Document:

Indemnification Agreement

 EXHIBIT 10.31 
  
 INDEMNIFICATION AGREEMENT 
  
 This Indemnification Agreement (the
“Agreement”) is made as of July 29, 2002, by and between RITA Medical Systems, Inc., a Delaware corporation (the “Company”), and Stephen J. Williams (the “Indemnitee”). 
  
 RECITALS 
  
 The Company and Indemnitee recognize the increasing difficulty in obtaining liability insurance for directors, officers and key employees, the significant increases in the cost of such insurance and the general reductions in the
coverage of such insurance. The Company and Indemnitee further recognize the substantial increase in corporate litigation in general, subjecting directors, officers and key employees to expensive litigation risks at the same time as the availability
and coverage of liability insurance has been severely limited. Indemnitee does not regard the current protection available as adequate under the present circumstances, and Indemnitee and agents of the Company may not be willing to continue to serve
as agents of the Company without additional protection. The Company desires to attract and retain the services of highly qualified individuals, such as Indemnitee, and to indemnify its directors, officers and key employees so as to provide them with
the maximum protection permitted by law. 
  
 AGREEMENT 
  

In consideration of the mutual promises made in this Agreement, and for other good and valuable consideration, receipt of which is hereby acknowledged, the Company and
Indemnitee hereby agree as follows: 
  
 1.    Indemnification. 

 
 (a)    Third Party Proceedings.    The Company shall indemnify Indemnitee
if Indemnitee is or was a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the Company)
by reason of the fact that Indemnitee is or was a director, officer, employee or agent of the Company, or any subsidiary of the Company, by reason of any action or inaction on the part of Indemnitee while an officer or director or by reason of the
fact that Indemnitee is or was serving at the request of the Company as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys’ fees),
judgments, fines and amounts paid in settlement (if such settlement is approved in advance by the Company, which approval shall not be unreasonably withheld) actually and reasonably incurred by Indemnitee in connection with such action, suit or
proceeding if Indemnitee acted in good faith and in a manner Indemnitee reasonably believed to be in or not opposed to the best interests of the Company, and, with respect to any criminal action or proceeding, had no reasonable cause to believe
Indemnitee’s conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that Indemnitee did
not act in good faith and in a manner which Indemnitee 

 reasonably believed to be in or not opposed to the best interests of the Company, or, with respect to any criminal action or proceeding, that
Indemnitee had reasonable cause to believe that Indemnitee’s conduct was unlawful. 
  
 (b)    Proceedings By or in the Right of the Company.    The Company shall indemnify Indemnitee if Indemnitee was or is a party or is threatened to be made a party to any
threatened, pending or completed action or proceeding by or in the right of the Company or any subsidiary of the Company to procure a judgment in its favor by reason of the fact that Indemnitee is or was a director, officer, employee or agent of the
Company, or any subsidiary of the Company, by reason of any action or inaction on the part of Indemnitee while an officer or director or by reason of the fact that Indemnitee is or was serving at the request of the Company as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys’ fees) and, to the fullest extent permitted by law, amounts paid in settlement (if such settlement is
approved in advance by the Company, which approval shall not be unreasonably withheld), in each case to the extent actually and reasonably incurred by Indemnitee in connection with the defense or settlement of such action or suit if Indemnitee acted
in good faith and in a manner Indemnitee reasonably believed to be in or not opposed to the best interests of the Company and its stockholders, except that no indemnification shall be made in respect of any claim, issue or matter as to which
Indemnitee shall have been finally adjudicated by court order or judgment to be liable to the Company in the performance of Indemnitee’s duty to the Company and its stockholders unless and only to the extent that the court in which such action
or proceeding is or was pending shall determine upon application that, in view of all the circumstances of the case, Indemnitee is fairly and reasonably entitled to indemnity for such expenses which such court shall deem proper. 

 
 (c)    Mandatory Payment of Expenses.    To the extent that Indemnitee
has been successful on the merits or otherwise in defense of any action, suit or proceeding referred to in Section 1(a) or Section 1(b) or the defense of any claim, issue or matter therein, Indemnitee shall be indemnified against expenses (including
attorneys’ fees) actually and reasonably incurred by Indemnitee in connection therewith. 
  
 2.    No Employment Rights.    Nothing contained in this Agreement is intended to create in Indemnitee any right to continued employment. 
  
 3.    Expenses; Indemnification Procedure. 
  
 (a)    Advancement of Expenses.    The Company shall advance all expenses incurred by Indemnitee in connection with
the investigation, defense, settlement or appeal of any civil or criminal action, suit or proceeding referred to in Section l(a) or Section 1(b) hereof (including amounts actually paid in settlement of any such action, suit or proceeding).
Indemnitee hereby undertakes to repay such amounts advanced only if, and to the extent that, it shall ultimately be determined that Indemnitee is not entitled to be indemnified by the Company as authorized hereby. 
  
 (b)    Notice/Cooperation by Indemnitee.    Indemnitee shall, as a condition
precedent to his or her right to be indemnified under this Agreement, give the Company notice in 

 
 -2- 

 writing as soon as practicable of any claim made against Indemnitee for which indemnification will or could be sought under this Agreement.
Notice to the Company shall be directed to the Chief Executive Officer of the Company and shall be given in accordance with the provisions of Section 12(d) below. In addition, Indemnitee shall give the Company such information and cooperation as it
may reasonably require and as shall be within Indemnitee’s power. 
  
 (c)    Procedure.    Any indemnification and advances provided for in Section 1 and this Section 3 shall be made no later than twenty (20) days after receipt of the written
request of Indemnitee. If a claim under this Agreement, under any statute, or under any provision of the Company’s Certificate of Incorporation or Bylaws providing for indemnification, is not paid in full by the Company within twenty (20) days
after a written request for payment thereof has first been received by the Company, Indemnitee may, but need not, at any time thereafter bring an action against the Company to recover the unpaid amount of the claim and, subject to Section 11 of this
Agreement, Indemnitee shall also be entitled to be paid for the expenses (including attorneys’ fees) of bringing such action. It shall be a defense to any such action (other than an action brought to enforce a claim for expenses incurred in
connection with any action, suit or proceeding in advance of its final disposition) that Indemnitee has not met the standards of conduct which make it permissible under applicable law for the Company to indemnify Indemnitee for the amount claimed,
but the burden of proving such defense shall be on the Company and Indemnitee shall be entitled to receive interim payments of expenses pursuant to Section 3(a) unless and until such defense may be finally adjudicated by court order or judgment from
which no further right of appeal exists. It is the parties’ intention that if the Company contests Indemnitee’s right to indemnification, the question of Indemnitee’s right to indemnification shall be for the court to decide, and
neither the failure of the Company (including its Board of Directors, any committee or subgroup of the Board of Directors, independent legal counsel, or its stockholders) to have made a determination that indemnification of Indemnitee is proper in
the circumstances because Indemnitee has met the applicable standard of conduct required by applicable law, nor an actual determination by the Company (including its Board of Directors, any committee or subgroup of the Board of Directors,
independent legal counsel, or its stockholders) that Indemnitee has not met such applicable standard of conduct, shall create a presumption that Indemnitee has or has not met the applicable standard of conduct. 
  
 (d)    Notice to Insurers.    If, at the time of the receipt of a notice of a claim
pursuant to Section 3(b) hereof, the Company has director and officer liability insurance in effect, the Company shall give prompt notice of the commencement of such proceeding to the insurers in accordance with the procedures set forth in the
respective policies. The Company shall thereafter take all necessary or desirable action to cause such insurers to pay, on behalf of the Indemnitee, all amounts payable as a result of such proceeding in accordance with the terms of such policies.

  
 (e)    Selection of Counsel.    In the event the Company
shall be obligated under Section 3(a) hereof to pay the expenses of any proceeding against Indemnitee, the Company, if appropriate, shall be entitled to assume the defense of such proceeding, with counsel approved by Indemnitee, upon the delivery to
Indemnitee of written notice of its election so to do. After delivery of such notice, approval of such counsel by Indemnitee and the retention of such counsel by the Company, the Company will not be liable to Indemnitee under this Agreement for any
fees 

 
 -3- 

 of counsel subsequently incurred by Indemnitee with respect to the same proceeding, provided that (i) Indemnitee shall have the right to employ
counsel in any such proceeding at Indemnitee’s expense; and (ii) if (A) the employment of counsel by Indemnitee has been previously authorized by the Company, (B) Indemnitee shall have reasonably concluded that there may be a conflict of
interest between the Company and Indemnitee in the conduct of any such defense or (C) the Company shall not, in fact, have employed counsel to assume the defense of such proceeding, then the fees and expenses of Indemnitee’s counsel shall be at
the expense of the Company. 
  
 4.    Additional Indemnification Rights;
Nonexclusivity. 
  
 (a)    Scope.    Notwithstanding
any other provision of this Agreement, the Company hereby agrees to indemnify the Indemnitee to the fullest extent permitted by law, notwithstanding that such indemnification is not specifically authorized by the other provisions of this Agreement,
the Company’s Certificate of Incorporation, the Company’s Bylaws or by statute. In the event of any change, after the date of this Agreement, in any applicable law, statute, or rule which expands the right of a Delaware corporation to
indemnify a member of its board of directors or an officer, such changes shall be deemed to be within the purview of Indemnitee’s rights and the Company’s obligations under this Agreement. In the event of any change in any applicable law,
statute or rule which narrows the right of a Delaware corporation to indemnify a member of its board of directors or an officer, such changes, to the extent not otherwise required by such law, statute or rule to be applied to this Agreement shall
have no effect on this Agreement or the parties’ rights and obligations hereunder. 
  
 (b)    Nonexclusivity.    The indemnification provided by this Agreement shall not be deemed exclusive of any rights to which Indemnitee may be entitled under the Company’s
Certificate of Incorporation, its Bylaws, any agreement, any vote of stockholders or disinterested members of the Company’s Board of Directors, the General Corporation Law of the State of Delaware, or otherwise, both as to action in
Indemnitee’s official capacity and as to action in another capacity while holding such office. The indemnification provided under this Agreement shall continue as to Indemnitee for any action taken or not taken while serving in an indemnified
capacity even though he or she may have ceased to serve in any such capacity at the time of any action, suit or other covered proceeding. 
  
 5.    Partial Indemnification.    If Indemnitee is entitled under any provision of this Agreement to indemnification by the Company for some or a portion of the expenses,
judgments, fines or penalties actually or reasonably incurred in the investigation, defense, appeal or settlement of any civil or criminal action, suit or proceeding, but not, however, for the total amount thereof, the Company shall nevertheless
indemnify Indemnitee for the portion of such expenses, judgments, fines or penalties to which Indemnitee is entitled. 
  
 6.    Mutual Acknowledgment.    Both the Company and Indemnitee acknowledge that in certain instances, Federal law or public policy may override applicable state law and prohibit
the Company from indemnifying its directors and officers under this Agreement or otherwise. For example, the Company and Indemnitee acknowledge that the Securities and Exchange Commission (the “SEC”) has taken the position that
indemnification is not permissible for liabilities arising under certain federal securities laws, and federal legislation prohibits 

 
 -4- 

 indemnification for certain ERISA violations. Indemnitee understands and acknowledges that the Company has undertaken or may be required in the
future to undertake with the SEC to submit the question of indemnification to a court in certain circumstances for a determination of the Company’s right under public policy to indemnify Indemnitee. 
  
 7.    Officer and Director Liability Insurance.    The Company shall, from time to
time, make the good faith determination whether or not it is practicable for the Company to obtain and maintain a policy or policies of insurance with reputable insurance companies providing the officers and directors of the Company with coverage
for losses from wrongful acts, or to ensure the Company’s performance of its indemnification obligations under this Agreement. Among other considerations, the Company will weigh the costs of obtaining such insurance coverage against the
protection afforded by such coverage. In all policies of director and officer liability insurance, Indemnitee shall be named as an insured in such a manner as to provide Indemnitee the same rights and benefits as are accorded to the most favorably
insured of the Company’s directors, if Indemnitee is a director; or of the Company’s officers, if Indemnitee is not a director of the Company but is an officer; or of the Company’s key employees, if Indemnitee is not an officer or
director but is a key employee. Notwithstanding the foregoing, the Company shall have no obligation to obtain or maintain such insurance if the Company determines in good faith that such insurance is not reasonably available, if the premium costs
for such insurance are disproportionate to the amount of coverage provided, if the coverage provided by such insurance is limited by exclusions so as to provide an insufficient benefit, or if Indemnitee is covered by similar insurance maintained by
a parent or subsidiary of the Company. 
  
 8.    Severability.    Nothing in this Agreement is intended to require or shall be construed as requiring the Company to do or fail to do any act in violation of applicable law.
The Company’s inability, pursuant to court order, to perform its obligations under this Agreement shall not constitute a breach of this Agreement. The provisions of this Agreement shall be severable as provided in this Section 8. If this
Agreement or any portion hereof shall be invalidated on any ground by any court of competent jurisdiction, then the Company shall nevertheless indemnify Indemnitee to the full extent permitted by any applicable portion of this Agreement that shall
not have been invalidated, and the balance of this Agreement not so invalidated shall be enforceable in accordance with its terms. 
  
 9.    Exceptions.    Any other provision herein to the contrary notwithstanding, the Company shall not be obligated pursuant to the terms of this Agreement: 

 
 (a)    Claims Initiated by Indemnitee.    To indemnify or advance
expenses to Indemnitee with respect to proceedings or claims initiated or brought voluntarily by Indemnitee and not by way of defense, except with respect to proceedings brought to establish or enforce a right to indemnification under this Agreement
or any other statute or law or otherwise as required under Section 145 of the Delaware General Corporation Law, but such indemnification or advancement of expenses may be provided by the Company in specific cases if the Board of Directors finds it
to be appropriate; 
  
 (b)    Lack of Good Faith.    To
indemnify Indemnitee for any expenses incurred by Indemnitee with respect to any proceeding instituted by Indemnitee to enforce or interpret this 

 
 -5- 

 Agreement, if a court of competent jurisdiction determines that each of the material assertions made by Indemnitee in such proceeding was not
made in good faith or was frivolous; 
  
 (c)    Insured
Claims.    To indemnify Indemnitee for expenses or liabilities of any type whatsoever (including, but not limited to, judgments, fines, ERISA excise taxes or penalties, and amounts paid in settlement) to the extent such
expenses or liabilities have been paid directly to Indemnitee by an insurance carrier under a policy of officers’ and directors’ liability insurance maintained by the Company; or 
  
 (d)    Claims under Section 16(b).    To indemnify Indemnitee for expenses or the payment of profits arising from the
purchase and sale by Indemnitee of securities in violation of Section 16(b) of the Securities Exchange Act of 1934, as amended, or any similar successor statute. 
  
 10.    Construction of Certain Phrases. 
  
 (a)    For purposes of this Agreement, references to the “Company” shall include, in addition to the resulting corporation, any constituent corporation (including any constituent of a constituent)
absorbed in a consolidation or merger which, if its separate existence had continued, would have had power and authority to indemnify its directors, officers, and employees or agents, so that if Indemnitee is or was a director, officer, employee or
agent of such constituent corporation, or is or was serving at the request of such constituent corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, Indemnitee shall
stand in the same position under the provisions of this Agreement with respect to the resulting or surviving corporation as Indemnitee would have with respect to such constituent corporation if its separate existence had continued. 

 
 (b)    For purposes of this Agreement, references to “other enterprises” shall include
employee benefit plans; references to “fines” shall include any excise taxes assessed on Indemnitee with respect to an employee benefit plan; and references to “serving at the request of the Company” shall include
any service as a director, officer, employee or agent of the Company which imposes duties on, or involves services by, such director, officer, employee or agent with respect to an employee benefit plan, its participants, or beneficiaries; and if
Indemnitee acted in good faith and in a manner Indemnitee reasonably believed to be in the interest of the participants and beneficiaries of an employee benefit plan, Indemnitee shall be deemed to have acted in a manner “not opposed to the
best interests of the Company” as referred to in this Agreement. 
  
 11.    Attorneys’ Fees.    In the event that any action is instituted by Indemnitee under this Agreement to enforce or interpret any of the terms hereof, Indemnitee shall be
entitled to be paid all court costs and expenses, including reasonable attorneys’ fees, incurred by Indemnitee with respect to such action, unless as a part of such action, the court of competent jurisdiction determines that each of the
material assertions made by Indemnitee as a basis for such action were not made in good faith or were frivolous. In the event of an action instituted by or in the name of the Company under this Agreement or to enforce or interpret any of the terms
of this Agreement, Indemnitee shall be entitled to be paid all court costs and expenses, including attorneys’ fees, incurred by Indemnitee in defense of such action (including with respect to 

 
 -6- 

 Indemnitee’s counterclaims and cross-claims made in such action), unless as a part of such action the court determines that each of
Indemnitee’s material defenses to such action were made in bad faith or were frivolous. 
  
 12.    Miscellaneous. 
  
 (a)    Governing Law.    This Agreement and all acts and transactions pursuant hereto and the rights and obligations of the parties hereto shall be governed, construed and
interpreted in accordance with the laws of the State of Delaware, without giving effect to principles of conflict of law. 
  
 (b)    Entire Agreement; Enforcement of Rights.    This Agreement sets forth the entire agreement and understanding of the parties relating to the subject matter herein and merges
all prior discussions between them. No modification of or amendment to this Agreement, nor any waiver of any rights under this Agreement, shall be effective unless in writing signed by the parties to this Agreement. The failure by either party to
enforce any rights under this Agreement shall not be construed as a waiver of any rights of such party. 
  
 (c)    Construction.    This Agreement is the result of negotiations between and has been reviewed by each of the parties hereto and their respective counsel, if any; accordingly,
this Agreement shall be deemed to be the product of all of the parties hereto, and no ambiguity shall be construed in favor of or against any one of the parties hereto. 
  
 (d)    Notices.    Any notice, demand or request required or permitted to be given under this Agreement shall be in
writing and shall be deemed sufficient when delivered personally or sent by telegram or fax, or forty-eight (48) hours after being deposited in the U.S. mail, as certified or registered mail, with postage prepaid, and addressed to the party to be
notified at such party’s address as set forth below or as subsequently modified by written notice. 
  
 (e)    Counterparts.    This Agreement may be executed in two or more counterparts, each of which shall be deemed an original and all of which together shall constitute one
instrument. 
  
 (f)    Successors and Assigns.    This
Agreement shall be binding upon the Company and its successors and assigns, and inure to the benefit of Indemnitee and Indemnitee’s heirs, legal representatives and assigns. 

 
 -7- 

  
 (g)    Subrogation.    In
the event of payment under this Agreement, the Company shall be subrogated to the extent of such payment to all of the rights of recovery of Indemnitee, who shall execute all documents required and shall do all acts that may be necessary to secure
such rights and to enable the Company to effectively bring suit to enforce such rights. 
  
 [Signature Page Follows]

 
 -8- 

  
 The parties hereto have executed this Agreement as of the day and year set forth
on the first page of this Agreement. 
  
 
	 RITA Medical Systems, Inc.
 
	 
	 By:
 	 	 /S/    BARRY CHESKIN        
 

	 Title:
 	 	 President and Chief Executive Officer
 

	 Address:
 	 	 967 Shoreline Blvd.
 
	  	 	 Mountain View, CA 94043
 

 
  
 
	 AGREED TO AND ACCEPTED:
  
 
	  
	 STEPHEN J. WILLIAMS
  
 
	 /S/    STEPHEN J.
WILLIAMS        
 
	
	
	

	 (Signature)
 	  	  
	  	  	  
	 Address:
 	  	 3678 Deer Trail Drive
 
	  	  	 Danville, CA 94506
 

 

 
 -9-<PAGE>

                                                                    Exhibit 10.1

                              EMPLOYMENT AGREEMENT

               EMPLOYMENT AGREEMENT (the "Agreement") made as of the 13th day of
September 2002, by and between Legato Systems, Inc., a Delaware corporation (the
"Corporation"), and David B. Wright ("Executive").

               WHEREAS, the Corporation desires to continue to employ the
Executive, and the Executive desires to continue his employment with the
Corporation, upon the terms and conditions set forth in this Agreement.

               WHEREAS, the Executive acknowledges that he has had an
opportunity to consider this agreement and consult with an independent
advisor(s) of his choosing with regard to the terms of this Agreement, and
enters this Agreement voluntarily and with a full understanding of its terms.

               NOW, THEREFORE, in consideration of the promises and mutual
covenants contained herein, the parties agree to as follows:

                             PART ONE - DEFINITIONS

               For purposes of this Agreement, the following definitions shall
be in effect:

               Board means the Corporation's Board of Directors.

               Change in Control means a change in the ownership or control of
the Corporation effected through any of the following transactions:

               (i)    a merger or consolidation in which securities possessing
          more than fifty percent (50%) of the total combined voting power of
          the Corporation's outstanding securities are transferred to a person
          persons different from the persons holding those securities
          or immediately prior to such transaction;

               (ii)   the sale, transfer or other disposition of all or
          substantially all of the Corporation's assets in complete liquidation
          or dissolution of the Corporation;

               (iii)  any transaction or series of related transactions pursuant
          to which any person or any group of persons comprising a "group"
          within the meaning of Rule 13d-5(b)(1) under the Securities Exchange
          Act of 1934, as amended (other than the Corporation or a person that,
          prior to such transaction or series of related transactions, directly
          or indirectly controls, is controlled by or is under common control
          with, the Corporation) becomes directly or indirectly the beneficial
          owner (within the meaning of Rule 13d-3 under the Securities Exchange
          Act of 1934, as amended) of securities possessing (or convertible into
          or exercisable for securities possessing) more than fifty percent
          (50%) of the total combined voting power of the Corporation's
          securities outstanding immediately after the consummation of such
          transaction or series of related transactions, whether such
          transaction involves a direct issuance from the Corporation or the
          acquisition of outstanding securities held by one or more of the
          Corporation's stockholders; or

               (iv)   a change in the composition of the Board over a period of
          thirty-six (36) consecutive months or less such that a majority of the
          Board members ceases to be comprised of individuals who either (A)
          have been Board members continuously since the beginning of such
          period, or (B) have been elected or nominated for election as Board
          members during such period by at least a majority of the Board members
          described in clause (A) who were still in office at the time the Board
          approved such election or nomination.

                                       1

<PAGE>

               Change in Control Severance Payments means the various payments
and benefits to which the Executive may become entitled under Paragraph 16 of
Part Four of this Agreement upon his Involuntary Termination in connection with
a Change in Control.

               Code means the Internal Revenue Code of 1986, as amended.

               Common Stock means the Corporation's common stock.

               Employment Period means the duration of the Executive's
employment with the Corporation pursuant to the terms of this Agreement.

               Employment Year means each full consecutive twelve (12)-month
period that the Executive is employed by the Corporation after the date of this
Agreement.

               Fair Market Value means, with respect to the shares of Common
Stock subject to any of the Executive's Options, the closing selling price per
share on the date in question, as such price is reported by the National
Association of Securities Dealers on the Nasdaq National Market and published in
The Wall Street Journal. If there is no closing selling price reported for the
Common Stock on the date in question, then the Fair Market Value will be the
closing selling price on the last preceding date for which such published report
exists.

               Incapacity means the inability of the Executive, by reason of any
injury or illness, to properly perform his normal duties under this Agreement
for a period of more than one hundred eighty (180) days.

               Independent Auditors means the accounting firm serving as the
Corporation's independent certified public accountants immediately prior to the
Change in Control; provided, however, that in the event such accounting firm
also serves as the independent certified public accountants for the corporation
or other entity effecting the Change in Control transaction with the
Corporation, then the Independent Auditors shall mean a nationally-recognized
public accounting firm mutually acceptable to both the Corporation and the
Executive.

               Involuntary Termination means (i) the Corporation's termination
of the Executive's employment for any reason other than a Termination for Cause,
or (ii) the Executive's voluntary resignation within one hundred eighty (180)
days following (A) a material reduction in the scope of his duties and
responsibilities or the level of management to which he reports, (B) a reduction
in the aggregate dollar amount of his base salary and Target Bonus by more than
fifteen percent (15%), (C) a relocation of his principal place of employment by
more than fifty (50) miles, or (D) a material breach by the Corporation of any
of its obligations under this Agreement and the failure of the Corporation to
cure such breach within sixty (60) days after receipt of written notice from the
Executive in which the actions or omissions constituting such material breach
are specified.

               An Involuntary Termination shall not include the termination of
Executive's employment by reason of death or Incapacity.

               Option means any option granted to the Executive under the Plan
or otherwise to purchase shares of Common Stock which is outstanding at the time
of (i) a Change in Control or (ii) his Involuntary Termination, whether or not
in connection with a Change in Control. In the event of a Change in Control, the
Options will be divided into two (2) separate categories as follows:

               Acquisition-Accelerated Options: any outstanding Option (or
          installment thereof) which immediately accelerates upon a Change in
          Control pursuant to the acceleration provisions of the agreement
          evidencing that Option or the special acceleration provisions of this
          Agreement.

               Severance-Accelerated Options: any outstanding Option (or
          installment thereof) which, pursuant to the terms of this Agreement,
          accelerates upon the Executive's Involuntary Termination following a
          Change in Control.

                                       2

<PAGE>

               Option Parachute Payment means, with respect to any
Acquisition-Accelerated Option or any Severance-Accelerated Option, the portion
of that Option deemed to be a parachute payment under Code Section 280G and the
Treasury Regulations issued thereunder. The portion of such Option which is
categorized as an Option Parachute Payment will be calculated in accordance with
the valuation provisions established under Code Section 280G and the applicable
Treasury Regulations and will include an appropriate dollar adjustment to
reflect the lapse of the Executive's obligation to remain in the Corporation's
employ or service as a condition to the vesting of the accelerated installment.

               Other Parachute Payment means any payment or benefit in the
nature of compensation (other than (i) the Special Change in Control Payment,
(ii) the Change in Control Severance Payments to which the Executive may become
entitled under Part Four of this Agreement and (iii) his Acquisition-Accelerated
Options) which is made to the Executive in connection with the Change in Control
and which is deemed to constitute a parachute payment under Code Section
280G(b)(2) and the Treasury Regulations issued thereunder.

               Parachute Payment means (i) the Special Change in Control Payment
and any Change in Control Severance Payment provided the Executive under Part
Four of this Agreement, to the extent any such payment or payments are deemed to
constitute a parachute payment within the meaning of Code Section 280G(b)(2) and
the Treasury Regulations issued thereunder, and (ii) any Option Parachute
Payment attributable to his Acquisition-Accelerated Options.

               Plan means (i) the Corporation's 1995 Stock Option/Stock Issuance
Plan, as amended or restated from time to time, and (ii) any successor stock
incentive plan subsequently implemented by the Corporation.

               Present Value means the value, determined as of the date of the
Change in Control, of any payment in the nature of compensation to which the
Executive becomes entitled in connection with the Change in Control or his
subsequent Involuntary Termination, including (without limitation) the Option
Parachute Payment attributable to the Executive's Acquisition-Accelerated and
Severance-Accelerated Options and the Parachute Payment attributable to the
additional benefits to which the Executive becomes entitled under Part Four of
this Agreement. The Present Value of each such payment shall be determined in
accordance with the provisions of Code Section 280G(d)(4), utilizing a discount
rate equal to one hundred twenty percent (120%) of the applicable Federal rate
in effect at the time of such determination, compounded semi-annually to the
effective date of the Change in Control.

               Special Change in Control Payment means the lump sum payment to
which the Executive shall, in accordance with Paragraph 14(a), become entitled
upon the occurrence of a Change in Control during the Employment Period,
provided he delivers the requisite general release required of him under such
Paragraph.

               Target Bonus means the annual incentive bonus to which the
Executive may become entitled for one or more fiscal years upon the
Corporation's attainment of the financial milestones designated for the
applicable year and the Executive's attainment of any personal objectives
specified for him for that year.

               Termination for Cause means the termination of the Executive's
employment due to (i) the commission of any act of fraud, embezzlement or
dishonesty by the Executive, (ii) any unauthorized use or disclosure by the
Executive of confidential information or trade secrets of the Corporation (or
any parent or subsidiary), (iii) any other intentional misconduct by the
Executive adversely affecting the business or affairs of the Corporation in a
material manner, or (iv) the Executive's breach of this Agreement. The foregoing
definition shall not be deemed to be inclusive of all the acts or omissions
which the Corporation (or any parent or subsidiary) may consider as grounds for
the dismissal or discharge of the Executive or any other individual in the
service of the Corporation (or any parent or subsidiary).

               The Corporation may not terminate the Executive under clause (iv)
above, unless it has given the Executive notice in writing of its intention to
terminate his employment for Cause pursuant to such provisions and thirty (30)
days to correct any condition giving rise to

                                       3

<PAGE>

Cause for termination. In the event that the Executive fails satisfactorily to
correct such conditions of which he is notified, which determination shall be
made by the Board, his employment shall be terminated.

                 PART TWO -- TERMS AND CONDITIONS OF EMPLOYMENT

               1.     Duties and Responsibilities.

               A.     The Executive shall continue to serve as the Chief
Executive Officer of the Corporation and shall in such capacity report directly
to the Board. As Chief Executive Officer, the Executive's job duties shall
include, without limitation (and the Corporation reserves the right to change),
the following: Overseeing all corporate functions and directing the organization
to ensure the attainment of revenue and profit goals and maximum return on
invested capital, formulating current and long-range plans and objectives, and
representing the organization in relations with its customers and the business
and non-business communities. The Executive shall devote his full business time
and attention to the business and affairs of the Corporation during the
Employment Period. The Executive shall not engage in any other business, job or
consulting activity during the Employment Period without the written permission
of the Corporation.

               B.     The Executive hereby agrees to remain in his capacity as
Chief Executive Officer during the Employment Period specified in Paragraph 2
and to perform in good faith and to the best of his ability all services which
may be required of the Executive hereunder and to be available to render
services at all reasonable times and places in accordance with such reasonable
directions and requests made by the Corporation acting by majority vote of the
Board.

               C.     The Executive shall be based at the Corporation's
principal offices in the Silicon Valley/Bay Area, California, but the Executive
may be required from time to time to travel to other geographic locations in
connection with the performance of his duties hereunder.

               2.     Employment Period. The Employment Period shall begin with
the initial Employment Year commencing as of the date of this Agreement and
shall continue for an additional two (2) Employment Years thereafter. After the
expiration of each Employment Year for which this Agreement remains in effect,
the Employment Period shall automatically be extended for an additional one
(1)-year period upon the same terms and conditions as are set forth herein,
unless either party gives written notice to the other at least thirty (30) days
prior to the end of the then current Employment Year that the Employment Period
shall not be extended beyond the remaining term of the Employment Period.

               3.     Cash Compensation.

               A.     Executive shall be paid a base salary at the annual rate
of Six Hundred Fifty Thousand Dollars ($650,000.00). Such rate shall be subject
to annual review by the Board and may be increased or decreased at the Board's
discretion. Base salary shall be paid at periodic intervals in accordance with
the Corporation's payroll practices for salaried employees.

               B.     For each fiscal year of the Corporation during the
Employment Period, including the fiscal year which commenced January 1, 2002,
the Executive shall be entitled to a Target Bonus of up to one hundred percent
(100%) of his annual base salary for that fiscal year. The amount of the bonus
shall be based on the individual performance of the Executive, as well as the
Corporation's attainment of certain financial objectives. The Board will
establish the Executive's individual performance objectives, as well as
financial objectives of the Corporation, no later than March 31 of the fiscal
year in which the bonus is to be awarded. The bonus earned for each fiscal year
shall become payable within ninety (90) days after the close of that year.

               C.     The Corporation shall deduct and withhold from the
compensation payable to the Executive hereunder any and all applicable federal,
state and local income and employment withholding taxes and any other amounts
required to be deducted or withheld by the Corporation under applicable
statutes, regulations,

                                       4

<PAGE>

ordinances or orders governing or requiring the withholding or deduction of
amounts otherwise payable as compensation or wages to employees.

               4.     Equity Compensation

               A.     The Executive has received a series of Options over his
period of employment to date with the Corporation. Each of those Options shall
vest and become exercisable for the shares of Common Stock subject to that
Option in installments over the Executive's period of service with the
Corporation. The Options granted to date may be summarized as follows:

               Grant Date             Number of Option Shares     Exercise Price
               ----------             -----------------------     --------------

               11/10/00               250,000                     $9.75

               11/10/00               1,308,976                   $9.75

               11/10/00               41,024                      $9.75

               01/02/01               650,000                     $9.75

               09/21/01               21,008                      $4.76

               09/21/01               578,992                     $4.76

               B.     The Executive shall be eligible to receive one or more
additional Option grants during the Employment Period, as the Board or the
Compensation Committee of the Board may deem appropriate in order to provide him
with sufficient equity incentives for his position.

               C.     The shares of Common Stock subject to the Options
summarized in Paragraph 4.A above, together with each additional Option which
the Executive may subsequently receive over the remainder of the Employment
Period, shall be subject to (i) the vesting acceleration provisions of Paragraph
13(d) of Part Three should there occur an Involuntary Termination of the
Executive's employment in the absence of a Change in Control, and (ii) the
applicable vesting acceleration provisions of Paragraph 14(b) or 16(d) of Part
Four in the event there should occur a Change in Control.

               5.     Expense Reimbursement. In addition to the compensation
specified in Paragraph 3, the Executive shall be entitled, in accordance with
the reimbursement policies in effect from time to time, to receive reimbursement
from the Corporation for all business expenses incurred by the Executive in the
performance of his duties hereunder, provided the Executive furnishes the
Corporation with vouchers, receipts and other details of such expenses in the
form required by the Corporation sufficient to substantiate a deduction for such
business expenses under all applicable rules and regulations of federal and
state taxing authorities.

               6.     Fringe Benefits. The Executive shall, throughout the
Employment Period, be eligible to participate in fringe benefit plans, described
in the Employee Benefit Handbook for employee's at the Executive's level, as may
be modified from time to time.

               7.     Indemnification. Throughout the Employment Period, the
Corporation shall indemnify and hold the Executive harmless from and against all
loss, cost and expense arising from or relating to (i) his service as officer or
employee of the Corporation or a member of the Board, or (ii) his service at the
Corporation's request as an officer, employee, agent or board member of any
other corporation, limited liability company, partnership, joint venture, trust
or other enterprise, other than losses attributable to the Executive's
intentional misconduct. The Corporation shall maintain in full force and effect
a Directors and Officers Liability Insurance Policy issued by an established and
nationally-recognized insurer which shall provide coverage in reasonable amounts
for the Executive. In addition, the Corporation shall pay and advance all
expenses, including (without limitation) attorneys' fees,

                                       5

<PAGE>

disbursements and retainers, accounting and witness fees, travel and deposition
costs, expenses of investigations and judicial or administrative proceedings and
appeals, actually incurred by the Executive in connection with any threatened,
pending or completed claim, action, suit or proceeding, whether formal or
informal and whether civil, criminal, administrative or investigative in nature,
or amounts paid by the Executive or on the Executive's behalf in settlement of
any such claim, action, suit or proceeding, to the extent such claim, action,
suit or proceeding arises from or relates to the Executive's service as officer
or employee of the Corporation or as a member of the Board or his service at the
Corporation's request as an officer, employee, agent or board member of any
other corporation, limited liability company, partnership, joint venture, trust
or other enterprise.

               8.     Death or Incapacity. Upon the Executive's death or
Incapacity during the Employment Period, the employment relationship created
pursuant to this Agreement and the Employment Period shall immediately
terminate, and the Corporation shall provide to the Executive or his estate,
contingent on the Executive or the Executive's heirs executing a general release
in a form prescribed by the Corporation: (i) any unpaid base salary earned under
Paragraph 3 for services rendered through the date of death or Incapacity, (ii)
the dollar value of all accrued and unused vacation benefits based upon the
Executive's most recent level of base salary, (iii) any bonus compensation which
becomes due and payable for the fiscal year in which the Executive's death or
Incapacity occurs, pro-rated in amount on the basis of the portion of that year
completed prior to the Executive's death or Incapacity; (iv) a lump sum cash
payment equal to one and one half (1.5) times the annual rate of base salary in
effect for the Executive under Paragraph 3 at the time of his death or
Incapacity; and (v) in the case of Incapacity, but not death, continued health
care coverage under the Corporation's medical plan for the Executive and his
eligible dependents, without charge, upon his election to receive such continued
health care coverage under Code Section 4980B ("COBRA"), for a period not to
exceed the earlier of (a) the expiration of the eighteen (18)-month period
following the termination of the Executive's employment or (b) the first date on
which the Executive and his eligible dependents are covered under another
employer's health benefit program without exclusion for any pre-existing medical
condition. Any additional health care coverage to which the Executive and his
dependents may be entitled under COBRA following the period of such
Corporation-paid coverage shall be at the Executive's sole cost and expense. All
vesting of the Executive's outstanding Options shall cease at the time of his
termination of employment by reason of death or Incapacity, and the Executive
shall not have more than the period of time specified in the applicable stock
option agreement for each Option in which to exercise that Option following such
termination of employment for the shares of Common Stock which are vested and
exercisable at the time of such termination.

               9.     Restrictive Covenants.

               A.     During the Employment Period, the Executive shall not,
without prior written consent from the Board, on his own account or as an
employee, agent, promoter, consultant, partner, officer, director, or
shareholder of any other person, firm, entity, partnership or corporation, own,
operate, lease, franchise, conduct, engage in, be connected with, have any
interest in, or assist any person or entity engaged in any business that is
competitive with the business that is conducted by the Corporation or is in the
same general field or industry as the Corporation, except as the holder of not
more than 1% of the outstanding stock of a publicly held company. In the event
that the Executive engages in any conduct described in this Paragraph 9, while
receiving severance payments from the Corporation under Part Three or Four of
this Agreement, the Corporation may withhold such payment from the Executive,
until the Executive ceases to engage in such activity described in this
paragraph.

               B.     In addition, the Executive shall not during the Employment
Period:

                      (i)     contact, solicit or call upon any customer or
          supplier of the Corporation on behalf of any person or entity other
          than the Corporation for the purpose of selling, providing or
          performing any services of the type normally provided or performed by
          the Corporation; or

                      (ii)    induce or attempt to induce any person or entity
          to curtail or cancel any business or contracts which such person or
          entity had with the Corporation.

               10.    Proprietary Information.

                                       6

<PAGE>

               A.    The Executive hereby acknowledges that the Corporation may,
from time to time during the Employment Period, disclose to the Executive
confidential information pertaining to the Corporation's business and affairs,
technology, research and development projects and customer base, including
(without limitation) financial information concerning customers and prospective
business opportunities. All information and data, whether or not in writing, of
a private or confidential nature concerning the business, technology or
financial affairs of the Corporation and its clients (collectively, "Proprietary
Information") is and shall remain the sole and exclusive property of the
Corporation. All tangible manifestations of such Proprietary Information
(whether written, printed or otherwise reproduced) shall be returned by the
Executive upon the termination of the Employment Period, and the Executive shall
not retain any copies or excerpts of the returned items.

               B.    The Executive shall, throughout the term of the Employment
Period, remain subject to the terms and conditions of the Proprietary
Information and Inventions Agreement which he previously executed with the
Corporation, and nothing in this Agreement shall supersede, modify or affect the
Executive's obligations, duties and responsibilities under such Proprietary
Information and Inventions Agreement, and that agreement shall accordingly
continue in full force and effect.

               11.   Termination of Employment.

               A.    The Corporation, acting by majority vote of the Board, may
terminate the Executive's employment under this Agreement at any time for any
reason, with or without Cause, by providing written notice of such termination
to the Executive. If such termination notice is given to the Executive, the
Corporation may, if it so desires, immediately relieve the Executive of some or
all of his duties.

               B.    The Executive may terminate his employment under this
Agreement at any time by giving the Corporation written notice of such
termination.

               C.    The Corporation, acting by majority vote of the Board, may
at any time, upon written notice, discharge the Executive from employment with
the Corporation hereunder pursuant to a Termination for Cause. Such termination
shall be effective immediately upon such notice.

               D.    Upon the termination of the Executive's employment pursuant
to this Paragraph 11, the Executive shall be paid (i) any unpaid base salary
earned under Paragraph 3 for services rendered through the date of such
termination, and (ii) the dollar value of all accrued and unused vacation
benefits based upon the Executive's most recent level of base salary. In
addition, the Executive shall be entitled to the payments and benefits provided
under Part Three or Part Four of this Agreement, to the extent he qualifies for
those payments and benefits in accordance with the applicable provisions.

               E.    If the Executive's employment is terminated by reason of a
Termination for Cause or should the Executive voluntarily resign (other than for
a reason which qualifies as grounds for an Involuntary Termination), then no
severance benefits shall be payable to the Executive under Part Three or Part
Four of this Agreement. In addition, all vesting of the Executive's outstanding
Options shall cease at the time of such termination or resignation, and the
Executive shall not have more than the period of time specified in the
applicable stock option agreement for each Option in which to exercise that
Option following such termination of employment for the shares of Common Stock
which are vested and exercisable at the time of his termination or resignation.
The Executive shall not be entitled to the Special Change in Control Payment in
the event his employment with the Corporation should cease for any reason prior
to the Change in Control that would otherwise trigger that payment.

                         PART THREE - SEVERANCE BENEFITS

               12.   Entitlement. Should the Executive's employment with the
Corporation terminate by reason of an Involuntary Termination in the absence of
a Change in Control or by reason of an Involuntary Termination more than
eighteen (18) months after a Change in Control, then the Executive shall become
entitled to receive the severance

                                       7

<PAGE>

benefits provided under this Part Three. Those benefits shall be in lieu of any
other severance benefits to which the Executive might otherwise be entitled by
reason of his termination of employment under such circumstances.

               Notwithstanding the foregoing, the Executive's entitlement to any
severance benefits under this Part Three shall be subject to his compliance with
the following requirement:

               -     The Executive shall, at the time of such Involuntary
          Termination, execute and deliver to the Corporation a general release
          which becomes effective in accordance with applicable law and pursuant
          to which the Executive releases the Corporation and its officers,
          directors, employees and agents from any and all claims the Executive
          may otherwise have with respect to the terms and conditions of his
          employment with the Corporation and the termination of that employment
          (other than his rights and entitlement to the payments and benefits
          provided under this Part Three).

               13.   Severance Benefits. The severance benefits payable to the
Executive under this Part Three shall consist of the following:

                     (a)    Lump Sum Payment. The Executive shall be entitled to
a lump sum cash payment equal to two (2) times the sum of (i) the annual rate of
base salary in effect for him under Paragraph 3 at the time of his Involuntary
Termination, and (ii) the Target Bonus in effect for him for the fiscal year of
the Corporation in which such Involuntary Termination occurs. Such lump sum
payment shall be made within three (3) business days following the date the
general release required of the Executive pursuant to Paragraph 12 becomes
effective and shall be subject to all applicable withholding requirements as set
forth in Paragraph 3.C.

                     (b)    Health Care Coverage. Continued health care coverage
under the Corporation's medical plan shall be provided, without charge, to the
Executive and his eligible dependents upon his election to receive such
continued health care coverage under Code Section 4980B ("COBRA"). Such
Corporation-paid coverage shall continue until the earlier of (i) the expiration
of the eighteen (18)-month period measured from the first day of the calendar
month following the calendar month in which his Involuntary Termination occurs
or (ii) the first date on which the Executive and his eligible dependents are
covered under another employer's health benefit program without exclusion for
any pre-existing medical condition. Any additional health care coverage to which
the Executive and his dependents may be entitled under COBRA following the
period of such Corporation-paid coverage shall be at the Executive's sole cost
and expense. However, should the Executive not be covered under another
employer's health plan at the time the initial eighteen (18)-month period of
Corporation-paid coverage expires, then the Corporation shall, for up to an
additional six (6)-month period thereafter, reimburse the Executive for any
premiums paid during such period on his continuing COBRA coverage (if any) or
the individual health care coverage policy issued to him in conversion of his
COBRA coverage.

                     (c)    Partial Option Acceleration. The vesting schedule in
effect for each outstanding Option held by the Executive at the time of his
Involuntary Termination will be accelerated by an additional thirty (30) months
so that each Option shall immediately vest and become exercisable for the
additional number of shares for which that Option would have otherwise been
vested and exercisable under the normal vesting schedule for such Option had the
Executive actually completed an additional thirty (30) months of employment with
the Corporation prior to the date of his Involuntary Termination.

                            Such partial acceleration of the outstanding Options
may result in the loss of favorable tax treatment under Code Section 422 for
more or more of the Options which might have otherwise qualified as incentive
stock options under Code Section 422.

                     (d)    Extension of Exercise Period. For each outstanding
Option (i) which is granted the Executive on or after September 13, 2002 or (ii)
which is outstanding on that date and is not otherwise listed as an excluded
Option on attached Schedule I, the Executive shall have until the earlier of (i)
the expiration of the twelve (12)-month period measured from the date of his
Involuntary Termination, or (ii) the expiration date of the option term in which
to exercise that Option. To the extent the exercise period of any existing
Option which is an

                                       8

<PAGE>

incentive stock option under the federal income tax laws is so extended, that
Option shall be deemed to be regranted on the date of this Agreement and may
accordingly fail to retain such incentive stock option status by reason of the
One Hundred Thousand Dollar ($100,000) limit on the initial exercisability of
incentive stock options per calendar year or because the exercise price of that
Option is below the Fair Market Value of the Common Stock on September 13, 2002.
Accordingly, if the Option does lose such incentive stock option status, the
Executive shall recognize immediate taxable income upon the subsequent exercise
of that Option in an amount equal to the Fair Market Value of the purchased
shares less the exercise price paid for those shares, and the Executive will
have to satisfy all applicable income and employment withholding taxes at the
time of such exercise. To the extent any such Option does retain its incentive
stock option status, the Executive shall not be entitled to long-term capital
gain treatment upon the subsequent sale of any shares purchased under that
Option unless such sale occurs more than two (2) years after the deemed
September 13, 2002, regrant date of that Option and more than one (1) year after
the date such Option is exercised for those shares.

                     PART FOUR - CHANGE IN CONTROL PAYMENTS

               This Part Four sets forth certain payments and benefits to which
the Executive may become entitled in connection with a Change in Control or an
Involuntary Termination following such Change in Control.

               14.   Change in Control Benefits. Should a Change in Control
occur during the Employment Period hereunder, then the Executive shall become
entitled to the following special Change in Control benefits:

                     (a)    Lump Sum Payment. The Executive shall be entitled to
a lump sum cash payment equal to two (2) times the sum of (I) the annual rate of
base salary in effect for him under Paragraph 3 at the time of the Change in
Control and (ii) the Target Bonus in effect for him for the fiscal year of the
Corporation in which such Change in Control occurs. Such lump sum payment (the
"Special Change in Control Payment") shall be made within ten (10) business days
following the effective date of such Change in Control, provided Executive shall
have delivered to the Corporation an effective release in substantially the same
as that which will also required of the Executive pursuant to Paragraph 15 upon
his Involuntary Termination and covering all claims through the date of such
payment. The Special Change in Control Payment shall be subject to all
applicable withholding requirements as set forth in Paragraph 3.C.

                     (b)    Option Acceleration. Each Option, to the extent
outstanding at the time of the Change in Control but not otherwise vested and
exercisable for all the shares of Common Stock subject to that Option will,
immediately prior to the effective date of that Change in Control, vest and
become exercisable for all of the shares of Common Stock at the time subject to
the Option and may be exercised for any or all of those shares as fully-vested
shares of Common Stock.

                     (c)    Target Bonus Pro-Ration. For each full or partial
month of employment which the Executive completes with the Corporation in the
fiscal year in which the Change of Control occurs, the Executive shall also be
entitled to receive a lump sum cash payment equal to one-twelfth (1/12th) of the
annual Target Bonus in effect for him for that year. Such lump sum payment shall
be made within three (3) business days following the date of the Change of
Control and shall be subject to all applicable withholding requirements as set
forth in Paragraph 3.C.

               15.   Entitlement to Change in Control Severance Payments. Should
the Executive's employment pursuant to this Agreement terminate by reason of an
Involuntary Termination within eighteen (18) months after such Change in
Control, then the Executive shall become entitled to receive the Change in
Control Severance Payments set forth in Paragraph 16, subject to his compliance
with the following requirement: The Executive shall, at the time of such
Involuntary Termination, execute and deliver to the Corporation a general
release which shall become effective under applicable law and pursuant to which
the Executive releases the Corporation and its officers, directors, employees
and agents from any and all claims the Executive may otherwise have with respect
to the terms and conditions of his employment with the Corporation and the
termination of that employment (other than his rights pertaining to the Change
in Control Severance Payments provided under this Part Four).

                                       9

<PAGE>

               -     The Executive shall, at the time of such Involuntary
          Termination, execute and deliver to the Corporation a general release
          which shall become effective under applicable law and pursuant to
          which the Executive releases the Corporation and its officers,
          directors, employees and agents from any and all claims the Executive
          may otherwise have with respect to the terms and conditions of his
          employment with the Corporation and the termination of that employment
          (other than his rights pertaining to the Change in Control Severance
          Payments provided under this Part Three).

               The Change in Control Severance Payments provided under this Part
Four shall be in lieu of any other severance benefits to which the Executive
might otherwise, by reason of the termination of his employment in connection
with a Change in Control, be entitled under any other severance plan, program or
arrangement of the Corporation.

               16.   Nature of Change in Control Severance Payments. The Change
in Control Severance Payments to which the Executive shall receive under this
Part Four shall consist of the following payments and benefits:

                     (a)    Health Care Coverage. Continued health care coverage
under the Corporation's medical plan shall be provided, without charge, to the
Executive and his eligible dependents upon his election to receive such
continued health care coverage under Code Section 4980B ("COBRA"). Such
Corporation-paid coverage shall continue until the earlier of (i) the expiration
of the eighteen (18)-month period measured from the first day of the calendar
month following the calendar month in which his Involuntary Termination occurs
or (ii) the first date on which the Executive and his eligible dependents are
covered under another employer's health benefit program without exclusion for
any pre-existing medical condition. Any additional health care coverage to which
the Executive and his dependents may be entitled under COBRA following the
period of such Corporation-paid coverage shall be at the Executive's sole cost
and expense. However, should the Executive not be covered under another
employer's health plan at the time the initial eighteen (18)-month period of
Corporation-paid coverage expires, then the Corporation shall, for up to an
additional six (6)-month period thereafter, reimburse the Executive for any
premiums paid during such period on his continuing COBRA coverage (if any) or
the individual health care coverage policy issued to him in conversion of his
COBRA coverage.

                     (b)    Option Acceleration. Each Option outstanding at the
time of such Involuntary Termination, to the extent not otherwise vested and
exercisable for all the shares subject to that Option, will immediately vest and
become exercisable for all those option shares and may be exercised for any or
all of those shares as fully vested shares.

                     (c)    Extension of Exercise Period. For each outstanding
Option (i) which is granted the Executive on or after September 13, 2002, or
(ii) which is outstanding on that date and is not otherwise listed as an
excluded Option on attached Schedule I, the Executive shall have until the
earlier of (i) the expiration of the twelve (12)-month period measured from the
date of his Involuntary Termination, or (ii) the expiration date of the option
term in which to exercise that Option. To the extent the exercise period of any
existing Option which is an incentive stock option under the federal income tax
laws is so extended, that Option shall be deemed to be regranted on the date of
this Agreement and may accordingly fail to retain such incentive stock option
status by reason of the One Hundred Thousand Dollar ($100,000) limit on the
initial exercisability of incentive stock options per calendar year or because
the exercise price of that Option is below the Fair Market Value of the Common
Stock on September 13, 2002. Accordingly, if the Option does lose such incentive
stock option status, the Executive shall recognize immediate taxable income upon
the subsequent exercise of that Option in an amount equal to the Fair Market
Value of the purchased shares less the exercise price paid for those shares, and
the Executive will have to satisfy all applicable income and employment
withholding taxes at the time of such exercise. To the extent any such Option
does retain its incentive stock option status, the Executive shall not be
entitled to long-term capital gain treatment upon the subsequent sale of any
shares purchased under that Option unless such sale occurs more than two (2)
years after the deemed September 13, 2002, regrant date of that Option and more
than one (1) year after the date such Option is exercised for those shares.

                                       10

<PAGE>

                         PART FIVE - SPECIAL TAX PAYMENT

               17.   Special Tax Gross-Up. In the event that one or more of the
Acquisition-Accelerated Options, the Special Change in Control Payment or any of
the Change in Control Severance Payments to which the Executive becomes entitled
under Part Four of this Agreement or any Other Parachute Payments are deemed, in
the opinion of the Independent Auditors or by the Internal Revenue Service, to
constitute an excess parachute payment under Code Section 280(G), then the
Executive shall be entitled to receive from the Corporation an additional
payment (the "Gross-Up Payment") in a dollar amount determined pursuant to the
following formula, provided and only if the general release required of the
Executive pursuant to Paragraph 14(a) or Paragraph 15 (as applicable) has become
effective:

                     X  =  Y  /  [1 - (A + B + C)], where

                     X is the total dollar payment  of the Gross-up Payment.

                     Y is the total excise tax, together with all applicable
                     interest and penalties (collectively, the "Excise Tax"),
                     imposed on the Executive pursuant to Code Section 4999 (or
                     any successor provision) with respect to the excess
                     parachute payment attributable to (i) one or more of the
                     Change in Control Severance Payments provided the Executive
                     under Part Four of this Agreement, (ii) his
                     Acquisition-Acceleration Options, (iii) his Special Change
                     in Control Payment and (iv) any Other Parachute Payments.

                     A is the Excise Tax rate in effect under Code Section 4999
                     for such excess parachute payment,

                     B is the highest combined marginal federal income and
                     applicable state income tax rate in effect for the
                     Executive for the calendar year in which the Gross-Up
                     Payment is made, determined after taking into account the
                     deductibility of state income taxes against federal income
                     taxes to the extent actually allowable for that calendar
                     year, and

                     C is the applicable Hospital Insurance (Medicare) Tax Rate
                     in effect for the Executive for the calendar year in which
                     the Gross-Up Payment is made.

               18.   Determination Procedures. All determinations required to be
made under this Part Five shall be made by the Independent Auditors in
accordance with the following procedures:

                     (a)    Within ten (10) business days after each receipt of
written notice from the Corporation or the Executive that the Special Change in
Control Payment or any Change in Control Severance Payment or Other Parachute
Payment has or is to be made or that one or more Options have or will become
Acquisition-Accelerated Options, then the Independent Auditors shall provide
both the Executive and the Corporation with a written determination of the
Parachute Payment attributable to that Special Change in Control Payment, Change
in Control Severance Payment or Other Parachute Payment or the Option Parachute
Payment attributable to those Acquisition-Accelerated Options, together with
detailed supporting calculations with respect to the Gross-Up Payment to which
the Executive is entitled by reason of those various Parachute Payments. The
Corporation shall pay the resulting Gross-Up Payment to the Executive within
three (3) business days after receipt of such determination or (if later)
contemporaneously with the Special Change in Control Payment, Change in Control
Severance Payment, Other Parachute Payment or Acquisition-Accelerated Options
triggering such Gross-Up Payment.

                                       11

<PAGE>

                     (b)    In the event temporary, proposed or final Treasury
Regulations in effect at the time under Code Section 280G (or applicable
judicial decisions) specifically address the status of the Special Change in
Control Payment, any Change in Control Severance Payment,
Acquisition-Accelerated Option or Other Parachute Payment or the method of
valuation therefor, the characterization afforded to such payment by the
Regulations (or such decisions) shall, together with the applicable valuation
methodology, be controlling. All other determinations by the Independent
Auditors shall be made on the basis of "substantial authority" (within the
meaning of Section 6662 of the Code).

                     (c)    The Corporation and the Executive shall each provide
the Independent Auditors with access to and copies of any books, records and
documents in their possession which may be reasonably requested by the
Independent Auditors and shall otherwise cooperate with the Independent Auditors
in connection with the preparation and issuance of the determinations
contemplated by this Part Five.

                     (d)    All fees and expenses of the Independent Auditors
and the appraisers shall be borne solely by the Corporation, and to the extent
those fees or expenses are treated as a Parachute Payment, they shall be taken
into account in the calculation of the Gross-Up Payment to which the Executive
is entitled under this Part Five.

               19.   Additional Claims. The Executive shall provide written
notification to the Corporation of any claim made by the Internal Revenue
Service which would, if successful, require the payment by the Corporation of an
additional Gross-Up Payment. Such notification shall be given as soon as
practicable after the Executive is informed in writing of such claim and shall
apprise the Corporation of the nature of such claim and the date on which such
claim is requested to be paid. The Executive shall not pay such claim prior to
the expiration of the thirty (30)-day period following the date on which such
notice is given to the Corporation (or such shorter period ending on the date
that any payment of taxes, interest and/or penalties with respect to such claim
is due). Prior to the expiration of such thirty (30)-day or shorter period, the
Corporation shall ether (i) make the additional Gross-Up Payment to the
Executive attributable to the Internal Revenue Service claim, or (ii) provide
written notice to the Executive that the Corporation shall contest the claim on
the Executive's behalf. In the event, the Corporation provides the Executive
with such written notice, the Executive shall:

               (A)   provide the Corporation with any information reasonably
requested by the Corporation relating to such claim;

               (B)   take such action in connection with contesting such claim
as the Corporation may reasonably request in writing from time to time,
including (without limitation) accepting legal representation with respect to
such claim by an attorney reasonably selected by the Corporation and reasonably
satisfactory to the Executive, with the fees and expenses of such attorney to be
the sole responsibility of the Corporation without any tax implications to the
Executive in accordance with the same tax indemnity/gross-up arrangement as in
effect under subparagraph (D) below;

               (C)   cooperate with the Corporation in good faith in order to
effectively contest such claim; and

               (D)   permit the Corporation to participate in any proceedings
relating to such claim; provided, however, that the Corporation shall bear and
pay directly all additional Excise Taxes imposed upon the Executive and all
costs, legal fees and other expenses (including additional interest and
penalties) incurred in connection with such contest and shall indemnify the
Executive for and hold him harmless from, on an after-tax basis, any additional
Excise Tax (including interest and penalties) imposed upon the Executive and any
Excise Tax or income or employment tax (including interest and penalties)
attributable to the Corporation's payment of that additional Excise Tax on the
Executive's behalf or imposed as a result of such representation and payment of
all related costs, legal fees and expenses. The amounts owed to the Executive by
reason of the foregoing shall be paid to him or on his behalf as they become due
and payable. Without limiting the foregoing provisions of this subparagraph (D),
the Corporation shall control all proceedings taken in connection with such
contest and, at its sole

                                       12

<PAGE>

option, may pursue or forgo any and all administrative appeals, proceedings,
hearings and conferences with the taxing authority in respect of such claim and
may, at the Corporation's sole option, either direct the Executive to pay the
tax claimed and sue for a refund or contest the claim in any permissible manner,
and the Executive shall prosecute such contest to a determination before any
administrative tribunal, in a court of initial jurisdiction and in one or more
appellate courts, as the Corporation shall determine; provided, however, that
should the Corporation direct the Executive to pay such claim and sue for a
refund, the Corporation shall advance the amount of such payment to the
Executive, on an interest-free basis, and shall indemnify the Executive for and
hold him harmless from, on an after-tax basis, any Excise Tax or income or
employment tax (including interest or penalties) imposed with respect to such
advance or with respect to any imputed income with respect to such advance or
any income resulting from the Corporation's forgiveness of such advance;
provided, further, that the Corporation's control of the contest shall be
limited to issues with respect to which a Gross-Up Payment would be payable
hereunder, and the Executive shall be entitled to settle or contest, as the case
may be, any other issue raised by the Internal Revenue Service or any other
taxing authority.

                        PART SIX -- RESTRICTIVE COVENANTS

               20.   Non-Solicitation. For a period of two (2) years following
the Executive's termination of employment with the Corporation, whether or not
in connection with a Change in Control, the Executive shall not encourage or
solicit any of the Corporation's employees to leave the Corporation's employ for
any reason or interfere in any other manner with employment relationships at the
time existing between the Corporation and its employees.

                     PART SEVEN -- MISCELLANEOUS PROVISIONS

               21.   Continued Indemnification. The indemnification provisions
for Officers and Directors under the Corporation's bylaws and Directors and
Officers Liability Insurance shall (to the maximum extent permitted by law) be
extended to the Executive during the period following his resignation or
termination of employment for any reason (other than a Termination for Cause),
whether or not in connection with a Change in Control, with respect to all
matters, events or transactions occurring or effected during the Executive's
period of employment with the Corporation.

               22.   Cessation of Benefits. In the event of a material breach by
the Executive of any of his obligations under Paragraph 9, 10 or 20 of this
Agreement or his Proprietary Information and Inventions Agreement with the
Corporation, he shall cease to be entitled to any further benefits under Part
Three or Part Four of this Agreement, including (without limitation) any
subsequent right to exercise any outstanding Options or to receive any further
salary/target bonus payments or continued health care coverage at the
Corporation's expense. In no event shall the Executive be entitled to any
benefits under Part Three or Part Four of this Agreement if his employment
ceases by reason of a Termination for Cause or if he voluntarily resigns other
than for a reason which qualifies as grounds for an Involuntary Termination. In
addition, no Special Change in Control Payment shall be made to Executive in the
event his employment with the Corporation should cease for any reason prior to
the Change in Control which would otherwise trigger that payment.

               23.   No Mitigation Duty. The Corporation shall not be entitled
to set off any of the following amounts against the payments or benefits to
which the Executive may become entitled under Part Three or Part Four of this
Agreement: (i) any amounts which the Executive may subsequently earn through
other employment or service following his termination of employment with the
Corporation, or (ii) any amounts which the Executive might have potentially
earned in other employment or service had he sought such other employment or
service.

               24.   Death. Should the Executive die before he receives the full
amount of payments and benefits to which he may become entitled under Part Three
or Part Four of this Agreement, then the balance of such payments shall be made,
on the due dates hereunder had the Executive survived, to the executors or
administrators of his estate.

                                       13

<PAGE>

               25.   Successors and Assigns. The provisions of this Agreement
shall inure to the benefit of, and shall be binding upon, (i) the Corporation
and its successors and assigns, including any successor entity by merger,
consolidation or transfer of all or substantially all of the Corporation's
assets (whether or not such transaction constitutes a Change in Control), and
(ii) the Executive, the personal representative of his estate and his heirs and
legatees.

               26.   General Creditor Status. The benefits to which the
Executive may become entitled under Part Three or Part Four of this Agreement
shall be paid, when due, from the Corporation's general assets, and no trust
fund, escrow arrangement or other segregated account shall be established as a
funding vehicle for such payments. Accordingly, the Executive's right (or the
right of the executors or administrators of the Executive's estate) to receive
such benefits shall at all times be that of a general creditor of the
Corporation and shall have no priority over the claims of other general
creditors.

               27.   Notices.

               A.    Any and all notices, demands or other communications
required or desired to be given hereunder by any party shall be in writing and
shall be validly given or made to another party if delivered either personally
or if deposited in the United States mail, certified or registered, postage
prepaid, return receipt requested. If such notice, demand or other communication
shall be delivered personally, then such notice shall be conclusively deemed
give at the time of such personal delivery.

               If such notice, demand or other communication is given by mail,
such notice shall be conclusively deemed given forty-eight (48) hours after
deposit in the United States mail addressed to the party to whom such notice,
demand or other communication is to be given as hereinafter set forth:

               To the Corporation:          Legato Systems, Inc.
                                            2350 West El Camino Real
                                            Mountain View, CA 94040
                                            Attention: General Counsel

               To Executive:                David B. Wright
                                            2350 West El Camino Real
                                            Mountain View, CA 94040

               B.    Any party hereto may change its address for the purpose of
receiving notices, demands and other communications as herein provided by a
written notice given in the manner aforesaid to the other party hereto.

               28.   Governing Documents. This Agreement, together with (i) the
stock option agreements evidencing the Executive's currently outstanding Options
and any future Option grants, (ii) his existing Proprietary Information and
Inventions Agreement, and (iii) any outstanding promissory notes of the
Executive payable to or to the order of the Corporation, shall constitute the
entire agreement and understanding of the Corporation and the Executive with
respect to the terms and conditions of the Executive's employment with the
Corporation and the payment of severance benefits and shall supersede all prior
and contemporaneous written or verbal agreements and understandings between the
Executive and the Corporation relating to such subject matter. This Agreement
may only be amended by written instrument signed by the Executive and an
authorized officer of the Corporation. Any and all prior agreements,
understandings or representations relating to the Executive's employment with
the Corporation, other than (i) the stock option agreements evidencing the
Executive's currently outstanding Options, (ii) his existing Proprietary
Information and Inventions Agreement and (iii) his outstanding promissory notes
payable to or to the order of the Corporation, are hereby terminated and
cancelled in their entirety and are of no further force or effect.

               29.   Governing Law. The provisions of Agreement shall be
construed and interpreted under the laws of the State of California applicable
to agreements executed and wholly performed within the State of California. If
any provision of this Agreement as applied to any party or to any circumstance
should be adjudged by

                                       14

<PAGE>

a court of competent jurisdiction to be void or unenforceable for any reason,
the invalidity of that provision shall in no way affect (to the maximum extent
permissible by law) the application of such provision under circumstances
different from those adjudicated by the court, the application of any other
provision of this Agreement, or the enforceability or invalidity of this
Agreement as a whole. Should any provision of this Agreement become or be deemed
invalid, illegal or unenforceable in any jurisdiction by reason of the scope,
extent or duration of its coverage, then such provision shall be deemed amended
to the extent necessary to conform to applicable law so as to be valid and
enforceable or, if such provision cannot be so amended without materially
altering the intention of the parties, then such provision will be stricken, and
the remainder of this Agreement shall continue in full force and effect.

               30.   Injunctive Relief. The Executive expressly agrees that the
covenants set forth in Paragraphs 9, 10 and 20 of this Agreement are reasonable
and necessary to protect the Corporation and its legitimate business interests,
and to prevent the unauthorized dissemination of Proprietary Information to
competitors of the Corporation. The Executive also agrees that the Corporation
will be irreparably harmed and that damages alone cannot adequately compensate
the Corporation if there is a violation of Paragraphs 9, 10 or 20 of this
Agreement by the Executive, and that injunctive relief against the Executive is
essential for the protection of the Corporation. Therefore, in the event of any
such breach, it is agreed that, in addition to any other remedies available, the
Corporation shall be entitled as a matter of right to injunctive relief in any
court of competent jurisdiction, plus attorneys' fees actually incurred for the
securing of such relief. Furthermore, the Executive agrees that the Corporation
shall not be required to post a bond or other collateral security with the court
if the Corporation seeks injunctive relief.

               31.   Arbitration. Each party agrees that any and all disputes
which arise out of or relate to the Executive's employment, the termination of
the Executive's employment, or the terms of this Agreement shall be resolved
through final and binding arbitration. Such arbitration shall be in lieu of any
trial before a judge and/or jury, and the Executive and Corporation expressly
waive all rights to have such disputes resolved via trial before a judge and/or
jury. Such disputes shall include, without limitation, claims for breach of
contract or of the covenant of good faith and fair dealing, claims of
discrimination, claims under any federal, state or local law or regulation now
in existence or hereinafter enacted and as amended from time to time concerning
in any way the subject of the Executive's employment with the Corporation or its
termination. The only claims not covered by this Agreement to arbitrate disputes
are: (i) claims for benefits under the unemployment insurance benefits; (ii)
claims for workers' compensation benefits under any of the Corporation's
workers' compensation insurance policy or fund; (iii) claims arising from or
relating to the non-competition provisions of this Agreement; and (iv) claims
concerning the validity, infringement, ownership, or enforceability of any trade
secret, patent right, copyright, trademark or any other intellectual property
right, and any claim pursuant to or under any existing
confidential/proprietary/trade secrets information and inventions agreement(s)
such as, but not limited to, the Proprietary Information and Inventions
Agreement. With respect to such disputes, they shall not be subject to
arbitration; rather, they will be resolved pursuant to applicable law.

               Arbitration shall be conducted in accordance with the National
Rules for the Resolution of Employment Disputes of the American Arbitration
Association ("AAA Rules"), provided, however, that the arbitrator shall allow
the discovery authorized by California Code of Civil Procedure section 1282, et
seq., or any other discovery required by applicable law in arbitration
proceedings, including, but not limited to, discovery available under the
applicable state and/or federal arbitration statutes. Also, to the extent that
any of the AAA Rules or anything in this arbitration section conflicts with any
arbitration procedures required by applicable law, the arbitration procedures
required by applicable law shall govern.

               Arbitration will be conducted in Santa Clara County, California
or, if the Executive does not reside within 100 miles of Santa Clara County at
the time the dispute arises, then the arbitration may take place in the largest
metropolitan area within 50 miles of the Executive's place of residence when the
dispute arises.

               During the course of the arbitration, the Executive and the
Corporation will each bear equally the arbitrator's fee and any other type of
expense or cost of arbitration, unless applicable law requires otherwise, and
each shall bear their own respective attorneys' fees incurred in connection with
the arbitration. The arbitrator will not have authority to award attorneys' fees
unless a statute or contract at issue in the dispute authorizes the award of
attorneys' fees to the prevailing party. In such case, the arbitrator shall have
the authority to make an award of

                                       15

<PAGE>

attorneys' fees as required or permitted by the applicable statute or contract.
If there is a dispute as to whether the Executive or the Corporation is the
prevailing party in the arbitration, the arbitrator will decide this issue.

               The arbitrator shall issue a written award that sets forth the
essential findings of fact and conclusions of law on which the award is based.
The arbitrator shall have the authority to award any relief authorized by law in
connection with the asserted claims or disputes. The arbitrator's award shall be
subject to correction, confirmation, or vacation, as provided by applicable law
setting forth the standard of judicial review of arbitration awards. Judgment
upon the arbitrator's award may be entered in any court having jurisdiction
thereof.

               32.   Counterparts. This Agreement may be executed in more than
one counterpart, each of which shall be deemed an original, but all of which
together shall constitute but one and the same instrument.

               IN WITNESS WHEREOF, the parties have executed this Employment
Agreement as of the day and year written above.

                                      LEGATO SYSTEMS,  INC.

                                      By:  /s/ George I. Purnell
                                         -------------------------------

                                      Title: Vice President, Human Resources &
                                             Chief Learning Officer

                                        /s/ David B. Wright
                                      -----------------------------------
                                      DAVID B. WRIGHT

                                       16

<PAGE>

                                                                      SCHEDULE I

                            LIST OF EXCLUDED OPTIONS

                    The following Options currently held by the Executive shall
not be modified pursuant to Paragraph 13(d) or Paragraph 16(e) of the Agreement
to provide the extended twelve (12)-month exercise period following the date of
his Involuntary Termination. Accordingly, for each of the Options listed below,
the Executive shall continue to have only until the earlier of (i) the
expiration of the option term or (ii) the end of the period specified in the
applicable stock option agreement for which that Option is to remain exercisable
following the date of his termination of employment with the Corporation,
including an Involuntary Termination, in which to exercise such Option.

          Grant Date          Number of Option Shares         Exercise Price
          ----------          -----------------------         --------------

                                       17

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00045-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00045-of-00352.parquet"}]]