previously granted may extend
beyond that date. As of April 30, 2000, we granted awards of and options
exercisable for 4,915,875 shares of common stock, excluding awards and options
that have been cancelled. Our board of directors may at any time amend, suspend
or terminate the 1999 plan, except that no award granted after an amendment of
the 1999 plan and designated as subject to Section 162(m) of the Internal
Revenue Code by our board of directors shall become exercisable, realizable or
vested, to the extent the amendment was required to grant the award, unless and
until the amendment is approved by our stockholders.
2000 Employee Stock Purchase Plan. Our 2000 employee stock purchase plan was
adopted by the board of directors in March 2000 and will be approved by the
stockholders in May 2000. The employee stock purchase plan authorizes the
issuance of up to a total of 750,000 shares of common stock to participating
employees.
All of our employees, including our employee-directors, who are customarily
employed by us for more than 20 hours a week and who are customarily employed
by us for at least five months in a calendar year are eligible to participate
in the employee stock purchase plan. Employees who would immediately after the
grant own 5% or more of the total combined voting power or value of our stock
or any subsidiary are not eligible to participate.
The employee stock purchase plan permits eligible employees to purchase
common stock through payroll deductions, which may not exceed 15% of an
employee's compensation, subject to certain limitations. On the first day of a
designated payroll deduction period, referred to as the offering period, we
will grant to each eligible employee who has elected to participate in the
employee stock purchase plan an option to purchase shares of common stock. On
the last day of the offering period, the employee is deemed to have exercised
the option, at the option exercise price, to the extent of accumulated payroll
deductions. Under the terms of the employee stock purchase plan, the option
price is an amount equal to 85% of the fair market value per share of the
common stock on either the first day or the last day of the offering period,
whichever is lower. The first offering period under the employee stock purchase
plan will commence on the first date that we have filed
58
<PAGE>
with the Securities and Exchange Commission an effective registration statement
on Form S-8 for purposes of registering under the Securities Act of 1933, or
the Securities Act, all shares of our common stock issuable under the employee
stock purchase plan, and shall end on December 31, 2000. The compensation
committee may, in its discretion, choose an offering period of 12 months or
less for each of the offerings and choose a different offering period for each
offering.
If an employee is not a participant on the last day of the offering period,
the employee is not entitled to exercise any option, and the amount of the
employee's accumulated payroll deductions will be refunded. An employee's
rights under the employee stock purchase plan terminate upon voluntary
withdrawal from the employee stock purchase plan at any time, or when the
employee ceases employment for any reason, except that upon termination of
employment because of death, the employee's beneficiary has a right to the
accumulated payroll deductions in the participant's account.
2000 Director Stock Option Plan. Our 2000 director stock option plan was
adopted by our board of directors in March 2000 and will be approved by our
stockholders in May 2000. Under the director plan, our directors who are not
employees of Network Engines or a subsidiary of Network Engines receive non-
statutory options to purchase shares of common stock. A total of 500,000 shares
of common stock may be issued upon the exercise of options granted under the
director plan.
Pursuant to the director plan, each non-employee director who first becomes
a non-employee director after the closing of this offering will be granted an
option to purchase 50,000 shares of common stock on the date of his or her
initial election to our board of directors, which will vest ratably over four
years on each anniversary of the date of grant. In addition, each non-employee
director will receive an option to purchase 15,000 shares of common stock on
the date of each annual meeting of stockholders commencing with the 2001 annual
meeting of stockholders (other than a director who was initially elected to the
board of directors at any annual meeting or, if previously, at any time after
the prior year's annual meeting). The options granted annually vest upon the
earlier of one year from the date of grant or the date immediately preceding
the next annual meeting of stockholders, so long as the optionee remains our
director. The exercise price per share of all options granted to directors
under the director plan will be the fair market value of a share of common
stock on the date of grant.
Employee Savings and Retirement Plan. We have an employment savings and
retirement plan. The plan covers all of our full-time employees. Under the
plan, participants may elect to defer a portion of their eligible compensation,
subject to certain limitations. We do not match employee contributions to the
plan.
Management Incentive Plan. The compensation committee adopted a management
incentive plan in February 2000. Under this plan, commencing with the quarterly
period ending June 30, 2000, we will pay on a quarterly basis to each of our
vice presidents and our president a percentage of their respective annual base
salaries if we achieve our net revenue targets for that quarter. For the
quarters ending June 30, 2000 and September 30, 2000, the compensation
committee determined that the executives will receive 12.5% of their respective
annual base salaries if targets for those periods are met.
59
<PAGE>
RELATED PARTY TRANSACTIONS
Transfer of P6000 Product Line
In April 2000, we sold all of our inventory and test equipment related to
the P6000 product line to Copernicus Systems, Inc., which is wholly-owned by
Cheryl H. Smith. Ms. Smith, the wife of Mr. Genovesi, is a co-founder,
stockholder and former director and officer of Network Engines. Our production
and development of the P6000 product line has been discontinued and we have
fully reserved for these assets on our balance sheet. In exchange for these
assets, Copernicus Systems, Inc. agreed to pay to us royalties on future sales
of the inventory and agreed to support P6000 units for which we have
obligations under warranty or service contracts.
Loan and Guarantee from Lawrence A. Genovesi and Cheryl H. Smith
In April 1993, Mr. Genovesi and Ms. Smith loaned us $26,175 in exchange for
a promissory note bearing interest at 10% annually made in their favor. In
January 1996, Ms. Smith also loaned us $4,300 in exchange for a promissory note
bearing interest at 12% annually in her favor. The interest rate on each note
was reduced by one-half in January 1999. These notes were paid in full and
canceled in August 1999.
In order to receive a Small Business Administration guarantee of 90% of a
$100,000 note obtained in May 1994, Mr. Genovesi and Ms. Smith granted a second
mortgage on their personal residence to the Small Business Administration. We
repaid the loan in fiscal 1999.
Severance Arrangements with Cheryl H. Smith
In January 1998, we and Ms. Smith executed a Severance Agreement and
Release, pursuant to which we paid Ms. Smith approximately $72,000 and engaged
Copernicus & Co., which is wholly-owned by Ms. Smith, as a consultant for one
month at a fee of $300 per day. We and Ms. Smith released each other from most
claims related to her employment by us.
Issuances of Preferred Stock to Directors and 5% Holders
We have issued four series of preferred stock. Each series A, series B and
series C preferred share is convertible upon the completion of this offering
into 7.5 shares of our common stock. Each series D preferred share is
convertible upon the completion of this offering into 2.5 shares of our common
stock. We issued the following number of shares of each series of preferred
stock on the following dates:
. On April 9, 1997, we issued an aggregate of 185,250 shares of series A
preferred stock at $5.40 per share, or 1,389,375 shares of common stock
at $0.72 per share on an as-converted basis;
. On January 13, 1999, we issued an aggregate of 357,142 shares of series
B preferred stock at $7.70 per share, or 2,678,565 shares of common
stock at $1.03 per share on an as-converted basis;
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<PAGE>
. On January 13 and June 30, 1999, we issued an aggregate of 1,123,549
shares of series C preferred stock at $7.70 per share, or 8,426,617
shares of common stock at $1.03 per share on an as-converted basis; and
. On December 20, 1999, we issued an aggregate of 3,581,554 shares of
series D preferred stock at $7.05 per share, or 8,953,885 shares of
common stock at $2.82 per share on an as-converted basis.
The following directors and 5% holders of our common stock and entities
controlled by them were issued the following number of shares of each series of
preferred stock in exchange for cash or the cancellation of bridge notes:
<TABLE>
<CAPTION>
Series A Series B Series C Series D
Preferred Preferred Preferred Preferred
Stock Stock Stock Stock
<S> <C> <C> <C> <C>
5% Holders
Ascent Venture Partners II, L.P.(1)... 148,200 285,714 111,298 --
MD Co................................. -- -- 388,941 141,894
Egan-Managed Capital, L.P............. -- -- 291,698 106,383
HarbourVest VI-Direct Fund, L.P....... -- -- -- 1,985,816
Canaan Equity Partners II, LLC........ -- -- -- 709,220
Directors
Dennis A. Kirshy...................... -- -- 6,493 2,056
Lawrence Kernan(2).................... -- -- 1,298 --
Frank M. Polestra(3).................. -- -- 9,740 --
</TABLE>
- ---------------------
(1) Ascent Venture Partners II, L.P. acquired all of its series A preferred
stock and series B preferred stock and 77,922 shares of its series C
preferred stock from Pioneer Ventures Limited Partnership II.
(2) Mr. Kernan may be deemed to beneficially own shares purchased by MD Co.,
which purchased 388,941 shares of series C preferred stock and 141,844
shares of series D preferred stock.
(3) Mr. Polestra may be deemed to beneficially own shares held by each of
Ascent Venture Partners, L.P., which purchased 37,050, 71,428, and 27,824
shares of series A preferred stock, series B preferred stock and series C
preferred stock, respectively, Ascent Venture Partners II, L.P., which
purchased 148,200, 285,714 and 111,298 shares of series A preferred stock,
series B preferred stock and series C preferred stock, respectively,
Ascent Venture Partners III, L.P., which purchased 283,688 shares of
series D preferred stock, and Le Serre, which purchased 4,544 shares of
series C preferred stock.
Issuances of Common Stock and Options to Purchase Common Stock to Directors and
5% Holders of our Common Stock
On March 16, 2000, our board of directors approved the sale of 12,500 shares
of common stock to Mr. Shanahan at $6.00 per share. Pursuant to a stock
restriction agreement these shares vest on the earlier of one year after the
date of grant or on the day prior to our next annual stockholders' meeting
after the end of fiscal 2000.
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<PAGE>
On March 16, 2000, we granted options to purchase 12,500 shares of our
common stock at $6.00 per share to each of Messrs. Kernan, Polestra and
Wadsworth.
On November 18, 1999, we sold 375,000 shares of common stock to Mr. Genovesi
for $0.24 per share in exchange for a $90,000 full recourse promissory note.
The note from Mr. Genovesi is due on demand or on November 18, 2004 and accrues
interest at 6.08% compounded annually. Pursuant to a stock restriction
agreement, these 375,000 shares vest on a quarterly basis beginning on December
31, 1999 and ending on September 30, 2002. Each quarter, the amount that vests
is determined based on the attainment of net revenue and net profit objectives
set by the board of directors. Mr. Genovesi must forfeit any shares that have
not vested by November 18, 2006.
We sold 225,000 shares of common stock to Mr. Kirshy for $0.07 per share on
January 7, 1998. Pursuant to a stock restriction agreement, these 225,000
shares vest over three years, one-third on June 30, 1998 and 8.375% of the
remainder each quarter until June 30, 2000. We sold 75,000 shares of common
stock to Mr. Kirshy for $0.24 per share on November 18, 1999. Pursuant to a
stock restriction agreement, one-half of these 75,000 shares vest one year
after the sale and 12.5% of the remainder vest each quarter thereafter.
We sold 187,500 shares of common stock to Mr. Blaeser for $0.24 per share on
November 18, 1999. Pursuant to a stock restriction agreement, these 187,500
shares vest over four years, 25% upon the expiration of one year and 6.25% at
the end of each quarter thereafter.
Issuance of Promissory Notes
We have issued the following subordinated promissory notes, bearing interest
at 10% per annum, to 5% holders of our common stock and entities controlled by
them, all of which were cancelled in exchange for series B or series C
preferred stock:
<TABLE>
<CAPTION>
Name Dates of Issuance Aggregate Amount
<S> <C> <C>
Ascent Venture Partners II,
L.P.(1)........................... 10/16/1997-11/2/1998 $2,720,000
MD Co.............................. 12/8/1998 428,571(2)
Egan-Managed Capital, L.P.......... 12/8/1998 321,429(2)
Frank Polestra(3).................. 8/12/1998 75,000(4)
</TABLE>
- ---------------------
(1) The notes held by Ascent Venture Partners, L.P. and Ascent Venture
Partners II, L.P. were originally acquired by Pioneer Ventures Limited
Partnership and Pioneer Ventures Limited Partnership II, respectively.
(2) Bore interest at a rate of 15% per annum.
(3) Mr. Polestra is a Managing Member or General Partner of each of the
general partners which control Ascent Venture Partners, L.P., Ascent
Venture Partners II, L.P. and Ascent Venture Partners III, L.P.
(4) Mr. Polestra could have been deemed to beneficially own $680,000 in
promissory notes issued to Ascent Venture Partners, L.P., $2,720,000 in
promissory notes issued to Ascent Venture Partners II, L.P., and a $25,000
promissory note issued to Le Serre, but those notes have not been included
as held by Mr. Polestra in the table.
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<PAGE>
Issuance of Warrants to Purchase Common Stock
Between October 16, 1997 and January 13, 1999, in connection with the sale
of promissory notes or series C preferred stock, we issued warrants to purchase
an aggregate of 1,705,500 shares of our common stock at an exercise price of
$0.36667 per share with a ten year term to the following holders of 5% or more
of our common stock on a fully converted basis and a director.
<TABLE>
<CAPTION>
Original Revised
Number of Number of
Shares of Shares of
Common Stock Common Stock
Underlying Underlying
Name (1) Warrants Warrants (2) Dates of Issuance
<S> <C> <C> <C>
Ascent Venture Partners
II, L.P.(3)............ 377,812 721,500 10/16/1997-11/2/1998
MD Co................... 546,427 NA 12/8/1998 and 1/13/1999
Egan-Managed Capital,
L.P.................... 409,822 NA 12/8/1998 and 1/13/1999
Frank Polestra.......... 10,410(4) 20,812(5) 11/2/1998
--------- ---------
Total.................. 1,344,471 1,698,561
========= =========
</TABLE>
- ---------------------
(1) See Notes to Table of Beneficial Ownership in "Principal Stockholders" for
information relating to the beneficial ownership of the referenced shares.
(2) Reflects modification of the number of shares underlying bridge warrants
issued on October 16, 1997, January 30, 1998, May 21, 1998, June 4, 1998,
August 12, 1998, by agreements dated December 8, 1998 by and among Network
Engines, Pioneer Ventures Limited Partnership, Pioneer Ventures Limited
Partnership II, Mr. Polestra, Le Serre and other investors who received
warrants on those dates.
(3) The warrants held by each of Ascent Venture Partners, L.P. and Ascent
Venture Partners II, L.P. were originally issued to Pioneer Ventures
Limited Partnership and Pioneer Ventures Limited Partnership II,
respectively.
(4) Mr. Polestra may be deemed to beneficially own warrants to purchase 94,455
shares of common stock issued to Ascent Venture Partners, L.P., warrants to
purchase 377,812 shares of common stock issued to Ascent Venture Partners,
II, L.P., and a warrant to purchase 3,465 shares of common stock issued to
Le Serre.
(5) Mr. Polestra may be deemed to beneficially own warrants to purchase 180,375
shares of common stock issued to Ascent Venture Partners, L.P., warrants to
purchase 721,500 shares of common stock issued to Ascent Venture Partners
II, L.P. and a warrant to purchase 6,937 shares of common stock issued to
Le Serre.
Issuance of Options to Purchase Common Stock
We have granted options to executive officers, and we intend to grant
additional options to our directors and executive officers in the future. See
"Management--Option Grants in Last Fiscal Year," "--Benefit Plans" and "--
Director Compensation."
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<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding beneficial
ownership of our common stock as of April 30, 2000 and as adjusted to reflect
the sale of the shares in this offering by:
. each person who is known by us to own beneficially more than 5% of the
outstanding shares of common stock;
. each of our directors and named executive officers; and
. all our directors and executive officers as a group.
<TABLE>
<CAPTION>
Number of Shares
Beneficially
Owned Prior to
and After
the Offering (1) Percentage of Shares(1)
------------------------------------------
Name and Address of Beneficial Before After
Owner the Offering the Offering
<S> <C> <C> <C> <C>
HarbourVest Partners VI--Direct
Fund, L.P........................ 4,964,540 18.8% 15.2%
c/o HarbourVest Partners, LLC
One Financial Center, 44th Floor
Boston, Massachusetts 02111
Ascent Venture Partners II,
L.P. ............................ 4,810,590 18.2 14.7
255 State Street
Boston, Massachusetts 02109
MD Co............................. 3,818,095 14.4 11.7
125 Cambridge Park Drive
Cambridge, Massachusetts 02140-
2314
Egan-Managed Capital, L.P......... 2,863,515 10.8 8.8
Thirty Federal Street
Boston, Massachusetts 02110
Canaan Equity Partners II,
LLC(2)........................... 1,773,050 6.7 5.4
105 Rowayton Avenue
Rowayton, Connecticut 06853-1436
Directors and Executive Officers
Lawrence A. Genovesi(3)........... 2,625,000 9.9 8.0
Douglas G. Bryant(4).............. 116,295 * *
Timothy J. Dalton(5).............. 70,780 * *
William B. Elliott(6)............. 96,092 * *
Rene E. Thibault.................. 65,250 * *
Robert F. Wambach(7).............. 65,250 * *
John A. Blaeser................... 187,500 * *
Lawrence Kernan(8)................ 3,827,830 14.5 11.7
Dennis A. Kirshy(9)............... 338,837 1.3 1.0
Frank M. Polestra(10)............. 6,857,330 26.0 21.0
Michael H. Shanahan(11)........... 2,876,015 10.9 8.8
Robert M. Wadsworth(12)........... 4,964,540 18.8 15.2
All directors and executive
officers as a group
(12 persons)(13)................. 22,090,719 83.3% 67.4%
</TABLE>
- ---------------------
* Less than 1% of the outstanding common stock.
64
<PAGE>
- ---------------------
(1) The number of shares of common stock deemed outstanding prior to this
offering includes: (i) 26,423,629 shares of common stock outstanding as of
April 30, 2000; and (ii) any shares issuable pursuant to options and
warrants held by the respective person which may be exercised within 60
days after April 30, 2000 as set forth in the additional footnotes below.
The number of shares of common stock deemed outstanding after this
offering includes the 6,250,000 shares that we are offering for sale in
this offering. Beneficial ownership is determined in accordance with the
rules of the Securities and Exchange Commission, and includes voting and
investment power with respect to shares. Unless otherwise indicated below,
to our knowledge, all persons named in the table have sole voting and
investment power with respect to their shares of common stock, except to
the extent authority is shared by spouses under applicable law. The fact
that we have included these "beneficially owned" shares, however, does not
constitute an admission that the named stockholder is a direct or indirect
beneficial owner of the shares. Unless otherwise indicated, the address of
each person listed is c/o Network Engines, Inc., 25 Dan Road, Canton,
Massachusetts 02021.
(2) Includes 1,161,350 shares owned by Caanan Equity II L.P., 92,197 shares
owned by Caanan Equity II Entrepeneurs LLC, and 519,502 shares owned by
Caanan Equity II L.P. (QP).
(3) Includes 750,000 shares of common stock owned by Cheryl H. Smith, the wife
of Mr. Genovesi. Mr. Genovesi disclaims beneficial ownership of all shares
owned by Ms. Smith.
(4) Includes 16,312 shares subject to options exercisable within 60 days
following April 30, 2000.
(5) Includes 10,875 shares subject to options exercisable within 60 days
following April 30, 2000.
(6) Includes 13,592 shares subject to options exercisable within 60 days
following April 30, 2000.
(7) Consists of 65,250 shares subject to options exercisable within 60 days
following April 30, 2000.
(8) Includes 3,818,095 shares owned by MD Co. Mr. Kernan may be deemed to have
or share voting or investment power with respect to these shares. He is a
Principal of MDT Advisers, Inc., which controls MD Co. Mr. Kernan
disclaims beneficial ownership of these shares except to the extent of his
pecuniary interest in the shares.
(9) Includes 7,500 shares of common stock held by Mr. Kirshy's son, Wade G.
Kirshy. Mr. Kirshy disclaims beneficial ownership of the 7,500 shares held
by Wade G. Kirshy.
(10) Includes 41,017 shares owned by Le Serre, 1,202,640 shares owned by
Ascent Venture Partners, L.P., 4,810,590 shares owned by Ascent Venture
Partners II, L.P. and 709,220 shares owned by Ascent Venture Partners
III, L.P. Mr. Polestra may be deemed to have or share voting or
investment power with respect to these shares. Mr. Polestra is a Managing
Member or General Partner of each of the general partners which control
Ascent Venture Partners, L.P., Ascent Venture Partners II, L.P. and
Ascent Venture Partners III, L.P. Mr. Polestra disclaims beneficial
ownership of these shares except to the extent of his pecuniary interest
in the shares.
(11) Includes 2,863,515 shares owned by Egan-Managed Capital, L.P. Mr.
Shanahan may be deemed to have or share voting or investment power with
respect to these shares. He is a General Partner of Egan-Managed Capital,
L.P. Mr. Shanahan disclaims beneficial ownership of these shares except
to the extent of his pecuniary interest in the shares.
(12) Consists of 4,964,540 shares owned by HarbourVest Partners VI--Direct
Fund, L.P. Mr. Wadsworth may be deemed to have or share voting or
investment with respect to these shares. He is a Managing Director of
HarbourVest Partners, LLC, which controls HarbourVest Partners VI-Direct
Fund, L.P. Mr. Wadsworth disclaims beneficial ownership of these shares
except to the extent of his pecuniary interest in the shares.
(13) Includes 106,030 shares subject to options exercisable within 60 days
following April 30, 2000.
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<PAGE>
DESCRIPTION OF CAPITAL STOCK
The following is a description of all of the material terms of our capital
stock contained in our second amended and restated certificate of
incorporation. Because this is a summary description, we refer you to the
provisions of Delaware corporate law and of our second amended and restated
certificate of incorporation and our second amended and restated by-laws, which
you can access using the EDGAR database at www.sec.gov/edgarhp.htm.
Effective upon the closing of this offering, our authorized capital stock
will consist of 100,000,000 shares of common stock, $.01 par value per share.
As of April 30, 2000, we had outstanding:
. 4,975,187 shares of common stock held by 52 stockholders of record;
. 5,247,495 shares of preferred stock held by 43 stockholders of record;
. options to purchase 3,721,615 shares of common stock; and
. warrants to purchase 1,882,851 shares of common stock.
Upon the closing of this offering, all outstanding shares of preferred stock
will automatically convert into 21,448,442 shares of common stock. The options
and warrants will remain outstanding.
Common Stock
Based upon the number of shares outstanding as of April 30, 2000, giving
effect to the conversion of all shares of preferred stock into 21,448,442
shares of common stock upon the closing of this offering, and giving effect to
the issuance of the shares of common stock offered by us in this offering,
there will be 32,673,629 shares of common stock outstanding upon the closing of
this offering. In addition, as of April 30, 2000, there were outstanding
options for the purchase of a total of 3,721,615 shares of common stock and
warrants for the purchase of 1,882,851 shares of common stock.
Holders of common stock are entitled to one vote for each share held on all
matters submitted to a vote of stockholders at the annual meeting of
stockholders and do not have cumulative voting rights. Directors are elected by
a plurality of the votes of the shares present in person or by proxy at the
meeting and entitled to vote in elections of directors. Holders of common stock
are entitled to receive ratably any dividends that are declared by the board of
directors out of funds legally available therefor, subject to any preferential
dividend rights of outstanding preferred stock. Upon the liquidation,
dissolution or winding up of Network Engines, the holders of common stock are
entitled to receive ratably our net assets available after the payment of all
our debts and other liabilities, subject to the prior rights of any outstanding
preferred stock. Holders of our common stock have no preemptive, subscription,
redemption or conversion rights, nor are they entitled to the benefit of any
sinking fund. The rights, powers, preferences and privileges of holders of
common stock are subject to, and may be adversely affected by, the rights of
the holders of shares of any series of preferred stock that our board of
directors may designate and issue in the future.
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<PAGE>
Preferred Stock
Our board of directors will be authorized, subject to any limitations
prescribed by law, without further stockholder approval, to issue from time to
time up to an aggregate of 5,000,000 shares of preferred stock, in one or more
series. Each series of preferred stock that may be authorized shall have the
number of shares, designations, preferences, voting powers, qualifications and
special or relative rights or privileges as shall be determined by our board of
directors, which may include, among others, dividend rights, voting rights,
redemption provisions, liquidation preferences, conversion rights and
preemptive rights.
Our stockholders have granted the board of directors authority to issue the
preferred stock and to determine its rights and preferences in order to
eliminate delays associated with a stockholder vote on specific issuances. The
rights of the holders of common stock will be subject to the rights of holders
of any preferred stock issued in the future. The issuance of preferred stock,
while providing desirable flexibility in connection with possible acquisitions
and other corporate purposes, could adversely affect the voting power or other
rights of the holders of common stock, and could make it more difficult for a
third party to acquire, or discourage a third party from attempting to acquire,
a majority of our outstanding voting stock.
Registration Rights
According to the terms of an investor rights agreement, beginning six months
following the date of the closing of this offering, the holders of 21,886,014
shares of common stock and 1,852,851 shares of common stock issuable upon
conversion of warrants, including Ascent Venture Partners II, L.P., HarborVest
VI-Direct Fund, L.P., MD Co., Egan-Managed Capital, L.P. and Canaan Equity
Partners II LLC, may require us to file a registration statement under the
Securities Act. To demand registration, stockholders holding an aggregate of
8,308,603 of those shares must request that we file a registration statement to
register the resale of their shares. Those stockholders must also request
registration of enough shares so that the offering would have an anticipated
aggregate offering price of $5.0 million. We are only required to effect up to
two of these demand registrations.
Additionally, these holders of 23,738,865 shares of common stock and shares
of common stock issuable upon exercise of warrants will have incidental
registration rights with respect to the future registration of our shares of
common stock under the Securities Act; these holders are entitled to notice of
any future registration and to include their shares in any future registration.
At any time we become eligible to file a registration statement on Form S-3
under the Securities Act, upon the request of holders of not less than 474,778
shares of common stock, we must effect a registration on Form S-3. However, the
registration must have a minimum anticipated aggregate offering price of $1.0
million.
These registration rights are subject to conditions and limitations,
including, in the case of an underwritten public offering, the right of the
managing underwriter to limit the number of shares of common stock to be
included in the registration. We are generally required to bear all the
expenses of registrations under the investor rights agreement, except
underwriting discounts and commissions. The investor rights agreement also
contains our commitment to indemnify the holders of registration
67
<PAGE>
rights for certain losses they might incur in connection with registrations
under the agreement. Registration of any of the shares of common stock held by
stockholders with registration rights would result in those shares becoming
freely tradeable without restriction under the Securities Act.
Warrants
As of April 30, 2000, the following warrants to purchase a total of
1,882,851 shares of our common stock were outstanding:
<TABLE>
<CAPTION>
Number of
Shares of
Common Stock Exercise Price Expiration Date
<S> <C> <C>
52,500 $0.5333 July 31, 2002
136,987 0.0733 August 31, 2002
30,000 0.3667 February 23, 2003
277,500 0.3667 October 15, 2007
208,125 0.3667 January 29, 2008
55,500 0.3667 May 20, 2008
222,000 0.3667 June 3, 2008
291,375 0.3667 August 12, 2008
13,875 0.3667 September 8, 2008
48,562 0.3667 November 2, 2008
428,572 0.3667 December 8, 2008
117,855 0.3667 January 13, 2009
</TABLE>
Delaware Law and Certain Charter and By-Law Provisions; Anti-Takeover Effects
We are subject to the provisions of Section 203 of the General Corporation
Law of Delaware. Section 203 prohibits a publicly-held Delaware corporation
from engaging in a "business combination" with an "interested stockholder" for
a period of three years after the date of the transaction in which the person
became an interested stockholder, unless the business combination is approved
in a prescribed manner. A "business combination" includes mergers, asset sales
and other transactions resulting in a financial benefit to the interested
stockholder. Subject to certain exceptions, an "interested stockholder" is a
person who, together with affiliates and associates, owns, or within three
years did own, 15% or more of the corporation's voting stock.
Our second amended and restated certificate of incorporation and second
amended and restated by-laws provide for the division of the board of directors
into three classes, as nearly equal in size as possible, with staggered three-
year terms. See "Management--Election of Directors." Under our second amended
and restated certificate of incorporation and second amended and restated by-
laws any vacancy on the board of directors, however occurring, including a
vacancy resulting from an enlargement of the board, may only be filled by vote
of a majority of the directors then in office. The classification of the board
of directors and the limitations on the removal of directors and filling of
vacancies could have the effect of making it more difficult for a third party
to acquire, or of discouraging a third party from acquiring, control of Network
Engines.
68
<PAGE>
Our second amended and restated certificate of incorporation and second
amended and restated by-laws also provide that, after the closing of this
offering, any action required or permitted to be taken by our stockholders at
an annual meeting or special meeting of stockholders may only be taken if it is
properly brought before a meeting of stockholders and may not be taken by
written action in lieu of a meeting. Our second amended and restated
certificate of incorporation and second amended and restated by-laws further
provide that special meetings of the stockholders may only be called by the
Chairman of the board of directors, the Chief Executive Officer, the President,
or by the board of directors. Under the second amended and restated by-laws, in
order for any matter to be considered "properly brought" before a meeting, a
stockholder must comply with certain requirements regarding advance notice to
us. The foregoing provisions could have the effect of delaying until the next
stockholders' meeting stockholder actions which are favored by the holders of a
majority of our outstanding voting securities. These provisions may also
discourage another person or entity from making a tender offer for our common
stock, because a person or an entity, even if that person or entity acquired a
majority of our outstanding voting securities, would be able to take action as
a stockholder (e.g., to elect new directors or approve a merger) only at a duly
called stockholders meeting, and not by written consent.
The General Corporation Law of Delaware provides generally that the
affirmative vote of a majority of the shares entitled to vote on any matter is
required to amend a corporation's certificate of incorporation or by-laws,
unless a corporation's certificate of incorporation or by-laws, as the case may
be, requires a greater percentage. Our second amended and restated by-laws may
be amended or repealed by a majority vote of the board of directors or the
holders of a majority of the shares of our capital stock issued and outstanding
and entitled to vote, subject to any limitations set forth in the restated by-
laws. The stockholder vote would be in addition to any separate class vote that
might in the future be required pursuant to the terms of any series of
preferred stock that might be outstanding at the time any amendments are
submitted to stockholders for approval.
Limitation of Liability and Indemnification
Our second amended and restated certificate of incorporation provides that
our directors and officers shall be indemnified by us to the fullest extent
authorized by Delaware law, as it now exists or may in the future be amended,
against all expenses and liabilities reasonably incurred in connection with the
service for or on our behalf. In addition, our second amended and restated
certificate of incorporation provides that our directors will not be personally
liable for monetary damages to us for breaches of their fiduciary duty as
directors, unless they violated their duty of loyalty to us or our
stockholders, acted in bad faith, knowingly or intentionally violated the law,
authorized illegal dividends or redemptions or derived an improper personal
benefit from their action as directors.
Transfer Agent and Registrar
The transfer agent and registrar for the common stock is EquiServe Trust
Company.
Nasdaq National Market Listing
We have applied for quotation of our common stock on the Nasdaq National
Market under the trading symbol "NENG."
69
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of this offering (assuming no exercise of the underwriters'
over-allotment option), we will have outstanding an aggregate of 32,673,629
shares of common stock, assuming no exercise of outstanding options or
warrants. Of the total outstanding shares, the 6,250,000 shares sold in this
offering will be freely tradeable without restriction or further registration
under the Securities Act, except that any shares held by our affiliates, as
that term is defined under the Securities Act, may generally only be sold in
compliance with the limitations of Rule 144 as described below.
Sales of Restricted Shares
The remaining 26,423,629 shares of common stock held by existing
stockholders are "restricted shares," which means they were issued and sold by
us in reliance on, and are subject to, exemptions from the registration
requirements of the Securities Act, including Rule 144, Rule 144(k) and Rule
701. These restricted shares are also subject to "lock-up" agreements with the
underwriters and will become eligible for sale in the public market during or
after the period covered by the lock-up agreements.
Rule 144. In general, under Rule 144 as currently in effect, beginning 90
days after the date of this prospectus, a person who has beneficially owned
shares of our common stock for at least one year would be entitled to sell
within any three-month period a number of shares that does not exceed the
greater of
. 1% of the number of shares of common stock then outstanding, which will
equal approximately 326,736 shares immediately after the offering, or
. the average weekly trading volume of the common stock on the Nasdaq
National Market during the four calendar weeks preceding the filing of a
notice on Form 144 with respect to such sale.
Sales under Rule 144 are also subject to specific manner-of-sale provisions,
notice requirements and the availability of current public information about
us.
Rule 144(k). Under Rule 144(k), a person who is not one of our affiliates at
any time during the 90 days preceding a sale and who has beneficially owned the
shares proposed to be sold for at least two years, including the holding period
of any prior owner other than an affiliate, is entitled to sell such shares
without complying with the manner of sale, public information, volume
limitation or notice provisions of Rule 144. Therefore, unless otherwise
restricted, "144(k)" shares may be sold immediately upon completion of this
offering.
Lock-up Agreements. All of the restricted shares are subject to lock-up
agreements providing that the stockholders will not offer, sell or otherwise
dispose of any shares owned by them for a period of 180 days after the date of
this offering. However, holders of restricted shares who have not been
executive officers or directors of our company on or since the date of this
prospectus may offer, sell or otherwise dispose of 25% of those shares on the
later of 90 days after the date of this offering or on the second trading day
after the first public release of our quarterly results, if the last recorded
sale price on the Nasdaq National Market for 20 of the 30 trading days ending
on the 90th day is at least twice the price per share in the initial public
offering. These stockholders may also offer, sell or
70
<PAGE>
otherwise dispose of an additional 25% of those shares 135 days after the date
of this offering if the price per share of common stock has achieved the same
target level for the 30 trading day period ending on the 135th day. However,
Donaldson, Lufkin & Jenrette Securities Corporation, may in its sole
discretion, at any time without notice, release all or any portion of the
shares subject to lock-up agreements. Upon expiration of the lock-up
agreements, additional shares will become eligible for sale pursuant to
Rule 144(k), additional shares will become eligible for sale under the
other provisions of Rule 144 and additional shares will become eligible
for sale under Rule 701.
Eligibility of Restricted Shares for Sale in the Public Market
Under Rules 144 and 701
(Listed by date upon which shares become saleable)
<TABLE>
<CAPTION>
Number
of
Date Shares
---- --------
<S> <C>
Later of 90 days after the effective date or second trading day
following first public release of quarterly earnings(1).............
135 days after the effective date(1).................................
180 days after the effective date (expiration of lockup).............
</TABLE>
- ------------
(1)The number of shares listed may be offered, sold or traded provided that the
last recorded sale price per share for 20 of the 30 trading days ending on
the applicable date is at least twice the initial public offering price per
share.
Options and Employee Compensation Shares
Rule 701 provides that currently outstanding shares of common stock acquired
under our employee compensation plans may be resold beginning 90 days after the
date of this prospectus by:
. persons, other than our affiliates, subject only to the manner of sale
provisions of Rule 144; and
. our affiliates under Rule 144 without compliance with its one-year
minimum holding period, subject to certain limitations.
At April 30, 2000, approximately 56,505 shares of common stock were issuable
pursuant to vested options under our 1999 plan, all of which are subject to
lock-up agreements with the underwriters and will be eligible for sale in the
public market in accordance with Rule 701 under the Securities Act beginning 90
days after the date of this prospectus.
We intend to file one or more registration statements on Form S-8 under the
Securities Act following the date of this prospectus, to register up to
8,227,650 shares of common stock underlying outstanding stock options or other
rights granted or to be granted pursuant to our 1999 plan, employee stock
purchase plan and director plan, including the 56,505 shares of common stock
subject to options vested as of April 30, 2000, and 4,506,035 shares of common
stock reserved for options or awards to be granted under our 1999 plan,
employee stock purchase plan and director plan. The registration statements for
the plans are expected to become effective upon filing.
71
<PAGE>
Registration Rights
Six months after this offering, the holders of 23,738,865 shares of common
stock and shares of common stock issuable upon conversion of warrants will
be entitled to certain rights with respect to the registration of their shares
under the Securities Act. After any required registration of shares, the
registered shares will be freely tradeable without restriction under the
Securities Act. These sales could cause the market price of our common stock to
decline. See "Description of Capital Stock--Registration Rights."
Pricing of the Offering
Prior to this offering, there has been no public market for our common
stock, and no predictions can be made as to the effect, if any, that market
sales of shares of common stock from time to time, or the availability of
shares for future sale, may have on the market price for the common stock.
Sales of substantial amounts of common stock, or the perception that
substantial sales could occur, could adversely affect prevailing market prices
for the common stock and could impair our future ability to obtain capital
through an offering of equity securities.
72
<PAGE>
UNDERWRITING
Subject to the terms and conditions contained in an underwriting agreement
dated , 2000, the underwriters named below, who are represented
by Donaldson, Lufkin & Jenrette Securities Corporation, Dain Rauscher
Incorporated, FleetBoston Robertson Stephens Inc., and DLJdirect Inc., have
severally agreed to purchase from us the number of shares of common stock set
forth opposite their names below:
<TABLE>
<CAPTION>
Number
Underwriters of Shares
<S> <C>
Donaldson, Lufkin & Jenrette Securities Corporation.................
Dain Rauscher Incorporated..........................................
FleetBoston Robertson Stephens Inc..................................
DLJdirect Inc.......................................................
----
Total.............................................................
====
</TABLE>
The underwriting agreement provides that the obligations of the underwriters
to purchase and accept delivery of the shares of common stock offered by this
prospectus are subject to approval by their counsel of legal matters concerning
the offering and to conditions that must be satisfied by us. The underwriters
are obligated to purchase and accept delivery of all of the shares of common
stock offered by this prospectus, other than those shares covered by the over-
allotment option described below, if any are purchased.
The underwriters initially propose to offer the shares of common stock in
part directly to the public at the initial public offering price set forth on
the cover page of this prospectus and in part to dealers, including the
underwriters, at the initial public offering price less a concession not in
excess of $ per share. The underwriters may allow, and dealers may re-
allow, to other dealers a concession not in excess of $ per share.
After the initial offering of the common stock, the public offering price and
other selling terms may be changed by the representatives at any time without
notice. The underwriters do not intend to confirm sales to any accounts over
which they exercise discretionary authority.
An electronic prospectus will be available on the web site maintained by
DLJdirect Inc., an affiliate of Donaldson, Lufkin & Jenrette Securities
Corporation.
We have granted to the underwriters an option, exercisable for 30 days after
the date of this prospectus, to purchase, from time to time, in whole or in
part, up to an aggregate of additional shares of common stock at
the initial public offering price less underwriting discounts and commissions.
The underwriters may exercise the option solely to cover over-allotments, if
any, made in connection with the offering. To the extent that the underwriters
exercise the option, each
73
<PAGE>
underwriter will become obligated, subject to conditions contained in the
underwriting agreement, to purchase its pro rata portion of the additional
shares based on the underwriter's percentage underwriting commitment.
We have agreed to indemnify the underwriters against liabilities which may
arise in connection with the offering, including liabilities under the
Securities Act, or to contribute to payments that the underwriters may be
required to make.
Each of Network Engines, our executive officers, directors and stockholders
have agreed to lock-up agreements which provide, subject to certain exceptions,
that Network Engines, our officers, directors and stockholders will not (i)
offer, pledge, sell, contract to sell, sell any option or contract to purchase,
purchase any option or contract to sell, grant any option, right or warrant to
purchase or otherwise transfer or dispose of, directly or indirectly, any
shares of common stock or any securities convertible into or exercisable or
exchangeable for common stock or (ii) enter into any swap or other arrangement
that transfers all or a portion of the economic consequences associated with
the ownership of any common stock (regardless of whether any of the
transactions described in clause (i) or (ii) is to be settled by the delivery
of common stock, other securities, in cash or otherwise) for a period of 180
days after the date of this prospectus without the prior written consent of
Donaldson, Lufkin & Jenrette Securities Corporation. However, up to 50% of the
shares of common stock held by our stockholders subject to the restrictions
described above (other than shares owned by directors and executive officers)
will be released from these restrictions under the conditions described under
the caption "Shares Eligible for Future Sale--Sales of Restricted Shares."
In addition, during the 180-day period after the date of this prospectus, we
have also agreed not to file any registration statement with respect to the
registration of any shares of common stock or any securities convertible into
or exercisable or exchangeable for common stock without the prior written
consent of Donaldson, Lufkin & Jenrette Securities Corporation. However, we are
permitted to file a registration statement on Form S-8 with respect to shares
of common stock issuable under our existing benefit plans, all of which shares
are subject to the lock-up agreements with Donaldson, Lufkin & Jenrette
Securities Corporation. Furthermore, none of our stockholders have registration
rights, which have not been waived, that may be exercised during the 180-day
period.
Prior to the offering, there has been no established trading market for the
common stock. The initial public offering price of the shares of common stock
offered by this prospectus will be determined by negotiation among us and the
underwriters. The factors to be considered in determining the initial public
offering price include:
. the history of and the prospects for the industry in which we compete;
. our past and present operations;
. the historical results of operations;
. our prospects for future earnings;
. the recent market prices of securities of generally comparable
companies; and
. the general condition of the securities markets at the time of the
offering.
74
<PAGE>
The underwriters have reserved up to shares of the common stock to be
sold in this offering for sale to some of our employees and associates of our
employees and directors, and to other individuals or companies who have
commercial arrangements or personal relationships with us. Through this
directed share program, we intend to ensure that those individuals and
companies that have supported us, or who are in a position to support us in the
future, have the opportunity to purchase our common stock at the same price
that we are offering our shares to the general public. Prospective participants
will not receive any investment materials other than a copy of this prospectus,
and will be permitted to participate in this offering at the initial public
price presented on the cover page of this prospectus. No commitment to purchase
shares by any participant in the directed share program will be accepted until
after the registration statement, of which this prospectus is a part, is
effective and an initial public offering price has been established. The number
of shares available for sale to the general public will be reduced by the
number of shares sold through the directed share program. Any shares reserved
for the directed share program which are not so purchased will be offered by
the underwriters to the general public on the same basis as the other shares
offered hereby.
Other than in the United States, no action has been taken by us or the
underwriters that would permit a public offering of the shares of common stock
offered in any jurisdiction where action for that purpose is required. The
shares of common stock offered may not be offered or sold, directly or
indirectly, nor may this prospectus or any other offering materials or
advertisements in connection with the offer and sale of any shares of common
stock be distributed or published in any jurisdiction, except under
circumstances that will result in compliance with the applicable rules and
regulations of the applicable jurisdiction. Persons into whose possession this
prospectus comes are advised to inform themselves about and observe any
restrictions relating to the offering and the distribution of this prospectus.
This prospectus does not constitute an offer to sell or a solicitation of an
offer to buy any shares of common stock offered in any jurisdiction in which
the offer or a solicitation of shares made by this prospectus is unlawful.
In connection with the offering, the underwriters may engage in transactions
that stabilize, maintain or otherwise affect the price of the common stock.
Specifically, the underwriters may over-allot the offering, creating a
syndicate short position. The underwriters may bid for and stabilize the price
of the common stock. In addition, the underwriting syndicate may reclaim
selling concessions from syndicate members and selected dealers if they
repurchase previously distributed common stock in syndicate covering
transactions, in stabilizing transactions or otherwise. These activities may
stabilize or maintain the market price of the common stock above independent
market levels. The underwriters are not required to engage in these activities,
and may end any of these activities at any time.
LEGAL MATTERS
The validity of the shares of common stock we are offering will be passed
upon for us by Hale and Dorr LLP, Boston, Massachusetts and for the
underwriters by Testa, Hurwitz & Thibeault, LLP, Boston, Massachusetts.
75
<PAGE>
EXPERTS
Our financial statements as of September 30, 1999 and 1998 and for each of
the three years in the period ended September 30, 1999 included in this
prospectus have been so included in reliance upon the report of
PricewaterhouseCoopers LLP, independent accountants, given upon the authority
of said firm as experts in auditing and accounting.
WHERE YOU CAN FIND ADDITIONAL INFORMATION
We have filed with the Securities and Exchange Commission a registration
statement on Form S-1 to register with the Commission the shares of our common
stock described in this prospectus. This prospectus is part of that
registration statement, and provides you with a general description of the
common stock being registered and offered, but does not include all of the
information you can find in the registration statement or the exhibits to the
registration statement. You should refer to the registration statement and its
exhibits for more information about our business and the shares of common stock
being registered.
You may read and copy all or any portion of the registration statement or
any reports, statements or other information we file with the Commission at the
Commission's public reference room at 450 Fifth Street, N.W., Judiciary Plaza,
Room 1024, Washington, D.C. 20549, and at the Commission's regional offices
located at Citicorp Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661-2511 and 7 World Trade Center, Suite 1300, New York, New York
10048. You may obtain information on the operation of the Public Reference Room
by calling the SEC at 1-800-SEC-0330. Copies of the registration statement or
any reports, statements or other information we file with the Commission can
also be obtained at prescribed rates by mail from the Public Reference Section
of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549. In
addition, the Commission maintains a web site (http://www.sec.gov) that
contains reports, proxy and information statements and other information
regarding registrants that file electronically with the Commission.
76
<PAGE>
NETWORK ENGINES, INC.
Index to Financial Statements
<TABLE>
<CAPTION>
Page
<S> <C>
Report of Independent Accountants........................................ F-2
Balance Sheets as of September 30, 1998 and 1999 and as of March 31, 2000
(unaudited)............................................................. F-3
Statement of Operations for the years ended September 30, 1997, 1998 and
1999 and the six months ended March 31, 1999 and 2000 (unaudited)....... F-4
Statement of Stockholders' Equity (Deficit) for the years ended September
30, 1997, 1998 and 1999 and the six months ended March 31, 2000
(unaudited)............................................................. F-5
Statement of Cash Flows for the years ended September 30, 1997, 1998 and
1999 and the six months ended March 31, 1999 and 2000 (unaudited)....... F-6
Notes to Financial Statements............................................ F-7
</TABLE>
F-1
<PAGE>
This is the form of report that we expect to issue upon the approval of
stockholders of a 2.5-for-one stock split and the increase in authorized shares
to 60,000,000 as discussed in Note 7 to the Financial Statements.
PricewaterhouseCoopers LLP
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders
of Network Engines, Inc.:
In our opinion, the accompanying balance sheets and the related statements
of operations, of stockholders' equity (deficit) and of cash flows present
fairly, in all material respects, the financial position of Network Engines,
Inc. at September 30, 1999 and 1998, and the results of its operations and its
cash flows for each of the three years in the period ended September 30, 1999
in conformity with accounting principles generally accepted in the United
States. These financial statements are the responsibility of the Company's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these statements in
accordance with auditing standards generally accepted in the United States,
which require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
Boston, Massachusetts
November 22, 1999, except as to
Note 13 for which the date is May 15, 2000
F-2
<PAGE>
NETWORK ENGINES, INC.
BALANCE SHEETS
(in thousands, except share data)
<TABLE>
<CAPTION>
As of As of
September 30, March 31, 2000
---------------- -------------------
1998 1999 Actual Pro Forma
(unaudited)
(Note 2)
Assets
<S> <C> <C> <C> <C>
Current assets:
Cash and cash equivalents.............. $ 113 $ 1,435 $ 16,793 $ 16,793
Restricted cash........................ -- 100 379 379
Accounts receivable, less allowance for
doubtful accounts of $107, $227 and
$287 at September 30, 1998, 1999 and
March 31, 2000 (unaudited),
respectively.......................... 492 2,025 5,211 5,211
Inventories............................ 587 1,251 3,949 3,949
Prepaid expenses and other current
assets................................ 86 222 957 957
------- ------- -------- --------
Total current assets................... 1,278 5,033 27,289 27,289
Property and equipment, net............. 452 831 2,056 2,056
Other assets............................ -- -- 634 634
------- ------- -------- --------
Total assets.......................... $ 1,730 $ 5,864 $ 29,979 $ 29,979
======= ======= ======== ========
<CAPTION>
Liabilities, Redeemable Preferred Stock
and Stockholders' Equity (Deficit)
<S> <C> <C> <C> <C>
Current liabilities:
Bridge loans........................... $ 3,717 $ -- $ -- $ --
Accounts payable....................... 752 2,354 5,047 5,047
Accrued interest....................... 247 -- -- --
Accrued expenses....................... 363 614 1,059 1,059
Deferred revenue....................... 29 105 620 620
Current portion of capital lease
obligations........................... 21 48 66 66
Notes payable.......................... 86 15 -- --
------- ------- -------- --------
Total current liabilities.............. 5,215 3,136 6,792 6,792
Capital lease obligations, net of
current portion........................ 69 132 109 109
Notes payable........................... -- 26 -- --
------- ------- -------- --------
Total liabilities...................... 5,284 3,294 6,901 6,901
Commitments and contingencies (Note 10)
Redeemable convertible preferred stock:
Series D redeemable convertible
preferred stock, $.01 par value,
3,581,554 shares authorized; 3,581,554
and no shares issued and outstanding
at March 31, 2000 (unaudited) and pro
forma March 31, 2000 (unaudited)
(liquidation preference of $25,250 at
March 31, 2000 (unaudited))........... -- -- 28,152 --
Series C redeemable convertible
preferred stock, $.01 par value,
1,123,549 shares authorized;
1,123,549, 1,123,549 and no shares
issued and outstanding at September
30, 1999, March 31, 2000 (unaudited)
and pro forma March 31, 2000
(unaudited) (liquidation preference of
$8,651 at March 31, 2000
(unaudited)).......................... -- 8,705 9,949 --
Series B redeemable convertible
preferred stock, $.01 par value,
360,000 shares authorized; 357,142,
357,142 and no shares issued and
outstanding at September 30, 1999,
March 31, 2000 (unaudited) and pro
forma March 31, 2000 (unaudited)
(stated at liquidation preference).... -- 2,750 2,750 --
Series A redeemable convertible
preferred stock, $.01 par value,
185,250 shares authorized; 185,250,
185,250, 185,250 and no shares issued
and outstanding at September 30, 1998,
1999, March 31, 2000 (unaudited) and
pro forma March 31, 2000 (unaudited)
(liquidation preference of $1,000 at
March 31, 2000 (unaudited))........... 1,000 1,012 1,125 --
------- ------- -------- --------
Total redeemable convertible preferred
stock................................. 1,000 12,467 41,976 --
Stockholders' equity (deficit):
Common stock, $.01 par value,
60,000,000 shares authorized;
3,407,250, 3,429,862, 4,902,035 and
26,350,477 shares issued and
outstanding at September 30, 1998,
1999, March 31, 2000 (unaudited) and
pro forma March 31, 2000 (unaudited).. 34 34 49 264
Additional paid-in capital............. 1,016 2,942 10,191 51,952
Accumulated deficit.................... (5,604) (11,434) (17,241) (17,241)
Note receivable from stockholder....... -- -- (92) (92)
Deferred stock compensation............ -- (1,439) (11,805) (11,805)
------- ------- -------- --------
Total stockholders' equity (deficit)... (4,554) (9,897) (18,898) 23,078
------- ------- -------- --------
Total liabilities, redeemable
convertible preferred stock and
stockholders' equity (deficit)....... $ 1,730 $ 5,864 $ 29,979 $ 29,979
======= ======= ======== ========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-3
<PAGE>
NETWORK ENGINES, INC.
STATEMENT OF OPERATIONS
(in thousands, except per share data)
<TABLE>
<CAPTION>
Year Ended Six Months Ended
September 30, March 31,
------------------------- -----------------
1997 1998 1999 1999 2000
<S> <C> <C> <C> <C> <C>
Net revenues..................... $ 609 $ 1,102 $ 6,031 $ 1,116 $ 10,466
Cost of revenues (excluding stock
compensation of $16 and $62 for
the year ended September 30,
1999 and the six months ended
March 31, 2000 (unaudited),
respectively)................... 465 1,591 4,733 1,268 6,805
------- ------- ------- ------- --------
Gross profit (loss)............. 144 (489) 1,298 (152) 3,661
Operating expenses:
Research and development
(excluding stock compensation
of $37 and $202 for the year
ended September 30, 1999 and
the six months ended March 31,
2000 (unaudited),
respectively).................. 395 923 2,564 867 3,084
Selling and marketing (excluding
stock compensation of $53 and
$311 for the year ended
September 30, 1999 and the six
months ended March 31, 2000
(unaudited), respectively)..... 477 1,593 2,920 1,147 4,627
General and administrative
(excluding stock compensation
of $21, $10 and $301 for the
year ended September 30, 1999
and the six months ended March
31, 1999 and 2000 (unaudited),
respectively).................. 396 620 934 389 1,191
Stock compensation.............. -- -- 127 10 876
------- ------- ------- ------- --------
Total operating expenses........ 1,268 3,136 6,545 2,413 9,778
------- ------- ------- ------- --------
Loss from operations............. (1,124) (3,625) (5,247) (2,565) (6,117)
Interest income.................. 12 18 52 19 340
Interest expense................. (45) (592) (949) (938) (30)
------- ------- ------- ------- --------
Loss before extraordinary item... (1,157) (4,199) (6,144) (3,484) (5,807)
Extraordinary gain on
extinguishment of debt.......... -- -- 314 314 --
------- ------- ------- ------- --------
Net loss......................... (1,157) (4,199) (5,830) (3,170) (5,807)
Accretion of redeemable
convertible preferred stock..... -- -- (223) -- (4,259)
------- ------- ------- ------- --------
Net loss attributable to common
stockholders.................... $(1,157) $(4,199) $(6,053) $(3,170) $(10,066)
======= ======= ======= ======= ========
Loss per common share before
extraordinary item--basic and
diluted......................... $ (0.36) $ (1.31) $ (1.92) $ (0.96) $ (2.86)
Extraordinary item per common
share--basic and diluted........ -- -- 0.09 -- --
------- ------- ------- ------- --------
Net loss per common share--basic
and diluted..................... $ (0.36) $ (1.31) $ (1.83) $ (0.96) $ (2.86)
======= ======= ======= ======= ========
Shares used in computing basic
and diluted net loss per common
share........................... 3,177 3,200 3,312 3,285 3,525
Pro forma net loss per common
share--basic and diluted
(unaudited)..................... $ (0.63) $ (0.37)
======= ========
Shares used in computing basic
and diluted pro forma net loss
per common share (unaudited).... 9,242 15,887
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-4
<PAGE>
NETWORK ENGINES, INC.
STATEMENT OF STOCKHOLDERS' EQUITY (DEFICIT)
(in thousands, except share data)
<TABLE>
<CAPTION>
Note Total
Common Stock Additional Receivable Deferred Stockholders'
---------------- Paid-in Accumulated from Stock Equity
Shares Amount Capital Deficit Stockholder Compensation (Deficit)
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, September 30,
1996................... 3,144,750 $31 $ 444 $ (248) $-- $ -- $ 227
Issuance of common
stock.................. 37,500 1 24 -- -- -- 25
Issuance costs
associated with Series
A redeemable
convertible preferred
stock.................. -- -- (48) -- -- -- (48)
Net loss................ -- -- -- (1,157) -- -- (1,157)
--------- --- ------- -------- ---- -------- --------
Balance, September 30,
1997................... 3,182,250 32 420 (1,405) -- -- (953)
Issuance of restricted
common stock........... 225,000 2 15 -- -- -- 17
Issuance of common stock
warrants in connection
with bridge loans...... -- -- 581 -- -- -- 581
Net loss................ -- -- -- (4,199) -- -- (4,199)
--------- --- ------- -------- ---- -------- --------
Balance, September 30,
1998................... 3,407,250 34 1,016 (5,604) -- -- (4,554)
Issuance costs
associated with Series
C redeemable
convertible preferred
stock.................. -- -- (188) -- -- -- (188)
Issuance of common stock
upon stock option
exercise............... 22,612 -- 2 -- -- -- 2
Issuance of common stock
warrants in connection
with bridge loans...... -- -- 608 -- -- -- 608
Issuance of common stock
warrants in connection
with Series C
redeemable convertible
preferred stock........ -- -- 157 -- -- -- 157
Issuance of common stock
options to consultants
and compensation
expense for stock
option modifications... -- -- 4 -- -- -- 4
Deferred stock
compensation related to
grants of stock
options................ -- -- 1,566 -- -- (1,566) --
Amortization of deferred
stock compensation to
expense................ -- -- -- -- -- 127 127
Accretion of redeemable
convertible preferred
stock to redemption
value.................. -- -- (223) -- -- -- (223)
Net loss................ -- -- -- (5,830) -- -- (5,830)
--------- --- ------- -------- ---- -------- --------
Balance, September 30,
1999................... 3,429,862 34 2,942 (11,434) -- (1,439) (9,897)
Issuance of common stock
upon stock option and
warrant exercises
(unaudited)............ 834,673 8 202 -- -- -- 210
Issuance of restricted
common stock
(unaudited)............ 637,500 7 146 -- (90) -- 63
Issuance costs
associated with Series
D redeemable
convertible preferred
stock (unaudited)...... -- -- (82) -- -- -- (82)
Interest on note
receivable from
stockholder
(unaudited)............ -- -- -- -- (2) -- (2)
Deferred stock
compensation related to
grants of stock options
(unaudited)............ -- -- 11,299 -- -- (11,299) --
Amortization of deferred
stock compensation to
expense (unaudited).... -- -- -- -- -- 876 876
Deferred compensation
related to cancellation
of stock options for
terminated employees
(unaudited)............ -- -- (57) -- -- 57 --
Accretion of redeemable
convertible preferred
stock to redemption
value (unaudited)...... -- -- (4,259) -- -- -- (4,259)
Net loss (unaudited).... -- -- -- (5,807) -- -- (5,807)
--------- --- ------- -------- ---- -------- --------
Balance, March 31, 2000
(unaudited)............ 4,902,035 $49 $10,191 $(17,241) $(92) $(11,805) $(18,898)
========= === ======= ======== ==== ======== ========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-5
<PAGE>
NETWORK ENGINES, INC.
STATEMENT OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
Six Months
Year Ended September Ended
30, March 31,
------------------------- ----------------
1997 1998 1999 1999 2000
(unaudited)
<S> <C> <C> <C> <C> <C>
Cash flows from operating
activities:
Net loss......................... $(1,157) $(4,199) $(5,830) $(3,170) $(5,807)
Adjustments to reconcile net loss
to net cash used in operating
activities:
Depreciation and amortization.... 88 194 361 135 289
Provision for inventory
reserves........................ 35 350 663 166 214
Amortization of discount on note
payable......................... -- 348 841 841 --
Provision for doubtful
accounts........................ 37 50 120 60 60
Gain on extinguishment of debt
................................ -- -- (314) -- --
Compensation expense related to
common stock options............ -- -- 131 -- 876
Interest on note receivable from
stockholder..................... -- -- -- -- (2)
Changes in operating assets and
liabilities:
Accounts receivable............. 435 (427) (1,653) 274 (3,246)
Inventories..................... (307) (587) (1,327) (197) (2,912)
Prepaid expenses and other
current assets................. (14) (71) (136) (97) (735)
Accounts payable................ (11) 447 1,602 (232) 2,693
Accrued interest and expenses... 126 458 325 (303) 445
Deferred revenue................ -- 29 76 (11) 515
------- ------- ------- ------- -------
Net cash used in operating
activities.................... (768) (3,408) (5,141) (2,534) (7,610)
Cash flows used in investing
activities:
Purchase of property and
equipment....................... (185) (343) (623) (151) (1,514)
Deposit of restricted cash....... -- -- (100) -- (279)
Increase in other assets......... -- -- -- (22) (634)
------- ------- ------- ------- -------
Net cash used in investing
activities.................... (185) (343) (723) (173) (2,427)
Cash flows from financing
activities:
Proceeds from bridge loans....... -- 3,950 1,100 1,100 --
Proceeds from notes payable...... -- 4 56 56 2,205
Payments on notes payable........ (40) (112) (101) (73) (2,246)
Payments on capital lease
obligations..................... -- (11) (27) -- (5)
Proceeds from issuance of common
stock........................... 25 17 2 -- 273
Proceeds from issuance of
redeemable convertible preferred
stock, net...................... 952 -- 6,156 3,070 25,168
------- ------- ------- ------- -------
Net cash provided by financing
activities.................... 937 3,848 7,186 4,153 25,395
------- ------- ------- ------- -------
Net increase (decrease) in cash
and cash equivalents............. (16) 97 1,322 1,446 15,358
Cash and cash equivalents,
beginning of period.............. 32 16 113 113 1,435
------- ------- ------- ------- -------
Cash and cash equivalents, end of
period........................... $ 16 $ 113 $ 1,435 $ 1,559 $16,793
======= ======= ======= ======= =======
Supplemental cash flow
information:
Interest paid.................... $ 29 $ 29 $ 36 $ 32 $ 29
Non-cash transactions:
Acquisition of property and
equipment under capital leases.. $ -- $ 101 $ 117 $ -- $ --
Bridge loans and accrued interest
converted to Series B and C
redeemable convertible preferred
stock........................... $ -- $ -- $ 5,057 $ 5,057 $ --
Restricted common stock issued in
exchange for note receivable
from stockholder................ $ -- $ -- $ -- $ -- $ 90
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-6
<PAGE>
NETWORK ENGINES, INC.
NOTES TO FINANCIAL STATEMENTS
1. NATURE OF BUSINESS
Business
Network Engines, Inc. (the "Company") develops, markets and provides
integrated and scalable server appliances that enable organizations to provide
information and applications over the Internet. The Company markets its
products principally in North America through a direct sales organization, as
well as through indirect channels consisting of original equipment
manufacturers, resellers and systems integrators. The Company reports results
in one operating segment.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Revenue Recognition
The Company recognizes product revenue upon delivery, provided evidence of
an arrangement has been received, no obligations remain outstanding and
collectibility is reasonably assured. The Company recognizes license revenue
upon sell through to the licensees' end users. License revenue was immaterial
for all periods presented in these financial statements. The Company accrues
for anticipated returns and warranty costs upon product delivery. Revenue from
support contracts is recognized ratably over the term of the agreement.
Unaudited Interim Financial Data
The interim financial data as of March 31, 2000 and for the six months
ended March 31, 1999 and 2000 have been derived from unaudited financial
statements of the Company. Management believes these unaudited financial
statements have been prepared on the same basis as the audited financial
statements and include all adjustments, consisting only of normal recurring
adjustments, necessary for a fair presentation of the financial position and
results of operations for such periods. Results for the six months ended March
31, 1999 and 2000 have not been audited and are not necessarily indicative of
results to be expected for the full fiscal year.
Concentrations of Risk
Credit. Financial instruments, which potentially subject the Company to
concentrations of credit risk, consist principally of cash, cash equivalents,
restricted cash and trade receivables. The Company invests primarily in money
market funds of major financial institutions. The Company provides credit to
customers in the normal course of business and does not require collateral
from its customers but routinely assesses their financial strength. The
Company maintains reserves for potential credit losses and such losses have
been within management's expectations.
Customers. Revenue of approximately $207,000 (34%), $140,000 (23%) and
$128,000 (21%) was attributable to three customers during the year ended
September 30, 1997. Revenue of approximately $562,000 (51%) and $132,000 (12%)
was attributable to two customers during the year ended September 30, 1998.
Revenue of approximately $2,774,000 (46%), $1,689,000 (28%) and $844,000 (14%)
was attributable to three customers during the year ended September 30, 1999.
F-7
<PAGE>
NETWORK ENGINES, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
Revenue of approximately $408,000 (37%) and $126,000 (11%) was attributable to
two customers during the six months ended March 31, 1999 (unaudited) and
revenue of approximately $2,774,000 (26%), $1,832,000 (18%) and $1,486,000
(14%) was attributable to three customers during the six months ended March 31,
2000 (unaudited).
One customer accounted for approximately $491,000 (82%) of accounts
receivable at September 30, 1998, three customers accounted for approximately
$1,809,000 (80%) of accounts receivable as of September 30, 1999 and three
customers accounted for approximately $3,444,000 (63%) of accounts receivable
at March 31, 2000 (unaudited).
Suppliers. Although the Company generally uses standard parts and components
for its products, certain processor board components are currently available
only from a single source. Other components and subassemblies are available
only from limited sources. Although the Company believes that these components
and subassemblies are sufficiently available from alternate sources in a
reasonable amount of time, the reduction or interruption of supply, a
significant price increase or engineering changes required by the use of
alternate components and subassemblies could adversely affect the Company's
operating results.
Fair Value of Financial Instruments
Financial instruments, including cash, cash equivalents, restricted cash,
accounts receivable, accounts payable and redeemable convertible preferred
stock, are carried in the financial statements at amortized cost which
approximated fair value as of September 30, 1997, 1998 and 1999 and March 31,
2000 (unaudited).
Cash, Cash Equivalents and Restricted Cash
The Company considers all highly liquid investments purchased with original
maturities of three months or less to be cash equivalents. At September 30,
1999, the Company's cash equivalents of $1,372,000 consisted of investments in
money market funds. These investments are stated at cost, which approximated
fair value. At September 30, 1998, the Company had no cash equivalents. At
September 30, 1999, $100,000 of cash was restricted and pledged as collateral
to the Company's primary contract manufacturer. At March 31, 2000, $379,000 of
cash was restricted and pledged as collateral to the Company's primary contract
manufacturer and its facility landlord (unaudited).
Inventories
Inventories are valued at the lower of cost or market, with cost determined
using the first-in, first-out method.
Property and Equipment
Property and equipment are recorded at cost and depreciated using the
straight-line method over their estimated useful lives. Property and equipment
held under capital leases are stated at the present
F-8
<PAGE>
NETWORK ENGINES, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
value of the minimum lease payments at the inception of the lease and are
amortized using the straight-line method over the lesser of the life of the
related asset or the term of the lease. Upon retirement or sale, the cost of
the assets disposed of and related accumulated depreciation are removed from
the accounts and any resulting gain or loss is included in the determination of
net income or loss. Repairs and maintenance are charged to expense as incurred.
Research and Development
Research and development costs, except for certain software development
costs, are expensed as incurred. Software development costs incurred after
technological feasibility has been achieved and until the products are
available for general release are capitalized and amortized as the greater of
the ratio of current revenues to total expected revenues from the product or
straight-line method over the remaining estimated economic life of the product.
Costs of internally developed software which qualify for capitalization have
not been material to date.
Accounting for Stock-Based Compensation
Stock options and restricted stock issued to employees and members of the
Company's Board of Directors are accounted for in accordance with Accounting
Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees,"
and related interpretations ("APB 25"); accordingly, compensation expense is
recorded for options and restricted stock awarded to employees and directors to
the extent that the exercise or purchase prices are less than the common
stock's fair market value on the date of grant, where the number of shares and
exercise or purchase price are fixed. The difference between the fair value of
the Company's common stock and the exercise or purchase price of the stock
option or restricted stock award is recorded as deferred stock compensation.
Deferred stock compensation is amortized to compensation expense over the
vesting period of the underlying stock option or restricted stock. The Company
follows the disclosure requirements of Statement of Financial Accounting
Standards No. 123, "Accounting for Stock-Based Compensation" ("SFAS 123") (see
Note 8). Stock-based awards to non-employees are accounted for under provisions
of SFAS 123.
Income Taxes
Deferred tax assets and liabilities are determined based on the difference
between the financial statement and the tax bases of assets and liabilities
using enacted tax rates in effect in the years in which the differences are
expected to reverse. A valuation reserve against deferred tax assets is
recorded, if based upon weighted available evidence, it is more likely than not
that some or all of the deferred tax assets will not be realized.
F-9
<PAGE>
NETWORK ENGINES, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
Comprehensive Income (Loss)
Comprehensive income (loss) is comprised of two components, net income (loss)
and other comprehensive income (loss). Comprehensive loss is equal to net loss
for the years ended September 30, 1997, 1998 and 1999 and the six month periods
ended March 31, 1999 and 2000 (unaudited).
Net Loss Per Common Share--Historical
Basic net loss per common share is computed by dividing net loss
attributable to common stockholders by the weighted average number of common
shares outstanding. Restricted common shares that are vested at the end of each
reporting period have been included as common shares outstanding for the basic
net loss per share calculation during that period; unvested restricted shares
have not been included in the basic net loss per common share calculation.
There is no difference between basic and diluted net loss per share since
potential common shares from the conversion of redeemable convertible preferred
stock and the exercises of options and warrants are dilutive for all periods
presented. The calculations of diluted net loss per common share for the years
ended September 30, 1997, 1998 and 1999 and the six months ended March 31, 1999
and 2000 do not include 1,638,862, 3,892,995, 16,782,135, 16,103,107
(unaudited) and 26,832,312 (unaudited) potential shares of common stock
equivalents, including common stock options and warrants and redeemable
convertible preferred stock, respectively.
Net Loss Per Common Share--Pro Forma
The unaudited pro forma net loss per common share for the year ended
September 30, 1999 and the six months ended March 31, 2000 is calculated
assuming the automatic conversion of all preferred stock outstanding had
occurred as of the beginning of the period or as of the date of issuance of the
preferred stock, if later. Therefore, accretion of the redeemable convertible
preferred stock is excluded from the calculation of pro forma net loss per
common share. The redeemable convertible preferred stock automatically converts
into 21,448,442 shares of common stock upon the completion of the Company's
initial public offering. The calculations of pro forma diluted net loss per
common share for the year ended September 30, 1999 and the six months ended
March 31, 2000 do not include 4,287,577 and 5,383,870 (unaudited) potential
shares of common stock equivalents as their inclusion would be dilutive,
respectively.
Unaudited Pro Forma Balance Sheet
Under the terms of the Company's redeemable convertible preferred stock, all
shares of such preferred stock will automatically convert into common stock
upon completion of the Company's initial public offering of common stock. The
unaudited pro forma balance sheet reflects the conversion of the outstanding
shares of redeemable convertible preferred stock into 21,448,442 shares of
common stock, as if the conversions had occurred on March 31, 2000.
F-10
<PAGE>
NETWORK ENGINES, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosures of contingent assets and liabilities at the date of financial
statements and the reported amounts of revenue and expenses during the period.
Actual results could differ from those estimates and would impact future
results of operations and cash flows.
Recent Accounting Pronouncements
In June 1998, the Financial Accounting Standard Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities" ("SFAS 133"). SFAS 133 establishes accounting and
reporting standards requiring that every derivative instrument be recorded in
the balance sheet as either an asset or liability measured at its fair value.
SFAS 133, as amended by Statement of Financial Accounting Standards No. 137,
"Accounting for Derivative Instruments and Hedging Activities--Deferral of the
Effective Date of FASB Statement No. 133," is effective for fiscal years
beginning after June 15, 2000. Because the Company does not currently hold any
derivative instruments and does not currently engage in hedging activities, the
adoption of SFAS 133 is not expected to have a material impact on its financial
position or operating results.
In December 1999, the Securities and Exchange Commission released Staff
Accounting Bulletin No. 101, "Revenue Recognition in Financial Statements"
("SAB 101"). This bulletin summarizes certain views of the staff of the
Securities and Exchange Commission (the "Staff") on applying generally accepted
accounting principals to revenue recognition in financial statements. The Staff
believes that revenue is realized or realizable and earned when all of the
following criteria are met: persuasive evidence of an arrangement exists;
delivery has occurred or services have been rendered; the seller's price to the
buyer is fixed or determinable; and collectibility is reasonably assured. The
Company does not expect the application of SAB 101 to have a material impact on
the Company's financial position or results of operations.
In March 2000, the Financial Accounting Standard Board issued FASB
Interpretation No. 44, "Accounting for Certain Transactions Involving Stock
Compensation--an interpretation of APB Opinion No. 25" ("FIN 44"). FIN 44
clarifies the application of APB Opinion No. 25 and among other issues
clarifies the following: the definition of an employee for purposes of applying
APB Opinion No. 25; the criteria for determining whether a plan qualifies as a
noncompensatory plan; the accounting consequence of various modifications to
the terms of previously fixed stock options or awards; and the accounting for
an exchange of stock compensation awards in a business combination. FIN 44 will
become effective July 1, 2000, but certain conclusions in FIN 44 cover specific
events that occurred after either December 15, 1998 or January 12, 2000. The
Company does not expect the application of FIN 44 to have a material impact on
the Company's financial position or results of operations.
F-11
<PAGE>
NETWORK ENGINES, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
3. INVENTORIES
Inventories consisted of the following at September 30, 1998, 1999 and March
31, 2000 (unaudited) (in thousands):
<TABLE>
<CAPTION>
September 30,
------------- March 31,
1998 1999 2000
<S> <C> <C> <C>
Raw materials........................................... $ 293 $ 845 $2,924
Work in process......................................... 121 120 66
Finished goods.......................................... 173 286 959
----- ------- ------
$ 587 $ 1,251 $3,949
===== ======= ======
</TABLE>
4. PROPERTY AND EQUIPMENT
Property and equipment consisted of the following at September 30, 1998 and
1999 (in thousands):
<TABLE>
<CAPTION>
Useful Life 1998 1999
<S> <C> <C> <C>
Office furniture and
equipment 5 years $163 $351
Engineering and production
equipment 3 years 173 404
Computer equipment and
software 3 years 335 642
Leasehold improvements Lesser of 3 years or lease term 210 210
---- -----
881 1,607
Less: accumulated
depreciation and
amortization 429 776
---- -----
$452 $831
==== =====
</TABLE>
As of September 30, 1998 and 1999, the Company had approximately $89,000 and
$165,000 (net of approximately $11,000 and $53,000 of accumulated amortization)
of office furniture, computer software and equipment under capital leases,
respectively.
Depreciation and amortization expense was approximately $88,000, $194,000
and $361,000 for the years ended September 30, 1997, 1998 and 1999,
respectively.
5. BRIDGE LOANS
During the year ended September 30, 1998, the Company issued a series of
uncollateralized subordinated promissory notes totaling $3,950,000 that were
payable on demand with an interest rate of 10% per annum. As of September 30,
1998, no principal or interest had been paid. In connection with these
promissory notes, the Company granted warrants to purchase 1,645,732 shares of
common stock at an exercise price of $0.37 per share. These warrants were
immediately exercisable on the date of issue and expire after ten years. The
fair value of the warrants on the date of issue of approximately $581,000 was
recorded in stockholders' equity (deficit) and as a discount on the related
notes payable. The discount was amortized as interest expense over the
estimated life of the notes and resulted in additional interest expense of
$348,000 and $233,000 during the years ended September 30, 1998 and 1999,
respectively.
F-12
<PAGE>
NETWORK ENGINES, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
During the year ended September 30, 1999, the Company issued a series of
uncollateralized subordinated promissory notes totaling $1,100,000 that were
payable on demand with interest rates of 10% and 15%. In connection with these
notes, the Company granted warrants to purchase 798,562 shares of the Company's
common stock at an exercise price of $0.37 per share. The fair value of the
warrants on the date of issue of approximately $608,000 was recorded in
stockholders' equity (deficit) and as a discount on the related notes payable.
The discount was amortized as interest expense during the year ended September
30, 1999.
On January 13, 1999, the Company converted approximately $2,750,000 of the
subordinated promissory notes into 357,142 shares of Series B redeemable
convertible preferred stock ("Series B Preferred") and approximately $2,300,000
of the subordinated promissory notes plus approximately $7,000 of accrued
interest into 299,631 shares of Series C redeemable convertible preferred stock
("Series C Preferred"). The note holders forgave $263,245 of accrued interest
upon the conversion of the subordinated promissory notes. The interest
forgiveness has been recorded as an extraordinary gain on extinguishment of
debt.
6. NOTES PAYABLE
Notes payable consisted of the following at September 30, 1998 and 1999 (in
thousands):
<TABLE>
<CAPTION>
1998 1999
<S> <C> <C>
Equipment line of credit....................................... $ -- $41
Note payable................................................... 17 --
Credit card debt............................................... 44 --
10% note payable to officer and stockholders................... 21 --
12% note payable to former officer and stockholder............. 4 --
----- ---
Total notes payable............................................ 86 41
Less current portion........................................... 86 15
----- ---
Long-term notes payable........................................ $ -- $26
===== ===
</TABLE>
In May 1994, the Company issued a $100,000 note payable to a bank with 60-
monthly payments of principal and interest through May 1999. The interest rate
on the note was determined monthly as prime plus 2.25%. In accordance with the
note's terms, this note was paid in full as of May 1999.
In March 1996, the Company obtained a credit card with a maximum limit of
$50,000. The interest rate on the credit card is prime plus 6.75% (14.75%, 15%
and 15.25% at September 30, 1999, 1998 and 1997, respectively).
At September 30, 1998, the Company had an uncollateralized 10% interest
bearing note payable of approximately $21,000 with two stockholders. The
original maturity of this note payable was April 30, 1996 and the Company had
been charged a late payment fee of 3% per month since the maturity date. At
September 30, 1998, the Company had an additional uncollateralized 12% interest
bearing note payable of approximately $4,000 with a former officer and
stockholder. No interest or
F-13
<PAGE>
NETWORK ENGINES, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
late fees had been paid on either note as of September 30, 1998. During the
year ended September 30, 1999, the Company entered into an agreement with the
holders of the related party notes whereby the interest rate on each note was
halved, no further interest accrued after January 13, 1999 and all late fees
were waived. In total, approximately $51,000 of interest and late fees were
forgiven during the year ended September 30, 1999. Both notes and the remaining
accrued interest were paid in full in August 1999. The interest forgiveness and
waiver of late fees have been recorded as an extraordinary gain on
extinguishment of debt.
In November 1998, the Company entered into a line of credit for the purchase
of equipment with a maximum limit of $60,000. The interest rate on the line is
determined on the average daily balance of prime plus 1.0% (9.0% at September
30, 1999). Under the terms of the agreement, any equipment advances that were
outstanding on November 30, 1998 (approximately $56,000) were payable in 34
equal monthly installments of principal, plus accrued interest, commencing
December 31, 1998. Equipment advances, once repaid, may not be re-borrowed. The
line of credit is collateralized by substantially all of the assets of the
Company.
The aggregate amounts of notes payable due as of September 30, 1999 were as
follows (in thousands):
<TABLE>
<S> <C>
Year ended September 30,
2000.................................................................. $22
2001.................................................................. 21
2002.................................................................. 2
---
Total payments........................................................ 45
Less amounts representing interest.................................... 4
---
41
Less amounts due within one year...................................... 15
---
Long-term portion..................................................... $26
===
</TABLE>
On September 28, 1998, the Company entered into an Accounts Receivable
Purchase Agreement (the "Agreement") with a bank. Under the terms of the
Agreement, the bank agreed to pay the Company 85% of approved receivables and
hold the remaining 15% in reserve until collected by the bank. The total of all
receivables purchased may not exceed $1,000,000 at any time. The Company is
charged a finance fee of 1% per month on outstanding Purchased Receivables and
a one-time administrative fee for each Purchased Receivable of .25% of the
receivable. Receivables purchased are collateralized by all of the assets of
the Company. The term of this Agreement is for one year and from year to year
thereafter unless terminated by either party. No amounts were outstanding under
this Agreement at September 30, 1998 or 1999.
F-14
<PAGE>
NETWORK ENGINES, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
7. STOCKHOLDERS' EQUITY (DEFICIT)
Redeemable Convertible Preferred Stock
The following table summarizes redeemable convertible preferred stock
activity (in thousands, except share data):
<TABLE>
<CAPTION>
Redeemable
Convertible
Preferred Stock
-----------------
Shares Amount
<S> <C> <C>
April 1997 issuance of Series A redeemable convertible
preferred stock....................................... 185,250 $ 1,000
--------- -------
Balance, September 30, 1997 and 1998................... 185,250 1,000
January 1999 issuance of Series B redeemable
convertible preferred stock upon conversion of bridge
loans................................................. 357,142 2,750
January 1999 issuance of Series C redeemable
convertible preferred stock upon conversion of bridge
loans................................................. 299,631 2,307
January 1999 issuance of Series C redeemable
convertible preferred stock for cash.................. 422,102 3,093
June 1999 issuance of Series C redeemable convertible
preferred stock for cash.............................. 401,816 3,094
Accretion of redeemable convertible preferred stock to
redemption value...................................... -- 223
--------- -------
Balance, September 30, 1999............................ 1,665,941 12,467
December 1999 issuance of Series D redeemable
convertible preferred stock for cash (unaudited)...... 3,581,554 25,250
Accretion of redeemable convertible preferred stock to
redemption value (unaudited).......................... -- 4,259
--------- -------
Balance, March 31, 2000 (unaudited).................... 5,247,495 $41,976
========= =======
</TABLE>
As of September 30, 1999, the Company had three series of redeemable
convertible preferred stock: Series A preferred stock ("Series A Preferred"),
Series B Preferred and Series C Preferred (collectively, the "Preferred Stock")
and had reserved 12,494,557 shares of its common stock for the conversion of
all Preferred Stock.
The Preferred Stock is convertible into common stock at any time, at the
option of the holder, based on specified formulas, subject to anti-dilution
adjustments, as defined. At September 30, 1999, each share of Preferred Stock
was convertible into 7.5 shares of common stock. Each share of Series B
Preferred and Series C Preferred will automatically convert into common stock
upon an initial public offering of common stock at a price per share of at
least $3.08 and proceeds to the Company of at least $30,000,000. Each share of
Series A Preferred will automatically convert into common stock upon an initial
public offering of common stock at a price per share of at least $2.16 and
proceeds to the Company of at least $10,000,000. Additionally, at the election
of 75% of the
F-15
<PAGE>
NETWORK ENGINES, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
holders of Series A Preferred or Series B Preferred, all shares of Series A
Preferred or Series B Preferred, respectively, will automatically convert into
shares of common stock.
Holders of the Preferred Stock are entitled to votes equaling the number of
shares of common stock into which their shares may be converted. The holders of
Preferred Stock are entitled to annual, cumulative dividends of $0.432 for
Series A Preferred and $0.693 for Series B Preferred and Series C Preferred
when and if declared by the Company's Board of Directors. If the Company pays
dividends of less than the total amount of unpaid dividends, such payments will
be made first to the holders of Series C Preferred until paid in full, then to
the holders of Series B Preferred until paid in full and then to the holders of
Series A Preferred. No dividends may be paid to the holders of common stock
until all unpaid dividends on the Preferred Stock have been paid.
In the event of liquidation, dissolution or winding up of the Company, the
holders of Series C Preferred are entitled to a liquidation preference of $7.70
per share plus all declared and unpaid dividends thereon, prior to any
distributions to holders of the Series A Preferred, Series B Preferred or
common stock. Upon satisfaction of the Series C Preferred liquidation
preference, the holders of Series B Preferred are entitled to a liquidation
preference of $7.70 per share plus all declared and unpaid dividends thereon,
prior to any distributions to holders of the Series A Preferred or common
stock. Upon the satisfaction of the Series C Preferred and Series B Preferred
liquidation preferences, the holders of Series A Preferred are entitled to a
liquidation preference of $5.40 per share plus all declared and unpaid
dividends thereon, prior to any distributions to holders of common stock.
However, to the extent any net assets available for distribution to
shareholders exceeds $125 million, the entire amount of such assets would be
distributed ratably among the holders of shares of common stock and Preferred
Stock as if converted into shares of common stock.
The Company, upon written notice from the holders of at least two-thirds of
the Series C Preferred, is obligated to redeem all or any portion (but not less
than one-third of the shares of the holders electing to redeem) of the
Preferred Stock after January 2003. The redemption price per share for the
Series C Preferred would be the sum of the liquidation value per share and the
amount calculated as the current valuation of the Company less the aggregate
liquidation value for all shares of Preferred Stock divided by the fully
diluted number of outstanding shares of common stock. If based on the then
current valuation of the Company, the net assets available for distribution to
shareholders exceeds $125 million, then the redemption price for each share of
Series C Preferred would be the amount payable if the entire net assets of the
Company were distributed ratably among the holders of shares of common stock
and Preferred Stock as if converted into shares of common stock. The redemption
price per share for Series B Preferred would be the liquidation value per
share. The redemption price per share for holders of Series A Preferred would
be the greater of the liquidation value per share or the current fair market
value per share that factors in aggregate consideration received upon the
assumed exercise of all derivative securities. If the Company does not have
sufficient funds for all requested redemptions, payment will be made first to
the holders of Series C Preferred until paid in full, then to the holders of
Series B Preferred until paid in full and then to the holders of Series A
Preferred. The Company has the option to redeem shares for cash or
F-16
<PAGE>
NETWORK ENGINES, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
in the form of an 18-month pre-payable note bearing interest at prime plus 2%,
secured by the available assets of the Company.
Common Stock
On November 12, 1999, the Company completed a three-for-one split of the
Company's common stock, which was effected through a stock dividend (the "1999
Stock Split"). All common stock share and per share amounts that appear in the
financial statements and the notes thereto have been restated to reflect the
1999 Stock Split.
On May 15, 2000, the Company's Board of Directors approved a 2.5-for-one
split of the Company's common stock, subject to stockholder approval (the "2000
Stock Split"). All common stock share and per share amounts that appear in the
financial statements and the notes thereto have been restated to reflect the
2000 Stock Split. The Board of Directors also approved an increase in the
authorized number of common shares to 60,000,000, subject to stockholder
approval.
On January 7, 1998, the Company issued 225,000 shares of restricted stock at
$0.07 per share to a director of the Company. In accordance with the restricted
stock agreement, the Company has the right to buy back any unvested shares at
the same purchase price if the director ceases to be affiliated with the
Company. Shares vest 33% as of June 30, 1998 and 8.375% per quarter thereafter.
As of September 30, 1999, 56,532 shares remained unvested.
Unaudited. In November 1999, the Company issued 637,500 shares of restricted
stock at $0.24 per share to certain officers and directors of the Company. Of
these shares, 75,000 shares vest 50% on November 18, 2000 and 12.5% per quarter
thereafter and 187,500 shares vest 25% on November 18, 2000 and 6.25% per
quarter thereafter. The remaining 375,000 shares vest quarterly upon the
achievement of certain financial targets or in December 2004, whichever is
earlier. As of March 31, 2000, the Company had achieved two quarterly financial
targets and, accordingly, 62,500 shares had vested. Unvested restricted shares
are subject to forfeiture in the event that an employee ceases to be employed
by the Company or a director ceases to be a director of the Company. The
Company recorded deferred stock compensation of approximately $1,206,000, which
represents the excess of the fair value of the restricted shares at the date of
issue over the purchase price. Compensation expense will be recognized ratably
over the vesting period of the restricted stock. For the six months ended
March 31, 2000, the Company recognized approximately $115,000 of related stock
compensation expense.
In connection with the November 1999 restricted stock grants, the Company
accepted a recourse note payable from an officer of the Company in the amount
of $90,000. This note has an interest rate of 6.08% and is payable on the
earlier of demand by the Company or November 18, 2004.
8. STOCK INCENTIVE PLAN
Options and awards to purchase shares of the Company's common stock have
been granted to employees and directors under the Company's 1997 Stock
Incentive Plan (the "1997 Plan"), which
F-17
<PAGE>
NETWORK ENGINES, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
was adopted by the Board of Directors in November 1997. On October 21, 1999 the
1997 Plan was terminated and all outstanding options became options under the
1999 Stock Incentive Plan.
On October 21, 1999, the Company's Board of Directors approved, subject to
shareholder approval, the Company's 1999 Stock Incentive Plan (the "1999
Plan"). Under the 1999 Plan, stock option and restricted stock or other stock-
based awards for up to 4,747,902 shares of common stock may be issued to
employees, officers, directors, consultants and advisors of the Company (see
Note 13). Options are granted for terms of up to ten years and vest over
varying periods, generally 25% on the first anniversary of the grant date and
thereafter in equal quarterly installments over the next three years. The
option price per share is determined by the Board of Directors.
Stock option activity for the 1997 Plan and 1999 Plan (the "Plans"), since
October 1, 1997 was as follows:
<TABLE>
<CAPTION>
Weighted
Average
Number of Exercise
Options Price
<S> <C> <C>
Outstanding, October 1, 1997.......................... -- $ --
Granted............................................. 882,150 0.07
Exercised........................................... (225,000) 0.07
Canceled............................................ (48,750) 0.07
---------
Outstanding, September 30, 1998....................... 608,400 0.07
Granted............................................. 1,593,975 0.14
Exercised........................................... (22,612) 0.07
Canceled............................................ (242,610) 0.08
---------
Outstanding, September 30, 1999....................... 1,937,153 0.13
Granted (unaudited)................................. 2,080,750 1.58
Exercised (unaudited)............................... (367,100) 0.10
Canceled (unaudited)................................ (149,786) 0.18
---------
Outstanding, March 31, 2000 (unaudited)............... 3,501,017 0.99
========= =====
</TABLE>
As of September 30, 1999 and March 31, 2000 (unaudited), options to purchase
199,915 and 92,242 shares of common stock, respectively, were exercisable with
a weighted-average exercise price of $0.08 and $0.10, respectively. No options
were exercisable at September 30, 1998. The weighted average fair value of
options granted during the year ended September 30, 1998 was $0.02 per share;
all options were granted with an exercise price equal to fair market value. For
financial reporting purposes, the weighted average fair values of options
granted during the year ended September 30, 1999 with exercise prices equal to
the fair market value and with exercise prices at below fair market value were
$0.02 (31,875 options) and $1.05 (1,562,100 options) per share, respectively.
As of September 30, 1999 and March 31, 2000 (unaudited), 201,735 and 3,549,785
shares, respectively, were available for future grants under the Plans (see
Note 13).
F-18
<PAGE>
NETWORK ENGINES, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
The following table summarizes the stock options outstanding at March 31,
2000 (unaudited):
<TABLE>
<CAPTION>
Number of Remaining Number of
Exercise Options Contractual Options
Price Outstanding Life (in years) Exercisable
<S> <C> <C> <C>
$0.07 240,820 7.82 51,555
0.13 1,119,352 9.11 40,687
0.24 860,845 9.60 --
1.20 278,250 9.75 --
2.00 740,625 9.83 --
4.00 139,250 9.88 --
6.00 121,875 9.96 --
--------- ------
3,501,017 92,242
========= ======
</TABLE>
During the year ended September 30, 1999 and the six months ended March 31,
2000 (unaudited), the Company recorded deferred compensation for restricted
stock and stock options granted to employees at prices deemed to be below fair
market value for financial reporting purposes of approximately $1,566,000 and
$11,299,000, respectively. The Company is recognizing the compensation expense
over the vesting period. The Company recognized compensation expense relating
to deferred compensation of approximately $127,000 and $876,000 for the year
ended September 30, 1999 and the six months ended March 31, 2000 (unaudited),
respectively.
Had compensation expense for the Company's Plans been determined based on
the fair value at the date of grant for awards made since the Plans' adoption,
consistent with the provisions of SFAS 123, the Company's net loss
attributable to common stockholders and net loss per common share for the
years ended September 30, 1998 and 1999 would have increased to the pro forma
amounts indicated below:
<TABLE>
<CAPTION>
1998 1999
-------------------- --------------------
Net Net
Net loss loss Net loss loss
attributable per attributable per
to common common to common common
stockholders share stockholders share
(in thousands, except per share data)
<S> <C> <C> <C> <C>
As reported..................... $(4,199) $(1.31) $(6,053) $(1.83)
Pro forma....................... (4,201) (1.31) (6,066) (1.83)
</TABLE>
For this purpose, the fair value of options at the date of grant were
estimated using the minimum value method with the following assumptions: risk-
free interest rate of 6.0% and 5.5% for 1998 and 1999, respectively; no
dividend yield; no volatility factor; and a weighted-average expected life of
the options of five years. However, because the determination of the fair
value of all options granted after the Company becomes a publicly-traded
entity will include an expected volatility factor, because most options vest
over periods of up to four years and because additional option grants are
expected to be made subsequent to September 30, 1999, the pro forma effects of
applying the fair value method may be materially different in future years.
F-19
<PAGE>
NETWORK ENGINES, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
9. STOCK WARRANTS
During the years ended September 30, 1998 and 1999, the Company issued
warrants to purchase 1,645,732 and 798,562 shares of common stock,
respectively, in connection with the issuance of a series of subordinated
promissory notes. Each warrant expires ten years from the date of issuance and
has an exercise price of $0.37 per share. The number of shares and the exercise
price are subject to anti-dilution adjustments. In the event that the Company
is obligated to redeem all or any portion of the Preferred Stock, the Company
must concurrently redeem an equivalent portion of these warrants. The fair
value of the warrants on the date of issue of approximately $588,000 and
$608,000 for the warrants issued in fiscal year 1998 and 1999, respectively,
was recorded in additional paid-in capital and interest expense over the
estimated life of the notes.
During the year ended September 30, 1999, the Company entered into
agreements with the holders of the 1998 subordinated promissory notes whereby
the warrants originally issued were reduced from the right to purchase
1,645,732 shares of common stock to 1,096,125 shares of common stock. Also,
during the year ended September 30, 1999, the Company issued warrants to
purchase 206,250 shares of common stock to some of the holders of Series C
Preferred, in connection with that financing. Each warrant expires ten years
from the date of issuance and has an exercise price of $0.37 per share. The
number of shares and the exercise price are subject to anti-dilution
adjustments. In the event the Company is obligated to redeem all or any portion
of the Preferred Stock, the Company must concurrently redeem an equivalent
portion of these warrants. The fair value of the warrants of approximately
$157,000 was recorded as a discount on the Series C Preferred and in additional
paid-in capital.
Prior to October 1, 1997, the Company issued warrants for the right to
purchase 249,487 shares of common stock. These warrants have exercise prices
which range from $0.07 per share to $0.53 per share and expire at various dates
between August 31, 2002 and February 23, 2003. These warrants, which were
issued in connection with notes payable, were determined to have an aggregate
value of $41,000 on the various dates of grant and were recorded in additional
paid-in capital and interest expense over the life of the related notes
payable.
As of September 30, 1999, the Company had reserved 2,350,424 shares of
common stock for the exercise of all of the Company's outstanding warrants.
10. COMMITMENTS AND CONTINGENCIES
Operating Leases
As of September 30, 1999, the Company had five months remaining on its
corporate headquarters lease. This lease provides for base rent and certain
additional expenses such as utilities and taxes. The Company also leases sales
offices in Virginia and California. These additional office leases expire
during fiscal year 2000. Extensions of sales office leases will be executed as
needed. Rent expense was approximately $18,000, $37,000 and $50,000 for the
years ended September 30, 1997, 1998 and 1999, respectively. As of September
30, 1999, the future noncancelable lease payments on all committed operating
leases were $23,502 for the year ended September 30, 2000.
F-20
<PAGE>
NETWORK ENGINES, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
Capital Leases
The Company leases certain furniture, equipment and software under non-
cancelable capital leases. The lease terms range from 36 to 60 months and have
interest rates of 12% to 15.5%. As of September 30, 1999, the required monthly
installment of principal and interest for all capital leases was approximately
$6,000.
Future minimum lease payments under all noncancelable capital leases as of
September 30, 1999 were as follows (in thousands):
<TABLE>
<S> <C>
Year ended September 30,
2000................................................................. $ 74
2001................................................................. 74
2002................................................................. 61
2003................................................................. 13
----
Total payments....................................................... 222
Less amounts representing interest................................... 42
----
Present value of future minimum payments............................. 180
Less amounts due within one year..................................... 48
----
Long-term portion.................................................... $132
====
</TABLE>
Contingencies
As a normal incidence of the nature of the Company's business, various
claims, charges and litigation have been asserted or commenced against the
Company arising from or related to employee relations. Management does not
believe these claims will have a material adverse effect of the financial
position or results of operations of the Company.
11. INCOME TAXES
Due to the loss incurred during fiscal years 1997, 1998 and 1999, the
Company did not record a provision for any federal or state income taxes in
those years. The following is a reconciliation between the amount of the
Company's income taxes utilizing the U.S. federal statutory rate and the
Company's actual provision for income taxes for the years ended September 30,
1997, 1998 and 1999 (in thousands):
<TABLE>
<CAPTION>
1997 1998 1999
<S> <C> <C> <C>
At U.S. federal statutory rate................. $(393) $(1,428) $(1,781)
State taxes, net of federal effect............. (92) (261) (381)
Research and development credits............... (17) (20) (92)
Non-deductible stock option compensation
charge........................................ -- -- 43
Non-deductible expenses and other charges...... 1 132 (103)
Effect of change in valuation allowance........ 501 1,577 2,314
----- ------- -------
Provision for income taxes..................... $ -- $ -- $ --
===== ======= =======
</TABLE>
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax
F-21
<PAGE>
NETWORK ENGINES, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
purposes. As of September 30, 1998 and 1999, net deferred tax assets consisted
of the following (in thousands):
<TABLE>
<CAPTION>
1998 1999
<S> <C> <C>
Net operating losses.................................... $ 1,795 $ 2,690
Tax credit carryforwards................................ 86 238
Capitalized research and engineering.................... -- 1,227
Temporary differences................................... 298 338
------- -------
Total deferred tax asset................................ 2,179 4,493
Valuation allowance..................................... (2,179) (4,493)
------- -------
Net deferred tax asset.................................. $ -- $ --
======= =======
</TABLE>
A valuation allowance is established if it is more likely than not that all
or a portion of the deferred tax asset will not be realized. Accordingly, as of
September 30, 1998 and 1999, a valuation allowance was recorded for the full
amount of the deferred tax asset due to the uncertainty of their realization.
As of September 30, 1999, the Company had net operating loss carryforwards
for both federal and state income tax purposes of approximately $6.7 million,
which expire at various dates through 2019 and 2004, respectively. The Company
also has available research and development credits for federal and state
income tax purposes of approximately $140,000 and $109,000, respectively, which
expire at various dates through 2014.
12. EMPLOYEE SAVINGS PLAN
The Company sponsors a savings plan for its employees, who meet certain
eligibility requirements, which is designed to be a qualified plan under
section 401(k) of the Internal Revenue Code. Eligible employees are permitted
to contribute to the 401(k) plan through payroll deductions within statutory
and plan limits. The Company does not contribute to the plan.
13. SUBSEQUENT EVENTS
Series D Preferred Stock Offering
On December 20, 1999, the Company issued 3,581,554 shares of Series D
redeemable convertible preferred stock ("Series D Preferred"), for proceeds to
the Company of $25,250,000, prior to any fees or offering costs.
Each share of Series D Preferred is convertible at any time at the option of
the holder into 2.5 shares of common stock, subject to anti-dilution
adjustments, as defined. Each share of Series D Preferred will automatically be
converted into shares of common stock upon the closing of an initial public
offering of the Company's common stock at a price per share of at least $7.05
and proceeds to the Company of at least $30,000,000.
F-22
<PAGE>
NETWORK ENGINES, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
Each share of Series D Preferred entitles the holder to the number of votes
equal to the number of shares of common stock issuable upon conversion. The
Series D Preferred holders have the right to receive cumulative dividends, when
and if declared by the Board of Directors, at a rate of $0.6345 per share per
annum. If the Company pays less than the total amount of dividends then
accrued, such payment will be made first to the holders of Series D Preferred
and Series C Preferred on a pro-rata basis until paid in full before any
payments are made to the holders of Series B Preferred and Series A Preferred.
The Series D Preferred has a liquidation preference of $7.05 per share plus
all declared and unpaid dividends. If the Company distributes less than the
total liquidation preference, such payments will be made first to the holders
of Series D Preferred and Series C Preferred on a pro-rata basis until paid in
full before any payments are made to holders of Series B Preferred and Series A
Preferred. Both the holders Series D Preferred and Series C Preferred
participate ratably, as if converted into shares of common stock, with holders
of common stock up to a maximum of four times their respective purchase price
per share. However, if the amount of net assets to be distributed to common
shareholders is greater than four times the Series D Preferred and Series C
Preferred purchase price, then the holders of Series D Preferred and Series C
Preferred will be liquidated as if converted into shares of common stock.
The Series D Preferred has a redemption provision that is substantially
identical to the Series C Preferred except that the Series D Preferred will be
redeemed prior to the Series C Preferred. The redemption option for all series
of Preferred Stock begins on the fourth anniversary of the Series D Preferred
closing and will extend to the time of a public offering. After the affirmative
election of redemption and payment to all holders of Series D Preferred, the
holders of Series C Preferred, Series B Preferred and Series A Preferred may
elect to redeem all or a portion, but not less than one-third, of their shares.
The Series D Preferred has the same pre-emptive rights as the Series C
Preferred and has anti-dilution protection. In connection with the Series D
Preferred offering, the Company increased the number of authorized shares of
common stock to 16,000,000.
Litigation
On December 29, 1999, a former employee commenced a lawsuit against the
Company, a current officer and director and a former officer and director for
unlawful termination of employment. Although the Company intends to vigorously
defend these claims, an adverse resolution could have a material impact of the
Company's future results of operations.
F-23
<PAGE>
NETWORK ENGINES, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
Office Leases
During October and November 1999, the Company entered into operating leases
for its new corporate headquarters located in Massachusetts and additional
sales offices located in New York, Virginia and California. The term of the
lease for the corporate headquarters is five years, plus an additional five-
month commitment for temporary office space. The sales offices all have
commitment terms of three months or less. The total noncancelable lease
payments for all new committed operating leases are approximately $3,028,000
over the next five years.
Increase of Authorized Shares of the 1999 Plan
In March 2000, the Company's Board of Directors approved, subject to
shareholder approval, an increase of 3,300,000 in the number of shares
authorized under the 1999 Plan.
Line of Credit
In April 2000, the Company amended its equipment line of credit to provide
for an additional amount of $2,000,000 and to provide a working capital
revolving line of credit of $4,000,000. The additional equipment line amount is
separated into two consecutive six-month borrowing periods for $1,000,000
beginning on the date of amendment. The equipment line amount has an interest
rate of prime plus 1.25%, which is payable monthly. Any outstanding balances at
the end of each of the equipment line borrowing periods will be repaid in 36
equal monthly installments. The working capital line of credit bears interest
at prime plus 1% and matures in April 2001.
Sale of P6000 Product Line
In April 2000, the Company sold all inventory and test equipment related to
its P6000 product line to Copernicus Systems, Inc., a company wholly-owned by a
stockholder and former officer and director of the Company. The production and
development of the P6000 product line had been discontinued and all related
assets and inventory had been reserved as of September 30, 1999. In exchange
for these assets, Copernicus Systems agreed to pay the Company royalties on
future sales of the inventory and agreed to support P6000 units for which the
Company had obligations under warranty or services contracts.
F-24
<PAGE>
[The inside back cover includes a picture of a cluster of five of our
WebEngine Roadster products. Above the picture appears the following text:
"Internet Server Appliances." Below the picture appears our logo.]
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
[LOGO OF NETWORK ENGINES]
6,250,000 Shares of Common Stock
----------------
PROSPECTUS
----------------
Donaldson, Lufkin & Jenrette
Dain Rauscher Wessels
Robertson Stephens
DLJdirect Inc.
- --------------------------------------------------------------------------------
We have not authorized any dealer, salesperson or other person to give you
written information other than this prospectus or to make representations as to
matters not stated in this prospectus. You must not rely on unauthorized
information. This prospectus is not an offer to sell these securities or our
solicitation of your offer to buy the securities in any jurisdiction where that
would not be permitted or legal. Neither the delivery of this prospectus nor
any sales made hereunder after the date of this prospectus shall create an
implication that the information contained herein or our affairs have not
changed since the date hereof.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Until , 2000 (25 days after the date of this prospectus), all dealers
that effect transactions in these shares of common stock may be required to
deliver a prospectus. This is in addition to the dealer's obligation to deliver
a prospectus when acting as an underwriter in its offering and when selling
previously unsold allotments or subscriptions.
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13. Other Expenses of Issuance and Distribution.
The following table sets forth the costs and expenses, other than the
underwriting discount, payable by the Registrant in connection with the sale of
common stock being registered. All amounts are estimates except the SEC
registration fee, the NASD filing fees and the Nasdaq National Market listing
fee.
<TABLE>
<S> <C>
SEC registration fee.............................................. $ 24,668
NASD filing fee................................................... 9,844
Nasdaq National Market listing fee................................ 95,000
Printing and engraving expenses................................... 200,000
Legal fees and expenses........................................... 300,000
Accounting fees and expenses...................................... 350,000
Blue Sky fees and expenses (including legal fees)................. 15,000
Transfer agent and registrar fees and expenses.................... 10,000
Miscellaneous..................................................... 10,488
---------
Total......................................................... 1,000,000
=========
</TABLE>
The Registrant will bear all expenses shown above.
Item 14. Indemnification of Directors and Officers.
The Registrant's Second Amended and Restated Certificate of Incorporation
(the "Restated Certificate") provides that, except to the extent prohibited by
the Delaware General Corporation Law (the "DGCL"), the Registrant's directors
shall not be personally liable to the Registrant or its stockholders for
monetary damages for any breach of fiduciary duty as directors of the
Registrant. Under the DGCL, the directors have a fiduciary duty to the
Registrant which is not eliminated by this provision of the Restated
Certificate and, in appropriate circumstances, equitable remedies such as
injunctive or other forms of nonmonetary relief will remain available. In
addition, each director will continue to be subject to liability under the DGCL
for breach of the director's duty of loyalty to the Registrant, for acts or
omissions which are found by a court of competent jurisdiction to be not in
good faith or involving intentional misconduct, for knowing violations of law,
for actions leading to improper personal benefit to the director, and for
payment of dividends or approval of stock repurchases or redemptions that are
prohibited by the DGCL. This provision also does not affect the directors'
responsibilities under any other laws, such as the federal securities laws or
state or federal environmental laws. The Registrant has obtained liability
insurance for its officers and directors.
Section 145 of the DGCL empowers a corporation to indemnify its directors
and officers and to purchase insurance with respect to liability arising out of
their capacity or status as directors and officers, provided that this
provision shall not eliminate or limit the liability of a director: (i) for any
breach of the director's duty of loyalty to the corporation or its
stockholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) arising under
Section 174 of the DGCL including for an unlawful payment of dividend or
unlawful stock purchase or redemption, or (iv) for any transaction from which
the director derived an
II-1
<PAGE>
improper personal benefit. The DGCL provides further that the indemnification
permitted thereunder shall not be deemed exclusive of any other rights to which
the directors and officers may be entitled under the corporation's by-laws, any
agreement, a vote of stockholders or otherwise. The Restated Certificate
eliminates the personal liability of directors to the fullest extent permitted
by the DGCL and, together with the Registrant's Second Amended and Restated By-
Laws (the "Restated By-Laws"), provides that the Registrant shall fully
indemnify any person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action, suit or proceeding (whether
civil, criminal, administrative or investigative) by reason of the fact that
such person is or was a director or officer of the Registrant, or is or was
serving at the request of the Registrant as a director or officer of another
corporation, partnership, joint venture, trust, employee benefit plan or other
enterprise, against expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by such person in
connection with such action, suit or proceeding. Reference is made to the
Registrant's Form of Amended and Restated Certificate of Incorporation and Form
of Amended and Restated By-Laws filed as Exhibits 3.2 and 3.4 hereto,
respectively.
The Underwriting Agreement provides that the Underwriters are obligated,
under certain circumstances, to indemnify directors, officers and controlling
persons of the Registrant against certain liabilities, including liabilities
under the Securities Act of 1933, as amended (the "Act"). Reference is made to
the form of Underwriting Agreement to be filed as Exhibit 1.1 hereto.
Item 15. Recent Sales of Unregistered Securities.
In the three years preceding the filing of this registration statement,
through a series of private placements and its stock option plan, the
Registrant has issued the following securities that were not registered under
the Securities Act (all information in this item has been adjusted to reflect
stock splits effected to date for the Registrants' common stock, including the
2.5-for-1 stock split to be effected prior to the completion of this offering):
(a) Issuances of Capital Stock:
. On April 9, 1997, the Registrant sold to Pioneer Ventures Limited
Partnership and Pioneer Ventures Limited Partnership II an aggregate of
185,250 shares of series A convertible preferred stock for $1,000,000.
. On January 7, 1998, the Registrant sold to Mr. Kirshy 225,000 shares of
our common stock, subject to a stock restriction agreement, for $16,500.
. On January 13, 1999, the Registrant sold to Pioneer Ventures Limited
Partnership and Pioneer Ventures Limited Partnership II an aggregate of
357,142 shares of series B convertible preferred stock for $2,749,993.
. On January 13, 1999, the Registrant sold to existing and new individual
and venture capital investors an aggregate of 721,733 shares of series C
convertible participating preferred stock for $5,557,344.10. On June 30,
1999, we sold to existing and new individual and venture capital
investors an additional 401,816 shares of series C convertible
participating preferred stock for $3,093,983.
II-2
<PAGE>
. On November 18, 1999, the Registrant sold to Mr. Genovesi, Mr. Blaeser
and Mr. Kirshy an aggregate of 637,500 shares of our common stock,
subject to stock restriction agreements, for $153,000. Mr. Genovesi paid
for his 375,000 shares by making a full recourse promissory note payable
to the Registrant for $90,000.
. On December 20, 1999, the Registrant sold to existing and new individual
and venture capital investors an aggregate of 3,581,554 shares of series
D convertible participating preferred stock for $25,249,956.
(b) Issuances of Warrants. From October 16, 1997 to January 13, 1999, the
Registrant issued warrants to purchase common stock to individual and venture
capital investors at an exercise price of $0.36667. In the case of the warrants
issued from October 16, 1997 to September 8, 1998, the number of shares of
common stock underlying those warrants was amended in exchange for each warrant
holder's waiver of its preemptive rights that would otherwise have been
triggered when the Registrant agreed to sell its shares of series C convertible
participating preferred stock to new and existing individual and venture
capital investors. These warrants were issued in the following numbers on the
following dates:
. On October 16, 1997, warrants exercisable for 138,937 shares were issued
in connection with the issuance of promissory notes made by the
Registrant on the same date in exchange for $1,000,000. On December 8,
1998, the number of shares of common stock underlying these warrants was
revised to equal 277,500.
. On January 30, 1998, warrants exercisable for 104,205 shares were issued
in connection with the issuance of promissory notes made by the
Registrant on the same date in exchange for $750,000. On December 8,
1998, the number of shares of common stock underlying these warrants was
revised to equal 208,125.
. On May 21, 1998, warrants exercisable for 27,787 shares were issued in
connection with the issuance of promissory notes made by the Registrant
on the same date in exchange for $200,000. On December 8, 1998, the
number of shares of common stock underlying these warrants was revised
to equal 55,500.
. On June 4, 1998, warrants exercisable for 111,150 shares were issued in
connection with the issuance of promissory notes made by the Registrant
on the same date in exchange for $800,000. On December 8, 1998, the
number of shares of common stock underlying these warrants was revised
to equal 222,000.
. On August 12, 1998, warrants exercisable for 159,562 shares were issued
in connection with the issuance of promissory notes made by the
Registrant on the same date in exchange for $1,150,000. On December 8,
1998, the number of shares of common stock underlying these warrants was
revised to equal 319,125.
. On September 8, 1998, warrants exercisable for 6,937 shares were issued
in connection with the issuance of promissory notes made by the
Registrant on the same date in exchange for $50,000. On December 8,
1998, the number of shares of common stock underlying this warrant was
revised to equal 13,875.
II-3
<PAGE>
. On November 2, 1998, warrants exercisable for 48,562 shares were issued
in connection with the issuance of promissory notes made by the
Registrant on the same date in exchange for $350,000.
. On December 8, 1998, warrants exercisable for 750,000 shares were issued
in connection with the issuance of promissory notes made by the
Registrant on the same date in exchange for $750,000.
. On January 13, 1999, warrants exercisable for 206,250 shares were issued
in connection with the sale of 680,639 shares of series C convertible
participating preferred stock in exchange for an aggregate of
$5,240,920.
(c) Grants and Exercises of Stock Options. The Registrant's 1999 Stock
Incentive Plan was approved by the Board of Directors in October 1999, subject
to stockholder approval. As of May 20, 2000, options to purchase and awards of
an aggregate of 1,070,252 shares of common stock granted to the Registrant's
employees and officers had been exercised for a consideration of $272,710 under
the Registrant's 1999 Stock Incentive Plan and options to purchase 3,845,365
shares of common stock granted to the Registrant's employees, officers and
directors were outstanding under the Registrant's 1999 Stock Incentive Plan.
(d) Issuances of Promissory Notes. On the following dates, the Registrant
issued promissory notes to new and existing individual and venture capital
investors in the following aggregate amounts each bearing interest at 10% per
year, except as otherwise noted:
. On October 16, 1997, the Registrant issued notes for an aggregate of
$1,000,000 in exchange for loans of the same principal amount.
. On January 30, 1998, the Registrant issued notes for an aggregate of
$750,000 in exchange for loans of the same principal amount.
. On May 21, 1998, the Registrant issued notes for an aggregate of
$200,000 in exchange for loans of the same principal amount.
. On June 4, 1998, the Registrant issued notes for an aggregate of
$800,000 in exchange for loans of the same principal amount.
. On August 12, 1998, the Registrant issued notes for an aggregate of
$1,150,000 in exchange for loans of the same principal amount.
II-4
<PAGE>
. On September 8, 1998, the Registrant issued notes for an aggregate of
$50,000 in exchange for loans of the same principal amount.
. On November 2, 1998, the Registrant issued notes for an aggregate of
$350,000 in exchange for loans of the same principal amount.
. On December 8, 1998, the Registrant issued notes for an aggregate of
$750,000 bearing interest at 15% per year in exchange for loans of the
same principal amount.
No underwriters were involved in the foregoing sales of securities. Such
sales were made in reliance upon an exemption from the registration provisions
of the Securities Act set forth in Section 4(2) thereof relative to sales by an
issuer not involving any public offering or the rules and regulations
thereunder, or, in the case of options to purchase common stock, Rule 701 of
the Securities Act. All of the foregoing securities are deemed restricted
securities for the purposes of the Securities Act.
Item 16. Exhibits and Financial Statement Schedules.
(a) Exhibits:
<TABLE>
<CAPTION>
Exhibit
No. Description
<C> <S>
**1.1 Form of Underwriting Agreement
*3.1 Amended and Restated Certificate of Incorporation of the Registrant
3.2 Form of Second Amended and Restated Certificate of Incorporation of
the Registrant, to be filed upon the closing of this offering
Form of Amendment to the Registrant's Amended and Restated Certificate
of Incorporation to be adopted prior to the effective date of this
registration statement
*3.3 By-Laws of the Registrant
3.4 Form of Second Amended and Restated By-Laws of the Registrant, to be
effective upon the closing of this offering
3.5 Form of Certificate of Amendment of Amended and Restated Certificate
of Incorporation of the Registrant
4.1 Specimen common stock certificate
*4.2 Provisions of the Second Amended and Restated Certificate of
Incorporation and Amended and Restated By-Laws of the Registrant
defining the rights of holders of common stock of the Registrant
(included in Exhibits 3.1, 3.2, 3.3 and 3.4)
**5.1 Opinion of Hale and Dorr LLP
*10.1 Lease for 25 Dan Road, Canton, Massachusetts
*10.2 The Registrant's 1999 Stock Incentive Plan
*10.3 Form of Incentive Stock Option Agreement under the Registrant's 1999
Stock Incentive Plan
10.4 The Registrant's 2000 Employee Stock Purchase Plan
10.5 The Registrant's 2000 Director Stock Option Plan
*10.6 Investor Rights Agreement, dated December 20, 1999, among the
Registrant and certain investors in our preferred stock and warrants
*10.7 Voting Trust Agreement, dated October 1, 1995 among Mr. Genovesi and
Ms. Smith, as trustees, and members of their families.
*10.8 Restricted Stock Agreement with Lawrence Genovesi, dated November 18,
1999, under the 1999 Stock Incentive Plan
</TABLE>
II-5
<PAGE>
<TABLE>
<CAPTION>
Exhibit
No. Description
<C> <S>
*10.9 Restricted Stock Agreement with Dennis Kirshy, dated January 7, 1998,
under the 1997 Stock Incentive Plan
*10.10 Restricted Stock Agreement with Dennis Kirshy, dated November 18,
1999, under the 1999 Stock Incentive Plan
*10.11 Restricted Stock Agreement with John Blaeser, dated November 18, 1999,
under the 1999 Stock Incentive Plan
10.12 P6000 Asset Purchase Agreement between the Registrant and Copernicus
Systems, Inc. dated April 13, 2000
*10.13 Loan Modification Agreement, dated as of April 5, 2000, between the
Registrant and Silicon Valley Bank
10.14 Restricted Stock Agreement with Michael H. Shanahan, dated April 3,
2000, under the 1999 Stock Incentive Plan
10.15 Form of option granted to each of Frank M. Polestra, Robert M.
Wadsworth and Lawrence Kernan on March 16, 2000
10.16 Form of First Amendment to the Registrant's 1999 Stock Incentive Plan
23.1 Consent of Hale and Dorr LLP (included in Exhibit 5.1)
23.2 Consent of PricewaterhouseCoopers LLP
24.1 Powers of Attorney (see page II-6)
*27.1 Financial Data Schedule
*27.2 Financial Data Schedule
*27.3 Financial Data Schedule
*27.4 Financial Data Schedule
*27.5 Financial Data Schedule
27.6 Financial Data Schedule
27.7 Financial Data Schedule
</TABLE>
- ---------------------
* Filed with the Registrant's initial filing of its registration statement on
Form S-1 on April 7, 2000
** To be filed by amendment.
(b) Financial Statement:
All schedules for which provision is made in the applicable accounting
regulation of the Securities and Exchange Commission have been omitted because
they are not required or because the required information is given in the
Financial Statements or Notes to these statements.
Item 17. Undertakings.
The undersigned registrant hereby undertakes to provide to the Underwriter
at the closing specified in the Underwriting Agreement, certificates in such
denominations and registered in such names as required by the Underwriter to
permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933, as amended (the "Act"), may be permitted to directors, officers and
controlling persons of the registrant pursuant to the Delaware General
Corporation Law, the Restated Certificate of the registrant, the Underwriting
Agreement, or otherwise, the registrant has been advised that in the opinion of
the Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act, and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other
II-6
<PAGE>
than the payment by the registrant of expenses incurred or paid by a director,
officer or controlling person of the registrant in the successful defense of
any action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered
hereunder, the registrant will, unless in the opinion of counsel the matter has
been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication
of such issue.
The undersigned registrant hereby undertakes that:
(1) For purpose of determining any liability under the Act, the information
omitted from the form of prospectus filed as part of this Registration
Statement in reliance upon Rule 430A and contained in a form of prospectus
filed by the registrant pursuant to Rule 424(b)(1) or (4), or 497(h) under the
Act shall be deemed to be part of this Registration Statement as of the time it
was declared effective.
(2) For purpose of determining any liability under the Act, each post-
effective amendment that contains a form of prospectus shall be deemed to be a
new Registration Statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
II-7
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Amendment No. 1 to the Registration Statement on Form S-1
to be signed on its behalf by the undersigned, thereunto duly authorized, in
Canton, Massachusetts, on this 19th day of May, 2000.
NETWORK ENGINES, INC.
By /s/ Lawrence A. Genovesi
_____________________________________
Lawrence A. Genovesi
Chairman of the Board, President,
Chief Executive Officer and Chief
Technology Officer
Pursuant to the requirements of the Securities Act of 1933, as amended, this
Amendment No. 1 to Registration Statement on Form S-1 has been signed by the
following persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
<S> <C> <C>
/s/ Lawrence A. Genovesi Chairman of the Board of May 19, 2000
____________________________________ Directors, President, Chief
Lawrence A. Genovesi Executive Officer and Chief
Technology Officer
(Principal Executive Officer)
/s/ Douglas G. Bryant Chief Financial Officer May 19, 2000
____________________________________ (Principal Financial Officer
Douglas G. Bryant and Principal Accounting
Officer)
* Director May 19, 2000
____________________________________
John A. Blaeser
* Director May 19, 2000
____________________________________
Lawrence Kernan
</TABLE>
II-8
<PAGE>
<TABLE>
<CAPTION>
Signature Title Date
<S> <C> <C>
* Director May 19, 2000
____________________________________
Dennis A. Kirshy
* Director May 19, 2000
____________________________________
Frank M. Polestra
* Director May 19, 2000
____________________________________
Michael H. Shanahan
* Director May 19, 2000
____________________________________
Robert M. Wadsworth
* /s/ Lawrence A. Genovesi
____________________________________
Per Power of Attorney
</TABLE>
II-9
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
No. Description
<C> <S>
**1.1 Form of Underwriting Agreement
*3.1 Amended and Restated Certificate of Incorporation of the Registrant
3.2 Form of Second Amended and Restated Certificate of Incorporation of
the Registrant, to be filed upon the closing of this offering
Form of Amendment to the Registrant's Amended and Restated Certificate
of Incorporation to be adopted prior to the effective date of this
registration statement
*3.3 By-Laws of the Registrant
3.4 Form of Second Amended and Restated By-Laws of the Registrant, to be
effective upon the closing of this offering
3.5 Form of Certificate of Amendment of Amended and Restated Certificate
of Incorporation of the Registrant
4.1 Specimen common stock certificate
*4.2 Provisions of the Second Amended and Restated Certificate of
Incorporation and Amended and Restated By-Laws of the Registrant
defining the rights of holders of common stock of the Registrant
(included in Exhibits 3.1, 3.2, 3.3 and 3.4)
**5.1 Opinion of Hale and Dorr LLP
*10.1 Lease for 25 Dan Road, Canton, Massachusetts
*10.2 The Registrant's 1999 Stock Incentive Plan
*10.3 Form of Incentive Stock Option Agreement under the Registrant's 1999
Stock Incentive Plan
10.4 The Registrant's 2000 Employee Stock Purchase Plan
10.5 The Registrant's 2000 Director Stock Option Plan
*10.6 Investor Rights Agreement, dated December 20, 1999, among the
Registrant and certain investors in our preferred stock and warrants
*10.7 Voting Trust Agreement, dated October 1, 1995 among Mr. Genovesi and
Ms. Smith, as trustees, and members of their families.
*10.8 Restricted Stock Agreement with Lawrence Genovesi, dated November 18,
1999, under the 1999 Stock Incentive Plan
*10.9 Restricted Stock Agreement with Dennis Kirshy, dated January 7, 1998,
under the 1997 Stock Incentive Plan
*10.10 Restricted Stock Agreement with Dennis Kirshy, dated November 18,
1999, under the 1999 Stock Incentive Plan
*10.11 Restricted Stock Agreement with John Blaeser, dated November 18, 1999,
under the 1999 Stock Incentive Plan
10.12 P6000 Asset Purchase Agreement between the Registrant and Copernicus
Systems, Inc. dated April 13, 2000
*10.13 Loan Modification Agreement, dated as of April 5, 2000, between the
Registrant and Silicon Valley Bank
10.14 Restricted Stock Agreement with Michael H. Shanahan, dated April 3,
2000, under the 1999 Stock Incentive Plan
10.15 Form of option granted to each of Frank M. Polestra, Robert M.
Wadsworth and Lawrence Kernan on March 16, 2000
10.16 Form of First Amendment to the Registrant's 1999 Stock Incentive Plan
23.1 Consent of Hale and Dorr LLP (included in Exhibit 5.1)
23.2 Consent of PricewaterhouseCoopers LLP
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Exhibit
No. Description
<C> <S>
24.1 Powers of Attorney (see page II-6)
*27.1 Financial Data Schedule
*27.2 Financial Data Schedule
*27.3 Financial Data Schedule
*27.4 Financial Data Schedule
*27.5 Financial Data Schedule
27.6 Financial Data Schedule
27.7 Financial Data Schedule
</TABLE>
- ---------------------
* Filed with the Registrant's initial filing of its registration statement on
Form S-1 on April 7, 2000
** To be filed by amendment.
<PAGE>
Exhibit 3.2
SECOND AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
NETWORK ENGINES, INC.
Network Engines, Inc. (hereinafter called the "Corporation"), a corporation
organized and existing under and by virtue of the General Corporation Law of the
State of Delaware, does hereby certify as follows:
1. The name of the corporation is Network Engines, Inc. The corporation was
originally incorporated on September 17, 1999.
2. This Second Amended and Restated Certificate of Incorporation amends and
restates the Amended and Restated Certificate of Incorporation of the
Corporation. At a duly called meeting of the Board of Directors of the
Corporation at which a quorum was present at all times, a resolution was duly
adopted, pursuant to Sections 242 and 245 of the General Corporation Law of the
State of Delaware, setting forth a Second Amended and Restated Certificate of
Incorporation of the Corporation and declaring said Second Amended and Restated
Certificate of Incorporation advisable. The stockholders of the Corporation duly
approved said proposed Second Amended and Restated Certificate of Incorporation
by written consent in accordance with Sections 228, 242 and 245 of the General
Corporation Law of the State of Delaware. The resolution setting forth the
Second Amended and Restated Certificate of Incorporation is as follows:
RESOLVED: That the Amended and Restated Certificate of Incorporation of the
- -------- Corporation be, and hereby is, amended and restated in its entirety
so that the same shall read as follows:
FIRST. The name of the Corporation is:
Network Engines, Inc.
SECOND. The address of its registered office in the State of Delaware is
Corporation Trust Center, 1209 Orange Street, in the City of Wilmington, County
of New Castle. The name of its registered agent at such address is The
Corporation Trust Company.
THIRD. The nature of the business or purposes to be conducted or promoted by
the Corporation is as follows:
To engage in any lawful act or activity for which corporations may be
organized under the General Corporation Law of Delaware.
<PAGE>
FOURTH. The total number of shares of all classes of stock which the
Corporation shall have authority to issue is 105,000,000 shares, consisting of
(i) 100,000,000 shares of Common Stock, $.01 par value per share ("Common
Stock"), and (ii) 5,000,000 shares of Preferred Stock, $.01 par value per share
("Preferred Stock").
The following is a statement of the designations and the powers,
preferences and rights, and the qualifications, limitations or restrictions
thereof in respect of each class of capital stock of the Corporation.
A. COMMON STOCK.
------------
1. General. The voting, dividend and liquidation rights of the holders of
the Common Stock are subject to and qualified by the rights of the holders of
any outstanding Preferred Stock of any series as may be designated by the Board
of Directors upon any issuance of the Preferred Stock of any series.
2. Voting. The holders of the Common Stock are entitled to one vote for
each share held at all meetings of stockholders. There shall be no cumulative
voting.
The number of authorized shares of Common Stock may be increased or
decreased (but not below the number of shares thereof then outstanding) by the
affirmative vote of the holders of a majority of the stock of the Corporation
entitled to vote, irrespective of the provisions of Section 242(b)(2) of the
General Corporation Law of Delaware.
3. Dividends. Dividends may be declared and paid on the Common Stock
from funds lawfully available therefor as and when determined by the Board of
Directors and subject to any preferential dividend rights of any then
outstanding Preferred Stock.
4. Liquidation. Upon the dissolution or liquidation of the Corporation,
whether voluntary or involuntary, holders of Common Stock will be entitled to
receive all assets of the Corporation available for distribution to its
stockholders, subject to any preferential rights of any then outstanding
Preferred Stock.
B. PREFERRED STOCK.
----------------
Preferred Stock may be issued from time to time in one or more series, each
of such series to have such terms as stated or expressed herein and in the
resolution or resolutions providing for the issue of such series adopted by the
Board of Directors of the Corporation as hereinafter provided. Any shares of
Preferred Stock which may be redeemed, purchased or acquired by the Corporation
may be reissued except as otherwise provided by law. Different series of
Preferred Stock shall not be construed to constitute different classes of shares
for the purposes of voting by classes unless expressly provided.
Authority is hereby expressly granted to the Board of Directors from time
to time to issue the Preferred Stock in one or more series, and in connection
with the creation of any such series, by resolution or resolutions providing for
the issuance of the shares thereof, to determine and fix such voting powers,
full or limited, or no voting powers, and such designations, preferences and
relative participating, optional or other special rights, and qualifications,
limitations or restrictions thereof, including without limitation thereof,
dividend rights, conversion rights,
-2-
<PAGE>
redemption privileges and liquidation preferences, as shall be stated and
expressed in such resolutions, all to the full extent now or hereafter permitted
by the General Corporation Law of Delaware. Without limiting the generality of
the foregoing, the resolutions providing for issuance of any series of Preferred
Stock may provide that such series shall be superior or rank equally or be
junior to the Preferred Stock of any other series to the extent permitted by
law. Except as otherwise provided in this Second Amended and Restated
Certificate of Incorporation, no vote of the holders of the Preferred Stock or
Common Stock shall be a prerequisite to the designation or issuance of any
shares of any series of the Preferred Stock authorized by and complying with the
conditions of this Second Amended and Restated Certificate of Incorporation, the
right to have such vote being expressly waived by all present and future holders
of the capital stock of the Corporation.
FIFTH. The Corporation shall have a perpetual existence.
SIXTH. In furtherance of and not in limitation of powers conferred by
statute, it is further provided:
1. Election of directors need not be by written ballot, except as and to
the extent provided in the By-Laws of the Corporation.
2. The Board of Directors is expressly authorized to adopt, amend or
repeal the By-Laws of the Corporation, except as and to the extent provided in
the By-Laws of the Corporation.
SEVENTH. Except as otherwise provided herein, the Corporation reserves the
right to amend, alter, change or repeal any provision contained in this Second
Amended and Restated Certificate of Incorporation, in the manner now or
hereafter prescribed by statute and this Second Amended and Restated Certificate
of Incorporation, and all rights conferred upon stockholders herein are granted
subject to this reservation.
EIGHTH. Except to the extent that the General Corporation Law of Delaware
prohibits the elimination or limitation of liability of directors for breaches
of fiduciary duty, no director of the Corporation shall be personally liable to
the Corporation or its stockholders for monetary damages for any breach of
fiduciary duty as a director, notwithstanding any provision of law imposing such
liability. No amendment to or repeal of this provision shall apply to or have
any effect on the liability or alleged liability of any director of the
Corporation for or with respect to any acts or omissions of such director
occurring prior to such amendment or repeal.
NINTH. 1. Actions, Suits and Proceedings Other than by or in the Right of
---------------------------------------------------------------
the Corporation. The Corporation shall indemnify each person who was or is a
- ---------------
party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the Corporation), by
reason of the fact that he is or was, or has agreed to become, a director or
officer of the Corporation, or is or was serving, or has agreed to serve, at the
request of the Corporation, as a director, officer or trustee of, or in a
similar capacity with, another corporation, partnership, joint venture, trust or
other enterprise (including any employee benefit plan) (all such persons being
referred to hereafter as an "Indemnitee"), or by reason of any action alleged to
have been taken or omitted in such capacity, against all expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred by him or on
-3-
<PAGE>
his behalf in connection with such action, suit or proceeding and any appeal
therefrom, if he acted in good faith and in a manner he reasonably believed to
be in, or not opposed to, the best interests of the Corporation, and, with
respect to any criminal action or proceeding, had no reasonable cause to believe
his conduct was unlawful. The termination of any action, suit or proceeding by
judgment, order, settlement, conviction or upon a plea of nolo contendere or its
equivalent, shall not, of itself, create a presumption that the person did not
act in good faith and in a manner which he reasonably believed to be in, or not
opposed to, the best interests of the Corporation, and, with respect to any
criminal action or proceeding, had reasonable cause to believe that his conduct
was unlawful. Notwithstanding anything to the contrary in this Article, except
as set forth in Section 7 below, the Corporation shall not indemnify an
Indemnitee seeking indemnification in connection with a proceeding (or part
thereof) initiated by the Indemnitee unless the initiation thereof was approved
by the Board of Directors of the Corporation. Notwithstanding anything to the
contrary in this Article, the Corporation shall not indemnify an Indemnitee to
the extent such Indemnitee is reimbursed from the proceeds of insurance, and in
the event the Corporation makes any indemnification payments to an Indemnitee
and such Indemnitee is subsequently reimbursed from the proceeds of insurance,
such Indemnitee shall promptly refund such indemnification payments to the
Corporation to the extent of such insurance reimbursement.
2. Actions or Suits by or in the Right of the Corporation. The
------------------------------------------------------
Corporation shall indemnify any Indemnitee who was or is a party or is
threatened to be made a party to any threatened, pending or completed action or
suit by or in the right of the Corporation to procure a judgment in its favor by
reason of the fact that he is or was, or has agreed to become, a director or
officer of the Corporation, or is or was serving, or has agreed to serve, at the
request of the Corporation, as a director, officer or trustee of, or in a
similar capacity with, another corporation, partnership, joint venture, trust or
other enterprise (including any employee benefit plan), or by reason of any
action alleged to have been taken or omitted in such capacity, against all
expenses (including attorneys' fees) and, to the extent permitted by law,
amounts paid in settlement actually and reasonably incurred by him or on his
behalf in connection with such action, suit or proceeding and any appeal
therefrom, if he acted in good faith and in a manner he reasonably believed to
be in, or not opposed to, the best interests of the Corporation, except that no
indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable to the Corporation
unless and only to the extent that the Court of Chancery of Delaware shall
determine upon application that, despite the adjudication of such liability but
in view of all the circumstances of the case, such person is fairly and
reasonably entitled to indemnity for such expenses (including attorneys' fees)
which the Court of Chancery of Delaware shall deem proper.
3. Indemnification for Expenses of Successful Party. Notwithstanding the
------------------------------------------------
other provisions of this Article, to the extent that an Indemnitee has been
successful, on the merits or otherwise, in defense of any action, suit or
proceeding referred to in Sections 1 and 2 of this Article, or in defense of any
claim, issue or matter therein, or on appeal from any such action, suit or
proceeding, he shall be indemnified against all expenses (including attorneys'
fees) actually and reasonably incurred by him or on his behalf in connection
therewith. Without limiting the foregoing, if any action, suit or proceeding is
disposed of, on the merits or otherwise (including a disposition without
prejudice), without (i) the disposition being adverse to the Indemnitee, (ii) an
adjudication that the Indemnitee was liable to the Corporation, (iii) a plea of
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<PAGE>
guilty or nolo contendere by the Indemnitee, (iv) an adjudication that the
---- ----------
Indemnitee did not act in good faith and in a manner he reasonably believed to
be in or not opposed to the best interests of the Corporation, and (v) with
respect to any criminal proceeding, an adjudication that the Indemnitee had
reasonable cause to believe his conduct was unlawful, the Indemnitee shall be
considered for the purposes hereof to have been wholly successful with respect
thereto.
4. Notification and Defense of Claim. As a condition precedent to his
---------------------------------
right to be indemnified, the Indemnitee must notify the Corporation in writing
as soon as practicable of any action, suit, proceeding or investigation
involving him for which indemnity will or could be sought. With respect to any
action, suit, proceeding or investigation of which the Corporation is so
notified, the Corporation will be entitled to participate therein at its own
expense and/or to assume the defense thereof at its own expense, with legal
counsel reasonably acceptable to the Indemnitee. After notice from the
Corporation to the Indemnitee of its election so to assume such defense, the
Corporation shall not be liable to the Indemnitee for any legal or other
expenses subsequently incurred by the Indemnitee in connection with such action,
suit, proceeding or investigation, other than as provided below in this Section
4. The Indemnitee shall have the right to employ his own counsel in connection
with such action, suit, proceeding or investigation, but the fees and expenses
of such counsel incurred after notice from the Corporation of its assumption of
the defense thereof shall be at the expense of the Indemnitee unless (i) the
employment of counsel by the Indemnitee has been authorized by the Corporation,
(ii) counsel to the Indemnitee shall have reasonably concluded that there may be
a conflict of interest or position on any significant issue between the
Corporation and the Indemnitee in the conduct of the defense of such action,
suit, proceeding or investigation, or (iii) the Corporation shall not in fact
have employed counsel to assume the defense of such action, suit, proceeding or
investigation, in each of which cases the fees and expenses of counsel for the
Indemnitee shall be at the expense of the Corporation, except as otherwise
expressly provided by this Article. The Corporation shall not be entitled,
without the consent of the Indemnitee, to assume the defense of any claim
brought by or in the right of the Corporation or as to which counsel for the
Indemnitee shall have reasonably made the conclusion provided for in clause (ii)
above. The Corporation shall not be required to indemnify the Indemnitee under
this Article for any amounts paid in settlement of any action, suit, proceeding
or investigation effected without its written consent. The Corporation shall
not settle any action, suit, proceeding or investigation in any manner which
would impose any penalty or limitation on the Indemnitee without the
Indemnitee's written consent. Neither the Corporation nor the Indemnitee will
unreasonably withhold or delay its consent to any proposed settlement.
5. Advance of Expenses. Subject to the provisions of Section 6 of this
-------------------
Article NINTH, in the event that the Corporation does not assume the defense
pursuant to Section 4 of this Article NINTH of any action, suit, proceeding or
investigation of which the Corporation receives notice under this Article, any
expenses (including attorneys' fees) incurred by an Indemnitee in defending a
civil or criminal action, suit, proceeding or investigation or any appeal
therefrom shall be paid by the Corporation in advance of the final disposition
of such matter; provided, however, that the payment of such expenses incurred by
-------- -------
an Indemnitee in advance of the final disposition of such matter shall be made
only upon receipt of an undertaking by or on behalf of the Indemnitee to repay
all amounts so advanced in the event that it shall ultimately be determined that
the Indemnitee is not entitled to be indemnified by the Corporation as
authorized in this Article.; and further provided that no such advancement of
expenses shall be made if it is
-5-
<PAGE>
determined (in the manner described in Section 6) that (i) the Indemnitee did
not act in good faith and in a manner he reasonably believed to be in, or not
opposed to, the best interests of the Corporation, or (ii) with respect to any
criminal action or proceeding, the Indemnitee had reasonable cause to believe
his conduct was unlawful. Such undertaking shall be accepted without reference
to the financial ability of the Indemnitee to make such repayment.
6. Procedure for Indemnification. In order to obtain indemnification or
-----------------------------
advancement of expenses pursuant to Section 1, 2, 3 or 5 of this Article NINTH,
the Indemnitee shall submit to the Corporation a written request, including in
such request such documentation and information as is reasonably available to
the Indemnitee and is reasonably necessary to determine whether and to what
extent the Indemnitee is entitled to indemnification or advancement of expenses.
Any such advancement of expenses shall be made promptly, and in any event within
60 days after receipt by the Corporation of the written request of the
Indemnitee, unless with respect to requests under Section 1, 2 or 5 of this
Article NINTH the Corporation determines within such 60-day period that the
Indemnitee did not meet the applicable standard of conduct set forth in Section
1, 2 or 5 of this Article NINTH, as the case may be. Any such indemnification,
unless ordered by a court, shall be made with respect to requests under Section
1 or 2 only as authorized in the specific case upon a determination by the
Corporation that the indemnification of the Indemnitee is proper because the
Indemnitee has met the applicable standard of conduct set forth in Section 1 or
2, as the case may be. Such determination shall be made in each instance (a) by
a majority vote of the directors of the Corporation consisting of persons who
are not at that time parties to the action, suit or proceeding in question
("disinterested directors"), whether or not a quorum, (b) by a majority vote of
a committee of disinterested directors designated by majority vote of
disinterested directors, whether or not a quorum, (c) a majority vote of a
quorum of the outstanding shares of stock of all classes entitled to vote for
directors, voting as a single class, which quorum shall consist of stockholders
who are not at that time parties to the action, suit or proceeding in question,
(d), if there are no disinterested directors, or if disinterested directors so
direct, by independent legal counsel (who may, to the extent permitted by law,
be regular legal counsel to the Corporation) in a written opinion, or, or
(e) a court of competent jurisdiction.
7. Remedies. The right to indemnification or advances as granted by this
--------
Article shall be enforceable by the Indemnitee in any court of competent
jurisdiction if the Corporation denies such request, in whole or in part, or if
no disposition thereof is made within the 60-day period referred to above in
Section 6. Unless otherwise required by law, the burden of proving that the
Indemnitee is not entitled to indemnification or advancement of expenses under
this Article shall be on the Corporation. Neither the failure of the
Corporation to have made a determination prior to the commencement of such
action that indemnification is proper in the circumstances because the
Indemnitee has met the applicable standard of conduct, nor an actual
determination by the Corporation pursuant to Section 6 of this Article NINTH
that the Indemnitee has not met such applicable standard of conduct, shall be a
defense to the action or create a presumption that the Indemnitee has not met
the applicable standard of conduct. The Indemnitee's expenses (including
attorneys' fees) incurred in connection with successfully establishing his right
to indemnification, in whole or in part, in any such proceeding shall also be
indemnified by the Corporation.
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<PAGE>
8. Subsequent Amendment. No amendment, termination or repeal of this
--------------------
Article or of the relevant provisions of the General Corporation Law of Delaware
or any other applicable laws shall affect or diminish in any way the rights of
any Indemnitee to indemnification under the provisions hereof with respect to
any action, suit, proceeding or investigation arising out of or relating to any
actions, transactions or facts occurring prior to the final adoption of such
amendment, termination or repeal.
9. Other Rights. The indemnification and advancement of expenses provided
------------
by this Article shall not be deemed exclusive of any other rights to which an
Indemnitee seeking indemnification or advancement of expenses may be entitled
under any law (common or statutory), agreement or vote of stockholders or
disinterested directors or otherwise, both as to action in his official capacity
and as to action in any other capacity while holding office for the Corporation,
and shall continue as to an Indemnitee who has ceased to be a director or
officer, and shall inure to the benefit of the estate, heirs, executors and
administrators of the Indemnitee. Nothing contained in this Article shall be
deemed to prohibit, and the Corporation is specifically authorized to enter
into, agreements with officers and directors providing indemnification rights
and procedures different from those set forth in this Article. In addition, the
Corporation may, to the extent authorized from time to time by its Board of
Directors, grant indemnification rights to other employees or agents of the
Corporation or other persons serving the Corporation and such rights may be
equivalent to, or greater or less than, those set forth in this Article.
10. Partial Indemnification. If an Indemnitee is entitled under any
-----------------------
provision of this Article to indemnification by the Corporation for some or a
portion of the expenses (including attorneys' fees), judgments, fines or amounts
paid in settlement actually and reasonably incurred by him or on his behalf in
connection with any action, suit, proceeding or investigation and any appeal
therefrom but not, however, for the total amount thereof, the Corporation shall
nevertheless indemnify the Indemnitee for the portion of such expenses
(including attorneys' fees), judgments, fines or amounts paid in settlement to
which the Indemnitee is entitled.
11. Insurance. The Corporation may purchase and maintain insurance, at
---------
its expense, to protect itself and any director, officer, employee or agent of
the Corporation or another corporation, partnership, joint venture, trust or
other enterprise (including any employee benefit plan) against any expense,
liability or loss incurred by him in any such capacity, or arising out of his
status as such, whether or not the Corporation would have the power to indemnify
such person against such expense, liability or loss under the General
Corporation Law of Delaware.
12. Merger or Consolidation. If the Corporation is merged into or
-----------------------
consolidated with another corporation and the Corporation is not the surviving
corporation, the surviving corporation shall assume the obligations of the
Corporation under this Article with respect to any action, suit, proceeding or
investigation arising out of or relating to any actions, transactions or facts
occurring prior to the date of such merger or consolidation.
13. Savings Clause. If this Article or any portion hereof shall be
--------------
invalidated on any ground by any court of competent jurisdiction, then the
Corporation shall nevertheless indemnify each Indemnitee as to any expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement in
connection with any action, suit, proceeding or investigation, whether civil,
criminal or administrative, including an action by or in the right of the
Corporation, to the fullest
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<PAGE>
extent permitted by any applicable portion of this Article that shall not have
been invalidated and to the fullest extent permitted by applicable law.
14. Definitions. Terms used herein and defined in Section 145(h) and
-----------
Section 145(i) of the General Corporation Law of Delaware shall have the
respective meanings assigned to such terms in such Section 145(h) and Section
145(i).
15. Subsequent Legislation. If the General Corporation Law of Delaware is
----------------------
amended after adoption of this Article to expand further the indemnification
permitted to Indemnitees, then the Corporation shall indemnify such persons to
the fullest extent permitted by the General Corporation Law of Delaware, as so
amended.
TENTH. Stockholders of the Corporation may not take any action by written
consent in lieu of a meeting. Notwithstanding any other provisions of law, this
Second Amended and Restated Certificate of Incorporation or the By-Laws of the
Corporation, and notwithstanding the fact that a lesser percentage may be
specified by law, the affirmative vote of the holders of at least seventy-five
percent (75%) of the votes which all the stockholders would be entitled to cast
in any annual election of directors or class of directors shall be required to
amend or repeal, or to adopt any provision inconsistent with, this Article
TENTH.
ELEVENTH. Special meetings of stockholders may be called at any time by only
the Chairman of the Board of Directors, the Chief Executive Officer, President
or the Board of Directors. Business transacted at any special meeting of
stockholders shall be limited to matters relating to the purpose or purposes
stated in the notice of meeting. Notwithstanding any other provision of law,
this Second Amended and Restated Certificate of Incorporation or the By-Laws of
the Corporation, and notwithstanding the fact that a lesser percentage may be
specified by law, the affirmative vote of the holders of at least seventy-five
percent (75%) of the votes which all the stockholders would be entitled to cast
in any annual election of directors or class of directors shall be required to
amend or repeal, or to adopt any provision inconsistent with, this Article
ELEVENTH.
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<PAGE>
IN WITNESS WHEREOF, the Corporation has caused its corporate seal to be
affixed hereto and this Second Amended and Restated Certificate of Incorporation
to be signed by its duly authorized officer this __________ day of _______,
2000.
NETWORK ENGINES, INC.
By:
-----------------------------------------
Lawrence A. Genovesi
Chairman of the Board, Chief Executive
Officer and Chief Technology Officer
<PAGE>
Exhibit 3.4
SECOND AMENDED AND RESTATED
BY-LAWS
OF
NETWORK ENGINES, INC.
ARTICLE I. -- Stockholders
--------------------------
1. Place of Meetings. All meetings of stockholders shall be held at such
place within or without the State of Delaware as may be designated from time to
time by the Board of Directors, the Chairman of the Board or the President or,
if not so designated, at the registered office of the corporation.
2. Annual Meeting. The annual meeting of stockholders for the election of
directors and for the transaction of such other business as may properly be
brought before the meeting shall be held on a date to be fixed by the Board of
Directors, the Chairman of the Board or the President (which date shall not be a
legal holiday in the place where the meeting is to be held) at the time and
place to be fixed by the Board of Directors, the Chairman of the Board or the
President and stated in the notice of the meeting. If no annual meeting is held
in accordance with the foregoing provisions, the Board of Directors shall cause
the meeting to be held as soon thereafter as is convenient. If no annual
meeting is held in accordance with the foregoing provisions, a special meeting
may be held in lieu of the annual meeting, and any action taken at that special
meeting shall have the same effect as if it had been taken at the annual
meeting, and in such case all references in these By-Laws to the annual meeting
of the stockholders shall be deemed to refer to such special meeting.
3. Special Meetings. Special meetings of stockholders may be called at any
time only by the Chairman of the Board, the Chief Executive Officer and
President or the Board of Directors. Business transacted at any special meeting
of stockholders shall be limited to matters relating to the purpose or purposes
stated in the notice of meeting.
4. Notice of Meetings. Except as otherwise provided by law, written notice
of each meeting of stockholders, whether annual or special, shall be given not
less than 10 nor more than 60 days before the date of the meeting to each
stockholder entitled to vote at such meeting. The notices of all meetings shall
state the place, date and hour of the meeting. The notice of a special meeting
shall state, in addition, the purpose or purposes for which the meeting is
called. If mailed, notice is given when deposited in the United States mail,
postage prepaid, directed to the stockholder at his address as it appears on the
records of the corporation.
5. Voting List. The officer who has charge of the stock ledger of the
corporation shall prepare, at least 10 days before every meeting of
stockholders, a complete list of the stockholders entitled to vote at the
meeting, arranged in alphabetical order, and showing the address of each
stockholder and the number of shares registered in the name of each stockholder.
Such list shall be open to the examination of any stockholder, for any purpose
germane to the
<PAGE>
meeting, during ordinary business hours, for a period of at least 10 days prior
to the meeting, at a place within the city where the meeting is to be held. The
list shall also be produced and kept at the time and place of the meeting during
the whole time of the meeting, and may be inspected by any stockholder who is
present.
6. Quorum. Except as otherwise provided by law, the Certificate of
Incorporation or these By-Laws, the holders of a majority of the shares of the
capital stock of the corporation issued and outstanding and entitled to vote at
the meeting, present in person or represented by proxy, shall constitute a
quorum for the transaction of business.
7. Adjournments. Any meeting of stockholders may be adjourned to any other
time and to any other place at which a meeting of stockholders may be held under
these By-Laws by the stockholders present or represented at the meeting and
entitled to vote, although less than a quorum, or, if no stockholder is present,
by any officer entitled to preside at or to act as Secretary of such meeting. It
shall not be necessary to notify any stockholder of any adjournment of less than
30 days if the time and place of the adjourned meeting are announced at the
meeting at which adjournment is taken, unless after the adjournment a new record
date is fixed for the adjourned meeting. At the adjourned meeting, the
corporation may transact any business which might have been transacted at the
original meeting.
8. Voting and Proxies. Each stockholder entitled to vote in accordance with
the terms of the Certificate of Incorporation and in accordance with the
provisions of these By-Laws shall be entitled to one vote, in person or by
proxy, for each share of stock entitled to vote held by such stockholder, but no
proxy shall be voted after three years from its date unless such proxy provides
for a longer period. Upon the demand of any stockholder, the vote for directors
and the vote upon any question before the meeting, shall be by ballot. All
elections for directors shall be decided by plurality vote; all other questions
shall be decided by majority vote except as otherwise provided by the
Certificate of Incorporation, these By-Laws or the laws of the State of
Delaware.
A complete list of the stockholders entitled to vote at the ensuing
election, arranged in alphabetical order, with the address of each, and the
number of shares held by each, shall be open to the examination of any
stockholder, for any purpose germane to the meeting, during ordinary business
hours, for a period of at least ten days prior to the meeting, either at a
place within the city where the meeting is to be held, which place shall be
specified in the notice of the meeting, or, if not so specified, at the place
where the meeting is to be held. The list shall also be produced and kept at
the time and place of the meeting during the whole time thereof, and may be
inspected by any stockholder who is present.
9. Action at Meeting. When a quorum is present at any meeting, the holders
of a majority of the stock present or represented and voting on a matter (or if
there are two or more classes of stock entitled to vote as separate classes,
then in the case of each such class, the holders of a majority of the stock of
that class present or represented and voting on a matter) shall decide any
matter to be voted upon by the stockholders at such meeting, except when a
different vote is required by express provision of law, the Certificate of
Incorporation or these By-Laws. Any election by stockholders shall be determined
by a plurality of the votes cast by the stockholders entitled to vote at the
election.
2
<PAGE>
10. Nomination of Directors. Only persons who are nominated in accordance
with the following procedures shall be eligible for election as directors.
Nomination for election to the Board of Directors of the corporation at a
meeting of stockholders may be made by the Board of Directors or by any
stockholder of the corporation entitled to vote for the election of directors at
such meeting who complies with the notice procedures set forth in this Section
10. Such nominations, other than those made by or on behalf of the Board of
Directors, shall be made by notice in writing delivered or mailed by first class
United States mail, postage prepaid, to the Secretary, and received not less
than 60 days nor more than 90 days prior to such meeting; provided, however,
that if less than 70 days' notice or prior public disclosure of the date of the
meeting is given to stockholders, such nomination shall have been mailed or
delivered to the Secretary not later than the close of business on the 10th day
following the date on which the notice of the meeting was mailed or such public
disclosure was made, whichever occurs first. Such notice shall set forth (a) as
to each proposed nominee (i) the name, age, business address and, if known,
residence address of each such nominee, (ii) the principal occupation or
employment of each such nominee, (iii) the number of shares of stock of the
corporation which are beneficially owned by each such nominee, and (iv) any
other information concerning the nominee that must be disclosed as to nominees
in proxy solicitations pursuant to Regulation 14A under the Securities Exchange
Act of 1934, as amended (including such person's written consent to be named as
a nominee and to serve as a director if elected); and (b) as to the stockholder
giving the notice (i) the name and address, as they appear on the corporation's
books, of such stockholder and (ii) the class and number of shares of the
corporation which are beneficially owned by such stockholder. The corporation
may require any proposed nominee to furnish such other information as may
reasonably be required by the corporation to determine the eligibility of such
proposed nominee to serve as a director of the corporation.
The chairman of the meeting may, if the facts warrant, determine and
declare to the meeting that a nomination was not made in accordance with the
foregoing procedure, and if he should so determine, he shall so declare to the
meeting and the defective nomination shall be disregarded.
11. Notice of Business at Annual Meetings. At an annual meeting of the
stockholders, only such business shall be conducted as shall have been properly
brought before the meeting. To be properly brought before an annual meeting,
business must be (a) specified in the notice of meeting (or any supplement
thereto) given by or at the direction of the Board of Directors, (b) otherwise
properly brought before the meeting by or at the direction of the Board of
Directors, or (c) otherwise properly brought before an annual meeting by a
stockholder. For business to be properly brought before an annual meeting by a
stockholder, if such business relates to the election of directors of the
corporation, the procedures in Section 10 of Article I must be complied with.
If such business relates to any other matter, the stockholder must have given
timely notice thereof in writing to the Secretary. To be timely, a
stockholder's notice must be delivered to or mailed and received at the
principal executive offices of the corporation not less than 60 days nor more
than 90 days prior to the meeting; provided, however, that in the event that
less than 70 days' notice or prior public disclosure of the date of the meeting
is given or made to stockholders, notice by the stockholder to be timely must be
so received not later than the close of business on the 10th day following the
date on which such notice of the date of the meeting was mailed or such public
disclosure was made, whichever occurs first. A stockholder's notice to the
Secretary shall set forth as to each matter the stockholder proposes to bring
before
3
<PAGE>
the annual meeting (a) a brief description of the business desired to be
brought before the annual meeting and the reasons for conducting such business
at the annual meeting, (b) the name and address, as they appear on the
corporation's books, of the stockholder proposing such business, (c) the class
and number of shares of the corporation which are beneficially owned by the
stockholder, and (d) any material interest of the stockholder in such business.
Notwithstanding anything in these By-Laws to the contrary, no business shall be
conducted at any annual meeting except in accordance with the procedures set
forth in this Section 11 and except that any stockholder proposal which complies
with Rule 14a-8 of the proxy rules (or any successor provision) promulgated
under the Securities Exchange Act of 1934, as amended, and is to be included in
the corporation's proxy statement for an annual meeting of stockholders shall be
deemed to comply with the requirements of this Section 11.
The chairman of the meeting shall, if the facts warrant, determine and
declare to the meeting that business was not properly brought before the meeting
in accordance with the provisions of this Section 11, and if he should so
determine, the chairman shall so declare to the meeting that any such business
not properly brought before the meeting shall not be transacted.
12. Action without Meeting. Stockholders may not take any action by written
consent in lieu of a meeting.
13. Organization. The Chairman of the Board, or in his absence the Vice
Chairman of the Board, or the President, in the order named, shall call meetings
of the stockholders to order, and shall act as chairman of such meeting,
provided, however, that the Board of Directors may appoint any stockholder to
act as chairman of any meeting in the absence of the Chairman of the Board. The
Secretary of the corporation shall act as secretary at all meetings of the
stockholders; but in the absence of the Secretary at any meeting of the
stockholders, the presiding officer may appoint any person to act as secretary
of the meeting.
ARTICLE II. -- Directors
------------------------
1. General Powers. The business and affairs of the corporation shall be
managed by or under the direction of a Board of Directors, who may exercise all
of the powers of the corporation except as otherwise provided by law, the
Certificate of Incorporation or these By-Laws. In the event of a vacancy in the
Board of Directors, the remaining directors, except as otherwise provided by
law, may exercise the powers of the full Board until the vacancy is filled.
2. Number; Election and Qualification. The number of directors which shall
constitute the whole Board of Directors shall be determined by resolution of the
Board of Directors, but in no event shall be less than three. The number of
directors may be decreased at any time and from time to time by a majority of
the directors then in office, but only to eliminate vacancies existing by reason
of the death, resignation, removal or expiration of the term of one or more
directors. The directors shall be elected at the annual meeting of stockholders
by such stockholders as have the right to vote on such election. Directors need
not be stockholders of the corporation.
3. Classes of Directors. The Board of Directors shall be and is divided
into three classes: Class I, Class II and Class III. No one class shall have
more than one director more than
4
<PAGE>
any other class. If a fraction is contained in the quotient arrived at by
dividing the designated number of directors by three, then, if such fraction is
one-third, the extra director shall be a member of Class I, and if such fraction
is two-thirds, one of the extra directors shall be a member of Class I and one
of the extra directors shall be a member of Class II, unless otherwise provided
from time to time by resolution adopted by the Board of Directors.
4. Terms of Office. Each director shall serve for a term ending on the date
of the third annual meeting following the annual meeting at which such director
was elected; provided, that each initial director in Class I shall serve for a
term ending on the date of the annual meeting of stockholders in 2001; each
initial director in Class II shall serve for a term ending on the date of the
annual meeting of stockholders in 2002, and each initial director in Class III
shall serve for a term ending on the date of the annual meeting of stockholders
in 2003; and provided further, that the term of each director shall be subject
to the election and qualification of his successor and to his earlier death,
resignation or removal.
5. Allocation of Directors Among Classes in the Event of Increases or
Decreases in the Number of Directors. In the event of any increase or decrease
in the authorized number of directors, (i) each director then serving as such
shall nevertheless continue as a director of the class of which he or she is a
member and (ii) the newly created or eliminated directorships resulting from
such increase or decrease shall be apportioned by the Board of Directors among
the three classes of directors so as to ensure that no one class has more than
one director more than any other class. To the extent possible, consistent with
the foregoing rule, any newly created directorships shall be added to those
classes whose terms of office are to expire at the latest dates following such
allocation, and any newly eliminated directorships shall be subtracted from
those classes whose terms of offices are to expire at the earliest dates
following such allocation, unless otherwise provided from time to time by
resolution adopted by the Board of Directors.
6. Quorum; Action at Meeting. A majority of the directors at any time in
office shall constitute a quorum for the transaction of business. In the event
one or more of the directors shall be disqualified to vote at any meeting, then
the required quorum shall be reduced by one for each director so disqualified,
provided that in no case shall less than one-third (1/3) of the number of
directors fixed pursuant to Section 2 above constitute a quorum. If at any
meeting of the Board of Directors there shall be less than such a quorum, a
majority of those present may adjourn the meeting from time to time. Every act
or decision done or made by a majority of the directors present at a meeting
duly held at which a quorum is present shall be regarded as the act of the Board
of Directors unless a greater number is required by law, by the Certificate of
Incorporation or these By-Laws.
7. Vacancies. Any vacancy in the Board of Directors, however occurring,
including a vacancy resulting from an enlargement of the Board, shall be filled
only by vote of a majority of the directors then in office, although less than a
quorum, or by a sole remaining director. A director elected to fill a vacancy
shall be elected to hold office until the next election of the class for which
such director shall have been chosen, subject to the election and qualification
of his successor and to his earlier death, resignation or removal.
5
<PAGE>
8. Resignation. Any director may resign by delivering his written
resignation to the corporation at its principal office or to the Chairman of the
Board or Secretary. Such resignation shall be effective upon receipt unless it
is specified to be effective at some other time or upon the happening of some
other event.
9. Regular Meetings. Regular meetings of the Board of Directors may be held
without notice at such time and place, either within or without the State of
Delaware, as shall be determined from time to time by the Board of Directors;
provided that any director who is absent when such a determination is made shall
be given notice of the determination. A regular meeting of the Board of
Directors may be held without notice immediately after and at the same place as
the annual meeting of stockholders.
10. Special Meetings. Special meetings of the Board of Directors may be
held at any time and place, within or without the State of Delaware, designated
in a call by the Chairman of the Board, President, two or more directors, or by
one director in the event that there is only a single director in office.
11. Notice of Special Meetings. Notice of any special meeting of directors
shall be given to each director by the Secretary or by the officer or one of the
directors calling the meeting. Notice shall be duly given to each director (i)
by giving notice to such director in person or by telephone at least 24 hours in
advance of the meeting, (ii) by sending a telegram, telecopy or telex,
electronic mail or delivering written notice by hand, to his last known business
or home address at least 24 hours in advance of the meeting, or (iii) by mailing
written notice to his last known business or home address at least 72 hours in
advance of the meeting. A notice or waiver of notice of a meeting of the Board
of Directors need not specify the purposes of the meeting.
12. Meetings by Telephone Conference Calls. Directors or any members of any
committee designated by the directors may participate in a meeting of the Board
of Directors or such committee by means of conference telephone, video
conference or similar communications equipment by means of which all persons
participating in the meeting can hear each other, and participation by such
means shall constitute presence in person at such meeting.
13. Action by Consent. Any action required or permitted to be taken at any
meeting of the Board of Directors or of any committee of the Board of Directors
may be taken without a meeting, if all members of the Board or committee, as the
case may be, consent to the action in writing, and the written consents are
filed with the minutes of proceedings of the Board or committee.
14. Committees. The Board of Directors may designate one or more
committees, each committee to consist of one or more of the directors of the
corporation. The Board may designate one or more directors as alternate members
of any committee, who may replace any absent or disqualified member at any
meeting of the committee. In the absence or disqualification of a member of a
committee, the member or members of the committee present at any meeting and not
disqualified from voting, whether or not he or they constitute a quorum, may
unanimously appoint another member of the Board of Directors to act at the
meeting in the place of any such absent or disqualified member. Any such
committee, to the extent provided in
6
<PAGE>
the resolution of the Board of Directors and subject to the provisions of the
General Corporation Law of the State of Delaware, shall have and may exercise
all the powers and authority of the Board of Directors in the management of the
business and affairs of the corporation and may authorize the seal of the
corporation to be affixed to all papers which may require it. Each such
committee shall keep minutes and make such reports as the Board of Directors may
from time to time request. Except as the Board of Directors may otherwise
determine, any committee may make rules for the conduct of its business, but
unless otherwise provided by the directors or in such rules, its business shall
be conducted as nearly as possible in the same manner as is provided in these
By-Laws for the Board of Directors.
15. Compensation of Directors. Directors may be paid such compensation for
their services and such reimbursement for expenses of attendance at meetings as
the Board of Directors may from time to time determine. No such payment shall
preclude any director from serving the corporation or any of its parent or
subsidiary corporations in any other capacity and receiving compensation for
such service.
ARTICLE III. -- Officers
------------------------
1. Enumeration. The officers of the corporation shall consist of a
President, a Secretary, a Treasurer and such other officers with such other
titles as the Board of Directors shall determine, including a Chairman of the
Board, a Vice Chairman of the Board, and one or more Vice Presidents, Assistant
Treasurers, and Assistant Secretaries. The Board of Directors may appoint such
other officers as it may deem appropriate.
2. Election. The President, Treasurer and Secretary shall be elected
annually by the Board of Directors at its first meeting following the annual
meeting of stockholders. Other officers may be appointed by the Board of
Directors at such meeting or at any other meeting.
3. Qualification. No officer need be a stockholder. Any two or more offices
may be held by the same person.
4. Tenure. Except as otherwise provided by law, by the Certificate of
Incorporation or by these By-Laws, each officer shall hold office until his
successor is elected and qualified, unless a different term is specified in the
vote choosing or appointing him, or until his earlier death, resignation or
removal.
5. Resignation and Removal. Any officer may resign by delivering his or her
written resignation to the corporation at its principal office or to the
Chairman of the Board, President or Secretary. Such resignation shall be
effective upon receipt unless it is specified to be effective at some other time
or upon the happening of some other event.
Any officer may be removed at any time, with or without cause, by vote of a
majority of the entire number of directors then in office.
Except as the Board of Directors may otherwise determine, no officer who
resigns or is removed shall have any right to any compensation as an officer for
any period following his resignation or removal, or any right to damages on
account of such removal, whether his
7
<PAGE>
compensation be by the month or by the year or otherwise, unless such
compensation is expressly provided in a duly authorized written agreement with
the corporation.
6. Vacancies. The Board of Directors may fill any vacancy occurring in any
office for any reason and may, in its discretion, leave unfilled for such period
as it may determine any offices other than those of President, Treasurer and
Secretary. Each such successor shall hold office for the unexpired term of his
predecessor and until his successor is elected and qualified, or until his
earlier death, resignation or removal.
7. Chairman of the Board and Vice Chairman of the Board. The Board of
Directors may appoint a Chairman of the Board and may designate the Chairman of
the Board as Chief Executive Officer. If the Board of Directors appoints a
Chairman of the Board, he shall perform such duties and possess such powers as
are assigned to him by the Board of Directors. Unless otherwise provided by the
Board of Directors, he shall preside at all meetings of the stockholders, and if
he is a director, at all meetings of the Board of Directors. If the Board of
Directors appoints a Vice Chairman of the Board, he shall, in the absence or
disability of the Chairman of the Board, perform the duties and exercise the
powers of the Chairman of the Board and shall perform such other duties and
possess such other powers as may from time to time be vested in him or her by
the Board of Directors. The person designated as the Chief Executive Officer of
the Company shall, subject to the direction of the Board of Directors, have
general charge and supervision of the business of the corporation.
8. President. Unless the Board of Directors has designated the Chairman of
the Board or another officer as Chief Executive Officer, the President shall be
the Chief Executive Officer of the corporation. The President shall perform such
other duties and shall have such other powers as the Chief Executive Officer or
the Board of Directors may from time to time prescribe.
9. Vice Presidents. Any Vice President shall perform such duties and
possess such powers as the Board of Directors or the Chief Executive Officer may
from time to time prescribe. In the event of the absence, inability or refusal
to act of the Chief Executive Officer, then, in the order determined by the
Board of Directors, the President (if he is not the Chief Executive Officer) and
the Vice President (or if there shall be more than one, the Vice Presidents)
shall perform the duties of the Chief Executive Officer and when so performing
shall have all the powers of and be subject to all the restrictions upon the
Chief Executive Officer. The Board of Directors may assign to any Vice President
the title of Executive Vice President, Senior Vice President or any other title
selected by the Board of Directors.
10. Secretary and Assistant Secretaries. The Secretary shall perform such
duties and shall have such powers as the Board of Directors or the Chief
Executive Officer may from time to time prescribe. In addition, the Secretary
shall perform such duties and have such powers as are incident to the office of
the secretary, including without limitation the duty and power to give notices
of all meetings of stockholders and special meetings of the Board of Directors,
to attend all meetings of stockholders and the Board of Directors and keep a
record of the proceedings, to maintain a stock ledger and prepare lists of
stockholders and their addresses as required, to be custodian of corporate
records and the corporate seal and to affix and attest to the same on documents.
8
<PAGE>
Any Assistant Secretary shall perform such duties and possess such powers
as the Board of Directors, the Chief Executive Officer or the Secretary may from
time to time prescribe. In the event of the absence, inability or refusal to
act of the Secretary, the Assistant Secretary (or if there shall be more than
one, the Assistant Secretaries in the order determined by the Board of
Directors) shall perform the duties and exercise the powers of the Secretary.
In the absence of the Secretary or any Assistant Secretary at any meeting
of stockholders or directors, the person presiding at the meeting shall
designate a temporary secretary to keep a record of the meeting.
11. Treasurer and Assistant Treasurers. The Treasurer shall perform such
duties and shall have such powers as may from time to time be assigned to him or
her by the Board of Directors or the Chief Executive Officer. In addition, the
Treasurer shall perform such duties and have such powers as are incident to the
office of treasurer, including without limitation the duty and power to keep and
be responsible for all funds and securities of the corporation, to deposit funds
of the corporation in depositories selected in accordance with these By-Laws, to
disburse such funds as ordered by the Board of Directors, to make proper
accounts of such funds, and to render as required by the Board of Directors
statements of all such transactions and of the financial condition of the
corporation.
The Assistant Treasurers shall perform such duties and possess such powers
as the Board of Directors, the Chief Executive Officer or the Treasurer may from
time to time prescribe. In the event of the absence, inability or refusal to
act of the Treasurer, the Assistant Treasurer (or if there shall be more than
one, the Assistant Treasurers in the order determined by the Board of Directors)
shall perform the duties and exercise the powers of the Treasurer.
12. Salaries. Officers of the corporation shall be entitled to such
salaries, compensation or reimbursement as shall be fixed or allowed from time
to time by the Board of Directors.
ARTICLE IV. -- Capital Stock
----------------------------
1. Issuance of Stock. Unless otherwise voted by the stockholders and
subject to the provisions of the Certificate of Incorporation, the whole or any
part of any unissued balance of the authorized capital stock of the corporation
or the whole or any part of any unissued balance of the authorized capital stock
of the corporation held in its treasury may be issued, sold, transferred or
otherwise disposed of by vote of the Board of Directors in such manner, for such
consideration and on such terms as the Board of Directors may determine.
2. Certificates of Stock. Every holder of stock of the corporation shall be
entitled to have a certificate, in such form as may be prescribed by law and by
the Board of Directors, certifying the number and class of shares owned by him
or her in the corporation. Each such certificate shall be signed by, or in the
name of the corporation by, the Chairman or Vice Chairman, if any, of the Board
of Directors, or the President or a Vice President, and the Treasurer or any
Assistant Treasurer, or the Secretary or an Assistant Secretary of the
corporation. Any or all of the signatures on the certificate may be a facsimile.
9
<PAGE>
Each certificate for shares of stock which are subject to any restriction
on transfer pursuant to the Certificate of Incorporation, the By-Laws,
applicable securities laws or any agreement among any number of stockholders or
among such holders and the corporation shall have conspicuously noted on the
face or back of the certificate either the full text of the restriction or a
statement of the existence of such restriction.
3. Transfers. Except as otherwise established by rules and regulations
adopted by the Board of Directors, and subject to applicable law, shares of
stock may be transferred on the books of the corporation by the surrender to the
corporation or its transfer agent of the certificate representing such shares
properly endorsed or accompanied by a written assignment or power of attorney
properly executed, and with such proof of authority or the authenticity of
signature as the corporation or its transfer agent may reasonably require.
Except as may be otherwise required by law, by the Certificate of Incorporation
or by these By-Laws, the corporation shall be entitled to treat the record
holder of stock as shown on its books as the owner of such stock for all
purposes, including the payment of dividends and the right to vote with respect
to such stock, regardless of any transfer, pledge or other disposition of such
stock until the shares have been transferred on the books of the corporation in
accordance with the requirements of these By-Laws.
4. Lost, Stolen or Destroyed Certificates. The corporation may issue a new
certificate of stock in place of any previously issued certificate alleged to
have been lost, stolen, or destroyed, upon such terms and conditions as the
Board of Directors may prescribe, including the presentation of reasonable
evidence of such loss, theft or destruction and the giving of such indemnity as
the Board of Directors may require for the protection of the corporation or any
transfer agent or registrar.
5. Record Date. The Board of Directors may fix in advance a date as a
record date for the determination of the stockholders entitled to notice of or
to vote at any meeting of stockholders, or entitled to receive payment of any
dividend or other distribution or allotment of any rights in respect of any
change, conversion or exchange of stock, or for the purpose of any other lawful
action. Such record date shall not be more than 60 nor less than 10 days before
the date of such meeting, nor more than 60 days prior to any other action to
which such record date relates.
If no record date is fixed, the record date for determining stockholders
entitled to notice of or to vote at a meeting of stockholders shall be at the
close of business on the day before the day on which notice is given, or, if
notice is waived, at the close of business on the day before the day on which
the meeting is held. The record date for determining stockholders for any other
purpose shall be at the close of business on the day on which the Board of
Directors adopts the resolution relating to such purpose.
A determination of stockholders of record entitled to notice of or to vote
at a meeting of stockholders shall apply to any adjournment of the meeting;
provided, however, that the Board of Directors may fix a new record date for the
adjourned meeting.
10
<PAGE>
ARTICLE V. -- General Provisions
--------------------------------
1. Fiscal Year. Except as from time to time otherwise designated by the
Board of Directors, the fiscal year of the corporation shall begin on the first
day of October of each year and end on the last day of September of each year.
2. Corporate Seal. The corporate seal shall be in such form as shall be
approved by the Board of Directors.
3. Waiver of Notice. Whenever any notice whatsoever is required to be given
by law, by the Certificate of Incorporation or by these By-Laws, a waiver of
such notice either in writing signed by the person entitled to such notice or
such person's duly authorized attorney, or by telecopy or any other available
method, whether before, at or after the time stated in such waiver, or the
appearance of such person or persons at such meeting in person or by proxy,
shall be deemed equivalent to such notice.
4. Voting of Securities. Except as the directors may otherwise designate,
the Chairman of the Board or Treasurer may waive notice of, and act as, or
appoint any person or persons to act as, proxy or attorney-in-fact for this
corporation (with or without power of substitution) at any meeting of
stockholders or shareholders of any other corporation or organization, the
securities of which may be held by this corporation.
5. Evidence of Authority. A certificate by the Secretary, or an Assistant
Secretary, or a temporary Secretary, as to any action taken by the stockholders,
directors, a committee or any officer or representative of the corporation shall
as to all persons who rely on the certificate in good faith be conclusive
evidence of such action.
6. Certificate of Incorporation. All references in these By-Laws to the
Certificate of Incorporation shall be deemed to refer to the Second Amended and
Restated Certificate of Incorporation of the corporation, as amended and in
effect from time to time.
7. Transactions with Interested Parties. No contract or transaction between
the corporation and one or more of the directors or officers, or between the
corporation and any other corporation, partnership, association, or other
organization in which one or more of the directors or officers are directors or
officers, or have a financial interest, shall be void or voidable solely for
this reason, or solely because the director or officer is present at or
participates in the meeting of the Board of Directors or a committee of the
Board of Directors which authorizes the contract or transaction or solely
because his or their votes are counted for such purpose, if:
a. The material facts as to his relationship or interest and as to the
contract or transaction are disclosed or are known to the Board of
Directors or the committee, and the Board or committee in good faith
authorizes the contract or transaction by the affirmative votes of a
majority of the disinterested directors, even though the disinterested
directors be less than a quorum;
b. The material facts as to his relationship or interest and as to the
contract or transaction are disclosed or are known to the stockholders
entitled to vote thereon, and
11
<PAGE>
the contract or transaction is specifically approved in good faith
by vote of the stockholders; or
c. The contract or transaction is fair as to the corporation as of the time
it is authorized, approved or ratified, by the Board of Directors, a
committee of the Board of Directors, or the stockholders.
Common or interested directors may be counted in determining the presence
of a quorum at a meeting of the Board of Directors or of a committee which
authorizes the contract or transaction.
8. Severability. Any determination that any provision of these By-Laws is
for any reason inapplicable, illegal or ineffective shall not affect or
invalidate any other provision of these By-Laws.
9. Pronouns. All pronouns used in these By-Laws shall be deemed to refer to
the masculine, feminine or neuter, singular or plural, as the identity of the
person or persons may require.
ARTICLE VI. -- Amendments
-------------------------
1. By the Board of Directors. These By-Laws may be altered, amended or
repealed or new by-laws may be adopted by the affirmative vote of a majority of
the directors present at any regular or special meeting of the Board of
Directors at which a quorum is present.
2. By the Stockholders. Subject to the following paragraph, these By-Laws
may be altered, amended or repealed or new by-laws may be adopted by the
affirmative vote of the holders of a majority of the shares of the capital stock
of the corporation issued and outstanding and entitled to vote at any regular or
special meeting of stockholders, provided notice of such alteration, amendment,
repeal or adoption of new by-laws shall have been stated in the notice of such
regular or special meeting.
3. Certain Provisions. Notwithstanding any other provision of law, the
Certificate of Incorporation or these By-Laws (including the preceding
paragraph), and notwithstanding the fact that a lesser percentage may be
specified by law, the affirmative vote of the holders of at least seventy-five
percent (75%) of the votes which all the stockholders would be entitled to cast
in any annual election of directors or class of directors shall be required to
amend or repeal, or to adopt any provisions inconsistent with, this Article VI
or Article II of these By-Laws.
12
<PAGE>
Exhibit 3.5
CERTIFICATE OF AMENDMENT
OF
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
NETWORK ENGINES, INC.
Pursuant to
the General Corporation Law of
the State of Delaware
---------------------
Network Engines, Inc. (hereinafter called the "Corporation"), a corporation
organized and existing under and by virtue of the General Corporation Law of the
State of Delaware, does hereby certify as follows:
At a meeting of the Board of Directors of the Corporation on March 16,
2000, resolutions were duly adopted, pursuant to the General Corporation Law of
the State of Delaware, setting forth an amendment to the Certificate of
Incorporation of the Corporation and declaring said amendment to be advisable.
The stockholders of the Corporation duly approved said proposed amendment by
written consent in accordance with Sections 228 and 242 of the General
Corporation Law of the State of Delaware. The resolution setting forth the
amendment is as follows:
RESOLVED: That the first paragraph of Article FOURTH of the Amended and
Restated Certificate of Incorporation of the Corporation be and
hereby is deleted and is replaced in its entirety with the
following:
"FOURTH:
The authorized capital stock of the Corporation consists of:
60,000,000 shares of Common Stock,
$0.01 par value per share ("Common Stock");
------------
185,250 shares of Series A Convertible Preferred
Stock, $0.01 par value per share ("Series A
--------
Preferred Stock");
---------------
357,142 shares of Series B Convertible Preferred Stock,
$0.01 par value per share ("Series B Preferred Stock");
------------------------
and
<PAGE>
1,123,549 shares of Series C Convertible Participating Preferred
Stock, $0.01 par value per share ("Series C Preferred
------------------
Stock").
-----
3,581,553 shares of Series D Convertible Participating Preferred
Stock, $0.01 par value per share ("Series D Preferred
------------------
Stock")."
-----
IN WITNESS WHEREOF, the Corporation has caused this Certificate of
Amendment to be signed by Lawrence A. Genovesi, its President this day of
-----
, 2000.
- -----------------
NETWORK ENGINES, INC.
-------------------------------
Lawrence A. Genovesi, President
2
<PAGE>
Exhibit 4.1
NEI-
[LOGO]
NETWORK ENGINES, INC.
INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE
COMMON STOCK
THIS CERTIFICATE IS TRANSFERABLE CUSIP 64121A 10 7
IN BOSTON, MA OR NEW YORK, NY SEE REVERSE FOR
CERTAIN DEFINITIONS
THIS CERTIFIES THAT _________________________________________________________
is the owner of _____________________________________________________________
FULLY PAID AND NON-ASSESSABLE SHARES OF COMMON STOCK OF THE PAR VALUE OF ONE
CENT ($.01) EACH OF
NETWORK ENGINES, INC.
(hereinafter called the "Corporation") transferable upon the books of the
Corporation by the holder hereof in person or by duly authorized attorney upon
surrender of this Certificate properly endorsed. This Certificate and the
shares represented hereby are issued and shall be subject to all the provisions
of the Second Amended and Restated Certificate of Incorporation and Second
Amended and Restated By-Laws of the Corporation as from time to time amended
(copied of which are on file with the Corporation) to all of which the holder,
by acceptance hereof, assents. This Certificate is not valid unless
countersigned and registered by the Transfer Agent and Registrar.
IN WITNESS WHEREOF, the Corporation has caused this Certificate to be
signed by the facsimile signatures of its duly authorized officers and its
facsimile corporate seal to be hereunto affixed.
Dated:__________ COUNTERSIGNED AND REGISTERED:
EQUISERVE TRUST COMPANY, N.A.
TRANSFER AGENT AND REGISTRAR
BY_______________________________
AUTHORIZED SIGNATURE
/s/ Douglas G. Bryant /s/ Lawrence Genovesi
VICE PRESIDENT, SECRETARY CHAIRMAN, PRESIDENT AND
AND TREASURER CHIEF EXECUTIVE OFFICER
[CORPORATE SEAL]
<PAGE>
NETWORK ENGINES, INC.
The Corporation is authorized to issue more than one class of stock.
A statement of the powers, designations, preferences, and the relative
participating, optional, or other rights of each class and series of stock and
the qualifications, limitations or restrictions thereon will be provided without
charge to each stockholder upon request to the Corporation.
The following abbreviations, when used in the inscription on the face of
this Certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
<TABLE>
<CAPTION>
TEN COM - as tenants in common UNIF GIFT MIN ACT - ______Custodian_______
TEN ENT - as tenants by the entireties (Cust) (Minor)
JT TEN - as joint tenants with right under Uniform Gifts to Minors
of survivorship and not as Act________________
tenants in common (State)
<S> <C>
</TABLE>
Additional abbreviations may also be used though not in the above list.
For value received, _____________________ hereby sell, assign and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
INDENTIFYING NUMBER OF ASSIGNEE
______________________________
_____________________________________________________________________________
PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE
_____________________________________________________________________________
_____________________________________________________________________________
_____________________________________________________________________________
of the capital stock represented by the within Certificate, and do hereby
irrevocably constitute and appoint
_____________________________________________________________________________
to transfer the said stock on the books of the within-named Corporation with
full power of substitution in the premises.
Dated,__________________ ________________________________________________
NOTICE: The signature to this assignment must
correspond with the name as written upon the face
of the Certificate, in every particular, without
alteration or enlargement, or any change
whatsoever.
SIGNATURE(S) GUARANTEED:_____________________________________________________
THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN ELIGIBLE
LOAN ASSOCIATIONS AND CREDIT UNIONS WITH MEMBERSHIP IN
AN APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM),
PURSUANT TO S.E.C. RULE 17Ad-15.
<TABLE>
<S> <C>
AMERICAN BANK NOTE COMPANY PRODUCTION COORDINATOR:
55TH and SANSOM STREET BELINDA BECK: 215-764-8619
PHILADELPHIA, PA 19139 PROOF OF APRIL 24, 2000
(215) 764-8600 NETWORK ENGINES, INC.
H 66191 BK
- --------------------------------------------------------------------------------------------------------------
SALES: DAN BURNS: 617-786-7600 OPERATOR: JW
- --------------------------------------------------------------------------------------------------------------
/HOME16/LIVE JOBS/N/NETWORK 66191 NEW
- --------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
Exhibit 10.4
NETWORK ENGINES, INC.
2000 EMPLOYEE STOCK PURCHASE PLAN
The purpose of this Plan is to provide eligible employees of Network
Engines, Inc. (the "Company") and certain of its subsidiaries with opportunities
to purchase shares of the Company's common stock, $.01 par value (the "Common
Stock"). Seven Hundred and Fifty Thousand (750,000) shares of Common Stock in
the aggregate have been approved for this purpose. This Plan is intended to
qualify as an "employee stock purchase plan" as defined in Section 423 of the
Internal Revenue Code of 1986, as amended (the "Code"), and the regulations
promulgated thereunder, and shall be interpreted consistent therewith.
1. Administration. The Plan will be administered by the Company's Board of
--------------
Directors (the "Board") or by a Committee appointed by the Board (the
"Committee"). The Board or the Committee has authority to make rules and
regulations for the administration of the Plan and its interpretation and
decisions with regard thereto shall be final and conclusive.
2. Eligibility. All employees of the Company, including Directors who are
-----------
employees, and all employees of any subsidiary of the Company (as defined in
Section 424(f) of the Code) designated by the Board or the Committee from time
to time (a "Designated Subsidiary"), are eligible to participate in any one or
more of the offerings of Options (as defined in Section 9) to purchase Common
Stock under the Plan provided that:
(a) they are customarily employed by the Company or a Designated
Subsidiary for more than twenty (20) hours a week and for more than five
(5) months in a calendar year; and
(b) they are employees of the Company or a Designated Subsidiary on
the first day of the applicable Plan Period (as defined below).
No employee may be granted an option hereunder if such employee,
immediately after the option is granted, owns five percent (5%) or more of the
total combined voting power or value of the stock of the Company or any
subsidiary. For purposes of the preceding sentence, the attribution rules of
Section 424(d) of the Code shall apply in determining the stock ownership of an
employee, and all stock which the employee has a contractual right to purchase
shall be treated as stock owned by the employee.
3. Offerings. The Company will make one or more offerings ("Offerings") to
---------
employees to purchase stock under this Plan. Offerings will begin each November
15 and May 15, or the first business day thereafter (the "Offering Commencement
Dates"). Each Offering Commencement Date will begin a six (6) month period (a
"Plan Period") during which payroll deductions will be made and held for the
purchase of Common Stock at the end of the Plan Period. The Board or the
Committee may, at its discretion, choose a different Plan Period of twelve (12)
months or less for subsequent Offerings. Notwithstanding anything to the
contrary, the first Plan Period shall begin on the first date the Company has
filed an effective registration statement on Form S-8 with the Securities and
Exchange Commission for purposes of registering
<PAGE>
under the Securities Act of 1933 all shares of the Common Stock issuable under
this Plan, and shall end on November 15, 2000.
4. Participation. An employee eligible on the Offering Commencement Date of
-------------
any Offering may participate in such Offering by completing and forwarding a
payroll deduction authorization form to the employee's appropriate payroll
office at least five (5) days prior to the applicable Offering Commencement
Date. The form will authorize a regular payroll deduction from the Compensation
received by the employee during the Plan Period. Unless an employee files a new
form or withdraws from the Plan, his deductions and purchases will continue at
the same rate for future Offerings under the Plan as long as the Plan remains in
effect. The term "Compensation" means the amount of money reportable on the
employee's Federal Income Tax Withholding Statement, excluding allowances and
reimbursements for expenses such as relocation allowances for travel expenses,
income or gains on the exercise of Company stock options or stock appreciation
rights, and similar items, whether or not shown on the employee's Federal Income
Tax Withholding Statement, but including, in the case of salespersons, sales
commissions to the extent determined by the Board or the Committee.
5. Deductions. The Company will maintain payroll deduction accounts for all
----------
participating employees. With respect to any Offering made under this Plan, an
employee may authorize a payroll deduction in any dollar amount up to a maximum
of fifteen percent (15%) of the Compensation he or she receives during the Plan
Period or such shorter period during which deductions from payroll are made.
Payroll deductions may be at the rate of up to fifteen percent (15%) in
increments of one percent (1%). The minimum payroll deduction is initially one
percent (1%) of Compensation and may be revised from time to time by the Board
or the Committee.
No employee may be granted an Option (as defined in Section 9) which
permits his rights to purchase Common Stock under this Plan and any other
employee stock purchase plan (as defined in Section 423(b) of the Code) of the
Company and its subsidiaries, to accrue at a rate which exceeds $25,000 of the
fair market value of such Common Stock (determined at the Offering Commencement
Date of the Plan Period) for each calendar year in which the Option is
outstanding at any time.
6. Deduction Changes. An employee may decrease or discontinue his payroll
-----------------
deduction once during any Plan Period, by filing a new payroll deduction
authorization form. However, an employee may not increase his payroll deduction
during a Plan Period. If an employee elects to discontinue his payroll
deductions during a Plan Period, but does not elect to withdraw his funds
pursuant to Section 8 hereof, funds deducted prior to his election to
discontinue will be applied to the purchase of Common Stock on the Exercise Date
(as defined below).
-2-
<PAGE>
7. Interest. Interest will not be paid on any employee accounts, except to
--------
the extent that the Board or the Committee, in its sole discretion, elects to
credit employee accounts with interest at such per annum rate as it may from
time to time determine.
8. Withdrawal of Funds. An employee may at any time prior to the close of
-------------------
business on the last business day in a Plan Period and for any reason
permanently draw out the balance accumulated in the employee's account and
thereby withdraw from participation in an Offering. Partial withdrawals are not
permitted. The employee may not begin participation again during the remainder
of the Plan Period. The employee may participate in any subsequent Offering in
accordance with terms and conditions established by the Board or the Committee.
9. Purchase of Shares. On the Offering Commencement Date of each Plan
------------------
Period, the Company will grant to each eligible employee who is then a
participant in the Plan an option ("Option") to purchase on the last business
day of such Plan Period (the "Exercise Date"), at the Option Price hereinafter
provided for, the largest number of whole shares of Common Stock of the Company
as does not exceed the number of shares determined by multiplying $2,083 by the
number of full months in the Offering Period and dividing the result by the
closing price (as defined below) on the Offering Commencement Date of such Plan
Period.
The purchase price for each share purchased will be eighty-five percent
(85%) of the closing price of the Common Stock on (i) the first business day of
such Plan Period or (ii) the Exercise Date, whichever closing price shall be
less. Such closing price shall be (a) the closing price on any national
securities exchange on which the Common Stock is listed, (b) the closing price
of the Common Stock on the Nasdaq National Market or (c) the average of the
closing bid and asked prices in the over-the-counter-market, whichever is
applicable, as published in The Wall Street Journal. If no sales of Common
-----------------------
Stock were made on such a day, the price of the Common Stock for purposes of
clauses (a) and (b) above shall be the reported price for the next preceding day
on which sales were made.
Each employee who continues to be a participant in the Plan on the Exercise
Date shall be deemed to have exercised his Option at the Option Price on such
date and shall be deemed to have purchased from the Company the number of full
shares of Common Stock reserved for the purpose of the Plan that his accumulated
payroll deductions on such date will pay for, but not in excess of the maximum
number determined in the manner set forth above.
Any balance remaining in an employee's payroll deduction account at the end
of a Plan Period will be automatically refunded to the employee, except that any
balance which is less than the purchase price of one share of Common Stock will
be carried forward into the employee's payroll deduction account for the
following Offering, unless the employee elects not to participate in the
following Offering under the Plan, in which case the balance in the employee's
account shall be refunded.
10. Issuance of Certificates. Certificates representing shares of Common
------------------------
Stock purchased under the Plan may be issued only in the name of the employee,
in the name of the employee and another person of legal age as joint tenants
with rights of survivorship, or (in the
-3-
<PAGE>
Company's sole discretion) in the name of a brokerage firm, bank or other
nominee holder designated by the employee. The Company may, in its sole
discretion and in compliance with applicable laws, authorize the use of book
entry registration of shares in lieu of issuing stock certificates.
11. Rights on Retirement, Death or Termination of Employment. In the event
--------------------------------------------------------
of a participating employee's termination of employment prior to the last
business day of a Plan Period, no payroll deduction shall be taken from any pay
due and owing to an employee and the balance in the employee's account shall be
paid to the employee or, in the event of the employee's death, (a) to a
beneficiary previously designated in a revocable notice signed by the employee
(with any spousal consent required under state law) or (b) in the absence of
such a designated beneficiary, to the executor or administrator of the
employee's estate or (c) if no such executor or administrator has been appointed
to the knowledge of the Company, to such other person(s) as the Company may, in
its discretion, designate. If, prior to the last business day of the Plan
Period, the Designated Subsidiary by which an employee is employed shall cease
to be a subsidiary of the Company, or if the employee is transferred to a
subsidiary of the Company that is not a Designated Subsidiary, the employee
shall be deemed to have terminated employment for the purposes of this Plan.
12. Optionees Not Stockholders. Neither the granting of an Option to an
--------------------------
employee nor the deductions from his pay shall constitute such employee a
stockholder of the shares of Common Stock covered by an Option under this Plan
until such shares have been purchased by and issued to him.
13. Rights Not Transferable. Rights under this Plan are not transferable by
-----------------------
a participating employee other than by will or the laws of descent and
distribution, and are exercisable during the employee's lifetime only by the
employee.
14. Application of Funds. All funds received or held by the Company under
--------------------
this Plan may be combined with other corporate funds and may be used for any
corporate purpose.
15. Adjustment in Case of Changes Affecting Common Stock. In the event of a
----------------------------------------------------
subdivision of outstanding shares of Common Stock, or the payment of a dividend
in Common Stock, the number of shares approved for this Plan, and the share
limitation set forth in Section 9, shall be increased proportionately, and such
other adjustment shall be made as may be deemed equitable by the Board or the
Committee. In the event of any other change affecting the Common Stock, such
adjustment shall be made as may be deemed equitable by the Board or the
Committee to give proper effect to such event.
16. Merger. If the Company shall at any time merge or consolidate with
------
another corporation and the holders of the capital stock of the Company
immediately prior to such merger or consolidation continue to hold at least 80%
by voting power of the capital stock of the surviving corporation ("Continuity
of Control"), the holder of each Option then outstanding will thereafter be
entitled to receive at the next Exercise Date upon the exercise of such Option
for each share as to which such Option shall be exercised the securities or
property which a holder of
-4-
<PAGE>
one share of the Common Stock was entitled to upon and at the time of such
merger or consolidation, and the Board or the Committee shall take such steps in
connection with such merger or consolidation as the Board or the Committee shall
deem necessary to assure that the provisions of Section 15 shall thereafter be
applicable, as nearly as reasonably may be, in relation to the said securities
or property as to which such holder of such Option might thereafter be entitled
to receive thereunder.
In the event of a merger or consolidation of the Company with or into
another corporation which does not involve Continuity of Control, or of a sale
of all or substantially all of the assets of the Company while unexercised
Options remain outstanding under the Plan, (a) subject to the provisions of
clauses (b) and (c), after the effective date of such transaction, each holder
of an outstanding Option shall be entitled, upon exercise of such Option, to
receive in lieu of shares of Common Stock, shares of such stock or other
securities as the holders of shares of Common Stock received pursuant to the
terms of such transaction; or (b) all outstanding Options may be cancelled by
the Board or the Committee as of a date prior to the effective date of any such
transaction and all payroll deductions shall be paid out to the participating
employees; or (c) all outstanding Options may be cancelled by the Board or the
Committee as of the effective date of any such transaction, provided that notice
of such cancellation shall be given to each holder of an Option, and each holder
of an Option shall have the right to exercise such Option in full based on
payroll deductions then credited to his account as of a date determined by the
Board or the Committee, which date shall not be less than ten (10) days
preceding the effective date of such transaction.
17. Amendment of the Plan. The Board may at any time, and from time to
---------------------
time, amend this Plan in any respect, except that (a) if the approval of any
such amendment by the shareholders of the Company is required by Section 423 of
the Code, such amendment shall not be effected without such approval, and (b) in
no event may any amendment be made which would cause the Plan to fail to comply
with Section 423 of the Code.
18. Insufficient Shares. In the event that the total number of shares of
-------------------
Common Stock specified in elections to be purchased under any Offering plus the
number of shares purchased under previous Offerings under this Plan exceeds the
maximum number of shares issuable under this Plan, the Board or the Committee
will allot the shares then available on a pro rata basis.
19. Termination of the Plan. This Plan may be terminated at any time by the
-----------------------
Board. Upon termination of this Plan all amounts in the accounts of
participating employees shall be promptly refunded.
20. Governmental Regulations. The Company's obligation to sell and deliver
------------------------
Common Stock under this Plan is subject to listing on a national stock exchange
or quotation on the Nasdaq National Market (to the extent the Common Stock is
then so listed or quoted) and the approval of all governmental authorities
required in connection with the authorization, issuance or sale of such stock.
-5-
<PAGE>
21. Governing Law. The Plan shall be governed by Delaware law except to the
-------------
extent that such law is preempted by federal law.
22. Issuance of Shares. Shares may be issued upon exercise of an Option
------------------
from authorized but unissued Common Stock, from shares held in the treasury of
the Company, or from any other proper source.
23. Notification upon Sale of Shares. Each employee agrees, by entering the
--------------------------------
Plan, to promptly give the Company notice of any disposition of shares purchased
under the Plan where such disposition occurs within two (2) years after the date
of grant of the Option pursuant to which such shares were purchased.
24. Effective Date and Approval of Shareholders. The Plan shall take effect
-------------------------------------------
on March 16, 2000 subject to approval by the shareholders of the Company as
required by Section 423 of the Code, which approval must occur within twelve
(12) months of the adoption of the Plan by the Board.
Adopted by the Board of Directors: March 16, 2000
Approved by the stockholders: _____________, 2000
-6-
<PAGE>
Exhibit 10.5
NETWORK ENGINES, INC.
2000 DIRECTOR STOCK OPTION PLAN
1. Purpose.
--------
The purpose of this 2000 Director Stock Option Plan (the "Plan") of Network
Engines, Inc. (the "Company") is to encourage ownership in the Company by non-
employee directors of the Company whose continued services are considered
essential to the Company's future progress and to provide them with a further
incentive to remain as directors of the Company.
2. Administration.
---------------
The Board of Directors (the "Board") shall supervise and administer the
Plan. All questions concerning interpretation of the Plan or any options
granted under it shall be resolved by the Board and such resolution shall be
final and binding upon all persons having an interest in the Plan. The Board
may, to the full extent permitted by or consistent with applicable laws or
regulations, delegate any or all of its powers under the Plan to a committee
appointed by the Board, and if a committee is so appointed, all references to
the Board in the Plan shall mean and relate to such committee.
3. Participation in the Plan.
--------------------------
Directors of the Company who are not employees of the Company or any
subsidiary of the Company ("non-employee directors") shall be eligible to
receive options under the Plan.
4. Stock Subject to the Plan.
--------------------------
(a) The maximum number of shares of the Company's Common Stock, par value
$.01 per share ("Common Stock"), which may be issued under the Plan shall be
500,000 shares, subject to adjustment as provided in Section 7.
(b) If any outstanding option under the Plan for any reason expires or is
terminated without having been exercised in full, the shares covered by the
unexercised portion of such option shall again become available for issuance
pursuant to the Plan.
(c) All options granted under the Plan shall be non-statutory options not
entitled to special tax treatment under Section 422 of the Internal Revenue Code
of 1986, as amended (the "Code").
(d) Shares issued under the Plan may consist in whole or in part of
authorized but unissued shares or treasury shares.
<PAGE>
5. Terms, Conditions and Form of Options.
--------------------------------------
Each option granted under the Plan shall be evidenced by a written
agreement in such form as the Board shall from time to time approve, which
agreements shall comply with and be subject to the following terms and
conditions:
(a) (i) Automatic Option Grant Dates. Each date of grant of an option
----------------------------
pursuant to this Section 5(a) is hereinafter referred to as an "Option Grant
Date." Options shall automatically be granted to all non-employee directors as
follows:
(x) each person who becomes a non-employee director after the
adoption of this Plan shall be granted an option to purchase 50,000 shares of
Common Stock on the date of his or her initial election to the Board; and
(y) each non-employee director shall be granted an option to purchase
15,000 shares of Common Stock on the date of each Annual Meeting of Stockholders
of the Company after the adoption of this Plan commencing with the Annual
Meeting of Stockholders to be held following the end of fiscal year 2000 to be
held in 2001 (other than a director who was initially elected to the Board at
any such Annual Meeting or, if previously elected, at any time after the prior
year's Annual Meeting of Stockholders), provided that he or she is serving as a
director immediately following the date of such Annual Meeting.
(ii) Periodic Grants of Options. Subject to execution by the non-
--------------------------
employee director of an appropriate option agreement, the Board may grant
additional options to purchase a number of shares to be determined by the Board
in recognition of services provided by a non-employee director in his or her
capacity as a director, provided that such grants are in compliance with the
requirements of Rule 16b-3, as promulgated under the Securities Exchange Act of
1934, as amended from time to time.
(b) Option Exercise Price. The option exercise price per share for each
---------------------
option granted under the Plan shall equal (i) the closing price on any national
securities exchange on which the Common Stock is listed, (ii) the closing price
of the Common Stock on the Nasdaq National Market or (iii) the average of the
closing bid and asked prices in the over-the-counter market, whichever is
applicable, as published in The Wall Street Journal, on the Option Grant Date.
-----------------------
If no sales of Common Stock were made on the Option Grant Date, the price of the
Common Stock for purposes of clauses (i) and (ii) above shall be the reported
price for the next preceding day on which sales were made.
(c) Transferability of Options. Except as the Board may otherwise determine
--------------------------
or provide in an option granted under the Plan, any option granted under the
Plan to an optionee shall not be transferable by the optionee other than by will
or the laws of descent and distribution or pursuant to a qualified domestic
relations order as defined by the Code or Title I of the Employee Retirement
Income Security Act, or the rules thereunder, and shall be exercisable during
the optionee's lifetime only by the optionee or the optionee's guardian or legal
representative. References to an optionee, to the extent relevant in the
context, shall include references to authorized transferees.
-2-
<PAGE>
(d) Vesting Period.
--------------
(i) General. Each option granted under the Plan pursuant to Section
-------
5(a)(i)(x) above shall become exercisable (vest) in four equal annual
installments beginning on the first anniversary of such Option Grant Date. Each
option granted under the Plan pursuant to Section 5(a)(i)(y) above shall become
exercisable in full upon the earlier of one year from the Option Grant Date or
the date immediately preceding the next Annual Meeting of Stockholders. No
further vesting shall occur with respect to an option granted pursuant to
Section 5(a)(i)(x) or 5(a)(i)(y) after the optionee ceases to be a non-employee
director of the Company. Each option granted under the Plan pursuant to Section
5(a)(ii) above shall become exercisable on such terms as shall be determined by
the Board and set forth in the option agreement with the respective optionee.
(ii) Acceleration Upon Acquisition Event. Notwithstanding the foregoing,
-----------------------------------
each outstanding option granted under the Plan shall immediately become
exercisable in full upon the occurrence of an Acquisition Event (as defined in
Section 8) with respect to the Company.
(iii) Right to Receive Restricted Stock. Notwithstanding the provisions
---------------------------------
of Section 5(d)(i) above, the Board shall have the authority to grant options
(including options granted pursuant to Section 5(a)(i) above) which are
immediately exercisable subject to the Company's right to repurchase any
unvested shares of stock acquired by the optionee on exercise of an option in
the event such optionee's service as a director terminates for any reason.
(e) Termination. Each option shall terminate, and may no longer be
-----------
exercised, on the earlier of (i) the date ten years after the Option Grant Date
of such option or (ii) the first anniversary of the date on which the optionee
ceases to serve as a director of the Company.
(f) Exercise Procedure. An option may be exercised only by written notice
------------------
to the Company at its principal office accompanied by (i) payment in cash or by
certified or bank check of the full consideration for the shares as to which
they are exercised, (ii) delivery of outstanding shares of Common Stock (which
have been outstanding for at least six months) having a fair market value on the
last business day preceding the date of exercise equal to the option exercise
price, or (iii) an irrevocable undertaking by a creditworthy broker to deliver
promptly to the Company sufficient funds to pay the exercise price or delivery
of irrevocable instructions to a creditworthy broker to deliver promptly to the
Company cash or a check sufficient to pay the exercise price.
(g) Exercise by Representative Following Death of Director. An optionee, by
------------------------------------------------------
written notice to the Company, may designate one or more persons (and from time
to time change such designation), including his or her legal representative,
who, by reason of the optionee's death, shall acquire the right to exercise all
or a portion of the option. If the person or persons so designated wish to
exercise any portion of the option, they must do so within the term of the
option as provided herein. Any exercise by a representative shall be subject to
the provisions of the Plan.
-3-
<PAGE>
6. Limitation of Rights.
---------------------
(a) No Right to Continue as a Director. Neither the Plan, nor the granting
----------------------------------
of an option nor any other action taken pursuant to the Plan, shall constitute
or be evidence of any agreement or understanding, express or implied, that the
Company will retain the optionee as a director for any period of time.
(b) No Stockholders' Rights for Options. An optionee shall have no rights
-----------------------------------
as a stockholder with respect to the shares covered by his or her option until
the date of the issuance to him or her of a stock certificate therefor, and no
adjustment will be made for dividends or other rights (except as provided in
Section 7) for which the record date is prior to the date such certificate is
issued.
(c) Compliance with Securities Laws. Each option shall be subject to the
-------------------------------
requirement that if, at any time, counsel to the Company shall determine that
the listing, registration or qualification of the shares subject to such option
upon any securities exchange or under any state or federal law, or the consent
or approval of any governmental or regulatory body, or the disclosure of non-
public information or the satisfaction of any other condition is necessary as a
condition of, or in connection with, the issuance or purchase of shares
thereunder, such option may not be exercised, in whole or in part, unless such
listing, registration, qualification, consent or approval, or satisfaction of
such condition shall have been effected or obtained on conditions acceptable to
the Board. Nothing herein shall be deemed to require the Company to apply for or
to obtain such listing, registration or qualification, or to satisfy such
condition.
7. Adjustment Provisions for Mergers, Recapitalizations and Related
----------------------------------------------------------------
Transactions.
-------------
If, through or as a result of any merger, consolidation, reorganization,
recapitalization, reclassification, stock dividend, stock split, reverse stock
split, or other similar transaction, (i) the outstanding shares of Common Stock
are exchanged for a different number or kind of securities of the Company or of
another entity, or (ii) additional shares or new or different shares or other
securities of the Company or of another entity are distributed with respect to
such shares of Common Stock, the Board shall make an appropriate and
proportionate adjustment in (w) the maximum number and kind of shares reserved
for issuance under the Plan, (x) the number and kind of shares or other
securities subject to then outstanding options under the Plan, (y) the price for
each share subject to any then outstanding options under the Plan (without
changing the aggregate purchase price for such options), and (z) the number and
kind of securities to be granted pursuant to Section 5(a)(i), to the end that
each option issued or to be issued shall be exercisable, for the same aggregate
exercise price, for such securities as such option holder would have held
immediately following such event if the option had been granted prior to such
event he had exercised such option immediately prior to such event. No
fractional shares will be issued under the Plan on account of any such
adjustments.
-4-
<PAGE>
8. Acquisition Event.
--------------------
For purposes of the Plan, an "Acquisition Event" shall be deemed to have
occurred only if any of the following events occurs: (i) 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; (ii) any sale of all
or substantially all of the assets of the Company; or (iii) the complete
liquidation of the Company.
9. Termination and Amendment of the Plan.
--------------------------------------
The Board may suspend or terminate the Plan or amend it in any respect
whatsoever.
10. Notice.
-------
Any written notice to the Company required by any of the provisions of the
Plan shall be addressed to the Treasurer of the Company and shall become
effective when it is received.
11. Governing Law.
--------------
The Plan and all determinations made and actions taken pursuant hereto
shall be governed by the internal laws of the State of Delaware (without regard
to any applicable conflicts of laws or principles).
12. Effective Date.
-----------------
The Plan shall take effect upon the closing of the Company's initial public
offering of Common Stock.
Adopted by the Board of Directors on
March 16, 2000.
Approved by the Stockholders on
______________, 2000.
-5-
<PAGE>
Exhibit 10.12
ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement (the "Agreement") is entered into as of April
13, 2000 ("Effective Date") by and between Copernicus Systems, Inc. (the
"Buyer") and Network Engines, Inc. (the "Seller").
WHEREAS, the Seller desires to sell to the Buyer, and the Buyer desires to
purchase, all of Seller's assets relating to the Seller's P6000 and P6000EXP
product lines, as more fully described in Exhibit A hereto.
NOW, THEREFORE, in consideration of the mutual promises and agreements set
forth herein, the Buyer and the Seller agree as follows:
1. THE ASSETS. Subject to the terms and conditions set forth herein, the
Seller hereby sells, assigns, transfers and delivers to the Buyer, and the Buyer
hereby purchases, acquires and takes assignment and delivery of, free and clear
of all liens and Encumbrances (as defined herein), all right, title and
ownership of the following assets of the Seller relating to Seller's P6000 and
P6000EXP Systems (collectively, the "Assets"):
(a) those tangible assets relating to Seller's manufacture, testing, packaging
and fulfillment of P6000 and P6000EXP Systems which are listed on Schedule 1(a)
hereto (the "Tangible Assets"); and
(b) all Seller's inventory of parts, subassemblies, components, finished goods
and other inventory of P6000 and P6000EXP Systems, which inventory is listed on
Schedule 1(b) hereto (the "Inventory"); and
(c) those computer software programs of Seller known as P6000 Cluster Director
and P6000 Cluster Monitor, as more fully described on Schedule 1(c) hereto (the
"Software"), including all object code and source code therein, and all media of
Seller on which such computer programs reside, but excluding any and all third
party software that may work with, depend on or support the Software (which
excluded third party software includes, without limitation, all software
provided by Microsoft and InterVu); and
(d) access to a copy of Seller's records relating to the Inventory and
Tangible Assets, including customer lists, supplier lists, bills of materials,
production schedules, shipping manifests, customs forms and similar records (the
"Records"); and
(e) (i) all patent, copyright and trade secret rights of Seller in and to the
design and layout of the P6000 and P6000EXP Systems and the Software and (ii)
all trademark rights in the marks listed on Schedule 1(d) and all goodwill
therein (collectively, the "Intellectual Property").
Buyer shall obtain no right or interest in or to any other assets of Seller,
whether or not related, directly or indirectly, to the Assets. In particular,
Buyer shall obtain no right or interest in or to any accounts receivable, cash,
employee benefit plans, leasehold interests, real estate or software or
technology other than the Software.
<PAGE>
2. PURCHASE PRICE.
(a) In consideration hereof, Buyer will pay to the Seller:
(i) $1.00 upon execution of this Agreement;
(ii) 10% of sales of complete P6000 and P6000EXP Systems (or
any successor or derivative system using a substantial portion of the
intellectual property or software sold to Buyer hereunder
("Derivatives")) (the "Systems") manufactured from the Inventory;
(iii) 10% of the Net Revenue for sales of upgrades or spare
parts from the Inventory;
(iv) 2% of the Net Revenue for sales of upgrades or spare
parts relating to the System or Derivative from inventory that is
purchased by Buyer not included in the Inventory;
(v) $242 per System or Derivative sold to The Concorde Group;
(vi) $300 per any System or Derivative sold to any other third party
included in Section 2(a)(ii) above; provided however, that this shall
not include new products, systems or designs created by Buyer or
licensed by Buyer from any third party; and
(vii) the amount set forth in Section 4.
"Net Revenue" per System shall be the amount actually received by the
Buyer for each System, less refunds.
(b) If the Buyer transfers its ownership rights to, or exclusively
licenses or leases, all or substantially all of the Tangible Assets or
Software before the date twelve (12) months after the Effective Date,
the Buyer will pay Seller 50% of the net proceeds of such sale ("Net
Proceeds"). If such sale occurs after the date twelve months from the
Effective Date, but before the date two years from the Effective Date,
the Buyer will pay the Seller 25% of such Net Proceeds. If such sale
occurs after the date two years from the Effective Date, Buyer will be
entitled to 100% of such Net Proceeds.
3. ASSUMPTION OF LIABILITIES. Buyer hereby assumes the following liabilities
and obligations of the Seller (the "Assumed Liabilities"):
(a) except as provided in Section 5 below, all warranty, support, repair,
replacement, maintenance and related liabilities and obligations of Seller with
respect to P6000 and P6000EXP (or predecessor) Systems sold or distributed by or
for Seller or Buyer, either prior to or after the Effective Date;
<PAGE>
(b) all other liabilities and obligations relating to P6000 and P6000EXP (or
predecessor) Systems sold or distributed by or for Seller or Buyer, either prior
to or after the Effective Date, whether for alleged defects, failures, injury or
other damage, and whether sounding in negligence, warranty, strict liability or
any other cause of action;
(c) all liabilities and obligations of Seller under the Contracts, including
all liability associated with the failure of Seller to obtain necessary consents
to assignment of the Contracts to Buyer; and
(d) any liability with respect to the bulk sales laws of any state.
4. LICENSE AND ROYALTY RATIFICATION. Seller hereby acknowledges and agrees
that prior to the signing of this Agreement the Buyer had a limited exclusive
license to make, sell and use P6000 and P6000EXP Systems, subject to the
obligation to pay the royalty set forth in Section 2 above. Buyer represents
and warrants to Seller that royalties in the aggregate amount of $4,010.44 are
accrued to date based on Buyer's activities prior to the Effective Date, and
Buyer shall remit such amount to Seller concurrently herewith.
5. SUPPORT.
(a) Buyer shall provide customer support, without charge, to existing
Seller customers of the System for Systems currently under warranty, for the
duration of their current warranty periods. To the extent that Buyer must obtain
any hardware from any third party to perform such warranty support, Seller shall
reimburse Buyer for its reasonable, documented out-of-pocket costs for such
parts.
(b) Notwithstanding Buyer's obligation to provide warranty support
hereunder, Seller shall have the right, for customers designated by Seller, to
continue to provide first-line (initial response) support with respect to P6000
and P6000EXP Systems sold or distributed by Seller prior to the Effective Date.
In such cases, Buyer shall provide second line (technical help) support to
Seller's support personnel or to customers referred to Buyer by Seller's support
personnel at no charge to Seller.
6. NO OTHER TECHNOLOGY. Buyer waives any right, title and interest in and to
any of Seller's other technologies, except as set forth herein.
7. LIABILITY
(a) EXCEPT AS OTHERWISE EXPRESSLY SET FORTH IN THIS SECTION 7, SELLER SELLS
THE ASSETS TO BUYER HEREUNDER "AS IS", "WHERE IS", ON A QUITCLAIM BASIS, WITHOUT
WARRANTY OR CONDITION OF ANY KIND, EXPRESS OR IMPLIED, WRITTEN OR ORAL; AND
SELLER HEREBY DISCLAIMS ALL EXPRESS AND IMPLIED WARRANTIES AND CONDITIONS,
INCLUDING, WITHOUT LIMIATION, THE IMPLIED WARRANTIES OF MERCHANTABILITY, FITNESS
FOR A PARTICULAR PURPOSE, TITLE AND NONINFRINGEMENT.
(b) Buyer hereby agrees to defend, indemnify and hold Seller and its
officers, directors, shareholders, affiliates, partners and agents (the
"Indemnitees") harmless from and
<PAGE>
against any and all claims, damages, liabilities, losses and expenses incurred
in connection with the Assumed Liabilities. The Indemnitees shall be entitled,
at their expense, to be represented by counsel of their choosing in any action
described in this Section 7(b).
(c) Under no circumstances will Seller be liable to Buyer for any cause
directly or indirectly relating to the Assets or the transfer thereof under this
Agreement for any consequential, incidental, indirect, exemplary or punitive
damages, no matter what the cause, even if Seller has been made aware of the
possibility of such damages.
(d) Under no circumstances will Seller be liable to Buyer for direct damages
for any cause directly or indirectly relating to the Assets or the transfer
thereof under this Agreement in an amount greater than the total amount that
Buyer has paid to Seller under this Agreement during the preceding 12-month
period.
(e) Organization of the Seller; Authority. The Seller is a corporation duly
-------------------------------------
organized, validly existing and in good standing under the laws of the State of
Delaware. The Seller has all requisite power and authority to own and hold the
Assets owned or held by it. The Seller has all requisite power, authority and
capacity to execute and deliver this Agreement and to carry out all actions
required of it pursuant to the terms of this Agreement, and this Agreement has
been duly executed and delivered by the Seller and constitutes the legal, valid
and binding obligation of the Seller, enforceable against the Seller in
accordance with its terms.
(f) Title to Assets. The Seller is the lawful owner of, has good and valid
---------------
record and marketable title to, and has the full right to sell, convey,
transfer, assign and deliver the Inventory and Tangible Assets, without
restrictions of any kind. All of the Inventory and Tangible Assets are free and
clear of any security interests, liens, claims, charges, options, mortgages,
debts, leases (or subleases), conditional sales agreements, title retention
agreements, encumbrances of any kind or restrictions against the transfer or
assignment thereof (collectively, "Encumbrances"). To Seller's actual knowledge
(without having conducted any search or investigation) there are no filings in
any registry of deeds in any jurisdiction or under the Uniform Commercial Code
or similar statute in any jurisdiction showing the Seller as debtor which create
or perfect or which purport to create or perfect any Encumbrance in or on any of
the Assets.
8. LICENSE. Buyer hereby grants Seller a worldwide, perpetual, irrevocable,
non-exclusive, paid-up, royalty-free license to use the proprietary rights
included in the Assets for any purpose whatsoever.
9. CONFIDENTIALITY. The parties acknowledge and agree that as a result of
entering into this Agreement, each party will have access to certain of the
other party's Confidential Information, which for purposes of this Agreement
shall include: (a) the terms and conditions of this Agreement; (b) each party's
trade secrets, business plans, strategies, methods and/or practices; and (c)
other information relating to either party that is not generally known to the
public. Notwithstanding the foregoing, the term "Confidential Information"
specifically excludes (1) information that is now in the public domain or
subsequently enters the public domain by publication or otherwise through no
action or fault of the other party; (2) information that is known to either
party without restriction prior to receipt from the other party, from its own
<PAGE>
independent sources as evidenced by such party's written records, and which was
not acquired, directly or indirectly, from the other party; (3) information that
either party receives from any third party having a legal right to transmit such
information, and not under any obligation to keep such information confidential;
and (4) information independently developed by either party's employees or
agents; provided however, that Seller acknowledges and agrees that following the
sale of the Assets, Seller will continue to treat as Confidential Information
all information relating to the Assets that it currently considers to be its
Confidential Information. Each party also understands and agrees that
disclosure of that information could adversely affect the other party's
business. Accordingly, the parties agree that each party shall: (i) restrict
disclosure of the other party's Confidential Information to its employees,
consultants or independent contractors with a need to know, (ii) not disclose
the other party's Confidential Information to any third party (other than its
legal, accounting, technical and/or business advisors) without the prior written
approval of the other party, and (iii) safeguard the confidentiality of the
Confidential Information by using at least the same physical and other security
measures as that party uses to protect its own Confidential Information.
Notwithstanding the foregoing, it shall not be a breach of this Agreement for
either party to disclose Confidential Information of the other party if required
to do so under law, in a judicial or other governmental investigation or
proceeding or pursuant to the rules of the Securities and Exchange Commission or
any stock exchange or listing system, provided the other party has been given
prior notice and the disclosing party has sought all reasonable safeguards
against widespread dissemination prior to such disclosure.
10. AUDIT. Seller shall have the right to audit the books and records of Buyer
relating solely to the arrangements contemplated in this Agreement in order to
verify the amounts owed and to be paid by Buyer to Seller hereunder; provided
that Seller may only conduct such audit twice per year and that Seller provide
Buyer at least 10 days prior written notice before conducting any such audit.
Seller shall be solely responsible for the cost of any such audit, unless the
audit discloses a discrepancy of greater than 10%, in which case Buyer will pay
the reasonable cost of the audit.
11. BUYER'S ACKNOWLEDGEMENT
Buyer hereby acknowledges that it has had ample opportunity to inspect and
review the Assets with its advisors, and that Buyer is satisfied with the
condition of the Assets and agrees that the consideration being paid by Buyer to
Seller hereunder is fair and reasonable in view of the condition of the Assets
and the disclaimers and limitations contained in Section 7.
12. GENERAL.
(a) Expenses. All expenses of the preparation, execution and consummation
--------
of this Agreement and of the transactions contemplated hereby,
including, without limitation, attorneys', accountants' and outside
advisers' fees and disbursements, shall be borne by the party incurring
such expenses.
(b) Notices. All notices, demands and other communications hereunder shall
-------
be in writing or by written telecommunication, and shall be deemed to
have been duly given if delivered personally or if mailed by certified
mail, return receipt requested, postage prepaid, or sent by written
telecommunication, as follows:
<PAGE>
If Buyer, to:
Cheryl Smith
Copernicus Systems, Inc.
135 King Street
Cohasset, MA 02025
(781) 383-1906
If to Seller, to:
Network Engines, Inc.
_____________________
_____________________
(c) Entire Agreement. This Agreement contains the entire understanding of
----------------
the parties, supersedes all prior agreements and understandings
relating to the subject matter hereof and shall not be amended except
by a written instrument hereafter signed by all of the parties hereto.
(d) Governing Law. The validity and construction of this Agreement shall be
-------------
governed by the internal substantive laws of the Commonwealth of
Massachusetts.
(e) Sections and Section Headings. The headings of sections and subsections
-----------------------------
are for reference only and shall not limit or control the meaning
thereof.
(f) Assigns. This Agreement shall be binding upon and inure to the benefit
-------
of the heirs and successors of each of the parties. Neither this
Agreement nor the obligations of any party hereunder shall be
assignable or transferable by such party without the prior written
consent of the other party hereto; provided, however, that nothing
contained in this Section shall prevent a party, without the consent of
the other party, from transferring or assigning this Agreement or its
rights or obligations hereunder to another entity controlling, under
the control of, or under common control with such party, provided that
such assignee is financially capable of fulfilling the assigning
party's responsibilities hereunder.
(g) Further Assurances. From time to time, at the request of the Buyer and
------------------
at Buyer's expense, the Seller shall execute and deliver such further
instruments of conveyance and transfer and take such other actions as
the Buyer may reasonably require more effectively to convey and
transfer any of the Assets to the Buyer. The Seller and the Buyer shall
also execute and deliver to the appropriate other party such other
instruments as may be reasonably required in connection with the
performance this Agreement and each shall take all such further actions
as may be reasonably required to carry out the transactions
contemplated by this Agreement.
<PAGE>
(h) No Implied Rights or Remedies. Except as otherwise expressly provided
-----------------------------
herein, nothing herein expressed or implied is intended or shall be
construed to confer upon or to give any person, firm or corporation,
other than the Seller and the Buyer and their respective shareholders,
any rights or remedies under or by reason of this Agreement.
(i) Counterparts. This Agreement may be executed in multiple counterparts,
------------
each of which shall be deemed an original, but all of which together
shall constitute one and the same instrument.
IN WITNESS WHEREOF, and intending to be legally bound hereby, the parties
hereto have caused this Agreement to be duly executed and delivered by their
respective duly authorized officers as an instrument under seal as of the date
and year first above written.
NETWORK ENGINES, INC. COPERNICUS SYSTEMS, INC.
By: Douglas G. Bryant By: /s/ Cherl H. Smith
------------------------- ------------------------------
Date: April 13, 2000 Date: April 13, 2000
------------------------ ------------------------
<PAGE>
Exhibit A
P6000EXP
- --------------------------------------------------------------------------------
Fault-tolerant Load-balanced Clustered Server
- -------------------------- W I N N E R
Data B E S T OF SHOW
Communications 97
- --------------------------
LANTIMES
- -------------------------- NETWORK INTEROP 97
[Picture of P6000EXP appears here]
NETWORK
ENGINES
Torque for your Network
<PAGE>
Network Engines' P6000EXP allows you to capitalize on your PC based technology
<TABLE>
<S> <C>
The latest generation of Network MP700 Communications Ports
Engines' fault-tolerant load-balanced Ethernet port o Modem port o Digital
clustered servers, the P6000EXP input port ( ) Serial port o Relay output
combines complete PC compatibility with port (4)
SNMP-enabled system monitoring and
high-density packaging, providing a
high-reliability environment for
enterprise mission-critical
applications. User-defined I/O panel
Key benefits from the P6000EXP platform
Linear scalability: 100%
performance increase each time you Triple redundant 400 watt
add another engine. hot-swappable Telco
grade power supplies
Clustering support: With 10
independent engines in a single
chassis, clustering is easy and
affordable.
Load-balancing: Eliminates single
point of failure and ensures
application response to users. [cross section of P6000EXP
appears here]
Fault-tolerance: Maintenance
environment to monitor all servers
via a single user interface.
Hot-swappable and redundant
sub-systems, triple Telco grade 400 Scalable engines:
watt power supplies that are up to 10 processor engines with Pentium
load-balanced and load-sharing. class through Pentium Pro processors
The P6000EXP is ideally suited for use
in enterprise applications such as
internet/intranet, remote access,
thin-client, fax and email. Optional RAID controller
Up to 10 fully functional independent
Pentium class engines can be configured
in the P6000EXP platform, with up to
twelve disk drives, CD-ROM and Drive bay power and connections
maintenance processor. Application backplane: IDE, SCSI, RAID
engines currently available are:
Pentium through Dual Pentium Pro with
various speeds and memory
configurations.
All engines have onboard SVGA, two Peripheral sharing subsystem for
serial, parallel, floppy disk, IDE, floppy disk drive, CD-ROM, mouse,
keyboard, mouse and maintenance port keyboard, video
support.
</TABLE>
<PAGE>
providing a platform that is clustered load-balanced and fault-tolerant.
Solid state, resettable short-circuit protection
for all backplane segments
Range of backplane choices, including ISA and ISA/PCI. Segmentable processor
backplane with power control, peripheral sharing and application monitoring
parts
Eight redundant cooling fans supply positive
pressures cooling
Easily accessible. Two screws for removal of
covers, for in rack maintenance & upgrades
[cross section of P6000EXP appears here]
Only 6u, 10.5" tall
Standard 19" rack-mount packaging
Control panel with system status indicators
The MP700 embedded maintenance processor controls and monitors all major
P6000EXP subsystems, including power supply voltages, system temperatures,
system status, operating system states, application software states and external
resources
Configurable to twelve hot-swappable disk drives with
power protection and control. Support for SCSI, IDE, and
RAID
<PAGE>
S p e c i f i c a t i o n s
Application Processor Engine
CPU
Select up to 10 independent fully functional application processor engines.
Pentium class through Dual Pentium Pro processors.
Bus Interface
ISA and PCI configurations available.
Cache Memory
512Kbyte.
RAM
Supports up to 512 MB memory (fast page or EDO).
Real Time Clock
On-board real time clock and calendar.
Ethernet Interface
Integrated ethernet option for on-board NIC. (Pentium only).
IDE Interface
On-board support for four IDE devices.
SCSI Interface
Optional on-board SCS1-3 controller (Pentium Pro only).
SVGA Interface On-board SVGA with 1MB memory.
Serial Ports
Two RS232C ports, up to 115k baud, uses IRQ3 and IRQ4, 10 KV ESD protection.
Parallel Port
One bi-directional parallel port, jumper selectable IRQ5, IRQ7 or no IRQ.
Floppy Interface Supports two floppy drives.
Mouse Interface
Standard PS/2 interface.
Keyboard Interface
Standard PS/2 interface.
Battery
On-board battery with ten year life expectancy.
Support and Services
Warranty
One year warranty on all parts and labor, return to factory.
On-Site Service
Worldwide on-site service available.
System Enclosure
Backplane and Expansion
Ability to populate each segment as a complete PC with application processor
engine, memory and application specific cards.
Individual segment power control.
20 slot passive ISA/PCI compatible backplanes, segmented into a variety of
combinations.
System Cooling
Four fans for backplane cooling. Four fans for power supply cooling. Removable
and washable filter.
Disk Drive and Openings
Up to 12 3.5" low profile, hot-swappable drive bays.
Supports IDE, SCSI-2, SCS1-3, and RAID interfaces.
Power Supplies
Triple redundant hot-swappable Telco grade power supplies, 400 watts per power
supply, load-balancing.
Auto ranging AC input 94-284 AC 50-60 Hz. Optional wide range DC input, 24-72 V
DC.
Form Factor
19" rack mountable enclosure 6U (10.5") high.
Application Systems Monitoring
Local and remote reset and power control for individual application processors.
Monitoring support for major applications and operating systems. High-level
application scripting language for automated maintenance support and
notification.
SNMP support.
External resource switching and sensing.
External serial device support.
Operating Environment
Temperature: 0-60(degree)C.
Humidity: 5-95% relative humidity (non-condensing).
MTBF/MTTR
(greater than) 100,000 hours at 25(degree)C/(less than)5 minutes.
Agency Approvals
UL, CSA, CE.
Weight and Dimensions
Weight: -- 80lb. (147.2 Kgs.)
Dimensions: 18.8" wide x 10.5" high x 24.0" deep.
(447.52 mm x 266.7mm x 609.6mm).
Operating Systems and Windows (GUI) Support
MS-DOS, Windows, Windows 95, Windows NT, OS/2, QNX, SCO Unix, Interactive Unix,
Solaris, Netware and Vines.
Clustered Server Support
Network Engines load-balancer
Microsoft Cluster Services
Citrix WinFrame with load-balancing option
RightFax with load-balancing option
Network Engines, Inc. Tel: 781-961-4400
Network 61 Pleasant Street Fax: 781-961-4508
Engines Randolph, MA 02368-4137 www.NetworkEngines.com
<PAGE>
Schedule 1(a)
P6000 TEST EQUIPMENT
Power supply calibration test stand
Drive carrier test system
Power supply and back plane load tester
Maintenance Processor configuration and test system
Cable tester
12
<PAGE>
Schedule 1(b)
NETWORK ENGINES P6000 INVENTORY 9/30/99
<TABLE>
<CAPTION>
NEI Part Generic Part Description Manufacturer Manufacturer Distributor Dist. Part
Number Type Part Number Number
<S> <C> <C> <C> <C> <C> <C>
100-1001-00 IC Logic IC (N) Tri-state Fairchild DM74LS244N DigiKey DM74LS244N-ND
octal buffer Semiconductor
100-1002-00 IC Logic IC PWR L OFF V QUAD National Semi LM339AN Digikey LM339AN-ND
COMP 14 DIP
100-1003-00 IC Logic IC ELECT CIRCUIT Linear Technology LTC1153CN8 DigiKey LTC1153CN8-ND
BREAKR 8 DIP
100-1006-00 IC Logic IC QUAD 2 IN OR Fairchild DM74LS32N DigiKey DM74LS32N-ND
GATE Semiconductor
100-1007-00 IC Logic IC BCD to Motorola 74ls42 Newark O8T SN74LS42N
Decimal Decoder
100-1008-00 IC Logic IC 12 or 24 Bit Fairchild FST16211MTD Arrow
Bus Switch Semiconductor
100-1009-00 IC Logic IC SCSI TERMINATOR 9 LINFINITY LX5212CPD REPTRON LX5212CDP
LINE, 16 PIN SIOC
100-1010-00 IC Logic Octal buffer / line Motorola 74LS244 DigiKey DM74LS244WM-ND
driver 3 state
outputs
100-1011-00 IC Logic Octal Bus Motorola 74LS245 DigiKey DM74LS245WM-ND
Transceiver 3 state
outputs
100-1012-00 IC Logic Itty Bitty RC Micrel MIC1555BM5 TS Newark 83F5882
Timer
100-1013-00 IC Logic 80ma Low DropOut Micrel MIC5203-3.0BM4 Newark 83F6053
Regulator TS
100-1014-00 IC B69000, Video
Accelerator with
integrated memory
100-1015-00 IC 74ALS245, BUFFER
100-1016-00 IC 74F32, OR GATE
100-1017-00 IC PENTIUM CHIP-CLOCK
SYNTHESIZER
100-1018-00 IC LTC 1753CT
100-1019-00 IC 74HCT14, Schmit
Inverter
100-1020-00 IC 74F07, BUFFER, OPEN
COLLECTOR
1001021-00 IC 74 LVC157, Quad
2T01, Data
selection/MUX
100-1022-00 IC 74ALS08, QUAD 2
I/P AND GATE
100-1023-00 IC 74LVC14,
INBERTER
100-1024-00 IC P13B16224, 12/24 BIT
BUS EXCHANGE SWITCH
100-1025-00 IC LT1587-1.5V,
REGULATOR
100-1026-00 IC LT1587, VOLTAGE
REGULATOR, ADJUSTAVLE
100-1027-00 IC 82443GX, HOST Pioneer Std FW82443GX
BRIDGE
100-1028-00 IC ICS9179, CLOCK
BUFFER, LOW SKEW
100-1029-00 IC LM79, HARDWARE Pioneer LM79CCVF
MONITOR
100-1030-00 IC 82093, IOAIPC Pioneer S82093AA IOAPIC
100-1031-00 IC 82558, ETHERNET Pioneer SV825558B
MAC AND PHY
100-1032-00 IC 93C46, 3-WIRE,
SERIAL CMOS E2PROMS
100-1033-00 IC FST 116211, 24
BIT BUS SWITCH
100-1034-00 IC 82B715, 12C BUS
EXTENDER
100-1035-00 IC 21152, PCI TO Pioneer 21152-AB
PCI BRIDGE PCI-PCI bridge
<CAPTION>
NEI Part Unit Rack 1 Rack 2 Rack 3 Table Back Cube Trailer Total QTY Extended Cost
Number Cost Room on Hand @ 9/30/99
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
100-1001-00 $0.27
- $ -
100-1002-00 $0.75
- $ -
100-1003-00 $2.10
- $ -
100-1006-00 $0.58
- $ -
100-1007-00 $0.63
- $ -
100-1008-00 $2.40
- $ -
100-1009-00 $1.60
- $ -
100-1010-00 $0.64
- $ -
100-1011-00 $0.64
- $ -
100-1012-00 $0.72
- $ -
100-1013-00 $0.66
- $ -
100-1014-00 $32.71
- $ -
100-1015-00 $0.24
- $ -
100-1016-00 $0.08
- $ -
100-1017-00 $2.58
- $ -
100-1018-00 $2.95
- $ -
100-1019-00 $0.13
- $ -
100-1020-00 $0.42
- $ -
1001021-00 $0.28
- $ -
100-1022-00 $0.12
- $ -
100-1023-00 $0.22
- $ -
100-1024-00 $1.93
- $ -
100-1025-00 $3.35
- $ -
100-1026-00 $3.40
- $ -
100-1027-00 $54.72
- $ -
100-1028-00 $2.58
- $ -
100-1029-00 $5.55
- $ -
100-1030-00 $10.75
- $ -
100-1031-00 $23.50
- $ -
100-1032-00 $0.27
- $ -
100-1033-00 $1.40
- $ -
100-1034-00 $2.07
- $ -
100-1035-00 $14.30
- $ -
</TABLE>
<PAGE>
NETWORK ENGINES P6000 INVENTORY 9/30/99
<TABLE>
<CAPTION>
NEI Part Generic Part Description Manufacturer Manufacturer Distributor Dist. Part
Number Type Part Number Number
<S> <C> <C> <C> <C> <C> <C>
100-1036-00 IC 82371EB, P11X4, PCI Pioneer FW82371EB ISA
TO ISA/IDE bridge
XECELARATOR
100-1037-00 IC LTC 1153,
Auto-reset
electronic circuit
breaker
100-1038-00 IC ISP1040B, SCSI
CONTROLLER
100-1039-00 IC HM62832, 32KX8 HIGH
SPEED CMOS SRAM
100-1040-00 IC ISP 1040B, SCSI
TERMINATOR
100-1041-00 IC IT8671, SUPER
I/O CHIP
100-1042-00 IC ITE8687, I/O
BUFFER
100-1043-00 IC MAX 1617,
Remote/local
temperature sensor
100-1044-00 IC LTC 1340, 3.3V
SWITCHER
100-1045-00 IC LTC1326C, Micropower
trible supply monitor
100-1046-00 IC ECP TERMINATION
NETWORK
100-1047-00 IC STATIC RAM
100-1048-00 IC LTC1326C, Micropower
trible supply monitor
100-1049-00 IC 82559, ETHERNET MAC Pioneer GD82559 SL3HD
AND PHY, PBGA 196 Device
103-1001-00 IC IC Serial EPROM Xilinx XC1765-PD8C
Unprogrammed dip 8 Blank
103-1002-00 IC IC FPGA Blank Xilinx XC3064-160-PQFP
Unprogrammed
103-1003-00 IC IC 8 Bit scenix SX28AC/SS Parallax SX28AC/SS
Unprogrammed Microcontroller
103-1004-00 IC 28F020, FLASH Pioneer N28F020-150
MEMORY
103-1005-00 IC 8 BIT
MICROCONTROLLER
TQFP-48
103-1006-00 IC 8 BIT MPU
103-1007-00 IC SPI SERIAL EEPROM
103-1008-00 IC FLASH MEMORY
105-1001-00 IC CPU CPU P586/233MMX W/ Intel Tech Data
512K cache stand
alone processor for
ATX motherboard
105-1002-00 IC CPU CPU P586/166MMX W/ Intel Tech Data 390925
512K cache stand
alone processor for
ATX motherboard
105-1003-00 IC CPU CPU P586/200MMX W/ Intel Tech Data
512K cache stand
alone processor for
ATX motherboard
105-1004-00 IC CPU PENTIUM II 400MHZ Pioneer
105-1005-00 IC CPU PENTIUM II 450 Pioneer
MHZ
110-1001-00 Simm / Dimm Memory Flash Simm Adastra 29F016 Flash
5v 120ns Std T
110-1002-00 Simm / Dimm MEMORY 72 pin SIMM Qestec 128 MB EDO
module, gold, 32 x GOLD
32 MB, 5V, 60 ns,
EDO, for SBC's
110-1003-00 Simm / Dimm MEMORY 72 pin SIMM Qestec 128 MB EDO TIN
module, tin, 32 x
32, EDO, 5V, 60 ns
for motherboards
110-1004-00 Simm / Dimm MEMORY 72 pin SIMM Qestec 64 MB EDO TIN
module, tin, 16 x
32, EDO, 5V, 60 ns
for motherboards
110-1005-00 Simm / Dimm MEMORY 72 pin SIMM Qestec 32 MB EDO TIN
module, tin, 8 x 32,
EDO, 5V, 60 ns for
motherboards
110-1006-00 Simm / Dimm MEMORY 72 pin SIMM Qestec 8 MB EDO TIN
module, tin, 2 x 32,
EDO, 5V, 60 ns for
motherboards
<CAPTION>
NEI Part Unit Rack 1 Rack 2 Rack 3 Table Back Cube Trailer Total QTY Extended Cost
Number Cost Room on Hand @ 9/30/99
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
100-1036-00 $9.78
- $ -
100-1037-00 $2.00
- $ -
100-1038-00 $41.00
- $ -
100-1039-00 $8.61
- $ -
100-1040-00 $2.19
- $ -
100-1041-00 $4.00
- $ -
100-1042-00 $4.00
- $ -
100-1043-00 $3.79
- $ -
100-1044-00 $3.25
- $ -
100-1045-00 $2.00
- $ -
100-1046-00 $0.81
- $ -
100-1047-00
- $ -
100-1048-00
- $ -
100-1049-00 $21.15
- $ -
103-1001-00 $3.71
- $ -
103-1002-00 $37.30
- $ -
103-1003-00 $4.70
- $ -
103-1004-00 $3.82
- $ -
103-1005-00
- $ -
103-1006-00
- $ -
103-1007-00
- $ -
103-1008-00
- $ -
105-1001-00 $287.00
- $ -
105-1002-00 $127.00
- $ -
105-1003-00
- $ -
105-1004-00 $380.00
- $ -
105-1005-00 $562.00
- $ -
110-1001-00 $91.00
- $ -
110-1002-00 $255.00 12
12 $ 3,060.00
110-1003-00 $340.00
- $ -
110-1004-00 $175.00
- $ -
110-1005-00 $55.00
- $ -
110-1006-00 $45.00
- $ -
</TABLE>
<PAGE>
NETWORK ENGINES P6000 INVENTORY 9/30/99
<TABLE>
<CAPTION>
NEI Part Generic Part Description Manufacturer Manufacturer Distributor Dist. Part
Number Type Part Number Number
<S> <C> <C> <C> <C> <C> <C>
110-1007-00 Simm / Dimm MEMORY 72 pin SIMM Qestec 64 MB EDO GOLD
module, gold, 16 x
32MB, 5V, 60 ns,
EDO, for use in SBC's
110-1008-00 Simm / Dimm MEMORY 72 pin SIMM, Qestec 32MB EDO GOLD
module, gold, 8 x 32
MB, 5V, 60ns, EDO,
for use in SBC's
110-1009-00 Simm / Dimm MEMORY 72 pin SIMM Qestec 16MB EDO GOLD
module, gold, 4 x 32
MB, 5V, 60ns, EDO,
for use in SBC's
110-1010-00 Simm / Dimm MEMORY 72 pin SIMM Qestec 8MB EDO GOLD
module, gold, 2 x 32
MB, 5V, 60ns, EDO,
for use in SBC's
110-1011-00 Simm / Dimm MEMORY 72 pin SIMM Kingston KTM-1X36L-60G Adastra
module, single sided
1 x 36 MB 70ns, for
use in mp700 only
110-1012-00 Simm / Dimm MEMORY 72 pin SIMM Qestec 16 MB EDO TIN
module, tin, 4 x 32,
EDO, 5V, 60 ns for
motherboards
110-1013-00 Simm / Dimm MEMORY 168 pin DIMM Qestec 64 MB EDO GOLD
module, gold,
3.3V,EDO, 64MB
110-1014-00 Simm / Dimm MEMORY 168 pin DIMM Qestec 128 MB EDO
module, gold, 3.3V, GOLD
EDO, 128MB
110-1015-00 Simm / Dimm MEMORY 168 pin DIMM Qestec 256 MB EDO
module, gold, 3.3V, GOLD
EDO, 256MB
110-1016-00 Simm / Dimm MEMORY 168pin DIMM Dense-Pac 256MB SDRM
module, gold, sdram
PC100 256MB
110-1016-00 Simm / Dimm MEMORY 168pin DIMM Kentron 256MB SDRM
module, gold, sdram
PC100 256MB
110-1017-00 Simm / Dimm MEMORY, 16mb dimm DPT SM4000/16 Tech Data 220066
ecc FOR dpt Raid
Cache
110-1018-00 Simm / Dimm MEMORY 168 pin DIMM Qestec 128 MB SYNC
module, gold, 3.3V, GOLD
SYNC, 128MB
110-1019-00 168 PIN 128MB PC 100
SDRAM DIMM
110-1020-00 168 PIN 64MB PC 100
SDRAM DIMM
120-1001-00 capacitor CAP 4.7UFD @ 25VDC Panasonic ECS-F1EE475K DigiKey P2047-ND
TANTALUM CAP
120-1002-00 capacitor CAP .01UF 50V STACK Panasonic ECQ-V1H103JL DigiKey P4513-ND
METAL FILM
120-1003-00 capacitor CAP .1UF 50V Panasonic ECQ-V1H104JL DigiKey P4525-ND
STACK METAL FILM
120-1004-00 capacitor CAP 0.1 UF Panasonic ECQ-U2A104MV Digikey P4610-ND
ECQ-UV BOX TYPE
120-1005-00 capacitor CAP 0.47 UF Panasonic ECQ-U2A474MV Digikey P4614-ND
ECQ-UV BOX TYPE
120-1006-00 capacitor CAP 1.0 UF Panasonic ECQ-U2A105MV Digikey P4616-ND
ECQ-UV BOX TYPE
120-1007-00 capacitor CAP .0022UF UV Panasonic ECQ-U2A222MV Digikey P4621-ND
BOX TYPE
120-1008-00 capacitor CAP .22MFD 50V STACK Panasonic ECQ-V1H224JL DigiKey P4667-ND
METAL FILM
120-1009-00 capacitor CAP 560UF 25V HFQ Panasonic ECA-1EFQ561 DigiKey P5706-ND
ALUM RADIAL CAP
120-1010-00 capacitor CAP 1000UF 200V Panasonic ECO-S2DP102EA Digikey P6129-ND
ELECT TSUP
120-1011-00 capacitor CAP ELECT 100UF Panasonic ECE-A1CKS101 DigiKey P970-ND
16V KS RADIAL
<CAPTION>
NEI Part Unit Rack 1 Rack 2 Rack 3 Table Back Cube Trailer Total QTY Extended Cost
Number Cost Room on Hand @ 9/30/99
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
110-1007-00 $135.00 1
1 $ 135.00
110-1008-00 $40.00
- $ -
110-1009-00 $22.00 10
10 $ 220.00
110-1010-00 $45.00
- $ -
110-1011-00 $91.00 8
8 $ 728.00
110-1012-00 $22.00
- $ -
110-1013-00 $126.00 1
1 $ 126.00
110-1014-00 $276.00
- $ -
110-1015-00 $550.00
- $ -
110-1016-00 $550.00
- $ -
110-1016-00 $555.00
6 6 $ 3,330.00
110-1017-00 $809.57
- $ -
110-1018-00 $276.00
- $ -
110-1019-00 $250.00
- $ -
110-1020-00 $135.00
- $ -
120-1001-00 $0.23
- $ -
120-1002-00 $0.11
- $ -
120-1003-00 $0.15
- $ -
120-1004-00 $0.83
- $ -
120-1005-00 $2.05
- $ -
120-1006-00 $3.50
- $ -
120-1007-00 $0.61
- $ -
120-1008-00 $0.18
- $ -
120-1009-00 $0.53
- $ -
120-1010-00 $4.50
- $ -
120-1011-00 $0.25
- $ -
</TABLE>
<PAGE>
NETWORK ENGINES P6000 INVENTORY 9/30/99
<TABLE>
<CAPTION>
NEI Part Generic Part Description Manufacturer Manufacturer Distributor Dist. Part
Number Type Part Number Number
<S> <C> <C> <C> <C> <C> <C>
120-1012-00 capacitor CAP ELECT SM NIC Components NACE101M16V6.3X5. NEWARK 91f6508
100UF, 16V INC
120-1013-00 capacitor CAP 4.7UF 16V Panasonic ECS-T1CY475R DIGIKEY PCS3475CT-ND
TANT TE SERIES
120-1014-00 capacitor CAP .18UF 16V PEN Panasonic ECW-U1C184JB DIGIKEY PCF1061CT-ND
FILM UF(B) SMD
120-1015-00 capacitor CAP .01UF 50V Panasonic ECW-U1H103JB DIGIKEY PCF1046CT-ND
UF(B) FILM SMD
120-1016-00 capacitor CAP .12UF 16V PEN Panasonic ECW-U1C124JB DIGIKEY PCF1059CT-ND
FILM UF(B) SMD
120-1017-00 capacitor CAP 1800 UF 25V Panasonic ECA-1EFQ182L DigiKey P5714-ND
120-1018-00 capacitor CAP 100 UF 16V Panasonic ECE-V1CA101 DigiKey PCE-2043CT-ND
SMD VA SERIES
120-1019-00 capacitor CAP HARRIS MOV GERBER V275LA20C
120-1020-00 capacitor 10UFD @ 10VDC Panasonic ECS-F1AE106K DigiKey P2026-ND
TANTALUM CAP
120-1021-00 capacitor CAP .22UF 16V PEN Panasonic ECW-U1C224JB9 DigiKey PCF1062TR-ND
FILM UF(B) SMD
120-1022-00 capacitor CAP 47uf 16 vdc Panasonic ECS-FICE476 Digikey P2042-ND
tantalum
120-1023-00 capacitor CAP ELECT 100UF Panasonic ECE-A1CKA101 DigiKey P833-ND
16V KA RADIAL
120-1024-00 capacitor CAP .1 UF/50 V Panasonic ECU-V1H104KBW DigiKey PCC104BCT-ND
CERAMIC CHIP CAP
130-1001-00 resistor RES 1.00K OHM 1/4W Yageo 1K00 DigiKey 1.00 KXBK-ND
1% METAL FILM MF-1/4W-B 1%
130-1002-00 resistor RES 1.00M OHM 1/4W Yageo 1M00 DigiKey 1.00 MXBK-ND
1% METAL FILM MF-1/4W-B 1%
130-1003-00 resistor RES 1.10K OHM 1/4W Yageo 1K10 Digikey 1.10kXBK-ND
1% METAL FILM MF-1/4W-B 1%
130-1004-00 resistor RES 1.58K OHM 1/4W Yageo 1K58 Digikey 1.58kXBK-ND
1% METAL FILM MF-1/4W-B 1%
130-1005-00 resistor RES 10M OHM 1/8W 5% Yageo 10M CR-1/8W-B DigiKey 10 MEBK-ND
CARBON FILM 5%
130-1006-00 resistor RES 10.0K OHM 1/4W Yageo 10K0 DigiKey 10.0KXTR-ND
1% MF TAPE/REEL MF-1/4W-T 1%
130-1007-00 resistor RES 10.0 OHM 1/4W 1% Yageo 10E0 DigiKey 10.0XBK-ND
METAL FILM MF-1/4W-B 1%
130-1008-00 resistor RES100K OHM 1/4W 1% Yageo 100K DigiKey 100KXBK-ND
METAL FILM MF-1/4W-B 1%
130-1009-00 resistor RES 100K OHM 1/4W 1% Yageo 100K DigiKey 100 KXBK-ND
METAL FILM MF-1/4W-B 1%
130-1010-00 resistor RES 12.4K OHM 1/4W Yageo 12K4 Digikey 12.4kXBK-ND
1% METAL FILM MF-1/4W-B 1%
130-1011-00 resistor RES 121K OHM 1/4W 1% Yageo 121K DigiKey 121 KXBK-ND
METAL FILM MF-1/4W-B 1%
130-1012-00 resistor RES 13.0K OHM 1/4W Yageo 13K0 DigiKey 13.0 KXBK-ND
1% METAL FILM MF-1/4W-B 1%
130-1013-00 resistor RES 143 OHM 1/4W 1% Yageo 143E Digikey 143XBK-ND
METAL FILM MF-1/4W-B 1%
130-1014-00 resistor RES 150K OHM 1/4W 1% Yageo 150K DigiKey 150KXBK-ND
METAL FILM MF-1/4W-B 1%
130-1015-00 resistor RES 1.00K OHM 1/4W Yageo 1K00 DigiKey 1.00KXTR-ND
1% MF TAPE/REEL MF-1/4W-T 1%
130-1016-00 resistor RES 243 OHM 1/4W 1% Yageo 243E Digikey 243XBK-ND
METAL FILM MF-1/4W-B 1%
130-1017-00 resistor RES 332 OHM 1/4W 1% Yageo 332E DigiKey 332 XBK-ND
METAL FILM MF-1/4W-B 1%
130-1018-00 resistor RES 100 OHM 3/8 SQ Bourns 3386F-1-101 Digikey 3386F-101-ND
CERM ST SL POT
<CAPTION>
NEI Part Unit Rack 1 Rack 2 Rack 3 Table Back Cube Trailer Total QTY Extended Cost
Number Cost Room on Hand @ 9/30/99
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
120-1012-00 $0.37
- $ -
120-1013-00 $0.33
- $ -
120-1014-00 $0.68
- $ -
120-1015-00 $0.40
- $ -
120-1016-00 $0.57
- $ -
120-1017-00 $1.63
- $ -
120-1018-00 $0.49
- $ -
120-1019-00 $0.79
- $ -
120-1020-00 $0.33
- $ -
120-1021-00 $0.34
- $ -
120-1022-00 $1.15
- $ -
120-1023-00 $0.11
- $ -
120-1024-00 $0.40
- $ -
130-1001-00 $0.04
- $ -
130-1002-00 $0.04
- $ -
130-1003-00 $0.04
- $ -
130-1004-00 $0.04
- $ -
130-1005-00 $0.02
- $ -
130-1006-00 $0.02
- $ -
130-1007-00 $0.04
- $ -
130-1008-00 $0.04
- $ -
130-1009-00 $0.04
- $ -
130-1010-00 $0.04
- $ -
130-1011-00 $0.04
- $ -
130-1012-00 $0.02
- $ -
130-1013-00 $0.04
- $ -
130-1014-00 $0.02
- $ -
130-1015-00 $0.02
- $ -
130-1016-00 $0.04
- $ -
130-1017-00 $0.04
- $ -
130-1018-00 $0.89
- $ -
</TABLE>
<PAGE>
NETWORK ENGINES P6000 INVENTORY 9/30/99
<TABLE>
<CAPTION>
NEI Part Generic Part Description Manufacturer Manufacturer Distributor Dist. Part
Number Type Part Number Number
<S> <C> <C> <C> <C> <C> <C>
130-1019-00 resistor RES 1.0K OHM 3/8 SQ Bourns 3386F-1-102 Digikey 3386F-102-ND
CERM ST SL POT
130-1020-00 resistor RES 10K OHM 3/8 SQ Bourns 3386F-1-103 DigiKey 3386F-103-ND
CERM ST SL POT
130-1021-00 resistor RES 100K OHM 3/8 SQ Bourns 3386F-1-104 Digikey 3386F-104-ND
CERM ST SL POT
130-1022-00 resistor RES 2.0K OHM 3/8 SQ Bourns 3386F-1-202 Digikey 3386F-202-ND
CERM ST SL POT
130-1023-00 resistor RES 100K OHM 3/8 SQ Bourns 3386P-1-104 DigiKey 3386P-104-ND
CERM ST SL POT
130-1024-00 resistor RES 4.7M OHM 1/8W 5% Yageo 4M7 CR-1/8W-B DigiKey 4.7 MEBK-ND
CARBON FILM 5%
130-1025-00 resistor RES 4.7K OHM 1/4W 1% Yageo 4K7 MF-1/4W-T DigiKey 4.7KXTR-ND
MF TAPE/REEL 1%
130-1026-00 resistor RES 432K OHM 1/4W 1% Yageo 432K DigiKey 432 KXBK-ND
METAL FILM MF-1/4W-B 1%
130-1027-00 resistor RES 5.23K OHM 1/4W Yageo 5K23 Digikey 5.23kXBK-ND
1% METAL FILM MF-1/4W-B 1%
130-1028-00 resistor RES 51.1K OHM 1/4W Yageo 51K1 DigiKey 51.1KXBK-ND
1% METAL FILM MF-1/4W-B 1%
130-1029-00 resistor RES-NET 220 OHM CTS 761-3-R220 DigiKey 761-3-R220-ND
16DIP 8RES
130-1030-00 resistor RES-NET 10K OHM CTS 770-101-R10K DigiKey 770-101-R10K-ND
10PIN 9RES
130-1031-00 resistor RES-NET 1K OHM CTS 770-101-R1K DigiKey 770-101-R1K-ND
10PIN 9RES
130-1032-00 resistor RES-NET 220 OHM CTS 770-103-R220 DigiKey 770-103-R220
10PIN 5RES
130-1033-00 resistor RES LOB-3.0101%BP IRC LOB-3.0101%BP Newark 96F3616R0.01(less than)
130-1034-00 resistor RES LOB-1.0301%BP IRC LOB-1.0301%BP Newark 96F3617R0.03(less than)
130-1035-00 resistor RES LOB-1.0501%BP IRC LOB-1.0501%BP Newark 96F3617R0.05(less than)
130-1036-00 resistor RES LOB-1.0701%BP IRC LOB-1.0701%BP Newark 96F3617R0.07(less than)
130-1037-00 resistor RES LOB-3.0051%BP IRC LOB-3.0051%BP Newark 96F6782
130-1038-00 resistor RES SMT SPRAGUE WSR2 R020FRE4 Newark 01F799
.455X.275 .02
OHM 2W
130-1039-00 resistor RES SMT SPRAGUE WSR2 R0205RE4 Newark 01F797
.455X.276 .005
OHM 2W
130-1040-00 resistor RES 10.0K OHM Panasonic ERJ-8ENF1002 DigiKey P10.0KFCT-ND
1/8W 1% 1206 SMD
130-1041-00 resistor RES 150K OHM Panasonic ERJ-8ENF1503 DigiKey P150KFCT-ND
1/8W 1% 1206 SMD
130-1042-00 resistor RES 100K OHM Panasonic ERJ-8ENF1003 DigiKey P100KFCT-ND
1/8W 1% 1206 SMD
130-1043-00 resistor RES 1.00K OHM Panasonic ERJ-8ENF1001 DigiKey P1.00KFCT-ND
1/8W 1% 1206 SMD
130-1044-00 resistor RES 332 OHM 1/8W Panasonic ERJ-8ENF3320 DigiKey P332FCT-ND
1% 1206 SMD
130-1045-00 resistor RES LOB-1-020 NEWARK 96F3617R0.02
1%BP
130-1046-00 resistor RES LOB-3-020 NEWARK 96F3616R0.02
1%BP
130-1047-00 resistor RES LOB-3-030 Newark 96F3616R0.03
1%BP
130-1048-00 resistor RES 100K OHM 3/8 SQ Bourns 3386F-104 DIGIKEY 3386F-104-ND
CERAMIC SL POT
130-1049-00 resistor RES 2.0K OHM 3/8 SQ Bourns 3386F-202 DIGIKEY 3386F-202-ND
CERAMIC ST SL POT
130-1050-00 resistor RES 499K OHM Yageo 499K DIGIKEY 499KXTR-ND
1/4W 1% MF MF-1/4W-T 1%
<CAPTION>
NEI Part Unit Rack 1 Rack 2 Rack 3 Table Back Cube Trailer Total QTY Extended Cost
Number Cost Room on Hand @ 9/30/99
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
130-1019-00 $0.89
- $ -
130-1020-00 $0.89
- $ -
130-1021-00 $0.89
- $ -
130-1022-00 $0.89
- $ -
130-1023-00 $0.89
- $ -
130-1024-00 $0.30
- $ -
130-1025-00 $0.02
- $ -
130-1026-00 $0.02
- $ -
130-1027-00 $0.04
- $ -
130-1028-00 $0.04
- $ -
130-1029-00 $0.35
- $ -
130-1030-00 $0.15
- $ -
130-1031-00 $0.15
- $ -
130-1032-00 $0.26
- $ -
130-1033-00 $1.19
- $ -
130-1034-00 $1.19
- $ -
130-1035-00 $1.19
- $ -
130-1036-00 $1.19
- $ -
130-1037-00 $0.74
- $ -
130-1038-00 $1.37
- $ -
130-1039-00 $1.37
- $ -
130-1040-00 $0.39
- $ -
130-1041-00 $0.39
- $ -
130-1042-00 $0.39
- $ -
130-1043-00 $0.39
- $ -
130-1044-00 $0.39
- $ -
130-1045-00 $1.21
- $ -
130-1046-00 $1.18
- $ -
130-1047-00 $1.18
- $ -
130-1048-00 $1.00
- $ -
130-1049-00 $1.00
- $ -
130-1050-00 $0.02
- $ -
</TABLE>
<PAGE>
NETWORK ENGINES P6000 INVENTORY 9/30/99
<TABLE>
<CAPTION>
NEI Part Generic Part Description Manufacturer Manufacturer Distributor Dist. Part
Number Type Part Number Number
<S> <C> <C> <C> <C> <C> <C>
130-1051-00 resistor RES 4.75k OHM Yageo 4K75 DigiKey 4.75KXTR-ND
1/4W 1% MF MF-1/4W-T 1%
130-1052-00 resistor RES 1.58K OHM Yageo 1K58 DigiKey 1.58KXBK-ND
1/4W 1% MF MF-1/4W-B 1%
130-1053-00 resistor RES 121 OHM 1/4W Yageo 121E Digikey 121XBK-ND
1% MF-1/4W-B 1%
130-1054-00 resistor RES SMT SPRAGUE WSR2 R010FRE4 Newark
.455X.275 .01
OHM 2W
130-1055-00 resistor SMT 1.0M OHM
1/8W 1206 SMD
140-1001-00 DIODE DIODE 100V 500MW Diodes Inc. 1N4148 DigiKey 1N4148CT-ND
FAST SWITCHING
140-1002-00 DIODE DIODE 15V 5% Diodes Inc. 1N5245B Digikey 1N5245BCT-ND
500MW ZENER
140-1003-00 DIODE DIODE LED BAR GRAPH Lite-On Inc LTA-1000G DigiKey LT1067-ND
10 SEGMENT GREEN
140-1004-00 DIODE DIODE LED GREEN Lite-On Inc LTL-93BGA1 DigiKey LT1073-ND
DIFFUSED SUB-MINI
140-1005-00 DIODE DIODE LED GREEN DIFF Lite-On Inc LTL-709L Digikey LT1086-ND
1.8 MM DOT POINT
140-1006-00 DIODE DIODE LED 3MM PC Lumex Opto SSF-LXH103GD DigiKey LU20115-ND
MNT GRN
140-1007-00 DIODE DIODE LED 3MM PC Lumex Opto SSF-LXH103YD DigiKey LU20117-ND
MNT YEL
140-1008-00 DIODE DIODE LED BICOLOR Lumex Opto SSL-LX3059IGW DigiKey LU204615-ND
RED/GRN WHT DIFF T-1
140-1009-00 DIODE DIODE LED 1 DIGIT Panasonic LN516GK DigiKey P352-ND
GREEN COMMON CATHODE
140-1010-00 DIODE DIODE RECTIFIER 1 Diodes Inc. 1N4001 DigiKey 1N4001CT-ND
AMP 50 PIV SILICON
140-1011-00 DIODE DIODE RECTIFIER 1AMP Diodes Inc. 1N4004 Digikey 1N4004CT-ND
400 PIV SILICON
140-1012-00 DIODE DIODE RECTIFIER 1.0A Diodes Inc. 1N5817 Digikey 1N5817CT-ND
20V SCHOTTKY BARRIER
140-1013-00 DIODE DIODE RECTIFIER 3.0A Diodes Inc. 1N5822 Digikey 1N5822CT-ND
40V SCHOTTKY BARRIER
140-1014-00 DIODE DIODE RECTIFIER International 80SQ045 Digikey 80SQ045-ND
SCHOTTKY 45V 8A Rectifier
DO-204AR
140-1015-00 DIODE DIODE SURG ARRESTER Wickmann 13931-N230 Digikey WK6005CT-ND
230V GASTUBE 2LEAD USA CG2-230L
CP Clare
140-1016-00 DIODE DIODE LED GREEN LITE-ON INC LTL-94PGK DigiKey LT1120CT-ND
CLEAR LENS SMD
140-1017-00 DIODE DIODE Elect circuit BELL LTC1153CN8 DigiKey LTC1153CN8-ND
breaker 8 PIN DIP
140-1018-00 DIODE DIODE 12V 410MW Diodes Inc. BZT52-C12DI Digikey BZT52-C12DICT-ND
ZENER SMD
140-1019-00 DIODE Diode Small Sig MICROSEMI DL4148 DigiKey DL4148MSCT-ND
SMT, 1N4148
140-1020-00 DIODE DIODE RECTIFIER 1A MICROSEMI DL4001 DigiKey DL4001MSCT-ND
50V SMT MELF
140-1021-00 DIODE DIODE ZENER 10V Digikey 1N5240BMCT-ND
5% 0.5W
140-1022-00 DIODE DIODE 15V 80A ARROW 85CNQ15
RECTIFIER
140-1023-00 DIODE DIODE 65F1459
140-1024-00 DIODE DIODE Converter Vicor M002838
30a 30v
Rectifier
140-1025-00 DIODE DIODE LED T1 Lite-On Inc LTL-4236N DigiKey LT1144-ND
Green Clear
140-1026-00 DIODE DIODE LED 3mm red Lite-On Inc LTL-4222N DigiKey LT1140-ND
high eff transparent
140-1027-00 DIODE DIODE Elect BELL LTC1153CS8 DigiKey LTC1153CS8-ND
circuit breaker
8 SO
140-1028-00 DIODE DIODE SCHOT RECT 1A MICROSEMI SMB5817 DigiKey SMB5817MSCT-ND
20V SMT SMBJ(SK12)
<CAPTION>
NEI Part Unit Rack 1 Rack 2 Rack 3 Table Back Cube Trailer Total QTY Extended Cost
Number Cost Room on Hand @ 9/30/99
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
130-1051-00 $0.02
- $ -
130-1052-00 $0.11
- $ -
130-1053-00 $0.11
- $ -
130-1054-00
- $ -
130-1055-00 $0.04
- $ -
140-1001-00 $0.04
- $ -
140-1002-00 $1.10
- $ -
140-1003-00 $1.83
- $ -
140-1004-00 $0.18
- $ -
140-1005-00 $0.18
- $ -
140-1006-00 $0.23
- $ -
140-1007-00 $0.23
- $ -
140-1008-00 $0.63
- $ -
140-1009-00 $2.03
- $ -
140-1010-00 $0.48
- $ -
140-1011-00 $0.06
- $ -
140-1012-00 $0.47
- $ -
140-1013-00 $0.91
- $ -
140-1014-00 $1.44
- $ -
140-1015-00 $2.83
- $ -
140-1016-00 $0.24
- $ -
140-1017-00 $3.25
- $ -
140-1018-00 $0.23
- $ -
140-1019-00 $0.11
- $ -
140-1020-00 $0.20
- $ -
140-1021-00 $0.11
- $ -
140-1022-00 $7.50
- $ -
140-1023-00
- $ -
140-1024-00 $3.20
- $ -
140-1025-00 $0.23
- $ -
140-1026-00 $0.23
- $ -
140-1027-00 $2.25
- $ -
140-1028-00 $0.36
- $ -
</TABLE>
<PAGE>
NETWORK ENGINES P6000 INVENTORY 9/30/99
<TABLE>
<CAPTION>
NEI Part Generic Part Description Manufacturer Manufacturer Distributor Dist. Part
Number Type Part Number Number
<S> <C> <C> <C> <C> <C> <C>
140-1029-00 DIODE DIODE Dual Schottky DigiKey BAT54CCT-ND
Diode, common cathode
140-1030-00 DIODE DIODE Dual Schottky DigiKey BAT54SCT-ND
Diode, series conn
140-1031-00 DIODE DIODE LED
YELLOW/YELLOW PC
MOUNT
140-1032-00 DIODE DIODE LED GREEN
CLEAR LENS SMT
140-1033-00 DIODE DIODE LED YELLOW
CLEAR LENS SMT
140-1034-00 DUAL LED RED CLEAR
LENS SMT
141-1001-00 TRANSISTOR TRANSISTOR FET 60V Zetec Inc. 2N7000P DigiKey 2N7000P-ND
0.2A N-CHAN DMOS
TO-92
141-1002-00 TRANSISTOR TRANSISTOR FET Temic Siliconix Bell Ind SI4435DY
S14435DY
141-1003-00 TRANSISTOR TRANSISTOR FET Temic Siliconix Bell Ind SI4410DY
SI4410DY
141-1004-00 TRANSISTOR TRANSISTOR QT Opto CNY17-4.300 Digikey CNY17-4ZQT-ND
OPTOISOLATOR
141-1005-00 TRANSISTOR TRANSISTOR NPN SS GP Fairchild PN2222 DigiKey PN2222-ND
(TO-92 CASE)S
141-1006-00 TRANSISTOR TRANSISTOR FET N Harris HUF75345S3S GERBER
CHANNEL ENHANCEMENT
MODE TMOS
141-1007-00 TRANSISTOR TRANSISTOR FET MOS BELL SI9939DY
DUAL CHANNEL
141-1008-00 TRANSISTOR TRANSISTOR FET BELL SI442DDY
SI442DDY
141-1009-00 TRANSISTOR DUPLICATE OF BELL SI9939DY
141-1009-00 DO NOT
USE
142-1001-00 REGULATOR REGULATOR VOLTAGE 3 National Semi LM317LZ Digikey LM317LZ-ND
TERM POS ADJ 100M
TO92
142-1002-00 REGULATOR REGULATOR VOLTAGE 3 National Semi LM337T Digikey LM337T-ND
TERM ADJ. NEG 1.5AMP
142-1003-00 REGULATOR Regulator Maxim MAX775CPA Arrow MAX775CPA
Switching
142-1004-00 REGULATOR REGULATOR Switching Maxim MAX775SEA Arrow MAX775SEA
power supply
controller
142-1005-00 REGULATOR REGULATOR IC, Maxim MAX8215CPD Arrow MAX8215CPD
Interface Comparator
142-1006-00 REGULATOR REGULATOR BELL MAX472CPA
CURRENT AMP
142-1007-00 REGULATOR REGULATOR VRM FOR RAYTHEON 1P518679
AMD K6-200
142-1008-00 REGULATOR REGULATOR BELL MAX774CPA DigiKey MAX774CPA
SWITCHING
150-1001-00 OSCILLATOR OSC 16.0000MHZ CTS MX045-16.0000 DigiKey CTX116-ND
CMOS/TTL FULLSIZE
151-1001-00 RELAY RELAY SPST 5V DIP Hamlin Inc. HE721A0510 DigiKey HE101-ND
REED W/DIODE
155-1001-00
160-1001-00 FUSE FUSE POLYSWITCH RUE Raychem Corp RUE300 DigiKey RUE300-ND
SERIES 3.0 AMPS
160-1002-00 FUSE FUSE HOLDER TR-5 Wickmann USA 19560 Digikey WK0001-ND
MACH CONTACTS
160-1003-00 FUSE FUSE 6.30A FAST Wickmann 19193-066 Digikey WK1066-ND
ACTING 5 X 20MM USA 19649
FUSE UNLIMITED
160-1004-00 FUSE FUSE POLYSWITCH RUE Raychem Corp RUE400 DigiKey RUE400-ND
SERIES 4.0 AMPS
160-1005-00 FUSE Fuse Block 5 x Wickmann USA 19649 DigiKey WK0011-ND
20 mm PC Mount
160-1006-00 FUSE FUSE Poly Fuse PTC Littlefuse Inc. 1812L110PR DigiKey F2152TR-ND
1.1A 6VDC RESETTABLE
1812L
170-1001-00 INDUCTOR INDUCTOR Filter Corcom Gerber 6ED4
line IEC
<CAPTION>
NEI Part Unit Rack 1 Rack 2 Rack 3 Table Back Cube Trailer Total QTY Extended Cost
Number Cost Room on Hand @ 9/30/99
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
140-1029-00 $0.42
- $ -
140-1030-00 $0.42
- $ -
140-1031-00 $1.51
- $ -
140-1032-00 $0.24
- $ -
140-1033-00 $0.04
- $ -
140-1034-00 $0.36
- $ -
141-1001-00 $0.30
- $ -
141-1002-00 $2.75
- $ -
141-1003-00 $1.60
- $ -
141-1004-00 $0.52
- $ -
141-1005-00 $0.08
- $ -
141-1006-00 $2.02
- $ -
141-1007-00 $1.79
- $ -
141-1008-00 $1.27
- $ -
141-1009-00
- $ -
142-1001-00 $0.68
- $ -
142-1002-00 $1.55
- $ -
142-1003-00 $2.45
- $ -
142-1004-00 $4.41
- $ -
142-1005-00 $2.20
- $ -
142-1006-00 $2.25
- $ -
142-1007-00 $17.24
- $ -
142-1008-00 $2.40
- $ -
150-1001-00 $2.31
- $ -
151-1001-00 $1.66
- $ -
155-1001-00
- $ -
160-1001-00 $0.99
- $ -
160-1002-00 $0.51
- $ -
160-1003-00 $0.25
- $ -
160-1004-00 $0.83
- $ -
160-1005-00 $0.21
- $ -
160-1006-00 $0.41
- $ -
170-1001-00 $6.97
- $ -
</TABLE>
<PAGE>
NETWORK ENGINES P6000 INVENTORY 9/30/99
<TABLE>
<CAPTION>
NEI Part Generic Part Description Manufacturer Manufacturer Distributor Dist. Part
Number Type Part Number Number
<S> <C> <C> <C> <C> <C> <C>
170-1002-00 INDUCTOR INDUCTOR 2MH COMMON Magnatek CMT908-V1 Digikey 10543-ND
MODE VERT
170-1003-00 INDUCTOR INDUCTOR TOROID 50UH J W Miller Inc. 5711 Digikey M5711-ND
HIGH CURRENT
170-1004-00 INDUCTOR INDUCTOR Transmag TM801
170-1005-00 INDUCTOR INDUCTOR LINE CORCOM 6ED4C
FILTER
171-1001-00 SPEAKER Sonalert II Mallory MSR320 Newark 93F4908
171-1002-00
172-1001-00 SWITCH SWITCH SPST DIP CTS 208-4 DigiKey CT2084-ND
TIN
172-1002-00 SWITCH SWITCH SPST PC MT E-Switch 320E1-1-5 DigiKey EG1305-ND
MOM SQUARE RED
172-1003-00 SWITCH SWITCH PC MT SPST E-Switch 320.01E1-1-8 DigiKey EG1328-ND
MOM FLT SQ WHT
172-1004-00 SWITCH SWITCH SLIDE SPDT E-Switch EG1213 DigiKey EG1906-ND
RT ANGLE 30V
172-1005-00 SWITCH SWITCH POWER P1000 / E-Switch RA1066AFX DigiKey EG1504-ND
2000 SWITCH ROCKER
SPST 10A BLK
172-1006-00 SWITCH SWITCH RESET P1000 / E-Switch PS1057A-RED DigiKey EG2045-ND
2000 PUSHBUTTON
SWITCH SPST MOM RED
172-1007-00 SWITCH SWITCH P2000 /
5000
172-1008-00 SWITCH SWITCH 8 435802-9
POSITION DIP
172-1009-00 SWITCH SWITCH PC MOUNT SPST E-Switch 320E1-1-8 DigiKey EG1308-ND
MOM SQ WHT
172-1010-00 SWITCH SWITCH 4 position ST Jameco 139002
DIP TIN, low profile
172-1011-00 SWITCH MOM KEY, GULL
WING SLD SMD
172-1014-00 SWITCH ASSEMBLY, P7000
AC PWR
180-1001-00 Connector / CONNECTOR HEADER 3M 2510-6002UB Digikey MHB10K-ND
contact SHROUDED 10 POS
STRAIGHT
180-1002-00 Connector / CONNECTOR HEADER 3M 2516-6002UB DigiKey MHB16K-ND
contact SHROUDED 16 POS
STRAIGHT
180-1003-00 Connector / CONNECTOR HEADER 3M 2540-6002UB DigiKey MHB40K-ND
contact SHROUDED 40 POS
STRAIGHT
180-1004-00 Connector / CONNECTOR HEADER 3M 2550-6002UB DigiKey MHB50K-ND
contact SHROUDED 50 POS
STRAIGHT
180-1005-00 Connector / CONNECTOR 40 pin AMP 1-746610-9 Glynn FTR-40-T
contact male transition
180-1006-00 Connector / CONNECTOR HEADER 3 Molex 22-23-2031 DigiKey WM4201-ND
contact CIR.100 STR FRICT
LOCK
180-1007-00 Connector / CONNECTOR HEADER AMP 350211-1 DigiKey A1212-ND
contact 4-PIN PCB ASSEMBLY
TIN
180-1008-00 Connector / CONNECTOR 8 PIN DIP AMP 2-640463-3 DigiKey A9308-ND
contact SOCKET TIN
180-1009-00 Connector / CONNECTOR ISA AMP 645169-2 NEWARK 90F3847
contact MBF TH KYCON KSR-98-BR
180-1010-00 Connector / CONNECTOR 2 CIRCUIT MOLEX 22-05-2021 DIGIKEY WM4100-ND
contact HEADER, .100 RT ANGLE
180-1011-00 Connector / CONNECTOR SHROUDED 3M 2550-5002UB DIGIKEY MHD50K-ND
contact HEADER 50 POS RT
ANGLE
180-1012-00 Connector / CONNECTOR EISA GLYNN HDCE-188G
contact
180-1013-00 Connector / CONNECTOR PCI KYCONCHE KHDS-120-G
contact Amp 646255-1
180-1014-00 Connector / CONNECTOR 34 AMP 746610-8 GLYNN FTR-34-T
contact POSITION TRANSITION
IDC
180-1015-00 Connector / CONNECTOR HEADER PI MFG 13601-026
contact 26 pin 2x13
180-1016-00 Connector / CONNECTOR 2POS HEADR AMP 350422-1 Digikey A14367-ND
contact VERT MNT TIN COM
180-1017-00 Connector / CONNECTOR 50 pin Amp 1-746610-0 Glynn FTR-50-G
contact male transition
<CAPTION>
NEI Part Unit Rack 1 Rack 2 Rack 3 Table Back Cube Trailer Total QTY Extended Cost
Number Cost Room on Hand @ 9/30/99
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
170-1002-00 $2.64
- $ -
170-1003-00 $7.01
- $ -
170-1004-00 $3.75
- $ -
170-1005-00
- $ -
171-1001-00 $3.84
- $ -
171-1002-00
- $ -
172-1001-00 $0.86
- $ -
172-1002-00 $1.60
- $ -
172-1003-00 $1.60
- $ -
172-1004-00 $0.42
- $ -
172-1005-00 $1.78
- $ -
172-1006-00 $1.69
- $ -
172-1007-00
- $ -
172-1008-00
- $ -
172-1009-00 $2.23
- $ -
172-1010-00 $0.65
- $ -
172-1011-00 $1.01
- $ -
172-1014-00 $6.40
- $ -
180-1001-00 $1.01
- $ -
180-1002-00 $1.17
- $ -
180-1003-00 $2.20
- $ -
180-1004-00 $2.72
- $ -
180-1005-00 $1.70
- $ -
180-1006-00 $0.25
- $ -
180-1007-00 $0.62
- $ -
180-1008-00 $0.03
- $ -
180-1009-00 $1.46 85
85 $ 124.10
180-1010-00 $0.13
- $ -
180-1011-00 $2.27
- $ -
180-1012-00
- $ -
180-1013-00 $1.10
- $ -
180-1014-00 $1.60
- $ -
180-1015-00 $0.16
- $ -
180-1016-00 $0.44
- $ -
180-1017-00 $1.97
- $ -
</TABLE>
<PAGE>
NETWORK ENGINES P6000 INVENTORY 9/30/99
<TABLE>
<CAPTION>
NEI Part Generic Part Description Manufacturer Manufacturer Distributor Dist. Part
Number Type Part Number Number
<S> <C> <C> <C> <C> <C> <C>
180-1018-00 Connector / CONNECTOR HEADER ST Sullins PZC36DAAN DigiKey S2011-36-ND
contact DUAL ROW M GOLD 72 Electronics Corp
PIN
180-1019-00 Connector / CONNECTOR 15 AMP 350588-1 Glynn
contact position Mate-N-Lok
male board mount
180-1020-00 Connector / Connector 15 pin AMP 350992-4 Glynn
contact Female
180-1021-00 Connector / CONNECTOR 16 Amp 746610-3 Glynn FTR-16-G
contact Position Transition
180-1022-00 Connector / Connector 12 Pin AMP 530844-1 Newark 89F4284
contact
180-1023-00 Connector / CONNECTOR HEADER AMP 350825-1 Digikey A14328-ND
contact CONN 3POS SOCKET IN
UNI
180-1024-00 Connector / CONN AMPMODU 100PO AMP 1-104693-0 NEWARK 66F9150
contact SMD.5X.25X.39 Digikey A3118-ND
180-1025-00 Connector / CONN AMPMODU 100POS AMP 1-104652-0 DigiKey A3106-ND
contact SMD .50 X.50
180-1026-00 Connector / CONNECTOR 50 BELL INDUSTRIES SBQ50PD100TG
contact POSITION BOARD MOUNT
180-1027-00 Connector / CONNECTOR 2 BY X
contact HEADER
180-1028-00 Connector / CONNECTOR 1 BY 3M 929834-01-36-R
contact 36 .235
180-1029-00 Connector / CONNECTOR PLCC AMP 822273-1
contact SOCKET 32 PIN
180-1030-00 Connector / CONNECTOR 12 PIN Molex 26-48-1126 DigiKey WM4710-ND
contact HEADER .156
180-1031-00 Connector / IC 14 PIN DIP SOCKET AMP 2-641599-5 DigiKey A95143-ND
contact IC 14 POS PHOS BRZ
TIN
180-1032-00 Connector / IC 16 PIN DIP AMP 2-640358-3 DigiKey A9316-ND
contact SOCKET
180-1033-00 Connector / Connector H15 ERNI Connector H15M Heilind 414.575
contact Male Electronics
180-1034-00 Connector / Connector H15 ERNI Connector H15F Heilind 594.750
contact Female Electronics
180-1035-00 Connector / CONNECTOR 30 pin Positronics PLC30F300A1
contact straight female
180-1036-00 Connector / Connector 30 pin Positronics PLC30M4B0A1
contact right angle Male
180-1037-00 Connector / Connector 44 Pin AMP 1-111626-0-00 Digikey ASA44K
contact Female
180-1038-00 Connector / Connector 50 Pin Amp 1-746285-0 Digikey AKC50G-ND
contact Female Rcpt GOLD
S/C W/POL KEY
180-1039-00 Connector / Connector 40 Pin Amp 1-746285-9 Glynn
contact Female Rcpt
180-1040-00 Connector / CONNECTOR 14 PIN AMP 746285-2 DigiKey AKC14G-ND
contact GOLD S/C W/POL KEY
180-1041-00 Connector / CONNECTOR 16POS AMP 111633-3 DigiKey AKC16A-ND
contact RECEPT GOLD W/POL UNI
180-1042-00 Connector / CONNECTOR 34POS AMP 111633-8 DigiKey AKC34A-ND
contact RECEPT GOLD W/POL UNI
180-1043-00 Connector / CONNECTOR 40 PIN AMP 746285-9 DigiKey AKC40G-ND
contact GOLD S/C W/POL KEY
180-1044-00 Connector / CONNECTOR 20
contact POSITION IDC
180-1045-00 Connector / CONNECTOR 26
contact POSITION IDC
180-1046-00 Connector / Connector 50 Pin CIRCUIT ASSEMBLY CA-50IDEC-2F Glynn CA-501DEC-2F
contact Female Card Edge
180-1047-00 Connector / CONNECTOR 15 DB15-F Krista 24-420
contact position female IDC
180-1048-00 Connector / CONNECTOR 10 PIN AMP 746285-1 DigiKey AKC10G-ND
contact GOLD S/C W/P-K
180-1049-00 Connector / CONNECTOR RECEPT 44 AMP 1-111626-0 DigiKey ASA44K-ND
contact POS 2.0MM IDC
180-1050-00 Connector / CONNECTOR 26
contact POSITION IDC
180-1051-00 Connector / CONNECTOR 50 POSTION CHAMP
contact FEMALE IDC
180-1052-00 Connector / CONNECTOR 68 PI MFG 1200-068P-SCSI-3
contact POSITION MALE IDC
SCSI3
<CAPTION>
NEI Part Unit Rack 1 Rack 2 Rack 3 Table Back Cube Trailer Total QTY Extended Cost
Number Cost Room on Hand @ 9/30/99
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
180-1018-00 $1.74
- $ -
180-1019-00 $1.12 54
54 $ 60.48
180-1020-00 $1.60 93
93 $ 148.80
180-1021-00 $1.08
- $ -
180-1022-00 $2.20
- $ -
180-1023-00 $0.55
- $ -
180-1024-00 $6.52 104
104 $ 678.08
180-1025-00 $8.64
- $ -
180-1026-00 $2.17
- $ -
180-1027-00
- $ -
180-1028-00
- $ -
180-1029-00 $0.93
- $ -
180-1030-00 $1.28
- $ -
180-1031-00 $0.07
- $ -
180-1032-00 $0.08
- $ -
180-1033-00 $6.05 3
3 $ 18.15
180-1034-00 $5.95 3
3 $ 17.85
180-1035-00 $8.63 308
308 $ 2,658.04
180-1036-00 $8.63 107
107 $ 923.41
180-1037-00 $2.26
- $ -
180-1038-00 $2.66
- $ -
180-1039-00 $1.64
- $ -
180-1040-00 $0.94
- $ -
180-1041-00 $0.86
- $ -
180-1042-00 $1.21
- $ -
180-1043-00 $2.20
- $ -
180-1044-00
- $ -
180-1045-00
- $ -
180-1046-00 $5.90
- $ -
180-1047-00 $0.75
- $ -
180-1048-00 $1.12
- $ -
180-1049-00 $3.52
- $ -
180-1050-00
- $ -
180-1051-00
- $ -
180-1052-00 $7.00
- $ -
</TABLE>
<PAGE>
NETWORK ENGINES P6000 INVENTORY 9/30/99
<TABLE>
<CAPTION>
NEI Part Generic Part Description Manufacturer Manufacturer Distributor Dist. Part
Number Type Part Number Number
<S> <C> <C> <C> <C> <C> <C>
180-1053-00 Connector / CONNECTOR 68 PI MFG 1200-068S-SCSI-3
contact POSITION FEMALE IDC
SCSI3
180-1054-00 Connector / CONNECTOR 9 DB9-M Krista 24-395
contact position male IDC
180-1055-00 Connector / Connector 10 AMP 102387-1 Glynn
contact Position Modu
180-1056-00 Connector / CONNECTOR 3 CIRCUIT Molex 22-01-3037 DigiKey WM2001
contact TERMINAL HOUSING,.100
180-1057-00 Connector / CONNECTOR 2 PIN MOLEX 22-01-2027 DigiKey WM2027
contact MOLEX
180-1058-00 Connector / CONNECTOR 2 PIN PHILMORE 70-4852
contact LOCKING SOCKET
180-1059-00 Connector / CONNECTOR MOLEX MOLEX 22-01-2087 DigiKey WM2087
contact 8 PIN
180-1060-00 Connector / CONNECTOR 6 AMP 1-87499-2
contact POSITION MODU
180-1061-00 Connector / CONNECTOR 2 AMP 1-87499-4
contact POSITION MODU
180-1062-00 Connector / CONNECTOR 16 AMP 1-87456-2 DIGIKEY A3037-ND
contact POSITION MODU
180-1063-00 Connector / CONNECTOR 26 AMP 2-87456-2 DigiKey A3041-ND
contact POSITION MODU
180-1064-00 Connector / CONNECTOR 12 AMP 2-87499-1 DigiKey A3021-ND
contact POSITION HOUSING
180-1065-00 Connector / CONNECTOR 15 AMP 2-87499-1 DigiKey A3024-ND
contact POSITION CONTACT
HOUSING
180-1066-00 Connector / CONNECTOR SOCKET, AMP 1-480318-0 DigiKey A1411-ND
contact FREE HANGING, 2
CIRCUITS
180-1067-00 Connector / Connector 15 pos Amp 350736-1 DigiKey A14296-ND
contact Mate-N-Lok Male
180-1068-00 Connector / CONN 3POS PLUG 94V-0 Amp 350766-1 DigiKey A14280-ND
contact UNI-MATE
180-1069-00 Connector / CONNECTOR PIN MOLEX Waldom 1938-4 DigiKey 1938-4-ND
contact IC SOCKET NO 1938-4 Electronics
180-1070-00 Connector / CONNECTOR 16 PIN AMP 746285-3 DigiKey AKC16G-ND
contact GOLD S/C W/POL KEY
180-1071-00 Connector / CONNECTOR 34 PIN Amp 746285-8 DigiKey AKC34G-ND
contact GOLD S/C W/POL KEY
180-1072-00 Connector / CONNECTOR 34 pos Amp 746610-8 Glynn
contact male transition
180-1073-00 Connector / Connector 4 Pos AMP
contact Female
180-1074-00 Connector / CONNECTOR SOCKET 4 AMP 1-480424-0 DIGIKEY A1431-ND
contact POSITION FREE HANGING
180-1075-00 Connector / CONNECTOR 3 POSITION AMP 350767-1 DigiKey A14281-ND
contact CAP 94V-0 UNI-MATE
180-1076-00 Connector / CONNECTOR 6 PIN Molex 09-50-3061 DigiKey WM2104-ND
contact TERMINAL HOUSING .156
180-1077-00 Connector / CONNECTOR 3 PIN Molex 09-50-3031 DigiKey WM2101-ND
contact TERMINAL HOUSING .156
180-1078-00 Connector / CONNECTOR 15 PIN NOR CRIMP T157-00 DigiKey 715M-ND
contact MALE CRIMP
180-1079-00 Connector / CONNECTOR 25 PIN NOR CRIMP T25P7 DigiKey 725M-ND
contact MALE
180-1080-00 Connector / CONNECTOR HOOD KRISTA
contact DB9
180-1081-00 Connector / CONNECTOR DB15 KRISTA 24-776
contact HOOD
180-1082-00 Connector / CONNECTOR DB25 KRISTA 24-779
contact HOOD
180-1083-00 Connector / CONNECTOR 9 PIN NOR CRIMP T09P7-00 DigiKey 709M-ND
contact MALE CRIMP
180-1084-00 Connector / CONNECTOR 9 PIN FE NOR CRIMP T09S7-01 DigiKey 709F-ND
contact MALE CRIMP
180-1085-00 Connector / CONNECTOR SHORTING PI MFG 000 JUMPER
contact JUMPER 2 POSITION
180-1086-00 Connector / CONNECTOR Pin 3 Pos Amp 350919-3 Glynn
contact Mate-N-Lok Male
180-1087-00 Connector / CONNECTOR MOLEX MOLEX 08-50-0144
contact PIN
180-1088-00 Connector / CONNECTOR SOCKET AMP 60619-1 DigiKey A1421-ND
contact 20-14 AWG TIN
180-1089-00 Connector / CONNECTOR PIN AMP Glynn 87756-700
contact Female Modu
180-1090-00 Connector / CONNECTOR TERMINAL MOLEX 08-052-0072 DIGIKEY WM2302-ND
contact CRIMP .156
180-1091-00 Connector / CONNECTOR PIN AMP 350918-3
contact MATE-N-LOK
<CAPTION>
NEI Part Unit Rack 1 Rack 2 Rack 3 Table Back Cube Trailer Total QTY Extended Cost
Number Cost Room on Hand @ 9/30/99
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
180-1053-00 $7.00
- $ -
180-1054-00 $0.75
- $ -
180-1055-00 $0.68
- $ -
180-1056-00 $0.12
- $ -
180-1057-00 $0.72
- $ -
180-1058-00
- $ -
180-1059-00 $0.28
- $ -
180-1060-00 $0.28
- $ -
180-1061-00
- $ -
180-1062-00 $1.43
- $ -
180-1063-00 $2.01
- $ -
180-1064-00 $0.87
- $ -
180-1065-00 $1.22
- $ -
180-1066-00 $0.19
- $ -
180-1067-00 $0.75 25
25 $ 18.75
180-1068-00 $0.47 34
34 $ 15.98
180-1069-00 $0.01
- $ -
180-1070-00 $1.07
- $ -
180-1071-00 $1.93
- $ -
180-1072-00 $1.57
- $ -
180-1073-00
- $ -
180-1074-00 $0.40
- $ -
180-1075-00 $0.48 93
93 $ 44.64
180-1076-00 $0.47
- $ -
180-1077-00 $0.24
- $ -
180-1078-00 $0.46
- $ -
180-1079-00 $0.46
- $ -
180-1080-00 $0.18
- $ -
180-1081-00 $0.20
- $ -
180-1082-00 $0.26
- $ -
180-1083-00 $0.39
- $ -
180-1084-00 $0.39
- $ -
180-1085-00 $0.02
- $ -
180-1086-00 $0.07
- $ -
180-1087-00
- $ -
180-1088-00 $1.00
- $ -
180-1089-00 $0.09
- $ -
180-1090-00 $0.73
- $ -
180-1091-00 $0.07
- $ -
</TABLE>
<PAGE>
NETWORK ENGINES P6000 INVENTORY 9/30/99
<TABLE>
<CAPTION>
NEI Part Generic Part Description Manufacturer Manufacturer Distributor Dist. Part
Number Type Part Number Number
<S> <C> <C> <C> <C> <C> <C>
180-1092-00 Connector / CONNECTOR Contact AMP 60617-1 DigiKey A1423-ND
contact 24-18 AWG tin socket
180-1093-00 Connector / CONNECTOR Panel AMP 1-480426- DigiKey A1402-ND
contact Mount 4 circuit
180-1094-00 Connector / CONNECTOR Contact AMP 60618-1 DigiKey A1422-ND
contact 24-18 AWG tin pin
180-1095-00 Connector / CONNECTOR, 2 pin Berge 69190-402 Newark 89F4699
contact Header .100"
180-1096-00 Connector / CONNECTOR, 50 JAE KX14-50K5D1 Kensington KX14-50K5D1
contact pin smt
180-1097-00 Connector / CONNECTOR, disk AMP 171826-4 Jameco 114999
contact drive power, 4 pin,
male, RA, PC mount
180-1098-00 Connector / CONNECTOR, 44 pin 3M 151244-8422-TB DigiKey 3M1144-ND
contact header, 2MM centers
180-1099-00 Connector / CONNECTOR, Shrouded 3M 2540-5002UB DigiKey MHD40K-ND
contact header 40 pos RT
Angle
180-1100-00 Connector / CONNECTOR, Shrouded 3M 2534-5002UB DigiKey MHD34K-ND
contact header 34 pos RT
Angle
180-1101-00 Connector / CONNECTOR, 4 circuit Waldom 22-05-2041 DigiKey WM4102-ND
contact header .100 RA Electronics
180-1102-00 Connector / CONNECTOR 10 pn Glynn FTR-10-T
contact IDC transition
180-1103-00 Connector / CONNECTOR 68 CIRCUIT ASSEMBLY CA-68NFTSL-1T Newark
contact POSITION MALE IDC
TRANSITION
180-1104-00 Connector / CONNECTOR 4circuit Molex 22-03-2041 DigiKey WM4002-ND
contact sip straight .100
180-1105-00 Connector / CONNECTOR 3 circuit Molex 22-03-2031 DigiKey WM4001-ND
contact sip straight .100
180-1106-00 Connector / CONNECTOR 68 AMP 174681-7 NEWARK 83F4530
contact POSITION
SUBMINIATURE D
180-1107-00 Connector / CONNECTOR 25 dual AMP 530843-5 Newark 89F4278
contact position card edge
180-1108-00 Connector / CONNECTOR 3 Molex 22-05-2031 DigiKey WM4101-ND
contact circuit sip RA
.100
180-1109-00 Connector / CONNECTOR, Jameco 114930
contact receptical, 4
pin RA
180-1110-00 Connector / CONNECTOR, PIN Jameco 114921
contact for 114930
180-1111-00 Connector / 50 POS AMPLIMETE RA
contact BOARD MOUNT
180-1112-00 Connector / 26 POS AMPLIMITE RA
contact BOARD MOUNT
180-1113-00 Connector / 68 POS AMPLIMITE RA
contact BOARD MOUNT
180-1116-00 Connector / AMPLIMITE 50 POS
contact PLUG RA
180-1117-00 Connector / AMPLINITE STACKED
contact 50/50 RECEPTICAL RA
180-1119-00 Connector / PLUG, 60 PIN,
contact CLUSTER STREAM
180-1121-00 Connector / SHROUDED 2MM HEADER,
contact 44 PIN, CD-ROM
180-1124-00 Connector / RECEPTACLE,
contact RJ45, STACKED
180-1125-00 Connector / PLUG, 26 PIN, KBD,
contact MOUSE, &VGA COMBO
180-1128-00 Connector / RECEPTACLE, 68 PIN,
contact SCSI, EXTERNAL
180-1148-00 Connector / 6 POSITION KYBD
contact MOUSE RT ANGLE
180-1149-00 Connector / VGA 15 PIN 4-40
contact THREADED FEMALE
180-1150-00 Connector / ACCESS BUS
contact
181-1001-00 ADAPTER ADAPTER PS2 TO
"AT" FEMALE
181-1002-00 ADAPTER ADAPTER SCSI 50 KINGSTON DX100-NTW
TO 68 PIN
181-1003-00 ADAPTER ADAPTER DB15M TO KRISTA 237641
RJ45
181-1004-00 ADAPTER ADAPTER RJ45 8 KRISTA 60758
POSITION T
181-1005-00 ADAPTER ADAPTER RJ45 6 KRISTA 60756
POSITION T
181-1006-00 ADAPTER ADAPTER Pacer 210ts-050
Transceiver
Twisted Pair
181-1007-00 ADAPTER ADAPTER Dual Siemon Company YT4-E2-E2 Branch
port Ethernet Elec.
182-1001-00 TERMINATOR TERMINATOR SCSI PI MFG 000-50-A-1
50 PIN
182-1002-00 TERMINATOR TERMINATOR SCSI PI MFG 000-68-A-1
68 PIN
182-1003-00 TERMINATOR TERMINATOR SCSI MALE KRISTA 22162
TO FEMALE
182-1004-00 TERMINATOR TERMINATOR SCSI PI MFG Inter-Active-S3
68 PIN Female
190-1001-00 Wire CABLE Buss Bar TransMag TM795
/cable/cord #14
190-1002-00 Wire CABLE Hard Drive Krista 23512
/cable/cord Y power
190-1003-00 Wire CABLE Power 1 unit Krista 23511
/cable/cord of 4 wires RBBY
190-1004-00 Wire CORD 6' Krista 23513S
/cable/cord Powercord UL
190-1005-00 Wire CABLE 44 COND 100' AMP AM44G-100 DigiKey AM44G-100-ND
/cable/cord GRAY RIBBON
190-1006-00 Wire Cable 34 Cond PI MFG F28-34 DigiKey AM34G-100-ND
/cable/cord Flat Ribbon
190-1007-00 Wire Cable 40 Cond PI MFG F28-40 DigiKey AM40G-100-ND
/cable/cord Flat Ribbon
<CAPTION>
NEI Part Unit Rack 1 Rack 2 Rack 3 Table Back Cube Trailer Total QTY Extended Cost
Number Cost Room on Hand @ 9/30/99
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
180-1092-00
- $ -
180-1093-00 $0.38
- $ -
180-1094-00 $0.10
- $ -
180-1095-00 $0.15
- $ -
180-1096-00 $3.10
- $ -
180-1097-00 $0.45
- $ -
180-1098-00 $3.48
- $ -
180-1099-00 $1.71
- $ -
180-1100-00 $1.83
- $ -
180-1101-00 $0.26
- $ -
180-1102-00 $0.40
- $ -
180-1103-00 $4.00
- $ -
180-1104-00 $0.23
- $ -
180-1105-00 $0.18
- $ -
180-1106-00 $5.03
- $ -
180-1107-00 $2.74
- $ -
180-1108-00 $0.18
- $ -
180-1109-00 $0.15
- $ -
180-1110-00 $0.04
- $ -
180-1111-00 $0.00
- $ -
180-1112-00 $3.78
- $ -
180-1113-00 $4.18
- $ -
180-1116-00 $0.00
- $ -
180-1117-00 $0.00
- $ -
180-1119-00 $1.51
- $ -
180-1121-00 $0.93
- $ -
180-1124-00 $3.19
- $ -
180-1125-00 $2.15
- $ -
180-1128-00 $2.45
- $ -
180-1148-00 $0.78
- $ -
180-1149-00 $0.61
- $ -
180-1150-00 $2.58
- $ -
181-1001-00
- $ -
181-1002-00 $38.33
- $ -
181-1003-00 $0.69
- $ -
181-1004-00 $0.55
- $ -
181-1005-00 $0.34
- $ -
181-1006-00 $22.50
- $ -
181-1007-00 $4.23
- $ -
182-1001-00 $6.50
- $ -
182-1002-00 $9.50
- $ -
182-1003-00
- $ -
182-1004-00 $12.00
- $ -
190-1001-00
- $ -
190-1002-00 $0.40
- $ -
190-1003-00 $0.49
- $ -
190-1004-00 $0.84
- $ -
190-1005-00 $53.00
- $ -
190-1006-00
- $ -
190-1007-00
- $ -
</TABLE>
<PAGE>
NETWORK ENGINES P6000 INVENTORY 9/30/99
<TABLE>
<CAPTION>
NEI Part Generic Part Description Manufacturer Manufacturer Distributor Dist. Part
Number Type Part Number Number
<S> <C> <C> <C> <C> <C> <C>
190-1008-00 Wire Cable 50 Cond PI MFG F28-50 DigiKey AM50G-100-ND
/cable/cord Flat Ribbon
190-1009-00 Wire CABLE 34COND 100FT 3M 3659/34(SF) DigiKey MC34R-100-ND
/cable/cord RND SHIELDED
190-1010-00 Wire CABLE 40 CONDUCTOR 3M 3659/40(SF) DigiKey MC40R-100-ND
/cable/cord RND SHIELDED
190-1011-00 Wire CABLE 50 CONDUCTOR 3M 3659/50(SF) DigiKey MC50R-100-ND
/cable/cord RND SHIELDED
190-1012-00 Wire CABLE 10 COND 100' Rikei Wire Corp R000-100 DigiKey R000-100-ND
/cable/cord MULTI RIBBON
190-1013-00 Wire CABLE 9 COND 200' Rikei Wire Corp R019-200 DigiKey R019-200-ND
/cable/cord GRAY RIBBON
190-1014-00 Wire CABLE 10 COND 200' Rikei Wire Corp B2(10)-7/0.127 DigiKey R020-200-ND
/cable/cord GRAY RIBBON
190-1015-00 Wire CABLE WIRE 14 gauge BayState UL1015-74-41-30
/cable/cord stranded Black
190-1016-00 Wire CABLE WIRE 14 gauge BayState UL1015-74-41-30
/cable/cord stranded Blue
190-1017-00 Wire CABLE WIRE 14 gauge BayState UL1015-74-41-30
/cable/cord stranded Red
190-1018-00 Wire CABLE WIRE 14 gauge BayState UL1015-74-41-30
/cable/cord stranded White
190-1019-00 Wire CABLE WIRE 14 gauge BayState UL1015-74-41-30
/cable/cord stranded Yellow
190-1020-00 Wire CABLE WIRE 20 gauge BayState UL1061-sr-pvc-20
/cable/cord stranded blk / red
cable TP
190-1021-00 Wire CABLE WIRE 18 AWG
/cable/cord green Stranded
190-1022-00 Wire CABLE WIRE 20 AWG
/cable/cord black stranded
190-1023-00 Wire CABLE WIRE 20
/cable/cord AWG red stranded
190-1024-00 Wire CABLE WIRE 20 AWG
/cable/cord yellow stranded
190-1025-00 Wire CABLE WIRE
/cable/cord jumper
190-1026-00 Wire CABLE 10 CONDUCTOR
/cable/cord SHIELDED FOR RS232
190-1027-00 Wire CABLE CABLE 16 COND Rikei Wire Corp B2(16)-7/0.127 DIGIKEY R022-200-ND
/cable/cord 200' GRAY RIBBON
190-1028-00 Wire CABLE 20 COND 200' Rikei Wire Corp B2(20)-7/0.127 DIGIKEY R023-200-ND
/cable/cord GRAY RIBBON
190-1029-00 Wire CABLE 68 POSITION MANN CA68NFC
/cable/cord FLAT RIBBON
190-1030-00 Wire CABLE 25 CONDUCTOR 3M 6000-60-00
/cable/cord FLAT RIBBON
190-1031-00 Wire CABLE 50 CONDUCTOR 3M 6000-61-00
/cable/cord FLAT RIBBON MULTI
COLOR
190-1032-00 Wire CABLE 68 POSITION
/cable/cord ROUND SHIELDED RIBBON
190-1033-00 Wire CABLE WIRE 18 AWG Alpha wire and 3075 green /
/cable/cord stranded copper cable yellow
wire, green / yellow
200-1001-00 pcb raw PCB DRIVE CARRIER Varitek 2014243
200-1002-01 pcb raw PCB P6000EXP Varitek 150 pieces
200-1003-00 pcb raw PCB MANIFOLD Varitek 50 pieces
200-1004-00 pcb raw PCB FRONT PANEL Varitek PCB6000107
200-1005-00 pcb raw PCB FRONT PANEL Tri-Star PCB6000108
CONTROL
200-1006-00 pcb raw PCB P6000PS Varitek
200-1007-00 pcb raw PCB DISK DRIVE Varitek
POWER
200-1008-00 pcb raw PCB MPC6000 Varitek
200-108-03 pcb raw mpc 6000 rev
200-1009-00 pcb raw PCB ORING Varitek
<CAPTION>
NEI Part Unit Rack 1 Rack 2 Rack 3 Table Back Cube Trailer Total QTY Extended Cost
Number Cost Room on Hand @ 9/30/99
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
190-1008-00 $55.17
- $ -
190-1009-00 $155.00
- $ -
190-1010-00 $192.00
- $ -
190-1011-00 $221.00
- $ -
190-1012-00 $20.00
- $ -
190-1013-00 $25.00
- $ -
190-1014-00 $23.00
- $ -
190-1015-00
- $ -
190-1016-00
- $ -
190-1017-00
- $ -
190-1018-00
- $ -
190-1019-00
- $ -
190-1020-00
- $ -
190-1021-00
- $ -
190-1022-00
- $ -
190-1023-00
- $ -
190-1024-00
- $ -
190-1025-00 $0.10
- $ -
190-1026-00
- $ -
190-1027-00 $36.98
- $ -
190-1028-00 $46.00
- $ -
190-1029-00
- $ -
190-1030-00
- $ -
190-1031-00
- $ -
190-1032-00
- $ -
190-1033-00
- $ -
200-1001-00 $7.90
- $ -
200-1002-01 $49.50
- $ -
200-1003-00 $12.00 227
227 $ 2,724.00
- $ -
200-1004-00 $9.75 52
52 $ 507.00
200-1005-00 $24.17
- $ -
200-1006-00 $16.25
- $ -
200-1007-00 $5.95
23 23 $ 136.85
200-1008-00 $62.00
30 $ 1,860.00
200-108-03 30
- $ -
200-1009-00 $24.75
- $ -
</TABLE>
<PAGE>
NETWORK ENGINES P6000 INVENTORY 9/30/99
<TABLE>
<CAPTION>
NEI Part Generic Part Description Manufacturer Manufacturer Distributor Dist. Part
Number Type Part Number Number
<S> <C> <C> <C> <C> <C> <C>
200-1010-00 pcb raw PCB DISK CARRIER Varitek
2.5"
200-1011-00 pcb raw PCB MP700 Varitek
INTERFACE
200-1012-00 pcb raw PCB BP4 Sanmina
200-1013-00 pcb raw PCB BP10 Sanmina
200-1014-00 pcb raw PCB BP10HC Sanmina
200-1015-00 pcb raw PCB BP5-2HC Sanmina
200-1016-00 pcb raw PCB BP4HC Sanmina
200-1017-01 pcb raw PCB CDRom Varitek
Adapter
200-1017-02 pcb raw old style
cda rev cdrom
adapter board
200-1018-00 pcb raw PCB Bus Bridge Varitek
for ISA20
200-1019-00 pcb raw PCB Peripheral Varitek
Sharing Switch Board
200-1020-00 pcb raw PCB SCSI Varitek
Backplane 2 slot
200-1021-00 pcb raw PCB SISCI Varitek
Backplane 4 slot
200-1022-00 pcb raw PCB Peripheral Varitek
Sharing Switch
Control Board
200-1023-00 pcb raw pcb wide drive
carrier
200-1023-03 pcb raw PCB Wide SCSI Varitek
drive carrier
200-1024-00 pcb raw PCB 7000-MMB Sanmina
mother board
200-1025-00 pcb raw PCB 7000-1 Sanmina
200-1026-00 pcb raw PCB 7000-2 Sanmina
200-1027-00 pcb raw PCB 7000-3 Sanmina
200-1028-00 PCB MBB STUNT BOARD
200-1030-00 PCB 7000 CD ROM
ADAPTER
210-1001-00 Hardware HARDWARE Metal Tech Etch 125LP45-16-02
Fixings Gasket 125LP45-16-02
210-1002-00 Hardware HARDWARE Metal Tech Etch 95TM-300-02
Fixings Gasket 95TM-300-02
210-1003-00 Hardware HARDWARE Lug
Fixings 18-20 Terminal
210-1004-00 Hardware HARDWARE NUT Mainsource M2.5D985
Fixings M2.5 ss
210-1005-00 Hardware HARDWARE Rivet 1/8" WT Tool Bss42
Fixings diameter #30 drill
grip 1/16"-1/8"
210-1006-00 Hardware HARDWARE SPACER Keystone 1903C DigiKey 1903CK
Fixings .500/6-32 NYLON HEX Electronics
THREAD
210-1007-00 Hardware HARDWARE SCREW 6-32 Main Source 614PPNBO
Fixings X 1/4 PH Pan BO
210-1008-00 Hardware HARDWARE SCREW Mainsource 614PPNNY
Fixings 6-32 X 1/4
210-1009-00 Hardware HARDWARE SCREW PHIL Building NY PMS 632 DigiKey H554-ND
Fixings NYLON 6-32 X 1/4 Fasteners 0025 PH
210-1010-00 Hardware HARDWARE screw M2.5 Mainsource M2.5X10D84A
Fixings x 10mm Steel Zinc
210-1011-00 Hardware HARDWARE screw M2.5 MainSource M2.5x12D84a
Fixings x 12mm steel zinc
210-1012-00 Hardware HARDWARE screw M2.5 Metric M2.5x14mm
Fixings x 14mm Steel Zinc Screw &
Tool
210-1013-00 Hardware HARDWARE Standoff M3 Mainsource M3X6PPNETZ
Fixings x 6 PH Pan ETLW
210-1014-00 Hardware HARDWARE Mainsource RAF2104632N
Fixings
210-1015-00 Hardware HARDWARE SEM 4-40 X Main Source SM414PPNETZ
Fixings 1/4 PH Pan ETLW
210-1016-00 Hardware HARDWARE SEM '6-32 x Mainsource SM612PPNETZ
Fixings 1/2 PH Pan ETLW
<CAPTION>
NEI Part Unit Rack 1 Rack 2 Rack 3 Table Back Cube Trailer Total QTY Extended Cost
Number Cost Room on Hand @ 9/30/99
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
200-1010-00
- $ -
200-1011-00
24 24 $ -
200-1012-00
- $ -
200-1013-00
- $ -
200-1014-00
- $ -
200-1015-00
- $ -
200-1016-00
- $ -
200-1017-01 $4.75 175
175 $ 831.25
200-1017-02 $4.75 24
24 $ 114.00
200-1018-00
- $ -
200-1019-00 $35.00 4
4 $ 140.00
200-1020-00 $38.00 50
50 $ 1,900.00
200-1021-00
- $ -
200-1022-00 $10.00
- $ -
200-1023-00 $9.00 69
69 $ 621.00
200-1023-03 $9.00 41
41 $ 369.00
200-1024-00
- $ -
200-1025-00
- $ -
200-1026-00
- $ -
200-1027-00
- $ -
200-1028-00 $29.75
- $ -
200-1030-00
- $ -
210-1001-00 $1.30 200
200 $ 260.00
210-1002-00 $1.60
- $ -
210-1003-00
- $ -
210-1004-00 $0.09
- $ -
210-1005-00 $0.01
- $ -
210-1006-00 $0.29
- $ -
210-1007-00 $0.10
- $ -
210-1008-00
- $ -
210-1009-00 $0.93
- $ -
210-1010-00 $0.04
- $ -
210-1011-00
- $ -
210-1012-00 $0.01
- $ -
210-1013-00 $0.06
- $ -
210-1014-00
- $ -
210-1015-00 $0.03
- $ -
210-1016-00 $0.03
- $ -
</TABLE>
<PAGE>
NETWORK ENGINES P6000 INVENTORY 9/30/99
<TABLE>
<CAPTION>
NEI Part Generic Part Description Manufacturer Manufacturer Distributor Dist. Part
Number Type Part Number Number
<S> <C> <C> <C> <C> <C> <C>
210-1017-00 Hardware HARDWARE SEM 6-32x MainSource SM6138PPNETZ
Fixings 1 3/8 PH PAN ETLW Z
210-1018-00 Hardware HARDWARE SEM 6-32 x Mainsource SM614PPNETZ
Fixings 1/4 PH pan ETLWZ
210-1019-00 Hardware HARDWARE SEM 6-32x MainSource SM634PPNETZ
Fixings 3/4 PH PAN ETLW Z
210-1020-00 Hardware HARDWARE SEM 6-32 X Main Source SM638PPNETZ
Fixings 3/8 PH Pan ETLW
210-1021-00 Hardware HARDWARE Standoff Mainsource RAF21433005B
Fixings RAF M2143-3005-B-O
210-1022-00 Hardware HARDWARE Standoff Mainsource RAF4530632A
Fixings 5/16" Brass Hex MF
6-32
210-1023-00 Hardware HARDWARE Standoff Mainsource RAF4531632B
Fixings 6-32 for HDD
RAF4531-632-B-O
210-1024-00 Hardware HARDWARE Standoff FC Phillips
Fixings Brass Bushing 1/4"x
7/16"
210-1025-00 Hardware HARDWARE Rackmount Cybex RMK-22
Fixings Kit 19" for AV8 Port
Autoview
210-1026-00 Hardware HARDWARE FASTON .187 TERMCO 71F-187-20-NBL
Fixings INSULATION
210-1027-00 Hardware HARDWARE CABLE TTI 3484-1
Fixings CLAMP
210-1028-00 Hardware HARDWARE LATCH GU2 DigiKey T2040
Fixings KIT AUI
210-1029-00 Hardware HARDWARE INSUL BELL 17371212A
Fixings PAD
210-1030-00 Hardware HARDWARE Machine NY PMS 440 0038 DIGIKEY H544
Fixings Screw 4-40 x 3/8 PH
nylon
210-1031-00 Hardware HARDWARE T1 Lens Jameco 143183
Fixings
210-1032-00 Hardware HARDWARE LED Jameco 143095
Fixings Assembly
210-1033-00 Hardware Hardware Nylon Newark 94F4411
Fixings Standoff, 4-40 x
.75"
210-1034-00 Hardware HARDWARE Lug Termco BS4B-6
Fixings 14-16 AWG
210-1035-00 Hardware HARDWARE nylon DIGIKEY 3348K-ND
Fixings washer #4 x .032 x
.250
210-1036-00 Hardware HARDWARE 6-32 Main Source KP6Z
Fixings Kep Nut
210-1037-00 Hardware HARDWARE 6-32 Main Source HN6SMZ
Fixings hex nut
210-1038-00 Hardware HARDWARE SEM 6-32 X Main Source 638PPNZ
Fixings 3/8 PH Pan
210-1039-00 Hardware HARDWARE SEM, 10-32 Main Source SM1014PPNETZ
Fixings x 1/4 PH PAN ETLW
210-1040-00 Hardware HARDWARE M2 x 5mm Metric screw
Fixings machine screw and Tool company
210-1041-00 Hardware HARDWARE M2 Metric screw
Fixings washer and Tool company
210-1042-00 Hardware HARDWARE Pem Pem KPS6-632-4
Fixings Insert
210-1043-00 Hardware HARDWARE Clear ASM 1011 R-N .090
Fixings hole spacer
210-1044-00 Hardware HARDWARE Clear ASM 2040-R-N .090
Fixings hole spacer
210-1045-00 Hardware HARDWARE Nylon Keystone 876 Hardware 876
Fixings spacer, .250" Electronics Spec
210-1046-00 Hardware HARDWARE SEM 6-32x MainSource SM6138PPNZ
Fixings 1 3/8 PH PAN Z
210-1047-00 Hardware HARDWARE, 4-40 MainSource RAF47503
Fixings JACK SCREW
210-1048-00 Hardware HARDWARE Terminal TERMCO R2C-6
Fixings Lug, 16 -18 AWG ,
barrel
210-1049-00 Hardware Epoxy Epoxy Technology 730 Part A
Fixings
210-1050-00 Hardware Epoxy Hardner Epoxy Technology 730 Part B
Fixings (hardner)
211-1001-00 TIE TIE Cable CATAMOUNT L-4-18-9-M
212-1001-00 Mechanical Mechanical AIR FILTRATION
Hardware Filter AIR PRODUCTS
212-1002-00 Mechanical Mechanical Card Hardware DC800
Hardware Guides, Pwr. Spec
Supply
212-1003-00 Mechanical Mechanical Card Hardware SDC450
Hardware Guides, Disk Spec
Drive
212-1004-00 Mechanical Mechanical Card Hardware SDC250
Hardware Guides, Card Cage Spec
<CAPTION>
NEI Part Unit Rack 1 Rack 2 Rack 3 Table Back Cube Trailer Total QTY Extended Cost
Number Cost Room on Hand @ 9/30/99
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
210-1017-00 $0.03
- $ -
210-1018-00 $0.03
- $ -
210-1019-00 $0.03
- $ -
210-1020-00 $0.03
- $ -
210-1021-00 $0.84
- $ -
210-1022-00 $0.32
- $ -
210-1023-00 $0.22
- $ -
210-1024-00 1350
1,350 $ -
210-1025-00 $31.50
- $ -
210-1026-00 $0.17
- $ -
210-1027-00
- $ -
210-1028-00 $0.76
- $ -
210-1029-00
- $ -
210-1030-00 $0.09
- $ -
210-1031-00 $0.18 15
15 $ 2.70
210-1032-00 $1.35 126
126 $ 170.10
210-1033-00 $0.40
- $ -
210-1034-00 $0.06
- $ -
210-1035-00 $0.02
223 223 $ 3.84
210-1036-00
- $ -
210-1037-00
- $ -
210-1038-00
- $ -
210-1039-00
- $ -
210-1040-00
- $ -
210-1041-00
- $ -
210-1042-00
- $ -
210-1043-00
- $ -
210-1044-00
- $ -
210-1045-00 $0.05
- $ -
210-1046-00 $0.03
- $ -
210-1047-00
- $ -
210-1048-00
- $ -
210-1049-00
- $ -
210-1050-00
- $ -
211-1001-00 $0.15
- $ -
212-1001-00 $8.82
- $ -
212-1002-00 $0.52 25
2 15 42 $ 21.84
212-1003-00 $0.20
2 15 17 $ 3.40
212-1004-00 $0.20
2 15 17 $ 3.40
</TABLE>
<PAGE>
NETWORK ENGINES P6000 INVENTORY 9/30/99
<TABLE>
<CAPTION>
NEI Part Generic Part Description Manufacturer Manufacturer Distributor Dist. Part
Number Type Part Number Number
<S> <C> <C> <C> <C> <C> <C>
212-1005-00 Mechanical Mechanical Schroff 20809-396
Hardware Handle Switch
Bracket
212-1006-00 Mechanical Mechanical Handle Promptus 235-242.5AL1032
Hardware Front 8"cl 10-32 2.5"
212-1007-00 Mechanical Mechanical Door McMaster 1770A52
Hardware Lock & Key Carr
212-1008-00 Mechanical Mechanical McMaster 8507K14
Hardware Gasket Rubber Carr
door
212-1009-00 Mechanical Mechanical Slide General Devices C-300-128 TriMap SL28
Hardware Rail Set 28" Ritchie C-300-128
Elec
212-1010-00 Mechanical Mechanical PARALLEL
Hardware PORT BRACKET
212-1011-00 Mechanical MECHANICAL ENET DB HM SYSTEMS
Hardware BRACKET
212-1012-00 Mechanical MECHANICAL CR ROM TOSHIBA TA57BL-ASSY
Hardware DRIVE BLK BEZEL
212-1013-00 Mechanical MECHANICAL MOUNTING 1P417849
Hardware KIT 3.5 TO 5.25 DDS
212-1014-00 Mechanical MECHANICAL MOUNTING 1P542003
Hardware FRAME 5.25 TO 3.5 DR
212-1015-00 Mechanical MECHANICAL
Hardware Serial Port
Bracket
212-1016-00 Mechanical MECHANICAL 3.5" TEAC TEAC235R 1P860017
Hardware MICRO FDD ADAPTER KIT
212-1017-00 Mechanical Mechanical Serial /
Hardware Parallel Port
Bracket
212-1018-00 Mechanical Pull Tab for 34 Digikey ASPT34-ND
Hardware pin IDC
212-1019-00 Mechanical Pull Tab for 40 Digikey ASPT40-ND
Hardware pin IDC
212-1020-00 Mechanical Pull Tab for 50 Digikey ASPT50-ND
Hardware pin IDC
212-1021-00 Mechanical Strain relief / 50 AMP 499252-4 Digikey ASSR50-ND
Hardware pin socket connector
212-1022-00 Mechanical Strain relief / 40 AMP 499252-1 Digikey ASSR40-ND
Hardware pin socket connector
212-1023-00 Mechanical Strain relief / 34 AMP 499252-6 Digikey ASSR34-ND
Hardware pin socket connector
212-1024-00 Mechanical 6" adjustable rail General Devices B308
Hardware extension for
C-300-128
212-1025-00 Mechanical Rack Mount Kit for Cybex
Hardware Cybex Autoview 8
port commander
212-1026-00 Mechanical Handle 3" for Globe Electronic S-47017-632-5
Hardware P6000EXP Power Supply Hardware, inc.
212-1027-00 AT BRACKET AT BRACKET, 68
PIN SCSI
215-1001-00 Heatsink Heat Sink 1 Sweeney SM6000128
215-1002-00 Heatsink Heat Sink 2 Sweeney SM6000130
215-1003-00 Heatsink Heat Sink EXP Wakefield Eng
215-1004-00 Heatsink HEATSINK FAN 486
215-1005-00 Heatsink HEATSINK FAN 586
215-1006-00 Heatsink HEATSINK FAN 586
LOW PROFILE
215-1007-00 Heatsink HEATSINK WITH FAN
FOR DUAL PII 400MHZ
215-1008-00 Heatsink HEATSINK WITH FAN
FOR DUAL PII 400MHZ
<CAPTION>
NEI Part Unit Rack 1 Rack 2 Rack 3 Table Back Cube Trailer Total QTY Extended Cost
Number Cost Room on Hand @ 9/30/99
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
212-1005-00 $0.72 73
73 $ 52.56
212-1006-00 $4.73 34
2 15 51 $ 241.23
212-1007-00 $3.11 8
8 $ 24.88
212-1008-00 $1.43
- $ -
212-1009-00 $50.00
- $ -
212-1010-00 $1.00
- $ -
212-1011-00 $1.00
- $ -
212-1012-00 $1.00
- $ -
212-1013-00 $6.50
- $ -
212-1014-00
- $ -
212-1015-00 $1.00 200
200 $ 200.00
212-1016-00
- $ -
212-1017-00
- $ -
212-1018-00 $0.17
- $ -
212-1019-00 $0.19
- $ -
212-1020-00 $0.22
- $ -
212-1021-00 $0.23
- $ -
212-1022-00 $0.20
- $ -
212-1023-00 $0.19
- $ -
212-1024-00 $10.98
- $ -
212-1025-00 $31.50
- $ -
212-1026-00 $4.25 40
40 $ 170.00
212-1027-00
- $ -
215-1001-00 $4.09 16
4 23 43 $ 175.87
215-1002-00 $4.09 17
4 23 44 $ 179.96
215-1003-00 $4.50 296
296 $ 1,332.00
215-1004-00 $0.00
- $ -
215-1005-00
- $ -
215-1006-00
- $ -
215-1007-00 $7.25
- $ -
215-1008-00 $4.80
- $ -
</TABLE>
<PAGE>
NETWORK ENGINES P6000 INVENTORY 9/30/99
<TABLE>
<CAPTION>
NEI Part Generic Part Description Manufacturer Manufacturer Distributor Dist. Part
Number Type Part Number Number
<S> <C> <C> <C> <C> <C> <C>
260-1001-00 Metal Fab METAL Bezel DISK Sweeney SM6000131
DRIVE Front Panel
260-1002-00 Metal Fab METAL Bezel FLOPPY Sweeney SM6000132
DRIVE Front Panel
260-1003-00 Metal Fab METAL Latch Disk Sweeney SM6000133
Drive
260-1004-00 Metal Fab METAL PS Chassis Sweeney SM600045
Pan (EXP)
206-1004-01 metal board
support
260-1005-00 Metal Fab METAL Board Sweeney SM6000043
Support
260-1006-00 Metal Fab METAL Sweeney SM6000046
Motherboard
Chassis
260-1007-00 Metal Fab METAL Box Sweeney SM6000047
Connector
260-1008-00 Metal Fab METAL Chassis Sweeney SM6000048
Assembly
260-1009-00 Metal Fab METAL AT Support Sweeney SM6000049
Assembly
260-1010-00 Metal Fab METAL Front Sweeney SM6000051
Panel SMCD
260-1011-00 Metal Fab METAL Support Sweeney SM6000105
Disk Top
260-1012-00 Metal Fab METAL Support Sweeney SM6000106
Disk Bottom
260-1013-00 Metal Fab METAL Support Sweeney SM6000107
Drive Right
260-1014-00 Metal Fab METAL Bracket Sweeney SM6000108
Disk Con
260-1015-00 Metal Fab METAL Support AT Sweeney SM6000109
Interface Assembly
260-1016-00 Metal Fab METAL Cover Sweeney SM6000110
260-1017-00 Metal Fab METAL Side Panel Sweeney SM6000111
Right
260-1018-00 Metal Fab METAL Side Panel Sweeney SM6000112
Left
260-1019-00 Metal Fab METAL Front Sweeney SM6000113
Panel Switch
Bracket
260-1020-00 Metal Fab METAL Chassis, Sweeney SM6000114
Power Supply
260-1021-00 Metal Fab METAL Pan Chassis Sweeney SM6000115
260-1022-00 Metal Fab METAL Support Sweeney SM6000116
Board
260-1023-00 Metal Fab METAL Bracket Fan Sweeney SM6000117
260-1024-00 Metal Fab METAL Door Sweeney SM6000118
Assembly
260-1025-00 Metal Fab METAL Support Sweeney SM6000120
Drive Hinge
260-1026-00 Metal Fab METAL Support Sweeney SM6000121
Drive Left
260-1027-00 Metal Fab METAL Hinge Sweeney SM6000124
Modified
260-1028-00 Metal Fab METAL Clamp AT Sweeney SM6000127
Board
260-1029-00 Metal Fab METAL Power Supply Sweeney SM6000129
Switch Bracket Clamp
260-1030-00 Metal Fab METAL CD ROM Sweeney SM6000135
Mount
260-1031-00 Metal Fab METAL Connector Sweeney SM6000136
Box
260-1032-00 Metal Fab METAL Slot Cover Win
AT Rear Bracket Enterprises
260-1033-00 Metal Fab METAL P6000 REAR Sweeney
CONNECTOR BRACKET
260-1034-00 Metal Fab METAL Serial Sweeney SM600055
/Parallel Port
Cover
260-1035-00 Metal Fab METAL P6000EXP Sweeney SM600053
Blanking Panel
260-1036-00 Metal Fab METAL P6000 Rear Sweeney
Connector Blanking
Panel
260-1037-00 Metal Fab METAL P6000EX pan Sweeney SM600054
chassis screen
260-1038-00 Metal Fab METAL P6000EX PS Sweeney SM600052 SM600052D-R1
chassis assy
260-1039-00 Metal Fab METAL Slider 1 Sweeney SM600040 SM600040D-R2 2
260-1040-00 Metal Fab METAL Slider 2 Sweeney SM600041 SM600041D-R3 3
260-1041-00 Metal Fab METAL Pan Chassis Sweeney SM600042 SM600042D-R4 4
260-1042-00 Metal Fab METAL Support AT Sweeney SM600044 SM600044-R2 2
Interface
260-1043-00 Metal Fab Duplicate Duplicate Duplicate Duplicate Duplicate
<CAPTION>
NEI Part Unit Rack 1 Rack 2 Rack 3 Table Back Cube Trailer Total QTY Extended Cost
Number Cost Room on Hand @ 9/30/99
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
260-1001-00 $6.55 157
157 $ 1,028.35
260-1002-00 $7.70 172
172 $ 1,324.40
260-1003-00 $4.66 452
452 $ 2,106.32
260-1004-00 $13.46
- $ -
206-1004-01 $13.46 62
62 $ 834.52
260-1005-00 $14.97
- $ -
260-1006-00 $42.18
- $ -
260-1007-00 $15.96
8 8 $ 127.68
260-1008-00 $73.85
- $ -
260-1009-00 $33.20
16 16 $ 531.20
260-1010-00 $30.90 7
2 43 52 $ 1,606.80
260-1011-00 $11.98
2 21 23 $ 275.54
260-1012-00 $13.75
2 24 26 $ 357.50
260-1013-00 $6.02
2 42 44 $ 264.88
260-1014-00 $20.49
2 15 17 $ 348.33
260-1015-00 $33.40
4 23 27 $ 901.80
260-1016-00 $19.67
13 13 $ 255.71
260-1017-00 $19.83
4 29 33 $ 654.39
260-1018-00 $19.83
4 29 33 $ 654.39
260-1019-00 $5.90 33
33 $ 194.70
260-1020-00 $18.50
40 40 $ 740.00
260-1021-00 $37.60
4 23 27 $ 1,015.20
260-1022-00 $14.50
4 23 27 $ 391.50
260-1023-00 $9.67
2 15 17 $ 164.39
260-1024-00 $40.52
- $ -
260-1025-00 $7.75
2 21 23 $ 178.25
260-1026-00 $2.57
2 36 38 $ 97.66
260-1027-00 $9.28 9
9 $ 83.52
260-1028-00 $2.16
4 23 27 $ 58.32
260-1029-00 $3.79
- $ -
260-1030-00 $5.64 38
18 56 $ 315.84
260-1031-00 $13.10
4 23 27 $ 353.70
260-1032-00 $0.20
- $ -
260-1033-00
- $ -
260-1034-00 $1.95 296
296 $ 577.20
260-1035-00 $9.64 51
51 $ 491.64
260-1036-00 $1.95
- $ -
260-1037-00 $3.00 9
9 $ 27.00
260-1038-00
- $ -
260-1039-00
- $ -
260-1040-00
- $ -
260-1041-00
- $ -
260-1042-00
- $ -
260-1043-00
- $ -
</TABLE>
<PAGE>
NETWORK ENGINES P6000 INVENTORY 9/30/99
<TABLE>
<CAPTION>
NEI Part Generic Part Description Manufacturer Manufacturer Distributor Dist. Part
Number Type Part Number Number
<S> <C> <C> <C> <C> <C> <C>
260-1044-00 Metal Fab METAL Slider 3 Sweeney SM600050 SM600050D-R1 1
260-1045-00 Metal Fab METAL Door Sweeney SM6000119 IA12E16D A
260-1046-00 Metal Fab Sweeney SM6000122
260-1047-00 Metal Fab METAL Retainer Sweeney SM6000123 MD13D01D A
Spring
260-1048-00 Metal Fab METAL Bracket, Sweeney SM6000125 MD13D03D A
Filter BT
260-1049-00 Metal Fab METAL Bracket, Sweeney SM6000126 MD13D04D A
Filter TP
260-1050-00 Metal Fab METAL Chassis Sweeney SM600056 SM600056D -
Assy BK
260-1051-00 Metal Fab METAL, board Sweeney sm600043 rev3
support
260-1052-00 Metal Fab METAL, Disk Sweeney
Carrier Blank
Plate
260-1053-00 Metal Fab METAL, Double Sweeney
floppy front
bezel
260-1054-00 Metal Fab MBB TBD
260-1055-00 Metal Fab MBB TBD
260-1056-00 Metal Fab MBB TBD
260-1057-00 Metal Fab MBB TBD
260-1058-00 Metal Fab MBB TBD
260-1059-00 Metal Fab MBB TBD
260-1060-00 Metal Fab MBB TBD
260-1061-00 Metal Fab MBB TBD
260-1062-00 Metal Fab MBB TBD
260-1063-00 Metal Fab MBB TBD
260-1064-00 Metal Fab 7000 RACK MOUNT
MOUNTING BRACKET
260-1065-00 Metal Fab 7000 PAN ASSEMBLY
206-1066-00
260-1067-00 Metal Fab 7000 STACKING
CONNECTOR 1
260-1068-00 Metal Fab 7000 STACKING
CONNECTOR 2
260-1068-00 Metal Fab 7000 PCI CLIP
260-1074-03 PLASTIC 7000 BEZEL
260-1079-00 PLASTIC 700 CD ROM SLED
260-1080-00 PLASTIC 7000 DRIVE SLED
260-1081-00 PLASTIC 7000 CD ROM COVER
300-1001-00 Converter Converter DC/DC Astec AL60A-300L-12F09 Reptron
12VDC
300-1002-00 Converter Converter DC/DC Astec BM80A-300L-050F60 Reptron
5VDC
300-1003-00 Converter Converter Vicor VI-ARM-C12
Autoranging Rectifer
Module
300-1005-00 Converter Converter Power Vicor
Supply
301-1001-00 Monitor MONITOR 14" color Viewsonic 1000S-2 D&H XT4871
monitor SVGA, beige
301-1002-00 Monitor Monitor 14" TriMap RMM06-14C
Color SVGA w/
shelf
302-1001-00 Keyboard Keyboard 104 Key Keytronics LTDESIGNER
with PS/2 connector
black
302-1002-00 Keyboard Keyboard Rackmount TriMap RMKB6
with trackball, 1U
Black
303-1001-00 Mouse Mouse 2 button Microsoft
PS/2
303-1002-00 Mouse MOUSE 2 BUTTO
SERIAL
304-1001-00 Fan FAN 12VDC 1.78W 60MM Panasonic FBA06T12H Digikey P9725-ND
FAB HYDRO
304-1002-00 Fan FAN 12VDC 2.4W 80MM Panasonic FBA08T12H Digi-Key P9733-ND
FBA HYDRO
304-1003-00 fan COMAIR ROTRON 12
VOLT BRUSHLESS DC
<CAPTION>
NEI Part Unit Rack 1 Rack 2 Rack 3 Table Back Cube Trailer Total QTY Extended Cost
Number Cost Room on Hand @ 9/30/99
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
260-1044-00
- $ -
260-1045-00
- $ -
260-1046-00
- $ -
260-1047-00
- $ -
260-1048-00
- $ -
260-1049-00
- $ -
260-1050-00
- $ -
260-1051-00
- $ -
260-1052-00 $6.55 188
188 $ 1,231.40
260-1053-00 $6.28 60
60 $ 376.80
260-1054-00
- $ -
260-1055-00
12 12 $ -
260-1056-00
16 16 $ -
260-1057-00
- $ -
260-1058-00
62 62 $ -
260-1059-00 $29.05
62 62 $ 1,801.10
260-1060-00 $8.15
36 36 $ 293.40
260-1061-00
33 33 $ -
260-1062-00
- $ -
260-1063-00
- $ -
260-1064-00 $1.85
39 39 $ 72.15
260-1065-00 $102.50
- $ -
206-1066-00
92
260-1067-00 $3.50
- $ -
260-1068-00 $3.80
- $ -
260-1068-00 $13.75
- $ -
260-1074-03 $4.42
60 60 $ 265.20
260-1079-00 $1.00
- $ -
260-1080-00 $1.00
- $ -
260-1081-00 $1.00
- $ -
300-1001-00 $93.00 68
68 $ 6,324.00
300-1002-00 $182.00 71
71 $ 12,922.00
300-1003-00 $41.00 32
32 $ 1,312.00
300-1005-00
- $ -
301-1001-00 $140.00
- $ -
301-1002-00 $565.00
- $ -
302-1001-00 $31.00
- $ -
302-1002-00 $250.00
- $ -
303-1001-00 $22.00
- $ -
303-1002-00 $21.90
- $ -
304-1001-00 $7.69 20
20 $ 153.80
304-1002-00 $7.69
- $ -
304-1003-00 $5.95
- $ -
</TABLE>
<PAGE>
NETWORK ENGINES P6000 INVENTORY 9/30/99
<TABLE>
<CAPTION>
NEI Part Generic Part Description Manufacturer Manufacturer Distributor Dist. Part
Number Type Part Number Number
<S> <C> <C> <C> <C> <C> <C>
306-1001-00 Disk Drive DISK DRIVE 9.1GB Seagate ST39173N
Internal SCSI HARD DRIVE,
BARRACUDA, 3.5" LP
306-1002-00 Disk Drive DISK DRIVE 1.44MB TEAC FD235HF7429
Internal Floppy 3.5" Black 19307772-40
bezel
306-1003-00 Disk Drive DISK DRIVE 9.1GB Seagate ST39173FC
Internal SCSI Wide, 80 pin
LP,10,000 RPM SCA /
FIBER CHANNEL
306-1004-00 Disk Drive DISK DRIVE 4.5GB Seagate ST34501FC
Internal SCSI Wide Cheetah,
10,000RPM, LP, 80
pin SCA / FIBER
CHANNEL
306-1005-00 Disk Drive DISK DRIVE 4.3GB Seagate Not available Not available
Internal SCSI Wide Cheetah,
10,000RPM, LP, 80
pin SCA
306-1006-00 Disk Drive DISK DRIVE 2.14GB Seagate Not available Not available
Internal SCSI WIDE Cheetah,
10,000 RPM, LP, 80
pin SCA
306-1007-00 Disk Drive DISK DRIVE 1.7GB IDE Seagate ST31720A Not available
Internal Hard drive 3.5"LP
Medalist Int.
306-1008-00 Disk Drive DISK DRIVE 2.5GB IDE Seagate ST32531A Not available
Internal Hard drive 3.5"LP
Medalist int.
306-1009-00 Disk Drive DISK DRIVE 4.3GB IDE Seagate ST34342A
Internal Hard drive 3.5"LP ST34321A
Medalist int.
306-1010-00 Disk Drive DISK DRIVE 2.17GB Seagate ST32171N Not available
Internal SCSI Hard drive,
Barracuda 3.5"LP int.
306-1011-00 Disk Drive DISK DRIVE 4.35GB Seagate ST34371N Not available
Internal SCSI Hard drive,
Barracuda 3.5"LP int.
306-1012-00 Disk Drive DISK DRIVE 4.5GB Seagate ST34572N
Internal SCSI HARD DRIVE
BARRACUDA 3.5" LP
INT
306-1013-00 Disk Drive DISK DRIVE 9.1GB IDE Seagate ST39140A
Internal HARD DRIVE, MEDALIST
3.5", LP
306-1014-00 Disk Drive DISK DRIVE 2.26GB Seagate ST32272N Not available
Internal SCSI Hard drive,
Barracuda 3.5"LP int.
306-1015-00 Disk Drive DISK DRIVE 9.1GB Seagate ST39173W
Internal Ultra Wide SCSI HARD
DRIVE, BARRACUDA,
3.5" LP
306-1016-00 Disk Drive DISK DRIVE 2.2GB Seagate ST32272N Not available
Internal SCSI HARD DRIVE,
BARRACUDA, 3.5" LP
306-1017-00 Disk Drive DISK DRIVE 4.5GB Seagate ST34572W
Internal ULTRA WSCSI HARD
DRIVE BARRACUDA 3.5"
LP INT
306-1018-00 Disk Drive DISK DRIVE 2.15GB Seagate ST32151N Not available
Internal SCSI Hard drive,
Barracuda 3.5"LP int.
306-1019-00 Disk Drive DISK DRIVE 4.5GB IDE Seagate ST34520A
Internal Hard drive 3.5"LP
Medalist int.
306-1020-00 Disk Drive DISK DRIVE 6.5GB IDE ST36531A Tech Data 800928
Internal Hard drive 3.5"LP
Medalist int.
306-1021-00 Disk Drive ST310240A, 10.2GB,
Internal Seagate drive,
5400RPM MEDALILST
306-1022-00 Disk Drive ST318275LW, 18.2GB,
Internal LOW VOLTAGE
DIFFERENTIAL WIDE
ULTRA 2 SCSI
306-1023-00 ST39102LW, 9.1GB Low
voltage wide ultra2
10,000
308-1001-00 CD-ROM Drive CD ROM DRIVE 16X TEAC CD-316E
Internal IDE super slim
308-1002-00 CD-ROM Drive CD ROM DRIVE Toshiba XM5702B
Internal SCSI 24Xblack bezel
internal
308-1003-00 CD-ROM Drive CD ROM INTERNAL IDE TEAC CD-220E
Internal IDE DRIVE 20X SUPER SLIM
308-1004-00 CD-ROM Drive CD ROM DRIVE IDE TOSHIBA 6102B-S
Internal IDE
308-1005-00 CD-224E TEAC CD ROM INTERNAL
IDE DRIVE 24X SUPER
SLIM
<CAPTION>
NEI Part Unit Rack 1 Rack 2 Rack 3 Table Back Cube Trailer Total QTY Extended Cost
Number Cost Room on Hand @ 9/30/99
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
306-1001-00 $587.27
- $ -
306-1002-00 $29.00
- $ -
306-1003-00 $675.00
- $ -
306-1004-00 $581.00
- $ -
306-1005-00
- $ -
306-1006-00
- $ -
306-1007-00 $118.56
- $ -
306-1008-00 $169.00
- $ -
306-1009-00 $129.83
- $ -
306-1010-00
- $ -
306-1011-00
- $ -
306-1012-00 $352.88
- $ -
306-1013-00 $287.34
- $ -
306-1014-00
- $ -
306-1015-00 $587.00
- $ -
306-1016-00 $327.45
- $ -
306-1017-00 $353.88
- $ -
306-1018-00
- $ -
306-1019-00 $161.02
- $ -
306-1020-00 $145.92
- $ -
306-1021-00 $179.00
- $ -
306-1022-00 $889.00
- $ -
306-1023-00 $557.00
- $ -
308-1001-00 $204.00
- $ -
308-1002-00 $135.00
- $ -
308-1003-00 $146.00
- $ -
308-1004-00 $135.00
- $ -
308-1005-00 $146.00
- $ -
</TABLE>
<PAGE>
NETWORK ENGINES P6000 INVENTORY 9/30/99
<TABLE>
<CAPTION>
NEI Part Generic Part Description Manufacturer Manufacturer Distributor Dist. Part
Number Type Part Number Number
<S> <C> <C> <C> <C> <C> <C>
310-1001-00 Tape Drive DAT Tape Drive Exabyte Tech Data 888701
5/10 GB
320-1001-00 PERIPHERAL Autoview Cybex AV-8A Tech Data 128060
Commander 8 Port
320-1002-00 PERIPHERAL MODEM FAX US Robotics 000839-0
External 33.6MHZ
320-1003-00 PERIPHERAL MODEM FAX US Robotics 000840-0
Internal 33.6MHZ
320-1004-00 PERIPHERAL A/B T1 Switch DataProbe
320-1005-00 PERIPHERAL Dual Circuit DataProbe K2-AB-RJ8-R
Failover Relay
Switch
320-1006-00 PERIPHERAL 6MP Laser Printer HP Tech Data 546110
320-1007-00 PERIPHERAL Digi 8 Port Digi Tech Data 195837
SerialPCI Board
320-1008-00 PERIPHERAL Autoview Cybex AV-16A Tech Data 128527
Commander 16
Port
330-1001-00 NIC 3rd party NIC Token Ring SMC Token Ring ISA
ISA 16/4
330-1002-00 NIC 3rd party NIC Intel Pro Intel IntelPro100B
100B ISA
10/100MB
330-1003-00 NIC 3rd party NIC EtherLink 3 3Com 3C515B-TX
16-Bit ISA Ethernet
TP Adapter ; RJ45
only 10MB/100MBsec
330-1004-00 NIC 3rd party NIC EtherLink 3 16 3Com 3C509B-COMBO
Bit, ISA Ethernet
Combo Adapter ;
RJ45/BNC/AUI 10MB/Sec
330-1005-00 NIC 3rd party NIC EtherLink XL PCI 3Com 3C905-TX
Fast Ethernet 100
BaseT/10 BaseT
Adapter 10/100MB/Sec
330-1006-00 NIC 3rd party NIC Intel Pro Intel IntelPRO100TX
100 TX PCI
10/100MB
330-1007-00 NIC 3rd party TOKEN RING MAU KINGSTON KTR-8UTP
330-1008-00 NIC 3rd party 100 MB Ethernet HM Systems
daughter card,
single port
330-1009-00 NIC 3rd party 100 MB Ethernet HM Systems
daughter card, dual
port
330-1010-00 NIC 3rd party NIC Intel Pro Intel IntelPRO100T4
100 T4 PCI
10/100MB
330-1011-00 NIC 3rd party HM single to HM Systems
dual enet upgrade
330-1012-00 Intel Pro100B
10/100TX Dual
Port
340-1001-00 SCSI ADAPTER SCSI-2 PI/O for Adaptec AHA-1520A
3rd party DOS/Windows/95/NT/OS/2/
UNIX/NetWare
16 Bit ISA Fast
SCSI-2 host Adapter
360-1001-00 SCSI ADAPTER SCSI-2 FAST 16 Bit Adaptec AHA-1540CP
3rd party ISA PnP Host
adapter; BusMaster;
no Floppy support
EZ-SCSI 14.0
360-1002-00 SCSI ADAPTER SCSI-2 FAST 16 Bit Adaptec AHA-1542CP
3rd party ISA PnP Host
Adapter; BusMaster;
Floppy support, EZ
SCSI 4.0
360-1003-00 SCSI ADAPTER SCSI-3 Ultra Wide Adaptec AHA-2940UW
3rd party 32-Bit PCI
BusMaster Host
Adapter; PhaseEngine
RISC; 40 MBPS, 15
SCSI devices support
360-1004-00 SCSI ADAPTER SCSI BusMaster DPT PM2041W
3rd party Adapter SmartCache
IV ISA-to-Wide
360-1005-00 SCSI ADAPTER SCSI BusMaster DPT PM2044W
3rd party Adapter SmartCache
IV PCI-to-Wide
360-1006-00 SCSI ADAPTER SCSI- ISA to Fast Adaptec AHA-1520B Tech Data 76091
3rd party SCSI Plug and Play
360-1007-00 SCSI ADAPTER 3 Channel Ultra wide Adaptec AAA-133 Kit Tech Data 76094
3rd party SCSI Raid controller
PCI
360-1008-00 SCSI ADAPTER SCSI PCI ADAPTER ADVAN APB930
3rd party
<CAPTION>
NEI Part Unit Rack 1 Rack 2 Rack 3 Table Back Cube Trailer Total QTY Extended Cost
Number Cost Room on Hand @ 9/30/99
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
310-1001-00 $627.16
- $ -
320-1001-00 $557.79
- $ -
320-1002-00 $142.00
- $ -
320-1003-00 $118.00
- $ -
320-1004-00 $575.00
- $ -
320-1005-00 $161.25
- $ -
320-1006-00 $861.04
- $ -
320-1007-00 $591.79
- $ -
320-1008-00 $1,118.70
- $ -
330-1001-00 $175.92 5
5 $ 879.60
330-1002-00 $82.00 2
2 $ 164.00
330-1003-00 $140.00 7
7 $ 980.00
330-1004-00 $96.00 5
5 $ 480.00
330-1005-00 $83.29
- $ -
330-1006-00 $82.00 1
1 $ 82.00
330-1007-00 $278.00
- $ -
330-1008-00 $78.00 2
2 $ 156.00
330-1009-00 $150.00 4
4 $ 600.00
330-1010-00 $82.00
- $ -
330-1011-00 $70.00
- $ -
330-1012-00 $221.00
- $ -
340-1001-00 $89.00
- $ -
360-1001-00 $168.00
- $ -
360-1002-00 $179.00
2 2 $ 358.00
360-1003-00 $229.00
- $ -
360-1004-00 $173.37 10
10 $ 1,733.70
360-1005-00 $237.00
- $ -
360-1006-00 $96.56
- $ -
360-1007-00 $635.88
- $ -
360-1008-00 $0.00 1
1 $ -
</TABLE>
<PAGE>
NETWORK ENGINES P6000 INVENTORY 9/30/99
<TABLE>
<CAPTION>
NEI Part Generic Part Description Manufacturer Manufacturer Distributor Dist. Part
Number Type Part Number Number
<S> <C> <C> <C> <C> <C> <C>
360-1010-00 QLOGIC QLA1080 PCI
64-bit SCSI adaptor
360-1017-00 st34573W 4.5 GB
ultra wscso jard
drove barracida 3.5"
lp int
370-1001-00 RAID RAID Integrated DPT RC4040/4
CONTROLLER Caching Module for
3rd Party SmartCache IV
adapters; 4MB
ECC-ported SIMM
370-1002-00 RAID RAID Integrated DPT RC4040
CONTROLLER Caching Module for
3rd Party SmartCache IV
adapters; no SIMM
370-1003-00 RAID Raid controller Adaptec AAA-130
CONTROLLER
3rd Party
370-1004-00 RAID Raid controller Compaq
CONTROLLER
3rd Party
380-1001-00 Video Card VIDEO Trident 9680P Trident 9680P
3rd Party 64 Bit accelerator 1
MB UPG 2 MB PCI
450-1001-00 Label Label, 1.5" x Brady WML-517-292
2.5" wire
marker, WHITE
450-1002-00 Label Label, 1.5" x Brady CL-217-621
.4" Clear
450-1003-00 Label Label, "Tested" Brady CLWO-317-4
Green
450-1004-00 Label Label, "HI POT" Brady NE100HP
450-1005-00 Label Label, "Shock Brady NE568x500
Hazard"
450-1006-00 Label Label, "Ground Screenprint Dow
Symbol"
450-1007-00 Label Label, Screenprint Dow
"ClusterDirector"
450-1008-00 Label Label, "P6000 Screenprint Dow
Front Panel
Status"
450-1009-00 Label Label, "P6000 Screenprint Dow
Serial Number"
450-1010-00 Label Label, " P6000 Screenprint Dow
Rating"
450-1011-00 Label Label, "P1000 Screenprint Dow
Serial Number"
450-1012-00 Label Label, P2000 Screenprint Dow
Serial Number"
450-1014-00 P7000 front
panel overlay
450-1015-00 Label P7000 AGENCY
LABEL
460-1001-00 Logo Logo Custom for NEI Logo
racks customer
provided artwork
460-1002-00 Logo P7000 front
panel logo lavel
497-1001-00 Procedure, MFG P1000 Assembly and NEI
Systems Integration
Procedure
497-1002-00 Procedure, MFG P2000 Assembly and NEI
Systems Integration
Procedure
497-1003-00 Procedure, MFG P6000 Assembly and NEI
Systems Integration
Procedure
497-1004-00 Procedure, MFG P6000/EXP Assembly NEI
and Systems
Integration Procedure
497-1005-00 Procedure, MFG Hi-Pot Test NEI
Procedure
497-1006-00 Procedure, MFG MP700 Flash NEI
Installation and
Testing Procedure
497-1007-00 Procedure, MFG WindowsNT OEM NEI
Rollback Procedure
498-1001-00 Process Final Inspection NEI
Document, MFG Check List P6000
498-1002-00 Process Final Assembly NEI
Document, MFG Check List P6001
498-1003-00 Process Packing and Shipping NEI
Document, MFG Check List P6000
<CAPTION>
NEI Part Unit Rack 1 Rack 2 Rack 3 Table Back Cube Trailer Total QTY Extended Cost
Number Cost Room on Hand @ 9/30/99
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
360-1010-00 $431.00 6
6 $ 2,586.00
360-1017-00 $353.88
- $ -
- $ -
370-1001-00 $623.00
3 3 $ 1,869.00
370-1002-00 $327.64
4 4 $ 1,310.56
370-1003-00 $398.00
- $ -
370-1004-00
- $ -
380-1001-00 $35.00
- $ -
450-1001-00
- $ -
450-1002-00
- $ -
450-1003-00
- $ -
450-1004-00
- $ -
450-1005-00
- $ -
450-1006-00
- $ -
450-1007-00
- $ -
450-1008-00
- $ -
450-1009-00
- $ -
450-1010-00
- $ -
450-1011-00
- $ -
450-1012-00
- $ -
450-1014-00
- $ -
450-1015-00
- $ -
460-1001-00 $50.00
- $ -
460-1002-00
- $ -
497-1001-00
- $ -
497-1002-00
- $ -
497-1003-00
- $ -
497-1004-00
- $ -
497-1005-00
- $ -
497-1006-00
- $ -
497-1007-00
- $ -
498-1001-00
- $ -
498-1002-00
- $ -
498-1003-00
- $ -
</TABLE>
<PAGE>
NETWORK ENGINES P6000 INVENTORY 9/30/99
<TABLE>
<CAPTION>
NEI Part Generic Part Description Manufacturer Manufacturer Distributor Dist. Part
Number Type Part Number Number
<S> <C> <C> <C> <C> <C> <C>
498-1004-00 Process Accessories List NEI
Document, MFG P6000
498-1005-00 Process Product NEI
Document, MFG Categorie Codes
498-1006-00 Process ClusterDirector NEI
Document, MFG Check List
620-1001-00 Box Packaging Box Shipping NEI P2000BX
P2000
620-1002-00 Box Packaging Box Shipping NEI P6000BX
P6000
700-1001-00 SBC SBC Maintenance Adastra NPC-486E-DX2-66-SGS
Processor, Cluster
Director
700-1002-00 SBC SBC AMD K6-200 PCI HM Systems H10K200-4
IDE SVGA w/1MB 512k
cache 0MB (32 bit
EDO n x32)
700-1003-00 SBC SBC P586 Pentium Trenton TR-P6V2/200/0
Pro, PCI, IDE, PCI
Ultra SCSI, PCI SVGA
w/2MB, 256k cache 0MB
700-1004-00 SBC SBC P586 Pentium Trenton TR-P6V5/200/0
Pro, PCI, IDE, PCI
Ultra SCSI, PCI SVGA
w/2MB, 512k cache 0MB
700-1005-00 SBC SBC P586 Dual Trenton TR-DP52/200/0
Pentium Pro, PCI,
IDE, 256k cache, 0MB
supports up to 512MB
700-1006-00 SBC SBC AMD K6-233 PCI HM Systems H10K233-4
IDE SVGA w/1MB 512k
cache 0MB (32 bit
EDO n x32)
700-1007-00 SBC SBC P586/233 PCI IDE HM Systems H10M233-4
SVGA w/1MB 512k
cache. 0MB (32 bit
EDO, n x 32)
700-1008-00 SBC SBC P586/166 PCI IDE HM Systems H10M166-4 $850.00
SVGA w/1MB 512k
cache. 0MB (32 bit
EDO, n x 32)
700-1009-00 SBC SBC P586 Dual Trenton TR-DP65/200/0
Pentium Pro, PCI,
IDE, 512k cache, 0MB
supports up to 512MB
700-1010-00 SBC SBC P586/200 PCI IDE HMSystems H10M200-4
SVGA w/1MB 512k
cache. 0MB (32 bit
EDO, n x 32)
700-1011-00 SBC SBC P586/166 PCI IDE HM Systems H10M166-4E
SVGA w/1MB 512k
cache. 0MB (32 bit
EDO, n x 32), w/
ENET DB
700-1012-00 SBC SBC P586/200 PCI IDE HMSystems H10M200-4E
SVGA w/1MB 512k
cache. 0MB (32 bit
EDO, n x 32), w/
ENET DB
700-1013-00 SBC SBC P586/233 PCI IDE HM Systems H10M233-4E
SVGA w/1MB 512k
cache. 0MB (32 bit
EDO, n x 32), w/
ENET DB
700-1014-00 SBC SBC AMD K6-200 PCI HM Systems H10K200-4E
IDE SVGA w/1MB 512k
cache 0MB (32 bit
EDO n x32), w/ ENET
DB
700-1015-00 SBC SBC AMD K6-233 PCI HM Systems H10K233-4E
IDE SVGA w/1MB 512k
cache 0MB (32 bit
EDO n x32), w/ ENET
DB
700-1016-00 SBC SBC P586/166 PCI IDE HM Systems H10M166-2FE
SVGA w/1MB 512k
cache. 0MB 2 simm
LP, w/ ENET DB
700-1017-00 SBC SBC P586/166 PCI IDE HM Systems H10M166-2F
SVGA w/1MB 512k
cache. 0MB 2 simm LP
700-1018-00 SBC SBC P586/200 PCI IDE HMSystems H10M200-2FE
SVGA w/1MB 512k
cache. 0MB 2 simm
LP, w/ ENET DB
700-1019-00 SBC SBC P586/200 PCI IDE HMSystems H10M200-2F
SVGA w/1MB 512k
cache. 0MB 2 simm LP
<CAPTION>
NEI Part Unit Rack 1 Rack 2 Rack 3 Table Back Cube Trailer Total QTY Extended Cost
Number Cost Room on Hand @ 9/30/99
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
498-1004-00
- $ -
498-1005-00
- $ -
498-1006-00
- $ -
620-1001-00 $7.00
- $ -
620-1002-00 $49.00
- $ -
700-1001-00 $590.00
12 12 $ 7,080.00
700-1002-00 $825.00
- $ -
700-1003-00 $1,644.00
- $ -
700-1004-00 $2,482.00
- $ -
700-1005-00 $2,338.00
- $ -
700-1006-00 $850.00 3
3 $ 2,550.00
700-1007-00 $730.00
- $ -
700-1008-00 $720.00
- $ -
700-1009-00 $4,014.00
- $ -
700-1010-00 $925.00
- $ -
700-1011-00 $900.00
- - $ -
700-1012-00 $800.00 4
4 $ 3,200.00
700-1013-00 $810.00 4
4 $ 3,240.00
700-1014-00 $875.00
- $ -
700-1015-00 $900.00
- $ -
700-1016-00 $900.00
- $ -
700-1017-00 $850.00
- $ -
700-1018-00 $800.00
- $ -
700-1019-00 $720.00 2
2 $ 1,440.00
</TABLE>
<PAGE>
NETWORK ENGINES P6000 INVENTORY 9/30/99
<TABLE>
<CAPTION>
NEI Part Generic Part Description Manufacturer Manufacturer Distributor Dist. Part
Number Type Part Number Number
<S> <C> <C> <C> <C> <C> <C>
700-1020-00 SBC SBC P586/233 PCI IDE HM Systems H10M233-2FE $1,075.00
SVGA w/1MB 512k
cache. 0MB 2 simm
LP, w/ ENET DB
700-1021-00 SBC SBC P586/233 PCI IDE HM Systems H10M233-2F
SVGA w/1MB 512k
cache. 0MB 2 simm LP
700-1022-00 SBC SBC AMD K6-200 PCI HM Systems H10K200-2FE
IDE SVGA w/1MB 512k
cache 0MB, 2 simm
LP, w/ ENET DB
700-1023-00 SBC SBC AMD K6-200 PCI HM Systems H10K200-2F
IDE SVGA w/1MB 512k
cache 0MB, 2 simm LP
700-1024-00 SBC SBC AMD K6-233 PCI HM Systems H10K233-2FE
IDE SVGA w/1MB 512k
cache 0MB, 2 simm
LP, w/ ENET DB
700-1025-00 SBC SBC AMD K6-233 PCI HM Systems H10K233-2F
IDE SVGA w/1MB 512k
cache 0MB, 2 simm LP
700-1026-00 SBC SBC P586/133 HM SYSTEMS
MUSTANG
700-1027-00 SBC SBC P586/166 HM SYSTEMS
MUSTANG
700-1028-00 SBC SBC P586/166 PCI IDE HM SYSTEMS H10M166-2FE2 $970.00
SVGA w/1MB 512k
cache. 0MB 2 simm
LP, w/ Dual ENET DB
700-1029-00 SBC SBC P586/200 PCI IDE HM SYSTEMS H10M200-2FE2 $1,045.00
SVGA w/1MB 512k
cache. 0MB 2 simm
LP, w/ Dual ENET DB
700-1030-00 SBC SBC P586/233 PCI IDE HM SYSTEMS H10M233-2FE2
SVGA w/1MB 512k
cache. 0MB 2 simm
LP, w/ Dual ENET DB
700-1031-00 SBC SBC AMD K6-200 PCI HM SYSTEMS H10K200-2FE2
IDE SVGA w/1MB 512k
cache 0MB, 2 simm
LP, w/ Dual ENET DB
700-1032-00 SBC SBC AMD K6-233 PCI HM SYSTEMS H10K233-2FE2
IDE SVGA w/1MB 512k
cache 0MB, 2 simm
LP, w/ Dual ENET DB
700-1033-00 SBC SBC P586/166 PCI IDE HM SYSTEMS H10M166-4E2 $970.00
SVGA w/1MB 512k
cache. 0MB (32 bit
EDO, n x 32), w/
Dual ENET DB
700-1034-00 SBC SBC P586/200 PCI IDE HM SYSTEMS H10M200-4E2
SVGA w/1MB 512k
cache. 0MB (32 bit
EDO, n x 32), w/
Dual ENET DB
700-1035-00 SBC SBC P586/233 PCI IDE HM SYSTEMS H10M233-4E2
SVGA w/1MB 512k
cache. 0MB (32 bit
EDO, n x 32), w/
Dual ENET DB
700-1036-00 SBC SBC AMD K6-200 PCI HM SYSTEMS H10K200-4E2
IDE SVGA w/1MB 512k
cache 0MB (32 bit
EDO n x32), w/ Dual
ENET DB
700-1037-00 SBC SBC AMD K6-233 PCI HM SYSTEMS H10K233-4E2
IDE SVGA w/1MB 512k
cache 0MB (32 bit
EDO n x32), w/ Dual
ENET DB
700-1038-00 SBC SBC AMD K6-266 PCI HM Systems H10K266-2FE
IDE SVGA w/1MB 512k
cache 0MB, 2 simm
LP, w/ ENET DB
700-1039-00 SBC SBC AMD K6-300 PCI HM Systems H10K300-2FE
IDE SVGA w/1MB 512k
cache 0MB, 2 simm
LP, w/ ENET DB
700-1040-00 SBC SBC AMD K6-266 PCI HM SYSTEMS H10K266-2FE2
IDE SVGA w/1MB 512k
cache 0MB, 2 simm
LP, w/ Dual ENET DB
<CAPTION>
NEI Part Unit Rack 1 Rack 2 Rack 3 Table Back Cube Trailer Total QTY Extended Cost
Number Cost Room on Hand @ 9/30/99
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
700-1020-00 $810.00
- $ -
700-1021-00 $1,025.00
- $ -
700-1022-00 $875.00
- $ -
700-1023-00 $825.00
- $ -
700-1024-00 $900.00
- $ -
700-1025-00 $850.00
- $ -
700-1026-00 $930.00 3
3 $ 2,790.00
700-1027-00 $880.00 4
4 $ 3,520.00
700-1028-00 $870.00
- $ -
700-1029-00 $870.00
- $ -
700-1030-00 $1,145.00
- $ -
700-1031-00 $945.00
- $ -
700-1032-00 $970.00
- $ -
700-1033-00 $870.00
- $ -
700-1034-00 $1,045.00
1 1 $ 1,045.00
700-1035-00 $880.00
- $ -
700-1036-00 $945.00
- $ -
700-1037-00 $970.00
- $ -
700-1038-00 $1,005.00
- $ -
700-1039-00 $1,150.00
- $ -
700-1040-00 $1,075.00
- $ -
</TABLE>
<PAGE>
NETWORK ENGINES P6000 INVENTORY 9/30/99
<TABLE>
<CAPTION>
NEI Part Generic Part Description Manufacturer Manufacturer Distributor Dist. Part
Number Type Part Number Number
<S> <C> <C> <C> <C> <C> <C>
700-1041-00 SBC SBC AMD K6-300 PCI HM SYSTEMS H10K300-2FE2
IDE SVGA w/1MB 512k
cache 0MB, 2 simm
LP, w/ Dual ENET DB
700-1042-00 SBC SBC AMD K6-266 PCI HM Systems H10K266-4E
IDE SVGA w/1MB 512k
cache 0MB (32 bit
EDO n x32), w/ ENET
DB
700-1043-00 SBC SBC AMD K6-300 PCI HM Systems H10K300-4E
IDE SVGA w/1MB 512k
cache 0MB (32 bit
EDO n x32), w/ ENET
DB
700-1044-00 SBC SBC AMD K6-266 PCI HM SYSTEMS H10K266-4E2
IDE SVGA w/1MB 512k
cache 0MB (32 bit
EDO n x32), w/ Dual
ENET DB
700-1045-00 SBC SBC AMD K6-300 PCI HM SYSTEMS H10K300-4E2
IDE SVGA w/1MB 512k
cache 0MB (32 bit
EDO n x32), w/ Dual
ENET DB
700-1046-00 SBC SBC AMD K6-266 PCI HM Systems H10K266-2F
IDE SVGA w/1MB 512k
cache 0MB, 2 simm LP
700-1047-00 SBC SBC AMD K6-300 PCI HM Systems H10K300-2F
IDE SVGA w/1MB 512k
cache 0MB, 2 simm LP
700-1048-00 SBC SBC AMD K6-266 PCI HM Systems H10K266-4
IDE SVGA w/1MB 512k
cache 0MB (32 bit
EDO n x32)
700-1049-00 SBC SBC AMD K6-300 PCI HM Systems H10K300-4
IDE SVGA w/1MB 512k
cache 0MB (32 bit
EDO n x32)
700-1050-00 SBC SBC, Pentium II Trenton
233MHZ
700-1051-00 SBC SBC Dual PII 400MHZ, Diversified LBC8523
PC100 Compatible
SBC SBC Dual PII 450MHZ, Diversified LBC8525
PC100 Compatible
700-1052-00 SBC SBC Dual PII 300MHZ, Texas Micro
PC100 Compatible
700-1053-00 SBC SBC HH1 Rev C to HM Systems HH1REVUPG
Rev E Upgrade
700-1054-00 SBC SBC Dual PII 400MHZ, Diversified LBC8524
GX, PC100 Compatible
700-1055-00 SBC SBC Single Diversified LBC8516
Pentium II,
400MHZ
700-1056-00 SBC SBC2300ST, SINGLE
PENTIUM II, 300MHZ
700-1057-00 SBC SBC2400ST, SINGLE
PENTIUM II, BX,
400MHZ
700-1080-00 SBC HH1 AMD 400Mhz SBC sbc HHI AMP 400
Dual Ethernet MHZ SBC
700-1058-00 SBC SBC2450DD, Dual
Pentium ii 450mhz,
GX, scsi, dual enet
701-1001-00 BPL Untested BPL Backplane, NEI BP4
PCI/ISA, 17 slots, 4
fixed segments
701-1002-00 BPL Untested BPL Backplane, ISA, NEI BP10
20 slots,
segmentable in
groups of 2
701-1003-00 BPL Untested BPL Segment NEI 6000SB
bridge for BP10
701-1004-00 BPL Untested BPL Backplane 14 NEI TriMap BP14-10/4
slots 10 ISA and 4
PCI
701-1005-00 BPL Untested BPL Backplane 14 NEI TriMap BP14
slot ISA Board non
segmented
701-1006-00 BPL Untested BPL Backplane 20 NEI ISA20
slot ISA,
segmentable in
groups of 2 slots
701-1007-00 BPL Untested BPL Segment NEI
bridge for ISA20
701-1008-00 BPL Untested BPL Backplane NEI BP5-2
BP5HC
701-1009-00 BPL Untested BPL Backplane NEI BP4HC
BP4HC
<CAPTION>
NEI Part Unit Rack 1 Rack 2 Rack 3 Table Back Cube Trailer Total QTY Extended Cost
Number Cost Room on Hand @ 9/30/99
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
700-1041-00 $1,220.00
- $ -
700-1042-00 $1,005.00
- $ -
700-1043-00 $1,150.00
- $ -
700-1044-00 $1,075.00
- $ -
700-1045-00 $1,220.00
- $ -
700-1046-00 $955.00
- $ -
700-1047-00 $1,100.00
- $ -
700-1048-00 $955.00
- $ -
700-1049-00 $1,100.00
- $ -
700-1050-00 $1,451.001
1 $ 1,451.00
700-1051-00 $3,602.003
3 6 $ 21,612.00
$3,108.00
3 3 $ 9,324.00
700-1052-00 $3,845.00
- $ -
700-1053-00 $25.00
- $ -
700-1054-00 $3,547.00
- $ -
700-1055-00 $2,500.001
1 $ 2,500.00
700-1056-00 $1,500.00
- $ -
700-1057-00 $1,673.00
- $ -
700-1080-00 $990.00 2
2 $ 1,980.00
700-1058-00 $3,262.00
- $ -
701-1001-00 $307.84
11 2 22 35 $ 10,774.40
701-1002-00 $426.32
9 2 20 31 $ 13,215.92
701-1003-00 $5.00 85
85 $ 425.00
701-1004-00 $193.00
- $ -
701-1005-00 $94.00
- $ -
701-1006-00 $695.00
- $ -
701-1007-00 $3.25 17
17 $ 55.25
701-1008-00 $492.42
7 1 8 $ 3,939.36
701-1009-00 $392.42
19 8 27 $ 10,595.34
</TABLE>
<PAGE>
NETWORK ENGINES P6000 INVENTORY 9/30/99
<TABLE>
<CAPTION>
NEI Part Generic Part Description Manufacturer Manufacturer Distributor Dist. Part
Number Type Part Number Number
<S> <C> <C> <C> <C> <C> <C>
702-1001-00 MBD Untested MBD Mother Board ATX Micronics M7S-HI006
for use in P1000
702-1002-00 MBD Untested MBD 7000-MMB Sanmina
motherboard
703-1001-00 PCA Untested PCA FLOPPY DRIVE NEI SANMINA
CARRIER
703-1002-00 PCA Untested PCA SCSI DRIVE NEI SANMINA
CARRIER
703-1003-00 PCA Untested PCA IDE DRIVE NEI SANMINA
CARRIER
703-1004-00 PCA Untested PCA MANIFOLD NEI SANMINA
703-1005-00 PCA Untested PCA FRONT PANEL NEI SANMINA
703-1006-00 PCA Untested PCA FRONT PANEL NEI CUSTOM
CONTROL COMPUTER
703-1007-00 PCA Untested PCA BP10 NEI SANMINA
703-1008-00 PCA Untested PCA BP4 NEI SANMINA
703-1009-00 PCA Untested PCA DISK DRIVE NEI SANMINA
POWER
703-1010-00 PCA Untested PCA MPC6000 NEI SANMINA
703-1011-00 PCA Untested PCA ORING NEI
703-1012-00 PCA Untested PCA DISK CARRIER NEI
2.5"
703-1013-00 PCA Untested PCA P6000 POWER NEI
SUPPLY
703-1014-00 PCA Untested PCA BUS JUMPER NEI
EVERGREEN
703-1015-00 PCA Untested PCA CDRom NEI
Adapter
703-1016-00 PCA Untested PCA Peripheral NEI
Switch Board
703-1017-00 PCA Untested PCA SCSI NEI
Backplane 4 slot
703-1018-00 PCA Untested PCA SCSI NEI
Backplane 2 slot
703-1019-00 PCA Untested PCA Wide SCSI NEI
Drive Carrier SMT
703-1020-00 PCA Untested PCA Peripheral NEI
Sharing Switch
Control Board
703-1021-00 PCA Untested PCA 7000-1 Sanmina
703-1022-00 PCA Untested PCA 7000-2 Sanmina
703-1023-00 PCA Untested PCA 7000-3 Sanmina
703-1024-00 PCA Untested PCA IDE drive Sanmina
carrier SMT
703-1025-00 PCA Untested PCA Floppy Sanmina
carrier SMT
703-1026-00 PCA Untested PCANarrow SCSI Sanmina
Drive carrier SMT
703-1027-00
703-1028-00
703-1029-00
703-1030-00 PCA Untested P7000 CDROM
ADAPTER BOARD
711-1001-00 Programmed PROGRAMMED Serial XC1765-PD8C
Part EPROM dip 8
711-1002-00 Programmed PROGRAMMED FPGA Xilinx XC3064-160-PQFP
Part
730-1001-00 CARRIER Sub Carrier, hot NEI carrier/s
assembly swappable, SCSI hard
drive
730-1002-00 CARRIER Sub Carrier, P6000 NEI Carrier/B
assembly blanking
730-1003-00 CARRIER Sub Carrier, hot NEI Carrier/F
assembly swappable,
floppy drive
730-1004-00 CARRIER Sub Carrier, hot NEI Carrier/I
assembly swappable, IDE
hard drive
730-1005-00 CARRIER Sub Carrier hot Sanmina Carrier/Wide
assembly swappable for Wide SCSI
SCSI drive
730-1006-00 CARRIER Sub CARRIER HOT KINGSTON DE-100I-A/B
assembly SWAPPABLE IDE
REMOVEABLE
730-1007-00 CARRIER Sub Carrier, hot Sanmina
assembly swappable, floppy
drive SMT
730-1008-00 CARRIER Sub Carrier, hot Sanmina
assembly swappable, IDE hard
drive SMT
703-109-01/01 CARRIER Sub Carrier, hot Sanmina
assembly swappable, NSCSI
drive SMT
<CAPTION>
NEI Part Unit Rack 1 Rack 2 Rack 3 Table Back Cube Trailer Total QTY Extended Cost
Number Cost Room on Hand @ 9/30/99
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
702-1001-00 $161.00
- $ -
702-1002-00 $624.56
- $ -
703-1001-00 $49.38
60 60 $ 2,962.80
703-1002-00 $52.47
- $ -
703-1003-00 $52.47
19 19 $ 996.93
703-1004-00 $126.17
24 24 $ 3,028.08
703-1005-00 $49.72
4 13 17 $ 845.24
703-1006-00 $115.47
11 11 $ 1,270.17
703-1007-00 $425.48 3
3 $ 1,276.44
703-1008-00 $307.84
- $ -
703-1009-00 $25.09
72 12 84 $ 2,107.56
703-1010-00 $76.62 8
8 $ 612.96
703-1011-00 $73.84 4
23 27 $ 1,993.68
703-1012-00
- $ -
703-1013-00 8
8 $ -
703-1014-00
- $ -
703-1015-00
29 29 $ -
703-1016-00 $167.47
1 39 40 $ 6,698.80
703-1017-00 $39.10
- $ -
703-1018-00 $44.40
59 59 $ 2,619.60
703-1019-00
56 56 $ -
703-1020-00 $26.30 18
49 67 $ 1,762.10
703-1021-00 $9.95
- $ -
703-1022-00 $8.85
- $ -
703-1023-00
- $ -
703-1024-00
11 11 $ -
703-1025-00 $39.10
- $ -
703-1026-00
- $ -
703-1027-00 $29.75
- $ -
703-1028-00 $8.67
- $ -
703-1029-00 $11.40
- $ -
703-1030-00
- $ -
711-1001-00 $3.71
- $ -
711-1002-00 $37.30
- $ -
730-1001-00 $60.90
- $ -
730-1002-00 $19.00
- $ -
730-1003-00 $58.81
- $ -
730-1004-00 $60.90
- $ -
730-1005-00 $81.91
4 4 $ 327.64
730-1006-00
- $ -
730-1007-00 $69.26
- $ -
730-1008-00 $60.90
- $ -
703-109-01/01 $75.39
110 110 $ 8,292.90
</TABLE>
<PAGE>
NETWORK ENGINES P6000 INVENTORY 9/30/99
<TABLE>
<CAPTION>
NEI Part Generic Part Description Manufacturer Manufacturer Distributor Dist. Part
Number Type Part Number Number
<S> <C> <C> <C> <C> <C> <C>
730-1010-00 CARRIER Sub Carrier, hot Sanmina
assembly swappable, Dual
Floppy drive SMT
735-1001-00 CHASSIS Sub Chassis assembly
assembly P6000
735-1002-00 CHASSIS Sub Chassis assembly Sweeney Metal
assembly P6000EXP
735-1003-00 CHASSIS Sub Chassis Assambly TriMap RM4U17-14
assembly P2000 19 x 7 x 17 ( (RM062)
14 slot backplane
not included)
735-1004-00 CHASSIS Sub Chassis Assembly TriMap RM 4U24-14
assembly P2000 19 x 7 x 24 (RM071)
(14 slot backplane
not included)
735-1005-00 CHASSIS Sub Chassis Assembly Tri-Map RM4U17-ATX
assembly P1000 19 x 7 x 17,
motherboard not
included
735-1006-00 CHASSIS Sub CHASSIS Fan PTI FAN-CAGE
assembly Assembly; 4
replacement fans
mounted on bracket
for card cage in
P6000
740-1001-00 Cable assembly Cable 15', COAX, Cybex CUFC-15
VGA, PS/2/AT
Keyboard, PS/2
/SERIAL Mouse
740-1002-00 Cable assembly Cable, 30', COAX, Cybex CUFC-30
VGA, PS/2/AT
Keyboard, PS/2
/SERIAL Mouse
740-1003-00 Cable assembly Cable, 6', COAX, Cybex CUFC-6
VGA, PS/2/AT
Keyboard, PS/2
/SERIAL Mouse
740-1004-00 Cable assembly Cable, 8', COAX, Cybex CUFC-8
VGA, PS/2/AT
Keyboard, PS/2
/SERIAL Mouse
740-1005-00 Cable assembly Cable, MPC6000
Backplane Control 24"
740-1006-00 Cable assembly Cable Front Panel
Controller Data
Cable / MP700 Data
740-1007-00 Cable assembly Cable Front Panel
Controller Power
Cable 5.5"
740-1008-00 Cable assembly Cable, MP700
Power 5"
740-1009-00 Cable assembly Cable, Floppy Drive
Data 34 conductor,
24.5"
740-1010-00 Cable assembly Cable, IDE Single
Drive Data 40
Conductor, 20"
740-1011-00 Cable assembly Cable, IDE Double
Drive Data 40
Conductor, 20"
740-1012-00 Cable assembly Cable, CD Rom Drive
Data 44 Conductor,
24"
740-1013-00 Cable assembly Cable Balance
Power Monitor
740-1014-00 Cable assembly Cable, MP700 DIO
35"
740-1015-00 Cable assembly Cable, MP700 AUI
35"
740-1016-00 Cable assembly Cable, MP700 S1
43.5"
740-1017-00 Cable assembly Cable, MP700 S2
43.5"
740-1018-00 Cable assembly Cable, Oring to
BP Power Harness
740-1019-00 Cable assembly Cable, Backplane
Fan Assembly
740-1020-00 Cable assembly Cable, Drive Bay
Transition Data
740-1021-00 Cable assembly Cable, MPC6000
Power
740-1022-00 Cable assembly Cable, Front
Panel Transition
740-1023-00 Cable assembly Cable, Drive
Power
740-1024-00 Cable assembly Cable, Floppy Drive
Carrier Transition
740-1025-00 Cable assembly Cable, IDE Drive
Carrier
Transition
740-1026-00 Cable assembly Cable, Narrow SCSi
Drive Carrier
Transition
740-1027-00 Cable assembly CABLE SERIAL PORT PI MFG 000-F903
WITH BRACKET
740-1028-00 Cable assembly CABLE PARALLEL PORT PI MFG 000-23201
WITH BRACKET
740-1029-00 Cable assembly CABLE EXTERNAL
SCSI
740-1030-00 Cable assembly CABLE 2 POSITION PI MFG ID-22
MODU CONNECTOR RESET
<CAPTION>
NEI Part Unit Rack 1 Rack 2 Rack 3 Table Back Cube Trailer Total QTY Extended Cost
Number Cost Room on Hand @ 9/30/99
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
730-1010-00 $67.84
1 1 2 $ 135.68
735-1001-00 $549.97
- $ -
735-1002-00 $527.47
35 35 $ 18,461.45
735-1003-00 $242.00
- $ -
735-1004-00 $290.00
- $ -
735-1005-00 $242.00
- $ -
735-1006-00
- $ -
740-1001-00 $59.50
- $ -
740-1002-00 $91.00
- $ -
740-1003-00 $28.00
- $ -
740-1004-00 $38.50
- $ -
740-1005-00 $4.57 12
12 $ 54.84
740-1006-00 $3.04 19
19 $ 57.76
740-1007-00 $1.80 12
12 $ 21.60
740-1008-00 $2.40 23
23 $ 55.20
740-1009-00 $10.35
- $ -
740-1010-00 $10.38
- $ -
740-1011-00 $12.99
- $ -
740-1012-00 $6.67 1
1 $ 6.67
740-1013-00 $9.09 5
5 $ 45.45
740-1014-00 $3.78 3
3 $ 11.34
740-1015-00 $3.78 2
2 $ 7.56
740-1016-00 $5.08 3
3 $ 15.24
740-1017-00 $5.08 3
3 $ 15.24
740-1018-00 $9.60 9
9 $ 86.40
740-1019-00 $40.22
- $ -
740-1020-00 $5.26 6
6 $ 31.56
740-1021-00 $3.44
- $ -
740-1022-00 $3.26
- $ -
740-1023-00 $3.08
- $ -
740-1024-00 $4.04 9
9 $ 36.36
740-1025-00 $3.20
- $ -
740-1026-00 $3.87 15
15 $ 58.05
740-1027-00 $0.46 2
2 $ 0.92
740-1028-00 $0.90 125
125 $ 112.50
740-1029-00
- $ -
740-1030-00 $0.70 140
140 $ 98.00
</TABLE>
<PAGE>
NETWORK ENGINES P6000 INVENTORY 9/30/99
<TABLE>
<CAPTION>
NEI Part Generic Part Description Manufacturer Manufacturer Distributor Dist. Part
Number Type Part Number Number
<S> <C> <C> <C> <C> <C> <C>
740-1031-00 Cable assembly CABLE INTERNAL IDE PI MFG 940-329 123
CONTROL 20"
740-1032-00 Cable assembly CABLE INTERNAL
FLOPPY DISK
740-1033-00 Cable assembly CABLE INTERNAL
SCSI DISK
740-1034-00 Cable assembly CABLE INTERNAL
PARALLEL PORT
740-1035-00 Cable assembly CABLE FLOPPY ADAPTER
POWER
740-1036-00 Cable assembly CABLE PS2 MALE PI MFG 000-PS-KOI KRISTA 23642
ADAPTER
740-1037-00 Cable assembly CABEL PS2 FEMALE
ADAPTER
740-1038-00 Cable assembly CAB;E 44 POSITION PI MFG 250-CONVERT-IDE
IDE CONVERTER
740-1039-00 Cable assembly CABLE 44 POSITION PI MFG 1200-250
2.5" DRIVE DABLE
740-1040-00 Cable assembly CABLE PEB / AEB
740-1041-00 Cable assembly CABLE 16 POSITION
MPC6000 TRANSITION
740-1042-00 Cable assembly CABLE MOTHERBOARD PI MFG PK-P8P9-EXT
POWER EXTENSION
740-1043-00 Cable assembly CABLE EXTERNAL
PARALLEL PORT
740-1044-00 Cable assembly CABLE SCSI DRIVE PI MFG ID-32
LED
740-1045-00 Cable assembly CABLE SVGE STARTECK MXT101
EXTENSION 6'
740-1046-00 Cable assembly CABLE 9 POSITION M/F STARTECK MXT100
EXTENSION 6'
740-1047-00 Cable assembly CABLE SCSI 2 M/M MICRO ELECRONICS M03-1196
EXTENSION INC
740-1048-00 Cable assembly CABLE SCSI 3 .50 M/M
EXTENSION
740-1049-00 Cable assembly CABLE SCSI 2 .50 M/M
EXTENSION
740-1050-00 Cable assembly CABLE ETHERNET AUI
EXTERNAL
740-1051-00 Cable assembly CABLE P6000EX KRISTA 23513S
LINE CARD
740-1052-00 Cable assembly CABEL CAT 5
ETHERNET 8'
740-1053-00 Cable assembly CABLE LINE CORD
EUROPE
740-1054-00 Cable assembly CABLE MP700 RJ45
40"
740-1055-00 Cable assembly CABLE CD ROM
DRIVE POWER
740-1056-00 Cable assembly CABLE SCSI II
.050 FLAT RIBBON
740-1057-00 Cable assembly CABLE Serial /
Parallel Port with
Bracket
740-1058-00 Cable assembly CABLE 40 pin IDE for
CD Rom drive 24"
740-1059-00 Cable assembly Cable SCSI
single drive data
740-1060-00 Cable assembly Cable SCSI two
drive data
740-1061-00 Cable assembly Cable SCSI three
drive data
740-1062-00 Cable assembly Cable SCSI four
drive data
740-1063-00 Cable assembly Cable, Null Modem PI MFG 833-0706-551
740-1064-00 Cable assembly Cable, Wide SCSI
carrier
transition
740-1065-00 Cable assembly Cable, IDE CDROM
40/40 14"
740-1066-00 Cable assembly Cable, IDE CDROM
40/40 18"
740-1066-00 Cable assembly IDE CD ROM 19",
SBC2000 TO PSH
740-1067-00 Cable assembly Cable, Floppy
Drive Data 34
pos 22"
740-1068-00 Cable assembly Cable, Floppy
Drive Data 50
pos 8"
740-1069-00 Cable assembly Cable, SCSI 68
pos 24"
740-1070-00 Cable assembly Cable, PSH
control 9"
740-1071-00 Cable assembly Cable, NSCSI
Data 50 pos 24"
740-1072-00 Cable assembly Cable, Floppy
Data, 34 pos, 13"
740-1073-00 Cable assembly Cable, IDE CD
Rom 40/40, 12"
740-1074-00 Cable assembly Cable, HDD Power
740-1075-00 Cable assembly Cable, Floppy
Power
740-1076-00 Cable assembly Cable Cluster
Stream, 50
position
740-1077-00 Cable assembly Cable, 26 pin, Kbd,
Mouse, VGA Com
740-1080-00 Cable assembly P7000 FRONT PANEL
740-1081-00 Cable assembly P7000 INTERNAL
POWER
<CAPTION>
NEI Part Unit Rack 1 Rack 2 Rack 3 Table Back Cube Trailer Total QTY Extended Cost
Number Cost Room on Hand @ 9/30/99
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
740-1031-00 $0.58
- $ -
740-1032-00
- $ -
740-1033-00
- $ -
740-1034-00 $0.86
- $ -
740-1035-00 5
5 $ -
740-1036-00 $1.00
- $ -
740-1037-00 $0.66
- $ -
740-1038-00 $6.50
- $ -
740-1039-00 $2.75
- $ -
740-1040-00
- $ -
740-1041-00
- $ -
740-1042-00 $1.22
- $ -
740-1043-00
- $ -
740-1044-00 $0.75 41
41 $ 30.75
740-1045-00 7
7 $ -
740-1046-00
- $ -
740-1047-00
- $ -
740-1048-00
- $ -
740-1049-00
- $ -
740-1050-00
- $ -
740-1051-00 $0.83
- $ -
740-1052-00
- $ -
740-1053-00
- $ -
740-1054-00
- $ -
740-1055-00
- $ -
740-1056-00
- $ -
740-1057-00 $1.00
- $ -
740-1058-00 $9.13
- $ -
740-1059-00 13
13 $ -
740-1060-00 $16.50
- $ -
740-1061-00
- $ -
740-1062-00 2
2 $ -
740-1063-00 $1.98
22 22 $ 43.56
740-1064-00 $10.00 190
190 $ 1,900.00
740-1065-00 $6.76 6
6 $ 40.56
740-1066-00 $6.76
- $ -
740-1066-00 $6.76 70
70 $ 473.20
740-1067-00 $7.48 62
62 $ 463.76
740-1068-00 $6.51 22
22 $ 143.22
740-1069-00
- $ -
740-1070-00 $3.66 5
5 $ 18.30
740-1071-00 $16.00 70
70 $ 1,120.00
740-1072-00 $6.50
- $ -
740-1073-00 $7.24
- $ -
740-1074-00
- $ -
740-1075-00
- $ -
740-1076-00 $17.78
- $ -
740-1077-00 $14.69
- $ -
740-1080-00 $2.60
- $ -
740-1081-00 $5.98
- $ -
</TABLE>
<PAGE>
NETWORK ENGINES P6000 INVENTORY 9/30/99
<TABLE>
<CAPTION>
NEI Part Generic Part Description Manufacturer Manufacturer Distributor Dist. Part
Number Type Part Number Number
<S> <C> <C> <C> <C> <C> <C>
740-1082-00 Cable assembly P7000 DUAL WSCSI
740-1083-00 Cable assembly P7000 DUAL IDE
740-1084-00 Cable assembly P7000 CD ROM
740-1085-00 Cable assembly P7000 DISK DRIVE
POWER
740-1086-00 Cable assembly SERIAL PORT IDC VOLEX
PIN TO PIN
740-1087-00 BULKLEAD CABLE
ULTRAII WIDE SCSI
780-1001-00 SYSTEM SYSTEM ENCLOSURE Tri-Map
ENCLOSURE P2000/PCI/24"
Assembly
780-1002-00 SYSTEM SYSTEM ENCLOSURE Tri-Map
ENCLOSURE P1000/ATX/17'
Assembly
780-1003-00 SYSTEM SYSTEM ENCLOSURE NEI
ENCLOSURE P6000EXP
Assembly
780-1004-00 SYSTEM SYSTEM ENCLOSURE Tri-Map
ENCLOSURE P2000/ISA/24"
Assembly
780-1005-00 SYSTEM SYSTEM ENCLOSURE NEI $1,754.99
ENCLOSURE P6000
Assembly
780-1006-00 SYSTEM SYSTEM ENCLOSURE Tri-Map
ENCLOSURE P2000/ISA/17"
Assembly
780-1007-00 SYSTEM SYSTEM ENCLOSURE 22u NETSHELETR NS-22U Tech Data 83247
ENCLOSURE EQUIPMENT RACK APC Rack AR1100 22U
Assembly
780-1008-00 SYSTEM SYSTEM ENCLOSURE 42u NETSHELETR NS-42U Tech Data 83380
ENCLOSURE EQUIPMENT RACK APC Rack AR1000 42U
Assembly
780-1009-00 System Enclosure
P7000
790-1001-00 POWER SUPPLY Power Supply 350 NEI 350WATT
Assembly watt for P6000
790-1002-00 POWER SUPPLY Power Supply 400 TriMap PS400-80
Assembly Watt for P2000
790-1003-00 POWER SUPPLY Power Supply 300 TriMap PS300-80
Assembly Watt for P1000, ATX
790-1004-00 POWER SUPPLY Power Supply 400WATT
Assembly 400W for P6000EXP
790-1005-00 POWER SUPPLY 150 WATT FOR Foresight US155-301
Assembly P7000 Elect
805-1001-00 Software 3rd SOFTWARE WindowsNT Microsoft 236-00001
party Workstation 4.0 OEM
805-1002-00 Software 3rd SOFTWARE WindowsNt Microsoft NTServer 4.0
party Server version 4.0, OEM
OEM
805-1003-00 Software 3rd SOFTWARE WindowsNt Microsoft Ntworkstation
party Workstation version
4.0, stand alone
805-1004-00 Software 3rd SOFTWARE Window NT Microsoft NT 4.0 Server
party Server, version 4.0, Add on
per user add-on over
10 user
805-1005-00 Software 3rd SOFTWARE WindowsNT Microsoft NTserver 50
party Server, 50 user User
licsense pack
805-1006-00 Software 3rd SOFTWARE WindowsNT Microsoft NT Client
party Client version 3.5.1 Single
3.5.1, single user User
licsense
805-1007-00 Software 3rd SOFTWARE WindowsNT Microsoft NT Client 4.0
party Client version 4.0, 20 User
20 user licsense
805-1008-00 Software 3rd SOFTWARE MS-DOS Microsoft 147095V622
party version 6.22 upgrade
<CAPTION>
NEI Part Unit Rack 1 Rack 2 Rack 3 Table Back Cube Trailer Total QTY Extended Cost
Number Cost Room on Hand @ 9/30/99
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
740-1082-00 $8.76
- $ -
740-1083-00 $5.15
- $ -
740-1084-00 $7.10
- $ -
740-1085-00 $2.45
- $ -
740-1086-00 $0.46
- $ -
740-1087-00
13 13 $ -
780-1001-00 $663.00
- $ -
780-1002-00 $557.00
- $ -
780-1003-00 $3,029.30
- $ -
780-1004-00 $564.00
- $ -
780-1005-00 $2,472.48
- $ -
780-1006-00 $486.00
- $ -
780-1007-00 $1,280.00
- $ -
780-1008-00 $1,466.81
- $ -
780-1009-00 $267.23
- $ -
790-1001-00 $352.00
23 23 $ 8,096.00
790-1002-00 $180.00
- $ -
790-1003-00 $98.00
- $ -
790-1004-00 $567.36
58 58 $ 32,906.88
790-1005-00 $106.00
- $ -
805-1001-00 $275.23
- $ -
805-1002-00 $701.00
- $ -
805-1003-00 $275.00
- $ -
805-1004-00
- $ -
805-1005-00 $1,841.00
- $ -
805-1006-00
- $ -
805-1007-00
- $ -
805-1008-00 $33.00
- $ -
</TABLE>
<PAGE>
NETWORK ENGINES P6000 INVENTORY 9/30/99
<TABLE>
<CAPTION>
NEI Part Generic Part Description Manufacturer Manufacturer Distributor Dist. Part
Number Type Part Number Number
<S> <C> <C> <C> <C> <C> <C>
805-1009-00 Software 3rd SOFTWARE WindowsNT Microsoft 227-00367
party server 4.0 - 10
user
805-1010-00 Software 3rd SOFTWARE Web load F5 Web Balance
party balancing software
805-1012-00 Software SOFTWARE P7000
CLUSTERDIRECTOR
805-1013-001
805-1014-00 Software p7000 cluster
control
880-1001-00 Software TLA SOFTWARE MP 150 PTI MP150 Software
maintenance system,
software only
880-1002-00 Software TLA SOFTWARE MP150 PTI MP150
maintenance system,
complete package
880-1003-00 Software SOFTWARE P6000
DRIVER LIBRARY
Concord Group
Exactel/Copernicus
Great Plains
P6000 and
P6000EXP
Canton P6000/EXP
Total P6000/EXP
Inventory
West Coast Demo
Ciber Network
Global Network
Intervu
Telecommunications
Microsoft DC
Wells Fargo
Intel
Learningstation
<CAPTION>
NEI Part Unit Rack 1 Rack 2 Rack 3 Table Back Cube Trailer Total QTY Extended Cost
Number Cost Room on Hand @ 9/30/99
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
805-1009-00 $948.00
- $ -
805-1010-00
- $ -
805-1012-00
- $ -
805-1013-001
- $ -
805-1014-00
- $ -
880-1001-00
- $ -
880-1002-00
- $ -
880-1003-00 $3.00
- $ -
Concord Group $ 276,343.82
$ 12,763.00
Exactel/Copernicus $ 5,000.00
--------------
Great Plains $ 294,106.82
P6000/EXP $ 17,579.99
Canton P6000/EXP $ 25,094.27
--------------
Total P6000/EXP Inventory $ 336,781.08
==============
West Coast Demo $ 7,395.00
Ciber Network
Global Network 8/17/99 $ 14,753.00
Intervu $ 11,832.00
Telecommunications 9/23/99 $ -
Microsoft DC $ 10,354.00
Wells Fargo 7/6/99
Intel
Learningstation $ 8,707.00
</TABLE>
<PAGE>
System: 04/03/2000 7:54:03 PM Network Engines, Inc. Page: 1
User Date: 4/03/2000 STOCK STATUS REPORT User ID: DougB
Inventory Control
<TABLE>
<S> <C> <C> <C> <C> <C>
Ranges: From To: From: To:
Item Number First Last Commodity Code First Last
Item Description First Last
Item Generic First Last
Bin First Last
Site P6000 P6000
Account Number From: - - -
To: - - -
</TABLE>
Sorted By Site By: Item Number
Include items with zero quantities: No
Include Serial/Lot numbers: Yes
<TABLE>
<CAPTION>
Item Number Item Description QTY On Hand QTY Allocated
- -----------------------------------------------------------------------------------------------------------------------
QTY Back QTY On Order QTY Requisitioned Current Cost Inventory Value
Ordered
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
130-1031-00 RES-NET 1K OHM 10PIN 9RES 190 0
0 0 0 $0.150 $28.50
130-1065-00 RES, CHIP, OE, O.1W 2,901 0
0 0 0 $0.004 $11.60
140-1003-00 DIODE LED BAR GRAPH 10 SEGMENT GREEN 23 0
0 0 0 $1.830 $42.09
140-1006-00 DIODE LED 3MM PC MNT GREN 178 0
0 0 0 $0.230 $40.94
140-1007-00 DIODE LED 3MM PC MNT YEL 208 0
0 0 0 $0.230 $47.84
140-1008-00 DIODE LED BICOLOR RED/GRN WHT DIFF T-1 349 0
0 0 0 $0.630 $219.87
140-1009-00 DIODE LED 1 DIGIT GREEN COMMON CATHODE 20 0
0 0 0 $2.030 $40.60
140-1016-00 DIODE LED GREEN CLEAR LENS SMD 1,335 0
0 0 0 $0.210 $320.40
140-1032-00 DIODE LED GREEN CLEAR LENS SMT 40 0
0 0 0 $0.210 $9.60
160-1001-00 FUSE POLYSWITCH RUE SERIES 3.0 AMPS 30 0
0 0 0 $0.990 $29.70
160-1003-00 FUSE 6.30A FAST ACTING 5 X 20MN 93 0
0 0 0 $0.250 $23.25
160-1004-00 FUSE POLYSWITCH RUE SERIES 4.0 AMPS 27 0
0 0 0 $0.830 $22.41
160-1006-00 FUSE POLY FUSE PTC 1.1A 6VDC RESETTABLE 1812L 21 0
0 0 0 $0.410 $8.61
</TABLE>
<PAGE>
System: 04/03/2000 7:54:03 PM Network Engines, Inc. Page: 2
User Date: 4/03/2000 STOCK STATUS REPORT User ID: DougB
Inventory Control
<TABLE>
<S> <C> <C> <C> <C> <C>
170-1001-00 INDUCTOR FILTER LINE IEC 10 0
0 0 0 $6.970 $69.70
172-1002-00 SWITCH SPST PC MT MOM SQUARE RED 6 0
0 0 0 $1.600 $9.60
172-1003-00 SWITCH PC MT SPST MOM FLT SQ WHT 5 0
0 0 0 $1.600 $8.00
172-1004-00 SWITCH SLIDE SPDT RT ANGLE 30V 214 0
0 0 0 $0.420 $89.88
172-1007-00 SWITCH P2000/5000 18 0
0 0 0 $0.000 $0.00
172-1008-00 SWITCH 8 POSITION DIP 474 0
0 0 0 $0.000 $0.00
172-1009-00 SWITCH PC MOUNT SPST MOM SQ WHT 60 0
0 0 0 $2.230 $133.80
172-1010-00 SWITCH 4 POSITION ST DIP TIN, LOW PROFILE 28 0
0 0 0 $0.650 $18.20
180-1003-00 CONNECTOR HEADER SHROUDED 40 POS STRAIGHT 35 0
0 0 0 $2.200 $77.00
180-1004-00 CONNECTOR HEADER SHROUDED 50 POS STRAIGHT 63 0
0 0 0 $2.720 $171.36
180-1005-00 CONNECTOR 40 PIN MALE TRANSITION 111 0
0 0 0 $1.700 $188.70
180-1007-00 CONNECTOR HEADER 4-PIN PCB ASSEMBLY TIN 63 0
0 0 0 $0.620 $39.06
180-1010-00 CONNECTOR 2 CIRCUIT HEADER, .100 RT ANGLE 164 0
0 0 0 $0.130 $21.32
180-1011-00 CONNECTOR SHROUDED HEADER 50 POS RT ANGLE 225 0
0 0 0 $2.270 $510.75
180-1013-00 CONNECTOR PCI 110 0
0 0 0 $1.100 $121.00
180-1014-00 CONNECTOR 34 POSITION TRANSITION IDC 113 0
0 0 0 $1.600 $180.80
180-1016-00 CONNECTOR 2POS HEADR VERT MNT TIN COM 30 0
0 0 0 $0.440 $13.20
180-1017-00 CONNECTOR 50 PIN MALE TRANSITION 158 0
0 0 0 $1.970 $311.26
180-1018-00 CONNECTOR HEADER ST DUAL ROW M GOLD 72 PIN 47 0
0 0 0 $1.740 $81.78
180-1021-00 CONNECTOR 16 POSITION TRANSITION 111 0
</TABLE>
<PAGE>
System: 04/03/2000 7:54:03 PM Network Engines, Inc. Page: 3
User Date: 4/03/2000 STOCK STATUS REPORT User ID: DougB
Inventory Control
<TABLE>
<S> <C> <C> <C> <C> <C>
0 0 0 $1.080 $119.88
180-1022-00 CONNECTOR 12 PIN 71 0
0 0 0 $2.200 $156.20
180-1023-00 CONNECTOR HEADER CONN 3POS SOCKET IN UNI 17 0
0 0 0 $0.550 $9.35
180-1027-00 CONNECTOR 2 BY X HEADER 500 0
0 0 0 $0.000 $0.00
18-1028-00 CONNECTOR 1 BY 36 .235 94 0
0 0 0 $0.000 $0.00
180-1030-00 CONNECTOR 12 PIN HEADER .156 7 0
0 0 0 $1.280 8.96
180-1031-00 IC 14 PIN DIP SOCKET IC 14 POS PHOS BRZ TIN 67 0
0 0 0 $0.070 $4.69
180-1038-00 CONNECTOR 50 PIN FEMALE RCPT GOLD S/C W/POL K 81 0
0 0 0 $2.660 $215.46
180-1041-00 CONNECTOR 16POS RECEPT GOLD W/POL UNI 103 0
0 0 0 $0.860 $88.58
180-1043-00 CONNECTOR 40 PIN GOLD S/C W/POL KEY 107 0
0 0 0 $2.200 $235.40
180-1044-00 CONNECTOR 20 POSITION IDC 24 0
0 0 0 $0.000 $0.00
180-1045-00 CONNECTOR 26 POSITION IDC 29 0
0 0 0 $0.000 $0.00
180-1046-00 CONNECTOR 50 PIN FEMALE CARD EDGE 98 0
0 0 0 $5.900 $578.20
180-1047-00 CONNECTOR 15 POSITION FEMALE IDC 116 0
0 0 0 $0.750 $87.00
180-1048-00 CONNECTOR 10 PIN GOLD S/C W/POL KEY 12 0
0 0 0 $1.120 $13.44
180-1049-00 CONNECTOR RECEPT 44 POS. 2.OMM IDC 76 0
0 0 0 $1.717 $267.52
180-1051-00 CONNECTOR 50 POSITION FEMALE IDC 9 0
0 0 0 $0.000 $0.00
180-1052-00 CONNECTOR 68 POSITION MALE IDC SCSI3 8 0
0 0 0 $7.000 $56.00
180-1054-00 CONNECTOR 9 POSITION MALE IDC 25 0
0 0 0 $0.750 $18.75
180-1055-00 CONNECTOR 10 POSITION MODU 152 0
0 0 0 $0.680 $103.36
</TABLE>
<PAGE>
System: 04/03/2000 7:54:03 PM Network Engines, Inc. Page: 4
User Date: 4/03/2000 STOCK STATUS REPORT User ID: DougB
Inventory Control
<TABLE>
<S> <C> <C> <C> <C> <C>
180-1056-00 CONNECTOR 3 CIRCUIT TERMINAL HOUSING, .100 98 0
0 0 0 $0.120 $11.76
180-1057-00 CONNECTOR 2 PIN MOLEX 703 0
0 0 0 $0.720 $506.16
180-1058-00 CONNECTOR 2 PIN LOCKING SOCKET 16 0
0 0 0 $0.000 $0.00
180-1059-00 CONNECTOR MOLEX 8 PIN 72
0 0 0 $0.000 $0.00
180-1060-00 CONNECTOR 6 POSITION MODU 352 0
0 0 0 $0.280 $0.00
180-1061-00 CONNECTOR 2 POSITION MODU 67 0
0 0 0 $0.000 $0.00
180-1062-00 CONNECTOR 16 POSITION MODU 362 0
0 0 0 $1.430 $517.66
180-1063-00 CONNECTOR 26 POSITION MODU 37 0
0 0 0 $2.010 $74.37
180-1064-00 CONNECTOR 12 POSITION HOUSING 10 0
0 0 0 $0.870 $8.70
180-1065-00 CONNECTOR 15 POSITION CONTACT HOUSING 4 0
0 0 0 $1.220 $4.88
180-1071-00 CONNECTOR 34 PIN GOLD S/C W/POL KEY 189 0
0 0 0 $0.905 $364.77
180-1074-00 CONNECTOR SOCKET 4 POSITION FREE HANGING 6 0
0 0 0 $0.400 $2.40
180-1076-00 CONNECTOR 6 PIN TERMINAL HOUSING .156 8 0
0 0 0 $0.470 $3.76
180-1077-00 CONNECTOR 3 PIN TERMINAL HOUSING .156 7 0
0 0 0 $0.240 $1.68
180-1078-00 CONNECTOR 15 PIN MALE CRIMP 37 0
0 0 0 $0.460 $17.02
180-1085-00 CONNECTOR SHORTING JUMPER 2 POSITION 275 0
0 0 0 $2.000 $550.00
180-1086-00 CONNECTOR PIN 3 POS MATE-N-LOK MALE 100 0
0 0 0 $0.070 $7.00
180-1087-00 CONNECTOR MOLEX PIN 100 0
0 0 0 $0.000 $0.00
180-1088-00 CONNECTOR SOCKET 20-14 AWG TIN 1,200 0
0 0 0 $1.000 $1,200.00
180-1089-00 CONNECTOR PIN FEMALE MODU 200 0
</TABLE>
<PAGE>
System: 04/03/2000 7:54:03 PM Network Engines, Inc. Page: 5
User Date: 4/03/2000 STOCK STATUS REPORT User ID: DougB
Inventory Control
<TABLE>
<S> <C> <C> <C> <C> <C>
0 0 0 $0.090 $18.00
180-1090-00 CONNECTOR TERMINAL CRIMP .156 130
0 0 0 $0.730 $94.90
180-1091-00 CONNECTOR PIN MATE-N-LOK 600 0
0 0 0 $0.070 $42.00
180-1092-00 CONNECTOR CONTACT 24-18 AWG TIN SOCKET 560 0
0 0 0 $0.000 $0.00
180-1093-00 CONNECTOR PANEL MOUNT 4 CIRCUIT 101 0
0 0 0 $0.380 $38.38
180-1094-00 CONNECTOR CONTACT 24-18 AWG TIN PIN 156 0
0 0 0 $0.100 $15.60
180-1095-00 CONNECTOR, 2 PIN HEADER .100" 19 0
0 0 0 $0.890 $16.91
180-1096-00 CONNECTOR, 50 PIN SMT 89 0
0 0 0 $3.100 $275.00
180-1097-00 CONNECTOR, DISK DRIVE POWER, 4 PIN, MALE, RA 118 0
0 0 0 $0.450 $53.10
180-1099-00 CONNECTOR, SHROUDED HEADER 40 POS RT ANGLE 50 0
0 0 0 $1.710 $85.50
180-1100-00 CONNECTOR, SHROUDED HEADER 34 POS RT ANGLE 44 0
0 0 0 $1.830 $80.52
180-1101-00 CONNECTOR, 4 CIRCUIT HEADER .100 RA 100 0
0 0 0 $0.260 $26.00
180-1102-00 CONNECTOR 10 PN IDC TRANSITION 127 0
0 0 0 $0.400 $50.80
180-1103-00 CONNECTOR 68 POSITION MALE IDC TRANSITION 90 0
0 0 0 $4.000 $360.00
180-1104-00 CONNECTOR 4CIRCUIT SIP STRAIGHT .100 100 0
0 0 0 $0.230 $23.00
180-1105-00 CONNECTOR 3 CIRCUIT SIP STRAIGHT .100 97 0
0 0 0 $0.180 $17.46
180-1106-00 CONNECTOR 68 POSITION SUBMINIATURE D 100 0
0 0 0 $5.030 $503.00
180-1107-00 CONNECTOR 25 DUAL POSITION CARD EDGE 5 0
0 0 0 $2.740 $13.70
180-1108-00 CONNECTOR 3 CIRCUIT SIP RA .100 310 0
0 0 0 $0.180 $55.80
180-1109-00 CONNECTOR, RECEPTICAL, 4 PIN RA 60 0
0 0 0 $0.150 $9.00
</TABLE>
<PAGE>
System: 04/03/2000 7:54:03 PM Network Engines, Inc. Page: 6
User Date: 4/03/2000 STOCK STATUS REPORT User ID: DougB
Inventory Control
<TABLE>
<S> <C> <C> <C> <C> <C>
180-1129-00 CONNECTOR, RECEPTACLE, SCSI, 68 PIN, INTERNAL 67 0
0 0 0 $1.880 $125.96
180-1132-00 CONNECTOR, PLUG, 26 PIN, PARALLEL 49 0
0 0 0 $0.660 $32.34
180-1134-00 HEADER, 30 PIN, 2X15 300 0
0 0 0 $1.420 $426.00
180-1135-00 HEADER, 3 PIN, 1X3 100 0
0 0 0 $0.070 $7.00
180-1136-00 HEADER, 4 PIN, 1X4 173 0
0 0 0 $0.050 $8.65
180-1137-00 HEADER, 4 PIN, 1X4 255 0
0 0 0 $0.050 $12.75
180-1138-00 HEADER, 2 PIN, 1X2 174 0
0 0 0 $0.050 $8.70
180-1139-00 HEADER 2 PIN, 1X2 70 0
0 0 0 $0.030 $2.10
180-1145-00 CONNECTOR .100 KK CRIMP TERMINAL 18-20 GA. 20 0
0 0 0 $0.180 $3.60
180-1146-00 RECEPTICAL 4 POSITION 5.25" PWR 90 0
0 0 0 $0.000 $0.00
180-1158-00 CONNECTOR 5 PIN TERMINAL HOUSING .156 69 0
0 0 0 $0.120 $8.28
181-1001-00 HEADER SHROUDED 10 POS STRAIGHT 97 0
0 0 0 $0.000 $0.00
181-1005-00 ADAPTER RJ45 6 POSITION T 91
0 0 0 $0.340 $30.94
181-1006-00 ADAPTER TRANSCEIVER TWISTED PAIR 6 0
0 0 0 $22.500 $135.00
181-1007-00 ADAPTER DUAL PORT ETHERNET 10 0
0 0 0 $4.230 $42.30
182-1001-00 TERMINATOR SCSI 50 PIN 16 0
0 0 0 $6.500 $104.00
182-1003-00 TERMINATOR SCSI MALE TO FEMALE 7 0
0 0 0 $0.000 $0.00
212-1008-00 MECHANIC GASKET RUBBER CALDOOR 1,001 0
0 0 0 $1.430 $1,431.43
306-1012-00 4.5GB SCSI HARD DRIVE 7,200 RPM 3.5" 4 0
0 0 0 $443.980 $1,775.92
306-1017-00 4.5GB ULTRA WSCSI HARD DRIVE 7,200 RPM 3.5" 7 0
</TABLE>
<PAGE>
System: 04/03/2000 7:54:03 PM Network Engines, Inc. Page: 7
User Date: 4/03/2000 STOCK STATUS REPORT User ID: DougB
Inventory Control
<TABLE>
<S> <C> <C> <C> <C> <C>
0 0 0 $469.240 $3,284.68
740-1029-00 CABLE EXTERNAL SCSI 3 0
0 0 0 $0.000 $0.00
740-1031-00 CABLE INTERNAL IDE CONTROL 20" 59 0
0 0 0 $0.580 $34.22
740-1033-00 CABLE INTERNAL SCSI DISK 10 0
0 0 0 $0.000 $0.00
740-1037-00 CABLE PS2 FEMALE ADAPTER 6 0
0 0 0 $0.000 $0.00
740-1038-00 CABLE 44 POSITION IDE CONVERTER 23 0
0 0 0 $6.500 $149.50
740-1039-00 CABLE 44 POSITION 2.5" DRIVE CABLE 5 0
0 0 0 $2.750 $13.75
740-1040-00 CABLE PEB/AEB 8 0
0 0 0 $0.000 $0.00
740-1042-00 CABLE MOTHERBOARD POWER EXTENSION 29 0
0 0 0 $1.220 $35.38
740-1043-00 CABLE EXTERNAL PARALLEL PORT 6 0
0 0 0 $0.000 $0.00
740-1046-00 CABLE 9 POSITION M/F EXTENSION 6' 19 0
0 0 0 $0.000 $0.00
740-1047-00 CABLE SCSI 2 M/M EXTENSION 1 0
0 0 0 $0.000 $0.00
740-1049-00 CABLE SCSI 2 .50 M/M EXTENSION 4 0
0 0 0 $0.000 $0.00
740-1050-00 CABLE ETHERNET AUI EXTERNAL 7 0
0 0 0 $0.000 $0.00
740-1052-00 CABEL CAT 5 ETHERNET 8' 1 0
0 0 0 $0.000 $0.00
740-1053-00 CABLE LINE CORD EUROPE 5 0
0 0 0 $0.830 $4.15
126 Items for Site: P6000 Total Inventory Value for Site P6000 $17,579.99
Total Inventory Value $17,579.99
</TABLE>
<PAGE>
- ----------------------------------------------------------------------
Network Engines, Inc.
- ----------------------------------------------------------------------
P6000 Stock Removed by Copernicus Systems, Inc.
- ----------------------------------------------------------------------
March, 2000
- ----------------------------------------------------------------------
Part # Qty Cost Total Cost
- ----------------------------------------------------------------------
100-002-00 48 0.75 $36.00
- ----------------------------------------------------------------------
100-1006-00 119 0.58 $63.80
- ----------------------------------------------------------------------
100-1007-00 18 0.63 $11.34
- ----------------------------------------------------------------------
100-1008-00 132 2.4 $316.80
- ----------------------------------------------------------------------
100-1009-00 8 1.6 $12.80
- ----------------------------------------------------------------------
100-1010-00 28 0.33 $9.24
- ----------------------------------------------------------------------
100-1011-00 50 0.332 $16.60
- ----------------------------------------------------------------------
100-1012-00 48 0.72 $34.56
- ----------------------------------------------------------------------
100-1013-00 133 0.66 $87.78
- ----------------------------------------------------------------------
100-1016-00 19 0.08 $1.52
- ----------------------------------------------------------------------
100-1018-00 116 2.95 $342.20
- ----------------------------------------------------------------------
100-1019-00 20 0.13 $2.60
- ----------------------------------------------------------------------
100-1021-00 19 0.28 $5.32
- ----------------------------------------------------------------------
100-1022-00 35 0.12 $4.20
- ----------------------------------------------------------------------
103-1006 1188 1.99 $2,364.12
- ----------------------------------------------------------------------
103-1006-00 0 1.99 $0.00
- ----------------------------------------------------------------------
103-1008-00 0 0 $0.00
- ----------------------------------------------------------------------
103-1009-00 0 0 $0.00
- ----------------------------------------------------------------------
120-1001-00 250 0.23 $57.50
- ----------------------------------------------------------------------
120-1002-00 60 0.11 $6.60
- ----------------------------------------------------------------------
120-1004-00 112 0.83 $92.96
- ----------------------------------------------------------------------
120-1005-00 75 2.05 $153.75
- ----------------------------------------------------------------------
120-1006-00 643 3.5 $255.50
- ----------------------------------------------------------------------
120-1007-00 131 0.61 $79.91
- ----------------------------------------------------------------------
120-1008-00 104 0.18 $18.72
- ----------------------------------------------------------------------
120-1009-00 106 0.53 $56.18
- ----------------------------------------------------------------------
120-1010-00 42 4.5 $189.00
- ----------------------------------------------------------------------
120-1011-00 181 0.25 $45.25
- ----------------------------------------------------------------------
120-1012-00 413 0.37 $152.81
- ----------------------------------------------------------------------
120-1013-00 1037 0.33 $342.21
- ----------------------------------------------------------------------
120-1014-00 156 0.68 $106.08
- ----------------------------------------------------------------------
120-1015-00 1125 0.4 $450.00
- ----------------------------------------------------------------------
120-1016-00 799 0.57 $455.43
- ----------------------------------------------------------------------
120-1017-00 32 1.63 $52.16
- ----------------------------------------------------------------------
120-1018-00 426 0.49 $208.74
- ----------------------------------------------------------------------
120-1019-00 52 0.79 $41.08
- ----------------------------------------------------------------------
120-1021-00 615 0.34 $209.10
- ----------------------------------------------------------------------
120-1022-00 31 1.15 $35.65
- ----------------------------------------------------------------------
<PAGE>
- ----------------------------------------------------------------------
120-1023-00 78 0.11 $8.58
- ----------------------------------------------------------------------
120-1035-00 825 0.15 $123.75
- ----------------------------------------------------------------------
120-1050-00 212 0.19 $40.28
- ----------------------------------------------------------------------
120-1065-00 0 0 $0.00
- ----------------------------------------------------------------------
130-1001-00 0 0 $0.00
- ----------------------------------------------------------------------
130-1002-00 134 0.04 $5.36
- ----------------------------------------------------------------------
130-1004-00 54 0.04 $2.15
- ----------------------------------------------------------------------
130-1005-00 4720 0.02 $94.40
- ----------------------------------------------------------------------
130-1006-00 4412 0.02 $88.24
- ----------------------------------------------------------------------
130-1007-00 182 0.04 $7.28
- ----------------------------------------------------------------------
130-1008-00 170 0.04 $6.80
- ----------------------------------------------------------------------
130-1010-00 41 0.04 $1.65
- ----------------------------------------------------------------------
130-1011-00 103 0.04 $4.12
- ----------------------------------------------------------------------
130-1013-00 106 0.04 $4.24
- ----------------------------------------------------------------------
130-1014-00 828 0.02 $16.56
- ----------------------------------------------------------------------
130-1015-00 4212 0.02 $8.24
- ----------------------------------------------------------------------
130-1016-00 102 0.04 $4.08
- ----------------------------------------------------------------------
130-1017-00 239 0.04 $9.56
- ----------------------------------------------------------------------
130-1018-00 84 0.89 $74.76
- ----------------------------------------------------------------------
130-1019-00 75 0.89 $66.75
- ----------------------------------------------------------------------
130-1020-00 15 0.89 $13.35
- ----------------------------------------------------------------------
130-1021-00 54 0.89 $48.06
- ----------------------------------------------------------------------
130-1022-00 55 0.89 $48.95
- ----------------------------------------------------------------------
130-1023-00 5 0.89 $4.45
- ----------------------------------------------------------------------
130-1028-00 293 0.04 $11.72
- ----------------------------------------------------------------------
130-1029-00 44 0.35 $15.40
- ----------------------------------------------------------------------
130-1032-00 84 0.26 $21.84
- ----------------------------------------------------------------------
130-1033-00 18 1.19 $21.42
- ----------------------------------------------------------------------
130-1034-00 553 1.19 $658.07
- ----------------------------------------------------------------------
130-1035-00 18 1.19 $21.42
- ----------------------------------------------------------------------
130-1036-00 35 1.19 $41.65
- ----------------------------------------------------------------------
130-1037-00 30 0.74 $22.20
- ----------------------------------------------------------------------
130-1038-00 134 1.37 $183.58
- ----------------------------------------------------------------------
130-1039-00 106 1.37 $145.22
- ----------------------------------------------------------------------
130-1046-00 40 1.18 $47.20
- ----------------------------------------------------------------------
130-1047-00 176 1.18 $207.68
- ----------------------------------------------------------------------
130-1050-00 24 0.02 $0.48
- ----------------------------------------------------------------------
130-1051-00 4212 0.02 $84.24
- ----------------------------------------------------------------------
130-1053-00 109 0.11 $11.99
- ----------------------------------------------------------------------
130-1054-00 169 0.03 $5.07
- ----------------------------------------------------------------------
130-1073-00 0 0 $0.00
- ----------------------------------------------------------------------
130-089-00 4841 0.03 $145.23
- ----------------------------------------------------------------------
140-1002-00 519 1.1 $570.90
- ----------------------------------------------------------------------
140-1005-00 125 0.18 $22.50
- ----------------------------------------------------------------------
140-1010-00 54 0.48 $25.92
- ----------------------------------------------------------------------
<PAGE>
- ----------------------------------------------------------------------
140-1012-00 98 0.47 $46.06
- ----------------------------------------------------------------------
140-1013-00 20 0.91 $18.20
- ----------------------------------------------------------------------
140-1014-00 53 1.44 $76.32
- ----------------------------------------------------------------------
140-1015-00 43 2.83 $121.69
- ----------------------------------------------------------------------
140-1017-00 55 3.25 $178.75
- ----------------------------------------------------------------------
140-1018-00 47 0.23 $10.81
- ----------------------------------------------------------------------
140-1019-00 201 0.11 $22.11
- ----------------------------------------------------------------------
140-1020-00 633 0.2 $126.50
- ----------------------------------------------------------------------
140-1021-00 100 0.11 $11.00
- ----------------------------------------------------------------------
140-1022-00 10 7.5 $75.00
- ----------------------------------------------------------------------
140-1023-00 2 1 $2.00
- ----------------------------------------------------------------------
140-1024-00 21 3.2 $67.20
- ----------------------------------------------------------------------
140-1025-00 105 0.23 $24.15
- ----------------------------------------------------------------------
140-1026-00 45 0.23 $10.35
- ----------------------------------------------------------------------
140-1027-00 167 2.25 $375.75
- ----------------------------------------------------------------------
140-1028-00 6 0.36 $2.16
- ----------------------------------------------------------------------
141-1001-00 237 0.3 $71.10
- ----------------------------------------------------------------------
141-1002-00 120 2.75 $330.00
- ----------------------------------------------------------------------
141-1003-00 2353 1.6 $3,764.80
- ----------------------------------------------------------------------
141-1004-00 89 0.52 $46.28
- ----------------------------------------------------------------------
141-1006-00 13 2.02 $26.26
- ----------------------------------------------------------------------
141-1007-00 368 1.79 $658.72
- ----------------------------------------------------------------------
141-1008-00 0 0 $0.00
- ----------------------------------------------------------------------
141-1014-00 118 0.05 $5.90
- ----------------------------------------------------------------------
142-1001-00 47 0.68 $31.96
- ----------------------------------------------------------------------
142-1002-00 51 1.55 $79.05
- ----------------------------------------------------------------------
142-1003-00 19 2.45 $46.55
- ----------------------------------------------------------------------
142-1005-00 0 0 $0.00
- ----------------------------------------------------------------------
142-1006-00 84 2.25 $189.00
- ----------------------------------------------------------------------
142-1007-00 32 17.24 $51.72
- ----------------------------------------------------------------------
142-1008-00 4 2.4 $9.60
- ----------------------------------------------------------------------
151-1001-00 50 1.66 $83.00
- ----------------------------------------------------------------------
160-1005-00 417 0.21 $87.57
- ----------------------------------------------------------------------
160-1008-00 100 0.445 $44.50
- ----------------------------------------------------------------------
170-1002-00 25 2.64 $66.00
- ----------------------------------------------------------------------
170-1003-00 53 7.01 $371.53
- ----------------------------------------------------------------------
170-1004-00 27 3.75 $101.25
- ----------------------------------------------------------------------
172-1005-00 20 1.78 $35.60
- ----------------------------------------------------------------------
172-1006-00 30 1.69 $50.70
- ----------------------------------------------------------------------
180-1024-00 447 6.52 $2,914.44
- ----------------------------------------------------------------------
180-1025-00 184 8.64 $1,589.76
- ----------------------------------------------------------------------
108-1026-00 29 2.17 $62.93
- ----------------------------------------------------------------------
180-1111-00 6 10 $60.00
- ----------------------------------------------------------------------
180-1113-00 5 4.18 $20.90
- ----------------------------------------------------------------------
180-116-00 8 3 $24.00
- ----------------------------------------------------------------------
<PAGE>
- ----------------------------------------------------------------------
180-1117-00 8 3 $24.00
- ----------------------------------------------------------------------
180-1118-00 163 2.1 $342.30
- ----------------------------------------------------------------------
180-1120-00 235 5.82 $1,367.70
- ----------------------------------------------------------------------
180-1123-00 0 1.41 $0.00
- ----------------------------------------------------------------------
180-1125-00 180 2.15 $387.00
- ----------------------------------------------------------------------
180-1126-00 72 1.8 $129.60
- ----------------------------------------------------------------------
180-1128-00 160 2.45 $392.00
- ----------------------------------------------------------------------
180-1129-00 0 $0.00
- ----------------------------------------------------------------------
180-1154-00 96 5 $480.00
- ----------------------------------------------------------------------
180-1157-00 1166 0.4 $466.40
- ----------------------------------------------------------------------
181-1004-00 44 0.55 $24.20
- ----------------------------------------------------------------------
181-1003-00 46 0.69 $31.74
- ----------------------------------------------------------------------
210-1088-00 6274 0.019 $119.21
CDR1S10PK (80663D) 60
-------------
$25,094.27
=============
- ----------------------------------------------------------------------
<PAGE>
Schedule 1(c)
[GRAPHIC: NETWORK ENGINES]
Network Engines
ClusterDirector(TM)
User's Manual
61 Pleasant Street
Randolph MA 02368
Phone: 781-961-4400
Fax: 781 961-4508
Revision B
June, 1998
<PAGE>
Warranty
Network Engines, Inc. (NEI) warrants its Products for a period of one (1) year
from the date of shipment to be free from defects in material and workmanship
provided the Products are installed, operated and maintained in accordance with
NEI specifications. Equipment purchased under this Agreement will be newly
manufactured by NEI from new and serviceable used parts which are equivalent to
new in performance in this Equipment. During the warranty period, NEI will, at
its option repair or replace any Equipment it deems to be defective. Warranty
service is return-to-factory and a Return Material Authorization (RMA) number
must be obtained from NEI Customer Support before any Equipment may be returned.
Standard warranty repair turn-around time is approximately ten (10) business
days after receipt of the defective product, FOB Randolph, MA 02368. Repaired or
replaced Equipment will be warranted for the remainder of the standard warranty
period.
Exclusions, Disclaimers and Limits on Warranty
a) No Other Warranties. No representation or other affirmation of fact, oral or
written, including but not limited to statements regarding capacity,
suitability for use or performance of Products, whether made by NEI
employees or otherwise, shall be deemed to be a warranty by NEI for any
purpose, or give rise to any liability of NEI whatsoever unless contained in
this Agreement. The express warranty stated in the section above entitled
"Warranty" is the only warranty given. THERE ARE NO OTHER WARRANTIES,
EXPRESS OR IMPLIED, BY OPERATION OF LAW OR OTHERWISE, FOR PRODUCTS OR
SERVICES FURNISHED IN CONNECTION WITH THIS AGREEMENT. NEI DISCLAIMS ALL
IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR PURPOSE.
b) Should NEI be unable to correct a defect covered under the section entitled
"Warranty" after the expenditure of reasonable efforts and time,
"reasonable" to be defined by the nature of the defect when encountered,
Buyer shall be entitled to return the Product and receive a refund at the
net purchase price paid for the returned Product, and such refund shall
constitute NEI's maximum liability for breach of warranty.
LIMITATION OF REMEDY AND LIABILITY: General Limitation. IN NO EVENT SHALL NEI BE
LIABLE FOR ANY INCIDENTAL, INDIRECT, SPECIAL OR CONSEQUENTIAL DAMAGES
WHATSOEVER, INCLUDING BUT NOT LIMITED TO LOST PROFITS AND DAMAGES RESULTING FROM
LOSS OF USE OR LOST DATA EVEN IF NEI HAS BEEN ADVISED, KNEW OR SHOULD HAVE KNOWN
OF THE POSSIBILITY THEREOF.
NEI shall not be liable for any errors of fact or omissions of fact contained
herein, or for incidental, indirect, special or consequential damages in
connection with the furnishing , performance, or use of this and related
documentation.
Product Returns
The equipment must be returned postage-prepaid. Package it securely and insure
it. You will be charged for parts and labor if you lack proof of date of
purchase, or if the warranty period is expired.
- --------------------------------------------------------------------------------
ClusterDirector User's Manual ii
<PAGE>
Copyrights
All rights reserved. No part of this publication may be reproduced, transmitted,
transcribed, stored in a retrieval system, or translated into any language or
computer language, in any form or by any means, electronic, mechanical,
magnetic, optical, chemical, manual or otherwise, without the prior written
permission of Network Engines Inc.
Network Engines ClusterDirector User's Manual, Rev B, June, 1998.
Trademarks
3Com(R), the 3Com logo, EtherDisk(R), Etherlink(R), EtherLink II(R), EtherLink
Plus(R), NetAge(R), Parallel Tasking(R), Smart Agent(R), and Transcend(R) are
registered trademarks of 3Com Corporation.
The Citrix(R) logo, WinFrame(R), and ICA(R) are registered trademarks, and
MultiWin(TM) is a trademark of Citrix Systems, Inc.
Microsoft(R), Windows(R), and Windows NT(R) are registered trademarks of
Microsoft Corporation.
Network Engines(TM), the Network Engines Logo, Torque for Your Network(TM),
ClusterDirector(TM), ClusterMonitor(TM), and ClusterBalance(TM) are trademarks
of Network Engines, Inc.
PC/AT and PS/2 are registered trademarks of International Business Machines,
(IBM).
Pentium(TM) is a trademark of Intel Corporation, Inc.
PICMG is a registered trademark of the PICMG Consortium.
Super I/O is a trademark of National Semiconductor, Inc.
Other brand and product names may be registered trademarks or trademarks of
their respective companies
- --------------------------------------------------------------------------------
ClusterDirector User's Manual iii
<PAGE>
Notice
This product was found to be compliant with the radiated emissions and line
conducted emissions requirements of AS3548/CISPR 22.
This equipment has been tested and found to comply with the limits for a Class A
digital device, pursuant to part 15 of the FCC Rules. These limits are designed
to provide reasonable protection against harmful interference when the equipment
is operated in a commercial environment. This equipment generates, uses, and can
radiate radio frequency energy and, if not installed and used in accordance with
the instruction manual, may cause harmful interference to radio communications.
Operation of this equipment in a residential area is likely to cause harmful
interference in which case the user will be required to correct the interference
at his own expense.
Changes or modifications not expressly approved by the manufacturer could void
the user's FCC granted authority to operate the equipment.
Caution
Lithium batteries may explode and can cause physical injury if they are replaced
incorrectly. Replace only with the same or an equivalent type recommended by the
manufacturer. Dispose of used batteries according to the manufacturer's
instructions. Never expose Lithium batteries to fire or extreme temperature
conditions.
- --------------------------------------------------------------------------------
ClusterDirector User's Manual iv
<PAGE>
Contents
- --------------------------------------------------------------------------------
Preface.....................................................................viii
Scope....................................................................viii
Audience...................................................................ix
Typographical Conventions..................................................ix
Related Publications and Internet Links....................................ix
How to Contact Us..........................................................xi
Chapter 1
Introduction.................................................................xii
Description...............................................................xii
Maintenance Scenarios....................................................xiii
Administration...........................................................xiii
Monitoring Applications.................................................xiv
Monitoring External Events..............................................xiv
Chapter 2
Using the Console..............................................................1
Logging on the system.......................................................1
Using Console Commands......................................................2
Chapter 3
Mapping System Addresses.......................................................3
Backplane Configuration.....................................................3
Control ID Numbers..........................................................4
DIO Port Signals............................................................6
Chapter 4
Modifying Configuration Files..................................................9
NEIbase.cfg File............................................................9
File Variables...........................................................10
Sample NEIbase.cfg file..................................................12
NEIsystems.cfg File........................................................13
Chapter 5
Using TCP/IP..................................................................19
Listening Ports............................................................19
TCP/IP Commands............................................................19
- --------------------------------------------------------------------------------
ClusterDirector User's Manual v
<PAGE>
Chapter 6
Receiving Event Notifications.................................................22
Watchdog Timers............................................................22
Creating the Timer.......................................................23
Alert Message Destinations.................................................23
Chapter 7
Writing Script Commands.......................................................25
Syntax.....................................................................25
Comments.................................................................25
Variables................................................................25
On-Conditions............................................................26
Commands...................................................................28
alert....................................................................29
assign...................................................................30
comment..................................................................31
define...................................................................32
dump.....................................................................33
on; on-end...............................................................34
print....................................................................35
reboot...................................................................36
reset....................................................................37
send.....................................................................38
stop.....................................................................39
save.....................................................................40
switch...................................................................41
variable>system-start - system-end.......................................42
Understanding I/O Signals..................................................45
Chapter 8
Using the ClusterMonitor......................................................47
Overview...................................................................47
Basic Operations...........................................................48
Menu Bar.................................................................49
Context-Sensitive Menus..................................................50
Adding a New ClusterDirector...............................................51
Example..................................................................52
Updating Text Files........................................................56
Notifications..............................................................58
- --------------------------------------------------------------------------------
ClusterDirector User's Manual vi
<PAGE>
Appendix A
Sample Configuration Files....................................................59
Default NEIsystems.cfg File................................................59
NEIsystems.cfg with Failover Scenario......................................72
Index.........................................................................87
- --------------------------------------------------------------------------------
ClusterDirector User's Manual vii
<PAGE>
Preface
- --------------------------------------------------------------------------------
This section is divided into the following main parts:
o A description of the scope of this manual
o A description of the intended audience
o A list of typographical conventions used in this manual
o Related publications and internet links
Scope
This manual describes the ClusterDirector(TM) System. The
following list gives a brief description of each chapter in this
manual.
Chapter 1. Introduction. This chapter gives a general description
of the system architecture, maintenance scenarios, and
administration procedures.
Chapter 2. Using the Console. This chapter describes the
procedures used to log on the system and explains how to issue
commands from the console.
Chapter 3. Mapping System Addresses. This chapter explains how to
map backplane configurations and gives port addresses, segment
and relay ID numbers, and power supply signals.
Chapter 4. Modifying Configuration Files. This chapter explains
how to make changes to the system's two main configuration files,
NEIbase.cfg and NEIsystems.cfg.
Chapter 5. Using TCP/IP. This chapter gives the rules and
commands for using the TCP/IP protocol.
Chapter 6. Receiving Event Notifications. This chapter explains
how to set the watchdog timer to provide notification of system
error conditions by pager, console, and management software.
- --------------------------------------------------------------------------------
ClusterDirector User's Manual viii
<PAGE>
Preface
- --------------------------------------------------------------------------------
Chapter 7. Writing Script Commands. This chapter provides syntax
rules for and examples of all the script commands.
Chapter 8. Using the ClusterMonitor. This chapter describes the
ClusterDirector Monitor, a graphical user interface that manages
one or more ClusterDirector systems.
Appendix A. Sample Configuration Files. This appendix provides
the default NEIsystems.cfg file and a sample NEIsystems.cfg file
illustrating a failover scenario.
Audience
This manual is written for Information Technology professionals
and system engineers who are responsible for installing and
maintaining P6000 Clustered Server Systems.
Typographical Conventions
The following typographical conventions are used in this manual.
-----------------------------------------------------------------
Convention Example
-----------------------------------------------------------------
Angle brackets separate single Press <Esc> to exit the
keys that you press from the menu.
surrounding text.
-----------------------------------------------------------------
Boldface identifies numbers and Type reset (dio) AC-OK-2.
characters that you must type.
-----------------------------------------------------------------
Courier indicates code lines and on IPport-1 = S
screen displays.
-----------------------------------------------------------------
Italics emphasize file names and See the NEIbase.cfg file.
variable information.
-----------------------------------------------------------------
Related Publications and Internet Links
o 82430HX PCIset Cache/Memory Subsystem; Intel 1995
o Chips & Technology 65548 High Performance Flat Panel/CRT GUI
Accelerator; Chips & Technology 1995
o IBM Personal Computer AT Technical Reference; IBM; 1984
- --------------------------------------------------------------------------------
ClusterDirector User's Manual ix
<PAGE>
Preface
- --------------------------------------------------------------------------------
o IBM Personal System/2 and Personal Computer BIOS Interface
Technical Reference; IBM; 1987
o IEEE-P996 specification Draft D2.02; IEEE
o Intel Pentium P54C Microprocessor Reference; Intel 1995
o MAX705 Microprocessor Reset Circuit data sheet; Maxim; 1995
o National Semiconductor PC87306 SuperI/O Enhanced Sidewinder
Lite; National Semiconductor; 1995.
o Network Engines ClusterDirector User's Manual, Revision A,
April, 1998.
o PICMG PCI card edge connector specification Rev2.0; PICMG
Consortium; 1994
Selected internet links and URLs are given in Table 1
Table 1. Selected Internet Links
-------------------------------------------------------------------------
Company Internet Address Product
-------------------------------------------------------------------------
AMI www.american.megatrends.com BIOS
-------------------------------------------------------------------------
AMP www.amp.com Connectors
-------------------------------------------------------------------------
Chips & Technology www.chips.com Video Controller &
BIOS
-------------------------------------------------------------------------
Dallas www.dalsemi.com MicroLAN Temp.
Sensor
-------------------------------------------------------------------------
Network Engines, www.networkengines.com Board Information,
Inc. sales & customer
support
-------------------------------------------------------------------------
Intel Corp www.intel.com Processor & Chipset
-------------------------------------------------------------------------
Maxim www.maxim-ic.com Voltage Monitor &
RS485
-------------------------------------------------------------------------
National www.national.com Super I/O
Semiconductor Controller
-------------------------------------------------------------------------
- --------------------------------------------------------------------------------
ClusterDirector User's Manual x
<PAGE>
Preface
- --------------------------------------------------------------------------------
-----------------------------------------------------------------------
Pericom www.pericom.com Quiet ISA Bus
Buffers
-----------------------------------------------------------------------
USB www.usb.org USB information
-----------------------------------------------------------------------
How to Contact Us
For sales information or technical assistance, please telephone
(781) 961-4400 or Fax (781) 961-4508. Or, use the following
on-line addresses:
Email: [email protected]
URL: www.networkengines.com
Network Engines is located at 61 Pleasant Street, Randolph, MA
02368
- --------------------------------------------------------------------------------
ClusterDirector User's Manual xi
<PAGE>
Chapter 1
Introduction
- --------------------------------------------------------------------------------
This chapter is divided in the following main parts:
o Description
o Maintenance Scenarios
o Administration
Description
The Network Engines ClusterDirector(TM) is an embedded
maintenance processor that dramatically improves the reliability
of a P6000 clustered server by allowing individual applications
to recover from both simple and catastrophic system failures. The
ClusterDirector provides remote notification, external resource
configuration, and processor fail-over response for the P6000.
These capabilities guarantee a high level of availability and
continuous compatibility with the network.
A ClusterDirector System consists of one or more ClusterDirectors
and a ClusterMonitor(TM), a portable, remote graphical user
interface (GUI) that gives information about, and control over,
all the ClusterDirectors connected to it. The ClusterMonitor is
described briefly in Chapter 8.
The ClusterDirector reports the following information about the
performance of a P6000 clustered server:
o Status of individual systems (OS, services on Windows NT(R),
or daemons on UNIX(R) platforms )
o Status of external resources
The ClusterDirector uses the information reported to it to make
decisions about the availability of each processor in the server
unit.
- --------------------------------------------------------------------------------
ClusterDirector User's Manual xii
<PAGE>
Introduction
- --------------------------------------------------------------------------------
Maintenance Scenarios
The ClusterDirector uses a high-level scripting language to
create different maintenance scenarios for system failures. The
language uses plain English statements and straightforward
syntax.
The scenarios can be written for automatic, semi-automatic, and
manual response. Examples of each kind of scenario are given
below:
o Automatic: a failure causes the external resources to be
switched automatically to a back-up system before notifying
service personnel of the problem.
o Semi-automatic: a failure causes a predetermined number of
alarms to be transmitted to service personnel before switching
to a backup system.
o Manual: a failure causes continuous alarms to be sent and
waits for instructions from service personnel at the console.
The scripting language allows new maintenance scenarios to be
created easily. The language contains descriptions for
communicating with various systems, including application
processors, UPSs, and remote maintenance environments. It also
provides conditional statements for testing the status of various
systems and making decisions about them.
Administration
The ClusterDirector can be administered from both local and
remote terminals. Local administration is accomplished by
connecting the P6000 to a terminal or PC via a serial port or a
network connection. Remote administration is achieved using a
Telnet, FTP, or SNMP interface over a network. Network Engines
also offers a graphical interface ClusterMonitor that controls
multiple ClusterDirectors remotely. The ClusterMonitor is
described in Chapter 8.
Remote administration can be performed using a modem-to-modem
connection between the ClusterDirector and a terminal or
- --------------------------------------------------------------------------------
ClusterDirector User's Manual xiii
<PAGE>
Introduction
- --------------------------------------------------------------------------------
PC. A modem-to-modem connection provides the same support
capabilities as a local connection.
Monitoring Applications
The key to the P6000's fault-tolerant environment is the
ClusterDirector's ability to monitor individual OSs, services,
and daemons. The ClusterDirector also listens for messages from
the ClusterMonitor. In case any event should occur, the
ClusterDirector performs the actions specified by the scenario
for that event.
A watch dog timer system allows the ClusterDirector to determine
whether a monitored system is running. The system sends a message
that indicates it will communicate within a predetermined period
of time. If the system fails to respond within the time
specified, the ClusterDirector decides that system is no longer
running and performs the actions specified by the scenario.
Monitoring External Events
The ClusterDirector monitors external events and systems through
the following interfaces:
o Four output relays that control switching between external
resources, such as telephone lines, fiber optics, and coax
cable.
o Four digital input contacts that sense external events, like
contact closures and alarm conditions.
o Two serial ports that communicate with devices like network
hubs, routers, bridges, UPSs, and other computer equipment.
- --------------------------------------------------------------------------------
ClusterDirector User's Manual xiv
<PAGE>
Chapter 2
Using the Console
- --------------------------------------------------------------------------------
This section explains how to use the console for manual
operations.
This chapter is divided in the following main parts:
o Logging on the system
o Using console commands
Logging on the system
Perform the following steps to log on the ClusterDirector.
1. Verify that you have a valid connection to the system through
one of the following interfaces:
A network connection using TELNET, port 2000, and the IP
address of the ClusterDirector
A direct serial connection to a terminal (Serial 1)
A serial connection to a terminal through a modem (Serial 2)
2. Press <?>
The system displays the following prompt
Password:
3. Enter your password.
The default password is powerst.
If the password is correct, the system displays the following
message:
Successful log on.
If the password is not correct, the system displays this
message:
Wrong password.
4. Press any key to display a list of console commands.
The console displays a list showing each command and a brief
description of its purpose. The commands are described in the
following section.
- --------------------------------------------------------------------------------
ClusterDirector User's Manual 1
<PAGE>
Using the Console
- --------------------------------------------------------------------------------
Using Console Commands
Table 2-1 lists the commands that are available after you log
into the system in column one. Column two lists the on-screen
help message that is displayed. The information in this table is
displayed on screen when you type ? at the prompt.
Table 2-1. Console Commands
--------------------------------------------------------------------
Command Description
--------------------------------------------------------------------
#x Sets the focus of the console to system number
x.(1)
--------------------------------------------------------------------
@@ Scroll through and change any DIO output lines.(2)
--------------------------------------------------------------------
$A About ClusterDirector
--------------------------------------------------------------------
$D Display event history, previously saved
following user "save" commands.
--------------------------------------------------------------------
$G Print listing of "global" and any local
variables defined by system in focus.
--------------------------------------------------------------------
$I Initialize the variables and event states for
the system in focus.
--------------------------------------------------------------------
$P Change password.
--------------------------------------------------------------------
$R Report events noted by the system in focus
including watchdog status.
--------------------------------------------------------------------
$Z Reboot the system in focus.
--------------------------------------------------------------------
$O Log off.
--------------------------------------------------------------------
$E Put system in `service' mode.
--------------------------------------------------------------------
$X Exit from ClusterDirector program.
--------------------------------------------------------------------
1. The procedure for numbering systems is explained in the following
section.
2. Do not change the state of a DIO bit that is currently under
program.
- --------------------------------------------------------------------------------
ClusterDirector User's Manual 2
<PAGE>
Chapter 3
Mapping System Addresses
- --------------------------------------------------------------------------------
Commands to, and messages from the ClusterDirector are identified
by a Control ID number. This section describes the backplanes
available for the P6000 and explains the rules for assigning
Control ID numbers, for identifying relay and power supply
signals, and for specifying I/O port addresses.
This chapter is divided in the following main parts:
o Backplane configuration
o Control ID numbers
o DIO port signals
Backplane Configuration
The P6000 can be configured with a BP4 or BP10 backplane to
provide different services.
BP4 Backplane
The BP4 backplane has 17 slots hard-wired in four segments. Each
of the first three segments has one CPU slot, one ISA slot, and
two PCI slots. The fourth segment has an additional ISA slot.
Each segment supports one engine and any combination of network,
fax, voice, or other application cards. The PCI buses on the BP4
provide extremely high data throughput.
BP10 Backplane
The BP10 backplane has 20 ISA slots, hard wired in ten groups
with two slots each. In this configuration, the BP10 backplane
supports up to ten independent processors.
The slot pairs on the BP10 can be bridged to form larger segments
with more than two slots in them. The backplane can be segmented
in any combination of slots that is a multiple of two, ranging
from one to ten segments per chassis. Each segment
- --------------------------------------------------------------------------------
ClusterDirector User's Manual 3
<PAGE>
Mapping System Addresses
- --------------------------------------------------------------------------------
supports one engine and as many network, fax, voice, or other
application cards as the number of slots allows.
In both the BP4 and BP10 backplanes, segments provide independent
power and data busses to their respective slots.
The segments are numbered sequentially, counting from the
leftmost segment, and the engine and its application cards are
mapped to the ClusterDirector by a logical control ID derived
from this segment number.
Control ID Numbers
The Control ID number is a logical representation of the segment
number on the backplane. It is associated with the port address
for the segment.
Each digital I/O (dio) signal is mapped by two numbers. The first
number identifies the main signal, and the second number
identifies the input line for the signal if the main signal is
output. If the main signal is input, the second number is zero.
The Control ID, Reset command, and dio mapping for each possible
chassis segment are given in Table 1.
Table 1 - Segment IDs and DIO Mapping
-----------------------------------------------------------------
DIO Reset DIO
Segment Control ID(1,2) Mapping(3) Command Mapping(4)
-----------------------------------------------------------------
1 CONTROL-1 81 1 RESET-1 33 49
-----------------------------------------------------------------
2 CONTROL-2 82 2 RESET-2 34 50
-----------------------------------------------------------------
3 CONTROL-3 83 3 RESET-3 35 51
-----------------------------------------------------------------
4 CONTROL-4 84 4 RESET-4 36 52
-----------------------------------------------------------------
5 CONTROL-5 85 5 RESET-5 37 53
-----------------------------------------------------------------
6 CONTROL-6 86 6 RESET-6 38 54
-----------------------------------------------------------------
7 CONTROL-7 87 7 RESET-7 39 55
-----------------------------------------------------------------
- --------------------------------------------------------------------------------
ClusterDirector User's Manual 4
<PAGE>
Mapping System Addresses
- --------------------------------------------------------------------------------
-----------------------------------------------------------------
DIO Reset DIO
Segment Control ID(1,2) Mapping(3) Command Mapping(4)
-----------------------------------------------------------------
8 CONTROL-8 88 8 RESET-8 40 56
-----------------------------------------------------------------
9 CONTROL-9 89 9 RESET-9 41 57
-----------------------------------------------------------------
10 CONTROL-10 90 10 RESET-10 42 58
-----------------------------------------------------------------
1. The ID must represent a real segment. For example, if a
chassis has four segments, Control ID numbers 5 through 10
are not used.
2. If a segment has no engine mounted in it, the ID number is
nevertheless valid.
3. Parameters in the first column should not be changed. Those
in the second column can be changed following the rules on
page 6.
4. Number combinations cannot be changed.
- --------------------------------------------------------------------------------
ClusterDirector User's Manual 5
<PAGE>
Mapping System Addresses
- --------------------------------------------------------------------------------
When two or more slot pairs are bridged to form one segment, the
additional slot-pairs are added to the Control ID number. The
number of each additional slot pair is appended to the Control ID
number, separated by a plus (+) sign. For example, if the first
four slot pairs on the back plane are bridged together, the
Control ID for segment 1 is mapped as shown in the following
definition statement:
define (dio) CONTROL-1 81 1+2+3+4
Where:
CONTROL-1 identifies the first segment on the backplane
81 1 is the port address for the first slot pair in the segment
+2+3+4 identify the additional pairs included in segment 1
This statement specifies that the command to power up CONTROL-1
must turn on pairs 1, 2, 3 and 4.
Note: Segments can be bridged on the BP10 and BP10 HC backplanes
only.
DIO Port Signals
DIO signals to the ClusterDirector are routed through the 15-pin
DIO port connector mounted on the rear of the P6000 chassis.
- --------------------------------------------------------------------------------
ClusterDirector User's Manual 6
<PAGE>
Mapping System Addresses
- --------------------------------------------------------------------------------
Relays
Table 3-2 gives relay mapping information for the connector.
Table 3-2 - Relay Mapping to Auxiliary I/O Connector
-----------------------------------------
DIO
Pin RELAY Mapping(1)
-----------------------------------------
1 RELAY-1 17 21
-----------------------------------------
2 RELAY-2 18 23
-----------------------------------------
3 RELAY-3 19 24
-----------------------------------------
4 RELAY-4 20 25
-----------------------------------------
5 DATAIN-1 117 0
-----------------------------------------
6 DATAIN-2 118 0
-----------------------------------------
7 DATAIN-3 119 0
-----------------------------------------
8 DATAIN-4 120 0
-----------------------------------------
1. Number combinations cannot be changed.
- --------------------------------------------------------------------------------
ClusterDirector User's Manual 7
<PAGE>
Mapping System Addresses
- --------------------------------------------------------------------------------
Power Supplies
The P6000A mounts two load-sharing, 350 Watt, telco-grade
supplies. Table 3-3 gives signal mapping information for the
P6000A power supply units.
Table 3-3 - P6000A Power Supply Signal Mapping
----------------------------------------------------------
Power DIO DIO
Unit DC Signal Mapping AC Signal Mapping(1)
----------------------------------------------------------
1 DC-OK-1 113 0 AC-OK-1 115 0
----------------------------------------------------------
2 DC-OK-2 114 0 AC-OK-2 116 0
----------------------------------------------------------
1. Number combinations cannot be changed.
The P6000B mounts two load-sharing, 400 Watt, telco-grade power
supplies. A third supply is optional. Table 3-4 gives signal
mapping for the P6000B power supplies.
Table 3-4 - P6000B Power Supply Signal Mapping
------------------------------------
Power DC Signal DIO Mapping(1)
Unit
------------------------------------
1 DC-OK-1 113 0
------------------------------------
2 DC-OK-2 114 0
------------------------------------
3 DC-OK-3 116 0
------------------------------------
1. Number combinations cannot be changed.
- --------------------------------------------------------------------------------
ClusterDirector User's Manual 8
<PAGE>
Chapter 4
Modifying Configuration Files
- --------------------------------------------------------------------------------
This chapter describes the two system configuration files that
users can modify. The chapter is divided in the following main
parts:
o NEIbase.cfg file
o NEIsystems.cfg file
NEIbase.cfg File
At startup, the ClusterDirector first performs initialization
functions, using user defined .cfg files, and then it performs
task switching functions
The initialization function opens ports and configures them with
user defined parameters. It then builds three linked lists that
define structures used to diagnose system performance and
identify alert events.
Task switching is performed according to maintenance scenarios
written for the ClusterDirector.
- --------------------------------------------------------------------------------
ClusterDirector User's Manual 9
<PAGE>
Modifying Configuration Files
- --------------------------------------------------------------------------------
File Variables
The variables in the NEIbase.cfg file are listed in column one of
Table 4-1Error! Reference source not found.. The function of each
variable is described briefly in column two.
Table 4-1. NEIbase.cfg File Variables
------------------------------------------------------------------
Variable Function(1)
------------------------------------------------------------------
debug Reserved.
------------------------------------------------------------------
hardware-wd Hardware watchdog enabling flag for
ClusterDirector.
1 = active
0 = inactive
------------------------------------------------------------------
hardware-wd-addr Reserved.
------------------------------------------------------------------
nr-dio-bits Reserved.
------------------------------------------------------------------
log on-time-out Time in miliseconds for timeout of remote
log on process.
------------------------------------------------------------------
hist-files Number of files allowed for event history
log. Default=3.
------------------------------------------------------------------
hist-rows Number of lines allowed in history files.
Default=20.
------------------------------------------------------------------
nr-comm-ports The number of communications ports.(2)
------------------------------------------------------------------
1. An explanation of each variable's function is included as a
comment field in the file.
2. The systems to be connected are identified by LINK-1 to
LINK-10. The actual value assigned to each LINK port is its
Control ID number plus 2. The following two serial connections
are always defined:
comm CONSOLE = 1
comm MODEM = 2
In the following example, two control ports are defined for
two surveyed systems:
nr-comm-ports 4
comm CONSOLE 1
comm MODEM 2
- --------------------------------------------------------------------------------
ClusterDirector User's Manual 10
<PAGE>
Modifying Configuration Files
- --------------------------------------------------------------------------------
comm LINK-1 3
comm LINK-2 4
All the variables listed in Error! Reference source not found.
may be changed by the user unless comments are displayed in the
file that caution against it.
If the user inadvertently deletes a variable line, most variables
default to the value 0. However, the hist-files variable defaults
to 3, and hist-rows to 20.
- --------------------------------------------------------------------------------
ClusterDirector User's Manual 11
<PAGE>
Modifying Configuration Files
- --------------------------------------------------------------------------------
Sample NEIbase.cfg file
An example of the NEIbase.cfg file is shown below. Your file may
not be identical to this example.
hardware-wd 1 ; 0=no h/w timer, 1=h/w timer
; with address following
hardware-wd-addr 1296 ; decimal number for h/w timer
; reset = 0x443
nr-dio-bits 200 ; number of dio bits allowed in
; system
logon-timeout 10000000 ; Set the delay for automatic
; logoff when user does not
hist-files 3
hist-rows 20 ; set the maximum number of files
; to keep track of events and the
; rows into these files. (see
; "save" function).
; The default numbers sugested by
; Network Engines, Inc. are 3 and
; 20. User can change them with
; caution, noting available disk
; space. Only values greater than
; one for hist-files and greater
; than 5 for hist-rows are
; allowed. For invalid values the
; system restores the defaults.
nr-comm-ports 12
comm CONSOLE 1
comm MODEM 2
comm LINK-1 3
comm LINK-2 4
comm LINK-3 5
comm LINK-4 6
comm LINK-5 7
comm LINK-6 8
comm LINK-7 9
comm LINK-8 10
comm LINK-9 11
comm LINK-10 12
modem-server 192.168.50.192 5000 ON
email-server 207.180.73.17 [email protected]
[email protected] ON
master-address MASTER 192.168.50.193 2050
include /configure/NEIsystems.cfg
- --------------------------------------------------------------------------------
ClusterDirector User's Manual 12
<PAGE>
Modifying Configuration Files
- --------------------------------------------------------------------------------
NEIsystems.cfg File
The NEIsystems.cfg file provides the user with a consistent way
to represent user defined variables, hardware signals, and
communication ports.
Independent tasks in a round robin scheduling strategy include
updating variables and checking to determine if their state has
changed. To accomplish this, on-condition blocks are written in
the configuration files to trap changes of variable status, or
events.
Each monitored system has a unique description where all its
variables are defined. Global variables, such as hardware
mapping, are described at the beginning of the configuration
file, so that they can be available for all systems. These
variables define a generic system.
The beginning of a system's description is established by a
system-start line and the end by the line, system-end. An example
system start line is shown below:
system-start NEIsystems 192.168.110.67 2000
After the system-start line, one or more lines of variable
definitions follow, for example, for dio variables (hardware
mapping), var (user defined variables), and com (communication
variables).
The following definition is an example of a user defined variable
that will put all systems in either automatic or manual mode:
define (var) MANUAL = 1 ; default value is Manual Mode
Automatic mode means that desired actions take place in response
to some events without user intervention. In manual mode, alerts
are sent, but no actions are taken in response to the event.
Manual mode avoids automatic reactions and is primarily used for
maintenance and test purposes. This variable is used as filter
for other events.
The following definition maps segments on the BP10 backplane:
define (dio) CONTROL-1 = 81 1+2+3
- --------------------------------------------------------------------------------
ClusterDirector User's Manual 13
<PAGE>
Modifying Configuration Files
- --------------------------------------------------------------------------------
CONTROL-1 maps the power switch for the first segment. From the
software point of view, CONTROL-1 is the first system to be
surveyed.
In the example, the first number (81) defines the dio mapping, or
an offset.
Note: The user must not change dio mapping numbers.
The string, 1+2+3, is reflects the fact that three physical
segments are bridged together to form first system. One power
command powers up the three segments, and signals from three
power sensors should be detected.
If no bridges are used, segment to CONTROL mapping will be
one-to-one.
The following two defined variables are involved in event
trapping:
on CONTROL-1 = 0 & MANUAL = 1
send MASTER CONTROL-1 OFF
on-end
on CONTROL-1 = 0 & MANUAL = 0
send MASTER CONTROL-1 OFF
power up SPARE_SERVER
send MODEM ATDT9,17813218932,,,11001145
on-end
In this situation, a power failure of the first system,
MAIN_SERVER, causes a message to be sent to a higher decision
layer, MASTER. In automatic mode, the spare system is powered up
and an alert is transmitted about the failure to a pager number.
(The string at the end of the modem command can include letters
if the pager is able to display them.) The user can write
whatever he can interpret at the reception port.
Whatever follows after the words, send MASTER, will be the string
transmitted through TCP/IP to the port and address that are
associated with MASTER.
The following is a sample NEIsystems.cfg file:
system-start NEIsystems 192.168.110.67 2000
- --------------------------------------------------------------------------------
ClusterDirector User's Manual 14
<PAGE>
Modifying Configuration Files
- --------------------------------------------------------------------------------
define (dio) BUZZER = 5 25 ; sound
define (dio) RESET-1 = 33 49 ; hardware reset for
; main
define (dio) RESET-2 = 34 50
define (dio) RESET-3 = 35 51
define (dio) RESET-3 = 36 52
define (dio) RELAY-1 = 17 21
define (dio) RELAY-2 = 18 22
define (dio) RELAY-3 = 19 23
define (dio) RELAY-4 = 20 24
define (dio) DC-OK-1 = 113 0
define (dio) DC-OK-2 = 114 0
define (dio) AC-OK-1 = 115 0
define (dio) AC-OK-2 = 116 0
define (dio) CONTROL-1 = 81 1+2 ; Power switch for main
define (dio) CONTROL-2 = 82 3+4 ; Power switch for
; spare
define (dio) CONTROL-3 = 83 5+6+7
define (dio) CONTROL-4 = 84 8+9+10
define (var) ON = 1
define (var) OFF = 0
define (var) Welcome = ON ; Start-up flag
define (var) SCSI = ON
define (var) SPAREON = 0
define (var) MANUAL = 1
on Welcome = ON
alert NEISYSTEMS. (C) NEI, 1996.
on-end
- --------------------------------------------------------------------------------
ClusterDirector User's Manual 15
<PAGE>
Modifying Configuration Files
- --------------------------------------------------------------------------------
on dio AC-OK-1 = 1
reset (dio) BUZZER = OFF
reset (dio) BUZZER = ON ; activate sound on
; power failure
send MASTER 9110030903 AC POWER UNIT 1 FAILURE
on-end
on dio AC-OK-1 = 0
reset (dio) AC-OK-1
reset (dio) BUZZER = OFF ; disable sound
send MASTER 4110030907 AC POWER UNIT 1 BACK ONLINE
on-end
on dio AC-OK-2 = 1
reset (dio) BUZZER = OFF
reset (dio) BUZZER = ON
send MASTER 9110030904 AC POWER UNIT 2 FAILURE
on-end
on dio AC-OK-2 = 0
reset (dio) AC-OK-2
reset (dio) BUZZER = OFF
send MASTER 4110030908 AC POWER UNIT 2 BACK ONLINE
on-end
on dio DC-OK-1 = 1
alert DC POWER UNIT 1 FAILURE
reset (dio) BUZZER = OFF
reset (dio) BUZZER = ON
send MASTER 9110030901 DC POWER UNIT 1 FAILURE
on-end
on dio DC-OK-1 = 0
reset (dio) BUZZER = OFF
reset (dio) DC-OK-1
send MASTER 4110030905 DC POWER UNIT 1 BACK ONLINE
on-end
on dio DC-OK-2 = 1
reset (dio) BUZZER = OFF
- --------------------------------------------------------------------------------
ClusterDirector User's Manual 16
<PAGE>
Modifying Configuration Files
- --------------------------------------------------------------------------------
reset (dio) BUZZER = ON
send MASTER 9110030902 DC POWER UNIT 2 FAILURE
on-end
on dio DC-OK-2 = 0
reset (dio) BUZZER = OFF
reset (dio) DC-OK-2
send MASTER 4110030906 DC POWER UNIT 2 BACK ONLINE
on-end
on dio CONTROL-1 = 1 & SCSI = OFF & MANUAL = 0
reset (dio) CONTROL-1 = 0
on-end
on dio CONTROL-1 = 1 & MANUAL = 1
send MASTER 4110030011 CONTROL-1 ON
on-end
on dio CONTROL-1 = 1 & SCSI = ON & SPAREON = 0 & MANUAL = 0
send MASTER 4110030011 CONTROL-1 ON
on-end
on dio CONTROL-1 = 0 & MANUAL = 1
reset (dio) CONTROL-1
send MASTER 9110030012 CONTROL-1 OFF
on-end
on dio CONTROL-1 = 0 & SCSI = ON & SPAREON = 0 & MANUAL = 0
reset (dio) CONTROL-1
reset (dio) CONTROL-2 = 1 ; start Spare Server
send MASTER 9110030012 CONTROL-1 OFF
on-end
on dio CONTROL-1 = 1 & SPAREON = 1 & MANUAL = 0
reset (dio) CONTROL-1 = 0
on-end
on dio CONTROL-2 = 0 & MANUAL = 1
reset (dio) CONTROL-2
assign SPAREON = 0
on-end
on dio CONTROL-2 =1 & SCSI = OFF & MANUAL = 0
- --------------------------------------------------------------------------------
ClusterDirector User's Manual 17
<PAGE>
Modifying Configuration Files
- --------------------------------------------------------------------------------
reset (dio) CONTROL-2 = 0
on-end
on dio CONTROL-2 = 1 & CONTROL-1 = 0 & SCSI = 1
assign SPAREON = 1
send MASTER 4110031011 CONTROL 2 ON
on-end
on dio CONTROL-2 = 1 & CONTROL-1 = 1 & SPAREON = 0 & MANUAL = 0
reset (dio) CONTROL-2 = 0
on-end
on dio CONTROL-2 = 0 & SCSI = ON & SPAREON = 1 & MANUAL = 0
reset (dio) CONTROL-2
assign SPAREON = 0
reset (dio) CONTROL-1 = 1 ; start Main Server
send MASTER 9110031012 CONTROL-2 OFF
on-end
on dio CONTROL-3 = 1
send MASTER 4110032011 CONTROL 3 ON
on-end
on dio CONTROL-3 = 0
reset (dio) CONTROL-3
send MASTER 9110032012 CONTROL 3 OFF
on-end
on dio CONTROL-4 = 1
send MASTER 4110033011 CONTROL 4 ON
on-end
on dio CONTROL-3 = 0
reset (dio) CONTROL-4
send MASTER 9110033012 CONTROL 4 OFF
on-end
system-end
- --------------------------------------------------------------------------------
ClusterDirector User's Manual 18
<PAGE>
Chapter 5
Using TCP/IP
- --------------------------------------------------------------------------------
This chapter defines the protocols and commands required for
connecting to the ClusterDirector through a TCP/IP interface. The
chapter is divided in the following main parts:
o Listening ports
o TCP/IP commands
Listening Ports
The listening port assignments for connections are given in Table
5-1.
Table 5-1. Listening Port Assignments
------------------------------------------------------------------
Port Function Description
------------------------------------------------------------------
2000 Maintenance Maintenance information
including requests for
information ("get" command),
and console mode access
(telnet).
------------------------------------------------------------------
3000 Inter- Maintenance information with no
ClusterDirector requests. All NEIsystems.cfg
Communication commands are supported.
------------------------------------------------------------------
TCP/IP Commands
get backplane returns the backplane mapping.
get global <VAR-NAME> returns the global variable value (as
string) or "UNKNOWN" if the variable was not defined .
get local <VAR-NAME> from <SYSTEM-NAME> returns local variable as
above, and the variable is searched in the definition of the
system specified in the command line.
- --------------------------------------------------------------------------------
ClusterDirector User's Manual 19
<PAGE>
Using TCP/IP
- --------------------------------------------------------------------------------
get messages {IP Address} directs the alert messages, as in send
MASTER statements in NEIsystems.cfg, to the given destination,
for example, to port 2050. Previously, a listening port should be
created at this address.
get messages MASTER disables a message redirection. This command
should be sent before closing a connection in the maintenance
screen. You must close the socket in the data arrival event after
the response is received.
Sockets are numbered in increments of 10 as shown below:
2010 - the listening port for the first segment.
2020 - the listening port for the second segment.
. . . . . . . . . . . .
2100 - the listening port for the tenth segment.
3000 - the port dedicated to receiving remote commands (commands
for maintenance system from higher decision level application)
get systems returns on the open socket the names of the connected
systems as written in the NEIsystems.cfg file, starting with the
name of the ClusterDirector. The names are comma delimited in the
returned string.
get version returns the current ClusterDirector version number.
get watchdog returns "INACTIVE," "STARTED," or "EXPIRED."
power down <CONTROL-NUMBER> power up the control identified by
CONTROL-NUMBER (can be 1 through 10)
power down <SYSTEM-NAME> power up the system with the specified
name.
power down all power down all controls on the P6000.
power up <CONTROL-NUMBER> power up the control identified by
CONTROL-NUMBER (can be 1 through 10), i.e power up 1,., power up
10
- --------------------------------------------------------------------------------
ClusterDirector User's Manual 20
<PAGE>
Using TCP/IP
- --------------------------------------------------------------------------------
power up <SYSTEM-NAME> power up the system with the specified
name. In the original file this name is 'CPU-1' through 'CPU-10'
but we strongly recommend that you replace these names with the
ones you currently use.
power up all power up all controls on the P6000 one a time,
starting with segment one.
reboot RESET-n reboot the system connected to the segment n. The
range of values is RESET-1 through RESET-10, depending on the
backplane configuration. This is a hardware reset.
reset (dio) <DIO-OUTPUT> = 0 change status of the named dio
output line in 0
reset (dio) <DIO-OUTPUT> = 1 change status of the named dio
output line in 1
reset (var) <VARIABLE-NAME> = 0 change the status of a variable
to 0
reset (var) <VARIABLE-NAME> = 1 change the status of a variable
to 1
- --------------------------------------------------------------------------------
ClusterDirector User's Manual 21
<PAGE>
Schedule 1(d)
Trademarks
----------
1. P6000
2. P6000EXP
<PAGE>
EXHIBIT 10.14
NETWORK ENGINES, INC.
Restricted Stock Agreement
Granted Under 1999 Stock Incentive Plan
---------------------------------------
AGREEMENT made this 16th day of March, 2000, between Network Engines,
---- -----
Inc., a Delaware corporation (the "Company"), and Michael Shanahan, a Director
----------------
of the Company (the "Participant").
For valuable consideration, receipt of which is acknowledged, the parties
hereto agree as follows:
1. Purchase of Shares.
------------------
The Company shall issue and sell to the Participant, and the Participant
shall purchase from the Company, subject to the terms and conditions set forth
in this Agreement and in the Company's 1999 Stock Incentive Plan (the "Plan")
5,000 shares (the "Shares") of common stock, $.01 par value, of the Company
- -----
("Common Stock"), at a purchase price of $15.00 per share. The aggregate
------
purchase price for the Shares shall be paid by the Participant by check payable
to the order of the Company or such other method as may be acceptable to the
Company. Upon receipt by the Company of payment for the Shares, the Company
shall issue to the Participant one or more certificates in the name of the
Participant for that number of Shares purchased by the Participant. The
Participant agrees that the Shares shall be subject to the Purchase Option set
forth in Section 2 of this Agreement and the restrictions on transfer set forth
in Section 4 of this Agreement.
2. Purchase Option.
---------------
(a) In the event that the Participant ceases to be a Director of the
Company for any reason or no reason, with or without cause, prior to the earlier
of the first anniversary date of the grant of the option ( the "Grant Date") or
the day prior to the Company's annual meeting that will take place in 2001, the
Company shall have the right and option (the "Purchase Option") to purchase from
the Participant, for a sum of $15.00 per share (the "Option Price"), some or all
------
of the Unvested Shares (as defined below).
"Unvested Shares" means the total number of Shares multiplied by the
Applicable Percentage at the time the Purchase Option becomes exercisable by the
Company. The "Applicable Percentage" shall begin as 100% and shall be
1
<PAGE>
reduced to zero on or after the earlier of the first anniversary date of the
grant of the option (the "Grant Date") or the day prior to the Company's annual
meeting that will take place 2001.
(b) For purposes of this Agreement, employment with the Company shall
include employment with a parent or subsidiary of the Company.
3. Exercise of Purchase Option and Closing.
---------------------------------------
(a) The Company may exercise the Purchase Option by delivering or mailing
to the Participant (or his estate), within 60 days after the termination of the
employment of the Participant with the Company, a written notice of exercise of
the Purchase Option. Such notice shall specify the number of Shares to be
purchased. If and to the extent the Purchase Option is not so exercised by the
giving of such a notice within such 60-day period, the Purchase Option shall
automatically expire and terminate effective upon the expiration of such 60-day
period.
(b) Within 10 days after his receipt of the Company's notice of the
exercise of the Purchase Option pursuant to subsection (a) above, the
Participant (or his estate) shall tender to the Company at its principal offices
the certificate or certificates representing the Shares which the Company has
elected to purchase in accordance with the terms of this Agreement, duly
endorsed in blank or with duly endorsed stock powers attached thereto, all in
form suitable for the transfer of such Shares to the Company. Upon its receipt
of such certificate or certificates, the Company shall deliver or mail to the
Participant a check in the amount of the aggregate Option Price therefor.
(c) After the time at which any Shares are required to be delivered to the
Company for transfer to the Company pursuant to subsection (b) above, the
Company shall not pay any dividend to the Participant on account of such Shares
or permit the Participant to exercise any of the privileges or rights of a
stockholder with respect to such Shares, but shall, in so far as permitted by
law, treat the Company as the owner of such Shares.
(d) The Option Price may be payable, at the option of the Company, in
cancellation of all or a portion of any outstanding indebtedness of the
Participant to the Company or in cash (by check) or both.
(e) The Company shall not purchase any fraction of a Share upon exercise of
the Purchase Option, and any fraction of a Share resulting from a computation
made pursuant to Section 2 of this Agreement shall be rounded to the nearest
whole Share (with any one-half Share being rounded upward).
2
<PAGE>
4. Restrictions on Transfer.
------------------------
The Participant shall not sell, assign, transfer, pledge, hypothecate or
otherwise dispose of, by operation of law or otherwise (collectively
"transfer"):
(a) any Shares, or any interest therein, that are subject to the Purchase
Option, except that the Participant may transfer such Shares to or for the
benefit of any spouse, child or grandchild, or to a trust for their benefit,
provided that such Shares shall remain subject to this Agreement (including
- --------
without limitation the restrictions on transfer set forth in this Section 4, the
Purchase Option and the right of first refusal set forth in Section 5) and such
permitted transferee shall, as a condition to such transfer, deliver to the
Company a written instrument confirming that such transferee shall be bound by
all of the terms and conditions of this Agreement; or
(b) any Shares, or any interest therein, that are no longer subject to the
Purchase Option, except in accordance with Section 5 below.
5. Right of First Refusal.
----------------------
(a) If the Participant proposes to transfer any Shares that are no longer
subject to the Purchase Option (either because they are no longer Unvested
Shares or because the Purchase Option expired unexercised), then the Participant
shall first give written notice of the proposed transfer (the "Transfer Notice")
to the Company. The Transfer Notice shall name the proposed transferee and state
the number of such Shares he proposes to transfer the ("Offered Shares"), the
price per share and all other material terms and conditions of the transfer.
(b) For 30 days following its receipt of such Transfer Notice, the Company
shall have the option to purchase all (but not less than all) of the Offered
Shares at the price and upon the terms set forth in the Transfer Notice. In the
event the Company elects to purchase all of the Offered Shares, it shall give
written notice of such election to the Participant within such 30-day period.
Within 10 days after his receipt of such notice, the Participant shall tender to
the Company at its principal offices the certificate or certificates
representing the Offered Shares, duly endorsed in blank by the Participant or
with duly endorsed stock powers attached thereto, all in form suitable for
transfer of the Offered Shares to the Company. Upon receipt of such certificate
or certificates, the Company shall deliver or mail to the Participant a check in
payment of the purchase price for the Offered Shares; provided that if the
-------- ----
terms of payment set forth in the Transfer Notice were other than cash against
delivery, the Company
3
<PAGE>
may pay for the Offered Shares on the same terms and conditions as were set
forth in the Transfer Notice.
(c) If the Company does not elect to acquire all of the Offered Shares, the
Participant may, within the 30-day period following the expiration of the option
granted to the Company under subsection (b) above, transfer the Offered Shares
to the proposed transferee, provided that such transfer shall not be on terms
-------- ----
and conditions more favorable to the transferee than those contained in the
Transfer Notice. Notwithstanding any of the above, all Offered Shares
transferred pursuant to this Section 5 shall remain subject to this Agreement
(including without limitation the restrictions on transfer set forth in Section
4 and the right of first refusal set forth in this Section 5) and such
transferee shall, as a condition to such transfer, deliver to the Company a
written instrument confirming that such transferee shall be bound by all of the
terms and conditions of this Agreement.
(d) After the time at which the Offered Shares are required to be delivered
to the Company for transfer to the Company pursuant to subsection (b) above, the
Company shall not pay any dividend to the Participant on account of such Offered
Shares or permit the Participant to exercise any of the privileges or rights of
a stockholder with respect to such Shares, but shall, in so far as permitted by
law, treat the Company as the owner of such Offered Shares.
(e) The following transactions shall be exempt from the provisions of this
Section 5:
(1) a transfer of Shares to or for the benefit of any spouse, child or
grandchild of the Participant, or to a trust for their benefit;
(2) any transfer pursuant to an effective registration statement filed
by the Company under the Securities Act of 1933, as amended (the "Securities
Act"); and
(3) the sale of all or substantially all of the shares of capital stock
of the Company (including pursuant to a merger or consolidation);
provided, however, that in the case of a transfer pursuant to clause (1) above,
- -------- -------
such Shares shall remain subject to this Agreement (including without limitation
the restrictions on transfer set forth in Section 4 and the right of first
refusal set forth in this Section 5) and such transferee shall, as a condition
to such transfer, deliver to the Company a written instrument confirming that
such transferee shall be bound by all of the terms and conditions of this
Agreement.
4
<PAGE>
(f) The Company may assign its rights to purchase Offered Shares in any
particular transaction under this Section 5 to one or more persons or entities.
(g) The provisions of this Section 5 shall terminate upon the earlier of
the following events:
(1) the closing of the sale of shares of Common Stock in an
underwritten public offering pursuant to an effective registration statement
filed by the Company under the Securities Act; or
(2) the sale of all or substantially all of the capital stock, assets
or business of the Company, by merger, consolidation, sale of assets or
otherwise.
6. Agreement in Connection with Public Offering.
--------------------------------------------
The Participant agrees, in connection with the initial underwritten public
offering of the Company's securities pursuant to a registration statement under
the Securities Act, (i) not to sell, make short sale of, loan, grant any options
for the purchase of, or otherwise dispose of any shares of Common Stock held by
the Participant (other than those shares included in the offering) without the
prior written consent of the Company or the underwriters managing such initial
underwritten public offering of the Company's securities for a period of 180
days from the effective date of such registration statement, and (ii) to execute
any agreement reflecting clause (i) above as may be requested by the Company or
the managing underwriters at the time of such initial offering.
7. Effect of Prohibited Transfer.
-----------------------------
The Company shall not be required (a) to transfer on its books any of the
Shares which shall have been sold or transferred in violation of any of the
provisions set forth in this Agreement, or (b) to treat as owner of such Shares
or to pay dividends to any transferee to whom any such Shares shall have been so
sold or transferred.
8. Escrow.
------
The Participant shall, upon the execution of this Agreement, execute Joint
Escrow Instructions in the form attached to this Agreement as Exhibit A. The
Joint Escrow Instructions shall be delivered to the Clerk of the Company, as
escrow agent thereunder. The Participant shall deliver to such escrow agent a
stock assignment duly endorsed in blank and hereby instructs the Company to
deliver to such escrow agent, on behalf of the Participant, the certificate(s)
evidencing
5
<PAGE>
the Shares issued hereunder. Such materials shall be held by such escrow agent
pursuant to the terms of such Joint Escrow Instructions.
9. Restrictive Legend.
------------------
All certificates representing Shares shall have affixed thereto a legend in
substantially the following form, in addition to any other legends that may be
required under federal or state securities laws:
"The shares of stock represented by this certificate are
subject to restrictions on transfer and an option to
purchase set forth in a certain Stock Restriction
Agreement between the corporation and the registered
owner of these shares (or his predecessor in interest),
and such Agreement is available for inspection without
charge at the office of the Clerk of the corporation."
"The shares represented by this certificate have not
been registered under the Securities Act of 1933, as
amended, and may not be sold, transferred or otherwise
disposed of in the absence of an effective registration
statement under such Act or an opinion of counsel
satisfactory to the corporation to the effect that such
registration is not required."
10. Provisions of the Plan.
----------------------
This Agreement is subject to the provisions of the Plan, a copy of which is
furnished to the Participant with this Agreement.
11. Investment Representations.
--------------------------
The Participant represents, warrants and covenants as follows:
(a) The Participant is purchasing the Shares for his own account for
investment only, and not with a view to, or for sale in connection with, any
distribution of the Shares in violation of the Securities Act, or any rule or
regulation under the Securities Act.
(b) The Participant has had such opportunity as he has deemed adequate to
obtain from representatives of the Company such information as is
6
<PAGE>
necessary to permit him to evaluate the merits and risks of his investment in
the Company.
(c) The Participant has sufficient experience in business, financial and
investment matters to be able to evaluate the risks involved in the purchase of
the Shares and to make an informed investment decision with respect to such
purchase.
(d) The Participant can afford a complete loss of the value of the Shares
and is able to bear the economic risk of holding such Shares for an indefinite
period.
(e) The Participant understands that (i) the Shares have not been
registered under the Securities Act and are "restricted securities" within the
meaning of Rule 144 under the Securities Act, (ii) the Shares cannot be sold,
transferred or otherwise disposed of unless they are subsequently registered
under the Securities Act or an exemption from registration is then available;
(iii) in any event, the exemption from registration under Rule 144 will not be
available for at least one year and even then will not be available unless a
public market then exists for the Common Stock, adequate information concerning
the Company is then available to the public, and other terms and conditions of
Rule 144 are complied with; and (iv) there is now no registration statement on
file with the Securities and Exchange Commission with respect to any stock of
the Company and the Company has no obligation or current intention to register
the Shares under the Securities Act.
7
<PAGE>
12. Withholding Taxes; Section 83(b) Election.
-----------------------------------------
(a) The Participant acknowledges and agrees that the Company has the right
to deduct from payments of any kind otherwise due to the Participant any
federal, state or local taxes of any kind required by law to be withheld with
respect to the purchase of the Shares by the Participant or the lapse of the
Purchase Option.
(b) The Participant acknowledges that he has been informed of the
availability of making an election in accordance with Section 83(b) of the
Internal Revenue Code of 1986, as amended; that such election must be filed with
the Internal Revenue Service within 30 days of the transfer of shares to the
Participant; and that the Participant is solely responsible for making such
election.
13. Severability.
------------
The invalidity or unenforceability of any provision of this Agreement shall
not affect the validity or enforceability of any other provision of this
Agreement, and each other provision of this Agreement shall be severable and
enforceable to the extent permitted by law.
14. Waiver.
------
Any provision for the benefit of the Company contained in this Agreement
may be waived, either generally or in any particular instance, by the Board of
Directors of the Company.
15. Binding Effect.
--------------
This Agreement shall be binding upon and inure to the benefit of the
Company and the Participant and their respective heirs, executors,
administrators, legal representatives, successors and assigns, subject to the
restrictions on transfer set forth in Sections 4 and 5 of this Agreement.
16. Notice.
------
All notices required or permitted hereunder shall be in writing and deemed
effectively given upon personal delivery or five days after deposit in the
United States Post Office, by registered or certified mail, postage prepaid,
addressed to the other party hereto at the address shown beneath his or its
8
<PAGE>
respective signature to this Agreement, or at such other address or addresses as
either party shall designate to the other in accordance with this Section 16.
17. Pronouns.
--------
Whenever the context may require, any pronouns used in this Agreement shall
include the corresponding masculine, feminine or neuter forms, and the singular
form of nouns and pronouns shall include the plural, and vice versa.
18. Entire Agreement.
----------------
This Agreement and the Plan constitutes the entire agreement between the
parties, and supersedes all prior agreements and understandings, relating to the
subject matter of this Agreement.
19. Amendment.
---------
This Agreement may be amended or modified only by a written instrument
executed by both the Company and the Participant.
20. Governing Law.
-------------
This Agreement shall be construed, interpreted and enforced in accordance
with the internal laws of the State of Delaware without regard to any applicable
conflicts of laws.
9
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
NETWORK ENGINES, INC.
By:___________________________
Title: President, CEO and CTO
-----------------------
______________________________
Michael Shanahan
Address:
______________________________
______________________________
10
<PAGE>
Exhibit A
Network Engines, Inc.
Joint Escrow Instructions
-------------------------
March 16, 2000
Secretary
Network Engines, Inc.
61 Pleasant Street
Randolph, MA 02368-4137
Dear Secretary:
As Escrow Agent for Network Engines, Inc., a Delaware corporation (the
"Company"), and the undersigned Participant ("Holder"), you are hereby
authorized and directed to hold the documents delivered to you pursuant to the
terms of that certain Restricted Stock Agreement (the "Agreement") of even date
herewith, to which a copy of these Joint Escrow Instructions is attached, in
accordance with the following instructions:
1. Holder irrevocably authorizes the Company to deposit with you any
certificates evidencing Shares (as defined in the Agreement) to be held by you
hereunder and any additions and substitutions to said Shares. Holder does
hereby irrevocably constitute and appoint you as his attorney-in-fact and agent
for the term of this escrow to execute with respect to such Shares all documents
necessary or appropriate to make such Shares negotiable and to complete any
transaction herein contemplated. Subject to the provisions of this paragraph 1
and the terms of the Agreement, Holder shall exercise all rights and privileges
of a stockholder of the Company while the Shares are held by you.
2. Upon any purchase by the Company of the Shares pursuant to the
Agreement, the Company shall give to Holder and you a written notice specifying
the purchase price for the Shares, as determined pursuant to the Agreement, and
the time for a closing hereunder (the "Closing") at the principal
11
<PAGE>
office of the Company. Holder and the Company hereby irrevocably authorize and
direct you to close the transaction contemplated by such notice in accordance
with the terms of said notice.
3. At the Closing, you are directed (a) to date the stock assignment form
or forms necessary for the transfer of the Shares, (b) to fill in on such form
or forms the number of Shares being transferred, and (c) to deliver same,
together with the certificate or certificates evidencing the Shares to be
transferred, to the Company against the simultaneous delivery to you of the
purchase price for the Shares being purchased pursuant to the Agreement.
4. The Holder shall have the right to withdraw from this escrow any
Shares as to which the Purchase Option (as defined in the Agreement) has
terminated or expired.
5. Your duties hereunder may be altered, amended, modified or revoked
only by a writing signed by all of the parties hereto.
6. You shall be obligated only for the performance of such duties as are
specifically set forth herein and may rely and shall be protected in relying or
refraining from acting on any instrument reasonably believed by you to be
genuine and to have been signed or presented by the proper party or parties.
You shall not be personally liable for any act you may do or omit to do
hereunder as Escrow Agent or as attorney-in-fact of Holder while acting in good
faith and in the exercise of your own good judgment, and any act done or omitted
by you pursuant to the advice of your own attorneys shall be conclusive evidence
of such good faith.
7. You are hereby expressly authorized to disregard any and all warnings
given by any of the parties hereto or by any other person or Company, excepting
only orders or process of courts of law, and are hereby expressly authorized to
comply with and obey orders, judgments or decrees of any court. In case you
obey or comply with any such order, judgment or decree of any court, you shall
not be liable to any of the parties hereto or to any other person, firm or
Company by reason of such compliance, notwithstanding any such order, judgment
or decree being subsequently reversed, modified, annulled, set aside, vacated or
found to have been entered without jurisdiction.
8. You shall not be liable in any respect on account of the identity,
authority or rights of the parties executing or delivering or purporting to
execute or deliver the Agreement or any documents or papers deposited or called
for hereunder.
12
<PAGE>
9. You shall be entitled to employ such legal counsel and other experts
as you may deem necessary properly to advise you in connection with your
obligations hereunder and may rely upon the advice of such counsel.
10. Your responsibilities as Escrow Agent hereunder shall terminate if you
shall cease to be Secretary of the Company or if you shall resign by written
notice to each party. In the event of any such termination, the Company shall
appoint any officer of the Company as successor Escrow Agent.
11. If you reasonably require other or further instruments in connection
with these Joint Escrow Instructions or obligations in respect hereto, the
necessary parties hereto shall join in furnishing such instruments.
12. It is understood and agreed that should any dispute arise with respect
to the delivery and/or ownership or right of possession of the securities held
by you hereunder, you are authorized and directed to retain in your possession
without liability to anyone all or any part of said securities until such
dispute shall have been settled either by mutual written agreement of the
parties concerned or by a final order, decree or judgment of a court of
competent jurisdiction after the time for appeal has expired and no appeal has
been perfected, but you shall be under no duty whatsoever to institute or defend
any such proceedings.
13. Any notice required or permitted hereunder shall be given in writing
and shall be deemed effectively given upon personal delivery or upon deposit in
the United States Post Office, by registered or certified mail with postage and
fees prepaid, addressed to each of the other parties thereunto entitled at the
following addresses, or at such other addresses as a party may designate by ten
days' advance written notice to each of the other parties hereto.
COMPANY: Network Engines, Inc.
61 Pleasant Street
Randolph, MA 02368-4137
HOLDER: Notices to Holder shall be sent to the address set
forth below Holder's signature below.
ESCROW AGENT: Douglas G. Bryant
-----------------
61 Pleasant St.
---------------
Randolph, MA 02368
-------------------
13
<PAGE>
14. By signing these Joint Escrow Instructions, you become a party hereto
only for the purpose of said Joint Escrow Instructions, and you do not become a
party to the Agreement.
15. This instrument shall be binding upon and inure to the benefit of the
parties hereto and their respective successors and permitted assigns.
Very truly yours,
Network Engines, Inc.
By: /s/ Lawrence Genovesi
---------------------
Title: President, CEO and CTO
----------------------
HOLDER:
/s/ Michael Shanahan
--------------------
(Signature)
Michael Shanahan
---------------------------
Print Name
Address:
____________________________________
____________________________________
Date Signed:________________________
ESCROW AGENT:
/s/ Douglas G. Bryant
- ---------------------
14
<PAGE>
EXHIBIT 10.15
NETWORK ENGINES, INC.
Nonstatutory Stock Option Agreement
Granted Under 1999 Stock Incentive Plan
---------------------------------------
1. Grant of Option.
---------------
This agreement evidences the grant by Network Engines, Inc., a Delaware
corporation (the "Company") on March 16, 2000 to Robert Wadsworth , a Director
-----------------
of the Company (the "Participant"), of an option to purchase, in whole or in
part, on the terms provided herein and in the Company's 1999 Stock Incentive
Plan (the "Plan"), a total of 5,000 shares of common stock, $.01 par value per
-----
share, of the Company ("Common Stock") (the "Shares") at $15.00 per Share.
------
Unless earlier terminated, this option shall expire on March 15, 2010 (the
--------------
"Final Exercise Date").
It is intended that the option evidenced by this agreement shall not be an
incentive stock option as defined in Section 422 of the Internal Revenue Code of
1986, as amended and any regulations promulgated thereunder (the "Code").
Except as otherwise indicated by the context, the term "Participant", as used in
this option, shall be deemed to include any person who acquires the right to
exercise this option validly under its terms.
2. Vesting Schedule.
----------------
This option will become exercisable ("vest") as to 100 % of the original
---
number of Shares on the earlier of the first anniversary date of the grant of
the option (the "Grant Date") or the day prior to the Company's annual meeting
that will take place in 2001.
The right of exercise shall be cumulative so that to the extent the option
is not exercised in any period to the maximum extent permissible it shall
continue to be exercisable, in whole or in part, with respect to all shares for
which it is vested until the earlier of the Final Exercise Date or the
termination of this option under Section 3 hereof or the Plan.
<PAGE>
3. Exercise of Option.
------------------
(a) Form of Exercise. Each election to exercise this option shall be in
----------------
writing, signed by the Participant, and received by the Company at its principal
office, accompanied by this agreement, and payment in full in the manner
provided in the Plan. The Participant may purchase less than the number of
shares covered hereby, provided that no partial exercise of this option may be
for any fractional share.
(b) Continuous Relationship with the Company Required. Except as otherwise
-------------------------------------------------
provided in this Section 3, this option may not be exercised unless the
Participant, at the time he or she exercises this option, is, and has been at
all times since the date of grant of this option, an employee, officer or
director of, or consultant or advisor to, the Company or any parent or
subsidiary of the Company as defined in Section 424(e) or (f) of the Code (an
"Eligible Participant").
(c) Termination of Relationship with the Company. If the Participant
--------------------------------------------
ceases to be an Eligible Participant for any reason, then, except as provided in
paragraphs (d) and (e) below, the right to exercise this option shall terminate
three months after such cessation (but in no event after the Final Exercise
Date), provided that this option shall be exercisable only to the extent that
-------- ----
the Participant was entitled to exercise this option on the date of such
cessation. Notwithstanding the foregoing, if the Participant, prior to the
Final Exercise Date, violates the non-competition or confidentiality provisions
of any employment contract, confidentiality and nondisclosure agreement or other
agreement between the Participant and the Company, the right to exercise this
option shall terminate immediately upon written notice to the Participant from
the Company describing such violation.
(d) Exercise Period Upon Death or Disability. If the Participant dies or
----------------------------------------
becomes disabled (within the meaning of Section 22(e)(3) of the Code) prior to
the Final Exercise Date while he or she is an Eligible Participant and the
Company has not terminated such relationship for "cause" as specified in
paragraph (e) below, this option shall be exercisable, within the period of one
year following the date of death or disability of the Participant, by the
Participant, provided that this option shall be exercisable only to the extent
-------- ----
that this option was exercisable by the Participant on the date of his or her
death or disability, and further provided that this option shall not be
exercisable after the Final Exercise Date.
(e) Discharge for Cause. If the Participant, prior to the Final Exercise
-------------------
Date, is discharged by the Company for "cause" (as defined below), the right to
exercise this option shall terminate immediately upon the effective date of such
discharge. "Cause" shall mean willful misconduct by the Participant or willful
failure by the Participant to
<PAGE>
perform his or her 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), as determined by the Company, which
determination shall be conclusive. 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 warranted.
4. Right of First Refusal.
----------------------
(a) If the Participant proposes to sell, assign, transfer, pledge,
hypothecate or otherwise dispose of, by operation of law or otherwise
(collectively, "transfer") any Shares acquired upon exercise of this option,
then the Participant shall first give written notice of the proposed transfer
(the "Transfer Notice") to the Company. The Transfer Notice shall name the
proposed transferee and state the number of such Shares the Participant proposes
to transfer (the "Offered Shares"), the price per share and all other material
terms and conditions of the transfer.
(b) For 30 days following its receipt of such Transfer Notice, the Company
shall have the option to purchase all (but not less than all) of the Offered
Shares at the price and upon the terms set forth in the Transfer Notice. In the
event the Company elects to purchase all of the Offered Shares, it shall give
written notice of such election to the Participant within such 30-day period.
Within 10 days after his receipt of such notice, the Participant shall tender to
the Company at its principal offices the certificate or certificates
representing the Offered Shares, duly endorsed in blank by the Participant or
with duly endorsed stock powers attached thereto, all in a form suitable for
transfer of the Offered Shares to the Company. Upon receipt of such certificate
or certificates, the Company shall deliver or mail to the Participant a check in
payment of the purchase price for the Offered Shares; provided that if the
-------- ----
terms of payment set forth in the Transfer Notice were other than cash against
delivery, the Company may pay for the Offered Shares on the same terms and
conditions as were set forth in the Transfer Notice.
(c) At and after the time at which the Offered Shares are required to be
delivered to the Company for transfer to the Company pursuant to subsection (b)
above, the Company shall not pay any dividend to the Participant on account of
such Shares or permit the Participant to exercise any of the privileges or
rights of a stockholder with respect to such Offered Shares, but shall, in so
far as permitted by law, treat the Company as the owner of such Offered Shares.
(d) If the Company does not elect to acquire all of the Offered Shares, the
Participant may, within the 30-day period following the expiration of the option
<PAGE>
granted to the Company under subsection (b) above, transfer the Offered Shares
to the proposed transferee, provided that such transfer shall not be on terms
-------- ----
and conditions more favorable to the transferee than those contained in the
Transfer Notice. Notwithstanding any of the above, all Offered Shares
transferred pursuant to this Section 4 shall remain subject to the right of
first refusal set forth in this Section 4 and such transferee shall, as a
condition to such transfer, deliver to the Company a written instrument
confirming that such transferee shall be bound by all of the terms and
conditions of this Section 4.
(e) The following transactions shall be exempt from the provisions of this
Section 4:
(i) any transfer of Shares to or for the benefit of any spouse,
child or grandchild of the Participant, or to a trust for their benefit;
(ii) any transfer pursuant to an effective registration statement
filed by the Company under the Securities Act of 1933, as amended (the
"Securities Act"); and
(iii) any transfer of the Shares pursuant to the sale of all or
substantially all of the business of the Company;
provided, however, that in the case of a transfer pursuant to clause (1) above,
- -------- -------
such Shares shall remain subject to the right of first refusal set forth in this
Section 4 and such transferee shall, as a condition to such transfer, deliver to
the Company a written instrument confirming that such transferee shall be bound
by all of the terms and conditions of this Section 4.
(f) The Company may assign its rights to purchase Offered Shares in any
particular transaction under this Section 4 to one or more persons or entities.
(g) The provisions of this Section 4 shall terminate upon the earlier of
the following events:
(1) the closing of the sale of shares of Common Stock in an
underwritten public offering pursuant to an effective registration statement
filed by the Company under the Securities Act; or
(2) the sale of all or substantially all of the capital stock, assets
or business of the Company, by merger, consolidation, sale of assets or
otherwise.
(h) The Company shall not be required (a) to transfer on its books any of
the Shares which shall have been sold or transferred in violation of any of the
provisions set
<PAGE>
forth in this Section 4, or (b) to treat as owner of such Shares or to pay
dividends to any transferee to whom any such Shares shall have been so sold or
transferred.
5. Agreement in Connection with Public Offering.
--------------------------------------------
The Participant agrees, in connection with the initial underwritten public
offering of the Company's securities pursuant to a registration statement under
the Securities Act, (i) not to sell, make short sale of, loan, grant any options
for the purchase of, or otherwise dispose of any shares of Common Stock held by
the Participant (other than those shares included in the offering) without the
prior written consent of the Company or the underwriters managing such initial
underwritten public offering of the Company's securities for a period of 180
days from the effective date of such registration statement, and (ii) to execute
any agreement reflecting clause (i) above as may be requested by the Company or
the managing underwriters at the time of such offering.
6. Withholding.
-----------
No Shares will be issued pursuant to the exercise of this option unless and
until the Participant pays to the Company, or makes provision satisfactory to
the Company for payment of, any federal, state or local withholding taxes
required by law to be withheld in respect of this option.
7. Nontransferability of Option.
----------------------------
This option may not be sold, assigned, transferred, pledged or otherwise
encumbered by the Participant, either voluntarily or by operation of law, except
by will or the laws of descent and distribution, and, during the lifetime of the
Participant, this option shall be exercisable only by the Participant.
8. Provisions of the Plan.
----------------------
This option is subject to the provisions of the Plan, a copy of which is
furnished to the Participant with this option.
IN WITNESS WHEREOF, the Company has caused this option to be executed under
its corporate seal by its duly authorized officer. This option shall take
effect as a sealed instrument.
<PAGE>
NETWORK ENGINES, INC.
Dated: March 16, 2000 By: ____________________________
Name: Lawrence A. Genovesi
--------------------
Title: President, CEO & CTO
--------------------
PARTICIPANT'S ACCEPTANCE
The undersigned hereby accepts the foregoing option and agrees to the terms
and conditions thereof. The undersigned hereby acknowledges receipt of a copy
of the Company's 1999 Stock Incentive Plan.
PARTICIPANT:
_____________________________
Address: _____________________
_____________________
<PAGE>
Exhibit 10.16
NETWORK ENGINES, INC.
1999 Stock Incentive Plan
First Amendment
---------------
The Network Engines, Inc. 1999 Stock Incentive Plan, pursuant to Section
9(e) thereof, is hereby amended as follows, effective as of March 16, 2000.
Section 4(a) is amended to read in its entirety as follows:
Subject to adjustment under Section 4(c), Awards may initially be made
under the Plan for up to an aggregate of 8,047,902 shares (after
taking into account the 2.5-for-1 stock split approved by the Board on
May 15, 2000 (the "Stock Split")) of Common Stock; provided, however,
that on October 1 of each year commencing on October 1, 2000 through
and including October 1, 2008, the number of shares of Common Stock
reserved for issuance under the Plan shall be automatically increased
by the lesser of (a) 4,000,000 shares (after taking into account the
Stock Split), (b) 5% of the Company's outstanding stock on such date
or (c) an amount determined by the Board. Except as provided below, in
no event may the aggregate number of shares of Common Stock issued
pursuant to Incentive Stock Options (as hereinafter defined) and any
other Awards during the life of the Plan exceed 20,047,902 (after
taking into account the Stock Split). 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, 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.
Adopted by the Board of Directors: March 16, 2000
Approved by the Stockholders: , 2000
-----------
<PAGE>
Exhibit 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in this Registration Statement on Form S-1
(File No. 333-34286) of our report dated November 22, 1999, except as to Note
13 for which the date is May 15, 2000, relating to the financial statements of
Network Engines, Inc., which appears in such Registration Statement. We also
consent to the references to us under the headings "Experts" and "Selected
Financial Data" in such Registration Statement.
PricewaterhouseCoopers LLP
Boston, Massachusetts
May 19, 2000
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<PAGE>
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<ALLOWANCES> 287 0
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41,976 0
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<INTEREST-EXPENSE> 10 30
<INCOME-PRETAX> (4,221) (5,807)
<INCOME-TAX> 0 0
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<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (4,221) (5,807)
<EPS-BASIC> (4.91) (3.06)
<EPS-DILUTED> (4.91) (3.06)
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<PAGE>
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