| Code of Conduct | This online version of FalconStor's Code of Conduct has been modified from the original version distributed to our employees. The references to some resources and electronic links have been changed or removed.
I. Introduction
1. A Statement of Principles. The conduct of each employee represents a part of the most important asset of FalconStor Software, Inc. — a reputation for integrity. FalconStor's reputation is nothing more or less than a reflection of the conduct of its employees. It is the responsibility of each employee to preserve that reputation.
This Code of Conduct (the "Code") states FalconStor's fundamental principles. Adherence to the Code's principles is important to maintain FalconStor's stature and to promote its success in a competitive business community. The principles are important to all employees as individuals because the Code addresses conduct that could lead to criminal and/or civil liability for the employees involved in the conduct.
FalconStor expects all of its employees to comply with applicable laws, rules and regulations. FalconStor also expects all of its employees to abide by both the letter and the spirit of the Code's provisions. It is the Company's intent to exceed the minimum requirements of the law and industry practice. The Code identifies behavior that is never acceptable and will always be considered to be outside the scope of employment.
FalconStor views seriously any violation of the Code. The misstep of a single employee can undermine FalconStor's reputation and success and reflect negatively on all other employees. Thus, code violations may lead to significant sanctions by the Company, including, among others, dismissal.
2. Scope of the Code. The Code applies to FalconStor Software, Inc., to all subsidiaries or affiliates in which FalconStor directly or indirectly owns more than 50 percent of the voting control and to all directors, officers and employees of each. All references to "FalconStor" or the "Company" include FalconStor Software, Inc., and its subsidiaries and affiliates. All references to "employees" include directors, officers, and employees of FalconStor and its subsidiaries or affiliates.
3. Compliance with Code. Failure to read and/or to acknowledge the Code does not exempt an employee from his/her responsibility to comply with the Code, applicable laws, regulations, and all FalconStor policies and guidelines that are related to his/her job.
The Code is not intended to cover every issue or situation an employee may face as an employee. Nor does the Code replace other more detailed policies and guidelines. Employees should use the Code as a reference guide in addition to FalconStor's policies and guidelines, including the Employee Handbook, required for each particular job.
4. Code Administration. If you need details on a specific policy, you may contact the Company's General Counsel, Director of Human Resources, or Chief Financial Officer.
The responsibility for the Code's enforcement extends throughout the Company. All managers are accountable for the Code's enforcement in their departments. Employees should immediately report possible violations of the Code to the Company's Director of Human Resources. Reports may also be made through the Company's compliance hotlines.
These hotlines are operated by a third party and are completely anonymous. Complaints submitted will be referred to other personnel as determined to be appropriate or as required under the directives of the Audit Committee. A copy of any complaint that relates to accounting issues, internal accounting controls or auditing matters will be forwarded to the Audit Committee for review.
5. Non-Retaliation. The Company is committed to providing a workplace conducive to open discussion of its business practices. It is Company policy to comply with all applicable laws that protect employees against unlawful discrimination or retaliation by their employer as a result of their lawfully reporting information regarding, or their participating in, investigations involving alleged corporate fraud or other alleged violations by the Company or its agents of federal or state law. Specifically, Company policy prevents any employee from being subject to disciplinary or retaliatory action by the Company or any of its employees or agents as a result of the employee:
- disclosing information to a government or law enforcement agency, where the employee has reasonable cause to believe that the information discloses a violation or possible violation of federal or state law or regulation; or
- providing information, causing information to be provided, filing, causing to be filed, testifying, participating in a proceeding filed or about to be filed, or otherwise assisting in an investigation or proceeding regarding any conduct that the employee reasonably believes involves a violation of:
- federal criminal law relating to securities fraud, mail fraud, bank fraud, or wire, radio and television fraud, or
- any rule or regulation of the Securities and Exchange Commission, or
- any provision of federal law relating to fraud against shareholders, or
- this Code,
where, with respect to investigations, such information or assistance is provided to or the investigation is being conducted by a federal regulatory agency, a member of Congress, or a person at the Company with supervisory or similar authority over the employee.
However, please be advised that employees who file reports or provide evidence that they know to be false or without a reasonable belief in the truth and accuracy of such information will not be protected by this Code and may be subject to disciplinary action, including termination of their employment. In addition, except to the extent required by law, the Company does not intend this Code to protect employees who violate the confidentiality of any applicable lawyer-client privilege to which the Company or its agents may be entitled under statute or common law principles, or to protect employees who violate their confidentiality obligations with regard to the Company's trade secret information. Employees considering providing information that may violate these privileges or reveal Company trade secrets are advised to consult an attorney before doing so.
If any Employee believes he or she has been subjected to any action that violates this Policy, he or she may file a complaint directly with our legal department or the Audit Committee of the Company. To contact our Audit Committee or to submit a report to them, please use the hotline described in the previous section. If it is determined that an Employee has experienced any improper employment action in violation of this Code, the Company will take appropriate corrective action.
6. Investigation of Suspected Violations. Suspected violations will be investigated under the supervision of the Company's legal department or the Company's outside counsel, as the legal department deems appropriate. Employees are expected to cooperate in the investigation of reported violations. When practical and appropriate under the circumstances, and in order to protect the privacy of the persons involved, those people investigating the suspected violation will attempt to keep confidential the identity of someone who reports a suspected violation or who participates in the investigation. There may be situations, however, when this information must be disclosed as part of our investigation.
Employees should be aware that the Company's legal department is legally obligated to act in the best interests of the Company as a company. They do not act as lawyers or personal representatives for any individual employees, including our CEO. Our Board of Directors has ultimate responsibility for final interpretation of this Code and for determining whether any violations of this Code have occurred.
7. Violations. Violations of the Code will be met with discipline up to and including termination of employment.
Appropriate disciplinary action will be taken promptly against any Employee, determined to have violated any applicable federal, state or local law or regulation, or this Code or any future version of this Code.
Among other things, employees of the Company may be disciplined for:
- Committing, authorizing, or directing an illegal act.
- Failing to exercise proper compliance oversight or tolerating illegal conduct, if acting as a supervisor of another employee of the Company.
- Failing to report illegal business conduct of which he or she directly knows or observes.
- Discouraging another employee from reporting a violation of law or of this Code.
- Improperly disclosing the identity of a person who reports a violation of this Code.
- Retaliating or condoning retaliation against any Employee who reports such a violation.
- The code is not intended to and does not create an employment contract, and does not create any contractual rights between FalconStor and its employees or create any express or implied promise for specific treatment in specific situations.
II. Use, Protection and Management of Corporate Assets
1. Financial Integrity. FalconStor follows generally accepted accounting principles and standards, and applicable laws, regulations and practices for accounting and financial reporting. To meet its obligations, the Company must rely on employee truthfulness to ensure the accuracy of its financial statements. Complete and accurate data must be maintained and provided to appropriate Company personnel so that the Company's financial statements present fairly its financial position and the results of its operations. Any employee who is aware of material misstatements or omissions affecting the fair presentation or accuracy of the Company's financial statements is under an obligation to use reasonable efforts to have them corrected or, failing that, to report this information promptly to an appropriate officer of the Company. Reports may also be made to the Company's hotlines, identified above.
All communications with the Company's outside auditors must be true and complete. FalconStor employees must cooperate fully with representatives of the Company's auditors by responding promptly, accurately and completely to all inquiries made by those representatives.
2. Code of Ethics. The Company has adopted a Code of Ethics for Chief Executive Officer and Senior Financial Officers. A copy is attached to this Code of Conduct.
3. Use of Corporate Assets. The misuse of any of FalconStor's property or the property of others in the care, custody or control of FalconStor is prohibited. The removal from FalconStor facilities of any of its property for a purpose other than use in FalconStor's business is prohibited unless specifically authorized by the appropriate department head. The foregoing policies apply to property such as furnishings, equipment and supplies, as well as to property created, obtained or copied by FalconStor for its exclusive use, such as files, reference materials and reports, computer software, data processing systems and databases.
4. Intellectual Property. All employees must comply with the laws and regulations that govern the rights to and protection of our own and others' copyrights, trademarks, patents, trade secrets, and other forms of intellectual property.
5. Third-Party Software. All employees must use software and content information only in accordance with the associated licenses and/or terms of use. The Company prohibits the making or using of copies of non-licensed copyrighted material, including software, documentation, graphics, photographs, clip art, animation, movie/video clips, sound, and music.
6. Trade Secrets and Confidential or Proprietary Information. "Confidential" information is information that the Company considers private and which is not common knowledge among other persons or organizations that might find it useful for competitive or other reasons. "Proprietary" information is information that the Company owns, develops, pays to develop, possesses, or to which it has an exclusive right.
During the course of business, Confidential or Proprietary Information or Company trade secrets may become available to the employee. It is very important for all employees to safeguard such information. Employees must also follow confidentiality restrictions from previous employers and not use or share that information at the Company.
Both during and after the employee's association with the Company, it is a violation of this policy to disclose, use, release or discuss any such Confidential, Proprietary or trade secret information, except as required by the Company. It is also a violation of this policy for an employee to appropriate any Confidential, Proprietary or trade secret information for the employee's own use or to use such information in any way inconsistent with the interests of the Company.
This section applies to employee conduct toward other companies, as well as to employee activities within the Company. While an employee should always obtain as much information as possible about the marketplace, an employee must do that only in accordance with this policy. Employees must never be a party to a situation in which proprietary or confidential information has been obtained improperly from another company. If an employee is approached with an offer of confidential information which may have been obtained improperly, the employee must immediate discuss this matter with her/his supervisor and/or the Company's legal department.
The files, manuals, reports, notes, lists and other records or data of the Company, in any form, including electronic, are the exclusive property of the Company and must be returned at the end of employment with the Company. Any Confidential, Proprietary or trade secret information to which an employee has access remains so after employment and may not be disclosed or use for any purpose after employment.
7. Ownership of Work. All intellectual property which any employee makes, conceives, reduces to practice or develops (in whole or in part, either alone or jointly with others) during the employee's employment is the sole property of the Company. The Company shall be the sole owner of all patents, copyrights and other intellectual property or other rights in connection therewith.
III. Legal and Regulatory Compliance
1. Communications with Government. All communications made by FalconStor employees to government officials must be truthful. The Company will not tolerate false statements (verbal or written) by any of its employees to a government agency — local, state or federal. This extends to communications made to the Company's legal department in conjunction with the preparation and filing of applications on behalf of the individual employee with a government agency. Deliberate misstatements to government officials or false statements made with a reckless disregard for their accuracy can expose both the Company and the individual employee involved to civil and criminal penalties.
Contact with government agencies should be brought to the attention of the Company's General Counsel. Any governmental investigation involving the Company, however informal, must be brought to the immediate attention of the Company's General Counsel. Such investigation can take the form of a subpoena, a letter, a visit, or a telephone conversation.
2. Bribery, Gratuities and Improper Payments. FalconStor complies with the anti-corruption laws of the countries in which it does business, including the United States Foreign Corrupt Practices Act ("FCPA"). In full compliance with the FCPA, neither FalconStor nor anyone acting on its behalf will make any direct or indirect payment or promise of payment to foreign government officials for the purpose of inducing the individual to use his/her position to obtain or to retain FalconStor business.
3. Anti-Boycott Requirements. FalconStor complies with United States law that prohibits participation in international boycotts that are not sanctioned by the United States government.
4. Export Control. In order to protect U.S. national security, to implement U.S. foreign policy, and to preserve scarce resources, the United States government restricts the export of certain technology and products, including certain computer software and technical goods and data. We strictly observe all restrictions placed on the export and re-export of a United States product or component of a product, good, service, or technical data.
5. International Business Activities. FalconStor acknowledges and respects the diverse cultures, customs and business practices it encounters in the global marketplace. FalconStor will apply with both the applicable United States laws and regulations that govern its operations and the local laws wherever it does business. If an employee feels at any time that United States laws and regulations and local laws applicable to FalconStor's business are in conflict, s/he should immediately contact the Company's General Counsel.
6. Political Activity. Political activity should be an exercise of individual choice and conviction. FalconStor encourages all employees to participate actively in the political process; our public institutions depend on such participation. However, employees should be careful not to associate FalconStor with their political activity. All political activity must be undertaken with the employee's own resources and on their own time. No contribution or support may be provided on behalf of the Company to a political candidate or committee without the approval of the Company's General Counsel. Neither the Company nor any FalconStor employee may require any employee to make a personal contribution to a political action committee or to a political candidate or committee, and no FalconStor employee will face retribution from the Company or any other employee for declining a request to make such a contribution.
IV. Conflicts of Interest
1. Avoidance of Conflicts. Employees should avoid any situation which involves or may involve a conflict between their personal interest and the interests of the Company. As in all other facets of their duties, employees dealing with customers, suppliers, contractors, competitors, or any person doing or seeking to do business with the Company, are to act in the best interests of the Company. Each employee must make prompt and full disclosure in writing to their manager of any potential situation which may involve a conflict of interest. Such conflicts include, but are not limited to:
- Ownership by the employee or by a member of the employee's family of an interest in any outside enterprise which does or seeks to do business with, is a competitor of, or is a vendor, supplier, competitor or contractor to the Company.
- Serving as a director, officer, partner, consultant, or in a managerial or technical capacity with an outside enterprise which does or is seeking to do business with or is a competitor of the Company. Exceptions to this can be approved by the Company's Board of Directors.
- Being promised or receiving a fee from a third party doing or seeking to do business with the Company for acting as a broker, finder or go-between.
- Borrowing from or being financially indebted to a competitor or supplier of goods and services of the Company, other than banks or other financial institutions for typical consumer debt generally available to non-Company employees.
- Any other arrangement or circumstance, including family or other personal relationships, which might dissuade the employee from acting in the best interests of the Company.
2. Gifts and Entertainment. FalconStor policy and practice encourage the use of good judgment, discretion and moderation when giving or accepting gifts or entertainment related to business activities. Gift giving and practices may vary in different cultures; however, any gifts and entertainment given or received must be in compliance with law, must not violate the giver's and/or the receiver's policies on the matter, and must be consistent with local custom and practice. FalconStor employees may not solicit gifts, entertainment or favors of any value from persons or firms with which FalconStor does, or potentially does, business. Nor may any employee act in a manner that would place any vendor or customer in a position where s/he may feel obligated to make a gift, provide entertainment, or provide personal favors in order to do business or to continue to do business with FalconStor. All employees are required to report gifts with a value of greater than one hundred dollars ($100.00) to the Company's Chief Financial Officer.
3. Relationships with Vendors and Suppliers. Transactions with vendors and suppliers must be carried out on an arms-length basis. This means conditions should exist for competitive, willing buyer and willing seller transactions. Competitive bidding should be used whenever possible. Decisions should be made on the basis of quality, price, availability and service. All vendors and suppliers should be dealt with fairly, honestly and openly. This policy extends to all services provided to the Company as well as goods used by the Company. In addition, if the representative for the vendor or supplier is a former employee, family member or close personal friend, you should disclose this information to your manager.
4. Diversion of Corporate Opportunity. Employees are prohibited from: (a) taking for themselves personally opportunities related to Company business; (b) using Company property, information, or position for personal gain; or (c) competing with the Company for business opportunities, provided, however, if the Company's disinterested directors determine that the Company will not pursue an opportunity that relates to Company's business, an employee may do so.
V. Work Environment
1. Equal Opportunity Employment. FalconStor promotes a cooperative and productive work environment by supporting the cultural and ethnic diversity of its workforce and is committed to providing equal employment opportunity to all qualified employees and applicants. Employment decisions will be made without regard to any individual's race, color, religion, gender, sexual orientation, national origin, age, marital status, physical or mental handicap or disability, or such characteristics of any individual's relatives, friends or associates.
2. Harassment. Harassment, intentional or unintentional, has no place in the work environment. FalconStor will not tolerate any form of harassment of employees based on their real or perceived race, color, religion, gender, sexual orientation, national origin, age, marital status, physical or mental handicap or disability, or based on such characteristics of any employee's relatives, friends or associates.
VI. Communications With the Public and Insider Trading
1. Communications with the Public. FalconStor's advertising, sales and promotional material seeks to be truthful, accurate, and free from false claims. FalconStor provides its shareholders with timely and appropriate information subject only to competitive and legal constraints. FalconStor provides a link on its website for shareholders to communicate with the Company and its directors.
2. Insider Trading. All employees are prohibited from buying or selling public securities of FalconStor or any other company if they are in possession of material non-public information about the company. All employees are subject to the Company's Policy of the Trading of Securities of FalconStor Software, Inc. Any questions regarding the purchase or sale of any security should be directed to the Company's General Counsel.
VII. Antitrust
FalconStor expects its employees to conduct the Company's business in full compliance with applicable federal, state and international antitrust and trade regulation laws.
All business decisions should be made by FalconStor independently and not as part of any collective decision-making involving competitors. Because antitrust laws are constantly evolving, no guidelines can adequately anticipate every situation to which these laws apply. The guidelines are intended, therefore, only to alert employees to potential problem areas. Employees should consult the Company's General Counsel whenever a situation presents itself which might appear to raise potential antitrust questions.
The following activities present a serious risk of antitrust exposure and should be reviewed in advance with FalconStor's General Counsel:
- Agreements with any competitor on the types of business the Company will conduct, the terms pursuant to which the Company will do business, the prices the Company will charge, the customers the Company will serve or the products the Company will offer.
- Agreements with anyone outside the Company to avoid dealing with or boycotting any individual or group of potential customers or suppliers.
- Attendance at trade association or group meetings without an approved agenda.
- Refusing to sell one product or service unless the customer also agrees to buy another product or service or refusing to purchase a product or service unless the seller agrees to buy some other product or service from the Company.
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FalconStor Headquarters
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2 Huntington Quadrangle
Suite 2S01
Melville, NY 11747 |
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