Document:

Stock Option Agreement - 2007 Stock Incentive Plan

 Exhibit 10.40 
 BLUE COAT SYSTEMS, INC. 
 2007
STOCK INCENTIVE PLAN 
 STOCK OPTION
AGREEMENT 
 (U.S. EMPLOYEES) 
  

			
	Grant of Option	  	You have been granted an option to purchase up to the number of Common Shares specified in the Notice of Stock Option Grant (“Option Shares”), effective on the Date of Grant set forth
in such Notice of Stock Option Grant. Terms not defined in this Stock Option Agreement shall have the meaning set forth in the 2007 Stock Incentive Plan (the “Plan”) incorporated herein by reference..
		
	Tax Treatment	  	This option is intended to be an incentive stock option under Section 422 of the Internal Revenue Code (or ISO) or a nonstatutory option or NSO), as provided in the Notice of Stock Option Grant.
However, notwithstanding any designation in such Notice as an ISO, to the extent that the aggregate fair market value (determined as of the applicable Date of Grant) of the Common Stock for which one or more options granted to you may for the first
time become exercisable exceeds the $100,000 or as otherwise required by federal tax laws, this option shall be treated as an NSO. You are responsible for any taxes owed by you in connection with this option.
		
	Vesting	  	This option becomes exercisable in installments, as shown in the Notice of Stock Option Grant. No additional shares become exercisable after your service as a Non-Employee Member of the Board or
an Employee or Consultant of the Company or a Parent, Subsidiary or Affiliate (“Service”) has terminated for any reason.
		
	Term	  	This option expires in any event on the 10th anniversary of the Date of Grant, as shown in
the Notice of Stock Option Grant. (It will expire earlier if your Service terminates, as described below.) If the expiration date of your option is not a business day and you wish to exercise your option by the expiration date, it is your
responsibility to ensure that you have validly exercised your option prior to the expiration date. This option may also be subject to earlier termination upon a Change in Control or other corporate events, as described in the Plan.

			
	Regular Termination	  	If your Service terminates for any reason except death, Permanent Disability or Cause, then this option will expire on the date 3 months after your termination date. The Company determines when
your Service terminates for this purpose.
		
	Permanent Disability	  	 If your Service terminates because of your Permanent Disability, then this option will expire on the date 12 months after your termination date. The
Company determines when your Service terminates for this purpose.
  
 Permanent Disability
means that you are unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or which has lasted, or can be expected to last, for a continuous
period of not less than 12 months.

		
	Death	  	If you die while in Service, the option will expire on the date 12 months after the date of death.
		
	Misconduct	  	If your Service terminates for Cause, then this option will terminate immediately and cease to be outstanding.
		
	Change in Control	  	 In the event of a Change in Control, then the vesting of this option will not automatically accelerate unless this option is, in connection with the
Change in Control, not to be assumed by the successor corporation (or its parent) or to be replaced with a comparable option for shares of the capital stock of the successor corporation (or its parent). The determination of option comparability will
be made by the Committee, and its determination will be final, binding and conclusive.
  
 The exercisability of this option may also be accelerated in the event of certain reorganizations, as provided under Section 12.3 of the Plan.

		
	Involuntary Termination After a Change in Control	  	If in connection with a Change in Control the option is assumed by the successor corporation (or its parent) and you experience an Involuntary Termination within eighteen months following such
Change in Control, the vesting of this option will automatically accelerate so that this option will, immediately before the effective date of the Involuntary Termination, become fully exercisable for all of the Common Shares at the time subject to
this option and may be exercised for any or all of those shares as fully-vested Common Shares.

  

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		  	An Involuntary Termination means the termination of your Service by reason of: (a) your involuntary dismissal or discharge by the Company (or the Parent, Subsidiary or Affiliate employing
you) for reasons other than Cause; (b) your voluntary resignation following (1) a change in your position with the Company which materially reduces your level of responsibility, (2) a reduction in your level of base salary or
(3) a relocation of your place of employment by more than fifty (50) miles, provided and only if such change, reduction or relocation is effected by the Company without your consent; or any other reason approved by the
Committee.
		
	Restrictions on Exercise	  	The obligation of the Company to issue Common Shares under the Plan shall be subject to all applicable laws, rules and regulations and such approval by any regulatory body as may be required.
The Company reserves the right to restrict, in whole or in part, the delivery of Common Shares pursuant to your option prior to the satisfaction of all legal requirements relating to the issuance of such Common Shares, to their registration,
qualification or listing or to an exemption from registration, qualification or listing.
		
	Notice of Exercise	  	 When you wish to exercise this option, you must do so in the form and manner as specified by the Company at that time. The exercise will be effective
only upon delivery of any form of notice then required, together with payment of the exercise price as described below.
  
 If someone else wants to exercise this option after your death, that person must prove to the Company’s satisfaction that he or she is entitled to do so.

		
	Form of Payment	  	When you submit your notice of exercise, you must include payment of the option exercise price for the shares you are purchasing. To the extent permitted by applicable law, payment may be made
in one (or a combination of two or more) of the following forms:
		
		  	 •        Cash or check made payable to the Company.

		
		  	 •        With the Company’s consent, certificates for, or attestations of ownership of,
Common Shares that you already own, along with any forms needed to effect a transfer of those shares to the Company. The Fair Market Value of the shares, determined as of the effective date of the option exercise, will be applied to the option
exercise price.

  

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		  	 •        To the extent permitted by applicable law, irrevocable directions to a securities broker
approved by the Company to sell all or part of your option shares and to deliver to the Company from the sale proceeds an amount sufficient to pay the option exercise price and any withholding taxes. (The balance of the sale proceeds, if any, will
be delivered to you.) The Company may require a specific notice of exercise, which may require information from the broker, to use this method of exercise.

		
	Withholding Taxes and Stock Withholding	  	You will not be allowed to exercise this option unless you make arrangements acceptable to the Company to pay any withholding taxes that may be due as a result of the option exercise. With the
Company’s consent, these arrangements may include withholding Common Shares that otherwise would be issued to you when you exercise this option, with respect to up to the statutory minimum withholding amount required by applicable tax law. Such
withheld Common Shares shall be valued at their Fair Market Value on the date they are withheld. The Company shall not be required to issue any Common Shares with respect to this option until such tax withholding obligations are
satisfied.
		
	Restrictions on Resale	  	You agree not to sell any option shares at a time when applicable laws, Company policies or an agreement between the Company and its underwriters prohibit a sale. This restriction will apply as
long as your Service continues and for such period of time after the termination of your Service as the Company may specify.
		
	Transfer of Option	  	 Before your death, only you may exercise this option. You cannot transfer or assign this option. For instance, you may not sell this option or use it
as security for a loan. If you attempt to do any of these things, this option will immediately become invalid. You may, however, dispose of this option in your will or by a beneficiary designation.
  
 Regardless of any marital property settlement agreement, the Company is not obligated to honor a
notice of exercise from your former spouse, nor is the Company obligated to recognize your former spouse’s interest in your option in any other way.

		
	Employment or Retention Rights	  	None of the Notice of Stock Option Grant, this Stock Option Agreement or your option gives you the right to be retained by the Company or a Parent, Subsidiary or Affiliate in any capacity. The
Company and any Parent, Subsidiary or Affiliate reserve the right to terminate your Service at any time, with or without cause.

  

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	Stockholder Rights	  	You, or your estate or heirs, have no rights as a stockholder of the Company under this option and with respect to the Option Shares until you have exercised this option by giving the required
notice to the Company and paying the exercise price. No adjustments are made for dividends or other rights if the applicable record date occurs before you exercise this option, except as described in the Plan.
		
	Adjustments	  	In the event of a stock split, a stock dividend or a similar change in Company stock, the number of shares covered by this option and the exercise price per share may be adjusted pursuant to the
Plan.
		
	Applicable Law	  	This Stock Option Agreement will be interpreted and enforced under the laws of the State of Delaware (without regard to their choice-of-law provisions).
		
	The Plan and Other Agreements	  	The text of the Plan is incorporated in this Agreement by reference. A copy of the Plan is available on the Company’s intranet or by request to the Company’s Finance
Department.
		
		  	This Stock Option Agreement, together with the Notice of Stock Option Grant and the Plan constitute the entire understanding between you and the Company regarding this option. Any prior
agreements, commitments or negotiations concerning this option are superseded. This Agreement may be amended only by another written agreement signed by both parties.

 YOU AGREE TO ALL OF
THE TERMS AND CONDITIONS DESCRIBED ABOVE AND IN THE COMPANY’S 2007
STOCK INCENTIVE PLAN. 
  

 5Executive Separation Policy

 Exhibit 10.41 
 BLUE COAT SYSTEMS, INC. 
 EXECUTIVE SEPARATION POLICY 
 Effective November 15, 2007 
 WHEREAS,
each executive of Blue Coat Systems, Inc. (the “Company”) is employed on an “at will” basis; 
 WHEREAS, the Company
acknowledges that, in the event an executive’s employment is terminated by the Company, it is likely that it will take the executive a period of time to locate new employment. 
 WHEREAS, the Company has previously agreed to make limited separation payments to certain executives in the event such executives’ employment is
terminated other than for cause and believes it appropriate to establish an Executive Separation Policy that is applicable to its Executive Officers (within the meaning of Section 16 of the Securities Exchange Act of 1934) and such other
executives as may be designated by the Compensation Committee of the Board of Directors of the Company (the “Compensation Committee”) from time to time (“Executives”). 
 The following is the Company’s policy with respect to separation compensation payable to Executives: 
 In the event an Executive’s employment with the Company is terminated either by the Company without Cause, or as a result of the Executive’s
resignation for Good Reason, and subject to the Executive’s execution, before he or she receives any of the benefits provided for in this paragraph, of a release of claims against the Company in substantially the terms set forth in Exhibit
A (attached hereto) and such release becoming effective in accordance with its terms, the Executive will be entitled to receive an amount equal to six months of his or her base salary as in effect on the date employment terminates (the
“Separation Payment’). The Separation Payment will be subject to applicable income and employment tax withholding and will be paid in accordance with the Company’s standard payroll procedures. 
 The Separation Payment under this Separation Policy shall be paid in one lump sum from the general assets of the Company on the first scheduled payroll
date of the Company following the latest of the following dates: the Executive’s last day of employment, the date the Company receives the Executive’s signed release, or the date the revocation period (if any) specified in the release
expires. The Company shall complete the form of release and deliver it to the Executive within 30 days after his or her employment terminates. The form of the release will specify how much time such Executive has to sign it and whether there is a
revocation period. 

 This Separation Policy and the Separation Payments provided for under this policy are intended to qualify
for the short-term deferral exception to Section 409A described in Treasury Regulation Section 1.409A-1(b)(4) to the maximum extent possible, and to the extent they do not so qualify, they are intended to qualify for the involuntary
separation pay plan exception to Section 409A described in Treasury Regulation Section 1.409A-1(b)(9)(iii) to the maximum extent possible. Notwithstanding anything to the contrary in this Agreement, if Executive is a “specified
employee” within the meaning of Section 409A and the regulations thereunder, as determined by the Compensation Committee, as of the date of Executive’s “separation from service” as defined in Treasury Regulation
Section 1.409A-1(h) (or any successor regulation) and if any payments or entitlements provided for in this Agreement constitute a “deferral of compensation” within the meaning of Section 409A and cannot be paid or provided in the
manner provided herein without subjecting Executive to additional tax, interest or penalties under Section 409A, then any such payment and/or entitlement which is payable during the first six months following Executive’s “separation
from service” shall be paid or provided to Executive in a lump sum on the first business day immediately following the six-month anniversary of Executive’s “separation from service”. If this provision applies, it shall supersede
any contrary provision of this Separation Policy. 
 The following definitions apply to this Separation Policy: 
 (A) “Cause” for termination of an Executive’s employment relationship with the Company will exist under only the
following circumstances: 
 (i) any willful and material act of personal dishonesty taken by the Executive in
connection with his or her job responsibilities which is intended to result in the Executive’s substantial personal enrichment; 
 (ii) any willful act of fraud, embezzlement or other misconduct that materially damages the Company; 
 (iii) any willful failure to follow the legal directives of the Executive’s immediate supervisor (other than failure to meet performance goals, objectives or measures), in each case in a manner that results in material damage to
the Company and that is not corrected within thirty (30) days following written notice thereof to the Executive by his or her immediate supervisor, such notice to state with specificity the nature of the failure; provided that if the failure
cannot be reasonably be corrected by the Executive within thirty (30) days of written notice thereof, correction shall be commenced by the Executive within thirty (30) days and may be corrected within a reasonable period thereafter; or

 (iv) any willful and material breach of any agreement with the Company that is not corrected within thirty
(30) days following written notice thereof to the Executive by his or her immediate supervisor, such notice to state with specificity the nature of the breach; provided that if the breach cannot reasonably be corrected within thirty
(30) days of written notice thereof, correction shall be commenced by the Executive within thirty (30) days and may be corrected within a reasonable period thereafter. 
  

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 (B) “Good Reason” for the Executive to voluntarily terminate his or her
employment relationship with the Company will exist under only the following circumstances: 
 (i) without the
Executive’s express written consent, a material diminution in the authority, duties or responsibilities of the supervisor to whom the Executive is required to report, or a material diminution in the Executive’s duties, authority or
responsibilities relative to his or her duties, authority or responsibilities in effect immediately prior to such reduction, or the Executive’s removal from such authority, duties and responsibilities, unless he or she is provided with
comparable duties, position and responsibilities that do not represent a material diminution; 
 (ii) without the
Executive’s express written consent, a reduction by Blue Coat of his or her base salary as in effect immediately prior to such reduction, other than in connection with an action affecting a majority of the Executives covered by the Separation
Policy; 
 (iii) without the Executive’s express written consent, a relocation that results in a material change
in the geographic location at which the Executive must perform his or her services; or 
 (iv) the Company’s
failure to cause this Agreement and its obligations hereunder to be expressly assumed by its successor in the event of a Change in Control, as defined in the Company’s 2007 Stock Incentive Plan. 
 For the Executive to receive the benefits under this Separation Policy as a result of a voluntary resignation for Good Reason, all of the following
requirements must be satisfied: (1) the Executive must provide notice to the Company of his or her intent to assert Good Reason for resignation within 90 days of the initial existence of one or more of the conditions set forth in subclauses
(i) through (iv); (2) the Company will have 30 days from the date of such notice to remedy the condition and, if it does so, the Executive may withdraw his or her resignation or may resign with no benefits under this Separation Policy; and
(3) any termination of employment due to resignation for Good Reason must occur within two years of the initial existence of one or more of the conditions set forth in subclauses (i) through (iv). Should the Company remedy the condition as
set forth above and then one or more of the conditions arises again within two years following the initial occurrence of a condition, then the Executive may assert Good Reason again subject to all of the conditions set forth herein. 
 General Provisions 
 The Company (or its acquiror or
successor) will withhold applicable taxes and other payroll deductions from any payment under this Separation Policy as required by law. 
  

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 No amounts under this Separation Policy shall actually be funded, set aside or otherwise segregated prior
to payment. The obligation to pay the Separation Payments hereunder shall at all times be an unfunded and unsecured obligation of the Company and be paid out of the general assets of the Company (or its acquiror or successor). Participants shall
have the status of general creditors. 
 No participant shall have the right to alienate, pledge or encumber his or her interest in this
Separation Policy, and such interest shall not (to the extent permitted by law) be subject in any way to the claims of the participant’s creditors or to attachment, execution or other process of law. 
 This Separation Policy supersedes and replaces any prior agreements, representations or understandings, whether written, oral or implied, between the
Employee and the Company with respect to the subject matter hereof. 
 No action of the Company in establishing this Separation Policy, no
action taken under this Separation Policy and no provision of this Separation Policy itself shall be construed to grant any person the right to remain in the employ of the Company or its subsidiaries for any period of specific duration. Rather, each
Executive is employed “at will,” which means that either such employee or the Company may terminate the employment relationship at any time for any reason, with or without cause. 
 The Board of Directors or the Compensation Committee may amend, revise, suspend or terminate this Separation Policy from time to time in their sole
discretion, provided that no amendment or termination may be effected after the date that the Company enters into a definitive agreement to effect a Change in Control. The determinations of the Board of Directors or the Compensation Committee with
regard to this Separation Policy will be final and binding on all participants. 
  

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 EXHIBIT A 
 GENERAL RELEASE OF ALL CLAIMS 
 In consideration of the Separation Payment to be paid to ____________
(“Executive”) by Blue Coat Systems, Inc. ( the “Company”), as described in the attached Company Executive Separation Policy (the “Policy”), Executive, on Executive’s own behalf and on behalf of Executive’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 Executive’s employment with the Company, including the termination of that employment. 
 1.
Executive 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. Executive further understands and agrees that this waiver includes all claims, known and
unknown, to the greatest extent permitted by applicable law. 
 2. Executive 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 Executive. 
 3. In addition, Executive hereby
expressly waives any and all rights and benefits conferred upon Executive by the provisions of Section 1542 of the Civil Code of the State of California, which 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 the release,
which if known by him or her must have materially affected his or her settlement with the debtor. 
 4. 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 slaw. 
  

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 5. This Release constitutes the entire agreement between Executive 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. Executive understands and agrees that
this Release may be modified only in a written document signed by Executive and a duly authorized officer of the Company. 
 6. Executive
agrees that the Company shall have no duty to provide to Executive any severance benefits described in the Separation Policy unless and until Executive (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 Executive’s possession or under Executive’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). Executive further agrees that at all times in the future Executive shall remain bound by the PIIA. 
 7. [INCLUDE PARAGRAPHS 7 AND 8 FOR ANY EMPLOYEE WHO IS 40 OR OVER AT TIME OF TERMINATION] Executive understands that Executive has the right to consult
with an attorney before signing this Release. Executive also understands that Executive has twenty-one days after receipt of this Release to review and consider this Release, discuss it with an attorney of Executive’s own choosing, and decide
to execute it or not execute it. Executive also understands that Executive may revoke this Release during a period of seven days after Executive signs it and that this Release will not become effective for seven days after Executive signs it (and
then only if Executive does not revoke it). In order to revoke this Release, within seven days after Executive executes this Release Executive must deliver to _____________ at the Company a letter stating that Executive is revoking it. 

8. Executive understands that if Executive chooses to revoke this Release within seven days after Executive signs it, Executive will not receive any
Separation Payment and the Release will have no effect. 
 9. Executive agrees not to disclose to others the terms of this Release, except
that Executive may disclose such information to Executive’s spouse and to Executive’s attorney or accountant in order for such attorney or accountant to render services to Executive related to this Release. 
  

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 10. Executive states that before signing this Release, Executive: 
  

	 	•	 	 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

  

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