EXHIBIT 10.33

 
HI/FN, INC.
 
ALBERT E. SISTO EMPLOYMENT AGREEMENT
 
This Employment Agreement (the “Agreement”) is entered into as of November 16,
2006, by and between Hi/fn, Inc. (the “Company”) and Albert E. Sisto
(“Executive”).
 
1. Duties and Scope of Employment.
 
    (a) Positions and Duties. As of November 9, 2006 (the “Effective Date”),
Executive will serve as the Company’s Interim Chief Executive Officer. Executive
will report to the Company’s Board of Directors (the “Board”) and will continue
in his role as Chairman of the Board. As of the Effective Date, Executive will
render such business and professional services in the performance of his duties,
consistent with Executive’s position within the Company, as will reasonably be
assigned to him by the Board. The period Executive is employed by the Company
under this Agreement is referred to herein as the “Employment Term”.
 
Subject to the termination and notice provisions herein, Executive agrees to
remain employed with the Company until the date upon which a successor Chief
Executive Officer commences employment with the Company. However, in the event
that the Company desires to retain Executive as its regular Chief Executive
Officer, then this Agreement will be terminated and the parties hereto will
negotiate a new employment agreement covering the terms and conditions of
Executive’s ongoing role.
 
    (b) Board Membership. Executive was appointed to serve as a member of the
Board prior to the Effective Date and was appointed Chairman of the Board on the
Effective Date. During the Employment Term, at each annual meeting of the
Company’s stockholders at which Executive’s term as a member of the Board has
otherwise expired, the Company will nominate Executive to serve as a member of
the Board. Executive’s service as a member of the Board will be subject to any
required stockholder approval. Upon the termination of Executive’s employment
for any reason, unless otherwise requested by the Board, Executive will be
deemed to have resigned from all positions held at the Company and its
affiliates, except that of Chairman of the Board, voluntarily, without any
further required action by Executive, as of the end of Executive’s employment
and Executive, at the Board’s request, will execute any documents necessary to
reflect his resignation.
 
    (c) Obligations. During the Employment Term, Executive will devote
Executive’s full business efforts and time to the Company and will use good
faith efforts to discharge Executive’s obligations under this Agreement to the
best of Executive’s ability and in accordance with each of the Company’s
corporate guidance and ethics guidelines, conflict of interests policies and
code of conduct. For the duration of the Employment Term, Executive agrees not
to actively engage in any other employment, occupation, or consulting activity
for any direct or indirect remuneration without the prior approval of the Board
(which approval will not be unreasonably withheld); provided, however, that
Executive may, without the approval of the Board, serve in any capacity with any
civic, educational, or charitable organization, provided such services do not
interfere with Executive’s obligations to Company. Executive expects to serve as
a member of the Board of Directors of Digital Signal Corporation, Tulip Ego
Lifestyle, and Validity Sensors, Inc. and such service will not constitute a
violation of this section 1(c).

 
 

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    Executive hereby represents and warrants to the Company that Executive is
not party to any contract, understanding, agreement or policy, written or
otherwise, that would be breached by Executive’s entering into, or performing
services under, this Agreement. Executive further represents that he has
disclosed to the Company in writing all threatened, pending, or actual claims
that are unresolved and still outstanding as of the Effective Date, in each
case, against Executive of which he is aware, if any, as a result of his
employment with his current employer (or any other previous employer) or his
membership on any boards of directors.
 
    (d) Other Entities. Executive agrees to serve and will be appointed, without
additional compensation, as an officer and director for each of the Company’s
subsidiaries, partnerships, joint ventures, limited liability companies and
other affiliates, including entities in which the Company has a significant
investment as determined by the Company. As used in this Agreement, the term
“affiliates” will include any entity controlled by, controlling, or under common
control of the Company.
 
2. At-Will Employment. Executive and the Company agree that Executive’s
employment with the Company constitutes “at-will” employment. Executive and the
Company acknowledge that this employment relationship may be terminated at any
time, upon written notice to the other party, with or without good cause or for
any or no cause, at the option either of the Company or Executive.
 
3. Compensation.
 
    (a) Base Salary. As of the Effective Date, the Company will pay Executive an
annual salary of $350,000 as compensation for his services (such annual salary,
as is then effective, to be referred to herein as “Base Salary”). The Base
Salary will be paid periodically in accordance with the Company’s normal payroll
practices and be subject to the usual, required withholdings.
 
    (b) Annual Incentive. Executive will be eligible to receive annual cash
incentives payable for the achievement of performance goals established by the
Board or by the Compensation Committee of the Board (the “Committee”). During
the Employment Term, Executive’s target annual incentive (“Target Annual
Incentive”) will equal 65% of Executive’s Base Salary. The actual earned annual
cash incentive, if any, payable to Executive for any performance period will
depend upon the extent to which the applicable performance goal(s) specified by
the Committee are achieved or exceeded and will be adjusted for under- or
over-performance. 
 
    (c) Stock Options.
 
        (i) Following the Effective Date, the Committee will grant an option to
purchase 225,000 shares of Company common stock at a per share exercise price
equal to the closing price per share on the Nasdaq Global Market (“Nasdaq”) for
the common stock of the Company on the date of grant (the “Option”). The Option
will be granted under and subject to the terms, definitions and provisions of
the Company’s Amended and Restated 1996 Equity Incentive Plan (the “Plan”) and
will be scheduled to vest 1/36th of the shares subject to the Option each month
following the Effective Date, subject to Executive’s continued employment with
the Company as its Chief Executive Officer (whether on an interim basis or
otherwise) through each scheduled vesting date. Upon Executive ceasing to be the
Company’s Chief Executive Officer (whether on an interim

 
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basis or otherwise), all vesting of the Option will terminate immediately and
the unvested portion of the Option will immediately terminate. Notwithstanding
the foregoing vesting schedule, if during the first year of the Employment Term
while Executive is acting as the Company’s Chief Executive Officer, the Company
hires a successor Chief Executive Officer other than Executive, the Option will
immediately vest and become exercisable as to 75,000 shares in addition to the
number of shares subject to the Option that have vested as of such date. Except
as provided in this Agreement, the Option will be subject to the Company’s
standard terms and conditions for options granted under the Plan.
 
        (ii) Following the Effective Date, the Committee will grant Executive
75,000 shares of restricted stock (the “Stock Grant”). The Stock Grant will be
granted under and subject to the terms, definitions and provisions of the Plan,
and will vest six (6) months from the Effective Date, subject to Executive’s
continued employment with the Company as its Chief Executive Officer on such
date. Subject to the provisions of Section 7 of this Agreement, upon Executive’s
termination as the Company’s Chief Executive Officer, all further vesting of the
Stock Grant will terminate immediately and such shares will be forfeited to the
Company at no cost to the Company. Notwithstanding the foregoing, if during the
first six (6) months of the Employment Term, the Company hires a successor Chief
Executive Officer other than Executive, the Stock Grant will fully vest. Except
as provided in this Agreement, the Stock Grant will be subject to the Company’s
standard terms and conditions for restricted stock granted under the Plan.
 
4. Employee Benefits.
 
    (a) Generally. Executive will be eligible to participate in accordance with
the terms of all Company employee benefit plans, policies and arrangements that
are applicable to other executive officers of the Company, as such plans,
policies and arrangements may exist from time to time.
 
    (b) Vacation. Executive will be entitled to receive paid annual vacation in
accordance with Company policy for other senior executive officers.
 
5. Expenses. The Company will reimburse Executive for reasonable travel,
entertainment and other expenses incurred by Executive in the furtherance of the
performance of Executive’s duties hereunder, in accordance with the Company’s
expense reimbursement policy as in effect from time to time.
 
6. Termination of Employment. In the event Executive’s employment with the
Company terminates for any reason, Executive will be entitled to any (a) unpaid
Base Salary accrued up to the effective date of termination; (b) unpaid, but
earned and accrued annual incentive for any completed fiscal year as of his
termination of employment; (c) pay for accrued but unused vacation; (d) benefits
or compensation as provided under the terms of any employee benefit and
compensation agreements or plans applicable to Executive (e) unreimbursed
business expenses required to be reimbursed to Executive, and (f) rights to
indemnification Executive may have under the Company’s Articles of
Incorporation, Bylaws, the Agreement, or separate indemnification agreement, as
applicable.

 
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7. Severance. If Executive’s employment with the Company is terminated by the
Company without Cause or by Executive for Good Reason, and the termination is in
Connection with a Change of Control, then, subject to Executive signing and not
revoking a separation agreement and release of claims in a form acceptable to
the Company, the Stock Grant will vest in full.
 
    (a) For purposes of this Agreement, “Cause” means:
 
        (i) A failure by Executive to substantially perform Executive’s duties
as an employee, other than a failure resulting from the Executive’s complete or
partial incapacity due to physical or mental illness or impairment;
 
        (ii) A willful act by Executive that constitutes misconduct;
 
        (iii) Circumstances where Executive intentionally or negligently imparts
material confidential information relating to the Company or its business to
competitors or to other third parties other than in the course of carrying out
Executive’s duties;
 
        (iv) A material violation by Executive of a federal or state law or
regulation applicable to the business of the Company;
 
        (v) A willful violation of a material Company employment policy or the
Company’s insider trading policy;
 
        (vi)  Any act or omission by Executive constituting dishonesty (other
than a good faith expense account dispute) or fraud, with respect to the Company
or any of its affiliates, or any other misconduct which is injurious to the
financial condition of the Company or any of its affiliates or is injurious to
the business reputation of the Company or any of its affiliates;
 
        (vii) Executive’s failure to cooperate with the Company in connection
with any actions, suits, claims, disputes or grievances against the Company or
any of its officers, directors, employees, shareholders, affiliates, divisions,
subsidiaries, predecessor and successor corporations, and assigns, whether or
not such cooperation would be adverse to Executive’s own interest; or
 
        (viii) Executive’s conviction or plea of guilty or no contest to a
felony.
 
    (b) Change of Control. For purposes of this Agreement, “Change of Control”
will mean the occurrence of any of the following events:
 
        (i) The sale, lease, conveyance or other disposition of all or
substantially all of the Company’s assets to any “person” (as such term is used
in Section 13(d) of the Securities Exchange Act of 1934, as amended (the
“Exchange Act”)), entity or group of persons acting in concert;

 
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        (ii) Any person or group of persons becoming the “beneficial owner” (as
defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of
securities of the Company representing 50% or more of the total voting power
represented by the Company’s then outstanding voting securities;
 
        (iii) A merger or consolidation of the Company with any other
corporation, other than a merger or consolidation that would result in the
voting securities of the Company outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or by being converted
into voting securities of the surviving entity or its controlling entity) at
least 50% of the total voting power represented by the voting securities of the
Company or such surviving entity (or its controlling entity) outstanding
immediately after such merger or consolidation; or
 
        (iv) A contest for the election or removal of members of the Board that
results in the removal from the Board of at least 50% of the incumbent members
of the Board.
 
    (c) Good Reason. For purposes of this Agreement, “Good Reason” means
(without Executive’s consent):
 
        (i) A material reduction in Executive’s title, authority, status, or
responsibilities, unless Executive is provided with a comparable position (i.e.
a position of equal or greater organizational level, duties, authority,
compensation and status);
 
        (ii) The reduction of Executive’s aggregate Base Salary and Target
Annual Incentive as in effect immediately prior to such reduction (other than a
reduction applicable to executives generally); or
 
        (iii) A relocation of Executive’s principal place of employment by more
than fifty (50) miles.
 
    (d) In Connection with a Change of Control. For purposes of this Agreement,
a termination of Executive’s employment with the Company is “in Connection with
a Change of Control” if Executive’s employment is terminated within twelve (12)
months following a Change of Control
 
8. Indemnification. Subject to applicable law, Executive will be provided
indemnification to the maximum extent permitted by the Company’s Articles of
Incorporation or Bylaws, including, if applicable, any directors and officers
insurance policies, with such indemnification to be on terms determined by the
Board or any of its committees, but on terms no less favorable than provided to
any other Company executive officer or director and subject to the terms of any
separate written indemnification agreement.
 
9. Confidential Information. As a condition of employment with the Company,
Executive will execute the Company’s standard form of Proprietary Information
and Inventions Agreement (the “Confidential Information Agreement”).
 
10. Assignment. This Agreement will be binding upon and inure to the benefit of
(a) the heirs, executors and legal representatives of Executive upon Executive’s
death, and (b) any

 
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successor of the Company. Any such successor of the Company will be deemed
substituted for the Company under the terms of this Agreement for all purposes.
For this purpose, “successor” means any person, firm, corporation, or other
business entity which at any time, whether by purchase, merger, or otherwise,
directly or indirectly acquires all or substantially all of the assets or
business of the Company. None of the rights of Executive to receive any form of
compensation payable pursuant to this Agreement may be assigned or transferred
except by will or the laws of descent and distribution. Any other attempted
assignment, transfer, conveyance, or other disposition of Executive’s right to
compensation or other benefits will be null and void.
 
11. Notices. All notices, requests, demands and other communications called for
hereunder will be in writing and will be deemed given (a) on the date of
delivery if delivered personally; (b) one (1) day after being sent overnight by
a well-established commercial overnight service, or (c) four (4) days after
being mailed by registered or certified mail, return receipt requested, prepaid
and addressed to the parties or their successors at the following addresses, or
at such other addresses as the parties may later designate in writing:
 
If to the Company:

 
Attn: Chairman of the Compensation Committee
c/o Corporate Secretary
750 University Avenue
Los Gatos, CA 95032
 
If to Executive:
 
at the last residential address known by the Company.
 
12. Severability. If any provision hereof becomes or is declared by a court of
competent jurisdiction to be illegal, unenforceable, or void, this Agreement
will continue in full force and effect without said provision.
 
13. Arbitration. The Parties agree that any and all disputes arising out of the
terms of this Agreement, their interpretation, and any of the matters herein
released, will be subject to arbitration in Santa Clara County before JAMS,
pursuant to its Employment Arbitration Rules & Procedures (“JAMS Rules”). The
Arbitrator will administer and conduct any arbitration in accordance with
California law, including the California Code of Civil Procedure, and the
Arbitrator will apply substantive and procedural California law to any dispute
or claim, without reference to any conflict-of-law provisions of any
jurisdiction. To the extent that the JAMS rules conflict with California law,
California law will take precedence. The Arbitrator may grant injunctions and
other relief in such disputes. The decision of the Arbitrator will be final,
conclusive, and binding on the parties to the arbitration. The Parties agree
that the prevailing party in any arbitration will be entitled to injunctive
relief in any court of competent jurisdiction to enforce the arbitration award.
The Arbitrator will award attorneys’ fees and costs to the prevailing party,
except as prohibited by law. The Parties hereby agree to waive their right to
have any dispute between them resolved in a court of law by a judge or jury.
This paragraph will not prevent either party from seeking injunctive relief (or
any other provisional remedy) from any court having jurisdiction over the
Parties and the subject matter

 
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of their dispute relating to Executive’s obligations under this Agreement and
the Confidential Information Agreement.
 
14. Integration. This Agreement, together with the Confidential Information
Agreement and the standard forms of equity award grant that describe Executive’s
outstanding equity awards, represents the entire agreement and understanding
between the parties as to the subject matter herein and supersedes all prior or
contemporaneous agreements whether written or oral. No waiver, alteration, or
modification of any of the provisions of this Agreement will be binding unless
in a writing and signed by duly authorized representatives of the parties
hereto. In entering into this Agreement, no party has relied on or made any
representation, warranty, inducement, promise, or understanding that is not in
this Agreement. To the extent that any provisions of this Agreement conflict
with those of any other agreement to be signed upon Executive’s hire, the terms
in this Agreement will prevail.
 
15. Waiver of Breach. The waiver of a breach of any term or provision of this
Agreement, which must be in writing, will not operate as or be construed to be a
waiver of any other previous or subsequent breach of this Agreement.
 
16. Survival. The Confidential Information Agreement will survive the
termination of this Agreement.
 
17. Headings. All captions and Section headings used in this Agreement are for
convenient reference only and do not form a part of this Agreement.
 
18. Tax Withholding. All payments made pursuant to this Agreement will be
subject to withholding of applicable taxes.
 
19. Governing Law. This Agreement will be governed by the laws of the state of
California without regard to its conflict of laws provisions.
 
20. Code Section 409A. The Company and the Executive agree to work together in
good faith to consider amendments to this Agreement necessary or appropriate to
avoid imposition of any additional tax or income recognition prior to actual
payment to Executive under Internal Revenue Code Section 409A and any temporary
or final Treasury Regulations and Internal Revenue Service guidance thereunder.
 
21. Acknowledgment. Executive acknowledges that he has had the opportunity to
discuss this matter with and obtain advice from his private attorney, has had
sufficient time to, and has carefully read and fully understands all the
provisions of this Agreement, and is knowingly and voluntarily entering into
this Agreement.
 
22. Counterparts. This Agreement may be executed in counterparts, and each
counterpart will have the same force and effect as an original and will
constitute an effective, binding agreement on the part of each of the
undersigned.
 

 
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IN WITNESS WHEREOF, each of the parties has executed this Agreement, in the case
of the Company by a duly authorized officer, as of the day and year written
below.
 
COMPANY:
 
HI/FN, INC.
 

/s/ William R. Walker  
Date: November 16, 2006
William R. Walker
Vice President of Finance, Chief Financial Officer
and Secretary
   

 

 

EXECUTIVE:

/s/ Albert E. Sisto  
Date: November 16, 2006
ALBERT E. SISTO
   

 

[SIGNATURE PAGE TO SISTO EMPLOYMENT AGREEMENT]
 
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