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Employment Agreement - CacheFlow Inc. and Brian NeSmith

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  • Sales Representative Contract. Independent sales representatives offer companies the potential to increase the sale of products or services without the burden of increasing headcount. Both parties should understand how commissions are calculated, when commissions will be paid, as well as how the representative will treat confidential information from the company and whether the representative may also sell a competing line of products or services.
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                           [LETTERHEAD OF CACHEFLOW]

                                                                   Exhibit 10.9

February 24, 1999

Mr. Brian NeSmith
180 Sylvian
Los Altos, CA  94022

Dear Brian:

We are pleased to extend to you an offer to join CacheFlow (the "Company") as
the President and Chief Executive Officer, reporting to the Board of
Directors. You will also be elected as a member of the Board of Directors of
the Company.

Per our conversations, we have structured a compensation package that consists
of eight (8) primary components.  They are as follows:

 .       You will receive an annual base salary of $175,000 paid according to
        standard company payroll policies.

 .       You will have the ability to earn incentive compensation based on
        corporate objectives and personal objectives. After you start, you must
        work with the Board of Directors to establish these objectives.

 .       You will be granted an option to purchase 995,500 shares of the
        Company's Common Stock, which represents 8% of the fully diluted
        capitalization of the Company, including all outstanding common and
        preferred stock, all outstanding options and warrants, and the pool
        reserved under the Company's option plan. The exercise price per share
        will be equal to the fair market value per share on the date the option
        is granted. You will vest in 25% of the option shares after 12 months
        of service, and the balance will vest in monthly installments over the
        next 36 months of service, as described in the applicable stock option

 .       You will be entitled to receive a cash bonus payable in the event that
        the Company is subject to a Corporate Transaction ( as defined in the
        Company's 1996 Stock Option Plan). The bonus will be equal to the amount
        you would have received in that Corporate Transaction if you held a
        number of shares of Series C

Mr Brian NeSmith
February 24, 1999
Page 2
        Preferred Stock with a cost of $3 million (determined using the price at
        which Series C Preferred Stock is sold in our next financing) less the
        amount you actually receive for holding an equivalent number of shares
        of common stock at the time of the Corporate Transaction. An example of
        this calculation is enclosed. You will vest in the cash bonus at the
        rate of 25% after 12 months of service, and the balance in monthly
        installments over the next 36 months of service. No such bonus shall be
        payable after the Company's initial public offering. In the event your
        employment is terminated without cause, you will fully vest in the
        change in control bonus.

 .       Subsequent to the closing of the Company's next round of financing (our
        Series C Preferred Stock financing), you will be given a no-interest,
        recourse loan from Cacheflow in the amount of $800,000. Interest will be
        imputed annually for Federal tax purposes at the applicable Federal rate
        for the month in which the loan is extended and the Company will pay you
        a bonus each year while you are employed equal to the taxes due on the
        loan. This loan will be due at the end of 5 years but must be repaid
        immediately if your employment with the Company terminates for any
        reason or as soon as practical after a liquidity event (e.g. after the
        lockup expires subsequent to a public offering or merger). The loan will
        be secured by any shares of the Company's Common Stock that you obtain
        by exercising the option. The loan will be evidenced by a promissory
        note and stock pledge agreement in a form approved by the Board. In the
        event your employment is terminated without cause, the loan to you will
        be forgiven. The amount received will also be grossed up to cover the

 .       In the event of a Corporate Transaction involving the Company, you will
        receive one year of acceleration on the vesting of your option shares
        and you will fully vest in the change in control cash bonus.

 .       You are eligible for all standard benefits according to the Company's
        benefits plan. Information on the benefits will be supplied to you as
        soon as possible. We will maintain at our expense, in addition to the
        normal group life insurance provided for employees, life insurance
        insuring your life in the amount of $3,800,000, payable to the
        beneficiary or beneficiaries that you designate. The Company will pay
        you a bonus each year while you are employed equal to the taxes due on
        the imputed income of this life insurance.

 .       Like all Company employees, you will be required, as a condition to your
        employment with the Company, to sign the Company's standard Proprietary
        Information and Inventions Agreement, a copy of which is enclosed.

 .       While you render services to the Company, you will not engage in any
        other gainful employment, business or activity without the written
        consent of the Company. While you render services to the Company, you
        also will not assist any person or organization in competing with the
        Company, in preparing to compete with the Company or in hiring any
        employees or consultants of the Company.

Mr. Brian NeSmith
February 24, 1999
Page 3

Your employment with the Company will be "at will," meaning that either you or
the Company will be entitled to terminate your employment at any time and for
any reason, with or without cause. Any contrary representations which may have
been made to you are superseded by this offer. This is the full and complete
agreement between you and the Company on this term. Although your job duties,
title, compensation and benefits, as well as the Company's personnel policies
and procedures, may change from time to time, the "at will" nature of your
employment may not only be changed in an express written agreement signed by you
and the Company's Chairman of the Board.

This letter and the enclosed Proprietary Information and Inventions Agreement
supersede any prior understandings or agreements, whether oral or written,
between you and the Company.  These documents may not be amended or modified
except by an express written agreement signed by you and the Company's Chairman
of the Board.  The terms of this letter agreement and the resolution of any
disputes will be governed by California law.

This offer stands until 6:00 p.m., Thursday, February 25, 1999, and your
signature below acknowledges your acceptance of these terms. We would expect
that you would start no later than Wednesday, March 31, 1999.

Brian, I cannot tell you how excited we all are to have you join the team. I
sincerely believe that this presents an opportunity for you to leverage all of
your skills and experience to date and to play a pivotal role on the CacheFlow
management team. I personally look forward to working closely with you over the
years and know that we will all be incredibly successful together.

Best Regards,

/s/ David Hanna                                    /s/ Brian NeSmith
_____________________                              ________________________
David W. Hanna                                     Brian NeSmith
Chief Executive Officer                            February 25, 1999
CacheFlow Inc.