exhibit10-18.htm


    Exhibit 10.18

     

    


    


     

    HI/FN,
INC.

     

    2001
NONSTATUTORY STOCK OPTION PLAN

     

    AS
AMENDED AND RESTATED EFFECTIVE October 23, 2008

     

    


     

    1.      
Purposes of the Plan.  The
purposes of this Nonstatutory Stock Option Plan are:

     

    
      	
              •  

            	
              to
      attract and retain the best available personnel for positions of
      substantial responsibility,

            


    

     

    
      	
              •  

            	
              to
      provide additional incentive to Employees and Consultants,
    and

            


    

     

    
      	
              •  

            	
              to
      promote the success of the Company’s
business.

            


    

     

    Options
granted under the Plan will be Nonstatutory Stock Options.

     

    2.      
Definitions.  As
used herein, the following definitions shall apply:

     

    (a)     
“Administrator” means
the Board or any of its Committees as shall be administering the Plan, in
accordance with Section 4 of the Plan.

     

    (b)     
“Applicable Laws”
means the requirements relating to the administration of stock option plans
under U.S. state corporate laws, U.S. federal and state securities laws, the
Code, any stock exchange or quotation system on which the Common Stock is listed
or quoted and the applicable laws of any foreign country or jurisdiction where
Options are, or will be, granted under the Plan.

     

    (c)     
“Board” means the
Board of Directors of the Company.

     

    (d)     
“Code” means the
Internal Revenue Code of 1986, as amended.

     

    (e)     
“Committee”  means
a committee of Directors appointed by the Board in accordance with
Section 4 of the Plan.

     

    (f)
      “Common Stock” means
the Common Stock of the Company.

     

    (g)    
 “Company” means hi/fn,
Inc. a Delaware corporation.

     

    (h)  “Consultant” means any
person, including an advisor, engaged by the Company or a Parent or Subsidiary
to render services to such entity.

     

    (i)       
“Director” means a
member of the Board.

     

    
      
         

      

      
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    (j)    
  “Disability” means
total and permanent disability as defined in Section 22(e)(3) of the
Code.

     

    (k)      
“Employee” means any
person, excluding Officers, employed by the Company or any Parent or Subsidiary
of the Company.  A Service Provider shall not cease to be an Employee
in the case of (i) any leave of absence approved by the Company or
(ii) transfers between locations of the Company or between the Company, its
Parent, any Subsidiary, or any successor.  Neither service as a
Director nor payment of a director’s fee by the Company shall be sufficient to
constitute “employment” by the Company.

     

    (l)      
 “Exchange Act” means
the Securities Exchange Act of 1934, as amended.

     

    (m)      “Fair Market Value”
means, as of any date, the value of Common Stock determined as
follows:

     

    (i)     
If the
Common Stock is listed on any established stock exchange, including without
limitation the NASDAQ Global Market, the NASDAQ Global Select Market or the
NASDAQ Capital Market of The NASDAQ Stock Market, its Fair Market Value shall be
the closing sales price for such stock (or the closing bid, if no sales were
reported) as quoted on such exchange or system on the date of grant, or if such
exchange is not open on the date of grant, on the last market trading day prior
to the date of grant, as reported in The Wall Street Journal or such other
source as the Administrator deems reliable;

     

    (ii)    
If the
Common Stock is regularly quoted by a recognized securities dealer but selling
prices are not reported, the Fair Market Value of a Share of Common Stock shall
be the mean between the high bid and low asked prices for the Common Stock on
the date of grant, or if the date of grant falls on a non-market trading day,
then on the last market trading day prior to the date of grant, as reported in
The Wall Street Journal or such other source as the Administrator deems
reliable; or

     

    (iii)   
In the
absence of an established market for the Common Stock, the Fair Market Value
shall be determined in good faith by the Administrator.

     

    (n)     
“Notice of Grant”
means a written or electronic notice evidencing certain terms and conditions of
an individual Option grant.  The Notice of Grant is part of the Option
Agreement.

     

    (o)      
“Officer” means a
person who is an officer of the Company within the meaning of Section 16 of the
Exchange Act and the rules and regulations promulgated thereunder.

     

    (p)     
 “Option” means a
nonstatutory stock option granted pursuant to the Plan, that is not intended to
qualify as an incentive stock option within the meaning of Section 422 of the
Code and the regulations promulgated thereunder.

     

    
      
         

      

      
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      (q)      
“Option Agreement”
means an agreement between the Company and an Optionee evidencing the terms and
conditions of an individual Option grant.  The Option Agreement is
subject to the terms and conditions of the Plan.

       

      (r)      
“Option Exchange
Program” means a program whereby outstanding options are surrendered in
exchange for options with a lower exercise price.

    

     

    (s)      
“Optioned Stock”
means the Common Stock subject to an Option.

     

    (t)       
“Optionee” means the
holder of an outstanding Option granted under the Plan.

     

    (u)      
“Parent” means a
“parent corporation,” whether now or hereafter existing, as defined in
Section 424(e) of the Code.

     

    (v)      
“Plan” means this 2001
Nonstatutory Stock Option Plan.

     

    (w)     
 “Service Provider”
means an Employee including an Officer, Consultant or Director.

     

    (x)       
“Share” means a share
of the Common Stock, as adjusted in accordance with Section 12 of the
Plan.

     

    (y)       “Subsidiary” means a
“subsidiary corporation,” whether now or hereafter existing, as defined in
Section 424(f) of the Code.

     

    3.      
Stock Subject to the Plan.  Subject
to the provisions of Section 12 of the Plan, the maximum aggregate number of
Shares which may be optioned and sold under the Plan is one million five hundred
thousand (1,500,000) Shares.  The Shares may be authorized, but
unissued, or reacquired Common Stock.

     

    If an
Option expires or becomes unexercisable without having been exercised in full,
or is surrendered pursuant to an Option Exchange Program, the unpurchased Shares
which were subject thereto shall become available for future grant or sale under
the Plan (unless the Plan has terminated).

     

    4.      
Administration of the Plan.

     

    (a)      
Administration.  The
Plan shall be administered by (i) the Board or (ii) a Committee, which
committee shall be constituted to satisfy Applicable Laws.

     

    (b)      
Powers of the Administrator.  Subject
to the provi­sions of the Plan, and in the case of a Committee, subject to
the specific duties delegated by the Board to such Committee, the Administrator
shall have the authority, in its discre­tion:

     

    (i)      
to
determine the Fair Market Value of the Common Stock;

     

    
      
         

      

      
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    (ii)      to select
the Service Providers to whom Options may be granted hereunder;

     

    (iii)    
to
determine whether and to what extent Options are granted hereunder;

     

    (iv)    
to
determine the number of shares of Common Stock to be covered by each Option
granted hereunder;

     

    (v) 
    to
approve forms of agreement for use under the Plan;

     

    (vi)   
 to
determine the terms and conditions, not inconsistent with the terms of the Plan,
of any award granted hereunder.  Such terms and conditions include,
but are not limited to, the exercise price, the time or times when Options may
be exercised (which may be based on performance criteria), any vesting
acceleration or waiver of forfeiture restrictions, and any restriction or
limitation regarding any Option  or the shares of Common Stock
relating thereto, based in each case on such factors as the Administrator, in
its sole discretion, shall determine;

     

    (vii)  
 to reduce
the exercise price of any Option to the then current Fair Market Value if the
Fair Market Value of the Common Stock covered by such Option shall have declined
since the date the Option was granted;

     

    (vii)   
to
institute an Option Exchange Program;

     

    (ix)    
 to
construe and interpret the terms of the Plan and awards granted pursuant to the
Plan;

     

    (x)     
 to
prescribe, amend and rescind rules and regulations relating to the Plan,
including rules and regulations relating to sub-plans established for the
purpose of qualifying for preferred tax treatment under foreign tax
laws;

     

    (xi)    
 to modify
or amend each Option (subject to Section 14(b) of the Plan), including the
discretionary authority to extend the post-termination exercisability period of
Options longer than is otherwise provided for in the Plan;

     

    (xii)   
 to
authorize any person to execute on behalf of the Company any instrument required
to effect the grant of an Option previously granted by the
Administrator;

     

    (xiii)  
 to
determine the terms and restrictions applicable to Options;

     

    (xiv)  
 to allow
Optionees to satisfy withholding tax obligations by electing to have the Company
withhold from the Shares to be issued upon exercise of an Option that number of
Shares having a Fair Market Value equal to the amount required to be
withheld.  The Fair Market Value of the Shares to be withheld shall be
determined on the date that the amount of tax to be withheld is to be
determined.  All elections by an Optionee to have Shares withheld for
this purpose 

     

    
      
         

      

      
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    shall be
made in such form and under such conditions as the Administrator may deem
necessary or advisable; and

     

    (xv)    
to make
all other determinations deemed necessary or advisable for administering the
Plan.

     

    (c)     
Effect of Administrator’s Decision.  The
Administrator’s decisions, determinations and interpretations shall be final and
binding on all Optionees and any other holders of Options.

     

    5.      
Eligibility.  Options
may be granted to Service Providers; provided, however, that notwithstanding
anything to the contrary contained in the Plan, Options may not be granted to
Officers and Directors.

     

    6.      
Limitation.  Neither
the Plan nor any Option shall confer upon an Optionee any right with respect to
continuing the Optionee’s relationship as a Service Provider with the Company,
nor shall they interfere in any way with the Optionee’s right or the Company’s
right to terminate such relationship at any time, with or without
cause.

     

    7.     
 Term of Plan.  The
Plan shall become effective upon its adoption by the Board.  It shall
continue in effect for ten (10) years, unless sooner terminated under Section 14
of the Plan.

     

    8.     
 Term of
Option.  The term of each Option shall be stated in the Option
Agreement.

     

    9.     
 Option Exercise Price and
Consideration.

     

    (a)      
Exercise
Price.  The per share exercise price for the Shares to be
issued pursuant to exercise of an Option shall be determined by the
Administrator.

     

    (b)     
 Waiting Period and Exercise
Dates.  At the time an Option is granted, the Administrator
shall fix the period within which the Option may be exer­cised and shall
determine any con­ditions which must be satisfied before the Option may be
exercised.

     

    (c)     
 Form of
Consideration.  The Administrator shall determine the
acceptable form of consideration for exercising an Option, including the method
of payment.  Such consideration may consist entirely of:

     

    (i)      
cash;

     

    (ii)    
 check;

     

    (iii)   
 promissory
note;

     

    (iv)   
other
Shares which (A) in the case of Shares acquired upon exercise of an option,
have been owned by the Optionee for more than six months on the date of
sur­render, and 

     

    
      
         

      

      
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    (B) have
a Fair Market Value on the date of surrender equal to the aggregate exercise
price of the Shares as to which said Option shall be
exer­cised;

     

    (v)    
consideration
received by the Company under a cashless exercise program implemented by the
Company in connection with the Plan;

     

    (vi)   
a
reduction in the amount of any Company liability to the Optionee, including any
liability attributable to the Optionee’s participation in any Company-sponsored
deferred compensation program or arrangement;

     

    (vii)   such
other considera­tion and method of payment for the issuance of Shares to the
extent permitted by Applicable Laws; or

     

    (viii) 
any
combination of the foregoing methods of payment.

     

    10.      
Exercise of Option.

     

    (a)       
Procedure for Exercise;
Rights as a Shareholder. Any Option granted hereunder shall be
exercisable according to the terms of the Plan and at such times and under such
conditions as determined by the Administrator and set forth in the Option
Agreement.  An Option may not be exercised for a fraction of a
Share.

     

        An Option
shall be deemed exercised when the Company receives: (i) written or electronic
notice of exercise (in accordance with the Option Agreement) from the person
entitled to exercise the Option, and (ii) full payment for the Shares with
respect to which the Option is exercised.  Full payment may consist of
any consideration and method of payment authorized by the Administrator and
permitted by the Option Agreement and the Plan.  Shares issued upon
exercise of an Option shall be issued in the name of the Optionee or, if
requested by the Optionee, in the name of the Optionee and his or her
spouse.  Until the Shares are issued (as evidenced by the appropriate
entry on the books of the Company or of a duly authorized transfer agent of the
Company), no right to vote or receive dividends or any other rights as a
shareholder shall exist with respect to the Optioned Stock, notwithstanding the
exercise of the Option.  The Company shall issue (or cause to be
issued) such Shares promptly after the Option is exercised.  No
adjustment will be made for a dividend or other right for which the record date
is prior to the date the Shares are issued, except as provided in
Section 12 of the Plan.

     

                      
Exercising an Option in any manner shall decrease the number of Shares
thereafter available, both for purposes of the Plan and for sale under the
Option, by the number of Shares as to which the Option is
exercised.

     

    (b)    
 Termination of
Relationship as a Service Provider.  If an Optionee ceases to
be a Service Provider, other than upon the Optionee’s death or Disability, the
Optionee may exercise his or her Option, but only within such period of time as
is specified in the Option Agreement, and only to the extent that the Option is
vested on the date of termination (but in no event later than the expiration of
the term of such Option as set forth in the Option Agreement).  In the
absence of a specified time in the Option Agreement, the Option shall remain
exercisable for three (3) months 

     

    
      
         

      

      
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    following
the Optionee’s termination.  If, on the date of termination, the
Optionee is not vested as to his or her entire Option, the Shares covered by the
unvested portion of the Option shall revert to the Plan.  If, after
termination, the Optionee does not exercise his or her Option within the time
specified by the Administrator, the Option shall terminate, and the Shares
covered by such Option shall revert to the Plan.

     

    (c)      
Disability of
Optionee.  If an Optionee ceases to be a Service Provider as a
result of the Optionee’s Disability, the Optionee may exercise his or her Option
within such period of time as is specified in the Option Agreement, to the
extent the Option is vested on the date of termination (but in no event later
than the expiration of the term of such Option as set forth in the Option
Agreement).  In the absence of a specified time in the Option
Agreement, the Option shall remain exercisable for twelve (12) months following
the Optionee’s termination.  If, on the date of termination, the
Optionee is not vested as to his or her entire Option, the Shares covered by the
unvested portion of the Option shall revert to the Plan.  If, after
termination, the Optionee does not exercise his or her Option within the time
specified herein, the Option shall terminate, and the Shares covered by such
Option shall revert to the Plan.

     

    (d)      
Death of Optionee.  If
an Optionee dies while a Service Provider, the Option may be exercised within
such period of time as is specified in the Option Agreement (but in no event
later than the expiration of the term of such Option as set forth in the Notice
of Grant), by the Optionee’s estate or by a person who acquires the right to
exercise the Option by bequest or inheritance, but only to the extent that the
Option is vested on the date of death.  In the absence of a specified
time in the Option Agreement, the Option shall remain exercisable for twelve
(12) months following the Optionee’s termination.  If, at the time of
death, the Optionee is not vested as to his or her entire Option, the Shares
covered by the unvested portion of the Option shall immediately revert to the
Plan.  The Option may be exercised by the executor or administrator of
the Optionee’s estate or, if none, by the person(s) entitled to exercise the
Option under the Optionee’s will or the laws of descent or
distribution.  If the Option is not so exercised within the time
specified herein, the Option shall terminate, and the Shares covered by such
Option shall revert to the Plan.

     

    (e)     
 Buyout
Provisions.  The Administrator may at any time offer to buy out
for a payment in cash or Shares, an Option previously granted based on such
terms and conditions as the Administrator shall establish and communicate to the
Optionee at the time that such offer is made.

     

    11.     
 Non-Transferability of Options.  Unless
determined otherwise by the Administrator, an Option may not be sold, pledged,
assigned, hypothecated, transferred, or disposed of in any manner other than by
will or by the laws of descent or distribution and may be exercised, during the
lifetime of the Optionee, only by the Optionee.  If the Administrator
makes an Option transferable, such Option shall contain such additional terms
and conditions as the Administrator deems appropriate.

     

    12.     
 Adjustments Upon Changes in Capitalization,
Dissolution, Merger or Asset Sale.

     

    (a)     
 Changes in
Capitalization.  Subject to any required action by the
shareholders of the Company, the number of shares of Common Stock covered by
each outstanding Option, and 

     

    
      
         

      

      
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    the
number of shares of Common Stock which have been authorized for issuance under
the Plan but as to which no Options have yet been granted or which have been
returned to the Plan upon cancellation or expiration of an Option, as well as
the price per share of Common Stock covered by each such outstanding Option,
shall be proportionately adjusted for any increase or decrease in the number of
issued shares of Common Stock resulting from a stock split, reverse stock split,
stock dividend, combination or reclas­sification of the Common Stock, or any
other increase or decrease in the number of issued shares of Common Stock
effected without receipt of consideration by the Company; provided, however,
that conversion of any convertible securities of the Company shall not be deemed
to have been “effected without receipt of consideration.”  Such
adjustment shall be made by the Board, whose determination in that respect shall
be final, binding and conclusive.  Except as expressly provided
herein, no issuance by the Company of shares of stock of any class, or
securities convertible
into shares of stock of any class, shall affect, and no adjustment by reason
thereof shall be made with respect to, the number or price of shares of Common
Stock subject to an Option.

     

    (b)     
 Dissolution or
Liquidation.  In the event of the proposed dissolution or
liquidation of the Company, the Administrator shall notify each Optionee as soon
as practicable prior to the effective date of such proposed
transaction.  The Administrator in its discretion may provide for an
Optionee to have the right to exercise his or her Option until ten (10) days
prior to such transaction as to all of the Optioned Stock covered thereby,
including Shares as to which the Option would not otherwise be
exercisable.  In addition, the Administrator may provide that any
Company repurchase option applicable to any Shares purchased upon exercise of an
Option shall lapse as to all such Shares, provided the proposed dissolution or
liquidation takes place at the time and in the manner
contemplated.  To the extent it has not been previously
exer­cised, an Option will terminate immediately prior to the
consum­mation of such proposed action.

     

    (c)     
 Merger or Asset
Sale.  In the event of a merger of the Company with or into
another corporation, or the sale of substantially all of the assets of the
Company, each outstanding Option shall be assumed or an equivalent option or
right substituted by the successor corporation or a Parent or Subsidiary of the
successor corporation.  In the event that the successor corporation
refuses to assume or substitute for the Option, the Optionee shall fully vest in
and have the right to exercise the Option as to all of the Optioned Stock,
including Shares as to which it would not otherwise be vested or
exercisable.  If an Option becomes fully vested and exercisable in
lieu of assumption or substitution in the event of a merger or sale of assets,
the Administrator shall notify the Optionee in writing or electronically that
the Option shall be fully vested and exercisable for a period of fifteen (15)
days from the date of such notice, and the Option shall terminate upon the
expiration of such period.  For the purposes of this paragraph, the
Option shall be considered assumed if, following the merger or sale of assets,
the option or right confers the right to purchase or receive, for each Share of
Optioned Stock, immediately prior to the merger or sale of assets, the
consideration (whether stock, cash, or other securities or property) received in
the merger or sale of assets by holders of Common Stock for each Share held on
the effective date of the transaction (and if holders were offered a choice of
consideration, the type of consideration chosen by the holders of a majority of
the outstanding Shares); provided, however, that if such consideration received
in the merger or sale of assets is not solely common stock of the successor


     

    
      
         

      

      
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    corporation
or its Parent, the Administrator may, with the consent of the successor
corporation, provide for the consideration to be received upon the exercise of
the Option, for each Share of Optioned Stock to be solely common stock of the
successor corporation or its Parent equal in fair market value to the per share
consideration received by holders of Common Stock in the merger or sale of
assets.

     

    13.     
 Date of
Grant.  The date of grant of an Option shall be, for all
purposes, the date on which the Administrator makes the determination granting
such Option, or such other later date as is determined by the
Administrator.  Notice of the determination shall be provided to each
Optionee within a reasonable time after the date of such grant.

     

    14.     
 Amendment and Termination of the Plan.

     

    (a)     
 Amendment and
Termination.  The Board may at any time amend, alter, suspend
or terminate the Plan.

     

    (b)      
Effect of Amendment or Termination.  No
amendment, alteration, suspension or termination of the Plan shall impair the
rights of any Optionee, unless mutually agreed otherwise between the Optionee
and the Administrator, which agreement must be in writing and signed by the
Optionee and the Company.  Termination of the Plan shall not affect
the Administrator’s ability to exercise the powers granted to it hereunder with
respect to options granted under the Plan prior to the date of such
termination.

     

    15.     
 Conditions Upon Issuance of Shares.

     

    (a)     
 Legal
Compliance.  Shares shall not be issued pursuant to the
exercise of an Option unless the exercise of such Option and the issuance and
delivery of such Shares shall comply with Applicable Laws and shall be further
subject to the approval of counsel for the Company with respect to such
compliance.

     

    (b)     
 Investment
Representations.  As a condition to the exercise of an Option
the Company may require the person exercising such Option  to
represent and warrant at the time of any such exercise that the Shares are being
purchased only for investment and without any present intention to sell or
distribute such Shares if, in the opinion of counsel for the Company, such a
representation is required.

     

    16.     
 Inability to Obtain
Authority.  The inability of the Company to obtain authority
from any regulatory body having jurisdiction, which authority is deemed by the
Company’s counsel to be necessary to the lawful issuance and sale of any Shares
hereunder, shall relieve the Company of any liability in respect of the failure
to issue or sell such Shares as to which such requisite authority shall not have
been obtained.

     

    17.     
 Reservation of Shares.  The
Company, during the term of this Plan, will at all times reserve and keep
available such number of Shares as shall be sufficient to satisfy the
requirements of the Plan.

    


    
      
         

      

      
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    HI/FN,
INC.

     

    2001
NONSTATUTORY STOCK OPTION PLAN

     

    STOCK
OPTION AGREEMENT

     

    Unless
otherwise defined herein, the terms defined in the Plan shall have the same
defined meanings in this Option Agreement.

     

    I. NOTICE OF STOCK OPTION
GRANT

     

    [Optionee’s
Name and Address]

     

    You have
been granted an option to purchase Common Stock of the Company, subject to the
terms and conditions of the Plan and this Option Agreement, as
follows:

     

    
    

     

    
      	 	 Grant
      Number  	 	 
	 	 	 	 
	 	 Date of
      Grant 	 	 
	 	 	 	 
	 	 Vesting
      Commencement Date 	 	 
	 	 	 	 
	 	 Exercise Price
      per Share    	 $	 
	 	 	 	 
	 	 Total Number
      of Shares Granted 	 	 
	 	 	 	 
	 	 Total Exercise
      Price     	 $	 
	 	 	 	 
	 	 Type of
      Option:     	 Nonstatutory
      Stock Option	 
	 	 	 	 
	 	 Term/Expiration
      Date	 	 


    

     

    Vesting
Schedule:

     

    Subject
to the Optionee continuing to be a Service Provider on such dates, this Option
shall vest and become exercisable in accordance with the following
schedule:

     

    


     

    


     

    Termination
Period:

     

    This
Option may be exercised for three months after Optionee ceases to be a Service
Provider.  Upon the death or Disability of the Optionee, this Option
may be exercised for such longer

    


    
      
         

      

      
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    period as
provided in the Plan.  In no event shall this Option be exercised
later than the Term/Expiration Date as provided above.

     

    II.     
 AGREEMENT

     

    1.      
Grant of
Option.  The Plan Administrator of the Company hereby grants to
the Optionee named in the Notice of Grant attached as Part I of this Agreement
(the “Optionee”) an option (the “Option”) to purchase the number of Shares, as
set forth in the Notice of Grant, at the exercise price per share set forth in
the Notice of Grant (the “Exercise Price”), subject to the terms and conditions
of the Plan, which is incorporated herein by reference.  Subject to
Section 14(b) of the Plan, in the event of a conflict between the terms and
conditions of the Plan and the terms and conditions of this Option Agreement,
the terms and conditions of the Plan shall prevail.

     

    2.     
 Exercise of
Option.

     

    (a)      
Right to
Exercise.  This Option is exercisable during its term in
accordance with the Vesting Schedule set out in the Notice of Grant and the
applicable provisions of the Plan and this Option Agreement.

     

    (b)     
 Method of
Exercise.  This Option is exercisable by delivery of an
exercise notice, in the form attached as Exhibit A (the “Exercise Notice”),
which shall state the election to exercise the Option, the number of Shares in
respect of which the Option is being exercised (the “Exercised Shares”), and
such other representations and agreements as may be required by the Company
pursuant to the provisions of the Plan.  The Exercise Notice shall be
completed by the Optionee and delivered to the Stock
Administrator.  The Exercise Notice shall be accompanied by payment of
the aggregate Exercise Price as to all Exercised Shares.  This Option
shall be deemed to be exercised upon receipt by the Company of such fully
executed Exercise Notice accompanied by such aggregate Exercise
Price.

     

           
No Shares shall be issued pursuant to the exercise of this Option unless such
issuance and exercise complies with Applicable Laws.  Assuming such
compliance, for income tax purposes the Exercised Shares shall be considered
transferred to the Optionee on the date the Option is exercised with respect to
such Exercised Shares.

     

    3. Method of
Payment.  Payment of the aggregate Exercise Price shall be by
any of the following, or a combination thereof, at the election of the
Optionee:

     

    (a)      
cash;

     

    (b)      
check;

     

    (c)     
 consideration
received by the Company under a cashless exercise program implemented by the
Company in connection with the Plan; or

     

    (d)     
 surrender
of other Shares which (i) in the case of Shares acquired upon exercise of an
option, have been owned by the Optionee for more than six (6) months on the date
of

    


    
      
         

      

      
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    surrender,
and (ii) have a Fair
Market Value on the date of surrender equal to the aggregate Exercise Price of
the Exercised Shares.

     

    4.       Non-Transferability of
Option.  This Option may not be transferred in any manner
otherwise than by will or by the laws of descent or distribution and may be
exercised during the lifetime of Optionee only by the Optionee.  The
terms of the Plan and this Option Agreement shall be binding upon the executors,
administrators, heirs, successors and assigns of the Optionee.

     

    5.     
 Term of
Option.  This Option may be exercised only within the term set
out in the Notice of Grant, and may be exercised during such term only in
accordance with the Plan and the terms of this Option Agreement.

     

    6.     
Tax
Consequences.  Some of the federal tax consequences relating to
this Option, as of the date of this Option, are set forth below.  THIS
SUMMARY IS NECESSARILY INCOMPLETE, AND THE TAX LAWS AND REGULATIONS ARE SUBJECT
TO CHANGE.  THE OPTIONEE SHOULD CONSULT A TAX ADVISER BEFORE
EXERCISING THIS OPTION OR DISPOSING OF THE SHARES.

     

    (a)     
 Exercising the
Option.  The Optionee may incur regular federal income tax
liability upon exercise of an NSO.  The Optionee will be treated as
having received compensation income (taxable at ordinary income tax rates) equal
to the excess, if any, of the Fair Market Value of the Exercised Shares on the
date of exercise over their aggregate Exercise Price.  If the Optionee
is an Employee or a former Employee, the Company will be required to withhold
from his or her compensation or collect from Optionee and pay to the applicable
taxing authorities an amount in cash equal to a percentage of this compensation
income at the time of exercise, and may refuse to honor the exercise and refuse
to deliver Shares if such withholding amounts are not delivered at the time of
exercise.

     

    (b)     
 Disposition of
Shares.  If the Optionee holds NSO Shares for at least one
year, any gain realized on disposition of the Shares will be treated as
long-term capital gain for federal income tax purposes.

     

    7.     
 Entire Agreement; Governing
Law.  The Plan is incorporated herein by
reference.  The Plan and this Option Agreement con­sti­tute
the entire agreement of the parties with respect to the subject matter hereof
and supersede in their entirety all prior undertakings and agreements of the
Company and Optionee with respect to the subject matter hereof, and may not be
modified adversely to the Optionee’s interest except by means of a writing
signed by the Company and Optionee.  This agreement is governed by the
internal substantive laws, but not the choice of law rules, of the State of
Delaware.

     

    8.     
 NO GUARANTEE OF CONTINUED
SERVICE.  OPTIONEE ACKNOWLEDGES AND AGREES THAT THE VESTING OF
SHARES PURSUANT TO THE VESTING SCHEDULE HEREOF IS EARNED ONLY BY CONTINUING AS A
SERVICE PROVIDER AT THE WILL OF THE COMPANY (AND NOT THROUGH THE ACT OF BEING
HIRED, BEING GRANTED AN OPTION OR PURCHASING SHARES
HEREUNDER).  OPTIONEE FURTHER 

    


    
      
         

      

      
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    ACKNOWLEDGES
AND AGREES THAT THIS AGREEMENT, THE TRANSACTIONSCONTEMPLATED HEREUNDER AND THE
VESTING SCHEDULE SET FORTH HEREIN DO NOT CONSTITUTE AN EXPRESS OR IMPLIED
PROMISE OF CONTINUED ENGAGEMENT AS A SERVICE PROVIDER FOR THE VESTING PERIOD,
FOR ANY PERIOD, OR AT ALL, AND SHALL NOT INTERFERE WITH OPTIONEE’S RIGHT OR THE
COMPANY’S RIGHT TO TERMINATE OPTIONEE’S RELATIONSHIP AS A SERVICE PROVIDER AT
ANY TIME, WITH OR WITHOUT CAUSE.

     

    By your
signature and the signature of the Company’s representative below, you and the
Company agree that this Option is granted under and governed by the terms and
conditions of the Plan and this Option Agreement.  Optionee has
reviewed the Plan and this Option Agreement in their entirety, has had an
opportunity to obtain the advice of counsel prior to executing this Option
Agreement and fully understands all provisions of the Plan and Option
Agreement.  Optionee hereby agrees to accept as binding, conclusive
and final all decisions or interpretations of the Administrator upon any
questions relating to the Plan and Option Agreement.  Optionee further
agrees to notify the Company upon any change in the residence address indicated
below.

     

    
      
         

        
          	 OPTIONEE	 	 HI/FN,
      INC.	 
	 	 	 	 
	 	 	 	 
	 Signature  	 	 By	 
	 	 	 	 
	 	 	 	 
	 Print
      Name	 	 Title	 
	 	 	 	 
	 	 	 	 
	 Residence
      Address	 	 	 
	 	 	 	 
	 	 	 	 


        

         

      

    

    


    
      
         

      

      
        -4-

        
          

        

      

      
         

      

    

    


    
       

      EXHIBIT
A

       

      HI/FN,
INC.

       

      EXERCISE
NOTICE

      
        


      

      
        Hi/fn,
Inc.

      

      
        750
University Ave.

        Los
Gatos, CA  95032

        


      

      
        Date
of Exercise: _______________________                                                      

      

      
        


        Attention: Stock
Administrator

        


        This constitutes notice under my stock
option that I elect to purchase the number of shares for the price set forth
below.

         

         

        


         

        
          	 	 Type of option
      (check one): 	 Incentive                                      Nonstatutory  	 
	 	 	 	 
	 	 Stock option
      dated:   	 	 
	 	 	 	 
	 	 Number
      of shares as to which option
      is
      exercised:         	 	 
	 	 	 	 
	 	 Certificates
      to be issued
      in name of:  	 	 
	 	 	 	 
	 	 Total exercise
      price:   	 $ 	 
	 	 	 	 
	 	 Cash
      payment delivered herewith:  	 $	 
	 	 	 	 
	 	 Shares to be
      sent to: 	 Home                                        
          Broker  	 
	 	 	 	 
	 	 Address:      	 	 
	 	 	 	 
	 	 	 	 
	 	 	 	 
	 	 	 	 
	 	 	 	 
	 	 Broker Fax
      #   	 	 
	 	 	 	 
	 	 Account # (if
      broker): 	 	 


        

         

        

          
            
               


            

            
              -1-

              
                

              

            

            
               


            

          

        

         

      

      
        
          
            
              
                1.     
Exercise of Option.
By this exercise, I agree (i) to provide such additional documents as you
may require pursuant to the terms of the 1996 Equity Incentive Plan or the 2001
Nonstatutory Stock Option Plan, (ii) to provide for the payment by me to
you (in the manner designated by you) of your withholding obligation, if any,
relating to the exercise of this option, and (iii) if this exercise relates
to an incentive stock option, to notify you in writing within fifteen (15) days
after the date of any disposition of any shares of Common Stock issued upon
exercise of this option that occurs within two (2) years after the date of grant
of this option or within one (1) year after such shares of Common Stock are
issued upon exercise of this option.

              

            

             

            2.    
 Delivery of
Payment.  Purchaser herewith delivers to the Company the full
purchase price for the Shares.

             

            3.    
 Representations of
Purchaser.  Purchaser acknowledges that Purchaser has received,
read and understood the Plan and the Option Agreement and agrees to abide by and
be bound by their terms and conditions.

             

            4.    
 Rights as
Shareholder.  Until the issuance (as evidenced by the
appropriate entry on the books of the Company or of a duly authorized transfer
agent of the Company) of the Shares, no right to vote or receive dividends or
any other rights as a shareholder shall exist with respect to the Optioned
Stock, notwithstanding the exer­cise of the Option.  The Shares so
acquired shall be issued to the Optionee as soon as practicable after exercise
of the Option.  No adjustment will be made for a divi­dend or
other right for which the record date is prior to the date of issuance, except
as pro­vided in Sec­tion 12 of the Plan.

             

            5.    
 Tax
Consultation.  Purchaser understands that Purchaser may suffer
adverse tax consequences as a result of Purchaser’s purchase or disposition of
the Shares.  Purchaser represents that Purchaser has consulted with
any tax consultants Purchaser deems advisable in connection with the purchase or
dis­position of the Shares and that Purchaser is not relying on the Company
for any tax advice.

             

            6.    
 Entire Agreement;
Governing Law.  The Plan and Option Agreement are incorporated
herein by reference.  This Agreement, the Plan and the Option
Agreement con­sti­tute the entire agreement of the parties with respect
to the subject matter hereof and supersede in their entirety all prior
undertakings and agreements of the Company and Purchaser with respect to the
subject matter hereof, and may not be modified adversely to the Purchaser’s
interest except by means of a writing signed by the Company and
Purchaser.  This agreement is governed by the internal substantive
laws, but not the choice of law rules, of California.

             

          

        

      

      
        
          
          

        

        
          -2-

          
            

          

        

        
          
          

        

      

       

       

      
      

       

      
        	 Submitted
      by: 	 	 	 Accepted
      by:	 	 
	 PURCHASER	 	 	 HI/FN,
      INC.	 	 
	 	 	 	 	 	 
	  	 	 	 	 	 
	 Signature 	 	 	 By	 	 
	 	 	 	 	 	 
	 	 	 	 	 	 
	 Print
      Name 	 	 	 Title	 	 
	 	 	 	 	 	 
	 	 	 	 	 	 
	 	 	 	 Date
      Received	 	 
	 Address:	 	 	 Address:	 	 
	 	 	 	 	 	 
	 	 	 	 	 	 
	 	 	 	 	 	 
	 	 	 	 	 	 


      

    

     

     

    -3-