FalconStor Software Reaches Agreement to Settle Class Action Lawsuit

FalconStor Software Reaches Agreement to Settle Class Action Lawsuit

MELVILLE, N.Y., Jan. 10, 2013 (GLOBE NEWSWIRE) -- FalconStor Software, Inc.
(Nasdaq:FALC), a market leader in disk-based data protection, today announced
that it had reached a settlement in principle of the class action lawsuit
pending against the Company.

Pursuant to a Memorandum of Understanding signed by counsel for the class
plaintiffs and by counsel for all defendants, FalconStor will pay $5 million
to settle the action. This amount includes damages, plaintiffs' attorneys'
fees, and costs of administration of the settlement. The Company expects to
pay this settlement with a combination of cash on hand and insurance proceeds.

"The agreement to settle the class action lawsuit represents another
significant step forward for our Company and our shareholders. As a result, we
have emerged as a stronger company, better equipped than ever to continue the
technological innovation for which we are known and to increase shareholder
value," said Jim McNiel, president and chief executive officer of
FalconStor."The improper acts of a few individuals that resulted in the
government investigations and the class action lawsuit were contrary to our
core values and ethical policies.Over the last two years, we have taken
aggressive measures to improve and to strengthen our business processes and
compliance programs."

In accordance with the Memorandum of Understanding, a stipulation of
settlement and a joint motion for preliminary approval of the settlement will
be submitted to the court for its approval no later than March 11, 2013.Final
settlement of the class action lawsuit is subject to certain conditions and to
approval by the court.

About FalconStor Software

FalconStor Software, Inc. (Nasdaq:FALC) is a market leader in disk-based data
protection. The company's mission is to transform traditional backup and
disaster recovery into next-generation service-oriented data protection. Built
upon an award-winning platform, FalconStor solutions deliver disk-based
backup, continuous data protection, WAN-optimized replication and disaster
recovery automation. FalconStor solutions are available through a worldwide
network of partners, including solution providers, top-tier strategic partners
and major OEMs. Thousands of customers worldwide, from small businesses to
Fortune 100 enterprises, entrust their data to FalconStor solutions.
FalconStor maintains headquarters in Melville, N.Y., and offices throughout
Europe and the Asia Pacific region. For more information, visit
www.falconstor.com or call 1-866-NOW-FALC (866-669-3252).

The FalconStor Software, Inc. logo is available at

This press release includes forward-looking statements that involve risk and
uncertainties that could cause actual results to differ materially from the
forward-looking statements. These risks and uncertainties include: delays in
product development; market acceptance of FalconStor's products and services;
technological change in the data protection industry; competition in the data
protection market; results and costs associated with governmental
investigations; intellectual property issues; and other risk factors discussed
in FalconStor's reports on Forms 10-K, 10-Q and other reports filed with the
Securities and Exchange Commission.

FalconStor and FalconStor Software are registered trademarks of FalconStor
Software, Inc., in the U.S. and other countries. All other company and product
names contained herein may be trademarks of their respective holders.

CONTACT: Joanne Ferrara
         FalconStor Software, Inc.

FalconStor Software Logo
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