LOGO [g22632g02r80.jpg]

 

 

Exhibit 10.1

August 30, 2010

Dear Mike:

I am pleased to offer you a position with Blue Coat Systems, Inc. (the
“Company”) as President and Chief Executive Officer, reporting to the Company’s
Board of Directors. In this role you will be expected to perform such duties as
are consistent with your title and position, as well as any other reasonable
duties determined by the Company’s Board of Directors. We anticipate that you
will commence employment with the Company on September 1, 2010.

We have structured a compensation package for you that includes the following:

 

  •  

You will receive an initial annual base salary of $585,000 (“Base Salary”), paid
according to the Company’s standard payroll policies. The Company’s Compensation
Committee will annually review your Base Salary.

 

  •  

You will be eligible to participate in the Company’s Profit Sharing Plan, or
such successor plan or program as may be implemented by the Company from time to
time to provide short term incentive compensation or bonuses to senior
executives. Your initial annual target incentive compensation under the Profit
Sharing Plan will be 100% of your Base Salary. The Company’s Compensation
Committee will annually review your target incentive compensation.

 

  •  

You will be paid a relocation allowance of $200,000, less applicable
withholding, with your first payroll check after your commencement of employment
with the Company.

 

  •  

You will be recommended for a non-qualified option to purchase 225,000 shares of
the Company’s Common Stock. The exercise price per share will be equal to the
fair market value per share on the date the option is granted, which will be the
third Thursday of the month after you commence employment. 25% of the option
shares will vest and be exercisable after 12 months of service, and the balance
will vest and be exercisable in monthly installments over the next 36 months of
service, as described in the applicable stock option agreement and subject to
your execution of that agreement. This award will be subject to applicable
NASDAQ rules on inducement awards.

 

  •  

You will be recommended for an award of 75,000 restricted stock units (“RSUs”).
25% of the RSUs will vest on September 15, 2011, and the balance will vest in
annual installments on the anniversary of such date over the following 3 years
of service, as described in the applicable restricted stock unit agreement and
subject to your execution of that agreement. This award will be subject to
applicable NASDAQ rules on inducement awards.

 

  •  

You will be eligible to participate in the Company’s standard benefits plans and
programs generally available to employees in the U.S., as they may be amended
from time to time in the sole discretion

 

Blue Coat Systems, Inc.    420 North Mary Ave Sunnyvale, CA
94085    866.30BCOAT    T: 408.220.2200    F: 408.220.2250    www.bluecoat.com

LOGO [g22632g16x06.jpg]

 

--------------------------------------------------------------------------------

LOGO [g22632g02r80.jpg]

 

 

 

of the Company. This includes automatic enrollment in the Company’s 401(k) Plan,
unless you give our provider, Fidelity Investments, prompt notice of your
election not to participate in that plan.

 

  •  

You will be eligible for other benefits offered to the Company’s senior
executive officers and you shall participate in the CEO Executive Change in
Control Severance Agreement provided herewith and be provided with the benefits
of the Indemnification Agreement provided herewith, subject to your execution of
those agreements.

Your employment shall be “at will,” meaning that either you or the Company will
be entitled to terminate your employment at any time and for any reason, with or
without cause. Nonetheless, you shall be entitled to certain benefits under the
Executive Separation Policy provided herewith in the event of a termination
without Cause or upon your termination for Good Reason (each as defined in your
CEO Change in Control Severance Agreement (instead of the Executive Separation
Policy)), and contingent on your executing the Release attached as Exhibit A
hereto (instead of the Release attached to the Executive Separation Policy). In
addition to the caveats to the Executive Separation Policy set forth above, the
Executive Separation Policy solely as it applies to you is modified to provide
that your “Separation Payment” may not be amended without your consent and shall
be as follows:

You shall be paid an amount equal to your annual Base Salary plus 100% of your
annual target incentive compensation payable in a single lump sum, and shall
receive payment or reimbursement of health benefit continuation coverage under
COBRA or otherwise from the termination date through the earlier of (A) 12
months following the termination date or (B) the date you become eligible for
health benefits with another employer, which shall be paid no later than the
month of such coverage.

In the event that the severance and other benefits provided for in this offer
letter or otherwise payable to you (i) constitute “parachute payments” within
the meaning of Section 280G of the Internal Revenue Code of 1986, as amended
(the “Code”) and (ii) but for this provision, would be subject to the excise tax
imposed by Section 4999 of the Code, then, at Employee’s discretion, Employee’s
severance, vesting and other benefits under this offer letter or otherwise shall
be payable either (i) in full, or (ii) as to such lesser amount which would
result in no portion of such severance and other benefits being subject to the
excise tax under Section 4999 of the Code, whichever of the foregoing amounts,
taking into account the applicable federal, state and local income taxes and the
excise tax imposed by Section 4999, results in the receipt by you on an
after-tax basis, of the greatest amount of severance benefits under this offer
letter or otherwise, notwithstanding that all or some portion of such severance
benefits may be taxable under Section 4999 of the Code. Any reduction shall be
made in the following manner: first a pro rata reduction of (i) cash payments
subject to Section 409A of the Code as deferred compensation and (ii) cash
payments not subject to Section 409A of the Code, and second a pro rata
cancellation of (i) equity-based compensation subject to Section 409A of the
Code as deferred compensation and (ii) equity-based compensation not subject to
Section 409A of the Code. Reduction in either cash payments or equity
compensation benefits shall be made prorata between and among benefits which are
subject to Section 409A of the Code and benefits which are exempt from
Section 409A of the Code. Unless the Company and you otherwise agree in writing,
any determination required under this provision shall be made in writing by the
Company’s independent public accountants (the “Accountants”), whose
determination shall be conclusive and binding upon you and the Company for all
purposes. For purposes of making the calculations required by this provision,
the Accountants may make reasonable assumptions and approximations concerning
applicable taxes and may rely on reasonable, good faith interpretations
concerning the application of Sections 280G and 4999 of the Code. The Company
and

 

Blue Coat Systems, Inc.    420 North Mary Ave Sunnyvale, CA
94085    866.30BCOAT    T: 408.220.2200    F: 408.220.2250    www.bluecoat.com

LOGO [g22632g16x06.jpg]

 

--------------------------------------------------------------------------------

LOGO [g22632g02r80.jpg]

 

 

you shall furnish to the Accountants such information and documents as the
Accountants may reasonably request in order to make a determination under this
provision. The Company shall bear all costs the Accountants may reasonably incur
in connection with any calculations contemplated by this provision.

While you remain an employee of the Company, to the extent consistent with the
exercise of its fiduciary duties, the Company’s Board of Directors will
recommend to the Company’s stockholders that you be elected to serve as a member
of the Board of Directors. No compensation will be paid for such service. You
agree to resign from the Board upon termination of your employment. It presently
is anticipated that the Company will appoint you to the Board of Directors on
October 7, 2010 to fill a vacant position.

In accordance with the Company’s vacation policy for senior level employees, you
will not accrue vacation, but you will be expected to take a reasonable amount
of vacation or personal time on an annual basis.

Like all Company employees, you will be required, as a condition of your
employment with the Company, to sign the Company’s standard Proprietary
Information and Inventions Agreement, a copy of which is enclosed. You agree
that, during the term of your employment with the Company, you will not engage
in any other employment, occupation, consulting or other business activity
directly related to the business in which the Company is now involved or becomes
involved during the term of your employment, nor will you engage in any other
activities that conflict with your obligations to the Company. While you render
services to the Company, you also will not assist any person or organization in
competing with the Company, in preparing to compete with the Company or in
hiring any employees or consultants of the Company.

In accordance with the requirements of the Immigration Reform and Control Act of
1986, you will be required to provide verification of your identity and your
legal right to work in the United States. This offer is contingent upon your
ability to provide us with such documentation. You also will be required to
complete an application form and a reference and background check authorization
form. Your offer of employment is contingent upon your execution of the
application form and our receipt of satisfactory results from the background
check, including verification of education and employment and a criminal records
search.

Any dispute between you and the Company with respect to your employment and the
terms and conditions of this offer of employment will be governed by the
Arbitration Provision attached hereto as Exhibit B.

To the extent (a) any payments or benefits to which you become entitled under
this offer letter, or under any agreement or plan referenced herein, in
connection with Employee’s termination of employment with the Company constitute
deferred compensation subject to Section 409A of the Code and (b) you are deemed
at the time of such termination of employment to be a “specified employee” under
Section 409A of the Code, then such payments shall not be made or commence until
the earliest of (i) the expiration of the six (6)-month period measured from the
date of your “separation from service” (as such term is at the time defined in
Treasury Regulations under Section 409A of the Code) from the Company; or
(ii) the date of your death following such separation from service; provided,
however, that such deferral shall only be effected to the extent required to
avoid adverse tax treatment to you, including (without limitation) the
additional twenty percent (20%) tax for which you would otherwise be liable
under Section 409A(a)(1)(B) of the Code in the absence of such deferral. Upon
the expiration of the applicable deferral period, any payments which would have
otherwise been made during that period (whether in a single sum or in
installments) in the absence of this paragraph shall be paid to you or your
beneficiary in one lump sum (without interest).

 

Blue Coat Systems, Inc.    420 North Mary Ave Sunnyvale, CA
94085    866.30BCOAT    T: 408.220.2200    F: 408.220.2250    www.bluecoat.com

LOGO [g22632g16x06.jpg]

 

--------------------------------------------------------------------------------

LOGO [g22632g02r80.jpg]

 

 

Any termination of your employment is intended to constitute a “separation from
service” and will be determined consistent with the rules relating to a
“separation from service” as such term is defined in Treasury Regulation
Section 1.409A-1. It is intended that each installment of the payments provided
hereunder constitute separate “payments” for purposes of Treasury Regulation
Section 1.409A-2(b)(2)(i). It is further intended that payments hereunder
satisfy, to the greatest extent possible, the exemption from the application of
Section 409A of the Code (and any state law of similar effect) provided under
Treasury Regulation Section 1.409A-1(b)(4) (as a “short-term deferral”). To the
extent that any provision of this Offer Letter is ambiguous as to its compliance
with Section 409A of the Code, the provision will be read in such a manner so
that all payments hereunder comply with Section 409A of the Code.

Except as otherwise expressly provided herein, to the extent any expense
reimbursement or the provision of any in-kind benefit under this Offer Letter is
determined to be subject to Section 409A of the Code, the amount of any such
expenses eligible for reimbursement, or the provision of any in-kind benefit, in
one calendar year shall not affect the expenses eligible for reimbursement in
any other taxable year (except for any lifetime or other aggregate limitation
applicable to medical expenses), in no event shall any expenses be reimbursed
after the last day of the calendar year following the calendar year in which you
incurred such expenses, and in no event shall any right to reimbursement or the
provision of any in-kind benefit be subject to liquidation or exchange for
another benefit.

This letter, together with the other policies and agreements referenced herein,
and when accepted by you, constitutes the entire agreement between us with
respect to your employment. It supersedes any prior understandings or
agreements, whether oral or written, between you and the Company. This offer
will remain open until the close of business on August 30, 2010. Your signature
below acknowledges your acceptance of these terms.

On behalf of the entire Board of Directors, we look forward to working with you.

Sincerely,

 

/s/    David W. Hanna

 

/s/    Michael J. Borman        

 

August 30, 2010

David W. Hanna

Chairman of the Board of Directors

  Michael J. Borman   Date

 

Blue Coat Systems, Inc.    420 North Mary Ave Sunnyvale, CA
94085    866.30BCOAT    T: 408.220.2200    F: 408.220.2250    www.bluecoat.com

LOGO [g22632g16x06.jpg]

 

--------------------------------------------------------------------------------

LOGO [g22632g02r80.jpg]

 

 

EXHIBIT A

GENERAL RELEASE OF ALL CLAIMS

In consideration of the [describe payment] to be paid              (“Employee”)
by Blue Coat Systems, Inc. ( the “Company”), as described in the attached
Executive Change in Control Severance Agreement (the “Agreement”), Employee, on
Employee’s own behalf and on behalf of Employee’s heirs, executors,
administrators and assigns, to the fullest extent permitted by applicable law,
hereby fully and forever releases and discharges the Company and its past,
present and future directors, officers, employees, agents, successors,
predecessors, subsidiaries, parent, shareholders, employee benefit plans and
assigns (together called “the Releasees”), from all known and unknown claims and
causes of action including, without limitation, any claims or causes of action
arising out of or relating in any way to Employee’s employment with the Company,
including the termination of that employment.

Employee understands and agrees that this General Release of All Claims (the
“Release”) is a full and complete waiver of all claims including, without
limitation, claims of wrongful discharge, constructive discharge, breach of
contract, breach of the covenant of good faith and fair dealing, harassment,
retaliation, discrimination, violation of public policy, defamation, invasion of
privacy, interference with a leave of absence, personal injury or emotional
distress and claims under Title VII of the Civil Rights Act of 1964, the Fair
Labor Standards Act, the Equal Pay Act of 1963, the Americans With Disabilities
Act, the Civil Rights Act of 1866, the Age Discrimination in Employment Act of
1967 (ADEA), the California Labor Code, the California Fair Employment and
Housing Act or any other federal or state law or regulation relating to
employment or employment discrimination. Employee further understands and agrees
that this waiver includes all claims, known and unknown, to the greatest extent
permitted by applicable law. Notwithstanding the foregoing, this Release does
not apply to (x) claims which cannot be released as a matter of law, (y) any
right Employee may have to enforce the Agreement or (z) Employee’s eligibility
for indemnification in accordance with applicable laws, the charter and bylaws
of the Company or any indemnification agreement or fiduciary insurance policy
Employee has with the Company.

Employee also hereby agrees that nothing contained in this Release shall
constitute or be treated as an admission of liability or wrongdoing by the
Releasees or Employee.

In addition, Employee hereby expressly waives any and all rights and benefits
conferred upon Employee by the provisions of Section 1542 of the Civil Code of
the State of California, and any law of any jurisdiction of similar effect.
Section 1542 states as follows:

A general release does not extend to claims which the creditor does not know or
suspect to exist in his or her favor at the time of executing

 

Blue Coat Systems, Inc.    420 North Mary Ave Sunnyvale, CA
94085    866.30BCOAT    T: 408.220.2200    F: 408.220.2250    www.bluecoat.com

LOGO [g22632g16x06.jpg]

 

--------------------------------------------------------------------------------

LOGO [g22632g02r80.jpg]

 

 

the release, which if known by him or her must have materially affected his or
her settlement with the debtor.

If any provision of this Release is found to be unenforceable, it shall not
affect the enforceability of the remaining provisions and the court shall
enforce all remaining provisions to the fullest extent permitted by applicable
law.

This Release constitutes the entire agreement between Employee and Releasees
with regard to the subject matter of this Release. It supersedes any other
agreements, representations or understandings, whether oral or written and
whether express or implied, which relate to the subject matter of this Release.
Employee understands and agrees that this Release may be modified only in a
written document signed by Employee and a duly authorized officer of the
Company.

Employee agrees that the Company shall have no duty to provide to Employee any
severance benefits described in the Agreement unless and until Employee (a) has
signed the Company’s Proprietary Information and Inventions Agreement (“PIIA”)
and (b) has returned to the Company any and all of the Company’s property in
Employee’s possession or under Employee’s control (including, but not limited
to, cellular phones; computers; keys; credit cards; access badges; Company files
or documents, including copies thereof; or facsimile machines). Employee further
agrees that at all times in the future Employee shall remain bound by the PIIA.

Employee understands that Employee has the right to consult with an attorney
before signing this Release. Employee also understands that Employee has [21/45]
days after receipt of this Release to review and consider this Release, discuss
it with an attorney of Employee’s own choosing, and decide to execute it or not
execute it. Employee also understands that Employee may revoke this Release
during a period of seven days after Employee signs it and that this Release will
not become effective for seven days after Employee signs it (and then only if
Employee does not revoke it). In order to revoke this Release, within seven days
after Employee executes this Release Employee must deliver to              at
the Company a letter stating that Employee is revoking it. Employee understands
that if Employee chooses to revoke this Release within seven days after Employee
signs it, Employee will not receive any Change in Control Severance Payment and
the Release will have no effect.

[Signature page follows]

 

Blue Coat Systems, Inc.    420 North Mary Ave Sunnyvale, CA
94085    866.30BCOAT    T: 408.220.2200    F: 408.220.2250    www.bluecoat.com

LOGO [g22632g16x06.jpg]

 

--------------------------------------------------------------------------------

LOGO [g22632g02r80.jpg]

 

 

Employee states that before signing this Release, Employee:

Has read it;

Understands it;

Knows that he or she is giving up important rights;

Is aware of his or her right to consult an attorney before signing it; and

Has signed it knowingly and voluntarily.

 

Date:  

 

 

 

Signature

 

Print Full Name

 

Blue Coat Systems, Inc.    420 North Mary Ave Sunnyvale, CA
94085    866.30BCOAT    T: 408.220.2200    F: 408.220.2250    www.bluecoat.com

LOGO [g22632g16x06.jpg]

 

--------------------------------------------------------------------------------

LOGO [g22632g02r80.jpg]

 

 

EXHIBIT B

BLUE COAT SYSTEMS, INC.

EMPLOYMENT ARBITRATION PROVISION

(a) Any dispute arising under my offer letter from the Company or otherwise
relating to my employment with the Company, including the termination of my
employment or any condition of or benefit with respect to my employment
(“Dispute”), shall be finally resolved by arbitration under the administration
of JAMS and in accordance with the then-current JAMS Employment Arbitration
Rules & Procedures (“Rules”) in the jurisdiction in which I am, or was, employed
by the Company. Copies of these rules are available at http://www.jamsadr.com,
and shall be made available to me upon request. Any disputes concerning the
enforcement, scope, or applicability of this Arbitration Provision shall in the
first instance be determined by the arbitrator in accordance with the Federal
Arbitration Act. Should either of us disregard this provision and initiate an
action in any court or administrative agency with respect to a Dispute, the
other party may apply to a court of competent jurisdiction to order the matter
to arbitration. The prevailing party in any such hearing shall be entitled to
recover its reasonable costs and attorneys’ fees incurred in connection
therewith.

(b) Either of us may initiate arbitration to resolve a Dispute by delivering to
the other party through personal delivery, certified or registered mail, a
written demand for arbitration. The demand shall include a concise statement of
the issue(s) to be arbitrated, along with a statement setting forth the relief
requested. Along with the demand for arbitration, if I am the filing party, I
shall submit a check or money order payable to “JAMS” in the amount of the then
prevailing JAMS initial Case Management Fee, as my portion of the administrative
fees of the arbitration. Thereafter, the remaining costs of the arbitration
(such as the arbitrator’s fees, costs of a court reporter, and room rental fees,
if any), but not the cost of any transcript, shall be paid by the Company. Any
remaining fees and costs, including but not limited to attorneys’ fees shall,
subject to any remedy to which the prevailing party may be entitled to under the
law, be borne by each party to the same extent as that party would be
responsible for such fees and costs were the Dispute litigated in court. Any
demand for arbitration by either of us must be filed within the statute or
statutes of limitation that is or are applicable to the claim or claims relating
to the Dispute upon which arbitration is sought or required. Any failure to
request arbitration within this time frame and according to this Arbitration
Provision shall constitute a waiver of all rights to raise any claims in any
forum arising out of the Dispute.

(c) The arbitrator be empowered to award either party any remedy at law or in
equity to which the prevailing party would otherwise have been entitled had the
Dispute been litigated in court, including but not limited to, general, special
and punitive damages, recoverable costs, attorney fees (where provided by
statute or contract) and injunctive relief; provided, however, that the
authority to award any remedy is subject to whatever limitations, if any, exist
in the applicable law on such remedies. The arbitrator shall have no
jurisdiction to issue any award contrary to or inconsistent with law. The
arbitrator shall issue a signed written statement regarding the disposition of
each claim of the Dispute and the relief, if any, awarded as to each claim. The
arbitrator will also provide a concise written statement of the reasons for the
award, stating the essential findings and conclusions on which the award was
based.

 

Blue Coat Systems, Inc.    420 North Mary Ave Sunnyvale, CA
94085    866.30BCOAT    T: 408.220.2200    F: 408.220.2250    www.bluecoat.com

LOGO [g22632g16x06.jpg]

 

--------------------------------------------------------------------------------

LOGO [g22632g02r80.jpg]

 

 

(d) Notwithstanding the foregoing provisions of this provision, nothing herein
is intended to nor shall preclude (i) me from filing any administrative charge
of discrimination with the United States Equal Employment Opportunity Commission
or equivalent state agency, or (ii) either me or the Company from seeking
temporary or preliminary injunctive relief from a court of applicable
jurisdiction pending final resolution of a Dispute.

(e) Except for the Federal Arbitration Act, the interpretation of any matter in
the Dispute (including matters arising under my offer letter from the Company or
otherwise relating to my employment with the Company, including the termination
of my employment or any condition of or benefit with respect to my employment)
shall be governed by and construed in accordance with the laws of (a) the State
of Texas, if I am employed in Texas; (b) the State of Utah, if I am employed in
Utah; and (c) the State of California, if I am employed in a state other than
Texas or Utah. The application of Texas, Utah or California law to this
Agreement shall not act as a means to add to or increase the statutory or
administrative rights granted to employees in the jurisdiction in which I am, or
was, employed by the Company in the event that I seek enforcement of such
statutory or administrative rights against the Company. In such event, the
arbitrator or presiding official shall apply only the statutory and
administrative laws of the state in the jurisdiction in which I am, or was,
employed by the Company.

 

Blue Coat Systems, Inc.    420 North Mary Ave Sunnyvale, CA
94085    866.30BCOAT    T: 408.220.2200    F: 408.220.2250    www.bluecoat.com

LOGO [g22632g16x06.jpg]