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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO
SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): May 7, 1998
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ODS NETWORKS, INC.
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(Exact Name of Registrant as Specified in Its Charter)
Delaware
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(State of Other Jurisdiction of Incorporation)
0-20191 75-1911917
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(Commission File Number) (IRS Employer Identification No.)
1101 East Arapaho Road, Richardson, Texas 75081
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(Address of Principal Executive offices) (Zip Code)
(214) 234-6400
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(Registrant's Telephone Number, Including Area Code)
N/A
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(Former Name or Former Address, if Changed Since Last Report)
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On May 7, 1998, the Registrant acquired Essential Communication
Corporation, a Delaware corporation ("Essential"), by the merger (the
"Essential Merger") of ECC Acquisition Corp., a Delaware corporation and
wholly owned subsidiary of the Registrant ("ECC"), with and into Essential.
The Essential Merger was effected pursuant to an Agreement and Plan of
Merger, dated April 30, 1998 (the "Merger Agreement"), by and among the
Registrant, ECC and Essential. As a result of the Essential Merger, the
Registrant became the owner of all of the issued and outstanding capital
stock of Essential and (a) each outstanding share of the Series A Preferred
Stock of Essential was converted into the right to receive $3.75 in cash, (b)
each outstanding share of the Series B Preferred Stock of Essential was
converted into the right to receive $5.00 in cash, and (c) each outstanding
share of Essential Common Stock was converted into the right to receive
approximately $0.75537 in cash and approximately 0.28577 of a share of the
Registrant's Common Stock. The shares of the Registrant's Common Stock
exchanged for shares of Essential Common Stock in the Merger are subject to
the placement of an aggregate of approximately 101,790 shares of the
Registrant's Common Stock, or approximately .0952 of a share of the
Registrant's Common Stock for each share of Common Stock of Essential, into
escrow for a period of twelve months to secure indemnification obligations
pursuant to the Merger Agreement. The terms of the Essential Merger were the
result of arm's-length negotiations among the Registrant and Essential.
A total of approximately $5,807,550 in cash is payable, and
approximately 409,000 shares of the Registrant's Common Stock are issuable,
to former Essential stockholders and optionholders in exchange for the
acquisition by the Registrant of all outstanding Essential capital stock and
all unexpired and unexercised options to acquire Essential capital stock.
Essential stock options to purchase Essential Common Stock were assumed by
the Registrant and remain outstanding as options to purchase shares of the
Registrant's Common Stock. All cash consideration from Registrant in this
transaction was paid out of Registrant's existing working capital. All
shares of Common Stock issued in this transaction were issued (and will be
issued) out of Registrant's authorized but unissued Common Stock.
Essential provides end-to-end gigabit networking solutions used in
workgroups, backbones, cluster computing, storage management and visual
computing, including High Performance Parallel Interface (HIPPI) switches and
network interface cards. The Registrant intends to continue such business.
The shares issued to the stockholders of Essential were issued pursuant
to the exemption from the registration requirements of the Securities Act of
1933 provided by Section 4(2) thereof.
Immediately prior to the Essential Merger, all of the issued and
outstanding shares of capital stock of Essential were owned by the
stockholders of Essential. The Registrant is not aware of any pre-existing
material relationships between such stockholders and the Registrant, its
affiliates, its directors or officers, or any associate of any such director
or officer.
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ITEM 7 FINANCIAL STATEMENTS AND EXHIBITS.
(a) FINANCIAL STATEMENTS OF BUSINESSES ACQUIRED:
As of this filing, it is impracticable for the Registrant to
provide the financial statements of Essential for the fiscal year
ending March 31, 1998. In accordance with the requirements of
Item 7(a) of Form 8-K, the requisite financial statements, if
any, will be filed within 60 days after the date that this
initial report on Form 8-K must be filed, as a part of a
subsequent filing on Form 8-K.
(b) PRO FORMA FINANCIAL INFORMATION.
As of this filing, it is impracticable for the Registrant to
provide the pro forma financial information required by Item 7(b)
of Form 8-K. In accordance with the requirements of Item 7(b) of
Form 8-K, the requisite pro forma financial information, if any,
will be filed within 60 days after the date that this initial
report on Form 8-K must be filed, as a part of a subsequent
filing on Form 8-K.
(c) EXHIBITS.
2.1 Agreement and Plan of Merger, dated April 30, 1998, by and
among the Registrant, ECC Acquisition Corp. and Essential
Communication Corporation (incorporated herein by reference
to the Registrant's Quarterly Report on Form 10-Q for the
quarter ended March 31, 1998).
99.1 Text of press release of the Registrant, dated April 30,
1998 (announcing the Essential Merger).
99.2 Text of press release of the Registrant, dated May 7, 1998
(announcing the closing of the Essential Merger).
2
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
ODS NETWORKS, INC.
By: /s/ TIMOTHY W. KINNEAR
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Timothy W. Kinnear, Vice President
and Chief Financial Officer
Dated: May 21, 1998
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EXHIBIT INDEX
Exhibit No. Description of Exhibit
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2.1 Agreement and Plan of Merger, dated April 30, 1998, by and among
the Registrant, ECC Acquisition Corp. and Essential Communication
Corporation (incorporated herein by reference to the Registrant's
Quarterly Report on Form 10-Q for the quarter ended March 31,
1998).
99.1 Text of press release of the Registrant, dated April 30, 1998
(announcing the Essential Merger).
99.2 Text of press release of the Registrant, dated May 7, 1998
(announcing the closing of the Essential Merger).
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EXHIBIT 99.1
FOR IMMEDIATE RELEASE
ODS NETWORKS TO ACQUIRE ESSENTIAL COMMUNICATIONS
-- Products From Leader in HIPPI Technology
Enhance Offerings for High-Speed Enterprise Networks --
RICHARDSON, Texas, April 30, 1998 - ODS Networks, Inc. (NASDAQ: ODSI) today
announced it has signed a definitive agreement to acquire Essential
Communications Corporation (Essential), a privately held company based in
Albuquerque, New Mexico. Essential is a market leader in High Performance
Parallel Interface (HIPPI) switches and network interface cards and Gigabit
Ethernet network interface cards. The combined ODS Networks-TM- (ODS) and
Essential product lines will allow companies with high-performance scientific
and technical computing, image processing, data warehousing, data mining,
transaction processing, and video and film archiving applications to
interconnect their HIPPI networks to more common desk-top interfaces,
including Gigabit Ethernet, for real-time network solutions. By the end of
1998, ODS and Essential also plan to offer a next generation Gigabyte System
Network (GSN), also known as HIPPI-6400, switch that can move media at more
than six times the speed of current Fibre Channel or Gigabit Ethernet
solutions.
"Essential Communications is a leader in the next generation 6.4 gigabits per
second GSN technology," said G. Ward Paxton, chairman, CEO and president of
ODS. "By combining ODS' LANBlazer-TM- Gigabit Ethernet switch and Essential's
6.4 gigabits per second GSN technology, we will be able to offer unique,
high-speed, standards-based solutions to customers in the government,
entertainment, petroleum and other industries that require the timely
movement of large amounts of information."
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"The combination of ODS and Essential will offer many benefits to Essential's
customers," said Michael McGowen, CEO of Essential. "Now they can connect
numerous environments at very high speeds through HIPPI and move that data
across to their existing desktops in real-time."
FINANCIAL DETAILS
The acquisition will be accounted for as a purchase with ODS exchanging a
combination of $5.8 million of cash and approximately 305,500 shares of ODS
common stock (worth approximately $2.6 million based upon ODS' April 29, 1998
closing price of $8.375) for all outstanding shares of Essential. In
addition, ODS will assume the Essential stock option plan, and ODS will
reserve approximately 100,500 shares of ODS stock to be issued upon the
exercise of such options.
In connection with the acquisition, ODS expects to recognize a one-time
charge against after-tax earnings of between $4.5 million and $5.5 million,
or $0.27 to $0.33 per share, for in-process technology in the second fiscal
quarter of 1998. The acquisition has been approved by the Board of Directors
of each company and is expected to be completed in May of 1998 subject to
various customary closing conditions including Essential stockholder approval.
When the transaction is complete, Michael McGowen, CEO of Essential, will
report to G. Ward Paxton, ODS chairman, CEO and president. Essential's sales
organization will be integrated with ODS' sales force immediately. The other
Essential employees will continue to operate under McGowen's leadership in
Albuquerque, New Mexico.
STRATEGIC INDUSTRY RELATIONSHIPS
Essential's current product line includes HIPPI switches delivering 800
million bits per second per port bi-directionally and HIPPI network interface
cards and drivers for most UNIX workstation vendors including Silicon
Graphics Inc. (SGI), Sun Microsystems Inc. (Sun), Hewlett-Packard Co. (HP),
Digital Equipment Corporation (DEC) and International Business Machines Corp.
(IBM). Essential also offers Gigabit Ethernet network interface cards for
Windows NT environments and Gigabit Ethernet network interface cards for
SGI's Octane and
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Origin products. Essential's Gigabit Ethernet drivers are expected to be
available for Sun's Solaris systems by mid-1998 and IBM's AIX systems by the
end of 1998.
Essential is currently collaborating with Raytheon E-Systems and SGI to
develop a GSN switch designed to support up to 32 non-blocking ports at 6.4
gigabits per second per port, providing an aggregate bandwidth of over 400
gigabits per second. With significantly more capacity than Gigabit Ethernet
or Fibre Channel, GSN technology will enable a cluster of commodity
computers, servers and storage devices, located throughout a building or
across a campus, to operate as the equivalent of a massively parallel
supercomputer. Essential's first GSN switches are slated to ship by the end
of 1998. SGI workstations and servers will be among the first in the
industry to support GSN in 1998. GSN network interface cards for Sun, HP,
DEC and IBM are also anticipated to pave the way for commodity supercomputing
and numerous high-throughput applications.
ACCESS TO HIPPI AND GSN SOLUTIONS
By tightly coupling ODS' LANBlazer Gigabit Ethernet switch with Essential's
HIPPI and GSN (HIPPI-6400) switches, ODS will be able to offer a real-time
solution that is unique in the industry. "We envision a significant
opportunity in the market for offering a SuperLAN architecture that utilizes
GSN and HIPPI-800 switches for supercomputer clusters and 400 gigabit per
second backbones connected to numerous LANBlazer switches. With HIPPI-800,
ATM OC3 and OC12 uplinks, along with high Gigabit and Fast Ethernet port
density, the LANBlazer combined with the Essential switch will offer a unique
solution for desk-top to high-speed network connectivity," stated G. Ward
Paxton.
ODS' LANBlazer 7000 represents one of the highest capacity Gigabit Ethernet
switches in the industry. "The combination of ODS' LANBlazer Gigabit
Ethernet switches with Essential's Gigabit Ethernet network interface cards,
HIPPI switches and network interface cards, and GSN switches and network
interface cards will position ODS as a single-source solution for Gigabit and
Gigabyte networking solutions," concluded Paxton.
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ABOUT ESSENTIAL COMMUNICATIONS
Founded in 1992, Essential has focused on providing affordable, end-to-end
gigabit networking solutions used in workgroups, backbones, cluster
computing, storage management and visual computing. Its HIPPI and Gigabit
Ethernet networking product families include switches and network interface
cards. Essential's vertical markets cover film post production, petroleum,
design engineering, scientific research, medical imaging, data mining, data
warehousing and data backup.
ABOUT ODS NETWORKS
ODS develops, manufactures and markets a complete range of enterprise,
workgroup, remote access and security networking products for large and
mid-range organizations, including its award-winning InfiniteSwitch. ODS'
InfiniteSwitch and LANBlazer switch family features a highly flexible
architecture that combined supports Ethernet, Fast Ethernet, Gigabit
Ethernet, FDDI, ATM and Token Ring and remote access while providing up to 45
Gigabits of switch throughput capacity and industry-leading performance in
management, security and fault tolerance. The ODS SecureCom-TM- family
offers advanced secure LAN infrastructure solutions for on-line intrusion
detection, asset protection and auditing.
This release, other than historical financial information, includes
forward-looking statements with respect to completing the acquisition of
Essential Communications Corporation, developing HIPPI-6400 and other
products, and certain other matters. These statements are made under the
"safe harbor" provisions of the Private Securities Litigation Reform Act of
1995 and involve risks and uncertainties which could cause actual results to
differ materially from those in the forward-looking statements, including but
not limited to the following: approval of the Essential Communications
Corporation acquisition by its stockholders, delays in the development of
HIPPI-6400 or other products, the rate of adoption of new technology,
competitive product introductions, competitive pricing actions and marketing
programs, as well as risks concerning future technology and others identified
in the Company's Annual Report on Form 10-K, Quarterly Reports on Form 10-Q
and other Securities and Exchange Commission filings. These filings can be
obtained by contacting ODS Investor Relations.
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ODS and ODS Networks are registered trademarks of ODS Networks, Inc.
LANBlazer, InfiniteSwitch and SecureCom are trademarks of ODS Networks, Inc.
All other trademarks are the property of their respective companies.
CONTACT:
Charleigh Shayne Terri Griffin Cynthia Stine
Director of Investor Relations Director of Marketing PRTek, Inc.
ODS Networks, Inc. ODS Networks, Inc. 972-276-5724
972-664-8061 972-664-8040 [email protected]
[email protected] [email protected]
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EXHIBIT 99.2
FOR IMMEDIATE RELEASE
ODS NETWORKS COMPLETES ACQUISITION OF
ESSENTIAL COMMUNICATIONS
-- Acquisition of Leader in HIPPI Technology
Enhance Offerings for High-Speed Enterprise Networks --
RICHARDSON, Texas, May 7, 1998 - ODS Networks, Inc. (NASDAQ: ODSI) today
announced the completion of its acquisition of Essential Communications
Corporation (Essential), a privately held company based in Albuquerque, New
Mexico. Essential is a market leader in High Performance Parallel Interface
(HIPPI) switches and network interface cards and Gigabit Ethernet network
interface cards.
On April 30, 1998, ODS Networks-TM- (ODS) announced that it had signed a
definitive agreement to acquire all of the outstanding shares of Essential in
exchange for approximately $5.8 million of cash and approximately 305,500
shares of ODS common stock (worth approximately $2.7 million based upon ODS'
May 6, 1998 closing price of $9.00). As part of the acquisition, ODS assumed
the Essential stock option plan, and ODS has reserved approximately 103,500
shares of ODS stock to be issued upon the exercise of such options. As a
result of the acquisition, ODS expects to recognize a one-time charge against
after-tax earnings of between $4.5 million and $5.5 million, or $0.27 to
$0.33 per share, for in-process technology in the second fiscal quarter of
1998.
The combined ODS and Essential product lines will allow companies with
high-performance scientific and technical computing, image processing, data
warehousing, data mining, transaction processing, and video and film
archiving applications to interconnect their HIPPI networks to more common
desk-top interfaces, including Gigabit Ethernet, for real-time network
solutions. By the end of 1998, ODS and Essential also plan to offer a next
generation Gigabyte System
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Network (GSN), also known as HIPPI-6400, switch that can move media at more
than six times the speed of current Fibre Channel or Gigabit Ethernet
solutions and will provide an aggregate bandwidth of over 400 gigabits per
second.
ABOUT ODS NETWORKS
ODS develops, manufactures and markets a complete range of enterprise,
workgroup, remote access and security networking products for large and
mid-range organizations, including its award-winning InfiniteSwitch. ODS'
InfiniteSwitch and LANBlazer switch family features a highly flexible
architecture that combined supports Ethernet, Fast Ethernet, Gigabit
Ethernet, FDDI, ATM and Token Ring and remote access while providing up to 45
Gigabits of switch throughput capacity and industry-leading performance in
management, security and fault tolerance. The ODS SecureCom-TM- and
CryptoCom-TM- security product families provide a complete suite of
infrastructure and remote access-based solutions for both detecting network
security violations and preventing them.
This release, other than historical financial information, includes
forward-looking statements with respect to developing HIPPI-6400 and other
products and certain other matters. These statements are made under the
"safe harbor" provisions of the Private Securities Litigation Reform Act of
1995 and involve risks and uncertainties which could cause actual results to
differ materially from those in the forward-looking statements, including but
not limited to the following: delays in the development of HIPPI-6400 or
other products, the rate of adoption of new technology, competitive product
introductions, competitive pricing actions and marketing programs, as well as
risks concerning future technology and others identified in the Company's
Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and other
Securities and Exchange Commission filings. These filings can be obtained by
contacting ODS Investor Relations.
ODS and ODS Networks are registered trademarks of ODS Networks, Inc.
LANBlazer, InfiniteSwitch, SecureCom and CryptoCom are trademarks of ODS
Networks, Inc. All other trademarks are the property of their respective
companies.
CONTACT:
Charleigh Shayne Terri Griffin Cynthia Stine
Director of Investor Relations Director of Marketing PRTek, Inc.
ODS Networks, Inc. ODS Networks, Inc. 972-276-5724
972-664-8061 972-664-8040 [email protected]
[email protected] [email protected]
