Exhibit 10.1

FALCONSTOR SOFTWARE, INC. EMPLOYMENT AGREEMENT
Employee: ReiJane Huai

EMPLOYMENT AGREEMENT made this 31st day of December, 2007 (hereinafter referred
to as this "Employment Agreement"), by FalconStor Software, Inc., a Delaware
corporation (hereinafter referred to as the "Corporation"), and ReiJane Huai
with an address at REDACTED (hereinafter referred to as the "Employee").
WHEREAS, the Employee desires to continue to be employed by the Corporation as
President and Chief Executive Officer (“CEO”), and the Corporation desires that
the Employee continue to be so employed, upon the terms and conditions
hereinafter set forth.
NOW, THEREFORE, in consideration of the premises and the mutual covenants and
agreements hereinafter set forth, the parties intending to be legally bound,
agree as follows:
1. Term of Employment. The Board hereby employs the Employee as President and
CEO, and the Employee hereby agrees to serve the Corporation in such capacity
for the period commencing on January 1, 2008 (the "Effective Date") and ending
on December 31, 2010 (hereinafter referred to as the "Employment Period"),
unless sooner terminated as hereinafter provided.
2. Scope of Duties. The Employee shall serve as a President and CEO. The
Employee shall report and be solely responsible to the Board of Directors of the
Corporation (the “Board”). The Employee's performance shall be reviewed by the
Board annually.
3. Time To Be Devoted to Employment. The Employee shall, except during
vacation  periods or absences due to temporary illness, devote substantially all
of his professional and business time, attention and energies to his duties and
responsibilities hereunder, and except for business trips which shall be
necessary or desirable in the Corporation's business, shall render such services
at the principal office of the Corporation. Nothing herein contained or in
Section 10 hereof shall prevent or be construed as preventing the Employee from
holding or purchasing five (5%) percent or less of any class of stock or
securities of a corporation which is listed on a national securities exchange or
regularly traded in the over-the-counter market, or making other investments or
participating in business ventures not in competition with the business of the
Corporation, as long as such investments and business ventures shall not require
any time during normal business hours and do not conflict with his duties or
obligations to the Corporation as provided in this Employment Agreement.

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4. Direct Compensation. (a) In consideration for services rendered and to be
rendered by the Employee hereunder during the Employment Period, the Employee
shall receive a salary for each calendar year of the Employment Period as set
forth below, or such greater amount as the Board shall determine from year to
year based on the Employee’s performance (the “Base Salary”), which shall be
paid semi-monthly in arrears or at such other intervals as other employees are
paid:
 
Calendar Year
Salary
2008
$310,000
2009
$341,000
2010
$375,100

(b) The Employee shall be entitled to receive a bonus (the “Bonus”) for each
calendar year of the Employment Period in an amount equal to four percent (4%)
of the Corporation’s net operating income for such period as determined by
reference to the Corporation’s income statements, but without giving effect to
(i) Statement of Financial Accounting Standard 123R, or (ii) such other
extraordinary, non-recurring and/or other unusual items as determined by the
Compensation Committee of the Corporation’s Board of Directors and agreed by a
majority of the independent directors of the Corporation’s Board of Directors
(hereinafter referred to as the “Operating Income”), provided that the Operating
Income for the particular calendar year exceeds the Operating Income for the
previous calendar year.  The Bonus shall be paid in shares of Restricted Stock
of the Corporation issued in accordance with the terms of the 2006 FalconStor
Software, Inc., Incentive Stock Plan, including Section 6 thereof.  The
Restricted Stock shall vest thirty three percent (33%) on January 1 of each of
the first two years following the issuance of the Restricted Stock and thirty
four percent (34%) on January 1 of the third year following the issuance of the
Restricted Stock.  The number of shares of Restricted Stock to be issued shall
be determined by dividing the Bonus amount by the average price of Corporation
common stock on the Nasdaq Global Market (or any market on which the
Corporation’s common stock is subsequently registered) for the calendar year for
which the Bonus is being paid (the “Bonus Formula”).  For purposes of this
Employment Agreement, the average price shall be the average of the daily
closing prices of the Corporation common stock.  The Employee shall not be
entitled to any fractional shares.  In the event the Bonus Formula results in a
fractional number, the number of Restricted Shares to be paid shall be rounded
down to the nearest whole number. The Bonus shall be paid within seventy five
(75) days of the end of the applicable calendar year.
5. Fringe Benefits. (a) The Employee shall be entitled to participate in any and
all fringe benefits and/or plans, generally afforded to other employees of the
Corporation (to the extent the Employee otherwise qualifies under the specific
terms and conditions of each such benefit), including, without limitation, group
disability, life insurance, medical insurance and pension plans (401K) which
are, or which may become available generally to senior personnel of the
Corporation. The Employee shall be entitled to vacation time during each year of
the Employment Period at the discretion of the Board.

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(b) If the Corporation has a group disability plan in force at the time the
Employee’s employment terminates, the Corporation shall offer the Employee the
opportunity to continue disability coverage at the Employee’s own expense for
such period as the Employee desires; provided, that the Employee shall be
required to make all insurance premium contributions.
(c) Upon termination of the Employee’s employment, the Corporation shall offer
the Employee the opportunity to continue the Employee’s health insurance
coverage in effect immediately prior to such termination or health insurance
coverage generally available at such time to executives of the Corporation, at
the Employee’s own expense, for such period as the Employee desires; provided,
that the Employee shall be required to make all insurance premium contributions.
6. Termination of Employment. During the Employment Period, the Employee's
employment may be terminated by the Board on the occurrence of any one or more
of the following events:
(a) The death of the Employee;
(b) For "Cause", which shall mean (i) the willful failure by the Employee to
substantially perform his duties hereunder (including the breach of any
provision of Section 9 and/or 10 hereof), for reasons other than death or
disability; (ii) the willful engaging by the Employee in misconduct materially
injurious to the Corporation; or (iii) the commission by the Employee of an act
constituting (A) common law fraud against the Corporation or (B) a felony; or
(c) If the Employee is unable substantially to perform the Employee’s duties and
responsibilities hereunder to the full extent required by the Board by reason of
illness, injury or incapacity for three consecutive months, or for more than
four months in the aggregate during any period of twelve calendar months (such
condition constituting “disability” for the purposes of this Employment
Agreement); provided, however, that the Corporation shall continue to pay the
Employee’s then current Base Salary until the Corporation acts to terminate the
Employee. The Employee agrees, in the event of a dispute under this Section
6(c), to submit to a physical examination by a licensed physician selected by
the Board and consented to by the Employee.
7. Death Benefit. In addition to all other insurance and similar death benefits
generally made available to employees of the Corporation, if the Employee's
death occurs during the term of the Employment Period, the Corporation shall
provide a death benefit to the estate of the Employee equal to the Employee's
then current annual Base Salary at the date of death. Such death benefit shall
be payable as may be determined by the Corporation, but not less often than six
(6) equal monthly installments, payable on the last day of each month,
commencing in the month subsequent to the month in which the death occurs.

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8. Severance Payment. (a) If the Corporation and the Employee do not enter into
a renewal agreement to be effective January 1, 2011, for a period of at least
two years and containing similar terms and conditions to those set forth herein,
then the Corporation will pay the Employee, as additional compensation, an
amount equal to the Employee's then current annual Base Salary, as determined
under Section 4(a), payable semi-monthly in arrears for the twelve  months
ending December 31, 2011 such compensation is hereinafter referred to as the
"Severance Payment".
(b) Notwithstanding the provisions of Section 8 (a) above, the Employee will not
receive the Severance Payment if,
(i) the Corporation declines to enter into a renewal agreement with the Employee
because the Employee breached the confidentiality and/or non-compete provisions
of this Employment Agreement or any other material terms or conditions of his
employment;
(ii) the Employee has been terminated for Cause hereunder;
(iii) the Employee declines to enter into a renewal agreement with the
Corporation, and the Corporation has offered a renewal agreement for a period of
not less than two years, containing similar terms and conditions as
discussed herein; or
(iv) the Employee has received a change of control payment from the Corporation
that provides change of control benefits that are at least equal to the amount
that would be received by the Employee pursuant to Section 8(a) above.
(c) If the Employee’s employment is terminated for Cause, the Corporation’s sole
obligation hereunder shall be to pay the Employee (i) any accrued and unpaid
Base Salary as of the date of termination, (ii) an amount equal to such
reasonable and necessary business expenses incurred by the Employee in
connection with the Employee’s employment on behalf of the Corporation on or
prior to the date of termination, but not previously paid to the Employee, and
(iii) if the basis for such termination arises under clause (i) of the
definition of “Cause,” his base Salary (at the rate in effect on the date of
termination) through the twelve–month anniversary of the date of termination in
accordance with the normal payroll practices of the Corporation with respect to
Base Salary.
(d) If at the time his employment is terminated the Employee is a “specified
employee” within the meaning of Section 409A of the Internal Revenue Code and
the regulations thereunder, to the extent required to comply with Section 409A,
payment of the Severance Payment and the Non-Renewal Severance, as applicable,
shall not commence until one day after the day which is six months following the
termination date, with the first payment equaling six months of Base
Salary.  Reimbursements pursuant to this Section 8 shall be made on or before
the last day of the Employee’s taxable year following the taxable year in which
the expense was incurred.
 
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9. Disclosure of Information. All memoranda, notes, records or other documents
made or compiled by the Employee or made available to him during the term of his
employment concerning the business of the Corporation shall be the Corporation's
property and shall be delivered to the Corporation on the termination of the
Employee's employment. The Employee shall not use for himself or others, or
divulge to others, any proprietary or confidential information of the
Corporation, obtained by him as a result of his employment, unless authorized by
the Corporation.  For purposes of this Section 9, the term "proprietary or
confidential information" shall mean all information which is known only to the
Employee or to the Employee and employees, former employees, consultants or
others in a confidential relationship with the Corporation and relates to
specific matters such as trade secrets, customers, potential customers and
vendor lists, pricing and credit techniques, program codes, software design
know-how, research and development activities, private processes, and books and
records, as they may exist from time to time, which the Employee may have
acquired or obtained by virtue of work heretofore or hereafter performed for or
on behalf of the Corporation or which he may acquire or may have acquired
knowledge of during the performance of said work, and which is not known to
others, or readily available to others from sources other than the Employee or
officers or other employees of the Corporation, or is not in the public domain.
In the event of a breach or a threatened breach by the Employee of the
provisions of this Section 9, the Corporation shall be entitled to an
injunction restraining the Employee from disclosing, in whole or in part, the
aforementioned proprietary or confidential information of the Corporation, or
from rendering any services to any person, firm, corporation, association or
other entity to whom such proprietary or confidential information, in whole or
in part, has been disclosed or is threatened to be disclosed.  Nothing herein
contained shall be construed as prohibiting the Corporation from pursuing any
other remedies available to the Corporation for such breach or threatened
breach, including the recovery of damages from the Employee.
10. Restrictive Covenants. (a) The Employee hereby acknowledges and recognizes
the highly competitive nature of the Corporation's business and accordingly
agrees that, in consideration of the premises contained herein, he will not from
and after the date hereof and during the Employment Period until the Designated
Date (as hereinafter defined): (i) directly or indirectly engage in any
Competitive Activity (as hereinafter defined), whether such engagement shall be
as an officer, director, employee, consultant, agent, lender, stockholder, or
other participant or (ii) assist others in engaging in Competitive Activity. As
used herein, the term "Competitive Activity" shall mean and include the
development and/or marketing of computer hardware and/or software for Storage
Networking applications and other similar systems.

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(b) As used in this Section 10, the "Designated Date" shall mean the following:
(i) if the Employee terminates his employment with the Corporation prior to the
expiration of the Employment Period (other than as a result of a breach by the
Corporation of a material term or condition of this Employment Agreement), then
the "Designated Date" shall mean the second (2nd) anniversary of the effective
date of such termination;
(ii) if the Corporation terminates the employment of the Employee under this
Employment Agreement for Cause, then the "Designated Date" shall be the second
(2nd) anniversary of the effective date of such termination;
(iii) if the Corporation, during the Employment Period, terminates the
employment of the Employee without Cause, then the "Designated Date" shall mean
the effective date of such termination; or
(iv) if the Corporation offers the Employee a renewal agreement pursuant to
Section 8(a) hereof and the Employee does not accept such agreement, then the
"Designated Date" shall mean December 1, 2011.
(c) It is the desire and intent of the parties that the provisions of this
Section 10 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 10 shall be
adjudicated to be invalid or unenforceable, such provision of this Section 10
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 10 in the particular jurisdiction
in which such adjudication is made and, further, only to the extent required in
order for this Section 10 to be enforceable.
(d) 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 Corporation's facilities, materials or personnel, either
solely or jointly with others during the Employee’s employment by the
Corporation:
(i) The Employee shall inform the Corporation 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 Corporation'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 Corporation'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 Corporation shall desire.

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(iii) The Employee hereby assigns and agrees to assign to the Corporation 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 Corporation,
without charge to the Corporation, 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 Corporation 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 Corporation. The
Employee agrees that if the Corporation 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 Corporation as above, the Employee hereby irrevocably
designates and appoints the Corporation 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
Corporation 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 Corporation.
(v) The Corporation 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.
(e) If there is a breach or threatened breach by the Employee of the provisions
of this Section 10, the Corporation shall be entitled to an injunction
restraining him from such breach.  Nothing herein contained shall be construed
as prohibiting the Corporation from pursuing any other remedies available for
such breach or threatened breach or any other breach of this Employment
Agreement.

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(f) The Employee hereby warrants and represents that he is not prohibited by any
agreement or the order of any court from entering into and carrying out the
terms of this Employment Agreement.  In particular, the Employee warrants and
represents that the scope of his activity is not restricted in any way with
respect to the design, development, enhancement, sale, marketing and/or
promotion of computer software and hardware.
11. (a) Notices. All notices required or permitted to be given under the
provisions of this Employment Agreement shall be in writing and delivered
personally or by certified or registered mail, return receipt requested, postage
prepaid to the following persons at the following addresses, or to such other
person at such other address as either party may request by notice in writing to
the other party to this Employment Agreement:
 
If to the Employee:
ReiJane Huai
REDACTED
 
If to the Corporation:
FalconStor Software, Inc.
2 Huntington Quadrangle
Suite 2S01
Melville, New York 11747
Attn:  Chief Financial Officer

(b) Construction. This Employment Agreement shall be construed in accordance
with, and be governed by, the laws of the State of New York for contracts
entered into and to be performed in New York.
(c) Successor and Assigns. This Employment Agreement and the various rights and
obligations arising hereunder shall inure to the benefit of and be binding upon
the Employee and his heirs, executors and administrators and upon the
Corporation and its successors (including, without limitation, by way of merger)
and assigns.  This Employment Agreement is personal in nature and may not be
assigned or transferred by the Employee without the prior written consent of the
Corporation.
(d) Entire Agreement; Amendment and Restatement. This instrument contains the
entire understanding and agreement between the parties relating to the subject
matter hereof, and neither this Employment Agreement nor any provision hereof
may be waived, modified, amended, changed, discharged or terminated, except by
an agreement in writing signed by the party against whom enforcement of any
waiver, modification, change, amendment, discharge or termination is sought.
(e) Counterparts. This Employment Agreement may be executed simultaneously in
counterparts, each of which shall be deemed an original, and both of which
counterparts shall together constitute a single agreement.
(f) Illegality. Without limitation of Section 10(c) hereof, if any one or more
of the provisions of this Employment Agreement shall be invalid, illegal or
unenforceable in any respect, the validity, legality and enforceability of the
remaining provisions contained herein shall not in any way be affected or
impaired thereby.
(g) Captions. The captions of the sections hereof are for convenience only and
shall not control or affect the meaning or construction of any of the terms or
provisions of this Employment Agreement.
                  
IN WITNESS WHEREOF, the parties hereto have set their hands and executed this
Employment Agreement the day and year first above written.

 
FalconStor Software, Inc.
 
By:
/s/ Jim Weber
   
Jim Weber
   
Vice President and Chief Financial Officer
             
By:
/s/ ReiJane Huai
   
ReiJane Huai
   

 
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