UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
SCHEDULE
14A
Proxy
Statement Pursuant to Section 14(a) of the Securities
Exchange
Act of 1934 (Amendment No. __ )
Filed by
the Registrant
T
Filed by
a Party other than the Registrant
*
Check the
appropriate box:
*
Preliminary
Proxy Statement
*
Confidential,
for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
T
Definitive
Proxy Statement
*
Definitive
Additional Materials
*
Soliciting
Material Pursuant to Rule 240.14a-11(c) or 240.14a-12
hi/fn,
inc.
(Name of
Registrant as Specified In Its Charter)
(Name of
Person(s) Filing Proxy Statement, if other than the Registrant)
Payment
of Filing Fee (Check the appropriate box):
*
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Fee
computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
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(1)
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Title
of each class of securities to which transaction
applies:
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(2)
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Aggregate
number of securities to which transaction
applies:
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(3)
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Per
unit price or other underlying value of transaction computed pursuant to
Exchange Act Rule 0-11 (set forth the amount on which the filing fee is
calculated and state how it was
determined):
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(4)
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Proposed
maximum aggregate value of
transaction:
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*
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Fee
paid previously with preliminary
materials.
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*
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Check
box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its
filing.
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(1)
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Amount
Previously Paid:
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(2)
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Form,
Schedule or Registration Statement
No.:
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_________________________________
NOTICE
OF
ANNUAL
MEETING OF STOCKHOLDERS
To
Be Held February 2, 2009
_________________________________
All Hifn
Stockholders:
NOTICE IS
HEREBY GIVEN that the Annual Meeting of Stockholders of hi/fn, inc., a Delaware
corporation (“Hifn”), will be held on Monday, February 2, 2009 at 10:00 a.m.,
Pacific Time, at Hifn’s principal executive offices at 750 University Avenue,
Los Gatos, California 95032, for the following purposes:
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1.
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To
elect one member of the Board of
Directors;
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2.
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To
ratify the appointment of PricewaterhouseCoopers LLP as Hifn’s independent
registered public accounting firm for the fiscal year ending
September 30, 2009; and
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3.
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To
transact such other business as may properly come before the meeting or
any adjournment or postponement
thereof.
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The foregoing
items of business are more fully described in the proxy statement accompanying
this notice.
Stockholders
of record at the close of business on December 12, 2008 are entitled to notice
of and to vote at the meeting and any adjournment or postponement
thereof.
We are
pleased to furnish proxy materials to our stockholders for the first time over
the Internet, in accordance with new Securities and Exchange Commission rules.
Consequently, most stockholders will not receive paper copies of our proxy
materials. On December 23, 2008, we mailed to our stockholders of record a
notice with instructions for accessing our proxy statement and annual report to
stockholders online, and for voting by Internet, telephone, mail or in person,
including information on how stockholders may obtain paper copies of our proxy
materials if they so choose. We believe this new process will make the proxy
distribution process more efficient, less costly and help in conserving natural
resources.
All
stockholders are cordially invited to attend the meeting in person. However, to
assure your representation at the meeting, you are urged to vote electronically,
by telephone or if you receive a paper proxy card in the mail, by mailing the
completed and signed proxy card. Any stockholder attending the meeting and
entitled to vote may do so in person even if he or she has returned a
proxy.
By Order
of the Board of Directors
William
R. Walker
Secretary
Los
Gatos, California
December
19, 2008
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______________
PROXY
STATEMENT
______________
GENERAL INFORMATION
These proxy
materials are provided in connection with the solicitation of proxies on behalf
of the Board of Directors of hi/fn, inc. (“Hifn,” “the Company,” “we,” “us” and
“our”) for use at our Annual Meeting of Stockholders to be held on Monday,
February 2, 2009 at 10:00 a.m., Pacific Time (the “Meeting”), at Hifn’s
principal executive offices located at 750 University Avenue, Los Gatos,
California 95032, or at any adjournment or postponement thereof, for the
purposes set forth herein and in the accompanying Notice of Annual Meeting of
Stockholders. Hifn’s telephone number at its principal executive offices is
(408) 399-3500 and its corporate website address is
www.hifn.com
.
These proxy
materials were first sent on or about December 23, 2008 to all stockholders
entitled to vote at the Meeting.
Hifn’s fiscal
year ends on September 30
th
.
Information About This Proxy Statement
Why did you receive this proxy
statement
?
As required
under the rules of the Securities and Exchange Commission, this proxy statement
includes information compiled to assist you in voting your shares on the matters
to be presented at the Meeting.
When is the record date for the
Meeting
?
The Board has
selected December 12, 2008, as the record date for the Meeting. Stockholders of
record as of the close of business on December 12, 2008 are entitled to notice
of and to vote at the Meeting. The closing price of Hifn’s common stock as
reported on the NASDAQ Global Market on the record date was $2.10 per
share.
Are
proxy materials available over the Internet?
This year we
are using the Internet as our primary means of furnishing proxy materials to
stockholders. Consequently, most stockholders will not receive paper copies of
our proxy materials. We will instead send these stockholders a Notice of
Internet Availability of Proxy Materials with instructions for accessing our
proxy statement and annual report to stockholders online, and for voting by
Internet, telephone, mail or in person, including information on how
stockholders may obtain paper copies of our proxy materials if they so choose.
We believe this new process will make the proxy distribution process more
efficient, less costly and help in conserving natural resources.
How
many shares are outstanding?
At the record
date, 14,725,752 shares of Hifn common stock, $0.001 par value, were issued and
outstanding.
Information About Voting
How
do I vote?
Stockholders
of record may vote (by following the instructions on the Notice of Internet
Availability of Proxy Materials or if you receive a paper copy of the proxy
materials, by following the instructions on the Notice of Proxy
Card):
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§
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By
Internet ─ Vote over the Internet at
www.proxy
vote.com
;
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§
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By
telephone ─ Use any touch-tone telephone to transmit your voting
instruction by calling
1-800-690-6903;
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§
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By
paper proxy card (if you receive a paper proxy card in the mail) - Mail
the completed proxy card; or
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§
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By
attending the Meeting and voting in
person.
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Internet
and telephone voting facilities will be available 24 hours a day until 11:59
p.m. Eastern Time on February 1, 2009.
If you
vote by proxy, the individuals named on the proxy card will vote your shares as
you direct. With proxy voting, your shares will be voted whether or not you
attend the Meeting. Even if you plan to attend the Meeting, it is advisable that
you vote your shares via proxy prior to the Meeting in case your plans change.
You may specify whether your shares should be voted for or against the nominee
for director, or you may abstain, and for or against each of the other
proposals. If you sign and return the proxy card without any voting
instructions, your shares will be voted in accordance with the Board’s
recommendations, as follows:
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§
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FOR
the proposal to elect one member of the Board of Directors;
and
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FOR
the ratification of the appointment of PricewaterhouseCoopers LLP as
Hifn’s independent registered public accounting firm for the fiscal year
ending September 30, 2009.
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How
many votes do I have?
Each
stockholder of record will be entitled to one vote on each matter for each share
of common stock held on the record date. Stockholders may not cumulate votes in
the election of directors. For information regarding holders of more than 5% of
the outstanding common stock, see “SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT.”
What
is the required quorum for the Meeting?
The
required quorum for the transaction of business at the Meeting is a majority of
shares of common stock issued and outstanding on the record date. If such a
quorum is not present or represented by proxy at the Meeting, the stockholders
entitled to vote, present in person or represented by proxy, shall have the
power to adjourn the Meeting from time to time, without notice other than
announcement at the Meeting, until a quorum shall be present or
represented.
Abstentions
and broker non-votes will be considered present and entitled to vote at the
Meeting and will be counted towards determining the presence of a quorum for the
transaction of business at the Meeting. A broker non-vote occurs when a bank,
broker or other stockholder of record holding shares for a beneficial owner
submits a proxy for the Meeting but does not vote those shares on a particular
proposal because that holder does not have discretionary voting power with
respect to that proposal and has not received instructions from the beneficial
owner. Abstentions and broker non-votes will have no effect with regard to
Proposal No. 1, since approval of a percentage of shares present or outstanding
is not required for this proposal, but will have the same effect as negative
votes on Proposal No. 2.
Can
I revoke or change a previously delivered proxy?
A
stockholder may revoke or change any proxy given pursuant to this solicitation
by:
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Attending
the Meeting, giving oral notice of your intention to revoke or change your
proxy and voting in person;
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By
delivering written notice of revocation of your proxy to Hifn’s Corporate
Secretary at Hifn’s principal executive offices before the beginning of
the Meeting;
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§
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By
delivering another proxy with a later date;
or
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§
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By
voting again via the Internet or by
telephone.
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If your
shares are registered in the name of a bank or brokerage firm (your record
holder), you will receive instructions from your record holder that must be
followed in order for your record holder to vote your shares per your
instructions. Many banks and brokerage firms have a process for their beneficial
holders to provide instructions over the Internet or over the telephone. If
Internet or telephone voting is unavailable from your bank or brokerage firm,
please complete and return the enclosed voting instruction card in the
addressed, postage paid envelope provided. If you hold shares through a bank or
brokerage firm, you must contact that bank or brokerage firm to revoke any prior
voting instructions. If you hold shares through a bank or brokerage firm and
wish to be able to vote in person at the Meeting, you must obtain a legal proxy
from your brokerage firm, bank or other holder of record and present it to the
inspector of elections with your ballot.
Can
I submit a question in advance of the Meeting?
Stockholders
wishing to submit a question in advance of the Meeting may do so
by:
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sending
an email to Hifn’s Corporate Secretary at
secretary@hifn.com
;
or
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by
mail to hi/fn, inc., Attention: Corporate Secretary, 750 University
Avenue, Los Gatos, California
95032.
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Where
can I find the voting results of the Meeting?
Hifn will
report the final voting results in its Quarterly Report on Form 10-Q for the
first fiscal quarter ending December 31, 2008. If available, Hifn will announce
preliminary voting results at the Meeting.
Information About Solicitation
How
are proxies solicited, and who pays for the solicitation?
Hifn will
bear the cost of soliciting proxies. Upon request, Hifn may reimburse brokerage
firms and other persons representing beneficial owners of shares for their
expenses in forwarding solicitation materials to such beneficial owners. Hifn
expects to solicit proxies primarily by mailing a Notice of Internet
Availability of Proxy Materials, but certain of our directors, officers and
regular employees, without additional compensation, may also solicit proxies
personally or by telephone or facsimile.
We
are multiple investors, why did we only receive one set of proxy
materials?
If you share
an address with another stockholder, you may receive only one set of proxy
materials (including Hifn’s Notice of Internet Availability of Proxy Materials,
annual report and proxy statement) unless you have provided contrary
instructions. If you wish to receive a separate set of proxy materials now or in
the future, you may contact Hifn to request a separate copy of these materials.
Your request should be addressed to hi/fn, inc., Attention: Corporate Secretary,
750 University Avenue, Los Gatos, CA 95032, or you may contact the
Corporate Secretary at (408) 399-3500. Similarly, if you share an
address
with
another stockholder and have received multiple copies of our proxy materials,
you may write or call us at the above address and phone number to request
delivery of a single copy of these materials for future stockholder
mailings.
Additional Information
Deadline
for Receipt of Stockholder Proposals for 2010 Annual Meeting of
Stockholders
Hifn’s
stockholders may submit proposals on matters appropriate for stockholder action
at meetings of Hifn’s stockholders in accordance with Rule 14a-8 promulgated
under the Securities Exchange Act of 1934. For such proposals to be included in
Hifn’s proxy materials relating to its 2010 Annual Meeting of Stockholders, all
applicable requirements of Rule 14a-8 must be satisfied and such proposals must
be received by Hifn no later than September 1, 2009. Such stockholder
proposals should be submitted to hi/fn, inc., Attention: Corporate Secretary,
750 University Avenue, Los Gatos, CA 95032.
Stockholders
who desire to nominate a person directly for election to the Board, or to
otherwise submit a proposal outside of the processes of Rule 14a-8, must meet
the deadlines and other requirements set forth in Section 5 of Hifn’s Bylaws and
the rules and regulations of the Securities and Exchange Commission. The
nominating stockholder must give timely notice thereof in writing to Hifn’s
Corporate Secretary. To be timely, a stockholder’s notice must be delivered to
or mailed and received at Hifn’s principal executive offices not less than 120
calendar days in advance of the anniversary of the date of Hifn’s proxy
statement released to stockholders in connection with the preceding year’s
annual meeting. However, in the event that the annual meeting is called for a
date that is not within 30 calendar days
of the
anniversary date on which the immediately preceding annual meeting was called,
to be timely, notice by the stockholder must be so received not later than the
close of business on the 10
th
calendar day following the date on which public announcement of the date of the
annual meeting of stockholders is first made. In no event will public
announcement of an adjournment of an annual meeting of stockholders commence a
new time period for the giving of a stockholder’s notice as provided
above.
CORPORATE GOVERNANCE
Director Independence
The Board
has adopted independence standards consistent with the requirements of the
Securities and Exchange Commission and all applicable corporate governance
guidelines of The NASDAQ Stock Market.
The Board
has determined that each of the following members of Hifn’s Board of Directors
is an “independent director” as defined under the rules of The NASDAQ Stock
Market: Robert W. Johnson, Taher Elgamal and Richard M.
Noling.
Director Nomination Process
The
Corporate Governance and Nominating Committee will consider director candidates
recommended by any stockholder holding at least 10,000 shares of Hifn common
stock for at least 12 months prior to the date of submission of the
recommendation or nomination. Additionally, a recommending stockholder shall
submit a written statement in support of the candidate, particularly within the
context of the criteria for Board membership, including issues of character,
judgment, age, independence, expertise, corporate experience, length of service,
other commitments and the like, personal references, and a written indication by
the candidate of her/his willingness to serve, if elected,
and
evidence of the nominating person’s ownership of Hifn common stock sufficient to
meet any applicable stock ownership requirements.
A
stockholder that instead desires to nominate a person directly for election to
the Board must meet the deadlines and other requirements set forth in Section 5
of Hifn’s Bylaws and the rules and regulations of the Securities and Exchange
Commission. The nominating stockholder must give timely notice thereof in
writing to Hifn’s Corporate Secretary. To be timely, a stockholder’s notice must
be delivered to or mailed and received at Hifn’s principal executive offices not
less than 120 calendar days in advance of the anniversary of the date of Hifn’s
proxy statement released to stockholders in connection with the preceding year’s
annual meeting. The Corporate Governance and Nominating Committee’s criteria and
process for evaluating and identifying the candidates that it selects, or
recommends to the full Board for selection, as director nominees, are: (i)
regular review of composition and size of the Board; (ii) review of
qualifications of candidates properly recommended or nominated by any qualifying
stockholder; (iii) evaluation of the performance of the Board and qualification
of members of the Board eligible for re-election; and (iv) consideration of the
suitability of each candidate, including current members of the Board, in light
of the size and composition of the Board. After such review and consideration,
the Corporate Governance and Nominating Committee will recommend a slate of
director nominees.
While the
Corporate Governance and Nominating Committee has not established specific
minimum requirements for director candidates, the committee believes that
candidates and nominees must reflect a Board that is comprised of directors who:
(i) are predominantly independent; (ii) are of high integrity; (iii) have
qualifications that will increase overall Board effectiveness; and (iv) meet
other requirements as may be required by applicable rules, such as financial
literacy or financial expertise with respect to audit committee members. The
Corporate Governance and Nominating Committee will evaluate individuals
recommended by stockholders using the same criteria as used by the committee in
evaluating other individuals.
Communications with the Board of
Directors
Stockholders
may contact any member of the Board of Directors by writing to them c/o Hifn,
Inc., Attention: Corporate Secretary, 750 University Avenue, Los Gatos,
California 95032. Stockholders and employees who wish to contact the Board or
any member of the Audit Committee to report questionable accounting or auditing
matters may do so anonymously by using the address above and designating the
communication as “confidential.” Communications raising safety, security or
privacy concerns, or that are otherwise improper, will be addressed in an
appropriate manner.
Executive Sessions of Non-Management and Independent
Directors
In order
to promote discussions among non-management directors, the Board conducts
executive sessions during each regularly scheduled Board meeting without the
presence of management.
Attendance at the Meeting
All
members of the Board of Directors are invited to attend the Meeting. None of the
Board members attended the 2008 annual meeting of stockholders except for Albert
E. Sisto, who hosted the meeting as Hifn’s Chairman and Chief Executive
Officer.
Review of Transactions with Related Persons
Hifn’s
Corporate Governance and Nominating Committee is responsible for reviewing
transactions that may constitute conflict of interest or related person
transactions. Related person transactions are transactions between
Hifn and related persons in which the aggregate amount involved exceeds or may
be
expected
to exceed $120,000 and in which a related person has or will have a direct or
indirect material interest. Related persons include our directors, executive
officers and 5% or more beneficial owners of our common stock, in each case,
since the beginning of the last fiscal year, and their immediate family
members.
Compensation Committee Interlocks and Insider
Participation
No
interlocking relationship exists between Hifn’s Board of Directors or
Compensation Committee and the board of directors or compensation committee of
any other company.
Board Meetings and Committees
The Board
held a total of 14 meetings during the 2008 fiscal year. No incumbent director
attended less than 75% of the aggregate of all meetings of the Board of
Directors and any committees of the Board on which he served, if any, during his
tenure as a director.
The Board
has the following standing committees, each of which operates pursuant to a
written charter, which are posted on the Investor Relations page of Hifn’s
website (www.hifn.com):
§
Audit
Committee;
§
Compensation
Committee; and
§
Corporate
Governance and Nominating Committee.
The
following table shows the names of all our directors, the committees and
capacity they serve in and the number meetings held in fiscal 2008:
Director
|
Audit
|
Compensation
|
Corporate
Governance and Nominating
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Albert E. Sisto
|
─
|
─
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─
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Douglas L. Whiting
|
─
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─
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─
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Robert W. Johnson
|
Member
|
─
|
Chairman
|
Taher Elgamal
|
Member
|
Chairman
|
Member
|
Thomas Lawrence *
|
─
|
Member
|
Member
|
Richard
M. Noling
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Chairman
|
Member
|
─
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Number of meetings during fiscal 2008
|
5
|
5
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2
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* Mr.
Lawrence resigned from the Board of Directors effective September 30,
2008
Committees of the Board of Directors
Audit
Committee
The
responsibilities of the Audit Committee are to:
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·
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oversee
Hifn’s internal accounting and financial reporting processes and the audit
of Hifn’s financial statements;
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·
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ensure
the integrity of Hifn’s internal accounting and financial controls and
compliance with legal and regulatory
requirements;
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·
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review
the independent auditor’s qualifications, independence and performance;
and
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·
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provide
the Board such information and material as it may deem necessary to make
the Board aware of financial matters requiring the Board’s
attention.
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The Board
has determined that Mr. Noling is an “audit committee financial expert” as
defined under regulations promulgated by the Securities and Exchange Commission,
and that each member of the Audit Committee is an “independent director” as
defined under the rules of The NASDAQ Stock Market.
Corporate
Governance and Nominating Committee
The
Corporate Governance and Nominating Committee’s responsibilities
include:
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·
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developing
principles of corporate governance and recommending them to the Board for
its consideration and approval;
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·
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reviewing
annually the principles of corporate governance approved by the Board to
ensure that they remain relevant and are being complied
with;
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·
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overseeing
compliance with applicable laws and regulations by the Board and its
committees;
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·
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overseeing
the Board evaluation process, including conducting periodic evaluations of
the performance of the Board as a
whole;
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·
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identifying
individuals qualified to become members of the Board of Directors,
nominating directors for election and reviewing any candidates recommended
by stockholders;
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·
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leading
the Board in its annual compensation and performance review;
and
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·
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reviewing
and making recommendations to the Board with respect to the annual
automatic grant of stock options to non-employee
directors.
|
The
Corporate Governance and Nominating Committee has approved the nominee for
director presented in this proxy statement.
Compensation
Committee
The
responsibilities of the Compensation Committee are to:
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·
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review
and recommend to the Board all compensation arrangements relating to
Hifn’s Chief Executive Officer (“CEO”) or non-employee
directors;
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·
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review
and approve all compensation arrangements relating to Hifn’s other
executive officers;
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·
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review
and approve cash-based incentive compensation plans affecting certain
non-officer employees;
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·
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make
recommendations to the Board regarding the adoption of or amendments to
any Hifn equity-based incentive compensation plans of
Hifn;
|
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·
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administer
Hifn’s equity-based and other compensation plans;
and
|
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·
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carry
out the other compensation-related responsibilities delegated to the
committee by the Board.
|
To the
extent permitted by applicable law, the Compensation Committee may delegate to a
subcommittee of at least two persons (at least one of whom shall be a
Compensation Committee member; the other may be a Compensation Committee member
or a member of Hifn management) the authority to
approve
equity grants to eligible individuals who are not directors or officers within
parameters and guidelines established by the Compensation Committee from time to
time by written resolution, and such subcommittee shall regularly report to the
Compensation Committee grants so made.
Hifn’s
Chief Executive Officer recommends to the Compensation Committee the salary,
bonus and equity award levels, and incentive compensation performance measure
targets, for the executive officers other than himself, and the Compensation
Committee makes the final determination of such matters. The
Compensation Committee determines all aspects of the compensation of the Chief
Executive Officer without the Chief Executive Officer present.
The
Compensation Committee selected Compensia as its independent compensation
consultant in connection with the design and implementation of Hifn’s 2008 and
2009 executive compensation programs. Compensia was instructed to recommend to
the Compensation Committee a peer group of companies and collect data on the
compensation of executive officers at those peer group
companies. Compensia also consulted with the Compensation Committee
on the reasonableness of its executive compensation determinations.
PROPOSAL NO. 1 - ELECTION OF DIRECTORS
There are
currently five members of Hifn’s Board of Directors, divided into three classes.
Class I consists of one director appointed as a Class I director in 2007,
serving a term that expires at the Meeting. Class II consists of two directors
who are serving three-year terms expiring in 2010. Class III consists of two
directors who are serving three-year terms expiring in 2011. At each annual
meeting of stockholders, directors elected to succeed those in the class whose
term expires will be elected to a three-year term so that the term of one class
of directors will expire each year. In each case, a director serves for the
designated term and until his or her respective successor is elected and
qualified.
One Class
I director is to be elected at the Meeting to serve a three-year term expiring
in 2012. The Corporate Governance and Nominating Committee of the Board
nominated Richard M. Noling for election to this Board seat. Holders of proxies
solicited by this proxy statement will vote the proxies received by them as
directed on the proxy card or, if no direction is made, for the election of the
Board’s nominee, who has agreed to serve if elected. If a nominee is unable to
serve as a director at the time of the Meeting, the proxy holders will vote for
a nominee designated by the Board to fill the vacancy.
Information Concerning the Nominee and Other
Directors
The names
of the nominee and other Board members, and certain information about them as of
December 12, 2008, are set forth below.
Name of Director
|
Age
|
Principal
Occupation and Directorship
|
Director
Since
|
Class I
|
|
|
|
Richard M. Noling
(1)
|
59
|
President
and Chief Executive Officer of Intellergy Corporation
|
2007
|
Class II
|
|
|
|
Dr. Taher Elgamal
|
52
|
Chief
Security Officer of Axway, Inc.
|
1998
|
Dr. Robert W. Johnson
|
58
|
Private
Investor
|
1998
|
Class III
|
|
|
|
Albert E. Sisto
|
58
|
Chairman,
Chief Executive Officer of Hifn
|
1998
|
Dr. Douglas L. Whiting
|
51
|
Chief
Scientist and Director of Hifn
|
1996
|
_________________________
(1)
|
Nominee
for election to the Board of Directors at the
Meeting.
|
Albert E. Sisto,
has served
as Hifn’s Chief Executive Officer since February 2007, as Hifn’s Chairman of the
Board since November 2006 and as a director of Hifn since 1998. Mr. Sisto served
as Hifn’s interim Chief Executive Officer from November 2006 to February 2007.
Mr. Sisto brings over 35 years of experience in the high-tech industry. From
1999 to May 2006 he served as President and CEO of Phoenix Technologies, Ltd., a
provider of Internet platform-enabling software. Mr. Sisto came to Phoenix from
RSA Data Security, Inc., where he served as Chief Operating Officer, from 1997
to 2000. Prior to RSA, he served as President, Chairman and Chief Executive
Officer of DocuMagix, Inc., a computer software company specializing in Internet
content management, which merged with JetFax, Inc. to become eFAX.com, Inc. Mr.
Sisto has also held executive positions at PixelCraft, Inc, MIPS Technologies,
Inc., Intel Corporation and Honeywell International, Inc. Mr. Sisto earned a
Bachelor of Science in Engineering from the Stevens Institute of
Technology.
Taher Elgamal, Ph.D.
has
served as a director of Hifn since December 1998. Since September 2008, Dr.
Elgamal has served as the Chief Security Officer at Axway, Inc., a provider of
multi-enterprise collaboration, secure content delivery, and application
integration solutions. From October 2006 through September 2008, Dr. Elgamal
served as Chief Technology Officer and Director of Tumbleweed Communications
Corp., which merged with Axway, Inc. In April 2004, Dr. Elgamal founded Ektasis,
Inc., which provided a networked application framework enabling a Web model for
client software, where up to October 2006, Dr. Elgamal served as the Chief
Executive Officer. Dr. Elgamal was also founder and through 2001 served as
President and Chief Executive Officer of Securify, Inc., a private company
providing assessments of companies’ Internet security efforts, where he also
served as Chief Technical Officer from 2001 through April 2004. From 1995
through 1998, Dr. Elgamal held the position of Chief Scientist of Netscape
Communications Corp., a provider of Internet software and services, where he
pioneered Internet security technologies such as SSL, the standard for web
security. From 1993 through 1995, Dr. Elgamal was Vice President of Advanced
Technologies at OKI Electric Industry Co., Ltd. From 1991 through 1993, he
served as Director of Engineering at RSA Data Security, Inc., a provider of
encryption technology and a subsidiary of Security Dynamics Technologies, Inc.,
where he produced the RSA cryptographic toolkits, the industry standards for
developers of security-enabled applications and systems. Dr. Elgamal received
both his M.S. and Ph.D. degrees in Computer Science from Stanford
University.
Dr. Robert W. Johnson
has
served as a director of Hifn since December 1998. He has worked in the venture
capital industry since 1980, and has acted as an independent investor since
1988. He currently serves as a director of ViaSat, Inc., a publicly held company
that manufactures satellite-based communications systems. He holds B.S. and M.S.
degrees in Electrical Engineering from Stanford University and M.B.A. and D.B.A.
degrees from Harvard Business School.
Richard M. Noling
has served
as a director of Hifn since December 2007. Since May 2008, Mr. Noling has served
as President and Chief Executive Officer of Intellergy Corporation, a developer
of clean energy systems that converts organic feedstock into hydrogen and other
products. Since September 2005, Mr. Noling has served on the Board of Directors
of Phoenix Technologies Ltd., where he has served as Chairman of the Audit
Committee and as a member of the Nominating and Corporate Governance Committee.
From 2003 to September 2005, Mr. Noling served as the Chief Executive Officer of
ThinGap Corporation, a designer, developer and manufacturer of high-efficiency
electric motors. Mr. Noling served as Chief Financial Officer of Insignia
Solutions Inc., a software company, from 1996 to 1997, and then as President and
Chief Executive Officer from 1997 to 2003. From 1994 to 1995, Mr. Noling was
Chief Financial Officer of DocuMagix, Inc., a personal paper management software
developer, and from 1991 to 1994, he was Sr. Vice President and Chief Financial
Officer of Gupta Corporation, a developer of relational databases and
development tools. Mr. Noling holds a Bachelor of Arts degree in aerospace and
mechanical engineering science from the University of California, San Diego, an
M.A. from the Fuller Theological Seminary and an M.S. in Administration from the
University of California, Irvine.
Douglas L. Whiting, Ph.D.,
has served as a director of Hifn since 1996 and as Hifn’s Chief Scientist since
2000. Dr. Whiting served as Hifn’s Chairman of the Board of Directors from 2000
to 2001. He served as Vice President of Technology of Stac, Inc., an engineering
company from which Hifn was spun out, from 1985 to 1998; he served as President
of Stac, Inc. from 1984 to 1986, and as a member of its Board of Directors from
1983 until its dissolution in 2002. Dr. Whiting received his Ph.D. in Computer
Science from the California Institute of Technology.
There are
no family relationships between any director, executive officer, or director
nominee of Hifn.
Director Compensation
Directors
who are not employees of Hifn receive $20,000 per year for serving on our Board
of Directors and an additional $1,500 for each Board meeting attended ($1,000 if
participating by telephone). The Audit Committee Chair receives $5,000 per year
and all Audit Committee members receive $1,500 for each Audit Committee meeting
attended ($1,000 if participating by telephone). The Compensation Committee
Chair and Corporate Governance and Nominating Committee Chair each receive
$3,000 per year and all committee members receive $1,000 for each Corporate
Governance and Nominating Committee meeting attended ($500 if participating by
telephone). Each non-employee director is also granted an option to purchase
30,000 shares of common stock at the time of initial appointment or election to
the Board of Directors, and an option to purchase 10,000 shares of common stock
annually thereafter, under the Hifn 1996 Equity Incentive Plan. The exercise
price of these options is set at the closing price of Hifn common stock on the
date of grant. Hifn also reimburses non-employee directors for travel and
related expenses incurred in attending meetings of the Board of Directors and
its committees.
The
following table provides information about the compensation for services of the
non-employee members of the Board of Directors during fiscal 2008.
DIRECTOR
COMPENSATION
Name
|
|
Fees
Earned or Paid in Cash
|
|
Option
Awards (1)
|
|
All
Other Compensation
|
|
|
Total
|
|
Robert W. Johnson
|
|
$
|
49,000
|
|
$
|
27,357
|
|
$
|
1,983
|
|
|
$
|
78,340
|
|
Taher Elgamal
|
|
|
51,500
|
|
|
27,357
|
|
─
|
|
|
|
78,857
|
|
Richard M. Noling
|
|
|
37,250
|
|
|
13,761
|
|
|
3,358
|
|
|
|
54,369
|
|
Thomas Lawrence (2)
|
|
|
38,500
|
|
|
44,945
|
|
─
|
|
|
|
83,445
|
|
(1)
|
Represents
the expense Hifn recognized for financial statement reporting purposes in
fiscal 2008, with respect to the fair value of options granted in the
current and previous years, but without regard to forfeitures. For
information on the valuation assumptions with respect to stock option
grants, refer to the note on Stock Options and Employee Benefits in the
notes to consolidated financial statements contained in Hifn’s Annual
Report on Form 10-K for the fiscal year in which the stock option was
granted. On February 21, 2008, each non-employee director, with the
exception of Mr. Noling, was granted an option to purchase 10,000 shares
of Hifn common stock, with a grant date fair value under FAS 123R of
$26,228. On December 13, 2007, Mr. Noling was appointed to the
Board of Directors and was granted an option to purchase 30,000 shares of
common stock with a grant date fair value of $86,241. As of September 30,
2008, the non-employee members of the Board of Directors held options to
purchase the following numbers of shares: Robert W. Johnson, 104,000;
Taher Elgamal, 104,001; Thomas Lawrence, 50,000; and Richard M. Noling,
30,000.
|
(2)
|
Mr.
Lawrence resigned as a member of the Board of Directors effective
September 30, 2008. Upon his resignation, Mr. Lawrence
forfeited 28,500 option shares with a FAS 123R value of
$80,514.
|
Required Vote
The
nominee receiving the greatest number of shares voted at the Meeting shall be
elected as the Class I Director.
Recommendation
Hifn’s
Board of Directors recommends a vote FOR the nominee listed above.
PROPOSAL NO. 2
RATIFICATION
OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
The Audit
Committee of the Board of Directors has appointed PricewaterhouseCoopers LLP as
Hifn’s independent registered public accounting firm to audit the books, records
and accounts of Hifn for the fiscal year ending September 30, 2009. This
appointment is being presented to the stockholders for ratification at the
Meeting. PricewaterhouseCoopers LLP has acted as Hifn’s independent registered
public accounting firm since its inception. Representatives of
PricewaterhouseCoopers LLP will be present at the Meeting, will have the
opportunity to make a statement if they desire to do so, and will be available
to respond to appropriate questions from stockholders.
Audit and Related Fees
The
following table shows the fees billed and accrued by Hifn in relation to audit
and other services provided by PricewaterhouseCoopers LLP in fiscal years 2008
and 2007:
|
|
2008
|
|
2007
|
|
Audit Fees
(1)
|
|
$
|
711,000
|
|
$
|
638,000
|
|
All Other Fees
(2)
|
|
|
2,000
|
|
─
|
|
Total
Fees...............................................................
|
|
$
|
713,000
|
|
$
|
638,000
|
|
(1)
|
Fees
were for professional services rendered in connection with the audit of
Hifn’s consolidated financial statements, review of the interim
consolidated financial statements included in quarterly reports and
services provided by PricewaterhouseCoopers LLP in connection with
statutory and regulatory filings.
|
(2)
|
Fees
were for Comperio subscription.
|
Audit Committee Pre-Approval of
Independent Registered Public Accounting Firm’s Services
. Except where
pre-approval of audit and permissible non-audit services is not required under
applicable SEC Rules, Hifn’s Audit Committee explicitly pre-approves any audit
and permissible non-audit services provided to Hifn by the independent
registered public accounting firm. The Audit Committee may delegate to one or
more designated members of the Audit Committee the authority to pre-approve
audit and permissible non-audit services, provided such pre-approval decision is
presented to the full Audit Committee at its scheduled meetings. All of the
services and estimates of expected fees in connection with Audit-related Fees
are reviewed and approved by the Audit Committee before such services are
rendered.
Required Vote
To be
approved, Proposal No. 2 requires the affirmative vote of a majority of shares
of common stock present in person or represented by proxy at the Meeting and
entitled to vote on Proposal No. 2.
Recommendation
The
Board of Directors recommends voting FOR the ratification of its appointment of
PricewaterhouseCoopers LLP as Hifn’s independent registered public accounting
firm.
CERTAIN TRANSACTIONS
Indemnification
Agreements
. Hifn has entered into indemnification agreements
with each of its directors and executive officers containing provisions that are
in some respects broader than the specific indemnification provisions under the
Delaware General Corporation Law. These agreements provide, among other things,
for indemnification of the directors and executive officers in proceedings
brought by third parties and for liabilities arising under stockholder
derivative actions. Each agreement also provides for advancement of expenses to
the indemnified party.
OTHER INFORMATION
Section 16(a)
Beneficial Ownership Reporting Compliance
Section
16(a) of the Exchange Act requires executive officers, directors and persons who
own more than ten percent of the outstanding shares of Hifn’s common stock to
file reports of their beneficial ownership and changes in beneficial ownership
with the Securities and Exchange Commission.
Based
solely upon a review of the copies of such forms received by Hifn, or written
representations from reporting persons, Hifn believes that during the 2008
fiscal year, all executive officers and directors complied with their filing
requirements, except for the following: three late filings of statements of
changes in beneficial ownership of securities filed to report the annual grants
to non-employee directors for Robert W. Johnson, Taher Elgamal and Thomas
Lawrence on March 6, 2008.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The
following table sets forth information about the beneficial ownership of Hifn
common stock, as of December 12, 2008, by: (i) each person known by Hifn to be
the beneficial owner of more than five percent of Hifn’s outstanding shares;
(ii) each director and nominee for director; (iii) Hifn’s Chief Executive
Officer, Chief Financial Officer and three most highly compensated executive
officers (other than the Chief Executive Officer and the Chief Financial
Officer) named in the “Summary Compensation Table” below (the “named executive
officers”); and (iv) all directors and executive officers as a group
.
|
|
|
|
Options
and Restricted
Stock
Units Currently Exercisable
or
Exercisable
within
60
days
(included
in
shares
owned)
|
|
Approximate
Percentage Owned
|
|
Austin Marxe & David Greenhouse
(2)
153 East 53
rd
Street, 55
th
Floor
New York, NY
10022
|
|
|
2,355,488
|
|
─
|
|
|
16.00
|
%
|
Heartland Advisors Inc.
(3)
789
North Water Street
Milwaukee, WI
53202
|
|
|
1,300,000
|
|
─
|
|
|
8.83
|
|
Dimensional Fund Advisors LP (
4
)
1299 Ocean Avenue, 11
th
Floor
Santa Monica, CA
90401
|
|
|
1,205,192
|
|
─
|
|
|
8.18
|
|
Robert W. Johnson
|
|
|
509,823
|
|
|
84,000
|
|
|
3.46
|
|
Douglas L. Whiting
|
|
|
333,063
|
|
|
119,165
|
|
|
2.26
|
|
Albert E Sisto
|
|
|
309,248
|
|
|
242,750
|
|
|
2.10
|
|
William R. Walker
|
|
|
200,617
|
|
|
148,538
|
|
|
1.36
|
|
Russell S. Dietz
|
|
|
111,814
|
|
|
111,814
|
|
|
*
|
|
John E. G. Matze
|
|
|
94,687
|
|
|
49,687
|
|
|
*
|
|
Taher Elgamal
|
|
|
74,000
|
|
|
74,000
|
|
|
*
|
|
Steven Yang
|
|
|
20,417
|
|
|
20,417
|
|
|
*
|
|
Richard Noling
|
|
|
6,500
|
|
|
6,500
|
|
|
*
|
|
All executive officers and directors as a group (12
persons)
|
|
|
1,822,542
|
|
|
1,014,243
|
|
|
12.38
|
|
_______________________________
*
Less than one percent (1%).
(1)
|
This
table is based upon information supplied by officers, directors, and
principal stockholders and Schedules 13D and 13G, if any, filed with the
Securities and Exchange Commission. Unless otherwise indicated in the
footnotes to this table, and subject to community property and marital
property laws where applicable, each of the stockholders named in this
table has sole voting and investment power with respect to the shares
indicated as beneficially owned. Applicable percentages are based on
14,725,752 shares of common stock outstanding on December 12, 2008, and
include shares issuable pursuant to stock options exercisable and
restricted stock units vesting within 60 days of December 12, 2008 where
applicable.
|
(2)
|
As
disclosed in a Schedule 13G filed on January 10, 2007, Mr. Marxe and Mr.
Greenhouse share voting and investment control over the shares owned by
Special Situations Fund III QP, L.P. (775,706 shares), Special Situations
Cayman Fund, L.P. (183,218 shares), Special Situations Technology Fund,
L.P. (143,513 shares), Special Situations Technology II, L.P. (1,197,730
shares), and Special Situations Fund III, L.P.
(55,321
|
|
shares).
The interests of each of Mr. Marxe and Mr. Greenhouse in these shares are
limited to the extent of his pecuniary
interest.
|
(3)
|
As
disclosed in a Schedule 13G/A filed on February 8, 2008, Heartland
Advisors Inc. has shared voting and dispositive power with respect to
1,300,000 shares.
|
(4)
|
As
disclosed in a Schedule 13G/A filed on February 6, 2008, Dimensional Fund
Advisors LP has sole voting and dispositive power with respect to
1,205,192 shares.
|
EXECUTIVE COMPENSATION
Compensation Discussion and Analysis
This section
explains all material elements of the compensation Hifn provides to its named
executive officers, namely Hifn’s Chief Executive Officer, Chief Financial
Officer and the other three most highly compensated executive officers as
identified in the Summary Compensation Table below.
Compensation
Objectives
Hifn’s
executive officer compensation policies are designed to promote the following
objectives:
|
§
|
Retain
executives by offering competitive
compensation;
|
|
§
|
Link
executive compensation to measurable corporate performance metrics
(related to revenue and profit that drive shareholder value) and
individual performance metrics; and
|
|
§
|
Provide
incentive compensation that is competitive with the incentive compensation
offered by peer companies.
|
Elements
of Executive Compensation
The
elements of our executive compensation, and the purpose and measurement of each
element, are shown in the table below:
Element
|
|
Compensation
Type
|
|
Purpose
|
|
Performance
Metric(s)
|
Base Salary
|
|
Cash
|
|
Provide
fixed, competitive compensation for the level of position
held
|
|
Fixed
compensation; annual evaluation
|
Annual Cash Incentive
|
|
Cash
|
|
Create
a financial incentive to achieve and exceed annual goals
|
|
Revenue,
new product revenue, EBITDA, MBO, sales
|
Equity Incentive
|
|
Time-based
Stock Options
|
|
Create
a long-term financial incentive with upside emphasis
|
|
Time-based
|
Equity Incentive
|
|
Time-based
Restricted Stock Units
|
|
Create
a long-term financial incentive with downside protection
|
|
Time-based
|
Equity Incentive
|
|
Performance-based
Restricted Stock Units (for CEO)
|
|
Create
an incentive to achieve and exceed short- and long-term performance
goals
|
|
Revenue,
new product revenue and EBITDA
|
Change-in-Control
|
|
Cash,
Stock Option Acceleration and time-based RSUs
|
|
Retention
|
|
None
|
The
elements of our executive compensation program are designed to attract, retain
and motivate talented executives to achieve and exceed company goals, in order
to create long-term shareholder value.
Benchmarking
and Approval of Compensation
The
Compensation Committee believes it is important to measure executive
compensation relative to the compensation of similar positions at companies that
Hifn considers its peers. As a result, the Compensation Committee,
after consultation with the Committee’s compensation consultant, identified the
following peer group companies for purposes of executive compensation analysis
in 2008 as well as in 2007:
§
Actividentity
§
Callidus
Software
§
Entrust
§
Looksmart
§
Pervasive
Software
§
SCM
Microsystems
§
Tumbleweed
Communications
§
VASCO Data
Security
§
Advanced Analogic
Technologies
|
§
AXT
§
California Micro
Devices
§
Centillium
Communications
§
CEVA
§
PLX
Technology
§
Quicklogic
§
Transwitch
§
Volterra
Semiconductor
|
Hifn’s
peer group consists of companies of the sort that Hifn competes with to attract
and retain executive leadership for the Company. As a result, the peer group
includes fabless semiconductor companies and security software companies because
Hifn operates in these industries, and these companies are of a similar size,
based on revenues, and are headquartered in the San Francisco Bay area. The
Compensation Committee believes that these particular companies are
representative of the many companies that fit these criteria. The peer group
used in 2008 was identical to the 2007 peer group, except for one company that
is no longer public. In addition to reviewing specific information
about peer group executive compensation, the Compensation Committee reviewed
survey data compiled by Radford High-Tech Executive Survey for high-technology
industry companies with less than $200 million in revenues, but it did not
determine executive compensation levels based on that information.
For 2008,
the Compensation Committee set base salaries and cash incentive compensation
targets for its named executive officers at approximately the 60
th
percentile of peer group executive officer base salaries, and granted equity
awards to its named executive officers worth approximately the 50
th
percentile of peer group equity compensation. The Compensation Committee
believes that these targeted levels of executive compensation are sufficient to
retain and motivate Hifn’s senior executive leadership. Target
compensation levels were determined without regard to the change-in-control
arrangements applicable to executive officers because the change-in-control
arrangements have primarily a retention purpose. The Compensation Committee made
its determinations without using tally sheets showing total compensation under
different scenarios.
Base
Salary
The
Compensation Committee generally determines base salary levels for each
executive officer during the first quarter of each fiscal year, based on the
following principles:
|
§
|
Base
salary should be set at a level approximating the 60
th
percentile for similar positions at companies within our peer
group;
|
|
§
|
Base
salary may be adjusted up or down based on the importance of the executive
officer’s function to Hifn; and
|
|
§
|
Base
salary should reflect the individual executive’s performance in the
immediately prior fiscal year.
|
For fiscal
2008, all of our named executive officers’ base salaries were set at the 60
th
percentile of peer group base salary compensation for similar
positions.
Annual
Bonuses
Hifn’s annual
cash bonus for executives is designed to reward achievement of Hifn’s annual
financial performance objectives as well as individual achievement of individual
objectives. Hifn’s Chief Executive Officer can earn a maximum of 75% of his
annual salary in cash compensation, and our other named executive officers can
earn between 50% and 75% of their annual salaries, as annual cash bonuses.
Target bonuses were set at levels designed to achieve cash incentive
compensation at the 60
th
percentile for similar positions among peer group companies. The bonuses for our
named executive officers are based on Hifn’s achievement of company targets, and
each executive’s achievement of individual performance objectives, and each
bonus component can be achieved independently of the others. Individual
objectives included, for example, implementation of sales and marketing plans,
achieving product tape-out dates, absence of material weakness in internal
controls, and managing inventory. For 2008, these performance metrics were
weighted as follows (Mr. Yang and Mr. McNulty are “sales executives” for
purposes of this table):
|
|
%
of Annual
Bonus
(Sales Executives)
|
|
%
of Annual
Bonus
|
|
Revenue ($50.6 million)
|
|
|
15
|
%
|
|
30
|
%
|
New Product Revenue ($15.9 million)
|
|
|
12.5
|
%
|
|
25
|
%
|
EBITDA ($7.0 million)
|
|
|
12.5
|
%
|
|
25
|
%
|
Individual MBOs
|
|
|
20
|
%
|
|
20
|
%
|
Sales (Sales Executives)
|
|
|
40
|
%
|
─
|
|
Total Annual Bonus
|
|
|
100
|
%
|
|
100
|
%
|
For each of
these performance metrics, a threshold level of performance was established (at
which a minimum bonus would be paid), a target level (at which 100% of the bonus
would be paid), and a maximum (at which the maximum bonus would be
paid). For achievement in between the minimum and target and the
target and maximum, proportionate bonuses were payable.
For
revenue, the minimum threshold was 86% of target (at which level 50% of the
bonus was earned), and the maximum threshold was 112% of target (at which level
a 150% of the bonus was earned).
For new
product revenue, the minimum threshold was 63% of target (at which level 50% of
the bonus was earned), and the maximum threshold was 138% of target (at which
level 150% of the bonus was earned). New product revenue was added as a
performance metric in 2008 to incentivize management to drive revenue growth and
diversify revenues.
For
EBITDA, the minimum threshold was 37% of target (at which level 50% of the bonus
was earned), and the maximum threshold was 136% of target (at which level 150%
of the bonus was earned).
For
individual performance metrics, the minimum threshold was 20% achievement (at
which level 20% of the bonus was earned), and the maximum threshold was 100% (at
which level 100% of the bonus was earned). The Compensation Committee determined
the degree of individual performance achievement based on recommendations of the
Chief Executive Officer. Bonuses for new executives were prorated based on their
hire or promotion date.
In 2008,
our revenues, new product revenues and EBITDA were insufficient for our
executives to earn minimum bonuses for these performance metrics, and none of
the bonuses based on individual performance metrics were earned. Mr. Yang and
Mr. McNulty earned bonuses based on achievement of sales performance metrics
(they achieved 81% to 111% of their respective targets). In addition, Mr. Matze
earned a bonus under an agreement we entered into in connection with our
acquisition of Siafu Software, LLC in 2007.
Long-Term
Incentives
To ensure
that our executives have an ownership interest that motivates them to promote
the long-term success of Hifn, our executive compensation program includes
equity-based awards in the form of stock options and restricted stock units
(“RSUs”). Equity-based awards are reviewed and approved by the Compensation
Committee on an annual basis, with the objective of providing a value of equity
awards that is comparable to that provided by our peer group companies,
targeting the 50
th
percentile for the equity award element of compensation for comparable
positions.
In 2008, our
Compensation Committee granted to all of our named executive officers other than
our Chief Executive Officer, a combination of stock options with time-based
vesting over four years and RSUs with time-based vesting over three years. The
Compensation Committee believes that stock options are an important tool to
provide upside incentives, while RSUs are an effective retention tool because
they continue to have value even if the Company’s stock price does not
appreciate.
In
addition, the Compensation Committee granted Mr. Sisto a performance-based RSU,
pursuant to which he could earn between 29,000 and 137,500 shares, depending
upon Hifn’s performance based on revenue, new product revenue and EBITDA targets
in 2008. The minimum, target and maximum thresholds for these metrics were the
same as those used for our incentive cash bonus program. In 2008, Mr. Sisto
earned no shares under this arrangement based on the performance of the Company
relative to these metrics. In 2007, Mr. Sisto earned 36,619 shares based on the
performance of the Company relative to these metrics, and those shares are
subject to time-based vesting over two years, so the first 50% of the 2007
shares were vested as of September 30, 2008.
Tax
and Accounting Considerations
Internal
Revenue Code Section 162(m) limits the deductibility of compensation in excess
of $1,000,000 paid to the Chief Executive Officer, the Chief Financial Officer
or any of the three most highly compensated executive officers. The limited
deductibility does not apply to performance-based compensation. We believe we
have taken all necessary actions required under Section 162(m) to continue to
qualify for tax deductibility of our executive compensation.
Hifn
applies a grant date fair value, as determined under FAS 123R, for valuing all
equity-based compensation. With the exception of performance-based awards, for
which the expense will vary based on estimated share vesting, all equity-based
expense is recognized on a straight-line basis over the option vesting
period.
Change-in-Control
Arrangements
Hifn has entered into agreements with
its named executive officers that provide for rights to receive payments and
other benefits in the event of termination of employment, including agreements
that provide for specific payments upon a termination following a
change-in-control of Hifn. For a description of such arrangements,
please refer to the discussion under the caption “Potential Payments Upon
Termination or Change-in-Control” below. The Compensation Committee
did not consider
amounts payable under such arrangements
in determining the amounts or other elements of executive
compensation.
Summary Compensation Table
The
following table sets forth the compensation earned by our named executive
officers. The information includes all compensation paid or earned for services
to Hifn in all capacities during our 2008 fiscal year.
Name and Principal Position
|
Fiscal
Year
|
Base
Salary
|
Bonus
|
Stock
Awards
|
Option
Awards(1)
|
All
Other
Compensation
(2)
|
Total
|
Albert E. Sisto
Chairman,
Chief Executive Officer
|
2008
2007
|
$350,000
312,981
|
$
─
156,466
|
$75,186
412,559
|
$209,295
205,593
|
$1,968
1,788
|
$636,449
1,089,387
|
|
|
|
|
|
|
|
|
William
R. Walker
Vice President of Finance,
Chief Financial Officer and Secretary
|
2008
2007
|
255,000
251,417
|
─
63,610
|
12,424
─
|
61,697
50,882
|
4,470
4,470
|
333,591
370,379
|
|
|
|
|
|
|
|
|
Matze John E. G.
Vice President of Business Development
|
2008
2007
|
235,000
47,301
|
117,000
─
|
113,998
36,786
|
62,675
57,882
|
1,290
185
|
529,963
142,154
|
|
|
|
|
|
|
|
|
Russell S. Dietz
Vice President and Chief Technical Officer
|
2008
2007
|
230,000
230,000
|
─
42,670
|
11,646
─
|
61,124
50,882
|
1,073
960
|
303,843
324,512
|
|
|
|
|
|
|
|
|
Steven Yang
Vice President
Asia Pacific Field
Operations
|
2008
2007
|
196,945
─
|
48,071
─
|
7,766
─
|
36,129
─
|
16,303
─
|
305,214
─
|
|
|
|
|
|
|
|
|
Gregory McNulty (3)
Vice President
Field Operations, Americas and EMEA
|
2008
2007
|
173,911
75,104
|
49,757
30,320
|
7,766
─
|
42,657
10,252
|
41,815
3,975
|
315,906
119,651
|
(1)
|
The
amounts reflect the dollar amount recognized for financial statement
reporting purposes for the fiscal years ended September 30, 2008 and
September 30, 2007, in accordance with FAS 123R, of stock option awards
issued pursuant to the 1996 Equity Incentive Plan and the 2001
Nonstatutory Stock Option Plan, and include amounts from outstanding stock
option awards granted during and prior to fiscal year 2008 and fiscal year
2007. For information on the valuation assumptions with respect to stock
option grants, refer to the note on Stock Options and Employee Benefits in
the notes to consolidated financial statements contained in Hifn’s Annual
Report on Form 10-K for the fiscal year in which the stock option was
granted. The amounts shown disregard estimated forfeitures related to
service-based vesting conditions. No stock options were forfeited by any
of the named executive officers during the fiscal year, except for the
forfeit of 51,875 option shares with an FAS 123R value of $175,347 by
Gregory McNulty. These amounts reflect Hifn’s accounting expense for these
awards, and do not correspond to the actual value that may be recognized
by the named executive officers. See the “Grant of Plan-Based
Awards—Fiscal 2008” table below for information on stock option grants
made in fiscal 2008.
|
(2)
|
Other
compensation includes:
|
Name
|
Fiscal
Year
|
Auto
Allowance
|
Severance
|
Other
(a)
|
Total
|
Albert E. Sisto
|
2008
|
$ ─
|
$ ─
|
$ 1,968
|
$ 1,968
|
|
2007
|
─
|
─
|
1,788
|
1,788
|
William R. Walker
|
2008
|
─
|
─
|
4,470
|
4,470
|
|
2007
|
─
|
─
|
4,470
|
4,470
|
John E. G. Matze
|
2008
|
─
|
─
|
1,290
|
1,290
|
|
2007
|
─
|
─
|
185
|
185
|
Russell S. Dietz
|
2008
|
─
|
─
|
1,073
|
1,073
|
|
2007
|
─
|
─
|
960
|
960
|
Steven Yang
|
2008
|
10,504
|
─
|
5,799
|
16,303
|
|
2007
|
─
|
─
|
─
|
─
|
Gregory McNulty
|
2008
|
5,945
|
34,744
|
1,126
|
41,815
|
|
2007
|
3,300
|
─
|
675
|
3,975
|
|
(a)
|
Includes
DSL allowance, group term life insurance and other
compensation.
|
(3)
|
Mr.
McNulty ceased to be employed by us on July 28,
2008.
|
Grants of Plan-Based Awards in Fiscal Year
2008
The
following table summarizes all equity grants to each of our named executive
officers during our 2008 fiscal year:
|
|
Estimated
Future Payouts
Under
Non-Equity Incentive
Plan
Awards
|
|
Estimated
Future Payouts
Under
Equity Incentive Plan
Awards
|
All Other
Stock
Awards:
Number of
Shares
of
Stock
or
Units
(#)
|
All
Other
Option
Awards:
Number
of
Securities
Underlying
Options
(#)
|
Exercise
or
Base
Price
of
Option
Awards
($/Share)
|
Closing
Price on Date of Option Award
|
Grant
Date
Fair Value
of
Stock
and
Option
Awards
($)
|
Name
|
Grant
Date
|
Threshold
($)
|
Target
($)
|
Maximum
($)
|
|
Threshold
(#)
|
Target
(#)
|
Maxi-
mum
(#)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Albert E.
Sisto
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
Incentive
|
12/13/2007
|
$131,250
|
$
262,500
|
$
393,750
|
|
─
|
─
|
─
|
─
|
─
|
$ ─
|
$ ─
|
$ ─
|
RSUs
|
12/13/2007
|
─
|
─
|
─
|
|
─
|
75,000
|
137,500
|
─
|
─
|
─
|
─
|
802,863
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
William R.
Walker
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
Incentive
|
12/13/2007
|
63,750
|
127,500
|
191,250
|
|
─
|
─
|
─
|
─
|
─
|
─
|
─
|
─
|
Options
|
12/13/2007
|
─
|
─
|
─
|
|
─
|
─
|
─
|
─
|
16,000
|
5.84
|
5.84
|
45,995
|
RSUs
|
12/13/2007
|
─
|
─
|
─
|
|
─
|
8,000
|
8,000
|
─
|
─
|
─
|
─
|
46,712
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
John E. G.
Matze
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
Incentive
|
12/13/2007
|
70,500
|
141,000
|
211,500
|
|
─
|
─
|
─
|
─
|
─
|
─
|
─
|
─
|
Options
|
12/13/2007
|
─
|
─
|
─
|
|
─
|
─
|
─
|
─
|
25,000
|
5.84
|
5.84
|
71,868
|
RSUs
|
12/13/2007
|
─
|
─
|
─
|
|
─
|
12,500
|
12,500
|
─
|
─
|
─
|
─
|
72,988
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Russell S.
Dietz
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
Incentive
|
12/13/2007
|
57,500
|
115,000
|
172,500
|
|
─
|
─
|
─
|
─
|
─
|
─
|
─
|
─
|
Options
|
12/13/2007
|
─
|
─
|
─
|
|
─
|
─
|
─
|
─
|
15,000
|
5.84
|
5.84
|
43,121
|
RSUs
|
12/13/2007
|
─
|
─
|
─
|
|
─
|
7,500
|
7,500
|
─
|
─
|
─
|
─
|
43,793
|
|
|
Estimated
Future Payouts
Under
Non-Equity Incentive
Plan
Awards
|
|
Estimated
Future Payouts
Under
Equity Incentive Plan
Awards
|
All Other
Stock
Awards:
Number of
Shares
of
Stock
or
Units
(#)
|
All
Other
Option
Awards:
Number
of
Securities
Underlying
Options
(#)
|
Exercise
or
Base
Price
of
Option
Awards
($/Share)
|
Closing
Price on Date of Option Award
|
Grant
Date
Fair Value
of
Stock
and
Option
Awards
($)
|
Name
|
Grant
Date
|
Threshold
($)
|
Target
($)
|
Maximum
($)
|
|
Threshold
(#)
|
Target
(#)
|
Maxi-
mum
(#)
|
Steven
Yang
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
Incentive
|
12/13/2007
|
73,828
|
147,656
|
221,484
|
|
─
|
─
|
─
|
─
|
─
|
─
|
─
|
─
|
Options
|
12/03/2007
|
─
|
─
|
─
|
|
─
|
─
|
─
|
─
|
60,000
|
5.93
|
5.93
|
175,140
|
RSUs
|
12/13/2007
|
─
|
─
|
─
|
|
─
|
5,000
|
5,000
|
─
|
─
|
─
|
─
|
29,195
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gregory
McNulty
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
Incentive
|
12/13/2007
|
56,250
|
112,500
|
168,750
|
|
─
|
─
|
─
|
─
|
─
|
─
|
─
|
─
|
Options
|
12/13/2007
|
─
|
─
|
─
|
|
─
|
─
|
─
|
─
|
30,000
|
5.84
|
5.84
|
86,241
|
RSUs
|
12/13/2007
|
─
|
─
|
─
|
|
─
|
5,000
|
5,000
|
─
|
─
|
─
|
─
|
29,195
|
Outstanding Equity Awards at 2008 Fiscal
Year-End
Option
Awards
The
following table summarizes all outstanding stock option awards held by our named
executive officers as of September 30, 2008:
Name
|
|
Grant
Date
|
|
Number
of
Securities
Underlying
Unexercised
Options
(#)
Exercisable
|
|
Number
of
Securities
Underlying
Unexercised
Options
(#)
Unexercisable
|
|
Equity
Incentive
Plan
Awards:
Number
of
Securities
Underlying
Unexercised
Unearned
Options
(#)
|
|
Option
Exercise
Price
($)
|
|
Option
Expiration
Date
|
|
Value
of
Underlying
Unexercised
In-The-Money
Options
at
Fiscal
Year
End
($)
|
Albert E. Sisto
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12/07/1998
|
|
|
10,000
|
|
─
|
|
─
|
|
$
|
5.00
|
|
12/07/2008
|
|
$ ─
|
|
|
02/25/2000
|
|
|
2,000
|
|
─
|
|
─
|
|
|
69.88
|
|
02/25/2010
|
|
─
|
|
|
02/23/2001
|
|
|
2,000
|
|
─
|
|
─
|
|
|
17.75
|
|
02/23/2011
|
|
─
|
|
|
10/17/2001
|
|
|
20,000
|
|
─
|
|
─
|
|
|
11.17
|
|
10/17/2011
|
|
─
|
|
|
03/06/2002
|
|
|
10,000
|
|
─
|
|
─
|
|
|
12.91
|
|
03/06/2012
|
|
─
|
|
|
02/24/2003
|
|
|
10,000
|
|
─
|
|
─
|
|
|
5.11
|
|
02/24/2013
|
|
─
|
|
|
02/23/2004
|
|
|
10,000
|
|
─
|
|
─
|
|
|
14.98
|
|
02/23/2014
|
|
─
|
|
|
02/17/2005
|
|
|
10,000
|
|
─
|
|
─
|
|
|
8.35
|
|
02/17/2015
|
|
─
|
|
|
02/27/2006
|
|
|
10,000
|
|
─
|
|
─
|
|
|
7.05
|
|
02/27/2016
|
|
─
|
|
|
11/16/2006
|
|
|
137,499
|
|
|
87,501
|
|
─
|
|
|
4.85
|
|
11/16/2016
|
|
─
|
Total
|
|
|
|
|
221,499
|
|
|
87,501
|
|
─
|
|
|
|
|
|
|
─
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
William R. Walker
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12/04/1998
|
|
|
15,000
|
|
─
|
|
─
|
|
|
5.00
|
|
12/04/2008
|
|
─
|
|
|
04/16/2001
|
|
|
25,000
|
|
─
|
|
─
|
|
|
16.00
|
|
04/16/2011
|
|
─
|
|
|
06/18/2002
|
|
|
40,832
|
|
─
|
|
─
|
|
|
6.66
|
|
05/24/2010
|
|
─
|
|
|
12/11/2003
|
|
|
35,000
|
|
─
|
|
─
|
|
|
10.52
|
|
12/11/2013
|
|
─
|
|
|
01/25/2006
|
|
|
20,000
|
|
|
10,000
|
|
─
|
|
|
6.71
|
|
01/25/2016
|
|
─
|
|
|
10/27/2006
|
|
|
14,375
|
|
|
15,625
|
|
─
|
|
|
5.10
|
|
10/27/2016
|
|
─
|
|
|
12/13/2007
|
|
|
2,999
|
|
|
13,001
|
|
─
|
|
|
5.84
|
|
12/13/2017
|
|
─
|
Total
|
|
|
|
|
153,206
|
|
|
38,626
|
|
─
|
|
|
|
|
|
|
─
|
Name
|
|
Grant
Date
|
|
Number
of
Securities
Underlying
Unexercised
Options
(#)
Exercisable
|
|
Number
of
Securities
Underlying
Unexercised
Options
(#)
Unexercisable
|
|
Equity
Incentive
Plan
Awards:
Number
of
Securities
Underlying
Unexercised
Unearned
Options
(#)
|
|
Option
Exercise
Price
($)
|
|
Option
Expiration
Date
|
|
Value
of
Underlying
Unexercised
In-The-Money
Options
at
Fiscal
Year
End
($)
|
John E. G. Matze
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
07/19/2007
|
|
|
32,500
|
|
|
27,500
|
|
─
|
|
|
6.33
|
|
07/19/2017
|
|
─
|
|
|
12/13/2007
|
|
|
4,687
|
|
|
20,313
|
|
─
|
|
|
5.84
|
|
12/13/2017
|
|
─
|
Total
|
|
|
|
|
37,187
|
|
|
47,813
|
|
─
|
|
|
|
|
|
|
─
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Russell S. Dietz
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
04/16/2001
|
|
|
30,020
|
|
─
|
|
─
|
|
|
16.00
|
|
04/16/2011
|
|
─
|
|
|
06/18/2002
|
|
|
9,608
|
|
─
|
|
─
|
|
|
6.66
|
|
08/08/2010
|
|
─
|
|
|
12/11/2003
|
|
|
25,000
|
|
─
|
|
─
|
|
|
10.52
|
|
12/11/2013
|
|
─
|
|
|
01/25/2006
|
|
|
20,000
|
|
|
10,000
|
|
─
|
|
|
6.71
|
|
01/25/2016
|
|
─
|
|
|
10/27/2006
|
|
|
14,375
|
|
|
15,625
|
|
─
|
|
|
5.10
|
|
10/27/2016
|
|
─
|
|
|
12/13/2007
|
|
|
2,811
|
|
|
12,189
|
|
─
|
|
|
5.84
|
|
12/13/2017
|
|
─
|
Total
|
|
|
|
|
101,814
|
|
|
37,814
|
|
─
|
|
|
|
|
|
|
─
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Steven Yang
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12/03/2007
|
|
─
|
|
|
60,000
|
|
─
|
|
|
5.93
|
|
12/03/2017
|
|
─
|
Total
|
|
|
|
─
|
|
|
60,000
|
|
─
|
|
|
|
|
|
|
─
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gregory McNulty
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
05/01/2007
|
|
|
8,750
|
|
─
|
|
─
|
|
|
6.40
|
|
05/01/2017
|
|
─
|
|
|
12/13/2007
|
|
|
4,375
|
|
─
|
|
─
|
|
|
5.84
|
|
12/13/2017
|
|
─
|
Total
|
|
|
|
|
13,125
|
|
─
|
|
─
|
|
|
|
|
|
|
─
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Restricted
Stock Unit Awards
The
following table summarizes all outstanding restricted stock unit awards held by
our named executive officers as of September 30, 2008:
Name
|
|
Grant
Date
|
|
Number
of Shares
or
Units of Stock
That
Have Not
Vested
(#)
|
|
Market
Value of
Shares
Or Units
of
Stock That
Have
Not Vested
($)
|
|
Equity
Incentive
Plan
Awards:
Number
of
Unearned
Shares,
Units
or Other
Rights
That
Have
Not Vested
(#)
|
|
Equity
Incentive
Plan
Awards:
Market
or Payout
Value
of Unearned
Shares,
Units or
Other
Rights That
Have
Not Vested
($)
|
|
Albert E. Sisto
|
|
|
|
|
|
|
|
|
|
|
|
|
|
02/07/2007
|
|
|
18,309
|
|
$
|
99,583
|
|
─
|
|
$
─
|
|
|
|
12/13/2007
|
|
─
|
|
─
|
|
|
137,500
|
|
|
802,863
|
|
Total
|
|
|
|
|
18,309
|
|
|
99,583
|
|
|
137,500
|
|
|
802,863
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
William R. Walker
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12/13/2007
|
|
─
|
|
─
|
|
|
8,000
|
|
|
46,712
|
|
Total
|
|
|
|
─
|
|
─
|
|
|
8,000
|
|
|
46,712
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
John E. G. Matze
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12/13/2007
|
|
─
|
|
─
|
|
|
12,500
|
|
|
72,988
|
|
Total
|
|
|
|
─
|
|
─
|
|
|
12,500
|
|
|
72,988
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Name
|
|
Grant
Date
|
|
Number
of Shares
or
Units of Stock
That
Have Not
Vested
(#)
|
|
Market
Value of
Shares
Or Units
of
Stock That
Have
Not Vested
($)
|
|
Equity
Incentive
Plan
Awards:
Number
of
Unearned
Shares,
Units
or Other
Rights
That
Have
Not Vested
(#)
|
|
Equity
Incentive
Plan
Awards:
Market
or Payout
Value
of Unearned
Shares,
Units or
Other
Rights That
Have
Not Vested
($)
|
|
Russell S. Dietz
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12/13/2007
|
|
─
|
|
─
|
|
|
7,500
|
|
|
43,793
|
|
Total
|
|
|
|
─
|
|
─
|
|
|
7,500
|
|
|
43,793
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Steven Yang
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12/13/2007
|
|
─
|
|
─
|
|
|
5,000
|
|
|
29,195
|
|
Total
|
|
|
|
─
|
|
─
|
|
|
5,000
|
|
|
29,195
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Exercises and Stock Vested in Fiscal Year
2008
The
following table summarizes all option exercises and stock vested for our named
executive officers during our fiscal year ended September 30, 2008:
|
|
Option
Awards
|
|
Stock
Awards
|
|
Name
|
|
Number
of Shares Acquired on Exercise
(#)
|
|
Value
Realized on Exercise
($)
|
|
Number
of Shares Acquired on Vesting
(#)
|
|
Value
Realized on Vesting (1)
($)
|
|
Albert E Sisto
|
|
─
|
|
$
─
|
|
|
18,310
|
|
$
|
58,940
|
|
William R. Walker
|
|
|
50,000
|
|
|
251,000
|
|
─
|
|
─
|
|
Total
|
|
|
50,000
|
|
|
251,000
|
|
|
18,310
|
|
|
58,940
|
|
(1)
|
Based
upon the market price of the purchased shares on the exercise date less
the option exercise price paid for such
shares.
|
Potential Payments Upon Termination or
Change-in-Control
Hifn has
entered into agreements with its named executive officers that provide for
rights or to receive payments and other benefits in the event of termination of
employment, including agreements that provide for specific payments upon a
termination following a change-in-control of the Company. Hifn
generally defines a “change-in-control” as: (i) the sale, lease, conveyance
or other disposition of all or substantially all of Hifn’s assets; (ii) any
person or group of persons becoming the “beneficial owner” of 50% or more of the
total voting power represented by Hifn’s then outstanding voting securities;
(iii) a merger or consolidation of Hifn with any other corporation, where Hifn
retain less than 50% of the total voting power of the surviving entity
immediately after such merger or consolidation; or (iv) a contest for the
election or removal of at least 50% of the serving members of the Board of
Directors.
Potential
Payments Upon Termination
Hifn has
entered into agreements with Al Sisto, William Walker, Russell Dietz and John
Matze that provide for payments upon a termination of employment that meets the
criteria described in those agreements.
Mr. Sisto – Potential Payments Upon
Termination.
Pursuant to the employment agreement that Hifn entered into
with Al Sisto, if Hifn terminates his employment without cause or if he resigns
for good reason and the termination or resignation is not in connection with a
change-in-control, then, subject to
signing
and not revoking a separation agreement and release of claims in a form
acceptable to Hifn, he will receive 18 months continued base salary, valued at
approximately $525,000 as of September 30, 2008, and 18 months continued health
benefits, valued at approximately $11,395 as of September 30, 2008.
Mr. Walker – Potential Payments Upon
Termination.
Pursuant to the severance and change-in-control agreement
that Hifn entered into with Mr. Walker, if his employment is involuntarily
terminated other than for cause, death or disability prior to, or more than 12
months following, a change-in-control, then, subject to signing and not revoking
a separation agreement and release of claims in a form acceptable to Hifn, he
will receive: (i) six months of continued base salary, valued at approximately
$127,500 as of September 30, 2008; (ii) six months of continued health benefits,
valued at approximately $7,523 as of September 30, 2008; and (iii) other
compensation or benefits as may be required by law.
Mr. Dietz – Potential Payments Upon
Termination.
Pursuant to the severance and change-in-control agreement
that Hifn entered into with Mr. Dietz, if his employment is involuntarily
terminated other than for cause, death or disability prior to, or more than 12
months following, a change-in-control, then, subject to signing and not revoking
a separation agreement and release of claims in a form acceptable to Hifn, he
will receive: (i) six months of continued base salary, valued at approximately
$115,000 as of September 30, 2008; (ii) six months of continued health benefits,
valued at approximately $10,231 as of September 30, 2008; and (iii) other
compensation or benefits as may be required by law.
Mr. Matze – Potential Payments Upon
Termination
. Pursuant to the employment agreement that Hifn entered into
with Mr. Matze, if his employment is voluntarily terminated, or terminated for
death or disability, he is entitled to pro rata vesting on his 75,000 share
restricted stock grant subject to certain performance based vesting milestone,
valued at approximately $474,675 as of September 30, 2008. In the
event Mr. Matze’s employment is involuntary terminated other than for cause,
death or disability, he is entitled to his 45,000 share restricted stock grant,
valued at approximately $284,805 and 50% of his base salary, valued at
approximately $117,500 as of September 30, 2008.
Potential
Payments Upon a Change-in-Control
Hifn has
entered into agreements with its named executive officers that provide for
payments upon a change-in-control of Hifn that meets the criteria described in
those agreements.
Mr. Sisto – Potential Payments Upon
a Change-in-Control
. Pursuant to an agreement that Hifn entered into with
Mr. Sisto, if his employment is involuntarily terminated other than for cause,
death or disability prior to, or more than 12 months following, a
change-in-control of Hifn, then, subject to signing and not revoking a
separation agreement and release of claims in a form acceptable to Hifn, he will
receive: (i) 24 months continued base salary, valued at approximately $700,000
as of September 30, 2008; (ii) accelerated vesting of all his outstanding equity
awards, valued at approximately $343,766 as of September 30, 2008; (iii) 18
months continued health benefits, valued at approximately $11,395 as of
September 30, 2008; and (iv) other compensation or benefits as may be required
by law.
Mr. Walker – Potential Payments Upon
a Change-in-Control
. Pursuant to an agreement that Hifn entered into with
Mr. Walker, if within 12 months after a change-in-control of Hifn Mr. Walker’s
employment is involuntarily terminated other than for cause, death or
disability, then, subject to signing and not revoking a separation agreement and
release of claims in a form acceptable to Hifn, he will receive: (i) 12 months
of continued base salary, valued at approximately $255,000 as of September 30,
2008; (ii) 12 months of continued health benefits, valued at
approximately $15,045 as of September 30, 2008; (iii) other
compensation or benefits as may be required by law; and (iv) immediate vesting
of 50% of the unvested shares subject to all of Mr. Walker’s outstanding rights
to purchase or receive shares of Hifn common stock and immediate vesting of 50%
of the shares of Hifn common stock held by Mr.
Walker
that are subject to a right of repurchase by Hifn or forfeiture upon termination
of his employment for any reason, which shares were valued at approximately
$85,318 as of September 30, 2008.
Mr. Dietz – Potential Payments Upon
a Change-in-Control
. Pursuant to an agreement that Hifn entered into with
Mr. Dietz, if within 12 months after a change-in-control of Hifn Mr. Dietz’s
employment is involuntarily terminated other than for cause, death or
disability, then, subject to signing and not revoking a separation agreement and
release of claims in a form acceptable to Hifn, he will receive: (i) 12 months
of continued base salary, valued at approximately $230,000 as of September 30,
2008; (ii) 12 months of continued health benefits, valued at approximately
$20,462 as of September 30, 2008; (iii) other compensation or benefits as may be
required by law; and (iv) immediate vesting of 50% of the unvested shares
subject to all of Mr. Dietz’s outstanding rights to purchase or receive shares
of Hifn common stock and immediate vesting of 50% of the shares of Hifn common
stock held by Mr. Dietz that are subject to a right of repurchase by Hifn or
forfeiture upon termination of his employment for any reason, which shares were
valued at approximately $82,691 as of September 30, 2008.
Mr. Matze – Potential Payments Upon
a Change-in-Control
. Pursuant to an agreement that Hifn entered into with
Mr. Matze, if within 12 months after a change-in control of Hifn Mr. Matze’s
employment is terminated by the surviving company, other than a termination due
to acts of dishonesty, conviction of a felony or willful misconduct by Mr.
Matze, or if Mr. Matze terminates his employment as a result of a material
diminution in salary, a material change in responsibility or a change in work
location of more than 30 miles from his job location, then, subject to signing
and not revoking a separation agreement and release of claims in a form
acceptable to Hifn, he will receive immediate vesting of 50% of the unvested
shares subject to all of Mr. Matze’s outstanding rights to purchase or receive
shares of Hifn common stock and immediate vesting of 50% of the shares of Hifn
common stock held by Mr. Matze that are subject to a right of repurchase by Hifn
or forfeiture upon termination of his employment for any reason, which shares
were valued at approximately $394,816 as of September 30, 2008.
Mr. Yang – Potential Payments Upon a
Change-in-Control
. Pursuant to an agreement that Hifn entered into with
Mr. Yang, if within 12 months after a change-in control of Hifn Mr. Yang’s
employment is involuntarily terminated by the surviving company, other than a
termination due to acts of dishonesty, conviction of a felony or willful
misconduct by Mr. Yang, or if Mr. Yang terminates his employment as a result of
a material diminution in salary, a material change in responsibility or a change
in work location of more than 30 miles from his job location, then, subject to
signing and not revoking a separation agreement and release of claims in a form
acceptable to Hifn, he will receive immediate vesting of 50% of the unvested
shares subject to all of Mr. Yang’s outstanding rights to purchase or receive
shares of Hifn common stock and immediate vesting of 50% of the shares of Hifn
common stock held by Mr. Yang that are subject to a right of repurchase by Hifn
or forfeiture upon termination of his employment for any reason, which shares
were valued at approximately $102,168 as of September 30, 2008.
CERTAIN RELATIONSHIPS AND RELATED PERSON
TRANSACTIONS
Other
than the employment arrangements described in the “Executive Compensation”
section of this Proxy Statement, since October 1, 2007 there has not been, nor
is there currently proposed, any transaction or series of similar transactions
to which we were or will be a participant:
|
·
|
In
which the amount involved exceeded or exceeds $120,000;
and
|
|
·
|
In
which any director, executive officer, holder of more than 5% of any class
of our common stock, or any immediate family member of any such person,
had or will have a direct or indirect material
interest.
|
COMMITTEE REPORTS
The
information contained in the following Compensation Committee Report and Audit
Committee Report shall not be deemed to be “soliciting material,” to be “filed”
with the SEC or subject to the liabilities of Section 18 of the Securities
Exchange Act of 1934, and shall not be deemed to be incorporated by reference in
future filings with the SEC except to the extent that Hifn specifically
incorporates it by reference into a document filed under the Securities Act of
1933 or the Securities Exchange Act of 1934.
Compensation Committee Report
The
Compensation Committee of the Board of Directors has reviewed and discussed the
Compensation Discussion and Analysis contained in this proxy statement with
management. Based on its review, the Compensation Committee recommended to the
Board that the Compensation Discussion and Analysis be included in this proxy
statement.
|
Compensation
Committee
|
|
|
|
Taher
Elgamal
|
|
R
ichard
M. Noling
|
Audit Committee Report
The Audit
Committee has reviewed and discussed with Hifn management and
PricewaterhouseCoopers LLP the audited consolidated financial statements of Hifn
contained in Hifn’s Annual Report on Form 10-K for the 2008 fiscal year. The
Audit Committee has also discussed with PricewaterhouseCoopers LLP the matters
required to be discussed by SAS No. 61, as amended (AICPA,
Professional Standards
, Vol.
1. AU section 380), as adopted by the Public Company Accounting Oversight Board
in Rule 3200T.
The Audit
Committee has received and reviewed the written disclosures and the letter from
PricewaterhouseCoopers LLP required by Independence Standards Board Standard
No. 1 (
Independence
Discussions with Audit Committees
), as adopted by the Public Company
Accounting Oversight Board in Rule 3600T, and has discussed with
PricewaterhouseCoopers LLP its independence from Hifn.
Based on
the review and discussions referred to above, the Audit Committee recommended to
the Board of Directors that the audited consolidated financial statements be
included in Hifn’s Annual Report on Form 10-K for the 2008 fiscal year for
filing with the Securities and Exchange Commission.
|
Audit
Committee
|
|
|
|
Richard
M. Noling
|
|
Robert W.
Johnson
|
|
Taher
Elgamal
|
FORM 10-K
Hifn
will furnish, without charge, to each person solicited upon the request of such
person, a copy of Hifn’s Annual Report on Form 10-K for the 2008 fiscal year,
including the financial statements and financial statement
schedules.
Copies
of such report may be obtained by submitting a request:
|
·
|
By
Internet -
www.proxyvote.com
;
|
|
·
|
By
telephone - 1-800-579-1639; or
|
|
·
|
By
e-mail -
sendmaterial@proxyvote.com
by sending a blank e-mail with the 12 digit control number in the subject
line.
|
OTHER MATTERS
The Board
of Directors does not intend to bring before the Meeting any matters other than
those set forth herein, and has no present knowledge that any other matters will
or may be brought before the Meeting by others. If, however, any other matters
properly come before the Meeting, it is the intention of the persons named in
the proxy to vote the proxies in accordance with their judgment.
Dated: December
19, 2008
|
BY
ORDER OF THE
BOARD
OF DIRECTORS
|
|
.
HIFN,
INC.
750 UNIVERSITY AVENUE
LOS
GATOS, CA 95032
|
VOTE BY INTERNET -
www.proxyvote.com
Use the
Internet to transmit your voting instructions and for electronic
delivery
of
information up until 11:59 P.M. Eastern Time the day before the cut-off
date
of meeting date.
Have your proxy card in hand when you access the web site
and follow the
instructions to obtain your records and to create an
electronic
voting instruction
form.
|
|
|
ELECTRONIC DELIVERY OF FUTURE PROXY MATERIALS
If you would
like to reduce the costs incurred by our company in mailing
proxy
materials,
you can consent to receiving all future proxy statements, proxy
cards
and annual
reports electronically via e-mail or the Internet. To sign up
for
electronic
delivery, please follow the instructions above to vote using
the
Internet and,
when prompted, indicate that you agree to receive or access
proxy
materials electronically in future years.
|
|
|
VOTE BY
PHONE - 1-800-690-6903
Use
any touch-tone telephone to transmit your voting instructions up
until
11:59 P.M.
Eastern Time the day before the cut-off date or meeting date.
Have your proxy card in
hand when you call and then follow the
instructions.
|
|
|
VOTE BY
MAIL
Mark,
sign, and date your proxy card and return it in the postage-paid
envelope
we have provided or
return it to Vote Processing, c/o Broadridge, 51 Mercedes
Way, Edgewood, NY
11717.
|
TO VOTE,
MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS:
|
HIFNI1
|
KEEP THIS PORTION FOR YOUR
RECORDS
|
|
THIS PROXY
CARD IS VALID ONLY WHEN SIGNED AND DATED.
|
DETACH AND RETURN THIS PORTION
ONLY
|
HIFN,
INC.
|
|
For
All
|
Withhold
All
|
For
All
Except
|
To withhold
authority to vote for any individual
nominees(s), mark
"For All Except" and write the
|
|
|
|
|
|
|
|
|
|
number(s)
of the nominees on the line below.
|
|
|
|
|
|
Vote on
Director
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1.
|
To elect one member to the
Board of Directors;
|
r
|
r
|
r
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Class I
Director
|
|
|
|
|
|
|
|
|
|
|
01) Richard M.
Noling
|
|
|
|
|
|
|
|
|
|
Vote on
Proposal
|
|
|
|
|
|
For
|
Against
|
Abstain
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2.
|
To ratify the
appointment of PricewaterhouseCoopers LLP as Hifn's independent registered
public accounting firm for the fiscal
year ending
September 30, 2009;
|
r
|
r
|
r
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3.
|
To transact such other business
as may properly come before the meeting or any adjournment
thereof.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Hifn's Board of Directors
recommends that you vote
FOR
the
nominee to the Board of Directors (Proposal 1) and
FOR
Proposal 2.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
THIS PROXY
WILL BE VOTED AS DIRECTED, OR, IF NO CONTRARY DIRECTION IS INDICATED, WILL
BE VOTED FOR THE
ELECTION OF
THE NOMINEE FOR DIRECTOR; FOR THE RATIFICATION OF THE APPOINTMENT OF
PRICEWATERHOUSECOOPERS
LLP AS INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM; AND AS SAID PROXIES
DEEM
ADVISABLE ON SUCH OTHER MATTERS AS MAY PROPERLY COME BEFORE THE
MEETING.
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For address changes
and/or comments, please check this box and
write them on the
back where indicated.
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Signature [PLEASE SIGN
WITHIN BOX]
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Date
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Signature (Joint
Owners)
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Date
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HI/FN,
INC.
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2009 ANNUAL
MEETING OF STOCKHOLDERS
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THIS PROXY
IS SOLICTED ON BEHALF OF THE BOARD OF DIRECTORS
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The undersigned stockholder of
hi/fn, inc., a Delaware corporation ("Hifn"), hereby acknowledges receipt
of the Notice of Annual Meeting of Stockholders and Proxy Statement of
Hifn, each dated, December 23, 2008 as well as Hifn's Annual Report for
the year ended September 30, 2008, and hereby appoints Albert E. Sisto and
William R. Walker, or either of them, proxies and attorneys-in-fact, with
full power to each of substitution, on behalf and in the name of the
undersigned, to represent the undersigned at the 2009 Annual Meeting of
Stockholders of Hifn to be held on Monday, February 2, 2009, at 10:00
a.m., Pacific Time, at Hifn's principal executive offices at 750
University Ave., Los Gatos, California and at any adjournment or
postponement thereof, and to vote all shares of Hifn common stock which
the undersigned would be entitled to vote if then and there personally
present, on the matters set forth on the reverse side of this
proxy.
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Address Changes/Comments:
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(If you noted any Address
Changes/Comments above, please mark corresponding box on the reverse
side.)
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