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Blue Coat Issues Convertible Notes

SUNNYVALE, Calif. -- Blue Coat Systems, Inc. (NASDAQ:BCSI), a leader in WAN Application Delivery and Secure Web Gateway, today announced that it has agreed to issue zero coupon convertible notes, in the aggregate principal amount of $80 million, to Francisco Partners II, L.P. and an affiliate of Elliott Associates, L.P. (the Purchasers”) in a private placement. Blue Coat will use the proceeds from the private placement to partially fund the acquisition of Packeteer, Inc. (see separate press release also issued today). The issuance of the notes is subject to the closing of the Packeteer transaction.

The notes are due in 2013 and will be convertible into shares of Blue Coat common stock at the holders’ option at any time prior to maturity at an initial conversion price of $20.76, which represents a 5% conversion premium based on the closing price of Blue Coat’s common stock of $19.77 per share on April 18, 2008. The notes will not bear interest. In connection with the issuance of the notes, Blue Coat has agreed to issue to the purchasers warrants to acquire 385,000 shares of Blue Coat at the initial conversion price of the notes.

Elliott Associates will terminate its previously announced tender offer for all of the shares of Packeteer and has agreed to sell its 9.9% interest in Packeteer to Blue Coat at the same price Blue Coat will offer to Packeteer shareholders.

Blue Coat has offered the notes to the Purchasers in reliance on the exemption from registration provided by Section 4(2) of the Securities Act. The Company relied on this exemption from registration based in part on representations made by the investors in the purchase agreement relating to the notes.

“The investment by Francisco Partners and Elliott Associates enables us to make a valuable investment to further our strategic objectives,” said Brian NeSmith, president and chief executive officer of Blue Coat Systems, Inc. “Adding Packeteer technology, expertise, channel partners and customer base will give us a competitive advantage that will help drive future business.”

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