Exhibit 4.5
FALCONSTOR SOFTWARE, INC.
2004 OUTSIDE DIRECTORS STOCK OPTION PLAN
1. PURPOSE. The FalconStor Software, Inc. 2004 Outside Directors Stock
Option Plan (the "Plan") is established effective as of the 26th day
of March, 2004, (the "Effective Date") to create additional
incentive for the non employee directors of FalconStor Software,
Inc., a Delaware corporation, and any successor corporation thereto
(collectively referred to as the "Company") to promote the financial
success and progress of the Company and any present or future parent
and/or subsidiary corporations of the Company. For purposes of the
Plan, a parent corporation and a subsidiary corporation shall be as
defined in sections 424(e) and 424(f) of the Internal Revenue Code
of 1986, as amended (the "Code").
2. ADMINISTRATION. The Plan shall be administered by the Board of
Directors of the Company (the "Board") and/or by a duly appointed
committee of the Board having such powers as shall be specified by
the Board. Any subsequent references herein to the Board shall also
mean the committee if such committee has been appointed and, unless
the powers of the committee have been specifically limited, the
committee shall have all of the powers of the Board granted herein,
including, without limitation, the power to terminate or amend the
Plan at any time subject to the terms of the Plan and any applicable
limitations imposed by law. The Board shall have no authority,
discretion or power to select the non-employee directors of the
Company who will receive options under the Plan, to set the exercise
price of the options granted under the Plan, to determine the number
of shares of common stock to be granted under option or the time at
which such options are to be granted, to establish the duration of
option grants, or to alter other terms or conditions specified in
the Plan, except in the sense of administering the Plan subject to
the provisions of the Plan. All questions of interpretation of the
Plan or of any options granted under the Plan (an "Option") shall be
determined by the Board, and such determinations shall be final and
binding upon all persons having an interest in the Plan and/or any
Option. Any officer of the Company shall have the authority to act
on behalf of the Company with respect to any matter, right,
obligation, or election which is the responsibility of or which is
allocated to the Company herein, provided the officer has apparent
authority with respect to such matter, right, obligation, or
election.
3. ELIGIBILITY AND TYPE OF OPTION. Options may be granted only to
directors of the Company who, at the time of such grant, are not
employees of the Company or of any parent or subsidiary corporation
of the Company ("Outside Directors"). Options granted to Outside
Directors shall be nonqualified stock options; that is, options that
are not treated as having been granted under section 422(b) of the
Code. A person granted an Option is hereinafter referred to as an
"Optionee".
4. SHARES SUBJECT TO OPTION. Options shall be for the purchase of
shares of authorized but unissued common stock or treasury shares of
common stock of the Company (the "Stock"), subject to adjustment as
provided in paragraph 8 below. The maximum number of shares of Stock
which may be issued under the Plan shall be Three Hundred Thousand
(300,000) shares. In the event that any outstanding Option for any
reason expires or is terminated and/or shares of Stock subject to
repurchase are repurchased by the Company, the shares allocable to
the unexercised portion of such Option, or such repurchased shares,
may again be subject to an Option grant.
5. TIME FOR GRANTING OPTIONS. All Options shall be granted, if at all,
within three years from the Effective Date.
6. TERMS, CONDITIONS AND FORM OF OPTIONS. Options granted pursuant to
the Plan shall be evidenced by written agreements specifying the
number of shares of Stock covered thereby, in substantially the form
attached hereto as Exhibit A (the "Option Agreement"), which written
agreement may incorporate all or any of the terms of the Plan by
reference and shall comply with and be subject to the following
terms and conditions:
a. AUTOMATIC GRANT OF OPTIONS. Subject to execution by an Outside
Director of an appropriate Option Agreement, Options shall be
granted automatically and without further action of the Board,
as follows:
i. Each person who is newly elected or appointed as an
Outside Director on or after the Effective Date shall be
granted an Option on the day of such initial election or
appointment to purchase Fifty Thousand (50,000) shares of
Stock.
ii. On the date of each Annual Meeting of Stockholders of the
Company occurring after the Effective Date, each Outside
Director shall be granted an Option to purchase Ten
Thousand (10,000) shares of Stock; provided, however, that
in the event an Outside Director was elected or appointed
as an Outside Director and was granted an Option pursuant
to the provisions of subparagraph 6(a)(i) above within six
months prior to the Annual Meeting of Stockholders, that
Outside Director shall be ineligible to receive an Option
with respect to such Annual Meeting of Stockholders.
iii. On the date of each Annual Meeting of Stockholders of the
Company, each Outside Director who served as the
Chairperson of any committee of the Company's Board of
Directors for at least six months during the Company's
most recently concluded fiscal year shall be granted an
Option to purchase Five Thousand (5,000) shares of Stock.
In the event an Outside Director served as the Chairperson
for two or more Committees, such Outside Director shall be
granted an option to purchase Five Thousand (5,000) shares
of Stock for each committee for which the Outside Director
served as Chairperson.
iv. Notwithstanding the foregoing, any person may elect not to
receive an Option to be granted pursuant to this paragraph
6(a) by delivering written notice of such election to the
Board no later than the day prior to the date on which
such Option would otherwise be granted. A person so
declining an Option shall receive no payment or other
consideration in lieu of such declined Option. A person
who has declined an Option may revoke such election by
delivering written notice of such revocation to the Board
no later than the day prior to the date on which such
Option would be granted pursuant to paragraph 6(a).
v. Notwithstanding any other provision of the Plan to the
contrary, no Option shall be granted to any individual on
a day when he or she is no longer serving as an Outside
Director of the Company.
b. OPTION EXERCISE PRICE. The exercise price per share of Stock
subject to an Option shall be the fair market value of a share
of the Stock on the close of business on the date of the
granting of the Option. Where there is a public market for the
common stock of the Company, the fair market value per share of
Stock shall be the mean of the bid and asked prices of the
common stock of the Company on the date of the granting of the
Option, as reported in the Wall Street Journal (or, if not so
reported, as otherwise reported by the National Association of
Securities Dealers Automated Quotation ("NASDAQ") System) or,
in the event the common stock of the Company is listed on the
NASDAQ National Market System or a securities exchange, the
fair market value per share of Stock shall be the closing price
on such National Market System or exchange on the date of
granting of the Option, as reported in the Wall Street Journal.
If the date of the granting of an Option does not fall on a day
on which the common stock of the Company is trading on NASDAQ,
the NASDAQ National Market System or securities exchange, the
date on which the Option exercise price shall be established
shall be the last day on which the common stock of the Company
was so traded prior to the date of the granting Option.
c. EXERCISE PERIOD AND EXERCISABILITY OF OPTIONS. An Option
granted pursuant to the Plan shall be exercisable for a term of
ten years. Options granted pursuant to the Plan shall first
become exercisable on the day (the "Initial Vesting Date")
which is one year from the date on which the Option was
granted. The Option shall first be exercisable on and after the
Initial Vesting Date and prior to termination of the Option in
an amount equal to the number of Option Shares multiplied by
the Vested Ratio (as hereinafter defined) as set forth below,
less the number of shares previously acquired upon exercise of
any portion of the Option.
The "Vested Ratio" shall mean, on any relevant date, except as
otherwise provided herein, the ratio determined as follows:
Vested Ratio
------------
(i) Prior to Initial Vesting Date: 0
On Initial Vesting Date, 1/3
provided the Optionee's
Service has not terminated
prior to such date:
PLUS
(ii) For each full month
of the Optionee's continuous
Service from the Initial
Vesting Date until the
Vested Ratio equals 1/1, an
additional: 1/24
For purposes of the Plan, "Service" shall mean the Optionee's service with the
Company, whether in the capacity of an employee, a director or a consultant. The
Optionee's Service shall not be deemed to have terminated merely because of a
change in the capacity in which the Optionee renders Service to the Company,
provided that there is no interruption or termination of the Optionee's Service.
d. TERMINATION OF OPTIONEE. In the event of an Optionee's
termination of Service for any reason other than as a result of
death or disability of the Optionee, in which case all Options
that have become vested will remain exercisable for the earlier
of 36 months or the expiration date of the Options, all Options
that have not become vested and exercisable as of the date of
such cessation of Service shall be forfeited and to the extent
that such Options have become vested and exercisable as of such
date, such Options must be exercised, if at all, within ninety
(90) days after the Optionee's termination of Service, after
which time such Options shall automatically terminate;
provided, however, in the event an Optionee ceases being a
director because the Optionee's Service was terminated for
cause, all Options granted hereunder (whether vested or
unvested) shall terminate immediately.
e. PAYMENT OF OPTION EXERCISE. Payment of the exercise price for
the number of shares of Stock being purchased pursuant to any
Option shall be made (i) in cash, by check, or cash equivalent,
(ii) by the assignment of the proceeds of a sale of some or all
of the shares being acquired upon the exercise of an Option
(including, without limitation, through an exercise complying
with the provisions of Regulation T as promulgated from time to
time by the Board of Governors of the Federal Reserve System),
(iii) by the delivery to the Company of shares of Stock which
have been owned by the holder of the Option for more than six
months and which have an aggregate value equal to such exercise
price, or (iv) by any combination thereof. The Company
reserves, at any and all times, the right, in the Company's
sole and absolute discretion, to establish, decline to approve
and/or terminate any program and/or procedure for the exercise
of Options by means of an assignment of the proceeds of a sale
of some or all the shares of Stock to be acquired upon such
exercise or the delivery of previously owned shares of Stock.
f. TRANSFER OF CONTROL. A "Transfer of Control" shall be deemed to
have occurred in the event any of the following occurs with
respect to the Company:
(i) a merger or consolidation in which the Company is not the
surviving corporation;
(ii) a merger or consolidation in which the Company is the
surviving corporation where the stockholders of the
Company before such merger or consolidation do not
retain, directly or indirectly, at least a majority of
the beneficial interest in the voting stock of the
Company after such merger or consolidation;
(iii) the sale, exchange, or transfer of all or substantially
all of the assets of the Company other than a sale,
exchange, or transfer to one or more subsidiary
corporations (as defined in paragraph 1 above) of the
Company;
(iv) the direct or indirect sale or exchange by the
stockholders of the Company of all or substantially all
of the stock of the Company where the stockholders of the
Company before such sale or exchange do not retain,
directly or indirectly, at least a majority of the
beneficial interest in the voting stock of the Company
after such sale or exchange; or
(v) a liquidation or dissolution of the Company.
In the event of a Transfer of Control, any unexercisable or unvested
portion of the outstanding Options shall be immediately exercisable and vested
in full as of the date ten (10) days prior to the expected date of the Transfer
of Control. The exercise or vesting of any Option that was permissible solely by
reason of this paragraph 6(f) shall be conditioned upon the consummation of the
Transfer of Control. In addition, the surviving, continuing, successor, or
purchasing corporation or parent corporation thereof, as the case may be (the
"Acquiring Corporation"), may either assume the Company's rights and obligations
under outstanding Options or substitute for outstanding Options substantially
equivalent options for the Acquiring Corporation's stock. For purposes of this
paragraph 6(e), an Option shall be deemed assumed if, following the Transfer of
Control, the Option confers the right to acquire in accordance with its terms
and conditions, for each share of Stock subject to the Option immediately prior
to the Transfer of Control, the consideration (whether stock, cash or other
securities or property) to which a holder of a share of Stock on the effective
date of the Transfer of Control was entitled. Any Options which are neither
assumed nor substituted for by the Acquiring Corporation in connection with the
Transfer of Control nor exercised as of the date of the Transfer of Control
shall terminate and cease to be outstanding effective as of the date of the
Transfer of Control.
g. STOCKHOLDER APPROVAL. No Option may be granted pursuant to the
Plan prior to obtaining stockholder approval of the Plan.
7. AUTHORITY TO VARY TERMS. The Board shall have the authority from
time to time to vary the terms of the Option Agreements either in
connection with the grant of an individual Option or in connection
with the authorization of a new standard form or forms of Option;
provided, however, that the terms and conditions of such revised or
amended standard form or forms of stock option agreement shall be in
accordance with the terms of the Plan. Such authority shall include,
but not be limited to, the authority to grant Options which are
immediately exercisable subject to the Company's right to repurchase
any unvested shares of Stock acquired by the Optionee on exercise of
an Option in the event such Optionee's service as director of the
Company is terminated for any reason.
8. EFFECT OF CHANGE IN STOCK SUBJECT TO PLAN. Appropriate adjustments
shall be made in the number and class of shares of Stock subject to
the Plan, the number of shares to be granted under the Plan and to
any outstanding Options and in the Option exercise price of any
outstanding Options in the event of a stock dividend, stock split,
recapitalization, reverse stock split, combination,
reclassification, or like change in the capital structure of the
Company.
9. TRANSFERABILITY OF OPTIONS.
a. Except as provided in paragraph 9(b), an Option may be
exercised during the lifetime of the Optionee only by the
Optionee or the Optionee's guardian or legal representative and
may not be assigned or transferred in any manner except by will
or by the laws of descent and distribution.
b. Notwithstanding the foregoing, with the consent of the Board,
in its sole discretion, an Optionee may transfer all or a
portion of the Option to: (i) an Immediate Family Member (as
defined below), (ii) a trust for the exclusive benefit of the
Optionee and/or one or more Immediate Family Members, (iii) a
partnership in which the Optionee and/or one or more Immediate
Family Members are the only partners, or (iv) such other person
or entity as the Board may permit (individually, a "Permitted
Transferee"). For purposes of this paragraph 9(b) "Immediate
Family Members" shall mean the Optionee's spouse, former
spouse, children or grandchildren, whether natural or adopted.
As a condition to such transfer, each Permitted Transferee to
whom the Option or any interest therein is transferred shall
agree in writing (in a form satisfactory to the Company) to be
bound by all of the terms and conditions of the Option
Agreement evidencing such Option and any additional
restrictions or conditions as the Company may require.
Following the transfer of an Option, the term "Optionee" shall
refer to the Permitted Transferee, except that, with respect to
any requirements of continued Service or provision for the
Company's tax withholding obligations, such term shall refer to
the original Optionee. The Company shall have no obligation to
notify a Permitted Transferee of any termination of the
transferred Option, including an early termination resulting
from the termination of Service of the Original Optionee. A
Permitted Transferee shall be prohibited from making a
subsequent transfer of a transferred Option except to the
original Optionee or to another permitted Transferee or as
provided in paragraph 9(a).
10. RE-PRICING OF OPTIONS / REPLACEMENT OPTIONS
The Company shall not re-price any Options or issue any
replacement Options unless the Option re-pricing or Option
replacement shall have been approved by the holders of a
majority of the outstanding shares of the Company.
11. TERMINATION OR AMENDMENT OF PLAN.
The Board, including any duly appointed committee of the Board,
may terminate or amend the Plan at any time; provided, however,
that without the approval of the stockholders of the Company,
there shall be no increase in the total number of shares of
Stock covered by the Plan (except by operation of the
provisions of paragraph 8 above). In any event, no amendment
may adversely affect any then outstanding Option, or any
unexercised portion thereof, without the consent of the
Optionee.
