Exhibit 10.1

 

BLUE COAT SYSTEMS, INC.

 

November 4, 2004

 

Robert P. Verheecke

730 Southhampton Drive

Palo Alto, CA 94303

 

Dear Bob:

 

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

 

  1. Your employment with the Company will terminate on May 2, 2005. You shall
continue as an employee until May 2, 2005, 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 May 2, 2005 only for Cause. “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 May 2, 2005 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. The Company will continue paying you your current base
salary in accordance with the Company’s standard payroll procedures until the
Termination Date. In addition, you will remain eligible for bonuses through the
Termination Date in accordance with our existing practice.

 

  2. 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.

 

  3. Although you are not otherwise entitled to receive any severance benefits
from the Company, following the Termination Date provided (A) you remain
employed through May 2, 2005 and your employment is not terminated for Cause,
and (B) you sign the Second Release attached hereto as Exhibit A, then on the
date of execution of the Second Release, the Company will (a) pay you a lump sum
severance payment less all applicable withholdings per the attached Schedule A
depending upon the hire date of a new CFO; (b) accelerate your stock option
vesting and provide the option exercise extension benefit as specified in
paragraph 4; and (c) if you elect to continue your health insurance coverage
under COBRA, the Company will reimburse the COBRA premiums paid by you to

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Robert P. Verheecke

November 4, 2004

Page 2

 

continue the medical benefits for you and your eligible dependents through and
until a date specified per the attached Schedule A. After the Company’s
obligation to reimburse COBRA premiums under this Agreement ends, you may elect
to continue your COBRA benefits at your own expense. If you breach any provision
of this Agreement, you understand that no additional severance payments will be
made and that you must immediately return to the Company all severance payments
that you already received.

 

  4. On July 31, 2001 the Company granted you an option to purchase 100,000
shares of the Company’s common stock at an exercise price of $16.75 per share
(the “First Option”), on July 10, 2002 the Company granted you an option to
purchase 50,000 shares of the Company’s common stock at an exercise price of
$2.25 per share (the “Second Option”), and also on June 17, 2003 the Company
granted you an option to purchase 40,000 shares of the Company’s common stock at
an exercise price of $5.60 per share (the “Third Option” and together with the
First and Second Option, 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 May 2,
2004, you will be vested in the number of shares indicated below:

 

Grant Date

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

   Number of
Shares

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

   Exercise
Price

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

  

Vested

5/02/04

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Unvested

5/03/04

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7/31/2001

   100,000    $ 16.75    100,000    0

7/10/2002

   50,000    $ 2.25    50,000    0

6/17/2003

   40,000    $ 5.60    20,000    20,000

 

Pursuant to the terms of this Agreement, on your Termination Date provided (A)
you remain employed through May 2, 2005 and your employment is not terminated
for Cause, and (B) you sign the Second Release, then on the Second Release
Effective Date you will become vested in additional shares of the Company’s
common stock under the Options such that you are vested in the aggregate number
of shares set forth below.

 

Grant Date

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

   Number of
Shares

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

   Exercise
Price

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

  

Vested

Effective
After
Termination
Date

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

  

Unvested

Effective
After
Termination

Date

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

7/31/2001

   100,000    $ 16.75    100,000    0

7/10/2002

   50,000    $ 2.25    50,000    0

6/17/2003

   40,000    $ 5.60    40,000    0

 

From the date of this Agreement through the Termination Date, you will continue
to vest in the Options. Should a Change in Control occur prior to the
Termination

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Robert P. Verheecke

November 4, 2004

Page 3

 

Date, vesting of the Options will accelerate in accordance with the existing
terms of the Option Agreements. Pursuant to the Option Agreements, you will have
three (3) months following your Termination Date to exercise the Options with
respect to the vested but unexercised shares. If you sign this Agreement and do
not revoke this Agreement and sign the Second Release, then as of the Second
Release Effective Date, the Company will agree to allow you twelve (12) months
following your Termination Date to exercise the Options with respect to the
vested but unexercised shares. All of the shares acquired pursuant to the
exercise of the Options will continue to be subject to and governed by the
Option Agreements, except that any incentive stock options will cease to be
eligible for favorable tax treatment as a result of the extension benefit set
forth herein. You acknowledge that under the terms, conditions and limitations
of the Option Agreements, the Options will expire with respect to the unvested
shares on your Termination Date. 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 paragraph 12 and further that all terms,
conditions and limitations applicable to the Options pursuant to the Option
Agreements shall remain in full force and effect.

 

  5. 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.

 

  6. In consideration for receiving the severance payment, benefits and stock
option vesting acceleration and extension benefits described 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.

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Robert P. Verheecke

November 4, 2004

Page 4

 

  7. 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.”

 

  8. 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.

 

  9. 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.

 

  10. 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, the
Indemnification Agreement between you and the Company dated May 1, 2001, or any
applicable insurance policy for officers and directors liability.

 

  11. At all times in the future, you will remain bound by the Company’s
Proprietary Information and Invention Agreement signed by you on May 1, 2001, a
copy of which is attached.

 

  12. Your participation in the Company’s Employee Stock Purchase Plan will
continue through the Termination Date or any earlier reduction in hours worked
to 20 hours per week or fewer. Any payroll deductions accumulated but not used
to purchase shares as of your last day worked will be refunded to you following
your last day worked. 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. All terms, conditions and limitations applicable to the purchase
rights pursuant to the Company’s Employee Stock Purchase Plan shall remain in
full force and effect.

 

  13. 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.

 

  14. 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.

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Robert P. Verheecke

November 4, 2004

Page 5

 

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

 

  16. 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.

 

  17. 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.

 

  18. 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.

 

  19. 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.

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Robert P. Verheecke

November 4, 2004

Page 6

 

Sincerely,

/s/ Brian NeSmith

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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/ Robert P. Verheecke

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  Dated: November 4, 2004                         Robert P. Verheecke        

 

Exhibit A   –    Second Release Exhibit B   –    PIIA

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Schedule A

 

New CFO Hire Date

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   Severance

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   COBRA Reimbursement*

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After Mar 31, Before April 30, 2005

   3 months = $ 62,500    3 months

After Feb 28, Before March 31, 2005

   3 months = $ 62,500    3 months

After Jan 31, Before February 28, 2005

   2 months = $ 41,667    2 months

Before January 31, 2005

   1 month   = $ 20,834    1 month

 

If you sign this Agreement and elect to continue group health insurance
coverage, then the Company will pay the monthly premium under COBRA for yourself
and, if applicable, your dependents until the earliest of (a) the end of the
period set forth in the table following the month in which the Termination Date
occurs, (b) the expiration of your continuation coverage under COBRA or (c) the
date you become eligible for substantially equivalent health insurance in
connection with new employment.