Document:

Filed by sedaredgar.com - Salamon Group, Inc. - Exhibit 10.10

CONSULTING AGREEMENT

THIS CONSULTING AGREEMENT (the "Agreement")
effective as of the1st day of September, 2008 (the “Effective Date”)

BETWEEN

SALAMON GROUP, INC.
4080
Paradise Road, #15-901 
Las Vegas, Nevada 89169

(the " Company")

AND

HAROLD SCHNEIDER
122 – 2550
Hollywood Road North 
Kelowna, British Columbia V1V 2S6

(the “Consultant”) 

WHEREAS:

	A. 	
      The Company is engaged in the business of developing,
      licensing and acquiring technologies and concepts in the field of
      Alternative Energy Sources;

	 	 
	B. 	
      The Consultant is in the business of assisting public
      companies in the area of accounting; and

	 	 
	C. 	
      The Company wishes to retain and the Consultant has
      agreed to provide the Consultant’s services to the Company on the terms
      and subject to the conditions of this Agreement.

NOW THEREFORE, in consideration of the foregoing and of
the mutual covenants contained herein, the receipt and sufficiency of which are
hereby acknowledged, the parties agree as follows:

	1. 	
      DUTIES AND ENGAGEMENT

	 	 	 
	1.1 	
      The Company hereby engages the Consultant as an
      independent contractor and the Consultant accepts such engagement. During
      the term of the engagement the Consultant shall provide the following
      services to the Company, as requested or modified by the Board of
      Directors of the Company from time to time (the
  “Services”):

	 	 	 
		(a) 	
      Accounting Services. The Consultant shall provide
      professional accounting services to the Company, including preparation of
      the Company’s tax returns;

Page 1 of 18

	 	(b) 	
      Accounting Standards. The Consultant shall
      develop, produce, or implement, on an ongoing, as needed basis, accounting
      standards, reporting systems, budgets and financial forecasts for the
      Company; and

	 	 	 
	 	(c) 	
      Other Services. Such other Services as reasonably
      required by the Company from time to time.

	2. 	
      LIMITATION ON DUTIES

	 	 	 
	2.1 	
      In carrying out the Services the Consultant
  shall:

	 	 	 
		(a) 	
      Act only upon and according to the lawful instructions
      given to the Consultant by the Board of Directors of the Company or, to
      the extent that there is no conflict with such instructions of the Board
      of Directors, according to the instructions of any executive officer or
      senior manager of the Company;

	 	 	 
		(b) 	
      Render and perform the Services to the best of its skill
      and ability in accordance with best professional practices;

	 	 	 
		(c) 	
      Not disclose any information about the Company, its
      business, or its subsidiaries to anyone prior to the information being
      released to the general public, unless specifically given written
      permission to make the specific disclosure by the Board of Directors of
      the Company;

	 	 	 
		(d) 	
      Not employ any person in any capacity, or contract for
      the purchase or rental of any service, article or material, nor make any
      commitment, agreement or obligation whereby the Company shall be required
      to pay any monies or other consideration without the Company's prior
      consent in each instance;

	 	 	 
		(e) 	
      Not hold itself out as being able to commit the Company,
      or hold itself out as an employee, partner or joint venturer of the
      Company; and

	 	 	 
		(f) 	
      Not provide any services related to investor relations
      or capital raising activities.

	 	 	 
	3 	
      TERM

	 	 	 
	31 	
      The term (the “Term”) of this Agreement shall
      commence as of September 1, 2008 and shall expire on August 31, 2009,
      unless terminated at an earlier time by either of the parties
  in

Page 2 of 18

		
      accordance with below Section 5, or unless extended by
      mutual written agreement of the parties prior to August 31,
2009.

	 	 
	4 	
      COMPENSATION AND EXPENSES

	 	 
	4.1 	
      Monthly Fee. As consideration for the provision of
      the Services, the Company shall pay to the Consultant a monthly fee of
      Seven Thousand United States Dollars (CAD $7,000) (the “Monthly
      Fee”). The Monthly Fee will be payable by the issuance of S-8 shares
      in the Company stock of the Company pursuant and subject to the Company’s
      2008 Stock Compensation Plan, a copy of which is attached hereto and
      incorporated into this Agreement as Exhibit “A”. The Monthly Fee for the
      entire initial term of the Agreement will be issued by the Company within
      10 business days of the Effective Date. In the event this Agreement is
      terminated, the Consultant shall be required to refund any pro-rated
      portion of the Shares to the Company for any period during the Term for
      which the Services were not provided.

	 	 
	4.4 	
      Expenses. The parties agree that the Monthly Fee
      hereunder shall be inclusive of any and all fees or expenses incurred by
      the Consultant pursuant to this Agreement, including but not limited to
      the costs of rendering the Services, unless otherwise pre-approved by the
      Company in writing. The Company shall reimburse the Consultant for any
      verifiable expenses of the Consultant that have been pre-approved by the
      Company, provided that the Consultant shall submit to the Company an
      itemized written account of each expense claimed by the Consultant
      hereunder, together with corresponding receipts, account statement or
      other proof of purchase in a form acceptable to the Company, within 10
      business days after the Consultant incurs each applicable
  expense.

	 	 
	5. 	
      TERMINATION AND DEFAULT

	 	 
	5.1 	
      Termination without Cause. Each party shall have
      the right to terminate this Agreement at any time by providing written
      notice to the other not less than 30 days prior to the desired date of
      termination.

	 	 
	5.2 	
      Termination for Default. If either party (i)
      breaches any warranty or other material provision of this agreement, (ii)
      files a voluntary petition in bankruptcy, (iii) is subject to an
      involuntary petition in bankruptcy filed against it, or (iv) if a trustee
      or liquidator is appointed for either party, whether directly or in
      relation to that parties properties (each and all such events being herein
      defined as “default”) then at any time during the continuance of
      such default the other party may, in addition to any other rights it may
      have at law or in equity, suspend delivery or performance of the Services
      as are affected by such default, and/or terminate this Agreement with
      respect to all the Services or such Services as are affected by such
      default. A default by

Page 3 of 18

		
      either party under this Agreement shall not be deemed to
      be a default under any and all other agreements between the Consultant and
      the Company.

	 	 	 
		
      Notwithstanding the foregoing, the party relying on such
      default shall provide written notice of its intention to terminate this
      Agreement by reason of default hereunder and the defaulting party shall
      have ten days from its receipt of such notice within which to cure such
      default (provided that the foregoing notice requirement shall not apply in
      the case of default which, by its nature, cannot be cured within ten
      days).

	 	 	 
	5.3 	
      Events of Default Warranting Termination Without
      Notice. Notwithstanding anything to the contrary herein the Company
      may terminate this Agreement without notice to the Consultant upon
      occurrence of any of the following events:

	 	 	 
		(a) 	
      any act or omission of the Consultant that constitutes an
      incident of fraud, dishonesty, misappropriation, bad faith, negligence or
      similar act, the whole as determined by the Company in its the sole
      discretion;

	 	 	 
		(b) 	
      any failure by the Consultant to comply with any material
      laws or regulation applicable to the Company, including but not limited to
      the United States Securities Act of 1933 and the United States Securities
      and Exchange Act of 1934), the whole as determined by the Company in its
      sole discretion; or

	 	 	 
		(c) 	
      any indictment of the Consultant on any criminal charge,
      whether in Canada the United States or elsewhere.

	 	 	 
	5.4 	
      Force Majeure. If it shall be impossible or become
      illegal for either party to substantially perform hereunder as required
      for a temporary period due to strike, flood or other natural calamity or
      catastrophe or due to governmental law, order or regulation, then such
      impossibility shall not constitute a default hereunder, and each of the
      provisions hereof shall continue with full force and effect; except that
      the Term of this Agreement shall be extended for a term equal to the
      duration of such temporary impossibility of performance. If such
      impossibility by either party shall continue for a period of more than ten
      days, either party may then terminate this Agreement by providing written
      notice to the other.

	 	 	 
	6. 	
      NON-EXCLUSIVITY

	 	 	 
	6.1 	
      The Company acknowledges that the Consultant is engaged
      in other business activities, and that it shall continue such activities
      during the term of this Agreement. The Consultant shall not
  be

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      restricted from engaging in other business activities
      during the term of this Agreement provided that the Services shall be
      rendered to the Company on a first priority basis without
  exception.

	 	 
	7. 	
      CONFIDENTIALITY

	 	 
	7.1 	
      “Confidential Information” means the specific
      terms and conditions set forth in this Agreement, and any information of
      the Company, or of any entity controlling, controlled by, or under common
      control with the Company (individually and collectively an
      “Affiliate”), which information is non-public, confidential or
      proprietary in nature, including, without limitation, business
      information, trade secrets, technical or non-technical data, know-how,
      formulas, patterns, compilations, computer programs and software
      (including source and object code), devices, drawings, processes, methods,
      techniques, financial and product plans or data, lists of or information
      regarding actual or potential customers or suppliers, and other business
      information which: (i) derives economic value, actual or potential, from
      not being generally known to or readily ascertainable by proper means, by
      other persons who can obtain economic value from its disclosure or use;
      and (ii) is the subject of efforts that are reasonable under the
      circumstances to maintain its secrecy.

	 	 
	7.2 	
      The Consultant acknowledges that certain of the material
      and information made available to the Consultant by the Company in the
      performance of the Services shall constitute Confidential Information. The
      Consultant recognizes that the Confidential Information is the sole and
      exclusive property of the Company, and the Consultant shall use its best
      efforts and exercise utmost diligence to protect and maintain the
      confidentiality of the Confidential Information. the Consultant shall not,
      directly or indirectly, use or disclose the Confidential Information,
      whether or not acquired, learned, obtained or developed by the Consultant
      alone or in conjunction with others, except as such disclosure or use may
      be required in connection with the performance of the Services or as may
      be consented to in writing by the Company.

	 	 
	7.3 	
      The Confidential Information is and shall remain the sole
      and exclusive property of the Company regardless of whether such
      information was generated by the Consultant or by others, and the
      Consultant agrees that upon termination of this Agreement it shall deliver
      promptly to the Company all such tangible parts of the Confidential
      Information including records, data, notes, reports, proposals, client
      lists, correspondence, materials, marketing or sales information, computer
      programs, equipment, or other documents or property which are in the
      possession or under the control of the Consultant without retaining copies
      thereof.

	 	 
	7.4 	
      Each of the obligations of the Consultant in this section
      7 shall also apply to any confidential information of customers, joint
      venture parties, partners, employees, contractors,
  directors,

Page 5 of 18

		
      officers or shareholders of the Company or an Affiliate,
      or to any other entities of any nature whatsoever with whom the Company or
      any Affiliate has business relations.

	 	 	 
	7.5 	
      Notwithstanding the foregoing provisions of this clause,
      the Consultant shall not be liable for the disclosure or use of any of the
      Confidential Information to the extent that the Confidential
      Information:

	 	 	 
		(a) 	
      was in the public domain prior to the Effective Date of
      this Agreement or subsequently came into the public domain through no
      fault of the Consultant;

	 	 	 
		(b) 	
      was lawfully received by the Consultant from a third
      party, which third party was, to the knowledge of the Consultant, free of
      any obligation of confidentiality;

	 	 	 
		(c) 	
      was already in the lawful possession of the Consultant
      without an obligation to maintain its confidentiality prior to its
      disclosure to the Consultant;

	 	 	 
		(d) 	
      is required to be disclosed by applicable law, or in a
      judicial or administrative proceeding, but only so long as the Consultant,
      to the extent it is not legally prohibited, gives the Company notice,
      prior to any disclosure, of any request to disclose Confidential
      Information so that the Company has an opportunity to object to the
      production or disclosure of the requested information. In the event that
      Confidential Information is produced under such legal compulsion, such
      production shall be strictly limited to the requesting party as dictated
      by applicable law or court order, shall be limited in scope to the extent
      practicable, and shall not otherwise affect the confidential nature of
      such Confidential Information;

	 	 	 
		(e) 	
      can be proven to have been subsequently and independently
      developed, without violation of this Agreement, by employees, consultants
      or agents of the Consultant who did not have access to the Confidential
      Information; or

	 	 	 
		(f) 	
      is disclosed by the Consultant in accordance with the
      prior written approval of the Company, but only to the extent allowed and
      for the limited purposes specified in such written approval. Such
      permitted disclosure shall not otherwise affect the confidential nature of
      such Confidential Information.

	 	 	 
	7.5 	
      For purposes of this Agreement, Confidential Information
      shall not be deemed to be in the public domain or be in the Consultant’s
      lawful possession merely because it consists of components that are within
      the public domain.

Page 6 of 18

	7.6 	
      The covenants and agreements contained in this section 7
      shall survive the termination of this Agreement.

	 	 	 
	8. 	
      NON-SOLICITATION

	 	 	 
	8.1 	
      The Consultant shall not during the Term of this
      Agreement hire or take away or cause to be hired or taken away any
      employee or consultant of the Company. Additionally, for a period
  of

	 	 	 
		12 	
      months following the termination of this Agreement, the
      Consultant shall not hire or take

	 	 	 
		
      away or cause to be hired or taken away any employee or
      consultant who was in the employ of the Company during the 12 months
      preceding such termination.

	 	 	 
	9. 	
      GRANT OF RIGHTS

	 	 	 
	9.1 	
      The Consultant agrees that the results and proceeds of
      the Consultant’s Services under this Agreement, although not created in an
      employment relationship, shall, for the purpose of copyright only, be
      deemed a work made in the course of employment under the Canadian law or a
      work-made-for-hire under the United States law and all other comparable
      international intellectual property laws and conventions. All work and
      materials, including all intellectual property and any other rights
      including, without limitation, all copyright which the Consultant may have
      in and to the results and proceeds of the Services hereunder shall vest
      irrevocably and exclusively with the Company, and are otherwise hereby
      assigned to the Company as and when created. The Consultant hereby waives
      in favor of the Company any moral rights which it may have, if any, in and
      to any works, materials, or services which it may provide or create
      hereunder.

	 	 	 
	9.2 	
      The Consultant hereby grants to the Company the
      irrevocable right to use or permit others to use the Consultant’s name,
      likeness, biography and other personal identification in connection with
      any advertising, publicity, promotion or other business of the Company, or
      in connection with any disclosure obligations of the Company pursuant to
      any applicable corporate or securities laws.

	 	 	 
	10. 	
      REPRESENTATIONS AND WARRANTIES

	 	 	 
	10.1 	
      The Consultant represents, warrants, and covenants to the
      Company as follows:

	 	 	 
		
      (a) 
	All material, notes, writings, or ideas written,
      submitted or published by the Consultant pursuant to this Agreement shall
      be wholly original with the Consultant or based on materials supplied by
      the Company and shall not be copied in whole or in part from
  any

Page 7 of 18

		
       
	other work except to the extent that such work is
      non-proprietary, in the public domain, or duly licensed on behalf of the
      Company pursuant to this Agreement;
	 	 	 
		(b) 	
      To the best of the Consultant’s knowledge, information
      and belief, all of the results and proceeds of the Consultant’s Services
      will not defame any person and will not infringe upon the copyright or any
      other right of any person or company, or violate any law, regulation, or
      judicial or governmental order.

	 	 	 
		(c) 	
      The Consultant will not accept any engagement nor engage
      in any activities that will interfere with the Consultants’ ability to
      provide the Services set out herein;

	 	 	 
	11. 	
      INDEMNIFICATION

	 	 	 
	11.1 	
      The Consultant agrees to indemnify and hold harmless the
      Company, its partners, financiers parent, affiliated and related
      companies, and all of their respective individual shareholders, directors,
      officers, employees, licensees and assigns (collectively the “the
      Company Indemnified Parties”) from and against any claims, actions,
      losses and expenses (including legal expenses) occasioned by any breach of
      the Consultant’s representations and warranties contained herein, by any
      breach of any other provision of this Agreement by the
  Consultant.

	 	 	 
	11.2 	
      Without limited the foregoing, the Consultant agrees to
      indemnify and hold harmless the Company Indemnified Parties from and
      against any and all taxes or amounts which the Company may have to pay and
      any and all liabilities (including judgments, penalties, interest,
      damages, costs and expenses including reasonable outside legal fees) which
      may be obtained against, imposed upon or suffered by the Company or which
      the Company may incur by reason of its failure to deduct and withhold from
      the compensation payable under the Agreement any amounts required or
      permitted to be deducted and withheld from the compensation of an
      employee.

	 	 	 
	12. 	
      MISCELLANEOUS PROVISIONS

	 	 	 
	12.1 	
      Relationship Between the Parties. Nothing
      contained in this Agreement shall be construed as creating any
      relationship (whether by way of employer/employee, agency, joint venture,
      association, or partnership). It is expressly understood that the
      relationship between the parties shall be that of independent contractors,
      whether for the purposes of the Income Tax Act (Canada), provincial
      taxation legislation or otherwise.

	 	 	 
	12.2 	
      Time. Time is of the essence of this
      Agreement.

Page 8 of 18

	12.3 	
      Presumption. This Agreement or any section
      thereof shall not be construed against any party due to the fact that said
      Agreement or any section thereof was drafted by said party.

	 	 
	12.4 	
      Titles and Captions. All article, section
      and paragraph titles or captions contained in this Agreement are for
      convenience only and shall not be deemed part of the context nor affect
      the interpretation of this Agreement.

	 	 
	12.5 	
      Further Action. The parties hereto shall
      execute and deliver all documents, provide all information and take or
      forbear from all such action as may be necessary or appropriate to achieve
      the purposes of this Agreement.

	 	 
	12.6 	
      Good Faith, Cooperation and Due Diligence.
      The parties hereto covenant, warrant and represent to each other good
      faith, complete cooperation, due diligence and honesty in fact in the
      performance of all obligations of the parties pursuant to this Agreement.
      All promises and covenants are mutual and dependent.

	 	 
	12.7 	
      Savings Clause. If any provision of this
      Agreement, or the application of such provision to any person or
      circumstance, shall be held invalid, the remainder of this Agreement, or
      the application of such provision to persons or circumstances other than
      those as to which it is held invalid, shall not be affected
  thereby.

	 	 
	12.8 	
      Assignment. This Agreement may not be
      assigned by either party hereto without the written consent of the other,
      but shall be binding upon the successors of the parties.

	 	 
	12.9 	
      Notices. All notices required or permitted
      to be given under this Agreement shall be given in writing and shall be
      sent by registered mail, postage paid, or delivered, either personally or
      by express delivery service to the party to be notified. Notice to each
      party shall be deemed to have been duly given within fort-eight (48) hours
      after mailing, or upon personally delivery or by delivery by courier,
      addressed to the attention of the officer at the address set forth
      heretofore, or to such other officer or addresses as either party may
      designate, upon at least ten (10) days written notice, to the other
      party.

	 	 
	12.10 	
      Entire agreement. This Agreement contains
      the entire understanding and agreement among the parties. There are no
      other agreements, conditions or representations, oral or written, express
      or implied, with regard thereto. This Agreement may be amended only in
      writing signed by all parties.

	 	 
	12.11 	
      Waiver. A delay or failure by any party to
      exercise a right under this Agreement, or a partial or single exercise of
      that right, shall not constitute a waiver of that or any other
    right.

Page 9 of 18

	12.12 	
      Counterparts. This Agreement may be
      executed in counterparts, each of which shall be deemed an original, but
      all of which together shall constitute one and the same Agreement. In the
      event that the document is signed by one party and faxed to another the
      parties agree that a faxed signature shall be binding upon the parties to
      this Agreement as though the signature was an original.

	 	 
	12.13 	
      Successors. The provisions of this
      Agreement shall be binding upon all parties, their successors and assigns,
      including any corporation with which or into which the Company may be
      merged or which may succeed to its assets or business, provided, however,
      that the obligations of the Consultant are personal and shall not be
      assigned.

	 	 
	12.14 	
      Counsel. The parties expressly acknowledge
      that each has been advised to seek separate counsel for advice in this
      matter and has been given a reasonable opportunity to do so.

	 	 
	12.15 	
      Governing Law. This Agreement shall be governed by
      the laws of the Province of British Columbia and the federal laws of
      Canada applicable therein.

IN WITNESS WHEREOF this Agreement has been executed by
the parties to it, effective as of the day, month and year first written
above:

	 	SALAMON GROUP, INC. 	 
	 	  	 
	 	/s/ John Salamon 	 
	 By: 		 
	 	John Salamon 	 
	 	President and Chief Executive
      Officer 	 
	 	  	 
	 	  	 
	 	THE CONSULTANT 	 
	 	  	 
	 	/s/ Harold Schneider 	 
	 By: 		 
	 	Harold Schneider 	 

Page 10 of 18

	EXHIBIT “A” 
	SALAMON GROUP INC. 
	 
	2008 STOCK COMPENSATION PLAN 
	 
	  
	SECTION 1 
	INTRODUCTION 

1.1 Establishment. Salamon Group Inc. (the
“Company”), a Nevada corporation, hereby establishes the Salamon Group
Inc. 2008 Non-qualified Stock Plan (the “Plan”) for employees,
consultants, directors, and other persons associated with the Company and any of
the Company’s subsidiaries, whom the Board wishes to incite.

1.2 Purposes. The purposes of this Plan are to (i)
attract and retain the best available personnel for positions of responsibility
within the Company (ii) provide incentives to employees, officers, and
management of the Company, (iii) provide Directors, Consultants and Advisors of
the Company with an opportunity to acquire a proprietary interest in the Company
to encourage their continued provision of services to the Company, and to
provide such persons with incentives and rewards for superior performance more
directly linked to the profitability of the Company's business and increases in
shareholder value, and (iv) generally to promote the success of the Company's
business and the interests of the Company and all of its stockholders, through
the issuance of shares of the Company's Common Stock. 

     Incentive benefits granted
hereunder may be shares. The amount of shares issued shall be determined by the
board or the Compensation Committee and reflected in the terms of written
agreements.

SECTION 2 
DEFINITIONS

2.1 Definitions. The following terms will have the
meanings set forth below:

“Affiliated Corporation” means any corporation or other
entity (including, but not limited to, a partnership) which exercises control
over the Company through stock ownership or otherwise, and includes subsidiaries
of the Company.

“Board” means the Board of Directors of the Company.

Page 11 of 18

“Code” means the Internal Revenue Code of the USA or the
Income Tax Act of Canada, as it may be amended form time to time, and as
appropriate to the context and as applies to the Eligible Participant.

“Effective Date” means the effective date of the Plan,
which will be upon approval of the Board of Directors of the Company.

“Eligible Participants” means any employees (including,
without limitation, all officers), directors, consultants and any other persons
whom the Board wishes to incite to contribute to the fortunes of the Company and
permitted by law or policy to receive Shares.

“Non-Statutory Share” means a Share issued under this
Plan in accordance with the requirements of the Code, as amended from time to
time.

“Plan Limit” shall have the meaning set forth in section
4.1.

“Share” or “Shares” shall mean the Company's
Common Shares, $.001 par value per share, or, in the event that the outstanding
Common Shares are hereafter changed into or exchanged for different shares of
securities of the Company, such other shares or securities.

“Share Agreement” shall mean an agreement that will be
entered into by the Company and the Eligible Participant to whom the Shares are
issued and will contain terms and conditions governing the issuance of
Shares

“Stockholder” means an Eligible Participant designated
by the Share Issuance Committee from time to time during the term of the Plan to
receive one or more Shares under the Plan.

“Share Issuance Committee” means the Compensation
Committee of the Company, unless the Board strikes a separate committee, and in
the absence of an empowered committee shall mean the Board.

“Stock” means the common stock of the Company.

2.2 Gender and Number. Except where otherwise indicated
by the context, the masculine gender also will include the feminine gender, and
the definition of any term herein in the singular also will include the
plural.

Page 12 of 18

SECTION 3 
PLAN ADMINISTRATION

3.1 The Plan shall be administered by the Board. Subject
to the express limitations of the Plan, the Board shall have authority in its
discretion to determine the Eligible Persons to whom, and the time or times at
which, Awards may be granted, the number of shares subject to each Award, the
time or times at which an Award will become vested, the performance criteria,
business or performance goals or other conditions of an Award, and all other
terms of the Award. The Board shall also have discretionary authority to
interpret the Plan, to make all factual determinations under the Plan, and to
make all other determinations necessary or advisable for Plan administration.
The Board may prescribe, amend, and rescind rules and regulations relating to
the Plan. All interpretations, determinations, and actions by the Board shall be
final, conclusive, and binding upon all parties.

SECTION 4
STOCK SUBJECT TO THE PLAN AND EXCEPTIONS

4.1 Plan limit. A maximum of 5,000,000 Shares (“Plan
Limit”) are authorized for issuance under the Plan in accordance with the
provisions of the Plan. Shares that are issued will be deducted from the Plan
Limit and such Plan Limit shall not be increased without approval of the board
or, if shareholders of the Company have so required, without approval of the
shareholders of the Company. While any Shares are outstanding, the Company will
retain as authorized and unissued Stock at least the number of Shares from time
to time required under the provisions of the Plan or otherwise assure itself of
its ability to perform its obligations hereunder.

4.2 Unused and Forfeited Stock. Any Shares that are
subject to this Plan that are not used because the terms and conditions of the
Share Agreement are not met or any Shares that are used for full or partial
payment of the purchase price of Shares or any Shares retained by the Company
for any purpose of this Plan automatically will be returned to the Plan Limit
and become available for again for use under the Plan.

4.3 Adjustments for Stock Split, Stock Dividend, Etc. If
the Company \at any time increases or decreases the number of its outstanding
Shares of Stock, or changes in any way the rights and privileges of such Shares
by means of the Payment of a Stock dividend or any other distribution upon such
Shares payable in Stock, or through a stock split, subdivision, consolidation,
combination, reclassification or recapitalization involving the Stock, then, in
relation to the Stock that is affected by the above events, the provisions of
this Section 4.3 will apply. In such event, the numbers, rights and privileges
of the following will be increased, 

Page 13 of 18

decreased or changed in like manner as if such shares had been
issued and outstanding, fully paid and non-assessable at the time of such
event.

4.4 General Adjustment Rules. If any adjustment or
substitution provided for in this Section 4 will result in the creation of a
fractional Share, the number of Shares will be rounded to the next higher
Share.

4.5 Determination by Share Issuance Committee, Etc.
Adjustments under this Section 4 will be made by the Share Issuance
Committee, whose determinations with regard thereto will be final and binding
upon all parties.

4.6 Shares Exceptional to Plan. With the concurrence of
the Board, the Share Issuance Committee may issue Shares outside the Plan or
within the Plan but in excess of the Plan Limit, such that the available Plan
Limit is not diminished, for exceptional circumstances or to acquire or retain
personnel or achieve important goals or strategic targets considered important
to the Company but which cannot reasonably be fit into the Plan Limit or the
Plan due to insufficiency of available Plan Shares, legal impediments whereby
the recipient cannot or is best not included in the Plan, or other purposes or
reasons considered appropriate to the Board.

4.7 Limitations on Issuance. The Share Issuance
Committee shall not, nor does it have the authority to, issue any stock
compensation under this Plan for service related to investor relations or
capital raising activities.

SECTION 5 
REORGANIZATION OR LIQUIDATION

5.1 Reorganization and Shares. In the event that the
Company is merged or consolidated with another corporation (other than a merger
or consolidation in which the Company is the continuing corporation and that
does not result in any reclassification or change of outstanding Shares), or if
all or substantially all of the assets or control of the outstanding voting
stock of the Company is acquired by any other corporation, business entity or
person (other than by a sale or conveyance in which the Company continues as a
holding company of an entity or entities that conduct the business of businesses
formerly conducted by the Company), or in case of a reorganization (other than a
reorganization under the United States Bankruptcy Code) or liquidation of the
Company, the Share Issuance Committee will have the power and discretion to
prescribe the terms and conditions for the modification of any outstanding
Shares issued hereunder. By way of illustration, and not by way of limitation,
the Share Issuance Committee may provide that such Shares will be exchanged or
converted into Shares of the surviving or acquiring corporation, or may provide
for a payment or distribution in respect of outstanding 

Page 14 of 18

Shares in cancellation thereof. Any such determinations by the
Share Issuance Committee may be made generally with respect to all Stockholders,
or may be made on a case-by-case base with respect to particular Stockholders.
The provisions of this Section 5 will not apply to any transaction undertaken
for the purpose of reincorporating the Company under the laws of another
jurisdiction, if such transaction does not materially affect the beneficial
ownership of the Company’s capital stock. Any determination by the Share
Issuance Committee hereunder shall not amend the terms of any Share without the
consent of the Stockholder unless, in the opinion of the Committee acting
reasonably, such amendment is necessary to permit the alterations to the Company
to be effected and such is in the interest of shareholders generally.

SECTION 6 
STOCK SHARES

6.1 Issuance of Shares. An Eligible Participant may be
issued one or more Shares.

6.2 Share Agreements. Each Share issued under the Plan
will be evidenced by a written Share Agreement that will be entered into by the
Company and the Eligible Participant to whom the Share is issued (the
“Stockholder”), and will be deemed to contain the following terms and
conditions, unless other terms and conditions inconsistent therewith have been
entered into the Share Agreement. In the event of inconsistency between the
provisions of the Plan and any Share Agreement entered into, the provisions of
the Share Agreement will be considered to have been determined to be exceptional
from the below and such Share Agreement shall govern where not inconsistent with
law. However, the provisions of the Plan will govern where the Share Agreement
omits to provide for a matter governed by the Plan and the Share Agreement will
not be incomplete nor unenforceable if it fails to provide for a matter provided
by the terms of this Plan as such shall be incorporated by reference:

(a) Number of Shares. Each Share Agreement will state
that it covers a specified number of Shares, as determined by the Share Issuance
Committee and the Share Agreement. If the Share Agreement fails to state the
number then it shall be the number set forth in the minutes of the Share
Issuance Committee.

(b) Issuance. Each share agreement will state the amount
of Shares which shall be issued. 

(c) Date of Issuance. Shares will be considered as
having been issued on the date specified in the issuance resolution of the Share
Issuance Committee.

6.3 Stockholder Privileges. Prior to the issuance of the
Shares to the Stockholder, the Stockholder will have no rights as a stockholder
with respect to any Shares issued to such 

Page 15 of 18

person under this Plan and, until the Stockholder becomes the
holder of the record of such Stock, no adjustments, other than those described
in Section 4, will be made for dividends or other distributions or other rights
to which there is a record date preceding the date such Stockholder becomes the
holder of record of such Stock.

SECTION 7
RIGHTS OF EMPLOYEES AND STOCKHOLDERS

7.1 Employment. Nothing contained in the Plan or in any
Share Agreement will confer upon any Eligible Participant any right with respect
to the continuation of employment by the Company, or interfere in any way with
the right of the Company, subject to the terms of any separate employment
agreement to the contrary, at any time to terminate such employment or to
increase or decrease the compensation of such Eligible Participant form the rate
in existence at the time of the issuance of Shares.

SECTION 8
GENERAL RESTRICTIONS

8.1 Investment representations. The Company may require
any person to whom Shares are issued to give written assurances, in substance
and form satisfactory to the Company and its counsel, to the effect that such
person is acquiring the Stock subject to the Share Agreement for his own account
for investment and not with any present intention of selling and to such other
effects as the Company deems necessary or appropriate in order to comply with
federal and applicable state and provincial securities laws. Legends evidencing
such restrictions may be placed on the certificates evidencing the Stock.

8.2 Compliance with Securities Laws. Each Share
Agreement will be subject to the requirement that if at any time counsel to the
Company determines that the listing, registration or qualification of the Shares
upon any securities exchange or under any state, provincial or federal law, or
the consent or approval of any governmental or regulatory body, is necessary as
a condition of, or in connection with, the issuance of Shares thereunder, such
Shares may not be issued in whole or in part unless such listing, registration,
qualification, consent or approval will have been effected or obtained on
conditions acceptable to the Share Issuance Committee. Nothing herein will be
deemed to require the Company to apply for or to obtain such listing,
registration or qualification. However, where available to the circumstances of
an Stockholder the Company will include the Share with any other filings that
the Company elects, at its sole discretion, to file under S-8 or any other
filings with the SEC but the Company shall not be obliged to make an individual
filing for a particular Share, unless such shall have been required pursuant to
the specific Share Agreement.

Page 16 of 18

SECTION 9
OTHER EMPLOYEE BENEFITS

9.1 Benefits and Taxes. The amount of any compensation
deemed to be received by a Stockholder as a result of a Share issuance will not
constitute “earnings” with respect to which any other employee benefits of such
Stockholder are determined, including, without limitation, benefits under any
pension, profit sharing, life insurance or salary continuation plan. Any taxable
consequences of any Share issuance are entirely the responsibility of the
Stockholder and no contribution shall be required of the Company and, further,
if the Company should suffer liability for unpaid taxes of a Stockholder then
the full amount of such shall be a debt of the Stockholder to the Company
payable immediately and for which the Company may seek judgment and, before
judgment or process, may set-off against any amounts due to the Stockholder or
may recover, again before judgment or process, by exercise of voiding the Share
Issuance at the discretion of the Share Issuance Committee. 

SECTION 10
PLAN AMENDMENT, MODIFICATION AND TERMINATION

10.1 Amendment. The Board may at any time terminate and,
from time to time, may amend or modify the Plan provided, however, that no
amendment or modification may become effective without approval of the amendment
or modification by the stockholders where stockholder approval is required to
enable the Plan to satisfy any applicable statutory requirements, or if the
Company, on the advice of counsel, determines that stockholder approval
otherwise is necessary or desirable.

     No amendment, modification or
termination of the Plan will in any manner adversely affect any Shares
theretofore issued under the Plan, without the consent of the Stockholders
holding such Shares.

SECTION 11 
WITHHOLDING

11.1 Withholding Requirement. The Company’s obligations
to issue Shares will be subject to the Stockholder’s satisfaction of all
applicable federal, state and local income and other tax withholding
requirements and applicable securities requirements.

11.2 Withholding With Stock. At the time Shares are
issued the Share Issuance Committee, in its sole discretion, may permit the
Stockholder to pay all such amounts of tax withholding, or 

Page 17 of 18

any part thereof, that is due upon exercise of the Share by
such adjustments as the Share Issuance Committee determines.

SECTION 12 
BROKERAGE ARRANGEMENTS

12.1 Brokerage. The Share Issuance Committee, in its
discretion, may enter into arrangements with one or more banks, brokers or other
financial institutions to facilitate the disposition of shares acquired upon,
including, without limitation, sale of acquired Shares

SECTION 13 
NONEXCLUSIVITY OF THE PLAN

13.1 Other Plans. The adoption of this Plan by the Board
will not be construed as creating any limitations on the power or authority of
the Board to adopt such other or additional incentive or other compensation
arrangements of whatever nature as the Board may deem necessary or desirable or
preclude or limit the continuation of any other plan, practice or arrangement
for the payment of compensation or fringe benefits to employees generally, or to
any class or group of employees, or any other persons that the Company or any
Affiliated Corporation now has lawfully put into effect, including, without
limitation, any retirement, pension, savings and stock purchase plan, insurance,
death and disability benefits and executive short-term incentive plans.

SECTION 14 
REQUIREMENTS OF LAW

14.1 Requirements of Law. The issuance of Stock and the
payment of cash pursuant to the Plan will be subject to all applicable laws,
rules and regulations.

14.2 Governing Law. The Plan and all agreements
hereunder will be construed in accordance with and governed by the laws of the
State of Nevada.

SECTION 15 
DURATION OF THE PLAN

15.1 Termination. The Plan will terminate at such time
as may be determined by the Board, and no Shares will be issued after such
termination. If not sooner terminated under the preceding sentence, the Plan
will fully cease and expire on the date that the Plan Limit has been exhausted
and all Shares issued.

Page 18 of 18exhibit10-18.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.

     

    
      
         

      

      
        -1-

        
          

        

      

      
         

      

    

     

    (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.

     

    
      
         

      

      
        -2-

        
          

        

      

      
         

      

    

     

    
      (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;

     

    
      
         

      

      
        -3-

        
          

        

      

      
         

      

    

     

    (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 

     

    
      
         

      

      
        -4-

        
          

        

      

      
         

      

    

    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 

     

    
      
         

      

      
        -5-

        
          

        

      

      
         

      

    

     

    (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 

     

    
      
         

      

      
        -6-

        
          

        

      

      
         

      

    

     

    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 

     

    
      
         

      

      
        -7-

        
          

        

      

      
         

      

    

     

    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

     

    
      
         

      

      
        -8-

        
          

        

      

      
         

      

    

     

    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.

    

    
      
         

      

      
        -9-

        
          

        

      

      
         

      

    

     

    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

    

    
      
         

      

      
        -1-

        
          

        

      

      
         

      

    

     

    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

    

    
      
         

      

      
        -2-

        
          

        

      

      
         

      

    

     

    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 

    

    
      
         

      

      
        -3-

        
          

        

      

      
         

      

    

     

    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-

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