MTI TECHNOLOGY CORP
EXHIBIT 10.57
<DOCUMENT>
<TYPE>EX-10.57
<SEQUENCE>4
<FILENAME>a78567exv10w57.txt
<DESCRIPTION>EXHIBIT 10.57
<TEXT>
<PAGE>
                                                                   EXHIBIT 10.57

                 DEVELOPMENT, LICENSE AND DISTRIBUTION AGREEMENT

       This Development, License and Distribution Agreement (the "Agreement"),
effective as of the date written below in the signature section (the "Effective
Date"), is entered into by and between MTI Technology Corporation, a Delaware
Corporation with principal offices at 4095 E. La Palma Avenue Anaheim, CA 92807
("MTI"), and FalconStor, Inc., a Delaware corporation with principal offices at
125 Baylis Road Melville, NY 11747 ("FalconStor").

       WHEREAS FalconStor designs, develops and licenses a line of computer
software as fully described on Exhibit A annexed hereto and made a part hereof
(the object code version of which, together with all enhancements, revisions,
versions, modifications, demonstration versions and regardless of the hardware
platform(s) used, is referred to herein as the "Software";

        WHEREAS MTI desires FalconStor to modify the Software to MTI's
specifications and desires to license and distribute the Software, as modified
and bundled with MTI's software and/or other third party products, to third
parties: and

        WHEREAS FalconStor agrees to modify the Software to MTI's specifications
and to grant the license to the Software, as modified, for distribution to
accordance with the terms and conditions set forth in this Agreement.

        NOW, THEREFORE, in consideration of the mutual promises and conditions
contained herein, and for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, FalconStor and MTI agree as
follows:

                                    AGREEMENT

 1.     DEVELOPMENT.

        1.1 Services. FalconStor hereby agrees during the term of this Agreement
to use best efforts to modify the Software ("Modified Software") in accordance
with the "Specifications" and the "Schedule," each set forth on Exhibit B for
the benefit of MTI ("Services"). FalconStor shall perform all Services in
compliance with applicable laws and the highest industry standards and shall
deliver each "Deliverable" (as set forth in Exhibit B) by the date indicated on
the Schedule for each Deliverable. FalconStor will not include or incorporate
within the Modified Software any third party works without MTI's prior written
consent. As part of the Services, FalconStor shall assist MTI in qualifying
integrating FC device drivers, and work together to allow MTI to customize
GUI/CLI.

        1.2 Relationship Managers. Each party will assign a relationship manager
to coordinate/execute business matters between the parties during the term of
this Agreement. MTI


                                       1
<PAGE>

and FalconStor Shall Meet Quarterly, Commencing On The Effective Date of this
Agreement, To exchange technology information and updates that may affect the
other party's product.

        1.3 Obligations of MTI. MTI shall supply components stated in the
project milestones set forth in Exhibit B and provide development environment
(project-specific hardware and software) and access to the MTI
development/certification organization, via phone and/or e-mail, as required to
complete the Services. MTI will cooperate with FalconStor in testing the
Software on the computer onto which the Software will be installed pursuant to
this Agreement (each computer onto which the Software is installed will be
referred to herein as a "Computer"). MTI shall provide to FalconStor, for a
reasonable period, its loan equipment to FalconStor for product testing and a
sample of each of its computer configurations onto which it intends to copy the
Software, to ensure proper functioning of the Software in conjunction with
Computers. FalconStor shall have the right to reject those configurations on
which the Software does not function properly, provided that FalconStor will
reasonably cooperate with MTI to determine if modifications are feasible to the
Software and/or the Computers to resolve the nonfunctionality. Prior to general
shipment, MTI shall provide to FalconStor a sample of each new Computer (with
the Software installed) for a period of ninety (90) days to enable FalconStor to
test the Software as installed on the Computer. After the ninety (90) day period
has expired, FalconStor will either return the Computer or purchase it, at cost,
at FalconStor's option. When MTI develops or offers to consumers a new hard
drive which is or will be available in Computers (rather than a new machine),
MTI will supply FalconStor with a sample of the new hard drive as soon as it is
available, to enable FalconStor to test the Software on the new hard drive.
After the ninety (90) day period has expired, FalconStor will either return the
hard drive or purchase it, at cost, at FalconStor's option.

        1.4 Delivery. FalconStor shall deliver to MTI any and all Deliverables
due on such delivery date on or before each delivery date set forth in the
Schedule. FalconStor shall provide to MTI one or more master disk(s) of all
Deliverables (each a "Master Disk"), which shall include the most current
release of the Software, to be used by MTI for hard disk installation of the
Software under Section 2.1 below. FalconStor shall have the right, in its sole
discretion, at any time, to modify any technical specifications or other
technical matters relating to the installation and/or operation of the Software,
including the hardware requirements for Computers, or other technical
specifications or matters relating to the Software that affect the operation of
the Software on Computers. FalconStor shall provide on a Master Disk to MTI
end-user documentation (the "Documentation") with each Software. The
Documentation shall inform the end-user regarding access to, and use of the
Software. FalconStor may provide MTI end-user inserts ("Inserts") for inclusion
with each Computer, containing information regarding access to the Software. MTI
shall include a copy of the Insert, if provided by FalconStor, with its related
Software.

        1.5 Review of Deliverable. For software code Deliverables, MTI shall
evaluate each Deliverable and shall submit a written acceptance or rejection to
FalconStor within sixty (60)


                                       2
<PAGE>

days after receipt of the Deliverable. Acceptance shall be in writing. If MTI
identifies errors in a Deliverable prior to acceptance, then FalconStor shall
correct such errors within sixty (60) days following receipt of notice thereof
during acceptance testing of each Deliverable. MTI shall also evaluate the
Documentation, and in the event the Documentation requires corrections or fails
to meet the specifications, as determined by MTI in its sole and reasonable
discretion, MTI shall specify the corrections needed, and FalconStor shall
deliver an amended version of such Documentation within five (5) business days.
Once MTI accepts the Software, MTI, in its sole and absolute discretion, shall
have the option of either (i) installing the Software directly on a Computer and
shipping the Computer to end users; or (ii) shipping the hard disk containing
the Software, replicated by MTI at its costs to the end user and installing the
Software at the end user's premises.

        1.6 Failure to Deliver. If FalconStor fails to deliver any Deliverable
by the delivery date, or if any errors discovered before acceptance cannot be
eliminated within the time period set forth in Section 1.5 hereof, then MTI may,
at its option: (i) terminate the Agreement and retain the Deliverable (including
any applicable Documentation); or (ii) extend the correction period in its sole
and absolute discretion.

        1.7 FalconStor's Support Obligations. If at any time or times subsequent
to the approval of any Deliverables pursuant to Section 1.5, MTI identifies any
material bugs with respect to any Deliverables or any material bugs with respect
to any Deliverables are brought to the attention of MTI, FalconStor shall, at no
cost to MTI, promptly correct any such material bugs to MTI's reasonable
satisfaction. For no additional training fees, FalconStor shall provide a
minimum of three (3) full business days of training in the use of the Software
and in providing end-user support for the Software to persons designated by MTI.
During the training period, any of the out-of-pocket expenses, travel and
production cost (e.g. telephone and faxes) will be mutually agreed beforehand
and then be billed separately. In addition, FalconStor shall make available its
telephone and e-mail maintenance and support services on a twenty-four (24)
hours, seven (7) days a week basis. The details of the maintenance and support
services provided by FalconStor is set forth in more detail on Exhibit D.

        2. LICENSE GRANT. Subject to the terms and conditions contained herein,
FalconStor hereby grants to MTI, and MTI hereby accepts from FalconStor during
the term of this Agreement, a non-exclusive, non-transferable, revocable,
license ("License"):

        2.1 to use, copy, edit, format, modify, translate, make and have made
and create derivative works from the Software and the Modified Software;

        2.2 to reproduce, license, rent, lease, install on Computers, export or
otherwise distribute, and have reproduced, licensed, rented, leased, installed
on Computers, exported or otherwise distributed, to and by third parties, the
Software, the Modified Software and the Documentation;


                                       3
<PAGE>

        2.3 to OEM and bundle the Software, the Modified Software and
Documentation in conjunction with MTI's products and/or third party products;
and

        2.4 to grant the rights set forth in Sections 2.2 and 2.3 to "Third
Party Distributors." "Third Party Distributor" shall mean any entity that has
the right, pursuant to an agreement with MTI that complies with and is
consistent with the applicable terms and conditions of this Agreement, to
distribute the Software to end users. The terms and conditions stated in this
Agreement shall apply to all sublicenses made hereunder during the term of this
Agreement.

        3. RESTRICTIONS. MTI agrees that the license granted in Section 2 does
not permit MTI to use, copy, modify or reproduce, distribute, or make available
the Software or any other material provided or licensed hereunder except as
expressly provided in Section 2. MTI shall not decompile, disassemble, or
reverse engineer the Software. Nothing in this Agreement shall prevent MTI from
selling computers without the Software or from selling software which compete
directly with the Software.

        4. EXPORT RESTRICTIONS. MTI acknowledges that the laws and regulations
of the United States may restrict the export and re-export of the Software. MTI
agrees that it will not export or re-export the Software in any form without the
appropriate United States or foreign government licenses. If MTI exports the
Software from the United States, MTI shall indemnify and hold FalconStor
harmless from and against any duties, penalties or other claims arising out of
or relating to such exportation or importation.

5.      ESCROW.

        5.1 Escrow Materials. Within fourteen (14) days after MTI's acceptance
of the Deliverables, FalconStor shall deposit in escrow the source code for all
Software and Modified Software (and any updates thereto), an electronic copy of
all Documentation, and any other documents or materials required to write,
support, test and manufacture the latest version of the Software ("Escrow
Materials").

        5.2 Escrow Release. If during the term of this Agreement, FalconStor
refuses or is unable to abide by the terms and conditions of this Agreement for
any reason whatsoever (including, but not limited to, FalconStor's bankruptcy,
termination of FalconStor's business, assignment of this Agreement or "Force
Majeure Event" (as defined in Section 14 below) or if MTI terminates this
Agreement for cause (each a "Triggering Event" as further defined below), MTI
shall send written notice demanding that FalconStor or any surviving entity to
abide by the Agreement. If MTI's demand is not met within thirty (30) days,
MTI's right to access Escrow Materials shall be triggered. For purposes of this
Section, neither FalconStor nor any entity that assumes the rights or
obligations of FalconStor, may terminate this Agreement (absent a material
breach by MTI) in order to cut short the term of this Agreement. For the
purposes of this


                                       4
<PAGE>

Section, a Triggering Event shall include, without limitation, failure to give
MTI access to upgrades and enhancements or institution of unreasonable price
increases by FalconStor. The use of source codes can only be used for the
"Deliverable" in exhibit B and "License" in the Section 2 in this agreement.

        5.3 License. If MTI's right to access Escrow Materials is triggered, MTI
shall have a nonexclusive, non-transferable right and license for a period of
three (3) years from the date of MTI's receipt of Escrow Materials, to use,
copy, edit, format, modify, translate, make and have made, and create derivative
works of the source code of the Software and Modified Software, provided that
MTI manages such actions in a confidential manner. During this period, MTI is
obligated for royalty payment per this Agreement

        5.4 Return of Escrow Materials. If after MTI's escrow rights are
triggered FalconStor resumes performance under this Agreement, MTI's escrow
rights shall be terminated and MTI shall immediately return to escrow all
applicable Escrow Materials.

        Escrow Agent. The parties shall agree upon an escrow agent. MTI shall
bear the cost of the escrow agent and related reasonable costs incurred by
FalconStor.

6. MARKETING EFFORTS. MTI shall use commercially reasonable efforts to market
and promote the Software through advertising, point-of-sale and online
promotions, sales literature and brochures, co-marketing opportunities,
including customer service and online forums, and such other promotions as MTI
shall deem appropriate in furtherance of its responsibilities under this
Agreement in its sole and absolute discretion. FalconStor will reimburse MTI a
maximum of MDF of S 20,000 upon the pre-approval marketing activities by
FalconStor.

7. PAYMENT.

        7.1 Purchase Fee. MTI will pay FalconStor the fees set forth for each
Software product on Exhibit C (including the applicable discount) ("Purchase
Fee") and will purchase the minimum number of Software set forth in Exhibit C
for each year ("Minimum Purchase Requirement"). In the event MTI fails to make
the Minimum Purchase Requirement in any given year, MTI will have the option to
pay the difference to qualify the discounts set forth in Exhibit C. In the event
MTI exceeds the Minimum Purchase Requirement in any given year, the amount sold
in excess may be applied towards the Minimum Purchase Requirement in any of the
following years. No Purchase Fee shall be due for copies of the Software: (i)
used or distributed for demonstration, marketing or training purposes; (ii)
distributed to an end user as a replacement for a defective copy or to fix an
error; (iii) used to repair or maintain a end user's system in the event such
end user does not have a back up or archival copy, (iv) used for backup or
archival purposes; (v) returned by an end user; or (vi) used for manufacturing
or testing purposes.


                                       5
<PAGE>
        7.2 Development Fee. MTI agrees to pay FalconStor the non-refundable and
non-returnable "Development Fee" of fifty thousand U.S. Dollars (US$50,000) upon
the execution of this agreement.

        7.3 Payment. MTI shall pay FalconStor the royalty fee payment and Point
of Sales (POS) report on a quarterly basis, within thirty (30) days of the end
of each Quarter, which ends on or about January 31, April 30, July 31 and
October 31. With the payment, MTI will include a written statement, net of
returns, setting forth all information reasonably required by FalconStor to
independently calculate the Purchase Fee payment. All payments shall be made in
United States currency.

        7.4 Taxes. FalconStor acknowledges and agrees that MTI has the right to
withhold any applicable taxes from any payment due under this Agreement if
required by any government agency. FalconStor shall be responsible for all taxes
based on its income.

        7.5 Audit. A nationally and/or USA recognized accounting organization
retained by FalconStor and reasonably acceptable to MTI may have access to
inspect MTI's compliance with this Agreement and to audit MTI's books and
records related to this Agreement to determine that Purchase Fee payments paid
to FalconStor are correct. Such audit may only take place upon sixty (60) days
written notice, during regular business hours and no more than once per calendar
year. Only two (2) years of MTI records immediately preceding the date of the
audit may be accessed from the date of audit, and MTI is only required to
maintain records for a two (2) year period. All records accessed during the
audit shall be deemed MTI's Confidential Information and will be treated as such
in accordance with Section 9 of this Agreement. FalconStor shall pay for the
entire cost of the audit.

8. OWNERSHIP AND PROPERTY RIGHTS. It is expressly understood and agreed that no
title to, or ownership of, the Software provided on any Master Disk, or any part
thereof, is hereby transferred to MTI, and that title thereto is and shall
remain the property of FalconStor or its third-party suppliers, as applicable;
and that all applicable copyrights, trade secrets, patents and other
intellectual property rights in the Software and all other items licensed
hereunder are and shall remain the property of FalconStor or its third-party
suppliers, as applicable.


 9.     CONFIDENTIALITY.

        9.1 Definition. Either party hereto may disclose to the other party
certain information that the party deems confidential. As used in this Section
9, "Confidential Information" means all information, regardless of the form in
which it is transmitted, relating to the disclosing party's business which, if
disclosed in tangible or electronic form, bears a legend indicating that it is
confidential information or if disclosed orally or visually only, is indicated
as confidential or proprietary at the time of disclosure and is promptly
thereafter identified in a non-confidential memorandum to the receiving party.


                                       6
<PAGE>

        9.2 Non-disclosure. For a period of three (3) years from the date of
disclosure, the receiving party shall not disclose any Confidential Information
it receives from the disclosing party to any person, firm or corporation except
to: (a) employees of the receiving party and employees of its affiliated
companies who have a need to know and who have been informed of the
confidentiality obligations hereunder; and (b) contractors or consultants under
contract to the receiving party who have a need to know, who have been informed
of the receiving party's obligations hereunder, and who have agreed in writing
not to disclose Confidential Information for a period not shorter than the
nondisclosure period provided above. Neither party will use the Confidential
Information of the other party for any purpose other than to further the
purposes of this Agreement. The terms of this Agreement are confidential and
neither party hereto shall publicize or disclose the terms of this Agreement
without the prior written consent of the other party.

        9.3 Exception. The confidentiality obligations hereunder shall not apply
to Confidential Information that: (a) is already known to the receiving party at
the time of disclosure, as demonstrated by contemporaneous written records; (b)
is or becomes publicly known through no wrongful act of the receiving party; (c)
is received from a third party without similar restrictions and without breach
of this Agreement; (d) is independently developed by the receiving party without
access to Confidential Information, as demonstrated by contemporaneous written
records; or (e) is lawfully required to be disclosed to any governmental agency
or is otherwise required to be disclosed by law, provided that the receiving
party will first have provided the disclosing party with prompt written notice
of such required disclosure (to the extent reasonably permissible) and will take
reasonable steps to allow the disclosing party to seek a protective order with
respect to the confidentiality of the information required to be disclosed.

        9.4 Injunctive Relief. If either party breaches this Section 9, the
parties acknowledge that the damage or imminent damage to the non-breaching
party's business and goodwill will be irreparable and difficult to estimate,
making any remedy at law or in damages inadequate. Accordingly, notwithstanding
any other provision in this Agreement, the non-breaching party shall have the
right to pursue a claim for injunctive relief, damages and attorneys' fees in a
court of competent jurisdiction for the breaching party's breach of any
covenant, agreement or obligation arising under this Section. in addition to any
other relief available to the non-breaching party under this Agreement.

10. TERMS AND TERMINATION.

        10.1 Term. The term of this Agreement shall commence on the Effective
Date and continue for a period of three (3) years. The term of this Agreement
shall automatically renew for consecutive additional one (1) year periods on
the same terms and conditions, unless earlier terminated as provided herein.


                                       7
<PAGE>

        10.2 Termination without Cause. MTI may terminate this Agreement for any
reason upon at least sixty (60) days' prior written notice to FalconStor as
provided herein.

        10.3 Termination with Cause. Either party may terminate this Agreement
at any time upon written notice in the event the other party breaches any of the
material terms of this Agreement. A good faith dispute between the parties with
respect to Purchase Fee payments will not be considered a material breach. Prior
to any termination, however, the non-breaching party will notify the breaching
party in writing of all outstanding deficiencies and/or complaints constituting
the material breach, and the breaching party will have thirty (30) calendar days
(the "Cure Period") to cure such deficiencies and/or complaints. If the
breaching party cures all such deficiencies and/or complaints within the Cure
Period, the material breach will be deemed corrected, and the non-breaching
party shall not be entitled to terminate this Agreement based upon the material
breaches contained in the notice.

        10.4 Survival. Any provisions of this Agreement, which are intended by
their specific terms or by necessary implication, to survive the termination of
this Agreement shall so survive. Neither party shall be liable to the other
party for damages of any sort resulting solely from terminating this Agreement
in accordance with its terms. Any licenses or sublicenses granted by MTI under
this Agreement shall not be affected by any termination of this Agreement and
shall remain in full force and effect. Upon termination of this Agreement, each
party will deliver to the other party, all Confidential Information of the other
Party, including any and all copies thereof, in its possession, unless the party
is authorized to retain such Confidential Information pursuant to this
Agreement.

11. WARRANTIES AND DISCLAIMERS.

        11.1 FalconStor Warranty. FalconStor warrants to MTI (i) that the
Software, as and when delivered to MTI on the Master Disk(s), will operate
substantially in conformance with FalconStor's the Specifications set forth in
Exhibit A when properly installed and configured on a personal computer system
approved by FalconStor hereunder; (ii) that the Modified Software, as and when
delivered to MTI on the Master Disk(s), will operate substantially in
conformance with FalconStor's the Specifications set forth in Exhibit B when
properly installed and configured on a personal computer system approved by
FalconStor hereunder; (iii) that the Master Disk(s) will be free from defects in
material and workmanship; (iv) that it has the full power to enter into this
Agreement and make the assignments and grant the license rights granted by
FalconStor herein; (v) that it has not previously granted, and shall not grant,
any rights in the Software or any Deliverables to any third party that are
inconsistent with the rights granted to MTI herein; and (vi) the Software,
Modified Software and Documentation are original to FalconStor and do not
infringe any copyright, patent, trade secret or other intellectual property or
proprietary rights of any third party.


                                       8
<PAGE>

        11.2 MTI's Rights. MTI may reject and return for replacement, at
FalconStor's expense and risk, any Master Disk that fails to meet the warranty
set forth in Section 11.1 hereof. To be eligible for replacement, MTI must
notify FalconStor of such failure within thirty (30) days of its discovery by
MTI. FalconStor will pay the shipping, freight and insurance charges for MTI's
return of the Master Disk and the replacement.

        11.3 MTI warrants to FalconStor that (i) it has the full right and
authority to perform, and will abide by all laws, regulations, and other legal
guidelines in performing, its obligations under this Agreement; and (ii) it
shall duplicate and install the Software from the Master Disk(s) onto hard disks
under this Agreement in a manner consistent with accepted industry standards for
hard disk installations.

        11.4 THE WARRANTIES SET FORTH IN THIS SECTION 11 ARE IN LIEU OF ALL
OTHER WARRANTIES, EXPRESS OR IMPLIED. WITHOUT LIMITATION, EACH PARTY
SPECIFICALLY DISCLAIMS ANY IMPLIED WARRANTIES OF MERCHANTABILITY, FITNESS FOR A
PARTICULAR PURPOSE AND NONINFRINGEMENT.

12. INDEMNIFICATION.

        12.1 The Parties' Indemnification. Each party shall indemnify and hold
the other, their respective parent, subsidiary and affiliate companies, its and
their officers, directors, agents and employees, free and harmless from and
against all claims, costs, liabilities, judgments, damages and expenses
(including reasonable attorneys' fees and costs) arising out of any (a) breach
of any warranties or representations made in this Agreement; or (b) failure to
comply in a material respect with any governmental law, statute, ordinance,
administrative order, rule or regulation, unless the claim arises out of or is a
result of the other party's breach of this Agreement.

        12.2 Limitation of FalconStor's Indemnification Obligations. FalconStor
shall have no liability for any claim of infringement based on: (i) use of a
superseded or altered release of the Software if such infringement would have
been avoided by the use of a current, unaltered release of the Software that
FalconStor or its agent provides to MTI, or (ii) the combination or use of the
Software with software, hardware or other materials not furnished or approved by
FalconStor or its agent if such infringement would have been avoided by use of
the Software alone. In the event that the Software is held or believed by
FalconStor to infringe, FalconStor shall have the option, at its expense to: (a)
modify the Software to be non infringing; (b) obtain for MTI a license to
continue using the Software, or (c) terminate this Agreement and refund the full
Development Fee and any Purchase Fee payments affected by the Software.

        12.3 MTI's Indemnification Obligations. In addition to MTI's
indemnification obligation set forth in Section 12.1 above, MTI shall indemnify
and hold FalconStor, its parent, subsidiary and affiliate companies, its and
their officers, directors, agents and employees, free


                                       9
<PAGE>

and harmless from and against all claims, costs, liabilities, judgments, damages
and expenses (including reasonable attorneys' fees and costs) arising out of any
claim relating to or in connection with damage to property, or personal injury,
in whole or in part, from any actual defect(s) in any Computer, whether such
defect is latent or patent, that is not caused by the Software or the Modified
Software. For purposes of this Section 12.3 only, "Computer" shall be deemed to
include any modem, monitor, and/or other equipment, part, or software (other
than the Software) included or installed with, in, or on such Computer by or on
behalf of MTI.

        12.4 Notice. It shall be an ongoing condition of the indemnity provided
in Sections 12.1 through 12.3 above, that the indemnified party give the
indemnifying party prompt written notice of any actual or threatened
indemnifiable claim (provided, however, that failure to give such notice shall
not relieve the indemnifying party of its obligation hereunder, except to the
extent that the indemnifying party was actually and materially prejudiced by
such failure), and provide the indemnifying party, at the indemnifying party's
expense, with all reasonably accessible information regarding such claims in the
indemnified party's possession. The indemnified party will promptly notify the
indemnifying party of any claim, demand, suit or proceeding for which the
indemnifying party has agreed to indemnify and hold the indemnified party
harmless, and the indemnifying party, upon written request by the indemnified
party, will promptly defend and continue the defense of such claim, demand, suit
or proceeding at the indemnifying party's expense. The indemnifying party shall
not enter into any settlement without the indemnified party's prior written
approval, which approval shall not be unreasonably withheld or denied. If the
indemnifying party fails to undertake and continue such defense, the indemnified
party will have the right (but not the obligation) to make and continue such
defense as it considers appropriate, and the expenses and costs thereof,
including but not limited to attorneys' fees, out-of-pocket expenses and the
costs of an appeal and bond thereof, together with the amounts of any judgment
rendered against the indemnified party, will be paid by the indemnifying party.
Nothing herein will prevent the indemnified party from defending, if it so
desires in its own discretion, any such claim, demand, suit or proceeding at its
own expense through its own counsel, notwithstanding that the defense thereof
may have been undertaken by the indemnifying party.

        13. LIMITATIONS of LIABILITY. WITH THE EXCEPTION OF THE PARTIES'
CONFIDENTIALITY OBLIGATIONS PURSUANT TO SECTION 9 AND INDEMNIFICATION
OBLIGATIONS PURSUANT TO SECTION 12, IN NO EVENT WILL EITHER PARTY BE LIABLE FOR
ANY INDIRECT, INCIDENTAL, CONSEQUENTIAL, EXEMPLARY OR SPECIAL DAMAGES OF ANY
KIND, WHETHER BASED ON CONTRACT, TORT OR ANY OTHER LEGAL THEORY, AND REGARDLESS
OF WHETHER EITHER PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF ANY SUCH DAMAGES.

        14. FORCE MAJEURE. Neither party shall be liable to the other party for
failure or delay in the performance of any of the obligations under this
Agreement for the time and to the extent such


                                       10
<PAGE>

failure or delay is caused by reason of acts of God or other cause beyond its
reasonable control, including acts of government, riots, war, interruption of
transportation, strikes or other labor trouble, shortage of labor, fire, storm,
flood or earthquake (each a "Force Majeure Event"). The performance of
obligations hereunder shall be suspended during the existence of any Force
Majeure Event, and upon cessation of such Force Majeure Event, shall again be
required; provided, however, that the parties hereto shall use their reasonable
commercial efforts to minimize the consequences of such Force Majeure Event and
in the event either party is unable to perform as a result of such Force Majeure
Event for a period of sixty (60) consecutive days, the other party may
immediately terminate this Agreement upon notice to the non-performing party.

15. MISCELLANEOUS. The parties hereto are independent contractors acting for
their own accounts; may not bind, act for or represent the other; and have no
agency, partnership or joint venture relationship. This Agreement shall be
governed by and construed in accordance with the laws of the State of California
without regard to its conflict of laws rules. Any legal suit, action or
proceeding arising out of or relating to this Agreement shall be commenced in a
state or federal court located in Orange County, California, and each party
hereto irrevocably submits to the exclusive jurisdiction and venue of any such
court in any such suit, action or proceeding. The application of the United
Nations Convention of Contracts for the International Sale of Goods is expressly
excluded. The captions and section and paragraph headings used in this Agreement
are inserted for convenience only and shall not affect the meaning or
interpretation of this Agreement. All notices, communications and reports
required or permitted under this Agreement shall be in writing, and the same
shall be given by overnight courier or by registered or certified mail, return
receipt requested, addressed to the parties at the addresses first set forth in
the preamble (or to other address as may be specified hereafter in writing in
accordance with this sentence), and to the attention of the person executing
this Agreement. Further, notice to FalconStor should be sent to the attention of
the Vice President, CFO, with a copy to General Counsel and a courtesy copy via
e-mail to www.Falconstor.com\oemorder.htm. The parties understand and agree that
notice is deemed effective as of the date of delivery. This Agreement sets forth
the entire understanding of the parties with respect to the subject matter
hereof, and supersedes any prior agreements and understandings, both written and
oral, which may have existed between the parties with respect to the subject
matter hereof. This Agreement may not be modified except by a writing signed by
both parties. No failure or delay by any party in exercising any right hereunder
shall operate as a waiver thereof, and no single or partial exercise of any
right shall preclude any other or further exercise thereof or the exercise of
any other right hereunder. MTI may assign this Agreement or any of its rights or
obligations hereunder upon written notice to FalconStor, provided the assignee
is not a competitor of FalconStor and the assignee agrees in writing to be bound
by the terms and conditions of this Agreement. FalconStor may assign this
Agreement or any of its rights or obligations hereunder solely upon written
notice to MTI and upon MTI's prior written approval, which shall not be
unreasonably withheld or delayed. In the event any one or more of the provisions
of this Agreement shall for any reason be held to be invalid, illegal or
unenforceable, the remaining provisions of this


                                       11
<PAGE>

Agreement shall be unimpaired, and the parties will negotiate in good faith to
substitute a provision of like effect. This Agreement may be executed in
counterparts, which taken together, shall constitute one Agreement and any party
hereto may execute this Agreement by signing such counterpart. A copy or
facsimile of a signature shall be binding upon the signatory as if it were an
original signature. This Agreement shall not be deemed to exist, and no
obligations on the part of either party shall arise, unless and until a
definitive agreement has been executed by and delivered to both parties.

        IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
 duly executed by their duly authorized representatives as of the Effective
 Date.


FALCONSTOR, INC.                        MTI TECHNOLOGY CORPORATION

By: /s/ JACOB FERNG                     By: /s/ V.S VENKATARAMAN
   ----------------------                  ---------------------------
Name:  Jacob Ferng                      Name: V.S. Venkataraman

Title: VP/CFO                           Title: Sr. V.P. Operations & Services

Date:  9/3/01                           Date:  9.10.01


                                       12
<PAGE>

                                    EXHIBIT A

                           [FALCONSTOR SOFTWARE LOGO]

                             [IPSTOR SOFTWARE LOGO]


                                       13
<PAGE>

                                      EXHIBIT B

                                       Schedule

Project Milestones:

       Phase I- On-going Private Labeling/Fibre Channel Failover.

           A. COMPONENTS TO BE SUPPLIED BY MTI

              2 Vivant Systems to be used by Falconstor Development and QA
              respectively.

           B. COMPONENTS TO BE DEVELOPED/SUPPLIED BY FALCONSTOR

              FalconStor will develop or supply the following items for Phase 1:

              Starting with IPStor version 2.0 feature set (see attached data
              sheet), FalconStor will private-label console GUI and maintain
              version-control of a configuration of IPStor for MTI over course
              of contract. MTI will be eligible to obtain and receive support
              from Falconstor all future software maintenance
              enhancements/revision upgrades during the course of the contract.
              Falconstor will also add Active-Active Fail-over Support for Fibre
              Channel and work with MTI to qualify it with MTI specified RAID
              controllers prior to MTI's First Customer Shipments. The target
              delivery date of a release candidate for MTI from Falconstor is
              September 15, 2001.

        Phase II-Additional Management layer/GUI integration

        A. COMPONENTS TO BE SUPPLIED BY MTI

           Note that this is not intended to be an exhaustive list and some
           items may have been omitted by error.

        B. COMPONENTS TO BE DEVELOPED/SUPPLIED BY FALCONSTOR

           FalconStor will develop or supply the following items for Phase II:
           To be determined in Joint Engineering meeting scheduled for in
           September.

           Specifications: [TBA]


                                       14
<PAGE>

                                    EXHIBIT C

1. MTI Discount Rate: The following discount will be applied to the prices set
forth in the Pricing Table below:

 65% for Software License
 50% for Maintenance and Support Fee.


                            NORTH AMERICA PRICE LIST
                             EFFECTIVE APRIL 1, 2001

<TABLE>
<CAPTION>
                                                                             ENGLISH VERSION
        PRODUCT                SKU                 DESCRIPTION                    MSRP
        -------                ---                 -----------               ----------------
<S>                         <C>             <C>                               <C>
IPStor Server               IPSTORSVR001    Base software including            $10,000
                                            boundless virtualization
                                            and connectivity to
                                            SAN/NAS Clients via a
                                            Java management console.

Active-Active Failover      IPSTORHAO001    Facilitates high-availability,     $ 4,000
Option                                      automatic failover
                                            configuration using two
                                            IPStor Servers. (Each
                                            member of the failover pair
                                            needs a separate IPStor
                                            Server and Option
                                            License).

Synchronous Mirroring       IPSTORMIR001    Allows synchronous mirroring of    $ 2,000
Option                                      virtual storage volumes
                                            attached to the IPStor Server to
                                            guard against storage
                                            device/channel failure.

Replication Option          IPSTORREP001    Allows asynchronous and/or         $ 5,000
                                            scheduled mirroring of
                                            virtual storage volumes from
                                            one IPStor server to another over
                                            the IP network, typically for
                                            automated off-site data
                                            protection and disaster
                                            recovery. (Individual
                                            Option license is needed
                                            for both IPStor Servers)
</TABLE>


                                       15
<PAGE>

<TABLE>
<CAPTION>
                                                                             ENGLISH VERSION
        PRODUCT                SKU                 DESCRIPTION                    MSRP
        -------                ---                 -----------               ----------------
<S>                         <C>             <C>                               <C>

Snapshot Copy Option        IPSTORSNC001    Creates an independent,            $2,000
                                            point-in-time copy of a
                                            virtual storage volume on
                                            demand. (Individual Option
                                            license is needed for each
                                            IPStor Server)

Serverless Backup           IPSTORLFB001    Enables the IPStor Server          $2,000
Enabler Option                              to become a Data Mover
                                            (3rd-Party Copy Manager) thereby
                                            allowing certified off-the-shelf
                                            backup software to increase
                                            backup/restore speed by
                                            transferring data directly
                                            between disk and tape.

Zero-Impact Backup          IPSTORZIO001    Allows certified off-the-          $2,000
Enabler Option                              shelf backup software to
                                            perform snapshot (point-in
                                            time), high-speed image
                                            tape backup and restore
                                            operations for a virtual
                                            storage volume on the
                                            IPStor Server.

NAS Option                  IPSTORNAS001    Allows shared access of            $2,000
                                            files and folders stored on
                                            virtual storage volumes via
                                            CIFS and/or NFS protocol.

IPStor SAN Client           IPSTORSCL001    Allows the target operating        $1000 per CPU
                                            system to access the
                                            authorized virtual storage
                                            resource through a virtual
                                            IP-based SCSI Host Bus
                                            Adapter driver.

Maintenance is 20%          IPSTORMTN001    Includes tech support and           +20%
MSRP                                        periodic maintenance
                                            updates. Maintenance for
                                            year 2 will be 20% of the
                                            then MSRP.

</TABLE>

Note : Pricing is subject to change without notice. Contact FalconStor sales for
undated information.



                                       16
<PAGE>

II.    MINIMUM PURCHASE COMMITMENT:

    Within fourteen (14) days after MTI passes DVT testing, MTI's minimum annual
    royalty volume commitment shall commenced.

<TABLE>
<S>                        <C>
First Year                  US$500,000
Second Year                 US$1,000,000
Third Year                  US$1,500,000
</TABLE>


                                       17
<PAGE>

                                    EXHIBIT D

                        Service and Support Requirements

1.0    SERVICE AND SUPPORT REQUIREMENT

       MTI will be responsible for working directly with the End Users, and
FalconStor Support will work directly with MTI to support MTI personnel, as
necessary. MTI represents and warrants that it is experienced in, capable of,
and staffed to provide, Level 1 and Level 2 support (as defined below).
FalconStor offers training programs to assist in attaining this level of
expertise on FalconStor Products. FalconStor Support will accept calls for
technical assistance only from Level 2 engineers who have attended FalconStor
instructed training Courses 1.2 and 1.3.

        FalconStor will provide Level 3 support (as defined below).

 2.0    SUPPORT LEVEL DEFINITIONS

 2.1    LEVEL 1 SUPPORT

        Level 1 support is the first line, direct End User contact, most likely
 via a telephone callhandling group provided by MTI.

        Level One support includes:

        -  First contact, direct MTI/End User interaction

        -  Information collection and analysis

        -  Identification of whether the problem is known and has a known
           solution

        -  Troubleshooting and problem reproduction

        -  Problem report administration and tracking

 The parties agree that End Users shall not have the right to contact FalconStor
 directly for questions related to the Products.

 2.2    LEVEL 2 SUPPORT

        Level 2 support is "technical support" provided by MTI personnel. Level
2 support is typically provided by experts in the applicable Product and who
serve as the escalation point for Level 1. Level 2 support personnel are
expected to resolve all known problems, installation and configuration issues,
assist in firmware or driver updates at the End User site, search FalconStor
posted Technical Notes and other technical information supplied that will assist
in providing problem resolutions. All pertinent data shall be entered in MTI's
problem tracking database.


                                       18
<PAGE>

        Should the Level 2 analyst be unable to resolve a problem, either
because of lack of expertise, exhausted troubleshooting knowledge, or expiration
of the allotted Level 2 resolution time, the Level 2 analyst may escalate the
problem to Level 3 for resolution. Level 2 personnel of MTI will continue to
diligently work with Level 3 personnel of FalconStor to accomplish resolution.
Level 2 personnel of MTI will communicate all resolutions back to the End Users.

        Escalations should be presented to FalconStor engineers in the form of a
problem tracking database record with all pertinent configuration detail and
failure information or symptoms documented in detail.

        In an effort to maintain an efficient support organization and crisp
exchange of information, MTI will limit the number of support personnel (Level
2) authorized to contact FalconStor (Level 3) to five (5) and ensure that these
personnel have attended courses 1.2 and 1.3 taught at the FalconStor training
facility.

 2.3    LEVEL 3 SUPPORT

        Level 3 support is provided by FalconStor System Engineers (SE) and/or
Technical Support Engineers (TSE). Level 3 is the first point of contact for
technical issues between FalconStor and MTI. Once a problem is escalated by MTI
and to Level 3, FalconStor is responsible for resolution and will utilize
commercially reasonable resources to resolve such problem.

FALCONSTOR'S SOFTWARE SUPPORT LEVEL

        FalconStor will provide engineering level support to MTI's engineering
staff as needed to isolate problem cause, make bug fixes to FalconStor supplied
code, and produce the object code required by MTI to support and update the
Products.

        FalconStor technical support will be available via telephone during
normal working days between the hours of 8:00 AM and 5:00 PM, Pacific Time.
Support between 5:00 PM and 8:00 AM, Pacific Time, is available via answering
service, twenty-four (24) hours a day, three hundred sixty-five (365) days per
year. Calls placed via the answering service will receive response from a
FalconStor technical support representative within two (2) hours.

        In the course of its investigations, FalconStor's technical support
group may require that MTI's personnel be able to obtain onsite network traces,
crash dumps or other diagnostic information for use by FalconStor's staff to
isolate the cause of the problem. MTI will ensure that its support staff has the
equipment and the training necessary to obtain this information.


                                       19
<PAGE>

        In those cases where FalconStor personnel are required to make direct
phone or field contact with a customer of MTI to obtain problem information, MTI
will designate a customer representative to be present for the duration of the
customer contact.

PROBLEM ESCALATION

       When the FalconStor technical support group determines that it is unable
to resolve the problem with its own resources, it will escalate the problem as
follows:

        In those cases where MTI requires on-site assistance to install, setup,
resolve operational issues or obtain necessary diagnostic information in order
to solve a problem, FalconStor will provide the services of a field applications
engineer or a product development engineer, as determined by FalconStor, for
that purpose. If it is determined that the cause of the problem is not due to a
defect in the FalconStor supplied Product, MTI will reimburse FalconStor for
time and materials at FalconStor's then standard rate plus reasonable expenses
for transportation, meals and lodging.

        FalconStor uses the following definitions:

        Bug Resolution: an analysis of the problem has been done and determined
to be a FalconStor problem, the area of the system causing the problem is
identified and it is possible to estimate the effort to fix the problem.

        Bug Fix: problem has been fixed, incorporated into an engineering build,
is ready for SQA to verify the fix.

        If the FalconStor technical support group determines that the problem
may be due to a defect in the FalconStor supplied Product, the problem will be
escalated to FalconStor engineering via the normal FalconStor System Problem
Report ("SPR") process. SPRs are assigned priorities as follows:

 BUG PRIORITY LEVELS AND RESPONSE TIME:
<TABLE>
<CAPTION>
PRIORITY       DEFINITION      INITIAL            SERVICE OBJECTIVE
                               RESPONSE TIME
<S>            <C>             <C>                <C>
</TABLE>


                                       20
<PAGE>

<TABLE>
<S>    <C>                        <C>                     <C>
1       The problem causes the    FalconStor will          FalconStor will make
        system to be not          acknowledge receipt      commercially reasonable
        operational, severely     within two (2) hours     efforts to provide a
        impaired where            of a bug filed as        maintenance or patch
        operations is             specified in a           release ASAP.
        impossible or un-         following section;
        usable, deemed a          FalconStor will
        critical failure, where   estimate resolution
        no viable work around     time within one (1)
        is possible.              business day of bug
                                  filing.

  2     Normal system             FalconStor will          FalconStor will assign
        operation is impaired,    acknowledge receipt      engineering resources to the
        some feature may not be   within 1 business day    problem, and make
        operational, failure      of bug filing (with all  commercially reasonable
        is intermittent and not   information specified    efforts to incorporate the
        consistently re-          in a below section);     bug fix into the next
        producible, a work        FalconStor will          scheduled maintenance
        around may exist.         estimate resolution      release.
                                  time within two (2)
                                  business days of bug
                                  filing.


  3     Product issues that can   FalconStor will          FalconStor identifies a
        be circumvented           acknowledge receipt      target maintenance release
        through programmatic,     within four (4)          for inclusion of this fix.
        procedural or             business days of bug
        configuration specific    filing (with all
        changes but product is    information specified
        still operational. Also   in following section);
        covers problems in        FalconStor will make
        documentation which       commercially
        can cause MTI             reasonable efforts to
        procedural problems       estimate resolution
                                  time within fifteen
                                  (15) business days of
                                  bug filing.

</TABLE>


                                       21
<PAGE>
<TABLE>

<S>                <C>                       <C>                      <C>
REQUEST FOR         Request to add feature    FalconStor will          FalconStor will consider all
ENHANCEMENT         or capability to the      acknowledge an RFE       such requests to be included
(RFE)               software that is not      request within four (4)  in future releases; such
                    currently present or to   business days.           decisions will be made
                    modify current                                     within sixty (60) days of
                    software to function                               request receipt.
                    differently.
</TABLE>

       FalconStor and MTI will establish contacts to report problems, track
status, exchange technical information, track build requirements, make bug fixes
and coordinate the transfer of software files to and from a MTI account on the
FalconStor Support website.

       Administrator of Technical Support. FalconStor will establish the
Administrator of Technical Support as the central contact point for receiving
written problem reports and sending problem resolution status via Email or FAX.
All verbal contacts with Technical Support should be made via supplied telephone
numbers.

        Development Engineering. FalconStor will assign Development Engineers as
required to resolve all MTI SPRs and provide engineering level support to MTI's
engineering staff.

        Problem Administrator. MTI will establish one person as the counterpart
to the FalconStor Administrator of Technical Support to send problem reports and
receive problem status.

        Engineering. MTI will designate specific members of their engineering
staff who are authorized to have engineering level contact with the designated
FalconStor Engineer. However, MTI specified contacts are required to send
problem reports and receives problem status via the Administrator of Tech
Support.

PROBLEM AND STATUS REPORTING (MTI)

        MTI will assign a person to send written problem reports and receive
problem resolution status.

        All problem reports will be submitted in a standard format using the
attached sample form. All reports will be submitted to the FalconStor Technical
Support Administrator via Email or FAX.

        The FalconStor Technical Support Administrator will log the fact that a
problem report was received in the Tech Support Database; and, if the issue is
not resolved by Technical Support, enter the details from the problem report
into the Engineering SPR Database and notify via Email the designated FalconStor
Engineering contact that an SPR has been filed.


                                       22
<PAGE>

        In the event a problem is escalated to FalconStor Development
Engineering, the FalconStor Technical Support Administrator will send a report
acknowledgment containing the SPR number assigned to the problem to the
designated MTI contact via Email or FAX.

        FalconStor will use its Engineering SPR system to record and track the
status of all MTI reported problems.

</TEXT>
</DOCUMENT>
