Document:

Ex. 10.1 - Q2 2015

                                                Exhibit 10.1
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this “Agreement”) is entered into this 24th day of July, 2015 by and between FalconStor Software, Inc., a Delaware corporation (the “Company” or “FalconStor”), and Gary Quinn (the “Employee”), whose address is 2 Pheasant Run, Old Field, NY  11733.
WHEREAS, the Company desires to continue to employ Employee and to enter into a further agreement embodying the terms of such employment; and 
WHEREAS, the Employee desires to accept continued employment with the Company as its President and CEO, subject to the terms and conditions of this Agreement. 
NOW, THEREFORE, in consideration of the mutual promises herein contained, the parties agree as follows: 
1.Definitions. 
As used in this Agreement, the following terms will have the following meanings:
(a)    Board. “Board” or “Board of Directors” means the Board of Directors of Company.
(b)    Cause. “Cause” means the occurrence of either of the following:
(i)    Willful misconduct or gross neglect in carrying out the duties of President or Chief Executive Officer, provided that no action or inaction is “willful” unless done or omitted in bad faith by the Employee or without the reasonable belief of the Employee that the action or omission was not adverse to the best interests of the Company, or
(ii)    The conviction of the Employee (or the entering by the Employee of a plea of guilty or nolo contendere) to A) any felony involving dishonesty, moral turpitude or violence, (B) any second felony during the Term of any kind, (C) any misdemeanor involving moral turpitude, or (D) any crime involving the Company or its property, or
(iii)    A breach of Sections 6(b), (c) or (e) of this Agreement.
(c)    “Change of Control” means and includes each and any of the following:
 (i)    An acquisition (other than directly from the Company) of any voting securities of the Company (the “Voting Securities”) by any “Person” (as the term “person” is used for purposes of Section 13(d) or 14(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), immediately after which such Person has “Beneficial Ownership” (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of more than fifty percent (50%) of (1) the then-outstanding shares of common stock of the Company (or any other securities into which such shares of common stock are changed or for which such shares of common stock are exchanged) (the “Shares”) or (2) the combined voting power of the Company’s then-outstanding Voting Securities; provided, however, that in determining whether a Change in Control has occurred pursuant to this paragraph (a), the acquisition of Shares or Voting Securities in a “Non-Control Acquisition” (as hereinafter defined) shall not constitute a Change in Control.  A “Non-Control Acquisition” shall mean an acquisition by (i) an employee benefit plan (or a trust forming a part thereof) maintained by (A) the Company or (B) any corporation or other Person the majority of the voting power, voting equity securities or equity interest of which is owned, directly or indirectly, by the Company (for purposes of this definition, a “Related Entity”), (ii) the Company or any Related Entity, or (iii) any Person in connection with a “Non-Control Transaction” (as hereinafter defined);

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(ii)    The individuals who, as of the Effective Date, are members of the board of directors of the Company (the “Incumbent Board”), cease for any reason to constitute at least a majority of the members of the board of directors of the Company or, following a Merger (as hereinafter defined), the board of directors of (x) the corporation resulting from such Merger (the “Surviving Corporation”), if fifty percent (50%) or more of the combined voting power of the then-outstanding voting securities of the Surviving Corporation is not Beneficially Owned, directly or indirectly, by another Person (a “Parent Corporation”) or (y) if there is one or more than one Parent Corporation, the ultimate Parent Corporation; provided, however, that, if the election, or nomination for election by the Company’s common stockholders, of any new director was approved by a vote of at least two-thirds of the Incumbent Board, such new director shall, for purposes of this Agreement, be considered a member of the Incumbent Board; and provided, further, however, that no individual shall be considered a member of the Incumbent Board if such individual initially assumed office as a result of an actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the board of directors of the Company (a “Proxy Contest”), including by reason of any agreement intended to avoid or settle any Proxy Contest; or 
(iii)    The consummation of:
(i)    A merger, consolidation or reorganization (1) with or into the Company or (2) in which securities of the Company are issued (a “Merger”), unless such Merger is a “Non-Control Transaction.”  A “Non-Control Transaction” shall mean a Merger in which:
(A)    the stockholders of the Company immediately before such Merger own directly or indirectly immediately following such Merger at least fifty percent (50%) of the combined voting power of the outstanding voting securities of (x) the Surviving Corporation, if there is no Parent Corporation or (y) if there is one or more than one Parent Corporation, the ultimate Parent Corporation; 
(B)    the individuals who were members of the Incumbent Board immediately prior to the execution of the agreement providing for such Merger constitute at least a majority of the members of the board of directors of (x) the Surviving Corporation, if there is no Parent Corporation, or (y) if there is one or more than one Parent Corporation, the ultimate Parent Corporation; and 
(C)    no Person other than (1) the Company, (2) any Related Entity, or (3) any employee benefit plan (or any trust forming a part thereof) that, immediately prior to the Merger, was maintained by the Company or any Related Entity, or (4) any Person who, immediately prior to the Merger had Beneficial Ownership of twenty percent (20%) or more of the then outstanding Shares or Voting Securities, has Beneficial Ownership, directly or indirectly, of twenty percent (20%) or more of the combined voting power of the outstanding voting securities or common stock of (x) the Surviving Corporation, if fifty percent (50%) or more of the combined voting power of the then outstanding voting securities of the Surviving Corporation is not Beneficially Owned, directly or indirectly by a Parent Corporation, or (y) if there is one or more than one Parent Corporation, the ultimate Parent Corporation;
(ii)    A complete liquidation or dissolution of the Company; or
(iii)    The sale or other disposition of all or substantially all of the assets of the Company and its subsidiaries taken as a whole to any Person (other than (x) a transfer to a Related Entity, (y) a transfer under conditions that would constitute a Non-Control Transaction, with the disposition of assets being regarded as a Merger for this purpose or (z) the distribution to the Company’s stockholders of the stock of a Related Entity or any other assets).
Notwithstanding the foregoing, a Change in Control shall not be deemed to occur solely because any Person (the “Subject Person”) acquired Beneficial Ownership of more than the permitted amount of the then outstanding Shares or Voting Securities as a result of the acquisition of Shares or Voting Securities by the Company which, by reducing the number of Shares or Voting Securities then outstanding, increases the proportional number of shares Beneficially Owned by the Subject Persons; provided, that if a Change in Control would occur (but for the operation of this sentence) as a result of the acquisition of Shares or Voting Securities by the Company and, after such share acquisition by the Company, the Subject Person becomes the Beneficial Owner of any additional Shares or Voting Securities and such 

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Beneficial Ownership increases the percentage of the then outstanding Shares or Voting Securities Beneficially Owned by the Subject Person, then a Change in Control shall occur.
(d)    Code.  “Code” means the Internal Revenue Code of 1986, as amended from time to time, and the Treasury Regulations and other interpretive guidance issued thereunder.
(e)    Disability.  For purposes of this Agreement, “Disability” means, as a result of a physical or mental injury or illness, Employee is unable to perform the essential functions of Employee’s job with reasonable accommodation for a period of (i) ninety (90) consecutive days or (ii) one hundred and twenty (120) days in any twelve (12) month period. Any question as to the existence of a Disability to which the Employee and the Company cannot agree will be determined in writing by a qualified independent physician mutually acceptable to Employee and the Company.  If Employee and the Company cannot agree as to a qualified independent physician, each will appoint a physician and those two physicians will select a third who shall make such determination in writing.  This written determination of Disability will be final and conclusive for all purposes under this Agreement.
(f)    Good Reason.  “Good Reason” means the occurrence of any of the following events or conditions without Employee’s prior written consent:
(i)    a material diminution in Employee’s title, position or reporting responsibility;
(ii)    a material diminution in Employee’s authority, duties or responsibilities;
(iii)    a material diminution in Employee’s total available  compensation, rather than any of the parts individually;
(iv)    failure of the Board or the relevant committee thereof to nominate the Employee for election as a member of the Board of Directors of the Company whenever his term as such a member shall expire;
(v)    a material change in the geographic location at which Employee must perform services for the Company (and the Company and Employee hereby agree that any involuntary relocation of Employee’s principal place of business to a location outside of the New York metropolitan area would constitute a material change); 
(vi)    the inability of the Company to maintain a minimum of two million dollars ($2,000,000) of Directors & Officers Insurance; or 
(vii)    any other action or inaction that constitutes a material breach by the Company or any successor or affiliate of its obligations to Employee under this Agreement.
Employee must provide written notice to the Company of the occurrence of any of the foregoing events or conditions without Employee’s prior written consent within fifteen (15) days after the Employee has received knowledge of the occurrence of such event. The Company or any successor or affiliate will have a period of thirty (30) days to cure such event or condition after receipt of written notice of such event or condition from Employee. Any voluntary termination of Employee’s employment for “Good Reason” following such thirty (30) day cure period must occur no later than the date that is five (5) days following the initial occurrence of such event or condition which occurred without Employee’s prior written consent. 
2.    Services to Be Rendered.
(a)    Duties and Responsibilities.  Employee shall serve as President and Chief Executive Officer of the Company, commencing on July 24, 2015. Employee shall report directly to the Board of Directors and its committees. Employee shall perform those duties and have such authority and powers as are customarily associated with the office of a Chief Executive Officer of a company engaged in a business similar to the business of the Company.  The Company 

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shall elect Employee, and Employee hereby consents to serve as a director of Company, without any additional salary or compensation.  Employee’s primary place of work shall be the Company’s principal place of business in Melville, New York, or such other location as directed by the Board (but not in violation of Section 1(f)(v) of this Agreement).
(b)    Exclusive Services. Employee shall at all times faithfully, diligently, and to the best of his ability, perform the lawful duties that may be assigned to Employee hereunder and, except during vacation periods or absences due to temporary illnesses, shall devote substantially all of his productive time and efforts to the performance of such duties. In no case will Employee be requested or directed to perform any act that is in violation of applicable law. Subject to the terms of Section 9 of this Agreement, this shall not preclude Employee from (i) devoting reasonable time to personal and family investments, (ii) serving on non-profit and corporate boards and committees, (iii) participating in industry associations, and (iv) delivering lectures, fulfilling speaking engagements, or teaching at educational institutions, provided such activities do not interfere with his duties to the Company, or do not present a conflict of interest with respect to the Company’s products or services, as determined in good faith by the Board of Directors. 
3.    Term. Subject to Section 5 hereof, this Agreement will automatically renew every twelve (12) months  (the “Term”), unless either party gives notice to the other party that it will not renew the agreement at least sixty (60) days prior to the end of the Term.
4.    Compensation and Benefits. 
The Company shall pay or provide, as the case may be, to Employee the compensation and other benefits and rights set forth in this Section 4.
(a)    Base Salary.  The Company shall pay Employee a base salary during each year of this Agreement of $475,000 per year in cash (the “Base Salary”), payable at such intervals as the Company pays employee salaries generally, with annual evaluations of the Employee’s Base Salary based upon the Employee’s performance and other criteria as determined by the Compensation Committee of the Board of Directors.   
(b)    Bonus.  If, during the Term, the Company institutes a bonus plan for senior executives, the Employee shall be entitled to participate in such plan.
(c)    Benefits.  Employee is entitled to participate in and receive benefits under all the Company’s benefit plans and arrangements, including, without limitation, group disability, life insurance, health insurance, and retirement and pension plans, and any employee benefit plan or arrangement made available in the future by the Company to any of its senior Employees generally, subject to and on a basis consistent with the terms, conditions and overall administration of such plans and arrangements. 
(d)    Expenses.  The Company shall reimburse Employee for reasonable out-of-pocket business expenses incurred in connection with the performance of his duties hereunder, provided such expenses conform to any travel and expense plan adopted by the Company during the Term that is applicable to all United States employees of the Company, including but not limited to (i) annual memberships in business organizations and associations, subject to Employee furnishing the Company with evidence in the form of receipts satisfactory to the Company substantiating the claimed expenditures. 
(e)    Vacation.  The Company shall provide Employee with paid vacation in accordance with the Company’s policies. 
(f)    Restricted Stock.  The Compensation Committee shall grant Employee at its first meeting following July 24, 2015 500,000 restricted shares of the Company’s common stock (the “Restricted Shares”), pursuant to the 2006 Plan.  The Restricted Shares will vest and the restrictions thereon will lapse as follows (1) fifty percent (50%) when the closing trading price of the Company’s Common Stock on its principal trading market is at or greater than the amount set forth in Schedule A for ninety (90) consecutive trading days; and (2) one hundred percent (100%) when the closing trading price of the Company’s Common Stock on its principal trading market is at or greater than the amount set forth in Schedule A for ninety  (90) consecutive trading days .  In the event of a Change of Control, as 

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defined under Section 1(c) of this Agreement, during the term of the Employee’s employment with Company, or Termination without Cause or for Good Reason all of Employee’s unvested Restricted Shares shall automatically vest on the date of such Change of Control or Termination without cause or for Good Reason.  If, at any time after any portion of the Restricted Shares has vested, the Restricted Shares are not registered with the Securities and Exchange Commission, the Employee shall be entitled to “piggy-back” registration rights on all registrations of the Company.
(g)    Provisions Applicable to Reimbursements.  To the extent that any payments or reimbursements provided to Employee under this Agreement are deemed to constitute compensation to which Treasury Regulation Section 1.409A-3(i)(1)(iv) would apply, such amounts shall be paid or reimbursed to Employee promptly, but in no event later than December 31 of the year following the year in which the expense is incurred. The amount of any such payments eligible for reimbursement in one year shall not affect the payments or expenses that are eligible for payment or reimbursement in any other taxable year, and Employee’s right to such payments or reimbursement shall not be subject to liquidation or exchange for any other benefit.
(h)    Taxes.  Employee acknowledges that Employee has sole responsibility for the payment of all federal, state and local taxes, if any, on all compensation and benefits.
5.    Termination; Notice to Executive; Consequences of Termination.
(a)    Notwithstanding any provision of this Agreement to the contrary, the employment of the Executive hereunder will terminate on the date of the first of the following to occur (the “Termination Date”):
(i)    the date of the Executive’s death;
(ii)    the date on which the Employee receives the written determination of the independent physician and the Company’s notice of termination on account of Disability;
(iii)    the date on which the Company gives the Employee written notice of termination for Cause; 
(iv)    ten (10) days after the date on which the Company gives the Employee written notice of termination without Cause; 
(v)    five (5) days after the Employee gives written notice of his  resignation from the Company for Good Reason (i.e., following the applicable cure period);
(vi)    the date on which the Employee gives written notice of his resignation without Good Reason; 
(vii)    the non-renewal of the Agreement.
(b)    In lieu of any other remedies available to the Employee, and in exchange for a written general release of the Company and its employees, officers and directors, Employee shall be entitled to receive the following payments and benefits upon termination of employment:
(viii)    Termination without Cause or for Good Reason.  If Employee’s employment is terminated by the Company without Cause or by Employee for Good Reason, the Company shall provide Employee:
(A)    his fully earned but unpaid Base Salary, when due, through the Termination Date at the rate then in effect, plus all other amounts which Employee earned and accrued under any compensation plan of the Company at the time of termination; 

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(B)    a lump sum cash payment equal to: twelve (12) months of the Employee’s annual Base Salary, up to a maximum of $475,000, payable within fifteen (15) days following the Termination Date, plus, in addition, if the Employee’s employment is terminated by the Company without Cause or by Employee for Good Reason prior to July 24, 2016, the Employee shall be entitled to be paid his full Base Salary through July 24, 2016; 
(C)    a pro rata portion of any Bonus earned and payable; and
(D)    as permitted by law, the Company shall pay all COBRA benefits through July 24, 2017, then subsequently, the Employee shall have the right to COBRA benefits, at Employer’s cost.
provided, however, the Employee will not be entitled to receive any payments or benefits under this Section 5(b)(i) if the Employee has received the Change of Control Severance Benefits payments from the Company under the plan in effect as of the date of this Agreement (the 2005 Amended and Restated Key Executive Severance and Protection Plan, amended as of April 1, 2014). 
(ix)    Termination as a result of Death.  If Employee's employment is terminated as a result of death, the Company shall provide Employee’s estate his fully earned but unpaid Base Salary, when due, through the Termination Date at the rate then in effect, plus all other amounts which Employee earned and accrued under any compensation plan of the Company at the Termination Date.
(x)    Termination for Cause or Voluntary Resignation without Good Reason.  If Employee’s employment is terminated by the Company for Cause or by Employee without Good Reason,  except as otherwise set forth in this Agreement, the Company shall not have any other or further obligations to Employee under this Agreement (including any financial obligations), except that the Company shall pay Employee (i) Employee’s fully earned but unpaid Base Salary, through the Termination Date at the rate then in effect, and (ii) all other amounts or benefits  earned and accrued by Employee  under any compensation, retirement or benefit plan  of the Company at the Termination Date in accordance with the terms of such plans or practices, including, without limitation, any continuation of benefits required by COBRA or other applicable law, such benefits continuation to be at Employee’s cost.
(xi)    Termination Due to Expiration of Agreement.  If the Term of this agreement expires and the parties do not enter into a subsequent agreement extending Employee’s employment as President and Chief Executive Officer, the Company shall provide Employee: 
(A)    his fully earned but unpaid Base Salary, when due, through the Termination Date at the rate then in effect, plus all other amounts which Employee earned and accrued under any compensation plan of the Company at the time of termination; and
(B)    the right to COBRA benefits, at Employee’s cost;
 
(c)    Delay of Payments.  Notwithstanding anything herein to the contrary, to the extent any payments to Employee, or his estate pursuant to Section 5 are treated as non-qualified deferred compensation subject to Section 409A of the Code, then (i) no amount shall be payable pursuant to such section unless Employee’s termination of employment constitutes a “separation from service” with the Company (as such term is defined in Treasury Regulation Section 1.409A-1(h) and any successor provision thereto) (a “Separation from Service”), and (ii) if at the time of Employee’s Separation from Service Employee is a “specified employee” as defined in Section 409A of the Code, as determined by the Company in accordance with Section 409A of the Code, and the deferral of the commencement of any payments or benefits otherwise payable hereunder as a result of such termination of employment is necessary in order to prevent any accelerated or additional tax under Section 409A of the Code, then the Company will defer the commencement of the payment of any such payments or benefits hereunder (without any reduction in such payments or benefits ultimately paid or provided to Employee) until the date that is six (6) months following Employee’s Separation 

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from Service (or such earlier date as is permitted under Section 409A of the Code); provided, however, that the Company shall use its reasonable efforts to minimize such deferral and the dollar amount of payments or benefits so impacted.
6.    Certain Covenants. 
(a)    Return of Company Property    The Employee agrees that following the termination of his employment for any reason, he will return all property of the Company which is then in or thereafter comes into the Employee’s possession, including, but not limited to, mobile equipment, documents, contracts, agreements, plans, photographs, books, notes, data stored electronically on tapes, computer disks or in any other manner and all copies of the foregoing as well as any other materials or equipment supplied by the Company to the Employee.
(b)    Confidentiality.  
(i)    The Employee acknowledges that he has already had access to the Confidential Information (as hereinafter defined) of the Company, and that he will come into possession of additional Confidential Information in connection with his employment as President and Chief Executive Officer.  The Employee will treat and hold as confidential all of the Confidential Information of the Company and refrain from disclosing or using any of the Confidential Information of the Company except in connection with his employment, and except as otherwise required hereunder or as may be required by law.  If, in the absence of a protective order or the receipt of a waiver hereunder, the Employee is compelled to disclose any Confidential Information under any court order, the Employee may disclose the Confidential Information; provided, however, that the Employee will use his best efforts to obtain, at the request and expense of Company, an order or other assurance that confidential treatment will be accorded to such portion of the Confidential Information required to be disclosed as the Company will designate. 
(ii)    In the event of any breach by the Employee of any provision of Section 6(b) herein, the Company will be entitled to injunctive or other equitable relief, restraining the Employee from using or disclosing any Confidential Information in whole or in part, or from engaging in conduct that would constitute a breach of the obligations of the Employee under Section 6(b).  Such relief will be in addition to and not in lieu of any other remedies that may be available, including an action for the recovery of damages.  The provisions set forth in Section 6(b) will survive the termination of this Agreement. 
(iii)    For purposes of this Agreement, “Confidential Information” means with respect to the Company any and all confidential or proprietary information and trade secrets of the Company including all information of any nature and in any form which at the time or times concerned is not in the public domain (other than because of illegal or unauthorized disclosure) and which relates to any one or more of the aspects of the Company’s business (including, but not limited to, the assets of the Company), and accounts, pricing policies, customer lists, referral lists, supplier lists, computer software and hardware, or any other materials relating to the Company's business or Company's customers or any trade secrets or Confidential Information, including, without limitation, any business or operational methods, know-how, marketing plans or strategies, business acquisition plans, financial or other performance data, personnel and other policies of Company, whether generated by the Employee or by any other person.  
(c)    Non-Competition.  
(i)    During the Agreement, and for One (1) year thereafter, unless the Employee is terminated without Cause or resigns for Good Reason, the Employee will not, directly or indirectly, alone or as a partner, joint venturer, officer, director, employee, consultant, agent, independent contractor or stockholder of any entity (other than passive stockholdings of less than two (2%) per cent of the outstanding equity of an entity whose securities are registered under the Securities Act of 1933, as amended),  engage in any business activity which is in competition with the Company.  For purposes of this Agreement, a business activity is in competition with the Company if in any manner involves the development and/or marketing of computer hardware and/or software for data protection or storage management.

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(ii)    The Employee acknowledges that a breach or threatened breach of the provisions contained in this Section 6(c) will cause the Company irreparable injury.  The Employee therefore agrees that the Company will be entitled, in addition to any other right or remedy, to a temporary, preliminary and permanent injunction, without the necessity of proving the inadequacy of monetary damages or the posting of any bond or security, enjoining or restraining the Employee from any such violation or threatened violations.
(d)    Ability to Enter into Agreement.  The Employee represents and warrants that his services for the Company and the execution and delivery of this Agreement and compliance with all the terms of this Agreement does not and will not breach any written or oral agreement he has entered into relating to intellectual property, non-competition, non-solicitation, or that would  otherwise prohibit or restrict in any way the Employee’s obligations under this Agreement.  The Employee has not and will not enter into any written or oral agreement in conflict with this Agreement.
(e)    Inventions.  With respect to Inventions (including but not limited to software) made or conceived by the Employee, whether or not during the hours of his employment or with the use of the Company's facilities, materials or personnel, either solely or jointly with others during the Employee’s employment by the Company:
(i) The Employee shall inform the Company promptly and fully of such Inventions by written report, setting forth in detail the procedures employed and the results achieved.  A report shall be submitted by the Employee upon completion of any studies or research projects undertaken on the Company's behalf whether or not in the Employee's opinion a given project has resulted in an Invention.
(ii) The Employee shall apply, at the Company's request and expense, for the United States and/or foreign letters patent or other registrations either in the Employee's name or otherwise, as the Company shall desire.     
(iii) The Employee hereby assigns and agrees to assign to the Company all of his right and interest to any and all such Inventions and to make applications for United States and/or foreign letters patent or other registrations granted upon such Invention.
(iv) The Employee shall acknowledge and deliver promptly to the Company, without charge to the Company, but at its expense, such written instruments and do such other acts in support of his inventorship, as may be necessary in the opinion of the Company to obtain and maintain United States and/or foreign letters patent or other registration and to vest the entire right in such Inventions, patents and patent applications in the Company. The Employee agrees that if the Company is unable because of the Employee’s mental or physical incapacity or unavailability or for any other reason to secure the Employee’s signature to apply for or to pursue any application for any United States or foreign patents or copyright registrations covering Inventions assigned to the Company as above, the Employee hereby irrevocably designates and appoints the Company and its duly authorized officers and agents as the Employee’s agent and attorney in fact, to act for and in the Employee’s behalf and stead to execute and file any such applications and to do all other lawfully permitted acts to further the application for, prosecution, issuance, maintenance or transfer of letters patent or copyright registrations thereon with the same legal force and effect as if originally executed by the Employee.  The Employee hereby waives and irrevocably quitclaims to the Company any and all claims, of any nature whatsoever, which the Employee now or hereafter may have for infringement of any and all proprietary rights assigned to the Company.
(v) The Company shall also have the royalty‐free right to use in its business, and to make, use, and sell products and/or services derived from any Inventions, discoveries, concepts and ideas, whether or not patentable, including, but not limited to applications, methods, formulas and techniques, as well as improvements or know‐how, whether or not within the scope of Inventions, but which are obtained, created or made by the Employee during the Employment Period, without payment of any additional compensation to the Employee.
(vi) For the purposes of this Employment Agreement, "Inventions" means discoveries, concepts and ideas, whether patentable or not, including but not limited to processes, methods, formulas and techniques as well as improvements or know‐how.

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(f)    It is the desire and intent of the parties that the provisions of this Section 6 shall be enforced to the fullest extent permissible under the laws and public policies applied in each jurisdiction in which enforcement is sought.  Accordingly, if any particular provision of this Section 6 shall be adjudicated to be invalid or unenforceable, such provision of this Section 6 shall be deemed amended to delete from the portion thus adjudicated to be invalid or unenforceable, such deletion to apply only with respect to the operation of such provisions of this Section 6 in the particular jurisdiction in which such adjudication is made and, further, only to the extent required in order for this Section 6 to be enforceable.
(g)    If the Company institutes a proceeding to the enforce its rights under this Section 6, and it is finally determined, following the exhaustion of any or all appeals, that the Employee did not violate the terms of this Section 6, then the Company shall reimburse the Employee for his reasonable attorney’s fees and costs for the cost of the Employee’s successful defense.
7.    Indemnification.  The Company will indemnify the Employee to the extent set forth in the Company’s charter and by-laws and by applicable law. 
8.    Entire Agreement; Amendment; Waiver; and Pre-emption.  This Agreement constitutes the entire Agreement between the parties hereto with respect to the subject matter thereof and merges and supersedes all prior understandings or agreements between the parties.  This Agreement may not be amended, changed or modified absent a writing signed by both parties or, with respect to a waiver, signed by the party to be charged.  This Agreement will be binding upon and inure to the benefit of the heirs, executors, administrators, successors and permitted assigns of the parties hereto.  The Company’s failure to enforce any provision of this Agreement will not constitute a waiver of its right to enforce such provision.  In the event of any conflict between the terms of this Agreement and the terms of any other employment related plan or agreement, including but not limited to the Option Agreement, the terms of this Agreement will prevail.
9.    Assignment.  Except as expressly provided herein, neither this Agreement nor any of the rights or obligations hereunder may be assigned or delegated by any party hereto without the express written consent of the other party hereto, provided, however, that no consent will be required for the assignment to any successor to all or substantially all of the Company’s assets or business (whether by purchase, merger, consolidation or otherwise).
10.    Severability.  If any of the covenants or other provisions in this Agreement is hereafter construed to be invalid or unenforceable, it is the intention of the parties that the same will not affect the remainder of the covenant or covenants or other provisions, which will be given full effect without regard to the invalid portions.  It is the intention of the parties that this Agreement be enforced to the fullest extent permitted by law.  Accordingly, if any court construes any provision or clause of this Agreement, or any portion thereof, to be illegal, void or unenforceable because of the scope of such covenant or provision, it is the intention of the parties that the Court will modify such a provision to render its scope legal and enforceable to the maximum extent permitted by law and, in its modified form, such provision will then be enforceable and will be enforced.
11.    Section 409A Compliance.    This Agreement is intended to comply with Internal Revenue Code Section 409A and final Treasury regulations.
12.    Notices.  All notices provided for in this Agreement will be in writing signed by the party giving such notice sent by (i) registered or certified mail, return receipt requested, (ii) any prepaid overnight courier delivery service then in general us, (iii) hand or (iv) facsimile transmission or similar means of communication if such transmission of such notice is confirmed immediately by any of the other means set forth above, as follows:

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	If to the Company:
	c/o FalconStor Software, Inc.

	 
	 
	2 Quadrangle, Suite 2S01

	 
	 
	Melville, New York 11747

	 
	 
	Attention: Chief Financial Officer

	 
	 
	 

	 
	If to the Employee:
	Gary Quinn

	 
	 
	2 Pheasant Run

	 
	 
	Old Field, NY  11733

        
or at such other address as will be indicated to either party in writing.  Notice of change of address will be effective only upon receipt. A notice provided in the manner required herein will be deemed given : (i) if delivered personally, upon delivery; (ii) if sent by overnight courier, on the first business day after it is sent; (iii) if mailed, three business days after mailing; and (iv) if sent by fax, upon actual receipt of the fax or confirmation thereof (whichever is first).  

13.    Governing Law; Jurisdiction. This Agreement will be governed and construed in accordance with the laws of the State of New York applicable to agreements executed and to be performed wholly within such State, without regard to any principles of conflicts of law. Each party agrees that any action or proceedings relating to this Agreement seeking injunctive relief or enforcement of an arbitration award may be instituted against such party in any appropriate court in the State of New York and hereby irrevocably submits to the jurisdiction of the State and Federal courts of the State of New York located in New York, Nassau or Suffolk counties and waives any claim of forum non conveniens with respect thereto.
14.    Descriptive Headings.  The Section headings contained herein are for reference purposes only and will not in any way affect the meaning or interpretation of this Agreement.
15.    Counterparts.  This Agreement may be executed in one or more counterparts, which, together, will constitute one and the same agreement.

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EMPLOYMENT AGREEMENT
SIGNATURE PAGE
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the date first written above.
	
				
	 
	 
	FALCONSTOR SOFTWARE, INC.
	 

	 
	 
	 
	 

	 
	By:
	/s/ Eli Oxenhorn
	 

	 
	 
	Eli Oxenhorn
	 

	 
	 
	Chairman of the Board of Directors
	 

	 
	 
	 
	 

	 
	 
	/s/ Gary Quinn
	 

	 
	 
	Gary Quinn
	 

11Ex. 10.2 - Q2 2015

Exhibit 10.2
INDEPENDENT CONTRACTOR SERVICES AGREEMENT
This Agreement is made and entered into on 24th of July, 2015 (the “Effective Date”) between FalconStor Software, Inc., a Delaware corporation and its successors or assignees (“Client” or the “Company”) and  RFN Prime Marketing, Inc., a Delaware LLC (the “Contractor”).  The parties agree as follows:
1.ENGAGEMENT OF SERVICES.  
1.1    Client may from time to time issue Project Assignment(s) in the form attached to this Agreement as Schedule A.  Subject to the terms of this Agreement, Contractor will, to the best of its ability, render the services set forth in Project Assignment(s) accepted by Contractor (the “Project(s)”) by the completion dates set forth therein.  The manner and means by which Contractor chooses to complete the Projects are in Contractor's sole discretion and control.  Contractor agrees to exercise the highest degree of professionalism, and to utilize its expertise and creative talents in completing such Projects.  In completing the Projects, Contractor agrees to provide and maintain its own equipment, tools and other materials at its own expense.  Client will make its facilities and equipment available to Contractor at mutually agreeable times.  Contractor shall perform the services necessary to complete the Projects in a timely and professional manner consistent with industry standards, and at a location, place and time that the Contractor deems appropriate.  
1.2    Contractor may not subcontract or otherwise delegate its obligations under this Agreement without Client's prior written consent.  Before any employee, consultant or subcontractor of Contractor performs services in  connection with this Agreement, each such employee, consultant and subcontractor must enter into a written agreement expressly for the benefit of Client containing provisions substantially equivalent to this Section 1.2 and to Sections 9 (No Conflict), 11 (Trade Secrets and Intellectual Property Rights) and 12.12 (Confidentiality).
2.    COMPENSATION.  Client will pay Contractor a fee for services rendered under this Agreement as set forth in Schedule A and also for reimbursable expenses provided Contractor has furnished such documentation for expenses as Client reasonably requested and in accordance with Client’s Business Travel, Entertainment and Expense Reimbursement Policy attached as Schedule C.  Upon termination of this Agreement for any reason, Contractor will be paid for reimbursable expenses in accordance with the preceding sentence.  
3.    INDEPENDENT CONTRACTOR RELATIONSHIP.  
3.1    Contractor’s relationship with Client 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.  Contractor is not the agent of Client and is not authorized to make any representation, contract, or commitment, express or implied, on behalf of Client unless specifically requested or authorized in writing to do so by Client.  Contractor will not be entitled to any of the benefits that Client may make available to its employees, such as group insurance, profit-sharing or retirement benefits.  Contractor 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 tax authority with respect to Contractor’s performance of services and receipt of fees under this Agreement.  Contractor will be solely responsible for and must maintain adequate records of expenses incurred in the course of performing services under this Agreement.  Because Contractor is an independent contractor, Client will not withhold or make payments for social security or employee payroll taxes; make unemployment insurance or disability insurance contributions; or obtain worker’s compensation insurance on Contractor’s behalf.  Contractor agrees to accept exclusive liability for complying with all applicable state and federal laws governing self-employed individuals, including obligations such as payment of taxes, social security, disability and other contributions based on fees paid to Contractor, its agents or employees under this Agreement.  Contractor hereby agrees to indemnify and defend Client against any and all such taxes or contributions, including penalties and interest.  
3.2    The Contractor agrees to abide by the Client Code of Business Conduct attached as Schedule B.  In addition, the Contractor acknowledges that any sales by him of Company Common Stock can only be made in accordance with the Company’s insider trading policy and during open trading windows of the Company.

3.3    Client will not be responsible for any out-of-pocket expenses incurred by or on behalf of the Contractor unless previously agreed upon and in direct relation to this Agreement.  Any reimbursable travel and entertainment expenses will be reimbursed in accordance with Client’s Business Travel, Entertainment and Reimbursement Policy as attached in Schedule C.  Client reserves the right in its sole discretion to change or modify its Business Travel, Entertainment and Reimbursement Policy at any time.  Contractor shall not submit invoices for expenses to Client more frequently than monthly. 
4.    CONTRACTOR REPRESENTATIONS AND WARRANTIES.  Contractor hereby represents and warrants that (a) Contractor has full right and power to enter into and perform this Agreement without the consent of any third party; (b) Contractor’s services and completion of the Projects under this Agreement do not violate any agreement or obligation between Contractor and any third party; (c) there is no other contract or duty on Contractor’s part now in existence inconsistent with this Agreement; (d) during the term of this Agreement, Contractor agrees not to accept work or enter into a contract or accept an obligation that would cause Contractor to not perform Contractor’s obligations under this Agreement or the scope of services for Client or that would cause a breach of this Agreement; (e) Contractor’s services and completion of the Projects under this Agreement will not infringe any copyright, patent, trade secret, or other proprietary right held by any third party; (f) the services provided by the Contractor shall be performed in a professional manner, and shall be of a high grade, nature, and quality, shall be performed in a timely manner and shall meet deadlines agreed between Client and Contractor; and (g) Contractor will take all reasonably necessary precautions to prevent injury to any persons (including employees of Client) or damage to property (including Client’s property) during the term of this Agreement.
5.    INDEMNIFICATION.  Contractor will indemnify, defend, and hold harmless Client and its successors, officers, directors, employees, sublicensees, customers and agents from any and all actions, causes of action, claims, demands, losses, liabilities, damages, expenses and costs (including attorneys’ fees and court costs) which result from a breach or alleged breach (“Claim”) of this Agreement by Contractor, provided that Client gives Contractor written notice of any such Claim within 10 days of actual or constructive notice of such claim and Contractor has the right to participate in the defense of any such Claim at its expense.  
		
	6.
	TERMINATION.

6.1    Termination by Client.   Client may terminate this Agreement for any reason on fifteen (15) days prior written notice to Contractor. Notwithstanding the foregoing, the Contractor is entitled to receive any vested restricted stock in accordance with the terms and conditions of Note 5 and Note 3 of Schedule A.
6.2    Termination by Contractor.  Contractor may terminate this Agreement at any time that there is no uncompleted Project Assignment in effect upon fifteen (15) days’ prior written notice to Client.
6.3    Termination Upon Expiration. This Agreement shall terminate automatically, without any action of either of the parties, twenty four (24) months after the date hereof.
7.    RETURN OF CLIENT PROPERTY.    All information relating to the business activities of Client or its customers or suppliers, which includes, without limitation, all documents, drawings, blueprints, manuals, letters, notebooks, reports, sketches, formulae, memoranda, records, files, computer programs, machine listings, data, costs, profits, market, sales, customer lists and other lists or the like whether furnished to Contractor by Client or made by Contractor in the performance of services under this Agreement, are and shall remain exclusive property of Client.  Contractor agrees to deliver promptly all Client’s property and all copies thereof in Contractor’s possession or custody to Client at any time upon Client’s request.  Upon termination of this Agreement for any reason or in any manner, Contractor agrees to deliver such Client property described herein, together with any other of Client’s property then in Contractor’s possession, except as Client may, by prior written permission, allow Contractor to retain.  
8.    NONINTERFERENCE WITH BUSINESS.    During and for a period of two (2) years immediately following termination of this Agreement, Contractor agrees not to interfere with the business of the Client in any manner.  By way of example and not of limitation, Contractor agrees not to solicit or induce any employee or independent contractor to terminate an employment, contractual or other relationship with the Client. 

		
	9.
	NO CONFLICT OF INTEREST.

9.1    Contractor agrees during the term of this Agreement not to accept work or enter into a contract or accept an obligation that would cause Contractor to not perform Contractor’s obligations under this Agreement or the scope of services for Client or that would cause a breach of this Agreement.
9.2    Contractor warrants that to the best of its knowledge, there is no other contract or duty on his part now in existence inconsistent with this Agreement, unless a copy of such contract or a description of such duty is attached to this Agreement as Schedule B.
		
	10.
	CODE OF CONDUCT.

Contractor shall abide, in all material respects, by the Code of Conduct set forth in Schedule B.
		
	11.
	TRADE SECRETS AND INTELLECTUAL PROPERTY RIGHTS.

11.1    Disclosure of Inventions.  Contractor agrees to disclose promptly in writing to Client, or any person designated by Client, every computer program, trade secret, invention, discovery, improvement, copyrightable material, process, manufacturing technique, formula or know-how, whether or not patentable, which is conceived, made, reduced to practice, or learned by Contractor within the scope of any work performed for Client.  Contractor represents that its performance of all of the terms of this Agreement does not and will not breach any agreement to keep in confidence proprietary information, knowledge or data of a third party and Contractor will not disclose to Client, or induce Client to use, any confidential or proprietary information belonging to third parties unless such use or disclosure is authorized in writing by such owners. 
11.2    Assignment of Copyrightable Works and Inventions.  
(A)To the extent any inventions, technologies, reports, memoranda, studies, writings, articles, plans, designs, specifications, exhibits, software code, or other materials prepared by Contractor in the performance of services under this Agreement include material subject to copyright protection, such materials have been specially commissioned by Client and they shall be deemed “work for hire” as such term is defined under U.S. copyright law.  To the extent any such materials do not qualify as “work for hire” under applicable law, and to the extent they include material subject to copyright, patent, trade secret, or other proprietary rights protection, Contractor hereby irrevocably and exclusively assigns to Client, its successors, and assigns, all right, title, and interest in and to all such materials.  To the extent any of Contractor rights in the same, including without limitation any moral rights, are not subject to assignment hereunder, Contractor hereby irrevocably and unconditionally waives all enforcement of such rights.  All documents, magnetically or optically encoded media, and other tangible materials created by Contractor as part of its services under this Agreement shall be owned by Client.

(B)Client will not have rights to any invention conceived or reduced to practice by Contractor for which no equipment, supplies, facility, or trade secret information of Client was used and which was developed entirely on Contractor’s own time, and (1) which does not relate (a) to Client’s business or (b) to Client’s actual or demonstrably anticipated research or development, or (2) which does not result from any work performed by Contractor for Client.

(C)Contractor agrees to assist Client in any reasonable manner to obtain and enforce for Client’s benefit patents, copyrights, and other property rights in any and all countries, and Contractor agrees to execute, when requested, patent, copyright or similar applications and assignments to Client and any other lawful documents deemed necessary by Client to carry the purpose of this Agreement.  Contractor further agrees that the obligations and undertakings under Section will continue beyond the termination of Contractor’s service to Client.  If called upon to render assistance under this Section, Contractor will be entitled to a fair and reasonable fee in addition to reimbursement of expenses incurred at the prior written request of Client.

(D)Contractor agrees to execute upon Client’s request a signed transfer of inventions or copyrights therein to Client in a form reasonably acceptable to Client for all inventions subject to copyright protection that result from Contractor’s work for Client under this Agreement.  

		
	12.
	GENERAL PROVISIONS.

12.1      Governing Law.  This Agreement will be governed and construed in accordance with the laws of the State of Delaware, as applied to transactions taking place wholly within Delaware between Delaware residents.  Each party hereby expressly consents to the exclusive personal and subject matter jurisdiction of the state and Federal courts located in the Federal Eastern District of New York, State of New York, for any lawsuit based upon, arising from or related to this Agreement.  Contractor agrees that process may be served on Contractor in any such action by mailing it to Contractor at the address shown on the signature page of this Agreement. 
12.2      Severability.  In case any one or more of the provisions contained in this Agreement shall, for any reason, be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect the other provisions of this Agreement, and this Agreement shall be construed as if such invalid, illegal or unenforceable provision had never been contained herein.  If moreover, any one or more of the provisions contained in this Agreement shall for any reason be held to be excessively broad as to duration, geographical scope, activity or subject, it shall be construed by limiting and reducing it, so as to be enforceable to the extent compatible with the applicable law as it shall then appear.
12.3      No Assignment.  Neither this Agreement nor any of the rights or obligations of Contractor arising under this Agreement may be assigned or transferred by Contractor without Client’s prior written consent, and any such attempted assignment shall be void and of no effect.  This Agreement may be assigned by Client and shall be binding on Contractor and permitted assignees. 
12.4      Notices.  All notices, requests and other communications under this Agreement must be in writing, and must be mailed by registered or certified mail, postage prepaid and return receipt requested, or delivered by hand to the party to whom such notice is required or permitted to be given.  If mailed, any such notice will be considered to have been given three (3) business days after it was mailed, as evidenced by the postmark.  If delivered by hand, any such notice will be considered to have been given when received by the party to whom notice is given, as evidenced by written and dated receipt of the receiving party.  The mailing address for notice to either party will be the address shown on the signature page of this Agreement.  Either party may change its mailing address by notice as provided by this Section.
12.5      Legal Fees.  If any proceeding arises between the parties with respect to  this Agreement, the prevailing party in such proceeding shall be entitled to receive its reasonable attorneys’ fees, expert witness fees and out-of-pocket costs incurred in connection with such proceeding, in addition to any other relief it may be awarded.
12.6      Injunctive Relief.  A breach of any of the promises or agreements contained in this Agreement may result in irreparable and continuing damage to Client for which there may be no adequate remedy at law, and Client is therefore entitled to obtain injunctive relief without the necessity of posting bond or proving irreparable harm, as well as such other and further relief as may be appropriate.
12.7      Survival.  The following provisions shall survive termination of this Agreement: Sections 2, 4, 5, 6, 7, 8, 11, 12 and Schedule A Note 3 and Note 5
12.8      Export.  Contractor agrees not to export, directly or indirectly, any U.S. source technical data acquired from Client or any products utilizing such data to countries outside the United States, which export may be in violation of the United States export laws or regulations.
12.9     Waiver.  No waiver by Client of any breach of this Agreement shall be a waiver of any preceding or succeeding breach.  No waiver by Client of any right under this Agreement shall be construed as a waiver of any other right.  Client shall not be required to give notice to enforce strict adherence to all terms of this Agreement.

12.10 Entire Agreement.  This Agreement is the final, complete and exclusive agreement of the parties with respect to the subject matter hereof and supersedes and merges all prior discussions between us.  No modification of or amendment to this Agreement, nor any waiver of any rights under this Agreement, will be effective unless in writing and signed by the party to be charged.  The terms of this Agreement will govern all Project Assignments and services undertaken by Contractor for Client.  
12.11  Headings.  Titles or headings to the sections of the Agreement are not part of the terms of this Agreement, but are inserted solely for convenience. 
12.12  Confidentiality.  Each party hereto agrees not to, and shall ensure that each of its stockholders shall not, make any disclosure to any third party (other than such party’s officers, directors, employees, agents and other representatives who have a need to know such information in furtherance of the transactions contemplated hereby) of the existence or contents of this Agreement, or the transactions contemplated hereby.  Contractor agrees during the term of this agreement and thereafter not to disclose to a third party any confidential information of Client which is learned, discovered, developed, or conceived by Contractor within the scope of the services and the completion of the Projects under this Agreement.  “Confidential Information” includes, but is not limited to, technical and business information relating to Client’s inventions or techniques, research and development, costs, profit or margin techniques, costs, finances, customers, sale and marketing, and future information and business plans.  Contractor’s obligations with respect to Client’s Confidential Information also extend to any third party’s proprietary or confidential information disclosed to Contractor in the course of providing services to Client.  Contractor’s confidentiality obligations with respect to any portion of the Confidential Information as set forth above shall terminate when Contractor can document that : (a) it was in the public domain at the time it was communicated to Contractor by Client; or (b) it entered the public domain through no fault of Contractor subsequent to the time it was communicated to Contractor by Client; or (c) it was in Contractor’s possession free of any obligation of confidence at the time it was communicated to Contractor free of any obligation of confidence subsequent to the time it was communicated to Contractor by Client. 
12.13  Registration.  (a) Upon the written request of the Contractor, the Company shall prepare and file with the Securities and Exchange Commission (the “Commission”) a “shelf” Registration Statement covering the resale of all the restricted shares to be acquired by the Contractor for an offering to be made on a continuous basis pursuant to Rule 415. If for any reason the Commission does not permit all of the restricted shares to be included in such Registration Statement, then the Company shall not be obligated to include such restricted shares in such Registration Statement but the Company shall prepare and file with the Commission a separate Registration Statement with respect to any such restricted shares not included with the initial Registration Statements, as promptly as reasonably possible, but in no event later than the date which is thirty (30) days after the date on which the Commission shall indicate as being the first date such filing may be made. The Registration Statement shall be on Form S-3.  In the event Form S-3 is not available for the registration of the resale of restricted shares hereunder, the Company shall (i) register the resale of the restricted shares on another appropriate form in accordance herewith as Contractor may consent and (ii) attempt to register the restricted shares on Form S-3 as soon as such form is available, provided that the Company shall maintain the effectiveness of the Registration Statements then in effect until such time as a Registration Statement on Form S-3 covering the restricted shares has been declared effective by the Commission. The Company shall use its commercially reasonable efforts to facilitate the sale of the Company’s shares held by the Contractor pursuant to any exemption from registration selected by Contractor in its sole and absolute discretion.
(b) The Company shall use its commercially reasonable efforts to cause any Registration Statement to be declared effective by the Commission as promptly as practicable after the filing thereof, and shall use commercially reasonable efforts to keep the Registration Statement continuously effective under the Securities Act until the earlier of (i) the fifth anniversary of the Effective Date, (ii) such time as all of the stock covered by such Registration Statement have been sold publicly or (iii) such time as all of the stock covered by such Registration Statement may be sold by the Contractor pursuant to Rule 144 without volume limitations and without the requirement that there be adequate current public information with regards to the Company.

               (c) The Company shall notify the Contractor in writing as promptly as reasonably possible (and in any event within one Business Day) after receiving notification from the Commission that the Registration Statement has been declared effective.

(d)  The Company shall pay (or reimburse the Contractor for) the following fees and expenses incident to the performance of or compliance with this Agreement by the Company, (i) all registration and filing fees and expenses, including without limitation those related to filings with the Commission, any Trading Market and in connection with applicable state securities or Blue Sky laws, (ii) printing expenses (including without limitation expenses of printing certificates for Registrable Securities and of printing prospectuses requested by the Contractor), (iii) messenger, telephone and delivery expenses, and (iv) fees and expenses of all other persons retained by the Company.

IN WITNESS WHEREOF, the parties have executed this Agreement or caused this Agreement to be executed by their duly authorized representative.

CLIENT:
FalconStor Software, Inc., a Delaware corporation
By: /s/ Louis J. Petrucelly    
Title: EVP & CFO
 

CONTRACTOR:
RFN Prime Marketing, Inc., a Delaware LLC
By: /s/ Authorized Officer of RFN Prime Marketing, Inc 
Title: President

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