Exhibit 10.2


 





EXECUTION COPY


NEITHER THIS WARRANT NOR THE SECURITIES
FOR WHICH THIS WARRANT IS EXERCISABLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION
OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES
ACT”), AND, ACCORDINGLY, MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND IN COMPLIANCE WITH APPLICABLE STATE SECURITIES OR BLUE SKY LAWS. 


FALCONSTOR SOFTWARE, INC.


WARRANT


Dated: November 17, 2017


FALCONSTOR SOFTWARE,
INC., a Delaware corporation (the “Company”), hereby certifies that, for value received, HCP-FVA, LLC or its
registered assigns (the “Holder”), is entitled to purchase from the Company up to a total of 13,859,128 (subject
to adjustment as provided herein) fully paid and non-assessable shares of common stock, $0.001 par value per share (the “Common
Stock”), of the Company (each such share, a “Warrant Share” and all such shares, the “Warrant
Shares”) at an exercise price equal to $0.001 per share (as adjusted from time to time as provided in Section 9,
the “Exercise Price”), at any time and from time to time from and after the date hereof (the “Issuance
Date”) and through and including November 17, 2027 (the “Expiration Date”), and subject to the following
terms and conditions. This Warrant (this “Warrant”) is being issued pursuant to Section 2(a)(ix) of that certain
Loan and Security Agreement, dated as of November 17, 2017 (the “Loan Agreement”), by and among the Company,
as borrower, the subsidiaries party thereto, as guarantors, and HCP-FVA, LLC, as lender.


1.          
Definitions. In addition to the terms defined elsewhere in this Warrant, capitalized terms that are not otherwise
defined herein shall have the meanings set forth below:


(a)          
Affiliate” means, with respect to any Person, each other Person that owns or controls directly or indirectly
the Person, any Person that controls or is controlled by or is under common control with the Person, including, without limitation,
any parallel fund, related fund, or management company of a Person (or such other Person responsible for its management), and each
of that Person’s senior executive officers, directors, partners and, for any Person that is a limited liability company,
that Person’s managers and members.


(b)         
“Business Day” means any day that is not a Saturday, Sunday or a nationally recognized holiday.



    	 



     


    




(c)          
“Change of Control” means that (A) the Company shall, directly or indirectly, including through Subsidiaries,
Affiliates or otherwise, in one or more related transactions, (i) consolidate or merge with or into another Subject Entity where
the holders of a majority of the Company’s outstanding Common Stock immediately prior to the consolidation or merger do not
continue to own at least 50.1% of the surviving corporation, or (ii) sell, assign, transfer, convey or otherwise dispose of all
or substantially all of the properties or assets of the Company or any Subsidiary, or (iii) make, or be subject to or have the
Common Stock be subject to or party to one or more Subject Entities making, a purchase, tender or exchange offer that is accepted
by the holders of at least either (x) 50.1% of the outstanding shares of Common Stock, or (y) such number of shares of Common
Stock such that all Subject Entities making or party to, or Affiliated with any Subject Entity making or party to, such purchase,
tender or exchange offer, become collectively the beneficial owners (as defined in Rule 13d-3 under the Exchange Act) of at least
50.1% of the outstanding shares of Common Stock, or (iv) consummate a stock purchase agreement or other business combination (including,
without limitation, a reorganization, recapitalization, spin-off or scheme of arrangement) with one or more Subject Entities whereby
all such Subject Entities, individually or in the aggregate, acquire, either (x) at least 50.1% of the outstanding shares of Common
Stock, or (y) such number of shares of Common Stock such that the Subject Entities become collectively the beneficial owners (as
defined in Rule 13d-3 under the Exchange Act) of at least 50.1% of the outstanding shares of Common Stock, or (v) reorganize,
recapitalize or reclassify its Common Stock or effect a compulsory share exchange pursuant to which the Common Stock is effectively
converted into or exchanged for other securities, cash or property, or (vi) the execution by the Company or any Subsidiary of a
definitive agreement directly or indirectly providing for any of the foregoing events, (B) any Subject Entity individually or the
Subject Entities in the aggregate is or shall become the “beneficial owner” (as defined in Rule 13d-3 under the Exchange
Act), directly or indirectly, whether through acquisition, purchase, assignment, conveyance, tender, tender offer, exchange, reduction
in outstanding shares of Common Stock, merger, consolidation, business combination, reorganization, recapitalization, spin-off,
scheme of arrangement, reorganization, recapitalization or reclassification or otherwise in any manner whatsoever, of either (x)
at least 50.1% of the aggregate ordinary voting power represented by issued and outstanding Common Stock, or (y) a percentage of
the aggregate ordinary voting power represented by issued and outstanding shares of Common Stock or other equity securities of
the Company sufficient to allow such Subject Entities to effect a statutory short form merger or other transaction requiring other
stockholders of the Company to surrender their shares of Common Stock without approval of the stockholders of the Company, (C) Continuing
Directors cease to constitute more than a majority of the members of the Board of Directors or (D) the issuance of or the
entering into any other instrument or transaction structured in a manner to circumvent, or that circumvents, the intent of this
definition in which case this definition shall be construed and implemented in a manner otherwise than in strict conformity with
the terms hereof to the extent necessary to correct this definition or any portion hereof which may be defective or inconsistent
with the intended treatment of such instrument or transaction.


(d)         
“Closing Price” means, for any date, the price determined by the first of the following clauses that
applies: (a) if the Common Stock is then listed or quoted on an Eligible Market or any other national securities exchange,
the closing bid price per share of Common Stock for such date (or the nearest preceding date) on the primary Eligible Market or
exchange on which the Common Stock is then listed or quoted; (b) if the Common Stock is then listed or quoted on the OTC Bulletin
Board, the most recent closing bid price per share of Common Stock so reported; (c) if prices for the Common Stock are then reported
in the “Pink Sheets” published by OTC Markets Group Inc. (or a similar organization or agency succeeding to its functions
of reporting prices), the most recent bid price per share of Common Stock so reported; or (d) in all other cases, the fair
market value of a share of Common Stock as determined by an independent appraiser selected in good faith by the Holder.



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(e)          
“Continuing Director” means (i) any individual who is a member of the Board of Directors of the Company
on the Issuance Date and (ii) any individual who is appointed to the Board of Directors of the Company or nominated for election
to the Board of Directors of the Company by other Continuing Directors or by the holders of the Company’s outstanding Series
A Preferred Stock in accordance with the terms of the Certificate of Designations for the Series A Preferred Stock


(f)          
“Control” (including the terms “controlling”, “controlled by” or “under
common control with”) means the possession, direct or indirect, of the power to direct or cause the direction of the management
and policies of a Person, whether through the ownership of voting securities, by contract or otherwise.


(g)         
“Eligible Market” means any of the following markets or exchanges on which the Common Stock is listed
or quoted for trading on the date in question: The NASDAQ Global Market, The NASDAQ Global Select Market, The NASDAQ Capital Market,
the New York Stock Exchange, NYSE Arca or the NYSE MKT (or any successor to any of the foregoing).


(h)         
“Exchange Act” means the Securities Exchange Act of 1934, as amended, or any successor statute, and the
rules and regulations promulgated thereunder.


(i)           
“Person” means an individual or corporation, partnership, trust, incorporated or unincorporated association,
joint venture, limited liability company, joint stock company, government (or an agency or subdivision thereof) or other entity
of any kind.


(j)           
“Proceeding” means an action, claim, suit, investigation or proceeding (including, without limitation,
an investigation or partial proceeding, such as a deposition).


(k)         
“Securities Act” means the Securities Act of 1933, as amended, or any successor statute, and the rules
and regulations promulgated thereunder.


(l)           
“Subject Entity” means any Person, Persons or “group” (as that term is used in Section 13(d)
of the Exchange Act and as defined in Rule 13d-5 thereunder) or any Affiliate or associate of any such Person, Persons or Group
(other than the Holder and its Affiliates).


(m)       
“Subsidiary(ies)” means at any time any Person which the Company (either alone or through or together
with any other Subsidiary), owns, directly or indirectly, more than a majority of the capital stock or equity interests the holders
of which are generally entitled to vote for the election of the board of directors or other governing body of such Person.



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(n)         
“Trading Day” means (a) any day on which the Common Stock is listed or quoted and traded on an Eligible
Market, or (b) if the Common Stock is not then listed or quoted and traded on any Eligible Market, then any Business Day.


(o)         
“VWAP” means, on any particular Trading Day or for any particular period, the volume weighted average
trading price per share of Common Stock on such Trading Day or for such particular period on the primary Eligible Market on which
the Common Stock is then traded as reported by Bloomberg L.P., through its “Volume at Price” functions, or any successor
performing similar functions, or, if the foregoing does not apply, the average of the highest Closing Price and the lowest closing
ask price of any of the market makers for the Common Stock as reported in the “pink sheets” by OTC Markets Group Inc.;
provided, however, that during any period the VWAP is being determined, the VWAP shall be subject to adjustment from time
to time for stock splits, stock dividends, combinations and similar events as applicable.


2.          
Registration of Warrant. The Company shall register this Warrant, upon records to be maintained by the Company for
that purpose (the “Warrant Register”), in the name of the record Holder hereof from time to time. The Company
may deem and treat the registered Holder of this Warrant as the absolute owner hereof for the purpose of any exercise hereof or
any distribution to the Holder, and for all other purposes, absent actual notice to the contrary.


3.          
Registration of Transfers. This Warrant and all rights hereunder are transferable in whole or in part upon the books
of the Company by the Holder hereof; provided, however, that the transferee shall agree in writing to be bound by the terms and
subject to the conditions of this Warrant. The Company shall register the transfer of any portion of this Warrant in the Warrant
Register, upon surrender of this Warrant, with the Form of Assignment attached hereto duly completed and signed, to the Company
at its address specified herein. Upon any such registration or transfer, a new warrant to purchase Common Stock, in substantially
the form of this Warrant (any such new warrant, a “New Warrant”), evidencing the portion of this Warrant not
so transferred, if any, shall be issued to the transferring Holder. The acceptance of the New Warrant by the transferee thereof
shall be deemed the acceptance by such transferee of all of the rights and obligations of a holder of a Warrant.


4.          
Exercise and Duration of Warrants.


(a)          
This Warrant shall be exercisable by the registered Holder at any time and from time to time on or after the Issuance Date
to and including the Expiration Date. At 5:30 P.M., New York City time on the Expiration Date, the portion of this Warrant not
exercised prior thereto shall be and become void and of no value; provided that, if the average of the Closing Prices for the five
(5) Trading Days immediately prior to (but not including) the Expiration Date exceeds the Exercise Price on the Expiration Date,
then this Warrant shall be deemed to have been exercised in full on a “cashless exercise” basis at 5:30 P.M. New York
City time on the Expiration Date.



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(b)         
A Holder may exercise this Warrant by delivering to the Company (i) an exercise notice, in the form attached hereto (the
“Exercise Notice”), appropriately completed and duly signed, and (ii) payment of the Exercise Price for
the number of Warrant Shares as to which this Warrant is being exercised (which may take the form of a “cashless exercise”
if so indicated in the Exercise Notice), and the date such items are delivered to the Company (as determined in accordance with
the notice provisions hereof) is an “Exercise Date.” The Holder shall not be required to deliver the original
Warrant in order to effect an exercise hereunder. Execution and delivery of the Exercise Notice shall have the same effect as cancellation
of the original Warrant and issuance of a New Warrant evidencing the right to purchase the remaining number of Warrant Shares.
The Holder shall deliver the original Warrant to the Company within thirty (30) days after the full exercise of this Warrant, provided,
that the Holder’s failure to so deliver the original Warrant shall not affect the validity of such exercise or any of the
Company’s obligations under this Warrant and the Company’s sole remedy for the Holder’s failure to deliver the
original Warrant shall be to obtain an affidavit of lost warrant from the Holder, which affidavit shall have customary indemnification
terms.


5.          
Delivery of Warrant Shares.


(a)          
Upon exercise of this Warrant, the Company shall promptly (but in no event later than three (3) Trading Days after the Exercise
Date) issue or cause to be issued and cause to be delivered to or upon the written order of the Holder and in such name or names
as the Holder may designate, a certificate for the Warrant Shares issuable upon such exercise or credit the Holder’s balance
account with DTC for the Warrant Shares issuable upon such exercise, in either case, free of restrictive legends unless required
by Section 5(d) below. The Holder, or any Person so designated by the Holder to receive Warrant Shares, shall be deemed to have
become holder of record of such Warrant Shares as of the Exercise Date.


(b)         
This Warrant is exercisable, either in its entirety or, from time to time, for a portion of the number of Warrant Shares.
Upon surrender of this Warrant following one or more partial exercises, the Company shall issue or cause to be issued, at its expense,
a New Warrant evidencing the right to purchase the remaining number of Warrant Shares.


(c)          
The Company’s obligations to issue and deliver Warrant Shares in accordance with the terms and subject to the conditions
hereof are absolute and unconditional, irrespective of any action or inaction by the Holder to enforce the same, any waiver or
consent with respect to any provision hereof, the recovery of any judgment against any Person or any action to enforce the same,
or any setoff, counterclaim, recoupment, limitation or termination, or any breach or alleged breach by the Holder or any other
Person of any obligation to the Company or any violation or alleged violation of law by the Holder or any other Person, and irrespective
of any other circumstance which might otherwise limit such obligation of the Company to the Holder in connection with the issuance
of Warrant Shares. Nothing herein shall limit the Holder’s right to pursue any other remedies available to it hereunder,
at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief with respect to the
Company’s failure to timely deliver certificates representing shares of Common Stock upon exercise of the Warrant as required
pursuant to the terms hereof.


(d)         
Each certificate for Warrant Shares shall bear a restrictive legend only if (i) there is not then an effective registration
statement covering the resale of the Warrant Shares and naming the Holder as a selling stockholder thereunder and (ii) the Warrant
Shares are not freely transferable without volume restrictions pursuant to Rule 144; provided, that, no such restrictive legend
shall be required if, in the opinion of outside counsel for the Holder (which opinion shall be reasonably satisfactory to counsel
for the Company) or the Company, the securities represented thereby are not, at such time, required by law to bear such legend.



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6.          
Charges, Taxes and Expenses. Issuance and delivery of certificates for shares of Common Stock upon exercise of this
Warrant shall be made without charge to the Holder for any issue or transfer tax, withholding tax, transfer agent fee or other
incidental tax or expense in respect of the issuance of such certificates, all of which taxes and expenses shall be paid by the
Company; provided, however, that the Company shall not be required to pay any tax which may be payable in respect of any transfer
involved in the registration of any certificates for Warrant Shares or Warrants in a name other than that of the Holder or an Affiliate
thereof.


7.          
Replacement of Warrant. If this Warrant is mutilated, lost, stolen or destroyed, the Company shall issue or cause
to be issued in exchange and substitution for and upon cancellation hereof, or in lieu of and substitution for this Warrant, a
New Warrant, but only upon receipt of evidence reasonably satisfactory to the Company of such loss, theft or destruction and customary
and reasonable indemnity, if requested. Applicants for a New Warrant under such circumstances shall also comply with such other
reasonable regulations and procedures as the Company may prescribe.


8.          
Reservation of Warrant Shares. The Company covenants that it will at all times reserve and keep available out of
the aggregate of its authorized but unissued and otherwise unreserved Common Stock, solely for the purpose of enabling it to issue
Warrant Shares upon exercise of this Warrant as herein provided, the number of Warrant Shares which are then issuable and deliverable
upon the exercise of this entire Warrant, free from preemptive rights or any other contingent purchase rights of persons other
than the Holder (taking into account the adjustments and restrictions of Section 9). The Company covenants that all Warrant
Shares so issuable and deliverable shall, upon issuance and the payment of the applicable Exercise Price in accordance with the
terms hereof, be duly and validly authorized, issued and fully paid and nonassessable. The Company will take all such action as
may be necessary to assure that such shares of Common Stock may be issued as provided herein without violation of any applicable
law or regulation, or of any requirements of any securities exchange or automated quotation system upon which the Common Stock
may be listed.


9.          
Certain Adjustments. The Exercise Price and number of Warrant Shares issuable upon exercise of this Warrant are subject
to adjustment from time to time as set forth in this Section 9.


(a)          
Stock Dividends and Splits. If the Company, at any time while this Warrant is outstanding, (i) pays a stock dividend
on its Common Stock or otherwise makes a distribution on any class of capital stock that is payable in shares of Common Stock,
(ii) subdivides outstanding shares of Common Stock into a larger number of shares, or (iii) combines outstanding shares of Common
Stock into a smaller number of shares, then in each such case the Exercise Price shall be multiplied by a fraction of which the
numerator shall be the number of shares of Common Stock outstanding immediately before such event and of which the denominator
shall be the number of shares of Common Stock outstanding immediately after such event. Any adjustment made pursuant to clause
(i) of this paragraph shall become effective immediately after the record date for the determination of stockholders entitled to
receive such dividend or distribution, and any adjustment pursuant to clause (ii) or (iii) of this paragraph shall become effective
immediately after the effective date of such subdivision or combination.



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(b)         
Pro Rata Distributions. If the Company, at any time while this Warrant is outstanding, distributes to holders of
Common Stock (i) evidences of its indebtedness, (ii) any security (other than a distribution of Common Stock covered by the preceding
paragraph), (iii) rights or warrants to subscribe for or purchase any security (other than in the case of the Financing (as
defined in the Loan Agreement) conducted via a rights offering), or (iv) cash or any other asset (in each case, “Distributed
Property”), then in each such case the Exercise Price in effect immediately prior to the record date fixed for determination
of stockholders entitled to receive such distribution shall be adjusted (effective on such record date) to equal the product of
such Exercise Price times a fraction of which the denominator shall be the average of the Closing Prices for the five (5) Trading
Days immediately prior to (but not including) such record date and of which the numerator shall be such average less the then fair
market value of the Distributed Property distributed in respect of one outstanding share of Common Stock, as determined by the
Company’s independent certified public accountants that regularly examine the financial statements of the Company (an “Appraiser”).
In such event, the Holder, after receipt of the determination by the Appraiser, shall have the right to select an additional appraiser
(which shall be a nationally recognized accounting firm), in which case such fair market value shall be deemed to equal the average
of the values determined by each of the Appraiser and such appraiser. As an alternative to the foregoing adjustment to the Exercise
Price, at the request of the Holder delivered before the ninetieth (90th) day after such record date, the Company will
deliver to such Holder, within five (5) Trading Days after such request (or, if later, on the effective date of such distribution),
the Distributed Property that the Holder would have been entitled to receive in respect of the Warrant Shares for which this Warrant
could have been exercised immediately prior to such record date. If such Distributed Property is not delivered to the Holder pursuant
to the preceding sentence, then upon expiration of or any exercise of the Warrant that occurs after such record date, the Holder
shall remain entitled to receive, in addition to the Warrant Shares otherwise issuable upon such exercise (if applicable), such
Distributed Property.


(c)          
Fundamental Transactions. If, at any time while this Warrant is outstanding, (i) the Company effects any merger or
consolidation of the Company with or into another Person, (ii) the Company effects any sale of all or substantially all of its
assets in one or a series of related transactions, (iii) any tender offer or exchange offer (whether by the Company or another
Person) is completed pursuant to which holders of more than 50.1% of the outstanding Common Stock tender or exchange their shares
for other securities, cash or property, (iv) the Company effects any reclassification of the Common Stock or any compulsory share
exchange pursuant to which the Common Stock is effectively converted into or exchanged for other securities, cash or property (other
than as a result of a subdivision or combination of shares of Common Stock covered by Section 9(a) above), or (v) there
is a Change of Control (in any such case, a “Fundamental Transaction”), then the Holder shall have the right
thereafter to receive, upon exercise of this Warrant, the same amount and kind of securities, cash or property as it would have
been entitled to receive upon the occurrence of such Fundamental Transaction if it had been, immediately prior to such Fundamental
Transaction, the holder of the number of Warrant Shares then issuable upon exercise in full of this Warrant (the “Alternate
Consideration”). The aggregate Exercise Price for this Warrant will not be affected by any such Fundamental Transaction,
but the Company shall apportion such aggregate Exercise Price among the Alternate Consideration in a reasonable manner reflecting
the relative value of any different components of the Alternate Consideration. If holders of Common Stock are given any choice
as to the securities, cash or property to be received in a Fundamental Transaction, then the Holder shall be given the same choice
as to the Alternate Consideration it receives upon any exercise of this Warrant following such Fundamental Transaction. In the
event of a Fundamental Transaction, the Company or the successor or purchasing Person, as the case may be, shall execute with the
Holder a written agreement providing that:



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(x)        this
Warrant shall thereafter entitle the Holder to purchase the Alternate Consideration in accordance with this Section 9(c),


 


(y)       in
the case of any such successor or purchasing Person, upon such consolidation, merger, statutory exchange, combination, sale or
conveyance such successor or purchasing Person shall be jointly and severally liable with the Company for the performance of all
of the Company’s obligations under this Warrant, and


 


(z)       if
registration or qualification is required under the Exchange Act or applicable state law for the public resale by the Holder of
shares of stock and other securities so issuable upon exercise of this Warrant, such registration or qualification shall be completed
prior to such reclassification, change, consolidation, merger, statutory exchange, combination or sale.


 


If, in the case of
any Fundamental Transaction, the Alternate Consideration includes shares of stock, other securities, other property or assets of
a Person other than the Company or any such successor or purchasing Person, as the case may be, in such Fundamental Transaction,
then such written agreement shall also be executed by such other Person and shall contain such additional provisions to protect
the interests of the Holder as the Board of Directors of the Company shall reasonably consider necessary by reason of the foregoing.
At the Holder’s request, any successor to the Company or surviving entity in such Fundamental Transaction shall issue to
the Holder a New Warrant consistent with the foregoing provisions and evidencing the Holder’s right to purchase the Alternate
Consideration for the aggregate Exercise Price upon exercise thereof. The terms of any agreement pursuant to which a Fundamental
Transaction is effected shall include terms requiring any such successor or surviving entity to comply with the provisions of this
paragraph (c) and insuring that the Warrant (or any such replacement security) will be similarly adjusted upon any subsequent transaction
analogous to a Fundamental Transaction.


(d)         
Number of Warrant Shares. Simultaneously with any adjustment to the Exercise Price pursuant to paragraphs (a) or
(b) of this Section, the number of Warrant Shares that may be purchased upon exercise of this Warrant shall be increased or decreased
proportionately, so that after such adjustment the aggregate Exercise Price payable hereunder for the increased or decreased number
of Warrant Shares shall be the same as the aggregate Exercise Price in effect immediately prior to such adjustment.



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(e)          
Calculations. All calculations under this Section 9 shall be made to the nearest cent or the nearest 1/100th
of a share, as applicable. The number of shares of Common Stock outstanding at any given time shall not include shares owned or
held by or for the account of the Company, and the disposition of any such shares shall be considered an issue or sale of Common
Stock.


(f)          
Notice of Adjustments. Upon the occurrence of each adjustment pursuant to this Section 9, the Company at its
expense will promptly compute such adjustment in accordance with the terms of this Warrant and prepare a certificate setting forth
such adjustment, including a statement of the adjusted Exercise Price and adjusted number or type of Warrant Shares or other securities
issuable upon exercise of this Warrant (as applicable), describing the transactions giving rise to such adjustments and showing
in detail the facts upon which such adjustment is based. Upon written request, the Company will promptly deliver a copy of each
such certificate to the Holder and to the Company’s transfer agent.


(g)         
Notice of Corporate Events. If the Company (i) declares a dividend or any other distribution of cash, securities
or other property in respect of its Common Stock, including without limitation any granting of rights or warrants to subscribe
for or purchase any capital stock of the Company, (ii) authorizes or approves, enters into any agreement contemplating or solicits
stockholder approval for a Fundamental Transaction or (iii) authorizes the voluntary dissolution, liquidation or winding up of
the affairs of the Company, then the Company shall deliver to the Holder a notice describing the material terms and conditions
of such transaction, at least twenty (20) calendar days prior to the applicable record or effective date on which a Person would
need to hold Common Stock in order to participate in or vote with respect to such transaction, and the Company will take all steps
reasonably necessary in order to insure that the Holder is given the practical opportunity to exercise this Warrant prior to such
time so as to participate in or vote with respect to such transaction; provided, however, that the failure to deliver such notice
or any defect therein shall not affect the validity of the corporate action required to be described in such notice.


10.      
Fractional Shares. The Company shall not be required to issue or cause to be issued fractional Warrant Shares on
the exercise of this Warrant. If any fraction of a Warrant Share would, except for the provisions of this Section, be issuable
upon exercise of this Warrant, the number of Warrant Shares to be issued will be rounded up to the nearest whole share or right
to purchase the nearest whole share, as the case may be.


11.      
Notices. Any and all notices or other communications or deliveries hereunder (including without limitation any Exercise
Notice) shall be in writing and shall be deemed given and effective on the earliest of (i) the date of transmission, if such notice
or communication is delivered via facsimile at the facsimile number specified in this Section prior to 5:30 p.m. (New York City
time) on a Trading Day, (ii) the next Trading Day after the date of transmission, if such notice or communication is delivered
via facsimile at the facsimile number specified in this Section on a day that is not a Trading Day or later than 5:30 p.m. (New
York City time) on any Trading Day, (iii) the Trading Day following the date of mailing, if sent by a nationally recognized overnight
courier service specifying next Business Day delivery, or (iv) upon actual receipt by the party to whom such notice is required
to be given, if by hand delivery. The address and facsimile number of a party for such notices or communications shall be as set
forth in the Loan Agreement, unless changed by such party by two (2) Trading Days’ prior notice to the other party in accordance
with this Section 11.



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12.      
Warrant Agent. The Company shall serve as warrant agent under this Warrant. Upon thirty (30) days’ notice to
the Holder, the Company may appoint a new warrant agent. Any corporation into which the Company or any new warrant agent may be
merged or any corporation resulting from any consolidation to which the Company or any new warrant agent shall be a party or any
corporation to which the Company or any new warrant agent transfers substantially all of its corporate trust or stockholders services
business shall be a successor warrant agent under this Warrant without any further act. Any such successor warrant agent shall
promptly cause notice of its succession as warrant agent to be mailed (by first class mail, postage prepaid) to the Holder at the
Holder’s last address as shown on the Warrant Register.


13.      
Indemnification.


The Company shall indemnify,
defend and hold the Holder and its affiliates, and their respective directors, officers, partners, managers, members, employees,
agents, attorneys, or any other Person affiliated with or representing any of the foregoing (each, an “Indemnified Person”)
harmless from and against all obligations, demands, claims, costs, losses, liabilities, damages, and expenses asserted against
any Indemnified Person in connection with or arising out of the issuance of this Warrant or any exercise thereof by the Holder.


 


14.      
Payment of Exercise Price. The Holder, at its election, may either pay the Exercise Price in immediately available
funds, or satisfy its obligation to pay the Exercise Price through a “cashless exercise,” in which event the Company
shall issue to the Holder the number of Warrant Shares determined as follows:


	 	X = Y [(A-B)/A]
	where:	 
	 	X = the number of Warrant Shares to be issued to the Holder.
	 	 
	 	Y = the number of Warrant Shares with respect to which this Warrant is being exercised.
	 	 
	 	A = the Current Market Price (as of the date of such calculation) of one share of Common Stock.
	 	 
	 	B = the Exercise Price (as adjusted to the date of such calculation).


 


For purposes of this
Warrant, the “Current Market Price” of one share of the Company’s Common Stock as of a particular date
shall be determined as follows: (a) if traded on a national securities exchange, the Current Market Price shall be deemed to be
the arithmetic average of the VWAPs for the five (5) consecutive Trading Days immediately preceding the applicable date; (b) if
traded over-the-counter but not on the Nasdaq Stock Market, the Current Market Price shall be deemed to be the average of the closing
bid and asked prices as of five (5) Business Days immediately prior to the date of exercise indicated in the Exercise Notice; and
(c) if there is no active public market, the Current Market Price shall be the fair market value of the Common Stock as of the
date of exercise, as determined by an independent appraiser selected in good faith by the Holder.



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For purposes of Rule
144, it is intended, understood and acknowledged that the Warrant Shares issued in a cashless exercise transaction shall be deemed
to have been acquired by the Holder, and the holding period for the Warrant Shares shall be deemed to have commenced, on the Issuance
Date.


15.      
Miscellaneous.


(a)          
Subject to the restrictions on transfer set forth on the first page hereof and in Section 3, this Warrant may be
assigned by the Holder. This Warrant may not be assigned by the Company except to a successor in the event of a Fundamental Transaction
or with the prior written consent of the Holder. This Warrant shall be binding on and inure to the benefit of the parties hereto
and their respective successors and assigns. Subject to the preceding sentence, nothing in this Warrant shall be construed to give
to any Person other than the Company and the Holder any legal or equitable right, remedy or cause of action under this Warrant.
This Warrant constitutes the entire agreement of the parties with respect to the subject matter hereof. This Warrant may be amended
only in writing signed by the Company and the Holder and their successors and assigns.


(b)         
The Company will not, by amendment of its governing documents or through any reorganization, transfer of assets, consolidation,
merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance
of any of the terms of this Warrant, but will at all times in good faith assist in the carrying out of all such terms and in the
taking of all such action as may be necessary or appropriate in order to protect the rights of the Holder against impairment. Without
limiting the generality of the foregoing, the Company (i) will take all such action as may be reasonably necessary or appropriate
in order that the Company may validly and legally issue fully paid and nonassessable Warrant Shares on the exercise of this Warrant,
and (ii) will not close its stockholder books or records in any manner which interferes with the timely exercise of this Warrant.


(c)
         
Governing Law; Venue; Waiver Of Jury Trial. all questions concerning the construction, validity, enforcement and
interpretation of this warrant shall be governed by and construed and enforced in accordance with the laws of the state of new
york (except for matters governed by corporate law in the state of Delaware). each party hereby irrevocably submits to the exclusive
jurisdiction of the state and federal courts sitting in the city of new york, borough of manhattan, for the adjudication of any
dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein, and hereby irrevocably
waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction
of any such court, that such suit, action or proceeding is improper. each party hereby irrevocably waives personal service of process
and consents to process being served in any such suit, action or proceeding by mailing a copy thereof via registered or certified
mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this warrant
and agrees that such service shall constitute good and sufficient service of process and notice thereof. nothing contained herein
shall be deemed to limit in any way any right to serve process in any manner permitted by law. the company hereby waives all rights
to a trial by jury.



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(d)         
The headings herein are for convenience only, do not constitute a part of this Warrant and shall not be deemed to limit
or affect any of the provisions hereof.


(e)          
In case any one or more of the provisions of this Warrant shall be invalid or unenforceable in any respect, the validity
and enforceability of the remaining terms and provisions of this Warrant shall not in any way be affected or impaired thereby
and the parties will attempt in good faith to agree upon a valid and enforceable provision which shall be a commercially reasonable
substitute therefor, and upon so agreeing, shall incorporate such substitute provision in this Warrant.


[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK,

SIGNATURE PAGE FOLLOWS]


 



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IN WITNESS WHEREOF,
the Company has caused this Warrant to be duly executed by its authorized officer as of the date first indicated above.


	FALCONSTOR SOFTWARE, INC.
	 
	By:	
        /s/ Patrick McClain

	Name:	Patrick McClain
	Title:	Executive Vice President, Chief Financial Officer, Treasurer and Secretary


 





	Acknowledged
    and Agreed to by:
	 
	HCP-FVA, LLC
	 
	By:	
        /s/ Martin Hale

	Name:	Martin Hale
	Title:	Managing Member


  



 



    	13



     


    

 


FORM OF EXERCISE NOTICE


(To be executed by the Holder to exercise
the right to purchase shares of Common Stock under the foregoing Warrant)


To: FALCONSTOR
SOFTWARE, INC.


The undersigned is the Holder of anWarrant
(the “Warrant”) issued by FALCONSTOR SOFTWARE, INC., a Delaware corporation (the “Company”).
Capitalized terms used herein and not otherwise defined have the respective meanings set forth in the Warrant.


		1.	The Warrant is currently exercisable to purchase a total of ______________ Warrant Shares.



		2.	The undersigned Holder hereby exercises its right to purchase _________________ Warrant Shares
pursuant to the Warrant.



		3.	The Holder intends that payment of the Exercise Price shall be made as (check one):



____“Cash Exercise”
under Section 14


____“Cashless Exercise”
under Section 14 


		4.	Pursuant to this exercise, the Company shall deliver to the Holder _______________ Warrant Shares
in accordance with the terms of the Warrant.



		5.	Following this exercise, the Warrant shall be exercisable to purchase a total of ______________
Warrant Shares.



 


[REMAINDER OF
PAGE INTENTIONALLY LEFT BLANK,

SIGNATURE PAGE FOLLOWS]


 






    	 



     


    




 


IN WITNESS WHEREOF, the undersigned has caused
this Exercise Notice to be duly executed as of the date indicated below.


 





Dated: __________, _____


 


	 	Name of Holder:
	 	 
	 	(Print) _______________
	 	 
	 	By:	
 


	 	 	Name:	 
	 	 	Title:	 
	 	 	 	 
	 	(Signature must conform in all respects to name of holder
as specified on the face of the Warrant)


 











    	 



     


    

 


FORM OF ASSIGNMENT


[To be completed
and signed only upon transfer of Warrant]


FOR VALUE RECEIVED,
the undersigned hereby sells, assigns and transfers unto _______________ the right represented by the within Warrant
to purchase _______________ shares of Common Stock of FALCONSTOR SOFTWARE, INC. to which the within Warrant relates and appoints _______________
attorney to transfer said right on the books of FALCONSTOR SOFTWARE, INC. with full power of substitution in the premises.





 


Dated: _______________,
_____


	 	
 


	 	(Signature must conform in all respects to name of holder as specified on the face of the Warrant)
	 	 
	 	
 


	 	Address of Transferee
	 	 
	 	
 


	 	 
	 	
 


	 	 
	In the presence of: