Exhibit 10.1
 
SEPARATION AGREEMENT AND MUTUAL RELEASE (“AGREEMENT”)
 
In return for the mutual promises in this Agreement, FalconStor Software, Inc.
(the “Company”), 2 Huntington Quadrangle, Melville, NY 11747, its predecessor
companies, and its and their respective stockholders, affiliates, subsidiaries,
divisions, successors and assigns and the current and former employees,
officers, directors and agents thereof (collectively referred to throughout this
Agreement as “Employer”), and Seth Horowitz, his/her heirs, executors,
administrators, successors, and assigns (collectively referred to throughout
this Agreement as “You”), agree as follows:
 
1.           Purpose.  This is a Separation Agreement between Company and You
and a General Release of claims against Employer, by You, and against You by
Employer.
 
2.           Time to Return and Legal Review.  You understand and agree that You
have until January 29, 2015 to sign and return this Agreement.  You are advised
to consult with an attorney, at your own expense, before signing.  By signing,
You acknowledge that Company has advised You to consult with an attorney before
signing, at your own expense, and that You have had enough time to do so.  You
further understand that if You do not sign and return this Agreement by January
29, 2015, Company shall have no obligation to make any payments or provide any
benefits to You under this Agreement.
 
3.           Revocation.  You may revoke (cancel) this Agreement for a period of
seven (7) calendar days after the day You sign this Agreement.  Any revocation
within this period must be submitted, in writing, to Bruce Sasson, Company’s
Director of Human Resources, and state, “I hereby revoke my acceptance of our
Agreement.”  The revocation must be personally delivered to Bruce Sasson or a
person he designates, or mailed to Bruce Sasson and received within seven (7)
calendar days of your signing of this Agreement and General Release.  This
Agreement shall not become effective or enforceable until the revocation period
has expired without revocation by You.  If the last day of the revocation period
is a Saturday, Sunday, or legal holiday in New York, then the revocation period
shall not expire until the next following day which is not a Saturday, Sunday,
or legal holiday.
 
4.           Resignation.  You  resign from all positions, whether as an
employee, as an officer, or as a director, at the Company and any of its direct
and indirect subsidiaries effective on the date you sign and return this
Agreement.  Both You and the Company agree that in response to inquiries
regarding your departure from the Company both You and the Employer will state
that You voluntarily resigned to pursue other opportunities and that You will
continue to serve as a consultant to the Company.
 
5.           Duty of Confidentiality.  You expressly agree and confirm that You
will comply with all of the terms and provisions of the Confidentiality,
Proprietary Information and Invention Agreement between You and the Company (the
“Confidentiality Agreement”).  A copy will be provided to You upon request.
 
6.           Return of Company Property; Expenses.  You represent and warrant
that, except as set forth in this Section 6, You have returned to Company all
property belonging to Company, including but not limited to keycard, master and
office keys,  files, records, computer access codes, cell phones, beepers,
personal digital assistants (such as BlackBerry or iPhone), memoranda, letters,
files, computer software, business plans, instruction manuals and any other
property whether furnished to You by the Company or which You have prepared or
helped to prepare in conjunction with Your employment with Company.  You further
agree to return to Company any such property You find in Your possession after
the date You sign and deliver this Agreement to Company.  You will submit a
final expense report by January 31, 2015.  Upon the effectiveness of this
Agreement, the Company transfers ownership of the Lenovo X1 ThinkPad Carbon
laptop (FS 26403), loaded with Windows and the Office suite, and the Lenovo
ThinkPad USB 3.0 dock, you were allocated by the Company at the time of your
resignation.  You may retain such equipment pending the effectiveness of this
Agreement; provided, however, that You will bring the laptop with you  at the
time of the consultation with the CFO set forth in Section 8, so that the
Company may make a copy of the flash drive and remove any Company property and
information from the laptop (such actions by the Company to be completed by the
close of business on the day of the consultation).
 
 
 

--------------------------------------------------------------------------------

 
 
7.           Nondisparagement and References.  You understand and agree that You
will not disparage Company or any other “Released Party” (as defined in
Paragraph 12) or encourage or induce others to disparage Company or any other
Released Party.  If the Company receives an inquiry regarding You from a
prospective employer, the Employer agrees to confirm the positions You held, the
dates You were employed by the Company, and that You resigned to pursue other
opportunities and that You continue to serve as a consultant to the
Company.  Nothing in this Agreement shall be construed to prevent You, the
Company or any Released Party from providing truthful and accurate testimony in
any civil, criminal or regulatory proceeding.  Subject to your obligations under
the Confidentiality Agreement, nothing in this Agreement shall be construed to
prevent You from providing factual information to a prospective employer that
you resigned to pursue other opportunities.
 
8.           Consideration.
 
 
a.
In consideration for (i) Your signing and returning this Agreement, (ii) Your
meeting with the Company’s CFO at a mutually agreeable time within seven (7)
days of the signing of this Agreement to provide the Company , to the best of
your recollection, with a summary of matters that you have been primarily
responsible for or have been involved with, including but not limited to
customer agreements, insurance policies, corporate record keeping, and
in-progress work product that needs to be finalized, and (iii) Your performance
of the obligations under this Agreement, the Company agrees to pay You severance
pay in the amount of $140,000 plus accrued and unused vacation time of $9,509.23
(minus applicable withholdings and deductions).  This will be paid to You in a
lump sum within fifteen (15) days following the effective date of this Agreement
(as set forth in Paragraph 3) and Your return of all Company property as set
forth in Paragraph 6.  On the same day as your meeting with the CFO, You will,
under Company supervision, clean out Your office and take with You Your personal
effects.

 
 
b.
In consideration for (i) Your signing and returning this Agreement, (ii) Your
meeting with the Company’s CFO at a mutually agreeable time within seven (7)
days of the signing of this Agreement to provide the Company, to the best of
your recollection, with a summary of matters that you have been primarily
responsible for or have been involved with, including but not limited to
customer agreements, insurance policies, corporate record keeping, and
in-progress work product that needs to be finalized, and (iii) Your performance
of the obligations under this Agreement, the Company shall reimburse You for the
employer’s portion of the premium associated with six (6) months of COBRA
coverage, provided You timely elect and are eligible for COBRA
coverage.  Reimbursement shall be made on a month by month basis within three
(3) days of the due date for Your payment.

 
 
2

--------------------------------------------------------------------------------

 
 
 
c.
As additional consideration for the consulting services provided pursuant to
Paragraph 9, Your options (collectively, the “Options”) to purchase shares of
Company Common Stock granted on March 9, 2009 pursuant to the 2000 Stock Option
Plan and on May 9, 2011, March 12, 2012 and May 9, 2013 pursuant to the Amended
and Restated 2006 Incentive Stock Plan shall be treated as follows: Any such
Options not vested as of the date of this Agreement which under their terms vest
within sixteen (16) months of the date of this Agreement shall continue to vest
in accordance with their initial terms and  any other unvested Options shall no
longer vest and shall terminate as of the date hereof.  All Options vested as of
the date of this Agreement or which vest within sixteen (16) months of the date
of this Agreement may continue to be exercised in accordance with their terms
for sixteen (16) months after the date of this Agreement, at which time all such
unexercised Options shall terminate. To the extent you elect to terminate
providing consulting services pursuant to paragraph 9 below prior to sixteen
(16) months from the date of this Agreement and pursuant to the terms and
conditions of the 2000 Stock Option Plan, as amended and the Amended and
Restated 2006 Stock Incentive Plan, the Options  shall thereupon terminate,
except that the portion of any Option that was exercisable on the date of such
termination of service may be exercised for the lesser of 30 days after the date
of termination or the balance of such Option's term if Your service with the
Company or any Subsidiary or Affiliate shall cease. All restricted stock granted
to you that has not vested, shall not vest and shall terminate on the date you
sign and return this Agreement; provided, however, to the extent that any of the
performance criteria for fiscal  2014 or for any quarterly period in 2014
pursuant to the terms of  the Restricted Stock Agreement, as amended, dated
April 1, 2014, between You and the Company were satisfied, any restricted stock
which would have  vested due to the satisfaction of these performance criteria
shall vest. In addition to the extent the Company satisfied any of the
performance criteria under the Company’s Management Incentive Plan (“MIP”)
for  any quarter in fiscal 2014 or fiscal 2014, you shall be entitled to any
cash payments under the MIP with respect to the Company meeting the fiscal 2014
quarterly and year-end performance criteria.

 
9.           Consulting Services.  You agree to continue and make yourself
reasonably available to assist the Company with the transition by providing
consulting services to the Company at the Company’s reasonable request for a
period of sixteen (16) months from the date of this Agreement.  In exchange for
the provision of such consulting services, the Company shall pay to You a
non-refundable monthly consulting fee of $1,000.  The Company will pay You for
consulting services and will reimburse You for previously approved expenses
within thirty (30) days of receipt of Your invoice, provided You have furnished
such documentation for expenses as the Company reasonably requested.  You shall
not be required to provide in excess of five (5) hours of consulting services
per month.  Consulting services shall be provided at times reasonably convenient
to You.  Consulting services not used by the Company in any month shall not be
rolled forward to any other month.  The consulting services shall consist of the
provision of factual information by You to the Company.  The Company
acknowledges that although You are an attorney, You will not be providing legal
services to the Company and the provision of the consulting services shall not
establish an attorney-client relationship between You and the Company.  Your
relationship with the  Company pursuant to this paragraph will be that of an
independent contractor and nothing in this Agreement should be construed to
create a partnership, joint venture, or employer-employee relationship.  You are
not the agent of the  Company and You are not authorized to make any
representation, contract, or commitment on behalf of the Company unless
specifically requested or authorized in writing to do so by Company.  You will
be solely responsible for and will file, on a timely basis, all tax returns and
payments required to be filed with or made to any federal, state or local
authority with respect to Your performance of services and receipt of fees under
this Agreement.  At any time, on two (2) days written notice to the Company, You
may elect to terminate Your obligations to provide Consulting Services.
 
 
3

--------------------------------------------------------------------------------

 
 
10.           Disclosure of this Agreement.  You acknowledge that You understand
that the Company is required to file this Agreement with the SEC.  That filing
shall be in the form of the Form 8-K which shall state that You resigned to
pursue other opportunities and that You continue to serve as a consultant to the
Company.  The Company will send You a draft of the Form 8-K prior to the filing
of the Form 8-K and will revise the Form  8-K to reflect any of Your comments
which are reasonably acceptable to the Company and received within twenty-four
hours of the required filing deadline.  Neither You nor Company will publicize
in any newspaper, electronic media, or other public or private forum (such as
“blogs,” job satisfaction websites, Facebook, Twitter or bulletin boards), the
terms of this Agreement.  However, You and Company may disclose this Agreement
to their respective attorneys, and to governmental agencies including, but not
limited to, the Internal Revenue Service, if so requested or required and as may
be required by law, subpoena or in answer to interrogatories or other discovery
requests, and Company may disclose this Agreement to any third parties who owe a
duty of confidentiality to Company or as required by law, rule or regulation.
 
11.           Nonadmission.  You and Company each understand and agree that
neither the signing of this Agreement nor the payment of any severance or other
money or benefits constitutes an admission by Company, or any other Released
Party of any wrongdoing.  Company and each other Released Party expressly denies
any liability or violation of law.
 
MUTUAL RELEASES OF ALL CLAIMS
 
12.           Release of Company and other Released Parties.  In consideration
of (in return for) the severance benefits from Company as outlined in Paragraph
8, You hereby irrevocably and unconditionally release, waive and forever
discharge Company, its affiliates, parents, successors, predecessors,
subsidiaries, assigns, stockholders, directors, officers, employees,
representatives, agents, and attorneys (collectively, the “Released Parties”),
from any and all claims, agreements, causes of action, demands, or liabilities
of any nature whatsoever (collectively referred to as “Claims”) arising,
occurring or existing at any time prior to the signing of this Agreement or
arising out of any facts or circumstances that occurred or existed at any time
prior to the signing of this Agreement, whether known or unknown, except as to
all claims that cannot be released under applicable law (including Claims of
discrimination arising under federal law filed with or through a federal agency)
or Claims related to the validity of this Agreement.
 
 
4

--------------------------------------------------------------------------------

 
 
Examples of Claims Released.  You understand that this release is intended to
and does waive:
 
 
a.
Your ability to file a lawsuit against the Company for any and all Claims
arising from or relating to Your employment with Company and/or the termination
of Your employment with Company.  This includes, but is not limited to, any and
all claims for breach of Company’s or its predecessor’s policies, rules,
regulations, or handbooks or for breach of expressed or implied contracts or
expressed or implied covenants of good faith, and any and all claims for
promissory estoppel, wrongful discharge, defamation, invasion of privacy,
violation of public policy, retaliation, mental distress or any other personal
injury; any and all claims for back pay, front pay, or for any kind of
compensatory, special or consequential damages, punitive or liquidated damages,
attorneys’ fees, costs, disbursements or expenses of any kind whatsoever.

 
 
b.
Any and all claims arising under the Family Medical Leave Act, as amended, that
were available on or prior to the date You sign this Agreement, whether known or
unknown.

 
 
c.
Any and all claims arising under the Age Discrimination in Employment Act, as
amended, that were available on or prior to the date You sign this Agreement,
whether known or unknown.

 
 
d.
Any and all other claims of any kind whatsoever that You had or may have against
Company or any other Released Party at the time You sign this Release, whether
known or unknown.  This includes, but is not limited to, any and all rights or
claims of any kind that You may have against Company or any other Released Party
arising, existing or occurring (or that arise out of any facts or circumstances
that occurred or existed) before You became an employee and/or during any period
of time You acted as a consultant to Company.

 
 
e.
Any and all claims for payment for vacation pay.

 
This provides examples of the Claims that are waived and is not a complete
listing of waived claims.
 
Notwithstanding the foregoing, nothing in this Agreement shall be construed to
prevent You from being indemnified as an officer of the Company pursuant to the
Company’s Amended and Restated By-Laws or  the General Corporation Law of the
State of Delaware or from filing a charge with or participating in an
investigation conducted by any governmental agency, including, without
limitation, the United States Equal Employment Opportunity Commission (“EEOC”)
or applicable state or city fair employment practices agency, to the extent
required or permitted by law.  Nevertheless, You understand and agree that You
are waiving any relief available (including, for example, monetary damages or
reinstatement), under any of the claims and/or causes of action waived in this
Paragraph 12, including but not limited to financial benefit or monetary
recovery from any lawsuit filed or settlement reached by the EEOC or anyone else
with respect to any claims released and waived in this agreement.
 
 
5

--------------------------------------------------------------------------------

 
 
13.           No Claims Exist.  You confirm that You have not filed, caused to
be filed, or are a party to, any claim, charge, complaint, or action against any
Released Party in any court.  In the event that any such claim, charge,
complaint, or action is filed in any court and You obtain a judgment, it is the
intent of You and Company parties that all payments made to You under this
Agreement shall be offset against (the amount will be deducted from) any
judgment You obtain. You further confirm that You have no known workplace
injuries.
 
14.           Release of You.  In consideration of (in return for) You entering
into this Agreement and the release set forth in Section 12, the Company hereby
irrevocably and unconditionally releases, waives and forever discharges You from
any and all claims, agreements, causes of action, demands, or liabilities of any
nature whatsoever (collectively referred to as “Claims”) arising, occurring or
existing at any time prior to the signing of this Agreement or arising out of
any facts or circumstances that occurred or existed at any time prior to the
signing of this Agreement, whether known or unknown or Claims related to the
validity of this Agreement.
 
15.           No Claims Exist.  The Company confirms that it has not filed,
caused to be filed, or are a party to, any claim, charge, complaint, or action
against You in any court.
 
16.           COBRA Rights.  Your regular coverage under Company’s medical and
dental plans ends on January 31, 2015.  You become eligible to receive health
care continuation coverage under the respective plans under COBRA and under
applicable laws the day after the regular coverage under the respective plans
ends.  If You timely elect health care continuation coverage under COBRA in
accordance with Section 4980B of the Code, You shall be entitled to receive
COBRA continuation coverage for eighteen (18) months at Your own expense, other
than as set forth in Paragraph 8, and in accordance with the provisions of
COBRA, which provisions are more fully explained in the COBRA information
provided to You by the Company.  However, You will no longer be eligible for any
continuation coverage under COBRA if Your eligibility for continuation coverage
ceases pursuant to the provisions of COBRA.
 
17.           No Entitlement to Severance.  You acknowledge that severance pay
is being received solely in exchange for Your promises in this Agreement.  You
understand that severance pay is not ordinarily available under Company’s policy
to employees whose employment relationship ends.
 
18.           Cooperation.  You shall assist in the orderly transition of all
current projects and assignments.  You will sign (and, as necessary, at the
Company’s expense, have notarized) all documents as reasonably requested by the
Company, including all documents relating to resignation from executive or
director positions with the Company’s subsidiaries.
 
 
6

--------------------------------------------------------------------------------

 
 
You shall provide reasonable cooperation with Company and with Company’s counsel
in connection with any present or future, actual or threatened, litigation or
administrative proceeding involving Company or any predecessor of Company that
relates to events, occurrences or conduct occurring (or claimed to have
occurred) during the period of Your employment by Company or any predecessor to
Company.  This cooperation by You shall include, but not be limited to (i) being
reasonably available for interviews and discussions with Company’s counsel as
well as for depositions and trial testimony; (ii) if depositions or trial
testimony are to occur, being reasonably available and cooperating in the
preparation therefore as and to the extent that Company’s or other party’s
counsel reasonably requests; (iii) refraining from impeding in any way Company’s
prosecution or defense of such litigation or administrative proceeding; and
(iv) cooperating fully in the development and presentation of prosecution or
defense of such litigation or administrative proceeding.
 
You will be reimbursed by Company for reasonable travel, lodging, telephone and
similar expenses incurred in connection with such cooperation.
 
19.           Governing Law.  This Agreement shall be governed by the laws of
the State of New York except to the extent preempted by Federal law.
 
20.           Venue.  Both You and the Company hereby irrevocably waive any
objection that they now or hereafter may have to the laying of venue of any
action or proceeding arising out of or relating to this Agreement brought in the
United States District Court for the Eastern District of New York, or any New
York state court, and any objection on the ground that any such action or
proceeding in either of such Courts has been brought in an inconvenient
forum.  This means that if Company sues you for violating this Agreement,
Company may do so in a state or federal court located in New York, including
Suffolk County.
 
21.           Waiver of Jury Trial.  TO THE EXTENT PERMITTED BY APPLICABLE LAW,
YOU AND THE COMPANY IRREVOCABLY WAIVE YOUR RESPECTIVE RIGHTS TO A JURY TRIAL
WITH RESPECT TO ANY ACTION, CLAIM OR OTHER PROCEEDING ARISING OUT OF ANY DISPUTE
IN CONNECTION WITH THIS AGREEMENT, ANY RIGHTS OR OBLIGATIONS HEREUNDER, OR THE
PERFORMANCE OF SUCH RIGHTS AND OBLIGATIONS.  This means that only a judge, not a
jury, will decide any lawsuit.
 
22.           Amendment.  This Agreement may not be modified, altered or changed
except upon express written consent of both parties in a document that
specifically refers to this Agreement.
 
23.           Severability.  Each provision of this Agreement is severable from
the entire Agreement.  In the event that any provision is declared invalid or
unenforceable, that provision shall be amended if possible to be enforceable,
but in any event, the remaining provisions of this Agreement shall remain in
effect.
 
 
7

--------------------------------------------------------------------------------

 
 
24.           Entire Agreement.  You and the Company agree that: (a) this
Agreement contains the entire agreement between the Released Parties,  the
Company and You; and (b) that neither Company, any other Released Party, nor You
has made any other representations except those set forth in this Agreement to
induce the other parties to agree to this Agreement.
 
YOU ACKNOWLEDGE THAT YOU HAVE READ THIS AGREEMENT, THAT YOU HAVE BEEN GIVEN AN
OPPORTUNITY TO HAVE ANY PARAGRAPHS EXPLAINED, AND THAT YOU UNDERSTAND EACH
PARAGRAPH OF THE AGREEMENT.
 
YOU HAVE BEEN ADVISED THAT YOU HAVE TWENTY-ONE (21) CALENDAR DAYS TO CONSIDER
THIS AGREEMENT AND YOU HAVE BEEN ADVISED IN WRITING TO CONSULT WITH AN ATTORNEY
BEFORE SIGNING THIS AGREEMENT.
 
YOU AGREE THAT ANY MODIFICATIONS, MATERIAL OR OTHERWISE, MADE TO THIS AGREEMENT
DO NOT RESTART OR AFFECT IN ANY MANNER THE ORIGINAL TWENTY-ONE (21) CALENDAR DAY
CONSIDERATION PERIOD.
 
HAVING ELECTED TO SIGN THIS AGREEMENT, TO FULFILL THE PROMISES SET FORTH IN THIS
AGREEMENT, AND TO RECEIVE THE AMOUNTS SET FORTH IN PARAGRAPH “8” ABOVE, YOU
FREELY AND KNOWINGLY, AND AFTER DUE CONSIDERATION, ENTER INTO THIS AGREEMENT
INTENDING TO WAIVE, SETTLE AND RELEASE ALL CLAIMS YOU HAVE OR MIGHT HAVE AS OF
THE DATE OF SIGNING AGAINST EMPLOYER OTHER THAN SET FORTH IN PARAGRAPH 12 ABOVE.
 
IN WITNESS WHEREOF, the parties hereto knowingly and voluntarily executed this
Agreement as of the date set forth below:
 

 
NAME
   
FalconStor Software, Inc.
         
By:
/s/ Seth Horowitz
 
By:
/s/  Eli Oxenhorn
 
Seth Horowitz
   
Eli Oxenhorn
Chairman
         
Date:
January 21, 2015
 
Date:
January 16, 2015

 
8

--------------------------------------------------------------------------------