THE CORPORATE LIBRARY

Related Party Transactions and Outside Related Director Information

Verity, Inc. (Retired) (VRTY.X)

8/26/2004 Proxy Information

On July 31, 1997, Verity appointed Mr. Sbona as President and Chief Executive Officer, and entered into an agreement with Regent Pacific Management Corporation, a management services firm of which Mr. Sbona is the Chairman and Chief Executive Officer. Verity reached the terms of the agreement in arms-length negotiations with Regent Pacific. As a result of a series of amendments, the latest of which occurred on January 9, 2004, the agreement has been extended through February 28, 2005. Pursuant to the amended agreement, Regent Pacific provides Verity management services at a fee of $12,500 per week, a 75% reduction in weekly fees payable by Verity prior to this amendment. The amended agreement also provides us with an option to extend the term of the agreement for an additional 26 weeks. As a result of the amendment, the services to be rendered by Regent Pacific to Verity has also been reduced. In addition, pursuant to the amendment, Gary J. Sbona will continue to serve as the our Executive Chairman of the Board, but Stephen W. Young ceased to serve as our Company’s Chief Operating Officer effective as of March 1, 2004.

Verity has entered into indemnity agreements with certain officers and directors which provide, among other things, that Verity will indemnify such officer or director, under the circumstances and to the extent provided for in those agreements, for expenses, damages, judgments, fines and settlements he may be required to pay in actions or proceedings which he is or may be made a party by reason of his position as one of Verity’s directors, officers or other agents, and otherwise to the fullest extent permitted under Delaware law and Verity’s bylaws.

Verity has loans outstanding in the aggregate principal amount of NLG 592,544.40 (approximately $327,709) to Hugo Sluimer, Verity’s Senior Vice President, EMEA and APAC Operations. The loans were entered into on December 24, 1999 (NLG 14,989.80), December 24, 1999 (NLG 359,748.60), April 19, 2000 (NLG 209,931.00) and July 14, 2000 (NLG 7,875.00). The loans have an annual interest rate of 0%. Since the beginning of fiscal year 2004, the largest amount of indebtedness outstanding pursuant to the loans was NLG 592,544.40 (approximately $327,709), all of which was outstanding as of May 31, 2004.

Verity has entered into employment agreements with Anthony J. Bettencourt, its Director, President and Chief Executive Officer and Steven R. Springsteel, its Senior Vice President of Finance and Administration and Chief Financial Officer.

9/10/2003 Proxy Information

On July 31, 1997, we appointed Mr. Sbona as our President and Chief Executive Officer, and we entered into an agreement with Regent Pacific Management Corporation, a management services firm. Mr. Sbona is the Chairman and Chief Executive Officer, and Mr. Young, our Chief Operating Officer, is a Director and Chief Operating Officer, of Regent Pacific. We reached the terms of the agreement in arms-length negotiations with Regent Pacific. As a result of a series of amendments, the latest of which occurred on March 4, 2003, the agreement has been extended through February 28, 2004. Pursuant to the amended agreement, Regent Pacific provides us management services at a fee of $50,000 per week. Mr. Sbona served as our Chief Executive Officer from July 1997 until March 2003 when we promoted Mr. Bettencourt to that position, and has been a member of our board since 1998. Mr. Sbona was our President from July 1997 until September 1999 when we promoted Mr. Bettencourt to that position. We may cancel the amended agreement without payment to Regent Pacific only after February 28, 2004. The amended agreement also provides us with an option to extend the term of the agreement through August 31, 2004. In addition, the amended agreement requires that we indemnify Regent Pacific and Mr. Sbona for certain liabilities arising out of the performance of services under the amended agreement.

In connection with Mr. Sbona’s service as our Chief Executive Officer, on July 18, 2002 our board granted Mr. Sbona an option to purchase 1,000,000 shares of our common stock at an exercise price of $9.75 per share. Any unvested shares subject to such options will vest entirely upon certain change of control transactions or upon a termination of Mr. Sbona without cause. The options will also remain exercisable for one year following the termination of Mr. Sbona’s services.

We have entered into indemnity agreements with certain officers and directors which provide, among other things, that we will indemnify such officer or director, under the circumstances and to the extent provided for in those agreements, for expenses, damages, judgments, fines and settlements he may be required to pay in actions or proceedings which he is or may be made a party by reason of his position as one of our directors, officers or other agents, and otherwise to the fullest extent permitted under Delaware law and our bylaws.

We have loans outstanding in the aggregate principal amount of NLG 592,544.40 (approximately $268,885) to Hugo Sluimer, our Senior Vice President, International Sales and European Operations. The loans were entered into on December 24, 1999 (NLG 14,989.80), December 24, 1999 (NLG 359,748.60), April 19, 2000 (NLG 209,931.00) and September 11, 2000 (NLG 7,875). The loans have an annual interest rate of 0%. Since the beginning of fiscal year 2003, the largest amount of indebtedness outstanding pursuant to the loans was NLG 592,544.40 (approximately $268,885), all of which was outstanding as of July 31, 2003.