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FORM 10-K/A.  ANNUAL REPORT PURSUANT TO SECTION 13
OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

(Mark One)

[x]    Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934

For the fiscal year ended December 31, 2001

or

[ ]     Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934

For the transition period from 
to

Commission File Number 000-29809

OTG Software, Inc.(Exact name of registrant as specified in its charter)

|                                                                       |  |                                               
|---------------------------------------------------------------------- |  | ----------------------------------------------
|Delaware(state or other jurisdiction of
incorporation or organization) |  | 52-1769077(IRS Employer
Identification Number)

2600 Tower Oaks Blvd.
Rockville, MD 20852
(240) 747-6400

(Address, including zip code, and telephone number, including
area code, of registrants principal executive offices)

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act:

Common stock,
par value $0.01 per share

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months, (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [x] No [ ]

Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of the registrants knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [x]

The aggregate market value of the voting stock of OTG Software, Inc. held by
non-affiliates on January 31, 2002 was approximately $203,730,757. As of
January 31, 2002, there were issued 33,313,990 shares and outstanding
33,219,790 shares of OTG Software, Inc. common stock, $0.01 par value per
share.

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EXPLANATORY NOTE

The purpose of this amendment is to include the information required by
Part III of Form 10-K, which was omitted from the Companys Form 10-K as
originally filed on March 8, 2002.

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PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The Companys Amended and Restated Certificate of Incorporation provides
that the Board of Directors is classified into three classes (designated as
Class I directors, Class II directors and Class III directors), with members of
each class holding office for staggered three-year terms. There are currently
two Class I directors, whose terms expire at the 2004 Annual Meeting of
Stockholders, two Class II directors, whose terms expire at the 2002 Annual
Meeting of Stockholders, and three Class III directors, whose terms expire at
the 2003 Annual Meeting of Stockholders (in all cases subject to the election
and qualification of their successors and to their earlier death, resignation
or removal).

|                         |  |     |    |       |  |                                                                                            
|------------------------ |  | --- | -- | ----- |  | -------------------------------------------------------------------------------------------
|NAME                     |  | AGE |    | TITLE
|                         |  |     |    |      
|Richard A. Kay           |  |     | 46 |       |  | President, Chief Executive Officer, Chairman of the Board of
Directors (Class III Director)
|F. William Caple         |  |     | 43 |       |  | Executive Vice President, Secretary, Class II Director                                     
|Ronald W. Kaiser         |  |     | 48 |       |  | Chief Financial Officer and Treasurer                                                      
|Gabriel A. Battista      |  |     | 57 |       |  | Class III Director                                                                         
|John Burton              |  |     | 50 |       |  | Class II Director                                                                          
|Joseph R. Chinnici       |  |     | 47 |       |  | Class I Director                                                                           
|Geaton A. DeCesaris, Jr. |  |     | 46 |       |  | Class III Director                                                                         
|Donald B. Hebb, Jr.      |  |     | 59 |       |  | Class I Director                                                                           

RICHARD A. KAY, the Companys founder, has served as chairman of the Companys
Board of Directors, president and chief executive officer since the Companys
inception in 1992. Prior to founding the Company, Mr. Kay co-founded National
Operator Services, Inc., a reseller of telephone operator services, and NOS
Communications, a reseller of AT&T long distance services.

F. WILLIAM CAPLE has served on the Board of Directors since December 1997. Mr.
Caple has served as the Companys executive vice president since May 1996.

RONALD W. KAISER has served as our chief financial officer and treasurer since
June of 1988. From April 1998 to June 1998, Mr. Kaiser was an employee of
Network Associates, Inc., an Internet security company, following the
acquisition of Trusted Information Systems, Inc. by Network Associates, Inc.
From May 1996 to April 1998, Mr. Kaiser served as the chief financial officer
of Trusted Information Systems, Inc., an information security company.

GABRIEL A. BATTISTA has served on the Board of Directors since June 1998. Mr.
Battista has served as chairman of the board of directors, president and chief
executive officer of Talk.com, Inc., an e-commerce and telecommunications
services company, since January 1999. From October 1996 to December 1998, Mr.
Battista served as the chief executive officer of Network Solutions, Inc., an
Internet domain name registration company. Mr. Battista also currently serves
as a director of Systems & Computer Technology Corporation and Via Net.Works,
Inc.

JOHN BURTON has served on the Board of Directors since June 1998. Mr. Burton
has served as managing director of Updata Capital, Inc., an investment banking
firm, since March 1997. Mr. Burton currently serves as a director of
Epresence, Inc.

3



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JOSEPH R. CHINNICI has served on the Board of Directors since June 1998. Since
September 1994, Mr. Chinnici has served in a number of positions at CIENA
Corporation, a telecommunications equipment manufacturer, and currently serves
as CIENA Corporations senior vice president, finance and chief financial
officer.

GEATON A. DECESARIS, JR. has served on the Board of Directors since June 1998.
Mr. DeCesaris has served as the chief operating officer, president of home
building operations and a director of Hovnanian Enterprises, Inc., a publicly
traded national home builder, since January, 2001. From August 1998 through
January 2001, Mr. DeCesaris served as the president, chief executive officer
and a director of Washington Homes, Inc., a national homebuilding company.

DONALD B. HEBB, JR. has served on the Board of Directors since June 1998. Mr.
Hebb has been a managing member of the general partner of ABS Capital Partners
II, L.P., a private equity firm, and related entities since March 1993. Mr.
Hebb currently serves as a director of T. Rowe Price Group, Inc., an investment
management firm, and SBA Communications Corporation, an owner and operator of
wireless communications structures.

ITEM 11. EXECUTIVE COMPENSATION

EXECUTIVE COMPENSATION

Summary Compensation

The following table sets forth the total compensation paid or accrued for
the last three years for the Companys Chief Executive Officer and its two
other executive officers (together, the Named Executive Officers):

SUMMARY COMPENSATION TABLE

|                            |                                        |      |                     |        |              |       |         |             |  |                  |         |         |  |  |            |         |           |   |       |       | 
|--------------------------- | -------------------------------------- | ---- | ------------------- | ------ | ------------ | ----- | ------- | ----------- |  | ---------------- | ------- | ------- |  |  | ---------- | ------- | --------- | - | ----- | ----- | 
|                            |                                        |      |                     |        |              |       |         |             |  |                  |         |         |  |  | Long-Term  |         |           |   |      
|                            |                                        |      | Annual Compensation |        | Compensation |       |         |             | 
|                            |                                        |      |                     |        |              |       |         |             | 
|                            |                                        |      |                     |        |              |       |         |             |  |                  |         |         |  |  | Securities |         |           |   |      
|                            |                                        |      |                     |        |              |       |         |             |  |                  |         |         |  |  | Underlying |         | All Other
|Name and Principal Position |                                        | Year |                     | Salary |              | Bonus |         | Options (1) |  | Compensation (2)
|                            |                                        |      |                     |        |              |       |         |             |  |                 
|Richard A. Kay              |                                        |      | 1999                |        |              | $     | 485,000 |             |  | $                | 115,000 |         |  |  |           |         |           | $ | 6,030 |      
|                            | Chairman of the Board, President and   |      |                     | 2000   |              |       |         | 485,000     |  |                  |         | 115,000 |  |  |            |        |           |   |       | 7,094 | 
|                            | Chief Executive Officer                |      |                     | 2001   |              |       |         | 600,000     |  |                  |         |        |  |  |            | 250,000 |           |   |       | 4,932 | 
|F. William Caple            |                                        |      | 1999                |        |              |       | 155,503 |             |  |                  | 49,950  |         |  |  | 200,000    |         |           |   | 6,030 |      
|                            | Executive Vice President and Secretary |      |                     | 2000   |              |       |         | 175,000     |  |                  |         | 260,925 |  |  |            |        |           |   |       | 7,113 | 
|                            |                                        |      | 2001                |        |              |       | 218,789 |             |  |                  |        |         |  |  | 125,000    |         |           |   | 4,115 |      
|Ronald W. Kaiser            |                                        |      | 1999                |        |              |       | 192,524 |             |  |                  | 41,076  |         |  |  | 100,000    |         |           |   | 6,030 |      
|                            | Chief Financial Officer and Treasurer  |      |                     | 2000   |              |       |         | 199,227     |  |                  |         | 189,535 |  |  |            |        |           |   |       | 8,364 | 
|                            |                                        |      | 2001                |        |              |       | 248,807 |             |  |                  |        |         |  |  | 125,000    |         |           |   | 5,855 |      



---

|(1) |  | Represents the number of shares covered by options to purchase shares of
Common Stock granted during the applicable year.                
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------
|   
|(2) |  | These amounts represent health insurance premiums and 401(k) matching funds
paid by the Company on behalf of the Named Executive Officer.

4



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OPTION GRANTS IN LAST FISCAL YEAR

The following table sets forth grants of stock options to each of the
Named Executive Officers during the year ended December 31, 2001.

|                 |  |                   |         |                      |  |             |     |            |  |    |      |                 |  |                        |           |  |  |                  |         |  |  |   |           | 
|---------------- |  | ----------------- | ------- | -------------------- |  | ----------- | --- | ---------- |  | -- | ---- | --------------- |  | ---------------------- | --------- |  |  | ---------------- | ------- |  |  | - | --------- | 
|                 |  | Individual Grants |         |                      |  |             |     |            |  |   
|                 |  |                   |         | Potential Realizable
|                 |  |                   |         |                      |  |             |     |            |  |    |      |                 |  |                        |           |  |  | Value at Assumed
|                 |  | Number of         |         | Percent of           |  |             |     |            |  |    |      |                 |  | Annual Rates of Stock 
|                 |  | Securities        |         | Total Options        |  |             |     |            |  |    |      |                 |  | Price Appreciation for
|                 |  | Underlying        |         | Granted to           |  | Exercise or |     |            |  |    |      | Option Term (2)
|                 |  | Options           |         | Employees in         |  | Base Price  |     | Expiration |  |   
|Name             |  | Granted           |         | Fiscal Year (1)      |  | Per Share   |     | Date       |  | 5% |      | 10%            
|                 |  |                   |         |                      |  |             |     |            |  |    |      |                
|Richard A. Kay   |  |                   | 250,000 |                      |  |             | 8.8 | %          |  | $  | 6.25 |                 |  |                        | 5/31/2011 |  |  | $                | 982,648 |  |  | $ | 2,490,223 | 
|F. William Caple |  |                   | 125,000 |                      |  |             | 4.4 |            |  |    | 6.25 |                 |  |                        | 5/31/2011 |  |  |                  | 491,324 |  |  |   | 1,245,111 | 
|Ronald W. Kaiser |  |                   | 125,000 |                      |  |             | 4.4 |            |  |    | 6.25 |                 |  |                        | 5/31/2011 |  |  |                  | 491,324 |  |  |   | 1,245,111 | 



---

|(1) |  | Total option grants for 2001 equaled 2,828,263 shares.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(2) |  | Amounts reported in these columns represent amounts that may be realized
upon exercise of the options immediately prior to the expiration of their
term assuming the specified compound rates of appreciation (5% and 10%) on
the market value of the Common Stock on the date of option grant over the
term of the options. These numbers are calculated based on rules
promulgated by the Securities and Exchange Commission and do not reflect
the Companys estimate of future stock price growth. Actual gains, if any,
on stock option exercises and Common Stock holdings are dependent on the
timing of such exercises and the future performance of the Common Stock.
The rates of appreciation in this table are assumptions only and may not
be achieved, and the amounts reflected may not be received by the
individuals.

Option Exercises and Year-End Option Values

The following table sets forth certain information concerning option
exercises by the Named Executive Officers in 2001 and the number and value of
unexercised options held by each of the Named Executive Officers on December
31, 2001.

AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION VALUES

|                 |  |             |        |              |  |             |        |                        |  |                        |         |                      |  |  |         |  |  |   |           |  |  |   |         | 
|---------------- |  | ----------- | ------ | ------------ |  | ----------- | ------ | ---------------------- |  | ---------------------- | ------- | -------------------- |  |  | ------- |  |  | - | --------- |  |  | - | ------- | 
|                 |  |             |        |              |  |             |        |                        |  | Number of Shares       |         |                      |  |  |         |  |  |  
|                 |  |             |        |              |  |             |        |                        |  | Underlying             |         | Value of Unexercised
|                 |  | Number of   |        |              |  |             |        | Unexercised Options at |  | In-the-Money Options  
|                 |  | Shares      |        |              |  |             |        | Fiscal Year End        |  | at Fiscal Year End (2)
|                 |  | Acquired on |        | Value        |  |             |        |                       
|Name             |  | Exercise    |        | Realized (1) |  | Exercisable |        | Unexercisable          |  | Exercisable            |         | Unexercisable       
|                 |  |             |        |              |  |             |        |                        |  |                        |         |                     
|Richard A. Kay   |  |             |       |              |  | $           |       |                        |  |                        |        |                      |  |  | 250,000 |  |  | $ |          |  |  | $ | 937,500 | 
|F. William Caple |  |             |       |              |  |             |       |                        |  |                        | 183,333 |                      |  |  | 141,667 |  |  |   | 1,496,914 |  |  |   | 604,836 | 
|Ronald W. Kaiser |  |             | 20,000 |              |  | $           | 82,050 |                        |  |                        | 247,626 |                      |  |  | 186,786 |  |  |   | 1,953,242 |  |  |   | 950,357 | 



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|(1) |  | Represents the difference between the exercise prices and the fair market
value per share of the Common Stock at the date of exercise. The fair market
value was the last sale price of the Common Stock on the date of exercise as
reported on The Nasdaq Stock Market.
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   
|(2) |  | Represents the difference between the exercise price and $10.00, which was
the last sale price of the Common Stock as reported on The Nasdaq Stock Market
on December 31, 2001, the last trading day of 2001.                                                           

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BOARD AND COMMITTEE MEETINGS

The Board of Directors has a Compensation Committee composed of Messrs.
Burton, Battista and DeCesaris. The Compensation Committee reviews executive
salaries, administers the Companys bonus, incentive compensation and stock
plans and approves the salaries and other benefits of the executive officers.
In addition, the Compensation Committee consults with management regarding the
Companys pension and other benefit plans and compensation policies and
practices. The Compensation Committee met three times during 2001.

The Board of Directors also has an Audit Committee, currently composed of
Messrs. Chinnici, Hebb and DeCesaris, which reviews the professional services
provided by the Companys independent accountants, the independence of the
accountants from the Companys management, annual financial statements and the
Companys system of internal accounting controls. The Audit Committee also
reviews such other matters with respect to the Companys accounting, auditing
and financial reporting practices and procedures as it may find appropriate or
may be brought to its attention. The Audit Committee met seven times during
2001.

The Board of Directors met 10 times during 2001. Each director attended at
least 75% of the aggregate of the number of Board meetings and the number of
meetings held by all committees on which the director then served.

DIRECTOR COMPENSATION

Directors are reimbursed for reasonable out-of-pocket expenses incurred in
connection with attendance at meetings of the Board of Directors and are paid
$1,000 per regular meeting attended. The Company may, in its discretion, grant
stock options and other equity awards to non-employee directors from time to
time pursuant to stock incentive plans. In June 1999, the Company granted
options to purchase 10,000 shares of Common Stock to each of Messrs. Battista,
Burton, Chinnici, DeCesaris and Hebb, each of whom is a non-employee director,
at an exercise price of $2.75 per share. These options vested in full upon the
date of grant. In December 2000, the Company granted options to purchase 10,000
shares of Common Stock to each of Messrs. Battista, Burton, Chinnici, DeCesaris
and Hebb at an exercise price of $10.25. These options vested in full on the
date of the 2001 Annual Meeting of Stockholders on May 31, 2001.

EMPLOYMENT AGREEMENTS

Mr. Kay serves as our chairman, president and chief executive officer
pursuant to the terms of an employment agreement dated June 9, 1999. The term
of the agreement continues until December 31, 2003. Pursuant to the terms of
the agreement, he was paid a salary of $600,000 and no cash bonus in 2001.
Upon termination without cause, as defined in the agreement, Mr. Kay is
entitled to severance payments equal to (1) the greater of (a) the remaining
portion of his compensation for the remaining term of the agreement, or (b) the
amount of his then current annual salary, to be paid in monthly installments
over a 12 month period and (2) the annual bonus that would otherwise have been
paid to Mr. Kay for the fiscal year in which he was terminated, to be paid in
one lump sum payment within 90 days of the date of termination. Upon
termination without cause, Mr. Kay is entitled to continue to receive the same
health, disability and term life insurance benefits as were provided prior to
termination until the earlier of his employment by a third party or December
31, 2003. Under the agreement, Mr. Kay agreed not to compete with us during the
term of his employment and for two years after his termination. In addition,
Mr. Kay agreed not to solicit our employees or customers during the same period.
However, if we terminate

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Mr. Kay
without cause, or he terminates his employment because we demoted him, because
he is not elected or is removed as chairman of the board or because we have
relocated our principal executive offices more than 50 miles from Bethesda,
Maryland, the non-competition and non-solicitation provisions of the agreement
expire upon the date of termination of his employment. In connection with the
Agreement and Plan of Merger among Legato Systems, Inc., Orion Acquisition Sub
Corp. and the Company dated February 20, 2002, Mr. Kay is expected to become
the chief executive officer of the OTG business group of Legato. Mr. Kay was
also granted stock options in May 2001 to purchase 250,000 shares of the
Companys common stock. Upon a change of control, these options will become
immediately exercisable.

Mr. Caple serves as our executive vice president pursuant to the terms of
an employment agreement dated January 1, 2002. The term of the agreement
continues until December 31, 2002, and provides for automatic 1-year extensions
thereafter unless either party provides at least 90 days prior notice of its
intent not to extend the employment period. Pursuant to the terms of the
agreement, Mr. Caples annual compensation consists of a base salary of
$250,000 and an annual bonus contingent upon the achievement of defined
performance targets. Mr. Caples target bonus for 2002 is $80,000. Upon a
change of control (as defined in the agreement) during Mr. Caples employment,
one-half of the number of shares subject to outstanding options will become
immediately exercisable and the remaining one-half shall continue to become
vested pursuant to the original vesting schedule, provided that if within
twelve months following the change of control date Mr. Caples employment is
terminated by the Company other than for cause or by Mr. Caple for good reason,
as each term is defined in the agreement, upon the date of termination each
outstanding option will become immediately exercisable in full and no longer
subject to a right of repurchase by the Company. Upon termination without
cause or for good reason, Mr. Caple is entitled to any accrued obligations paid
in a lump sum, any other benefits for which he may be eligible upon termination
and, in exchange for the execution of a severance agreement and release,
severance payments equal to 12 months of his then current annual salary to be
paid bi-weekly over a 12 month period, and, provided that he is not employed
elsewhere, benefits for the same period. If Mr. Caple resigns without good
reason or is terminated for cause, he is entitled to any accrued obligations in
a lump sum payment and any other benefits for which he may be eligible upon
termination. Mr. Caple agreed not to compete with us nor solicit any Company
employees during the term of his employment and for two years after the
termination or cessation of his employment.

Additionally, in connection with the Merger Agreement entered into with
Legato, Legato required that Mr. Caple enter into a new employment arrangement
that will take effect upon the consummation of the merger and would replace his
current employment agreement. Under the employment agreement with Legato, upon
completion of the merger, in exchange for waivers of his rights to benefits and
accelerated vesting with respect to outstanding Company options, Mr. Caple
would receive severance payments in an amount equal to twelve months of his
base salary, and a pro rata share of his annual bonus, as well as the provision
of fringe benefits for twelve months after the date of termination. Mr. Caple
will also receive a retention bonus in the amount of $100,000, to be paid in
two equal installments on July 1, 2003 and December 31, 2003 if he completes
continuous employment with Legato from the closing of the merger through
December 31, 2003 or if he is terminated prior to such time other than for
cause. Finally, Mr. Caple will receive options to purchase 75,000 shares of
Legato common stock with an exercise price equal to the closing price of Legato
common stock on the date of the closing of the merger.

Mr. Kaiser serves as our chief financial officer pursuant to the terms of
an employment agreement dated December 20, 2001. The term of the agreement
continues until December 31, 2002, and provides for automatic 1-year extensions
thereafter unless either party provides at least 60 days prior notice of its
intent not to extend the employment period. Pursuant to the terms of the
agreement,

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Mr. Kaisers annual compensation consists of a base salary of
$250,000 and an annual bonus contingent upon the achievement of certain defined
performance targets. Mr. Kaisers target bonus for 2002 is $80,000. Upon a
change of control (as defined in the agreement) during Mr. Kaisers employment,
one-half of the number of shares subject to outstanding options will become
immediately exercisable and the remaining one-half shall continue to become
vested pursuant to the original vesting schedule, provided that if within
twelve months following the change of control date Mr. Kaisers employment is
terminated by the Company other than for cause or by Mr. Kaiser for good
reason, as each term is defined in the agreement, upon the date of termination
each of Mr. Kaisers outstanding options will become immediately exercisable in
full and no longer subject to a right of repurchase by the Company. Upon
termination without cause or for good reason, Mr. Kaiser is entitled to any
accrued obligations paid in a lump sum, any other benefits for which he may be
eligible upon termination and, in exchange for the execution of a severance
agreement and release, severance payments equal to 12 months of his then
current annual salary to be paid bi-weekly over a 12 month period, and,
provided that he is not employed elsewhere, benefits for the same period. If
Mr. Kaiser resigns without good reason or is terminated for cause, he is
entitled to any accrued obligations in a lump sum payment and any other
benefits for which he may be eligible upon termination. Mr. Kaiser agreed not
to compete with the Company or solicit any Company employees during the term of
his employment and for two years after the termination or cessation of his
employment.

Mr. Kaiser entered into an amendment to his employment agreement which
would take effect upon the consummation of the merger with Legato. Pursuant to
the amendment, Mr. Kaiser agreed to waive his right to accelerated vesting of
his stock options upon the completion of the merger with Legato until the
earliest of December 31, 2002, such earlier time as may be mutually agreed to,
or upon his termination without cause by Legato, in exchange for the right to
receive a cash payment of $60,000 upon the completion of his continuous service
from the closing of the merger through December 31, 2002, or upon his earlier
termination without cause by Legato. Under the amendment, Mr. Kaiser is only
entitled to accelerated vesting of his stock options if he completes continuous
service through December 31, 2002 or is earlier terminated as described in the
prior sentence.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

No member of the Compensation Committee is an officer or employee. No
interlocking relationships exist between the Board of Directors or Compensation
Committee and the Board of Directors or compensation committee of any other
company, nor has any interlocking relationship existed in the past.

8



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COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION

This report addresses the compensation policies of the Company applicable
to its officers during fiscal 2001. The Companys executive compensation
program is administered by the Compensation Committee of the Board of Directors
(the Committee), which is composed of three non-employee directors. The
Committee is responsible for determining the compensation package of each
executive officer, including the Chief Executive Officer. In fiscal 2001, the
Board of Directors did not modify in any material way or reject any action or
recommendation of the Committee with respect to executive officer compensation.

OVERVIEW AND PHILOSOPHY

The Companys executive compensation program is designed to promote the
following objectives:



| |  |   To provide competitive compensation that will help attract, retain and
reward highly qualified executives who contribute to the long-term success of
the Company.     
| |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|
| |  |   To align managements interests with the success of the Company by
placing a portion of the executives compensation at risk in relation to the
Companys performance.
|
| |  |   To align managements interests with stockholders by including
long-term equity incentives.                                                                           

The Committee believes that the Companys executive compensation program
provides an overall level of compensation that is competitive within its
industry and among companies of comparable size and complexity. To ensure that
compensation is competitive, the Company regularly compares its compensation
practices with those of other similar companies and sets its compensation
guidelines based on this review. The Committee also seeks to achieve an
appropriate balance of the compensation paid to a particular individual and the
compensation paid to other executives and attempts to maintain an appropriate
mix of salary and incentive compensation. While compensation data are useful
guides for comparative purposes, the Committee believes that a successful
compensation program also requires the application of judgment and subjective
determinations of individual performance.

EXECUTIVE COMPENSATION PROGRAM

The Companys executive compensation program consists of base salary,
annual incentive compensation in the form of cash bonuses and long-term equity
incentives in the form of stock options. Executive officers also are eligible
to participate in certain benefit programs which are generally available to all
employees of the Company, such as life insurance benefits and the Companys
2000 Employee Stock Purchase Plan and 401(k) savings plan.

BASE SALARY

At the beginning of each year, the Committee establishes an annual salary
plan for the Companys senior executive officers based on recommendations made
by the Companys Chief Executive Officer. The Committee attempts to set base
salary compensation within the range of salaries of executive officers with
comparable qualifications, experience and responsibilities at other companies
in the same or similar businesses, and of comparable size and success. In
setting the annual cash compensation for Company executives, the Committee
reviews compensation for comparable positions by reviewing compensation data
available in a number of publicly available surveys and

9



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databases. All of the
companies in the H&Q Computer Software Index (as defined below) are included,
along with other companies, in the compensation data reviewed. In addition to
external market data, salary determinations depend both upon the Companys
financial performance and upon the individuals performance as measured by
certain financial and non-financial objectives. These financial objectives
include the achievement of the Companys budgeted revenue and earnings per
share targets for the applicable year, while the non-financial objectives
include the achievement of certain specified management objectives for the
applicable year.

ANNUAL INCENTIVE COMPENSATION

The Companys bonus program is designed to provide its key employees with
cash incentives to achieve the Companys financial goals. The Company paid no
cash bonuses to Mr. Kay, Mr. Caple, or Mr. Kaiser for 2001.

LONG-TERM EQUITY INCENTIVES

The Companys stock option program is designed to promote the identity of
long-term interests between the Companys employees and its stockholders and to
assist in the retention of executives. The size of option grants is generally
intended by the Committee to reflect the executives position with the Company
and his or her contributions to the Company. Stock options generally vest over
a three to five year period in order to encourage key employees to continue in
the employ of the Company. In 2001, all stock options were granted at an
option price equal to the fair market value of the Companys Common Stock on
the date of the grant.

BENEFITS

The Companys executive officers are entitled to receive medical and life
insurance benefits and to participate in the Companys 401(k) retirement
savings plan on the same basis as other full-time employees of the Company. The
Companys 2000 Employee Stock Purchase Plan, which is available to virtually
all employees including executive officers, allows participants to purchase
shares at a discount of 15% from the fair market value at the beginning or end
of the applicable purchase period.

The amount of perquisites, as determined in accordance with the rules of
the Securities and Exchange Commission relating to executive compensation, did
not exceed 10% of salary and bonus for 2000 for any of the Named Executive
Officers.

SUMMARY OF COMPENSATION OF CHIEF EXECUTIVE OFFICER

In 2001, Mr. Kay, the Companys Chief Executive Officer, received a salary
of $600,000 in accordance with the terms of his employment agreement and the
recommendation of the Compensation Committee. Mr. Kay received no cash bonus in
2001. Mr. Kays base compensation was set by the Compensation Committee in
accordance with (i) the base compensation of persons with comparable
qualifications, experience and responsibilities at other companies in the same
or similar businesses and of comparable size and success, (ii) the financial
performance of the Company, as measured by specific objectives for the year,
and (iii) Mr. Kays performance, as measured by certain subjective performance
criteria for the year.

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COMPLIANCE WITH INTERNAL REVENUE CODE SECTION 162(m)

Section 162(m) of the Internal Revenue Code generally disallows a tax
deduction to public companies for compensation in excess of $1 million paid to
the corporations Chief Executive Officer and four other most highly paid
executive officers. Qualifying performance-based compensation will not be
subject to the deduction limitation if certain requirements are met. The
Committee has determined that it will make every reasonable effort, consistent
with sound executive compensation principles and the needs of the Company, to
ensure that all amounts paid to the Companys Chief Executive Officer or to any
of the other Named Executive Officers comply with Section 162(m).

COMPENSATION COMMITTEE

John Burton
Gabriel A. Battista
Geaton A. DeCesaris, Jr.

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##### 



COMPARATIVE STOCK PERFORMANCE

The following graph compares the cumulative total stockholder return on
the Common Stock of the Company from March 10, 2000 (the first trading date
following the Companys initial public offering) to December 31, 2001 with the
cumulative total return of (i) U.S. companies traded on The Nasdaq Stock Market
(the Nasdaq Index) and (ii) the J.P. Morgan Hambrecht and Quist Technology
Index  Software Sector (the H&Q Computer Software Index). This graph
assumes the investment of $100.00 on March 10, 2000 in the Companys Common
Stock, the Nasdaq Index and the H&Q Computer Software Index, and assumes any
dividends are reinvested.



|         |  |                    |        |       |  |              |        |        |  |              |        | 
|-------- |  | ------------------ | ------ | ----- |  | ------------ | ------ | ------ |  | ------------ | ------ | 
|         |  |                    |        |       |  |              |        |        |  | NASDAQ STOCK
|         |  |                    |        |       |  | H&Q COMPUTER |        | MARKET
|         |  | OTG SOFTWARE, INC. |        | INDEX |  | (U.S.)      
|         |  |                    |        |       |  |             
|3/10/00  |  |                    | 100.00 |       |  |              | 100.00 |        |  |              | 100.00 | 
|3/31/00  |  |                    | 71.75  |       |  |              | 85.63  |        |  |              | 90.28  | 
|6/30/00  |  |                    | 50.83  |       |  |              | 75.64  |        |  |              | 78.24  | 
|9/30/00  |  |                    | 72.75  |       |  |              | 87.80  |        |  |              | 72.44  | 
|12/31/00 |  |                    | 28.73  |       |  |              | 60.70  |        |  |              | 48.40  | 
|3/31/01  |  |                    | 11.26  |       |  |              | 36.92  |        |  |              | 36.49  | 
|6/30/01  |  |                    | 12.46  |       |  |              | 48.85  |        |  |              | 42.77  | 
|9/30/01  |  |                    | 9.88   |       |  |              | 26.36  |        |  |              | 29.70  | 
|12/31/01 |  |                    | 17.80  |       |  |              | 39.71  |        |  |              | 38.71  | 



12



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##### 



ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

BENEFICIAL OWNERSHIP OF COMMON STOCK

The following table sets forth certain information regarding the
beneficial ownership of the Companys Common Stock as of February 28, 2002 by
(i) each person or entity who is known by the Company to be the beneficial
owner of more than 5% of the outstanding shares of Common Stock, (ii) by each
director or nominee for director, (iii) by each of the executive officers named
in the Summary Compensation Table set forth under the caption Executive
Compensation below and (iv) by all directors and executive officers as a
group. Unless otherwise indicated, each person or entity named in the table has
sole voting power and investment power (or shares such power with his or her
spouse) with respect to all shares of capital stock listed as owned by such
person or entity.

|                                                                                           |  |              |            |            |  |  |      |  
|------------------------------------------------------------------------------------------ |  | ------------ | ---------- | ---------- |  |  | ---- | -
|                                                                                           |  | Number of    |            |            |  | 
|                                                                                           |  | Shares       |            | Percentage
|                                                                                           |  | Beneficially |            | Owned     
|Name and Address of Beneficial Owner                                                       |  | Owned (1)    |            | (%)(2)    
|                                                                                           |  |              |            |           
|Richard A. Kay (3)                                                                         |  |              | 11,199,022 |            |  |  | 33.4 | %
|Waddell & Reed Investment
Management Company (4)
6300 Lamar Avenue
Overland Park, KS 66202 |  |              | 3,889,900  |            |  |  | 11.6 |  
|Donald B. Hebb, Jr. (5)                                                                    |  |              | 3,496,198  |            |  |  | 10.4 |  
|ABS Capital Partners II, L.P.
400 E. Pratt Street, Suite 910
Baltimore, MD 21202           |  |              | 3,473,118  |            |  |  | 10.4 |  
|F. William Caple (6)                                                                       |  |              | 400,254    |            |  |  | 1.2  |  
|Ronald W. Kaiser (7)                                                                       |  |              | 374,260    |            |  |  | 1.1  |  
|Geaton A. DeCesaris, Jr. (8)                                                               |  |              | 293,900    |            |  |  | *    |  
|John Burton (9)                                                                            |  |              | 218,360    |            |  |  | *    |  
|Gabriel A. Battista (9)                                                                    |  |              | 137,464    |            |  |  | *    |  
|Joseph R. Chinnici (9)                                                                     |  |              | 55,796     |            |  |  | *    |  
|All executive officers and
directors as a group (8 persons)
(10)                           |  |              | 16,175,254 |            |  |  | 47.4 | %



---

|* |  | Less than 1% of the outstanding Common Stock.
|- |  | ---------------------------------------------

(1)  The number of shares beneficially owned by each stockholder is determined
under rules promulgated by the Securities and Exchange Commission, and the
information is not necessarily indicative of beneficial ownership for any other
purpose. Under such rules, beneficial ownership includes any shares as to which
the individual or entity has sole or shared voting power or investment power
and any shares as to which the individual or entity has the right to acquire
beneficial ownership within 60 days after February 28, 2002 through the
exercise of any stock option, warrant or other right. The inclusion herein of
such shares, however, does not constitute an admission that the named
stockholder is a direct or indirect beneficial owner of such shares.

13



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##### 



(2)  On February 28, 2002, there were outstanding an aggregate of 33,554,434
shares of Common Stock of the Company. This number does not include 222,222
shares held in escrow as potential additional consideration upon the
achievement of specific performance objectives in 2001 in connection with the
Companys acquisition of UniTree Software, Inc. because the Company believes no
further consideration is due under the agreement, as these objectives were not
achieved.

(3)  Includes 199,756 shares owned by Rebecca Kay, Mr. Kays wife, 450,578
shares owned by a minor daughter of Mr. Kay, 1,000,000 shares owned by Mr.
Kays charitable remainder unitrust and 1,197,088 shares held by grantor
retained annuity trusts organized for the benefit of other minor children of
Mr. Kay. In connection with the Agreement and Plan of Merger dated February 20,
2002 among Legato Systems, Inc., Orion Acquisition Sub Corp. and the Company,
Mr. Kay entered into a Voting Agreement with Legato Systems, Inc. dated
February 20, 2002. Under the Voting Agreement, Mr. Kay agreed to vote certain
shares of Common Stock over which he has voting control, representing
approximately 10,603,688 shares of Common Stock, in favor of the adoption of
the Merger Agreement.

(4)  Represents shares reported by Waddell & Reed Investment Management Company
on Form 13G/A filed on March 7, 2002.

(5)  Consists of 20,000 shares issuable upon exercise of options and 3,473,118
shares owned by ABS Capital Partners II, L.P. Mr. Hebb is a managing member of
ABS Partners II, LLC, which is the general partner of ABS Capital Partners II,
L.P. Mr. Hebb disclaims beneficial ownership of the 3,473,118 shares owned by
ABS Capital Partners II, L.P., except to the extent of his pecuniary interest
held therein.

(6)  Includes 1,000 shares owned by Mr. Caples wife and 200,000 shares issuable
upon exercise of options.

(7)  Includes 280,482 shares issuable upon exercise of options.

(8)  Includes 20,000 shares issuable upon exercise of options, 150,000 shares
held by Mr. DeCesariss charitable remainder unitrust and 10,500 shares owned
by Mr. DeCesaris minor children.

(9)  Includes 20,000 shares issuable upon exercise of options.

(10)  Includes 580,482 shares issuable upon exercise of options.

14



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##### 



ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

CERTAIN RELATIONSHIPS AND TRANSACTIONS

In January 1997, the Company sold 269,254 shares of Common Stock to Mr.
Caple, for an aggregate purchase price of $102,698. Mr. Caple paid for these
shares with a promissory note bearing 8% interest per annum that became due on
January 1, 2002. On January 1, 2002, by agreement of the Companys
Compensation Committee, the Company and Mr. Caple entered into an allonge to
this promissory note which increased the interest rate to 10% and extended the
maturity date of the note to July 1, 2002. As of January 2, 2002, the
outstanding balance of Mr. Caples note to the Company, including accrued
interest, was $143,800.

Mr. John Burton, a member of the Companys board of directors, is the
managing director of Updata Capital, Inc. Updata provides consulting services
for Legato Systems, Inc. Upon completion of the merger between the Company and
Legato, Updata will receive a fee of $500,000 from the Company in connection
with services rendered to the Company relating to the merger. Mr. Burton
recused himself from the Companys board deliberations concerning this
transaction. In addition, Updata previously provided advisory services to the
Company with regard to its acquisition by merger of Smart Storage, Inc. on
March 29, 2001, and received a fee of $400,000 from the Company in connection
therewith.

The Company has entered into indemnification agreements with each of the
Companys directors and officers. Such indemnification agreements will require
the Company to indemnify the directors and officers to the fullest extent
permitted by Delaware law.

The Board of Directors has adopted the policy that all future
transactions, including loans between the Company and its officers, directors,
principal stockholders and their affiliates, will be approved by a majority of
the Board of Directors, including a majority of the independent and
disinterested outside directors on the Board of Directors, and will be on terms
no less favorable to the Company than could be obtained from unaffiliated third
parties.

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

The Company is not aware of any failure during 2001 by its officers,
directors or holders of 10% of the Companys Common Stock to comply in a timely
manner with the filing requirements of Section 16(a) of the Securities Exchange
Act of 1934.

15



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##### 



SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Act
of 1934, the Company has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.

|                                                                                      |  |       |  |              
|------------------------------------------------------------------------------------- |  | ----- |  | -------------
|By: /s/ Richard A. Kay
Richard A. Kay
President, Chairman and Chief Executive Officer |  | Date: |  | April 9, 2002

Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on our behalf and in the
capacities and on the dates indicated.

|                                                                                        |  |                    
|--------------------------------------------------------------------------------------- |  | -------------------
|By: /s/ Ronald W. Kaiser                                                                |  | Date: April 9, 2002
|                                                                                        |  |                    
|Ronald W. Kaiser
Chief Financial Officer and Treasurer
(Principal Financial Officer)    |  |                    
|                                                                                       
|By: /s/ Hunter J. Louis                                                                 |  | Date: April 9, 2002
|                                                                                        |  |                    
|Hunter J. Louis
Vice President of Finance and Accounting
(Principal Accounting Officer) |  |                    
|                                                                                       
|By: /s/ Gabriel A. Battista                                                             |  | Date: April 9, 2002
|                                                                                        |  |                    
|Gabriel A. Battista, Director                                                           |  |                    
|                                                                                       
|By: /s/ John Burton                                                                     |  | Date: April 9, 2002
|                                                                                        |  |                    
|John Burton, Director                                                                   |  |                    
|                                                                                       
|By: /s/ F. William Caple                                                                |  | Date: April 9, 2002
|                                                                                        |  |                    
|F. William Caple, Director                                                              |  |                    
|                                                                                       
|By: /s/ Joseph R. Chinnici                                                              |  | Date: April 9, 2002
|                                                                                        |  |                    
|Joseph R. Chinnici, Director                                                            |  |                    
|                                                                                       
|By: /s/ Geaton A. DeCesaris, Jr.                                                        |  | Date: April 9, 2002
|                                                                                        |  |                    
|Geaton A. DeCesaris, Jr., Director                                                      |  |                    
|                                                                                       
|By: /s/ Donald B. Hebb, Jr.                                                             |  | Date: April 9, 2002
|                                                                                        |  |                    
|Donald B. Hebb, Jr., Director                                                           |  |                    

16