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Exhibit 4.1    
    

 
  AMENDMENT NO 1. TO RIGHTS AGREEMENT    
    

        THIS AMENDMENT NO. 1 TO RIGHTS AGREEMENT (the "Amendment")
is made as of the 28th day of May, 2008, by and between KOSAN BIOSCIENCES INCORPORATED, a Delaware corporation (the
"Company"), and MELLON INVESTOR SERVICES LLC, a New Jersey limited liability company (the
"Rights Agent"). 

        WHEREAS, the Company is entering into an Agreement and Plan of Merger (as the same may be amended from time to time, the
"Merger Agreement"), among the Company, Bristol-Myers Squibb Company, a Delaware corporation ("Parent"),
and KB Acquisition Corp., a Delaware corporation and a wholly-owned subsidiary of Parent ("Sub"), pursuant to which Sub will: (i) make a tender
offer to acquire all of the outstanding shares of common stock, par value $0.001 per share, of the Company ("Company Common Stock"), on the terms and
subject to the conditions set forth in the Merger Agreement (such tender offer, as it may be amended and/or extended from time to time, is referred to in this Amendment as the
"Offer"); and (ii) after acquiring shares of Company Common Stock pursuant to the Offer, Sub will merge with and into the Company upon the terms
and subject to the conditions set forth in the Merger Agreement (such merger is referred to in this Amendment as the "Merger"); 

        WHEREAS, concurrently with the execution and delivery of the Merger Agreement, Parent, Sub and certain stockholders of the Company are
entering into a Stockholder Agreement (as the same may be amended from time to time, the "Stockholder Agreement") pursuant to which such stockholders
will agree to take the actions specified therein in furtherance of the Offer and the Merger; 

        WHEREAS, the Company and the Rights Agent are parties to that certain Rights Agreement, dated as of October 5, 2001 (the
"Rights Agreement"); 

        WHEREAS, the Company desires to amend the Rights Agreement in connection with the execution and delivery of each of the Merger Agreement
and the Stockholder Agreement and the consummation of the transactions contemplated thereby; and 

        WHEREAS, the Board of Directors of the Company has approved this Amendment and authorized its appropriate officers to execute and deliver
the same to the Rights Agent. 

        NOW, THEREFORE, in accordance with the procedures for amendment of the Rights Agreement set forth in Section 27 thereof, and in
consideration of the foregoing and the mutual agreements herein set forth, the parties hereby agree as follows: 

        1.     Capitalized terms that are not otherwise defined herein shall have the meanings ascribed to them in the Rights Agreement. 

        2.     The definition of "Acquiring Person" set forth in Section 1(a) of the Rights Agreement is hereby amended by adding
the following sentence to the end of said Section 1(a) that shall read in its entirety as follows: 

"Notwithstanding
anything in this Agreement to the contrary, no Person (or any of such Person's Affiliates or Associates) shall be or become an Acquiring Person by reason of, and the term "Acquiring
Person" shall not include any Person (or any of such Person's Affiliates or Associates) by reason of, (i) the approval, execution and/or delivery of the Agreement and Plan of Merger, dated as
of May 28, 2008, among Bristol-Myers Squibb Company, a Delaware corporation ("Parent"), KB Acquisition Corp., a Delaware corporation and a wholly-owned subsidiary of Parent ("Sub"), and the
Company (such Agreement and Plan of Merger, as the same may be amended from time to time, is referred to in this Agreement as the "Merger Agreement") or the approval, execution and/or delivery of any
amendment thereto, (ii) the approval, execution and/or delivery of 

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the
Stockholder Agreement, dated as of May 28, 2008, among Parent, Sub and the individuals and other parties listed on Schedule A thereto (such Stockholder Agreement, as the same may be
amended from time to time, is referred to in this Agreement as the "Stockholder Agreement") or the approval, execution and/or delivery of any amendment thereto, (iii) the acceptance for payment
or purchase by Sub of Common Shares pursuant to a tender offer to acquire all of the outstanding Common Shares to be commenced by Sub pursuant to, and on the terms and subject to the conditions set
forth in, the Merger Agreement (such tender offer, as it may be amended and/or extended from time to time pursuant to the terms of the Merger Agreement, is referred to in this Agreement as the
"Offer"), (iv) the merger of Sub with and into the Company pursuant to, and on the terms and subject to the conditions set forth in, the Merger Agreement (such merger is referred to in this
Agreement as the "Merger"), (v) the consummation of any other transactions contemplated by the Merger Agreement or the Stockholder Agreement (the Merger Agreement and the Stockholder Agreement
collectively referred to in this Agreement as the "Merger Transaction Agreements"), or (vi) the announcement of any of the Merger Transaction
Agreements, the Offer, the Merger or any other transactions contemplated by the Merger Transaction Agreements." 

        3.     The definition of "Interested Stockholder" set forth in Section 1(i) of the Rights Agreement is hereby amended by
adding the following sentence to the end of said Section 1(i) that shall read in its entirety as follows: 

"Notwithstanding
anything in this Agreement to the contrary, no Person (or any of such Person's Affiliates or Associates) shall be or become an Interested Stockholder by reason of, and the term
Interested Stockholder shall not include any Person (or any of such Person's Affiliates or Associates) by reason of, (i) the approval, execution and/or delivery of the Merger Agreement or any
amendment thereto, (ii) the approval, execution and/or delivery of the Stockholder Agreement or any amendment thereto, (iii) the acceptance for payment or purchase by Sub of Common
Shares pursuant to the Offer, (iv) the Merger, (v) the consummation of any other transactions contemplated by any of the Merger Transaction Agreements, or (vi) the announcement of
any of the Merger Transaction Agreements, the Offer, the Merger or any other transactions contemplated by the Merger Transaction Agreements." 

        4.     The definition of "Shares Acquisition Date" in Section l(n) of the Rights Agreement is hereby amended by adding the
following sentence to the end of said Section l(n) that shall read in its entirety as follows: 

"Notwithstanding
anything in this Agreement to the contrary, no Shares Acquisition Date shall be deemed to have occurred by reason of (i) the approval, execution and/or delivery of the Merger
Agreement or any amendment thereto, (ii) the approval, execution and/or delivery of the Stockholder Agreement or any amendment thereto, (iii) the acceptance for payment or purchase by
Sub of Common Shares pursuant to the Offer, (iv) the Merger, (v) the consummation of any other transactions contemplated by any of the Merger Transaction Agreements, or (vi) the
announcement of any of the Merger Transaction Agreements, the Offer, the Merger or any other transactions contemplated by the Merger Transaction Agreements." 

        5.     Section 3(a) of the Rights Agreement is hereby amended by adding the following sentence to the end of said
Section 3(a) that shall read in its entirety as follows: 

"Notwithstanding
anything in this Agreement to the contrary, no Distribution Date shall be deemed to have occurred by reason of (i) the approval, execution and/or delivery of the Merger
Agreement or any amendment thereto, (ii) the approval, execution and/or delivery of the Stockholder Agreement or any amendment thereto, (iii) the acceptance for payment or purchase by
Sub of Common Shares pursuant to the Offer, (iv) the Merger, (v) the consummation of any other transactions contemplated by any of the Merger Transaction Agreements, or (vi) the 

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announcement
of any of the Merger Transaction Agreements, the Offer, the Merger or any other transactions contemplated by the Merger Transaction Agreements." 

        6.     Section 7(a) of the Rights Agreement is hereby amended and restated to read in its entirety as follows: 

"(a)    The registered holder of any Right Certificate may exercise the Rights evidenced thereby (except as otherwise provided herein) in
whole or in part at any time after the Distribution Date upon surrender of the Right Certificate, with the form of election to purchase on the reverse side thereof duly executed, to the Rights Agent
at the office of the Rights Agent designated for such purpose, together with payment of the Purchase Price for each one one-hundredth of a Preferred Share (or such other number of shares
or other securities) as to which the Rights are exercised, at or prior to the earliest of (i) the Close of Business on October 29, 2011, (ii) the time at which the Rights are
redeemed as provided in Section 23 hereof (the "Redemption Date"), (iii) the time at which such Rights are exchanged as provided in Section 24 hereof, or (iv) the moment in
time immediately prior to the Effective Time (as such term is defined in the Merger Agreement) (the earlier to occur of the events described in clauses (i) and (iv) of this
paragraph (a) shall be referred to herein as the "Final Expiration Date")." 

        7.     Section 11(a)(ii) of the Rights Agreement is hereby amended by adding the following sentence to the end of said
Section 11(a)(ii) that shall read in its entirety as follows: 

"Notwithstanding
anything in this Agreement to the contrary, no event requiring an adjustment under this Section 11(a) shall be deemed to have occurred by reason of (i) the approval,
execution and/or delivery of the Merger Agreement or any amendment thereto, (ii) the approval, execution and/or delivery of the Stockholder Agreement or any amendment thereto, (iii) the
acceptance for payment or purchase by Sub of Common Shares pursuant to the Offer, (iv) the Merger, (v) the consummation of any other transactions contemplated by any of the Merger
Transaction Agreements, or (vi) the announcement of any of the Merger Transaction Agreements, the Offer, the Merger or any other transactions contemplated by the Merger Transaction Agreements." 

        8.     Section 13(a) of the Rights Agreement is hereby amended by adding the following sentence to the end of said
Section 13(a) that shall read in its entirety as follows: 

"Notwithstanding
anything in this Agreement to the contrary, none of the events described in clauses (x) through (z) of the first sentence of Section 13(a) shall be deemed to have
occurred as a result of (i) the approval, execution and/or delivery of the Merger Agreement or any amendment thereto, (ii) the approval, execution and/or delivery of the Stockholder
Agreement or any amendment thereto, (iii) the acceptance for payment or purchase by Sub of Common Shares pursuant to the Offer, (iv) the Merger, (v) the consummation of any other
transactions contemplated by any of the Merger Transaction Agreements, or (vi) the announcement of any of the Merger Transaction Agreements, the Offer, the Merger or any other transactions
contemplated by the Merger Transaction Agreements." 

        9.     Section 30 of the Rights Agreement is hereby amended by adding the following sentence to the end of said
Section 30 that shall read in its entirety as follows: 

"Further,
nothing in this Agreement shall be construed to give any holder of Rights or any other Person any legal or equitable rights, remedies or claims under this Agreement by virtue of
(i) the approval, execution and/or delivery of the Merger Agreement or any amendment thereto, (ii) the approval, execution and/or delivery of the Stockholder Agreement or any amendment
thereto, (iii) the acceptance for payment or purchase by Sub of Common Shares pursuant to the Offer, (iv) the Merger, (v) the consummation of any other transactions contemplated
by any of the Merger Transaction Agreements, or (vi) the announcement of any of the Merger Transaction 

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Agreements,
the Offer, the Merger or any other transactions contemplated by the Merger Transaction Agreements." 

        10.   The Rights Agreement, as amended by this Amendment, shall remain in full force and effect in accordance with its terms.
In the event of any conflict, inconsistency or incongruity between any provision of this Amendment and any provision of the Rights Agreement, the provisions of this Amendment shall govern and control. 

        11.   All of the covenants and provisions of this Amendment by or for the benefit of the Company or the Rights Agent shall bind
and inure to the benefit of their respective successors and assigns. 

        12.   Nothing in this Amendment shall be construed to give to any person or corporation other than the Company, the Parent, the
Sub, the Rights Agent and the registered holders of the Right Certificates (and, prior to the Distribution Date, the Common Shares) any legal or equitable right, remedy or claim under this Amendment;
but this Amendment shall be for the sole and exclusive benefit of the Company, the Parent, the Sub, the Rights Agent and the registered holders of the Right Certificates (and, prior to the
Distribution Date, the Common Shares). 

        13.   If any term, provision, covenant or restriction of this Amendment is held by a court of competent jurisdiction or other
authority to be invalid, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions of this Amendment shall remain in full force and effect and shall in no way be
affected, impaired or invalidated. 

        14.   This Amendment shall be deemed to be a contract made under the laws of the State of Delaware and for all purposes shall
be governed by and construed in accordance with the laws of such State applicable to contracts to be made and performed entirely within such State; provided,
however, that all provisions regarding the rights, duties and obligations of the Rights Agent shall be governed by, and construed in accordance with, the laws of the State of
New York applicable to contracts made and to be performed entirely within such state. 

        15.   This Amendment may be executed in any number of counterparts and each of such counterparts shall for all purposes be
deemed to be an original, and all such counterparts shall together constitute but one and the same instrument. 

        16.   The Company hereby certifies to the Rights Agent that this Amendment is in compliance with Section 27 of the
Rights Agreement. 

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        IN WITNESS WHEREOF, the parties herein have caused this Amendment to be duly executed and attested, all as of the date and year first
above written. 

	 	 	 	 	KOSAN BIOSCIENCES INCORPORATED
	

 	
 	

 	
 	

By:	
 	

/s/  HELEN S. KIM      

	 	 	 	 	 	 	Name: Helen S. Kim
	 	 	 	 	 	 	Title: President & CEO
	

Attest:	
 	

/s/  JONATHAN K. WRIGHT      
	
 	

 	
 	

 
	 	 	Name: Jonathan K. Wright	 	 	 	 
	 	 	Title: General Counsel & Secretary	 	 	 	 
	 	 	 	 	MELLON INVESTOR SERVICES LLC
	

 	
 	

 	
 	

By:	
 	

/s/  MARIA G. COOPER      

	 	 	 	 	 	 	Name: Maria G. Cooper
	 	 	 	 	 	 	Title: Relationship Manager
	

Attest:	
 	

/s/  JOSHUA P. MCGINN      
	
 	

 	
 	

 
	 	 	Name: Joshua P. McGinn	 	 	 	 
	 	 	Title: Assistant Vice President	 	 	 	 

5

QuickLinks

Exhibit 4.1

AMENDMENT NO 1. TO RIGHTS AGREEMENTexhibit10-1.htm

    EXHIBIT
10.1

    
 

    HI/FN,
INC.

    AMENDED
AND RESTATED 1998 EMPLOYEE STOCK PURCHASE PLAN

    (AS
AMENDED ON February 21, 2008)

     

    The
following constitute the provisions of the 1998 Employee Stock Purchase Plan of
hi/fn, inc.

     

    1.           Purpose.  The
purpose of the Plan is to provide employees of the Company and its Designated
Subsidiaries with an opportunity to purchase Common Stock of the Company through
accumulated payroll deductions. It is the intention of the Company to have the
Plan qualify as an “Employee Stock Purchase Plan” under Section 423 of the
Internal Revenue Code of 1986, as amended. The provisions of the Plan,
accordingly, shall be construed so as to extend and limit participation in a
manner consistent with the requirements of that section of the
Code.

     

    2.           Definitions.

     

    (a)           “Board”
shall mean the Board of Directors of the Company.

     

    (b)           “Code”
shall mean the Internal Revenue Code of 1986, as amended.

     

    (c)           “Common
Stock” shall mean the common stock of the Company.

     

    (d)           “Company”
shall mean hi/fn, inc. and any Designated Subsidiary of the
Company.

     

    (e)           “Compensation”
shall mean all base straight time gross earnings and commissions, but exclusive
of payments for overtime, shift premium, incentive compensation, incentive
payments, bonuses and other compensation.

     

    (f)           “Designated
Subsidiary” shall mean any Subsidiary which has been designated by the Board
from time to time in its sole discretion as eligible to participate in the
Plan.

     

    (g)           “Employee”
shall mean any individual who is an Employee of the Company for tax purposes
whose customary employment with the Company is at least twenty (20) hours per
week and more than five (5) months in any calendar year. For purposes of the
Plan, the employment relationship shall be treated as continuing intact while
the individual is on sick leave or other leave of absence approved by the
Company. Where the period of leave exceeds 90 days and the individual’s right to
reemployment is not guaranteed either by statute or by contract, the employment
relationship shall be deemed to have terminated on the 91st day of such
leave.

     

    (h)           “Enrollment
Date” shall mean the first Trading Day of each Offering Period.

     

    (i)           “Exercise
Date” shall mean the last Trading Day of each Offering Period.

    
      
        
           

        

         

      

      
        -1-

        
          

        

      

      
         

      

    

    (j)           
“Fair Market Value” shall mean, as of any date, the value of Common Stock
determined as follows:

     

    (1)           If
the Common Stock is listed on a national securities exchange, its closing price
on the date of determination on the principal national securities exchange on
which the Common Stock is listed or admitted to trading as reported in The Wall
Street Journal or such other source as the Board deems reliable;

     

    (2)           If
the Common Stock is regularly quoted by a recognized securities dealer but
selling prices are not reported, its Fair Market Value shall be the mean of the
closing bid and asked prices for the Common Stock on the date of such
determination, as reported in The Wall Street Journal or such other source as
the Board deems reliable;

     

    (3)           For
purposes of the Enrollment Date of the first Offering Period under the Plan, the
Fair Market Value shall be the initial price to the public as set forth in the
information statement included within the registration statement in Form 10
filed with the Securities and Exchange Commission for the distribution of the
Company’s Common Stock held by Stac, Inc., a Delaware corporation, and any
parent of Company (the “Registration Statement”); or

     

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

     

    (k)           “Offering
Periods” shall mean the periods of approximately six (6) months during which an
option granted pursuant to the Plan may be exercised, commencing on the first
Trading Day on or after May 1 and November 1 of each year and terminating on the
last Trading Day in the periods ending six months later; provided, however, that
the first Offering Period under the Plan shall commence with the first day of
regular way trading of the Common Stock on any established stock exchange or a
national market system and ending on the last Trading Day on or before April 30,
1999. The duration and timing of Offering Periods may be changed pursuant to
Section 4 of this Plan.

     

    (l)           “Plan”
shall mean this 1998 Employee Stock Purchase Plan.

     

    (m)           “Purchase
Price” shall mean 85% of the Fair Market Value of a share of Common Stock on the
Enrollment Date or on the Exercise Date, whichever is lower; provided however,
that the Purchase Price may be adjusted by the Board pursuant to Section
20.

     

    (n)           “Reserves”
shall mean the number of shares of Common Stock covered by each option under the
Plan which have not yet been exercised and the number of shares of Common Stock
which have been authorized for issuance under the Plan but not yet placed under
option.

     

    (o)           “Subsidiary”
shall mean a corporation, domestic or foreign, of which not less than 50% of the
voting shares are held by the Company or a Subsidiary, whether or not such
corporation now exists or is hereafter organized or acquired by the Company or a
Subsidiary.

    
      
         

      

      
        -2-

        
          

        

      

      
         

      

    

    (p)           “Trading
Day” shall mean a day on which national securities exchange is open for
trading.

     

    3.           Eligibility.

     

    (a)           Any
Employee who shall be employed by the Company on a given Enrollment Date shall
be eligible to participate in the Plan.

     

    (b)           Any
provisions of the Plan to the contrary notwithstanding, no Employee shall be
granted an option under the Plan (i) to the extent that, immediately after the
grant, such Employee (or any other person whose stock would be attributed to
such Employee pursuant to Section 424(d) of the Code) would own capital stock of
the Company and/or hold outstanding options to purchase such stock possessing
five percent (5%) or more of the total combined voting power or value of all
classes of the capital stock of the Company or of any Subsidiary, or (ii) to the
extent that his or her rights to purchase stock under all employee stock
purchase plans of the Company and its subsidiaries accrues at a rate which
exceeds Twenty-Five Thousand Dollars ($25,000) worth of stock (determined at the
fair market value of the shares at the time such option is granted) for each
calendar year in which such option is outstanding at any time.

     

    4.           Offering Periods. The
Plan shall be implemented by consecutive, overlapping Offering Periods with a
new Offering Period commencing on the first Trading Day on or after May 1 and
November 1 of each year, or on such other date as the Board shall determine, and
continuing thereafter until terminated in accordance with Section 20 hereof;
provided, however, that the first Offering Period under the Plan shall commence
with the first day of regular way trading of the Common Stock on any established
national securities exchange or a national market system and ending on the last
Trading Day on or before April 30, 1999. The Board shall have the power to
change the duration of Offering Periods (including the commencement dates
thereof) with respect to future offerings without stockholder approval if such
change is announced prior to the scheduled beginning of the first Offering
Period to be affected thereafter.

     

    5.           Participation.

     

    (a)           An
eligible Employee may become a participant in the Plan by completing a
subscription agreement authorizing payroll deductions in the form of Exhibit A
to this Plan and filing it with the Company’s payroll office prior to the
applicable Enrollment Date.

     

    (b)           Payroll
deductions for a participant shall commence on the first payroll following the
Enrollment Date and shall end on the last payroll in the Offering Period to
which such authorization is applicable, unless sooner terminated by the
participant as provided in Section 10 hereof.

     

    6.           Payroll
Deductions.

     

    (a)           At
the time a participant files his or her subscription agreement, he or she shall
elect to have payroll deductions made on each pay day during the Offering Period
in an amount not exceeding fifteen percent (15%) of the Compensation which he or
she receives on each pay day during the Offering Period.

    
      
         

      

      
        -3-

        
          

        

      

      
         

      

    

    (b)           All
payroll deductions made for a participant shall be credited to his or her
account under the Plan and shall be withheld in whole percentages only. A
participant may not make any additional payments into such account.

     

    (c)           A
participant may discontinue his or her participation in the Plan as provided in
Section 10 hereof, or may increase or decrease the rate of his or her payroll
deductions during the Offering Period by completing or filing with the Company a
new subscription agreement authorizing a change in payroll deduction rate. The
Board may, in its discretion, limit the number of participation rate changes
during any Offering Period. The change in rate shall be effective with the first
full payroll period following five (5) business days after the Company’s receipt
of the new subscription agreement unless the Company elects to process a given
change in participation more quickly. A participant’s subscription agreement
shall remain in effect for successive Offering Periods unless terminated as
provided in Section 10 hereof.

     

    (d)           Notwithstanding
the foregoing, to the extent necessary to comply with Section 423(b)(8) of the
Code and Section 3(b) hereof, a participant’s payroll deductions may be
decreased to zero percent (0%) at any time during an Offering Period. Payroll
deductions shall recommence at the rate provided in such participant’s
subscription agreement at the beginning of the first Offering Period which is
scheduled to end in the following calendar year, unless terminated by the
participant as provided in Section 10 hereof.

     

    (e)           At
the time the option is exercised, in whole or in part, or at the time some or
all of the Company’s Common Stock issued under the Plan is disposed of, the
participant must make adequate provision for the Company’s federal, state, or
other tax withholding obligations, if any, which arise upon the exercise of the
option or the disposition of the Common Stock. At any time, the Company may, but
shall not be obligated to, withhold from the participant’s compensation the
amount necessary for the Company to meet applicable withholding obligations,
including any withholding required to make available to the Company any tax
deductions or benefits attributable to sale or early disposition of Common Stock
by the Employee.

     

    7.           Grant of
Option.  On the Enrollment Date of each Offering Period, each
eligible Employee participating in such Offering Period shall be granted an
option to purchase on each Exercise Date during such Offering Period (at the
applicable Purchase Price) up to a number of shares of the Company’s Common
Stock determined by dividing such Employee’s payroll deductions accumulated
prior to such Exercise Date and retained in the Participant’s account as of the
Exercise Date by the applicable Purchase Price; provided that in no event shall
an Employee be permitted to purchase during each Offering Period more than 5,000
shares of the Company’s Common Stock (subject to any adjustment pursuant to
Section 19), and provided further that such purchase shall be subject to the
limitations set forth in Sections 3(b) and 13 hereof. The Board may, for future
Offering Periods, increase or decrease, in its absolute discretion, the maximum
number of shares of the Company’s Common Stock an Employee may purchase during
each Offering Period. Exercise of the option shall occur as provided in Section
8 hereof, unless the participant has withdrawn pursuant to Section 10 hereof.
The option shall expire on the last day of the Offering Period.

     

    
      
         

      

      
        -4-

        
          

        

      

      
         

      

    

    8.           Exercise of
Option.

     

    (a)           Unless
a participant withdraws from the Plan as provided in Section 10 hereof, his or
her option for the purchase of shares shall be exercised automatically on the
Exercise Date, and the maximum number of full shares subject to option shall be
purchased for such participant at the applicable Purchase Price with the
accumulated payroll deductions in his or her account. No fractional shares shall
be purchased; any payroll deductions accumulated in a participant’s account
which are not sufficient to purchase a full share shall be retained in the
participant’s account for the subsequent Offering Period, subject to earlier
withdrawal by the participant as provided in Section 10 hereof. Any other monies
left over in a participant’s account after the Exercise Date shall be returned
to the participant. During a participant’s lifetime, a participant’s option to
purchase shares hereunder is exercisable only by him or her.

     

    (b)           If
the Board determines that, on a given Exercise Date, the number of shares with
respect to which options are to be exercised may exceed (i) the number of shares
of Common Stock that were available for sale under the Plan on the Enrollment
Date of the applicable Offering Period, or (ii) the number of shares available
for sale under the Plan on such Exercise Date, the Board may in its sole
discretion (x) provide that the Company shall make a pro rata allocation of the
shares of Common Stock available for purchase on such Enrollment Date or
Exercise Date, as applicable, in as uniform a manner as shall be practicable and
as it shall determine in its sole discretion to be equitable among all
participants exercising options to purchase Common Stock on such Exercise Date,
and continue all Offering Periods then in effect, or (y) provide that the
Company shall make a pro rata allocation of the shares available for purchase on
such Enrollment Date or Exercise Date, as applicable, in as uniform a manner as
shall be practicable and as it shall determine in its sole discretion to be
equitable among all participants exercising options to purchase Common Stock on
such Exercise Date, and terminate any or all Offering Periods then in effect
pursuant to Section 20 hereof. The Company may make pro rata allocation of the
shares available on the Enrollment Date of any applicable Offering Period
pursuant to the preceding sentence, notwithstanding any authorization of
additional shares for issuance under the Plan by the Company’s stockholders
subsequent to such Enrollment Date.

     

    9.           Delivery.  As
promptly as practicable after each Exercise Date on which a purchase of shares
occurs, the Company shall arrange the delivery to each participant, as
appropriate, of a certificate representing the shares purchased upon exercise of
his or her option.

     

    10.         Withdrawal.

     

    (a)           A
participant may withdraw all but not less than all the payroll deductions
credited to his or her account and not yet used to exercise his or her option
under the Plan at any time by giving written notice to the Company in the form
of Exhibit B to this Plan. All of the participant’s payroll deductions credited
to his or her account shall be paid to such participant promptly after receipt
of notice of withdrawal and such participant’s option for the Offering Period
shall be automatically terminated, and no further payroll deductions for the
purchase of shares shall be made for such Offering Period. If a participant
withdraws from an Offering Period, payroll deductions shall not resume at the
beginning of the succeeding Offering Period unless the participant delivers to
the Company a new subscription agreement.

    
      
         

      

      
        -5-

        
          

        

      

      
         

      

    

    (b)           A
participant’s withdrawal from an Offering Period shall not have any effect upon
his or her eligibility to participate in any similar plan which may hereafter be
adopted by the Company or in succeeding Offering Periods which commence after
the termination of the Offering Period from which the participant
withdraws.

     

    11.         Termination of
Employment.  Upon a participant’s ceasing to be an Employee,
for any reason, he or she shall be deemed to have elected to withdraw from the
Plan and the payroll deductions credited to such participant’s account during
the Offering Period but not yet used to exercise the option shall be returned to
such participant or, in the case of his or her death, to the person or persons
entitled thereto under Section 15 hereof, and such participant’s option shall be
automatically terminated. The preceding sentence notwithstanding, a participant
who receives payment in lieu of notice of termination of employment shall be
treated as continuing to be an Employee for the participant’s customary number
of hours per week of employment during the period in which the participant is
subject to such payment in lieu of notice.

     

    12.         Interest.  No
interest shall accrue on the payroll deductions of a participant in the
Plan.

     

    13.         Stock.

     

    (a)           Subject
to adjustment upon changes in capitalization of the Company as provided in
Section 19 hereof, the maximum number of shares of the Company’s Common Stock
which shall be made available for sale under the Plan shall be 1,400,000
shares.

     

    (b)           The
participant shall have no interest or voting right in shares covered by his
option until such option has been exercised.

     

    (c)           
Shares to be delivered to a participant under the Plan shall be registered in
the name of the participant or in the name of the participant and his or her
spouse.

     

    14.         Administration.  The
Plan shall be administered by the Board or a committee of members of the Board
appointed by the Board. The Board or its committee shall have full and exclusive
discretionary authority to construe, interpret and apply the terms of the Plan,
to determine eligibility and to adjudicate all disputed claims filed under the
Plan. Every finding, decision and determination made by the Board or its
committee shall, to the full extent permitted by law, be final and binding upon
all parties.

     

    15.         Designation of
Beneficiary.

     

    (a)           A
participant may file a written designation of a beneficiary who is to receive
any shares and cash, if any, from the participant’s account under the Plan in
the event of such participant’s death subsequent to an Exercise Date on which
the option is exercised but prior to delivery to such participant of such shares
and cash. In addition, a participant may file a written designation of a
beneficiary who is to receive any cash from the participant’s account under the
Plan in the event of such participant’s death prior to exercise of the option.
If a participant is married and the designated beneficiary is not the spouse,
spousal consent shall be required for such designation to be
effective.

    
      
         

      

      
        -6-

        
          

        

      

      
         

      

    

    (b)           Such
designation of beneficiary may be changed by the participant at any time by
written notice. In the event of the death of a participant and in the absence of
a beneficiary validly designated under the Plan who is living at the time of
such participant’s death, the Company shall deliver such shares and/or cash to
the executor or administrator of the estate of the participant, or if no such
executor or administrator has been appointed (to the knowledge of the Company),
the Company, in its discretion, may deliver such shares and/or cash to the
spouse or to any one or more dependents or relatives of the participant, or if
no spouse, dependent or relative is known to the Company, then to such other
person as the Company may designate.

     

    16.         Transferability.  Neither
payroll deductions credited to a participant’s account nor any rights with
regard to the exercise of an option or to receive shares under the Plan may be
assigned, transferred, pledged or otherwise disposed of in any way (other than
by will, the laws of descent and distribution or as provided in Section 15
hereof) by the participant. Any such attempt at assignment, transfer, pledge or
other disposition shall be without effect, except that the Company may treat
such act as an election to withdraw funds from an Offering period in accordance
with Section 10 hereof.

     

    17.         Use of
Funds.  All payroll deductions received or held by the Company
under the Plan may be used by the Company for any corporate purpose, and the
Company shall not be obligated to segregate such payroll
deductions.

     

    18.         Reports.  Individual
accounts shall be maintained for each participant in the Plan. Statements of
account shall be given to participating Employees at least annually, which
statements shall set forth the amounts of payroll deductions, the Purchase
Price, the number of shares purchased and the remaining cash balance, if
any.

     

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

     

    (a)           Changes in
Capitalization.  Subject to any required action by the
stockholders of the Company, the Reserves, the maximum number of shares each
participant may purchase each Offering Period (pursuant to Section 7), as well
as the price per share and the number of shares of Common Stock covered by each
option under the Plan which has not yet been exercised 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 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.

    
      
         

      

      
        -7-

        
          

        

      

      
         

      

    

    (b)           Dissolution or
Liquidation.  In the event of the proposed dissolution or
liquidation of the Company, the Offering Period then in progress shall be
shortened by setting a new Exercise Date (the “New Exercise Date”), and shall
terminate immediately prior to the consummation of such proposed dissolution or
liquidation, unless provided otherwise by the Board. The New Exercise Date shall
be before the date of the Company’s proposed dissolution or liquidation. The
Board shall notify each participant in writing, at least ten (10) business days
prior to the New Exercise Date, that the Exercise Date for the participant’s
option has been changed to the New Exercise Date and that the participant’s
option shall be exercised automatically on the New Exercise Date, unless prior
to such date the participant has withdrawn from the Offering Period as provided
in Section 10 hereof.

     

    (c)           Merger or Asset
Sale.  In the event of a proposed sale of all or substantially
all of the assets of the Company, or the merger of the Company with or into
another corporation, each outstanding option shall be assumed or an equivalent
option 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, any Offering Periods then in progress shall
be shortened by setting a new Exercise Date (the “New Exercise Date”) and any
Offering Periods then in progress shall end on the New Exercise Date. The New
Exercise Date shall be before the date of the Company’s proposed sale or merger.
The Board shall notify each participant in writing, at least ten (10) business
days prior to the New Exercise Date, that the Exercise Date for the
participant’s option has been changed to the New Exercise Date and that the
participant’s option shall be exercised automatically on the New Exercise Date,
unless prior to such date the participant has withdrawn from the Offering Period
as provided in Section 10 hereof.

     

    20.         Amendment or
Termination.

     

    (a)           The
Board of Directors of the Company may at any time and for any reason terminate
or amend the Plan. Except as provided in Section 19 hereof, no such termination
can affect options previously granted, provided that an Offering Period may be
terminated by the Board of Directors on any Exercise Date if the Board
determines that the termination of the Offering Period or the Plan is in the
best interests of the Company and its stockholders. Except as provided in
Section 19 and this Section 20 hereof, no amendment may make any change in any
option theretofore granted which adversely affects the rights of any
participant. The Company shall obtain stockholder approval of any Plan amendment
to the extent necessary and desirable to comply with Section 423 of the Code (or
any successor rule or provision or any other applicable law, regulation or stock
exchange rule), the Company shall obtain stockholder approval in such a manner
and to such a degree as required.

     

    (b)           Without
stockholder consent and without regard to whether any participant rights may be
considered to have been “adversely affected,” the Board (or its committee) shall
be entitled to change the Offering Periods, limit the frequency and/or number of
changes in the amount withheld during an Offering Period, establish the exchange
ratio applicable to amounts withheld in a currency other than U.S. dollars,
permit payroll withholding in excess of the amount designated by a participant
in order to adjust for delays or mistakes in the Company’s processing of
properly completed withholding elections, establish reasonable waiting and
adjustment periods and/or accounting and crediting procedures to ensure
that

    
      
         

      

      
        -8-

        
          

        

      

      
         

      

    

    amounts
applied toward the purchase of Common Stock for each participant properly
correspond with amounts withheld from the participant’s Compensation, and
establish such other limitations or procedures as the Board (or its committee)
determines in its sole discretion advisable which are consistent with the
Plan.

     

    (c)           In
the event the Board determines that the ongoing operation of the Plan may result
in unfavorable financial accounting consequences, the Board may, in its
discretion and, to the extent necessary or desirable, modify or amend the Plan
to reduce or eliminate such accounting consequence including, but not limited
to:

     

    (1)           altering
the Purchase Price for any Offering Period including an Offering Period underway
at the time of the change in Purchase Price;

     

    (2)           shortening
any Offering Period so that the Offering Period ends on a new Exercise Date,
including an Offering Period underway at the time of the Board action;
and

     

    (3)           allocating
shares.

     

    Such
modifications or amendments shall not require stockholder approval or the
consent of any Plan participants.

     

    21.         Notices.  All
notices or other communications by a participant to the Company under or in
connection with the Plan shall be deemed to have been duly given when received
in the form specified by the Company at the location, or by the person,
designated by the Company for the receipt thereof.

     

    22.         Conditions Upon Issuance of
Shares.  Shares shall not be issued with respect to an option
unless the exercise of such option and the issuance and delivery of such shares
pursuant thereto shall comply with all applicable provisions of law, domestic or
foreign, including, without limitation, the Securities Act of 1933, as amended,
the Securities Exchange Act of 1934, as amended, the rules and regulations
promulgated thereunder, and the requirements of any stock exchange upon which
the shares may then be listed, and shall be further subject to the approval of
counsel for the Company with respect to such compliance.

     

    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 by any of the aforementioned
applicable provisions of law.

     

    23.         Stockholder
Approval.  The Plan shall be subject to approval by the
stockholders of the Company within twelve (12) months after the date the Plan is
adopted by the Board. Such stockholder approval shall be obtained in the degree
and manner required under applicable state and federal law and any stock
exchange rules.

     

    24.         Term of
Plan.  Subject to Section 23 of the Plan, the Plan shall become
effective upon the date of the Company’s initial public offering of its equity
securities registered on Form

     

    
      
         

      

      
        -9-

        
          

        

      

      
         

      

    

    S-1 with
the Securities and Exchange Commission. Unless sooner terminated under Section
20, the Plan shall continue in effect for a term of five (5) years from December
16, 2008.

     

    
      
         

      

      
        -10-

        
          

        

      

      
         

      

    

    

    EXHIBIT
A

     

    HI/FN,
INC.

     

    1998
EMPLOYEE STOCK PURCHASE PLAN

    (AS
AMENDED ON February 21, 2008)

    SUBSCRIPTION
AGREEMENT

     

    
      	 
      	 
      	 
      
	
              __________
      Original Application

               

            	 
      	
              Enrollment
      Date: __________________________

            
	
              __________
      Change in Payroll Deduction Rate

               

            	 
      	 
      
	
              __________
      Change of Beneficiary(ies)

            	 
      	 
      

    

    

     

    1.           ______________
hereby elects to participate in the hi/fn, inc. 1998 Employee Stock Purchase
Plan (the “Employee Stock Purchase Plan”) and subscribes to purchase shares of
the Company’s Common Stock in accordance with this Subscription Agreement and
the Employee Stock Purchase Plan.

     

    2.           I
hereby authorize payroll deductions from each paycheck in the amount of ____% of
my Compensation on each payday (from 1 to 15%) during the Offering Period in
accordance with the Employee Stock Purchase Plan. Please note that no fractional
percentages are permitted.)

     

    3.           I
understand that said payroll deductions shall be accumulated for the purchase of
shares of Common Stock at the applicable Purchase Price determined in accordance
with the Employee Stock Purchase Plan. I understand that if I do not withdraw
from an Offering Period, any accumulated payroll deductions will be used to
automatically exercise my option.

     

    4.           I
have received a copy of the complete Employee Stock Purchase Plan. I understand
that my participation in the Employee Stock Purchase Plan is in all respects
subject to the terms of the Plan. I understand that my ability to exercise the
option under this Subscription Agreement is subject to stockholder approval of
the Employee Stock Purchase Plan.

     

    5.           Shares
purchased for me under the Employee Stock Purchase Plan should be issued in the
name(s) of (Employee or Employee and Spouse only):

     

    _______________________________

     

    _______________________________

     

    6.           I
understand that if I dispose of any shares received by me pursuant to the Plan
within 2 years after the Enrollment Date (the first day of the Offering Period
during which I purchased such shares) or one year after the Exercise Date, I
will be treated for federal income

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    tax
purposes as having received ordinary income at the time of such disposition in
an amount equal to the excess of the fair market value of the shares at the time
such shares were purchased by me over the price which I paid for the shares. I
hereby agree to notify the Company in writing within 30 days after the date of
any disposition of my shares and I will make adequate provision for Federal,
state or other tax withholding obligations, if any, which arise upon the
disposition of the Common Stock. The Company may, but will not be obligated to,
withhold from my compensation the amount necessary to meet any applicable
withholding obligation including any withholding necessary to make available to
the Company any tax deductions or benefits attributable to sale or early
disposition of Common Stock by me. If I dispose of such shares at any time after
the expiration of the 2-year and 1-year holding periods, I understand that I
will be treated for federal income tax purposes as having received income only
at the time of such disposition, and that such income will be taxed as ordinary
income only to the extent of an amount equal to the lesser of (1) the excess of
the fair market value of the shares at the time of such disposition over the
purchase price which I paid for the shares, or (2) 15% of the fair market value
of the shares on the first day of the Offering Period. The remainder of the
gain, if any, recognized on such disposition will be taxed as capital
gain.

     

    7.           I
hereby agree to be bound by the terms of the Employee Stock Purchase Plan. The
effectiveness of this Subscription Agreement is dependent upon my eligibility to
participate in the Employee Stock Purchase Plan.

     

    8.           In
the event of my death, I hereby designate the following as my beneficiary(ies)
to receive all payments and shares due me under the Employee Stock Purchase
Plan:

     

    

     

    

     

    
      	 
      	 
      	 
      	 
      	 
      
	
              NAME:

            	
              (Please
      print)

            	
               

            	
               

            	
               

            
	 
      	 
      	
              (First)

            	
              (Middle)

            	
              (Last)

            

    

    

    
      	 
      	 
      	 
      
	
               

            	 
      	
               

            
	
              Relationship

            	 
      	 
      
	 
      	 
      	
               

            
	 
      	 
      	
              Address

            
	 
      	 
      	 
      
	
              Employee’s
      Social

              Security
      Number:

            	 
      	 
      
	 
      	 
      	 
      
	
              Employee’s
      Address:

            	 
      	
               

            
	 
      	 
      	 
      
	 
      	 
      	
               

            
	 
      	 
      	 
      
	 
      	 
      	
               

            

    

     

    

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    I UNDERSTAND
THAT THIS SUBSCRIPTION AGREEMENT SHALL REMAIN IN EFFECT THROUGHOUT SUCCESSIVE
OFFERING PERIODS UNLESS TERMINATED BY ME.

     

    
      	Dated:	 
      	 
      
	
               

            	 
      	
               

            
	 
      	 
      	
              Signature
      of Employee

            
	 
      	 
      	 
      
	 
      	 
      	
               

            
	 
      	 
      	
              Spouse’s
      Signature (If beneficiary other than
spouse)

            

    

     

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    EXHIBIT
B

     

    HI/FN,
INC.

    1998
EMPLOYEE STOCK PURCHASE PLAN

    NOTICE OF
WITHDRAWAL

     

     

            The
undersigned participant in the Offering Period of the hi/fn, inc. 1998 Employee
Stock Purchase Plan which began on ____________, 19____ (the “Enrollment Date”)
hereby notifies the Company that he or she hereby withdraws from the Offering
Period. He or she hereby directs the Company to pay to the undersigned as
promptly as practicable all the payroll deductions credited to his or her
account with respect to such Offering Period. The undersigned understands and
agrees that his or her option for such Offering Period will be automatically
terminated. The undersigned understands further that no further payroll
deductions will be made for the purchase of shares in the current Offering
Period and the undersigned shall be eligible to participate in succeeding
Offering Periods only by delivering to the Company a new Subscription
Agreement.

     

    
      	 
      	 
      
	 
      	
              Name
      and Address of Participant:

               

            
	 
      	
               

            
	 
      	 
      
	 
      	
               

            
	 
      	 
      
	 
      	
               

            
	 
      	 
      
	 
      	
              Signature:

               

            
	 
      	 
      
	 
      	
               

            
	 
      	
              Date:

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