Document:

Separation Agreement between Blue Coat Systems, Inc. and Tom Ayers

 Exhibit 10.27 
 

 
 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.

  

	 	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. 

 
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.

  

	 	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. 

  

	 	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 – PIIA2006 Profit Sharing Plan

 Exhibit 10.28 
 BLUE COAT SYSTEMS, INC. 
 2006 PROFIT SHARING PLAN 
 1. PURPOSES OF THE PLAN 
 1.1 The Blue
Coat Systems, Inc. 2006 Profit Sharing Plan (the “Plan”) is established to promote the interests of the Company and reward employees for the achievement of superior financial results. 
 2. ADMINISTRATION OF THE PLAN 
 2.1
The Compensation Committee of the Board of Directors of the Company (the “Committee”) shall approve the Plan and adopt rules and regulations to implement the Plan. Decisions of the Committee shall be final and binding on all parties who
have an interest in the Plan. 
 3. DETERMINATION OF PARTICIPANTS 
 3.1 An individual shall be eligible to participate in the Plan if he or she is an Employee on the first day of the last month of the fiscal quarter.
Payments to eligible employees who joined the company within the quarter will be pro-rated based on the number of days of employment, divided by the total days within the quarter. 
 3.2 For purposes of the Plan: 
 (i) An individual shall be considered an “Employee” as long as such individual remains employed by the Company or one or more of its Subsidiaries. Sales personnel on commission are excluded from the Plan 
 4. PROFIT SHARING AWARDS 
 4.1 The
profit sharing plan is established as an incentive to achieve superior financial results. Profit sharing is applicable for fiscal quarters in which the Net Profit After Tax (NPAT) exceeds 10%. For purposes of the profit sharing calculation, NPAT is
calculated before expense, if any, required under the Plan. The Plan pays 20% of an individual’s target rate for each 1% of NPAT in excess of 10%, such that 100% of an individual’s target is paid at NPAT of 15%. Target rates by level are
20% for Executives reporting directly to the Chief Executive Officer (Executives), 10% for Vice Presidents, Directors and Senior Managers and 5% for all other employees. 
 4.2 The aggregate bonus pool established by the formula set forth in Section 4.1 above shall be allocated among the eligible Employees in accordance with this Section 4.2. 
 A. Executives profit sharing payout at target is 20% of quarterly base pay. 
  

 B. Vice Presidents, Directors and Senior Managers profit sharing payout at target is 10%
of quarterly base pay. 
 C. All other employees profit sharing payout at target is 5% of quarterly base pay. Sales personnel
on commission are excluded from the Plan. 
 5. PAYMENT OF BONUS AWARDS 
 5.1 Profit sharing plan distributions for executive staff are paid as follows: 40% of each fiscal quarter’s calculation is paid in the subsequent
quarter, with the remaining 60% deferred and paid out over the next four (4) quarters at 15% per quarter pending an individual’s continued employment. For all other employees, 100% of each quarter’s profit sharing plan
calculation is paid in the subsequent quarter. 
 6. GENERAL PROVISIONS 
 6.1 The Plan shall become effective when adopted by the Board of Directors. The Board of Directors may at any time amend, suspend or terminate the Plan,
provided it must do so in a written resolution and such action shall not adversely affect rights and interests of Plan participants to individual bonuses allocated prior to such amendment, suspension or termination. 
 6.2 No amounts awarded or accrued under this Plan shall actually be funded, set aside or otherwise segregated prior to payment. The obligation to pay the
bonuses awarded hereunder shall at all times be an unfunded and unsecured obligation of the Company. Plan participants shall have the status of general creditors and shall look solely to the general assets of the Company for the payment of their
bonus awards. 
 6.3 No Plan participant shall have the right to alienate, pledge or encumber his/her interest in this Plan, and such
interest shall not (to the extent permitted by law) be subject in any way to the claims of the Employee’s creditors or to attachment, execution or other process of law. 
 6.4 No action of the Company in establishing the Plan, no action taken under the Plan by the Committee and no provision of the Plan 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 Employee will be 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. Only the President has the authority to enter into an agreement on any other terms, and he or she can only do so in a writing signed by him or her.

 6.5 This is the full and complete agreement between the eligible Employees and the Company on the terms described herein. 
  

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