Related Party Transactions and Outside Related Director Information

Legato Systems, Inc. (Retired) (LGTO.X)

In December 2000, the Company loaned $0.5 million to Mr. Wright in order to assist him in the repayment of a promissory note to his former employer. The loan is evidenced by Mr. Wright's promissory note and is secured by a deed of trust conveying a security interest to the Company in Mr. Wright's principal residence. The note bears interest at 6.5% per year, compounded annually. The note balance (principal and accrued interest) will become due on December 6, 2003, subject to acceleration upon Mr. Wright's cessation of employment or the occurrence of certain other events. However, in accordance with the terms of the note, 50% of the principal and all accrued interest was forgiven on December 6, 2002, and the remaining 50% of the principal balance, together with all accrued interest, will be forgiven on December 6, 2003 provided Mr. Wright is employed through such date and is not otherwise in default under the note. The largest aggregate amount of indebtedness during 2002 was $567,267, and the outstanding balance, including accrued interest, as of March 31, 2003 was $289,566.

In December 2001, the Company loaned $0.3 million to Mr. Chappell, which was repaid with interest in December 2002. The note bore interest at 4.55% and was secured by a deed of trust conveying a security interest in Mr. Chappell's principal residence. The largest aggregate amount of indebtedness during 2002 was $313,866.

We paid Mr. Dawson $0.1 million in 2001 and less than $0.1 million in 2002 for consulting services and the reimbursement of travel expenses. Also, in March 2002, we engaged Mr. Dawson to provide integration support in connection with our acquisition of OTG. Mr. Dawson received 10,000 shares of common stock, valued at $0.1 million, in connection with this work.

Mr. Kay has ownership interests in the Washington Capitals, a professional hockey team, the Washington Wizards, a professional basketball team, KJets LLC and National Operator Service, Inc. (dba Sonet Solutions).

In February 2002, OTG entered into a two-year marketing commitment with the Washington Capitals for $0.3 million, which was amended to one year for $0.2 million in January 2003. In addition, OTG purchased 2002-2003 season tickets from the Washington Capitals for less than $0.1 million.

In April 2002, OTG purchased 2002-2003 season tickets from the Washington Wizards for $0.1 million.

Legato agreed to reimburse Mr. Kay for use of a corporate jet for business purposes through December 31, 2002. We incurred $0.2 million of costs in connection with this agreement, and payments were made to KJets LLC.

Sonet Solutions currently subleases space in our Rockville facility. Legato received sublease income of less than $0.1 million in 2002.

The Company's Bylaws provide that the Company shall indemnify its directors and officers to the fullest extent permitted by Delaware law, including in circumstances in which indemnification is otherwise discretionary under Delaware law. The Company has also entered into indemnification agreements with its officers and directors containing provisions that may require the Company, among other things, to indemnify such officers and directors against certain liabilities that may arise by reason of their status or service as directors or officers and to advance their expenses incurred as a result of any proceeding against them as to which they could be indemnified.