Exhibit 10.27

LOGO [g20682img_005.jpg]

November 20, 2006

Tom Ayers

[address]

Dear Tom:

This letter (the “Agreement”) is to confirm the agreement between you and Blue
Coat Systems, Inc. (the “Company”) regarding the termination of your employment
with the Company.

 

  1. Your employment with the Company will terminate on April 30, 2007 unless
earlier terminated as described in this paragraph. You shall continue as an
employee of the Company until April 30, 2007, provided that you may resign your
employment on any earlier date for any reason or no reason. The Company may
terminate your employment prior to April 30, 2007 only for Cause. For purposes
of this Agreement only, “Cause” means (a) a material failure to comply with the
Company’s written policies or rules, (b) conviction of, or plea of “guilty” or
“no contest” to, a felony under the laws of the United States or any state
thereof, or (c) gross misconduct. The earlier of April 30, 2007 or the earlier
date that you resign as an employee or are terminated for Cause by the Company
shall be referred to herein as the “Termination Date.” From the date of this
Agreement through the Termination Date, you may continue to participate in those
employee benefits for which you are an eligible employee. Until the Termination
Date, the Company will continue paying you your current base salary. For the
months of November and December, the Company will pay you one hundred percent
(100%) of your variable compensation based on the FY2007 Sales Compensation
Plan..

 

  2. Effective November 20, 2006 and continuing through and until the
Termination Date, the Company shall employ you in a full-time position reporting
directly to me, responsible for the transition of the NetCache business to the
Company and other special projects assigned to you at my discretion. You
understand and agree that through and until the Termination Date you will not
commence employment with any other employer and that you will not render any
services as an independent contractor or partner without the Company’s prior
written consent. You agree that you will spend a minimum of 40 hours per week on
your responsibilities to the Company.

 

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  3. Although you are not otherwise entitled to receive any severance benefits
from the Company, following the Termination Date provided (A) your employment is
not terminated for Cause, and (B) you sign the Second Release attached hereto as
Exhibit A, then on the first payroll date after the Effective Date of the Second
Release, the Company will pay you the lesser of (i) a lump sum severance payment
of fifty-seven thousand, six hundred and ninety-two dollars and thirty-one cents
($57,692.31), less all applicable withholdings, which is equal to twelve
(12) weeks of your current base salary or (ii) a lump sum severance payment
equal to the number of weeks remaining before April 30, 2007 times three
thousand and forty-six dollars ($3846.00) (your weekly base salary payment),
less all applicable withholdings. For example, if you voluntarily leave the
Company on April 2, 2007 (four weeks before April 30, 2007), and you sign the
Second Release, then you will be paid fifteen thousand, three hundred and
eighty-four dollars ($15,384.00), less all applicable withholdings, which is
equal to four (4) weeks of your current base salary. If you breach any provision
of this Agreement, you understand and agree that you shall not be paid the
severance payment described in this paragraph 3.

 

  4. On the Termination Date you will be paid all of your accrued but unused
vacation and all of your salary earned through the Termination Date. You agree
that prior to the execution of this Agreement you were not entitled to receive
any further monetary payments from the Company, and that the only payments and
benefits that you are entitled to receive from the Company in the future are
those specified in this Agreement.

 

  5. On the dates set forth below, the Company granted you options to purchase
the number of shares of the Company’s common stock set forth below (each an
“Option” and collectively, the “Options”). Each of the Options is evidenced by
an option agreement (collectively, the “Option Agreements”) and is subject to
the terms and conditions of the Company’s 1999 Equity Incentive Plan. As of
August 25, 2006, you were vested in the number of shares indicated below:

 

Grant Date

 

Number of

Shares

 

Vested

 

Unvested

11/20/02

  66,000   61,875   4,125

6/17/03

  10,000   8,125   1,875

2/4/04

  10,350   2,836   7,514

2/4/04

  14,650   11,225   3,425

5/23/05

  3,989   0   3,989

8/16/05

  10,000   10,000   0

5/23/05

  11,011   4,687   6,324

Your Options will continue to vest until your Termination Date. If a Change in
Control occurs prior to the Termination Date, vesting of the Options will
accelerate in accordance with the existing terms of the Option Agreements.

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Pursuant to the Option Agreements, you will have ninety (90) days following your
Termination Date to exercise the Options with respect to the vested but
unexercised shares. You acknowledge that all terms, conditions and limitations
applicable to the Options pursuant to the Option Agreements shall remain in full
force and effect.

 

  6. You acknowledge that you have continuing obligations under the Federal and
state securities laws for a period of time following your cessation of
employment, including (without limitation) under Rule 144 and Section 16, and
that you may not sell shares of the Company’s common stock in violation of the
Company’s insider trading policy or in violation of Rule 10b-5.

 

  7. In consideration for the Company’s agreement to modify your at-will
employment relationship and to provide you an opportunity to be paid a severance
payment as described in paragraphs 1 and 3 above, you waive and release and
promise never to assert any claims or causes of action, whether or not now
known, against the Company or its predecessors, successors, or past or present
subsidiaries, stockholders, officers, directors, agents, consultants, attorneys,
employees and assigns, and employee benefit plans with respect to any matter
(without limitation) arising out of or connected with your employment with the
Company or the termination of that employment, including without limitation,
claims to attorneys’ fees or costs, claims of wrongful discharge, constructive
discharge, emotional distress, defamation, invasion of privacy, fraud, breach of
contract, breach of the covenant of good faith and fair dealing, any claims of
discrimination or harassment based on sex, age, race, national origin,
disability or on any other basis, under Title VII of the Civil Rights Act of
1964, as amended, the California Fair Employment and Housing Act, the Age
Discrimination in Employment Act of 1967, the Americans with Disabilities Act,
and all other laws and regulations relating to employment. However, this release
covers only those claims that arose prior to the execution of this Agreement.
Execution of this Agreement does not bar any claim that arises hereafter,
including (without limitation) a claim for breach of this Agreement.

 

  8. You expressly waive and release any and all rights and benefits under
Section 1542 of the Civil Code of the State of California, which reads as
follows: “A general release does not extend to claims which the creditor does
not know or suspect to exist in his favor at the time of executing the release,
which, if known by him, must have materially affected his settlement with the
debtor.”

 

  9. You agree that you will never, individually or with any other person,
commence, aid in any way (except as required by legal process) or prosecute, or
cause or permit to be commenced or prosecuted, any action or other proceeding
based on any claim that is the subject of this Agreement.

 

  10. Nothing contained in this Agreement shall constitute or be treated as an
admission by you or the Company of liability, of any wrongdoing, or of any
violation of law.

 

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  11. You and the Company understand and agree that nothing in this Agreement
shall modify in any manner any indemnification and/or insurance rights you may
have pursuant to the Company’s Certificate of Incorporation, Bylaws or any
applicable insurance policy for officers and directors liability.

 

  12. At all times in the future, you will remain bound by the Company’s
Proprietary Information and Invention Agreement signed by you on October 26,
2002, a copy of which is attached as Exhibit A.

 

  13. You acknowledge that you have no other stock rights in the Company (or any
parent or subsidiary) other than those rights enumerated in this paragraph and
in paragraph 4 and other than shares you own and that are in your possession.

 

  14. You agree that you will not disclose to others the fact or terms of this
Agreement, except that you may disclose such information to your attorney or
accountant in order for such individuals to render services to you if such
individuals agree that they will not disclose to others the existence or terms
of this Agreement or unless otherwise required by law and only to the extent
required.

 

  15. You agree that except as expressly provided in this Agreement, this
Agreement renders null and void any and all prior agreements between you and the
Company. You and the Company agree that this Agreement constitutes the entire
agreement between you and the Company regarding the subject matter of this
Agreement, and that this Agreement may be modified only in a written document
signed by you and a duly authorized officer of the Company.

 

  16. This Agreement shall be construed and interpreted in accordance with the
laws of the State of California.

 

  17. You agree that this Agreement may be executed in counterparts, each of
which shall be an original, but all of which together shall constitute one
agreement. Execution of a facsimile copy shall have the same force and effect as
execution of an original, and a facsimile signature shall be deemed an original
and valid signature.

 

  18. Any controversy involving the construction or application of any terms,
covenants or conditions of this Agreement, or any claims arising out of any
alleged breach of this Agreement, will be governed by the rules of the American
Arbitration Association and submitted to and settled by final and binding
arbitration in Santa Clara County, California, except that any alleged breach of
the Company’s Proprietary Information and Inventions Agreement shall not be
submitted to arbitration and instead the Company may seek all legal and
equitable remedies, including without limitation, injunctive relief.

 

  19. You have up to twenty-one (21) days after receipt of this Agreement within
which to review it and to discuss with an attorney of your own choosing, at your
own expense, whether or not you wish to sign it. Furthermore, you have seven
(7) days after you have signed this Agreement during which time you may revoke
this Agreement.

 

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  20. If you wish to revoke this Agreement, you may do so by delivering a letter
of revocation to me. Because of this revocation period, you understand that this
Agreement shall not become effective or enforceable until the eighth day after
the date you sign this Agreement.

Please indicate your agreement with the above terms by signing below.

 

Sincerely,

/s/ Brian NeSmith

Brian NeSmith President & CEO

My agreement with the above terms is signified by my signature below.
Furthermore, I acknowledge that I have read and understand this Agreement and
that I sign this release of all claims voluntarily, with full appreciation that
at no time in the future may I pursue any of the rights I have waived in this
Agreement.

 

Signed:   

/s/ Tom Ayers

   Dated:                         Tom Ayers   

Exhibit A – PIIA