As filed with the Securities and Exchange Commission on December __, 1998
Registration No. 333-64693
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------------
AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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LEGATO SYSTEMS, INC.
(Exact Name of Registrant as Specified in Its Charter)
Delaware 94-3077394
(State or Other Jurisdiction (I.R.S. Employer Identification
of Incorporation or Organization) Number)
3210 Porter Drive
Palo Alto, CA 94304
(650) 812-6000
(Address, Including Zip Code, and Telephone Number, Including Area Code,
of Registrant's Principal Executive Offices)
Stephen C. Wise
Chief Financial Officer
Legato Systems, Inc.
3210 Porter Drive
Palo Alto, CA 94304
(650) 812-6000
(Name, Address, Including Zip Code, and Telephone
Number, Including Area Code, of Agent for
Service) The Commission is requested to send copies of all
communications to:
Robert V. Gunderson, Jr., Esq.
Daniel E. O'Connor, Esq.
Gunderson Dettmer Stough
Villeneuve Franklin & Hachigian, LLP
155 Constitution Drive
Menlo Park, California 94025
(650) 321-2400
Approximate date of commencement of proposed sale to the public: As soon as
practicable after this Registration Statement becomes effective.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. |_|
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. |X|
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. |_|
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. |_|
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. |_|
The registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
<PAGE>
Subject to Completion, dated December __, 1998
249,999 Shares
LEGATO SYSTEMS, INC.
Common Stock
-----------------
This Prospectus relates to the public offering, which is not being
underwritten, of 249,999 shares (the "Shares") of Common Stock, $0.0001 par
value (the "Common Stock") of Legato Systems, Inc. (the "Company", "Legato" or
the "Registrant").
The Shares may be offered by certain stockholders of the Company (the
"Selling Stockholders") from time to time in transactions on the Nasdaq National
Market, in privately negotiated transactions, or by a combination of such
methods of sale, at fixed prices that may be changed, at market prices
prevailing at the time of sale, at prices related to such prevailing market
prices or at negotiated prices. The Selling Stockholders may effect such
transactions by selling the Shares to or through broker-dealers and such
broker-dealers may receive compensation in the form of discounts, concessions or
commissions from the Selling Stockholders or the purchasers of the Shares for
whom such broker-dealers may act as agent or to whom they sell as principal or
both (which compensation to a particular broker-dealer might be in excess of
customary commissions). See "Selling Stockholders" and "Plan of Distribution."
The Company will not receive any of the proceeds from the sale of the
Shares by the Selling Stockholders. The Company has agreed to bear certain
expenses in connection with the registration and sale of the Shares being
offered by the Selling Stockholders.
The Common Stock is traded on the Nasdaq National Market under the
symbol "LGTO." Application has been made to list the shares on the Nasdaq
National Market. On December __, 1998, the closing bid price of the Company's
Common Stock on the Nasdaq National Market was $____ per share.
------------------------------
The Selling Stockholders and any broker-dealers or agents that
participate with the Selling Stockholders in the distribution of the Shares may
be deemed to be "underwriters" within the meaning of Section 2(11) of the
Securities Act, and any commissions received by them and any profit on the
resale of the Shares purchased by them may be deemed to be underwriting
commissions or discounts under the Securities Act.
No underwriting commissions or discounts will be paid by the Company in
connection with this offering. Estimated expenses payable by the Company in
connection with this offering are estimated to be $9,614. The aggregate price of
the Common Stock sold less the aggregate agents' commissions and underwriters'
discounts, if any, and other expenses of issuance and distribution not borne by
the Company. See "Plan of Distribution."
------------------------------
THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" ON PAGE 8.
------------------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED THESE SECURITIES
OR PASSED UPON THE ADEQUACY OR ACCURACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
INFORMATION HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A REGISTRATION
STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES EXCHANGE AND COMMISSION. THESE SECURITIES MAY NOT BE SOLD
NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL
OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR
SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR
QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
------------------------------
The date of this Prospectus is December___, 1998
<PAGE>
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TABLE OF CONTENTS
Page
Available Information 4
Information Incorporated by Reference 4
Forward-Looking Statements 6
The Company 7
Recent Developments 7
Risk Factors 8
Use of Proceeds 14
Selling Stockholders 15
Plan of Distribution 16
Legal Matters 17
Experts 17
<PAGE>
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "1934 Act"), and, in accordance
therewith, files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information filed by the Company with the Commission can be
inspected and copied at the public reference facilities maintained by the
Commission at Judiciary Plaza, 450 Fifth Street, N.W., Room 1024, Washington,
D.C. 20549, and the following regional offices of the Commission: New York
Regional Office, Seven World Trade Center, 13th Floor, New York, New York 10048;
and Chicago Regional Office, Northwestern Atrium Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60621. Copies of such material may also be
obtained from the Public Reference Section of the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549, upon payment of prescribed fees. The
Commission also makes electronic filings publicly available on the Internet
within 24 hours of acceptance. The Commission's Internet address is
http://www.sec.gov. The Commission web site also contains reports, proxy and
information statements, and other information regarding registrants that file
electronically with the Commission. The Common Stock of the Company is quoted on
the Nasdaq National Market. Reports, proxy and information statements and other
information concerning the Company may be inspected at the National Association
of Securities Dealers, Inc. at 1735 K Street, N.W., Washington, D.C. 20006.
The Company has filed with the Commission a registration statement on
Form S-3 (herein, together with all amendments, exhibits and schedules, referred
to as the "Registration Statement") under the Securities Act of 1933, as amended
(the "Securities Act") with the Commission, with respect to the Shares offered
hereby. This Prospectus does not contain all of the information set forth in the
Registration Statement and the exhibits thereto, certain parts of which are
omitted in accordance with the rules and regulations of the Commission, and to
which reference is hereby made. Statements contained in this Prospectus
regarding the contents of any contract or other document to which reference is
made are not necessarily complete, and in each instance reference is made to the
copy of such contract or other document filed as an exhibit to the Registration
Statement, each such statement being qualified in its entirety by such
reference. The Registration Statement, including the exhibits and schedules
thereto, may be inspected at the public reference facilities maintained by the
Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington,
D.C. 20549. Copies of such material may be obtained from the Public Reference
Section of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549,
upon the payment of the fees prescribed by the Commission.
INFORMATION INCORPORATED BY REFERENCE
The following documents previously filed by the Company with the
Commission (File No. 0-26130) pursuant to the 1934 Act are hereby incorporated
by reference in this Prospectus and made a part hereof:
1. The Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1997, as amended by the Company's Amendment to the Annual Report on
Form 10-K/A for the fiscal year ended December 31, 1997, filed on November 11,
1998;
2. The Company's Quarterly Report on Form 10-Q for the three-month period
ended March 31, 1998, as amended by the Company's Amendment to the Quarterly
Report on Form 10-Q/A for the three-month period ended March 31, 1998, filed on
November 20, 1998;
3. The Company's Quarterly Report on Form 10-Q for the three-month period
ended June 30, 1998, as amended by the Company's Amendment to the Quarterly
Report on Form 10-Q/A for the three-month period ended June 30, 1998, filed on
November 20, 1998;
4. The Company's Quarterly Report on Form 10-Q for the three-month period
ended September 30, 1998, filed on November 12, 1998;
5. The Company's Current Report on Form 8-K, filed on November 2, 1998, as
amended by the Company's Amendment to the Current Report on Form 8-K/A, filed on
December 14, 1998;
6. The description of the Company's capital stock contained in the
Company's Registration Statement on Form 8-A, dated May 24, 1995, including any
amendment or report updating such description; and
7. The description of the Company's capital stock contained in the
Company's Registration Statement on Form 8-A, dated May 23, 1997, including any
amendment or report updating such description.
All documents filed by the Company pursuant to Sections 13(a), 13(c),
14 or 15(d) of the 1934 Act subsequent to the date of this Prospectus but prior
to the termination of the offering to which this Prospectus relates shall be
deemed to be incorporated by reference in this Prospectus and to be a part
hereof from the respective dates of filing of such documents. Any statement
contained in a document incorporated or deemed to be incorporated by reference
herein shall be deemed to be modified or superseded for purposes of this
Prospectus to the extent that a statement contained herein or in any other
subsequently filed document which also is incorporated herein modifies,
supersedes or replaces such statement. Any statement so modified or superseded
shall not be deemed, except as so modified, superseded or replaced, to
constitute a part of this Prospectus.
The information relating to the Company contained in this Prospectus
does not purport to be comprehensive and should be read together with the
information contained in the documents incorporated by reference herein.
Upon written or oral request, the Company will provide without charge
to each person, including any beneficial owner, to whom a copy of the Prospectus
is delivered a copy of the documents incorporated by reference herein but not
delivered with the prospectus (other than exhibits to such documents unless such
exhibits are specifically incorporated by reference herein). Requests should be
submitted in writing or by telephone at (650) 812-6000 to Chief Financial
Officer, Legato Systems, Inc., at the headquarters of the Company, 3210 Porter
Drive, Palo Alto, California 94304.
------------------------------
This Prospectus includes trademarks of the Company and
other corporations.
------------------------------
<PAGE>
FORWARD - LOOKING STATEMENTS
This Prospectus, including the documents incorporated by reference
herein, contains forward-looking statements that involve risks and
uncertainties. The statements contained in this Prospectus or incorporated by
reference herein that are not purely historical are forward-looking statements
within the meaning of Section 27A of the Securities Act and Section 21E of the
1934 Act, including without limitation statements regarding the Company's
expectations, beliefs, intentions or strategies regarding the future. All
forward-looking statements included in this document are based on information
available to the Company on the date hereof, and the Company assumes no
obligation to update any such forward-looking statements. The Company's actual
results could differ materially from those anticipated in these forward-looking
statements as a result of certain factors, including, but not limited to, those
set forth in this Prospectus under "Risk Factors." In evaluating the Company's
business, prospective investors should consider carefully the factors set forth
in this Prospectus under "Risk Factors" in addition to the other information set
forth in this Prospectus and incorporated by reference herein.
<PAGE>
THE COMPANY
The Company develops, markets and supports network storage management
software products for heterogeneous client/server computing environments. The
Company believes it is currently a technology leader in the network storage
management software market because of the scalability, heterogeneity,
performance, ease of use and central administration of its software products.
The Company's NetWorker family of products and Global Enterprise Management
Systems ("G.E.M.S.") software supports many storage management server platforms
and can accommodate a variety of clients, servers, applications, databases and
storage devices. The Company utilizes multiple distribution channels, including
resellers, OEMs and direct sales. The Company licenses its source code to
leading computer system and software suppliers, including Amdahl, Banyan, Data
General, Digital, ICL, Nihon-Unisys, NEC, Siemens Nixdorf, Silicon Graphics,
Sony, Sun Microsystems, Tandem and Unisys, which port the products to their
proprietary platforms, sell the products through their direct and indirect
distribution channels and provide primary support for the products after
installation. These relationships enable the Company to reach a broad customer
base, while reducing development, support and product costs. The Company also
has established strategic partnerships with Hewlett-Packard, Informix, Netscape
and Oracle.
The Company was incorporated in Delaware in 1988. The Company's principle
executive offices are located at 3210 Porter Drive, Palo Alto, California 94304.
Its telephone number is (650) 812-6000. The Company's home page can be located
on the world wide web at http://www.legato.com. As used in this Prospectus, the
"Company" and "Legato" refer to Legato Systems, Inc. and its subsidiaries.
RECENT DEVELOPMENTS
Acquisition of Software Moguls, Inc.
On August 6, 1998, the Company acquired the net assets of Software Moguls,
Inc., a developer of advanced backup-retrieval products for the Windows NT and
UNIX environments, in exchange for 249,999 shares (inclusive of fractional
shares paid in cash) of the Company's common stock pursuant to the Agreement and
Plan of Reorganization, dated July 30, 1998, by and among Legato Systems, Inc.,
Aspen Acquisition Corp., Software Moguls, Inc., Sunil Khadilkar (as
Shareholders' Representative), Louis C. Cole (as Escrow Agent) and the Selling
Stockholders, who were parties thereto (the "Reorganization Agreement"). The
combination was accounted for as a pooling of interests. The Company's
historical operating results have been restated to reflect the Company's
acquisition of Software Moguls, Inc.
Proposed Acquisition of Qualix Group, Inc.
On October 25, 1998, the Company entered into a definitive agreement to
acquire Qualix Group, Inc. (dba FullTime Software, Inc.), a market leader and
leading developer of distributed, enterprise-wide, cross-platform, adaptive
computing solutions that enable customers to proactively manage application
service level availability. The agreement provides for the issuance of 1,721,000
shares of the Company's common stock in exchange for all the common stock and
options of Qualix Group, Inc. The transaction is expected to be completed by
late February 1999, and is subject to the satisfaction of standard closing
conditions, including regulatory approval and the approval of Qualix Group, Inc.
stockholders. The transaction is expected to be accounted for as a pooling of
interests.
<PAGE>
RISK FACTORS
In addition to the other information in this Prospectus and in the
documents incorporated by reference herein, the following risk factors should be
carefully considered in evaluating the Company and its business before
purchasing the Common Stock offered by this Prospectus.
Fluctuations in Quarterly Operating Results; Future Operating Results Uncertain
The Company's quarterly operating results have in the past varied and may
in the future vary significantly depending on a number of factors, including,
but not limited to, the size and timing of significant orders; increased
competition; market acceptance of new products, applications and product
enhancements; changes in pricing policies by the Company and its competitors;
the ability of the Company to timely develop, introduce and market new products,
applications and product enhancements and to control costs; the Company's
success in expanding its sales and marketing programs; technological changes in
the network storage management market; the mix of sales among the Company's
channels; deferrals of customer orders in anticipation of new products,
applications or product enhancements; changes in Company strategy; personnel
changes; and general economic factors.
The Company's future revenues are difficult to predict. The Company
operates with virtually no order backlog because its software products typically
are shipped shortly after orders are received. In addition, the Company does not
recognize revenues on sales to domestic distributors until the products are sold
through to end-users. As a result, product license revenues in any quarter are
substantially dependent on orders booked and shipped and on sell-through to
end-users in that quarter. Revenues for any future quarter are not predictable
with any significant degree of certainty. Product licenses and software services
and support revenues are difficult to forecast because the network storage
management market is rapidly evolving and the Company's sales cycle varies
substantially from customer to customer. The Company has become increasingly
dependent upon the larger enterprise license transactions to corporate
customers, which often include product license, service and support components.
The Company's operating results are sensitive to the timing of such orders and
are subject to purchasing cycles and budgetary constraints of the customer,
which are difficult to predict. Due to the lengthier sales cycle and the larger
size of enterprise license transactions, if orders forecasted for a particular
quarter are not realized in that quarter, the Company's operating results for
that quarter may be adversely affected. Royalty revenues are substantially
dependent upon product license sales by OEMs of their products that incorporate
the Company's software. Accordingly, royalty revenues are subject to OEMs'
product cycles, which are also difficult to predict. Royalty revenues are
further impacted by fluctuations in licensing activity from quarter-to-quarter,
because initial license fees generally are non-recurring and recognized upon the
signing of the license agreement. The Company's expense levels are based, in
part, on its expectations as to future revenues. If revenue levels are below
expectations, operating results are likely to be adversely affected. Net income
may be disproportionately affected by a reduction in revenues because a
proportionately smaller amount of the Company's expenses varies with its
revenues. As a result, the Company believes that period-to-period comparisons of
its results of operations are not necessarily meaningful and should not be
relied upon as indications of future performance. Due to all of the foregoing
factors, it is possible that in some future quarters the Company's operating
results may be below the expectations of public market analysts and investors.
In such event, the price of the Company's common stock would likely be
materially adversely affected.
Competition
The network storage management market is intensely competitive, highly
fragmented and characterized by rapidly changing technology and evolving
standards. Competitors vary in size and in the scope and breadth of the products
and services offered. The Company's major competitors on the Novell NetWare and
Windows NT platforms include Computer Associates (Cheyenne Software) and Seagate
(Palindrome and Arcada); on the Sun Solaris/SunOS platform include Computer
Associates (Legent/Lachman), EMC2 (Epoch), Peripheral Devices (Delta
Microsystems), Spectra Logic and Veritas; on the AIX platform include IBM; and
on the HP-UX platform include Hewlett Packard. In the future, as the Company
enters new markets, the Company expects that such markets will have additional,
market-specific competitors. In addition, many of the Company's existing
competitors are broadening their platform coverage. The Company also expects
increased competition from systems and network management companies, especially
those that have historically focused on the mainframe market and are broadening
their focus to include the client/server market. In addition, because there are
relatively low barriers to entry in the software market, the Company expects
additional competition from other established and emerging companies. Increased
competition is likely to result in price reductions, reduced gross margins and
loss of market share, any of which could materially adversely affect the
Company's business, operating results and financial condition.
Many of the Company's current and potential competitors have significantly
greater financial, technical, marketing and other resources than the Company. As
a result, they may be able to respond more quickly to new or emerging
technologies and changes in customer requirements, or to devote greater
resources to the development, promotion, sale and support of their products than
the Company. The Company also expects that competition will increase as a result
of future software industry consolidations, which have occurred in the network
storage management market in the past and are expected to occur in the future.
In addition, current and potential competitors have established or may establish
cooperative relationships among themselves or with third parties. Accordingly,
it is possible that new competitors or alliances among competitors may emerge
and rapidly acquire significant market share. In addition, network operating
system vendors could introduce new or upgrade existing operating systems or
environments that include storage management functionality offered by the
Company's products, which could render the Company's products obsolete and
unmarketable. There can be no assurance that the Company will be able to compete
successfully against current or future competitors or that competitive pressures
faced by the Company will not materially adversely affect its business,
operating results and financial condition.
Product Concentration
The Company currently derives a substantial majority of its revenues from
its NetWorker software products and related services, and the Company expects
that revenues from NetWorker will continue to account for a majority of the
Company's revenues for the foreseeable future. Broad market acceptance of
NetWorker is, therefore, critical to the Company's future success. As a result,
a decline in unit prices of or demand for NetWorker, or failure to achieve broad
market acceptance of NetWorker, as a result of competition, technological change
or otherwise, would have a material adverse effect on the business, operating
results and financial condition of the Company. The life cycle of NetWorker is
difficult to estimate due in large measure to the recent emergence of the
Company's market, the effect of new products, applications or product
enhancements, technological changes in the network storage management
environment in which NetWorker operates and future competition. The Company's
future financial performance will depend in part on the successful development,
introduction and market acceptance of new products, applications and product
enhancements. There can be no assurance that the Company will continue to be
successful in marketing and licensing NetWorker or any new products,
applications, product enhancements and related services.
Dependence on New Software Products; Rapid Technological Change
The network storage management market is characterized by rapid
technological change, changing customer needs, frequent new software product
introductions and evolving industry standards. The introduction of products
embodying new technologies and the emergence of new industry standards could
render the Company's existing products obsolete and unmarketable. The Company's
future success will depend upon its ability to develop and introduce new
software products (including new releases, applications and enhancements) on a
timely basis that keep pace with technological developments and emerging
industry standards and address the increasingly sophisticated needs of its
customers. There can be no assurance that the Company will be successful in
developing and marketing new products that respond to technological changes or
evolving industry standards, that the Company will not experience difficulties
that could delay or prevent the successful development, introduction and
marketing of these new products, or that its new products will adequately meet
the requirements of the marketplace or achieve market acceptance. If the Company
is unable, for technological or other reasons, to develop and introduce new
products in a timely manner in response to changing market conditions or
customer requirements, the Company's business, operating results and financial
condition will be materially adversely affected. The Company currently has plans
to introduce and market several potential new products in the next twelve
months. Some of the Company's competitors currently offer certain of these
potential new products. Due to the complexity of client/server software and the
difficulty in gauging the engineering effort required to produce these potential
new products, such potential new products are subject to significant technical
risks. There can be no assurance that such potential new products will be
introduced on a timely basis or at all. In the past, the Company has experienced
delays in the commencement of commercial shipments of its new products,
resulting in customer frustrations and delay or loss of product revenues. If
potential new products are delayed or do not achieve market acceptance, the
Company's business, operating results and financial condition will be materially
adversely affected. The Company has also, in the past, experienced delays in
purchases of its products by customers anticipating the launch of new products
by the Company. There can be no assurance that material order deferrals in
anticipation of new product introductions will not occur, which could have a
material adverse effect upon the Company's business, operating results and
financial condition.
Software products as complex as those offered by the Company may contain
undetected errors or failures when first introduced or as new versions are
released. The Company has in the past discovered software errors in certain of
its new products after their introduction and has experienced delays or lost
revenues during the period required to correct these errors. Although the
Company has not experienced material adverse effects resulting from any such
errors to date, there can be no assurance that, despite testing by the Company
and by current and potential customers, errors will not be found in new products
after commencement of commercial shipments, resulting in loss of or delay in
market acceptance, which could have a material adverse effect upon the Company's
business, operating results and financial condition.
Risks Associated with Reliance on Enterprise License Transactions;
Resellers; Strategy of Expanding OEM Channel
An integral part of the Company's strategy is to pursue larger enterprise
license transactions with corporate customers. As there has been an increasing
number of larger enterprise license transactions, which may often include
product license, service and support components, the Company's operating results
are sensitive to the timing of such orders. These transactions are typically
difficult to manage and predict. The execution of such larger enterprise license
transactions typically involves significant technical evaluation and commitment
of capital and other resources, with the delays frequently associated with
customers' internal procedures, including delays to approve large capital
expenditures, to implement the deployment of new technologies within their
networks, and to test and accept new technologies that affect key operations.
For these and other reasons, the sales cycle associated with the completing an
enterprise license transaction is typically lengthy, generally lasting three to
six months, is subject to a number of significant risks, including customers'
budgetary constraints and internal acceptance reviews, that are beyond the
Company's control, and varies substantially from transaction to transaction. Due
to the lengthy sales cycle and the large size of certain transactions, if orders
forecasted for a specific transaction for a particular quarter are not realized
in that quarter, the Company's operating results for that quarter may be
adversely affected. There can be no assurance that the Company will continue to
complete or increase the number of such larger enterprise license transactions,
and the inability to do so could materially adversely affect the Company's
business, operating results and financial condition.
The Company relies significantly on its distributors, systems integrators
and value added resellers (collectively, "resellers") for the marketing and
distribution of its products. The Company's agreements with resellers are
generally not exclusive and in many cases may be terminated by either party
without cause. Many of the Company's resellers carry product lines that are
competitive with those of the Company. There can be no assurance that these
resellers will give a high priority to the marketing of the Company's products
(they may, in fact, give a higher priority to other products, including the
products of competitors) or that they will continue to carry the Company's
products. Events or occurrences of this nature could materially adversely affect
the Company's business, operating results and financial condition. The Company's
results of operations could also be materially adversely affected by changes in
reseller inventory strategies, which could occur rapidly, and in many cases, may
not be related to end user demand. There can be no assurance that the Company
will retain any of its current resellers, nor can there be any assurance that
the Company will be successful in recruiting replacement or new organizations to
represent it. Any such changes in the Company's distribution channels could
materially adversely affect the Company's business, operating results and
financial condition.
The Company's strategy is also to increase the proportion of the Company's
customers licensed through OEMs. The Company is currently investing, and intends
to continue to invest, resources to develop this channel, which could materially
adversely affect the Company's operating margins. There can be no assurance that
the Company will be successful in its efforts to increase the revenues
represented by this channel. The Company is dependent upon its OEMs' ability to
develop new products, applications and product enhancements on a timely and
cost-effective basis that will meet changing customer needs and respond to
emerging industry standards and other technological changes. There is no
assurance that the Company's OEMs will effectively meet these technological
challenges. These OEMs are not within the control of the Company, may
incorporate into their products the technologies of other companies in addition
to those of the Company and are not obligated to purchase products from the
Company. In addition, the Company's OEMs generally have exclusive rights to the
Company's technology on their respective platforms, subject to certain minimum
royalty obligations. There can be no assurance that any OEM will continue to
carry the Company's products, and the inability to recruit, or the loss of,
important OEMs could materially adversely affect the Company's business,
operating results and financial condition.
International Operations; Risks Associated with International Sales
The Company believes that its continued growth and profitability will
require further expansion of its international operations. In order to
successfully expand international sales, the Company must establish additional
foreign operations, hire additional personnel and recruit additional
international resellers. This will require significant management attention and
financial resources and could materially adversely affect the Company's
operating margins. To the extent that the Company is unable to effect these
additions in a timely manner, the Company's growth, if any, in international
sales will be limited, and the Company's business, operating results and
financial condition could be materially adversely affected. In addition, there
can be no assurance that the Company will be able to maintain or increase
international market demand for the Company's products. The Company's
international sales are currently denominated in U.S. dollars. An increase in
the value of the U.S. dollar relative to foreign currencies could make the
Company's products more expensive and, therefore, potentially less competitive
in those markets. In some markets, localization of the Company's products is
essential to achieve market penetration. The Company may incur substantial costs
and experience delays in localizing its products, and there can be no assurance
that any localized product will ever generate significant revenues. In addition,
the Company relies significantly on its distributors and other resellers in
international sales efforts. Since these distributors and other resellers are
not employees of the Company and typically do not offer the Company's products
exclusively, there can be no assurance that they will continue to market the
Company's products. Additional risks inherent in the Company's international
business activities generally include unexpected changes in regulatory
requirements, tariffs and other trade barriers, lack of acceptance of localized
products, if any, in foreign countries, longer accounts receivable payment
cycles, difficulties in managing international operations, potentially adverse
tax consequences including restrictions on the repatriation of earnings, and the
burdens of complying with a wide variety of foreign laws. There can be no
assurance that such factors will not have a material adverse effect on the
Company's future international sales and, consequently, the Company's business,
operating results and financial condition.
Management of Expanding Operations
The Company has recently experienced a period of significant expansion of
its operations that has placed a significant strain upon its management systems
and resources. In addition, the Company has recently hired a significant number
of employees, and plans to further increase its total headcount. The Company
also plans to expand the geographic scope of its customer base and operations.
This expansion has resulted and will continue to result in substantial demands
on the Company's management resources. From time to time, the Company receives
customer complaints about the timeliness and accuracy of customer support.
Although the Company plans to add customer support personnel in order to address
current customer support needs and intends to closely monitor progress in this
area, there can be no assurance that these efforts will be successful. If the
Company's efforts are not successful, the Company's business, operating results
and financial condition could be materially adversely affected. The Company's
ability to compete effectively and to manage future expansion of its operations,
if any, will require the Company to continue to improve its financial and
management controls, reporting systems and procedures on a timely basis and
expand, train and manage its employee work force. There can be no assurance that
the Company will be able to do so successfully. The Company's failure to do so
could have a material adverse effect upon the Company's business, operating
results and financial condition.
Risks Related to Acquisitions
On August, 6, 1998, the Company acquired Software Moguls, Inc. ("SMI"), a
developer of advanced backup-retrieval products for the Windows NT and UNIX
environments. SMI is based in Eden Prairie, Minnesota and had 32 employees as of
August 6, 1998. Legato expects that it will face numerous challenges in
integrating the SMI operations and employees into the Company. If such
integration is not successful, the Company's business, operating results and
financial condition could be materially adversely effected.
On October 25, 1998, the Company entered into a definitive agreement to
acquire Qualix Group, Inc. (dba FullTime Software, Inc.). The agreement provides
for the issuance of 1,721,000 shares of the Company's common stock in exchange
for all the common stock and options of Qualix Group, Inc. The transaction is
expected to be completed by late February 1999, and is subject to the
satisfaction of standard closing conditions, including regulatory approval and
the approval of Qualix Group, Inc. stockholders. The transaction is expected to
be accounted for as a pooling of interests. The Company intends to file with the
Securities and Exchange Commission, in January 1999, a Registration Statement on
Form S-4 related to the acquisition of Qualix Group, Inc. If the acquisition is
consummated, the Company expects that it will still face numerous challenges in
integrating the operations and employees of Qualix Group, Inc., into the
Company. If such integration is not successful, the Company's business,
operating results and financial condition could be materially adversely
effected.
The Company may make acquisitions in the future. Acquisitions of companies,
products or technologies entail numerous risks, including: an inability to
successfully assimilate acquired operations and products; diversion of
management's attention; loss of key employees of acquired companies; and
substantial transaction costs.
Some of the products acquired may require significant additional
development before they can be marketed and may not generate revenue at levels
anticipated by the Company. Moreover, future acquisitions by the Company may
result in dilutive issuances of its equity securities, the incurrence of debt,
large one-time write-offs and the creation of goodwill or other intangible
assets that could result in amortization expense. Any such problems or factors
could materially adversely affect the Company's business, financial condition
and results of operations.
<PAGE>
Dependence Upon Key Personnel
The Company's future performance also depends in significant part upon the
continued service of its key technical and senior management personnel, none of
whom is bound by an employment agreement. The loss of the services of one or
more of the Company's officers or other key employees could have a material
adverse effect on the Company's business, operating results and financial
condition. The Company's future success also depends on its continuing ability
to attract and retain highly qualified technical and managerial personnel.
Competition for such personnel is intense, and there can be no assurance that
the Company can retain its key technical and managerial employees or that it can
attract, assimilate or retain other highly qualified technical and managerial
personnel in the future.
Dependence on Growth in the Network Storage Management Market;
General Economic and Market Conditions
All of the Company's business is in the network storage management market,
which is still an emerging market. The Company's future financial performance
will depend in large part on continued growth in the number of organizations
adopting network storage management solutions for their client/server computing
environments. There can be no assurance that the market for network storage
management will continue to grow. If the network storage management market fails
to grow or grows more slowly than the Company currently anticipates, the
Company's business, operating results and financial condition would be
materially adversely affected. During recent years, segments of the computer
industry have experienced significant economic downturns characterized by
decreased product demand, production overcapacity, price erosion, work slowdowns
and layoffs. The Company's operations may in the future experience substantial
fluctuations from period-to-period as a consequence of such industry patterns,
general economic conditions affecting the timing of orders from major customers,
and other factors affecting capital spending. There can be no assurance that
such factors will not have a material adverse effect on the Company's business,
operating results or financial condition.
Dependence on Proprietary Technology; Risks of Infringement
The Company depends significantly upon proprietary technology. The Company
relies on a combination of patent, copyright and trademark laws, trade secrets,
confidentiality procedures and contractual provisions to protect its proprietary
rights. The Company seeks to protect its software, documentation and other
written materials under patent, trade secret and copyright laws, which afford
only limited protection. There can be no assurance that the Company will develop
proprietary products or technologies that are patentable, that any issued patent
will provide the Company with any competitive advantages or will not be
challenged by third parties, or that the patents of others will not have a
material adverse effect on the Company's ability to do business. Despite the
Company's efforts to protect its proprietary rights, unauthorized parties may
attempt to copy aspects of the Company's products or to obtain and use
information that the Company regards as proprietary. Policing unauthorized use
of the Company's products is difficult, and although the Company is unable to
determine the extent to which piracy of its software products exists, software
piracy can be expected to be a persistent problem. In licensing its products
(other than in enterprise license transactions), the Company relies primarily on
"shrink wrap" licenses that are not signed by licensees, and, therefore, such
licenses may be unenforceable under the laws of certain jurisdictions. In
addition, the laws of some foreign countries do not protect the Company's
proprietary rights to as great an extent as do the laws of the United States.
There can be no assurance that the Company's means of protecting its proprietary
rights will be adequate or that the Company's competitors will not independently
develop similar technology, duplicate the Company's products or design around
patents issued to the Company or other intellectual property rights of the
Company.
There have also been substantial amounts of litigation in the software
industry regarding intellectual property rights. The Company has from time to
time received claims that it is infringing third parties' intellectual property
rights, and there can be no assurance that third parties will not in the future
claim infringement by the Company with respect to current or future products,
trademarks or other proprietary rights. The Company expects that software
product developers will increasingly be subject to infringement claims as the
number of products and competitors in the Company's industry segment grows and
the functionality of products in different industry segments overlaps. Any such
claims, with or without merit, could be time-consuming, result in costly
litigation, cause product shipment delays or require the Company to enter into
royalty or licensing agreements. Such royalty or licensing agreements, if
required, may not be available on terms acceptable to the Company or at all,
which could have a material adverse effect upon the Company's business,
operating results and financial condition.
Product Liability
The Company's license agreements with its customers typically contain
provisions designed to limit the Company's exposure to potential product
liability claims. In licensing its products (other than in enterprise license
transactions), the Company relies primarily on "shrink wrap" licenses that are
not signed by licensees, and, therefore, such licenses may be unenforceable
under the laws of certain jurisdictions. As a result of these and other factors,
the limitation of liability provisions contained in the Company's license
agreements may not be effective. The Company's products can be used to manage
data critical to organizations, and, as a result, the sale and support of
products by the Company may entail the risk of product liability claims. A
successful product liability claim brought against the Company could have a
material adverse effect upon the Company's business, operating results and
financial condition.
Year 2000 Compliance
Many currently installed computer systems and software products are coded
to accept only two digit entries in the date code field. These date code fields
will need to accept four digit entries to distinguish 21st century dates from
20th century dates. As a result, in less than two years, computer systems and/or
software used by many companies will need to be upgraded to comply with such
"Year 2000" requirements. Systems that do not properly recognize such
information could generate erroneous data or cause a system to fail. Significant
uncertainty exists in the software industry concerning the potential effects
associated with such compliance.
The Company has conducted Year 2000 compliance reviews for current versions
of the Company's products. The review includes assessment, implementation,
validation testing and contingency planning. The Company continues to respond to
customer concerns about prior versions of the Company's products on a
case-by-case basis. Although the Company believes its software products are Year
2000 compliant, there can be no assurance that the Company's software products
contain all the necessary software routines and programs for the accurate
calculation, display, storage and manipulation of data involving dates. If the
Company's software products do not contain all the necessary software routines
and programs for the accurate calculation, display, storage and manipulation of
data involving dates, it would have a material adverse effect on the Company's
business, operating results and financial condition.
The Company has tested software obtained from third parties that is
incorporated into the Company's products, and is seeking assurances from vendors
that licensed software is Year 2000 compliant. Despite testing by the Company
and by current and potential customers, and assurances from developers of
products incorporated into the Company's products, such products may contain
undetected errors or defects associated with Year 2000 date functions. Known or
unknown errors or defects in our products may result in delay or loss of
revenue, diversion of development resources, damage to the Company's reputation,
or increased service and warranty costs, any of which could materially adversely
affect the Company's business, operating results, or financial condition.
The Company does not currently have any information concerning the Year
2000 compliance status of our customers. As is the case with other similarly
situated software companies, if our current or future customers fail to achieve
Year 2000 compliance or if they divert technology expenditures to address Year
2000 compliance problems, the Company's business, results of operations, or
financial condition could be materially adversely affected.
The Company has initiated an assessment of material internal systems.
Although the Company believes the software and hardware it uses internally
comply with Year 2000 requirements and is not aware of any material operational
issues or costs associated with preparing its internally used software and
hardware for the Year 2000, there can be no assurances that the Company will not
experience serious, unanticipated negative consequences and/or material costs
caused by undetected errors or defects in the technology used in its internal
systems. The occurrence of any of the foregoing could have a material adverse
effect on the Company's business, operating results or financial condition.
The Company has funded its Year 2000 compliance review from operating cash
flows and has not separately accounted for these costs in the past. The Company
will incur additional amounts related to the Year 2000 compliance review for
administrative personnel to manage the review, outside contractor assistance,
technical support for our products, product engineering and customer
satisfaction. However, management does not anticipate that the Company will
incur significant operating expenses or be required to invest heavily in
computer systems improvements to be Year 2000 compliant.
Possible Volatility of Stock Price
The trading price of the Company's common stock has been subject to wide
fluctuations. The trading price of the Company's common stock could be subject
to wide fluctuations in the future in response to quarterly variations in
operating results, announcements of technological innovations or new products,
applications or product enhancements by the Company or its competitors, changes
in financial estimates by securities analysts and other events or factors. In
addition, the stock market has experienced volatility that has particularly
affected the market prices of equity securities of many high technology
companies and that often has been unrelated to the operating performance of such
companies. These broad market fluctuations may adversely affect the market price
of the Company's common stock.
USE OF PROCEEDS
The Company will not receive any proceeds from the sale of the shares by
the Selling Stockholders.
<PAGE>
SELLING STOCKHOLDERS
The following table sets forth certain information, as of December 8,
1998, with respect to the number of shares of Common Stock owned by the Selling
Stockholders and as adjusted to give effect to the sale of the Shares offered
hereby. The Shares are being registered to permit public secondary trading of
the Shares, and the Selling Stockholders may offer the Shares for resale from
time to time. See "Plan of Distribution."
The Shares being offered by the Selling Stockholders were acquired from
the Company in the Company's acquisition of Software Moguls, Inc., pursuant to
the Reorganization Agreement on August 6, 1998. The Common Stock was issued
pursuant to an exemption from the registration requirements of the Securities
Act. The Selling Stockholders represented to the Company that they were
acquiring the Shares for investment and with no present intention of
distributing the Shares.
The Company has filed with the Commission, under the Securities Act, a
Registration Statement on Form S-3, as amended, of which this Prospectus forms a
part, with respect to the resale of the Shares from time to time on the Nasdaq
National Market or in privately-negotiated transactions. The Company has agreed
to use commercially reasonable efforts to keep such Registration Statement
effective until the earlier of such time as (i) all the shares have been sold or
(ii) all the Shares may be sold under Rule 144 of the Securities Act in any
three-month period.
The Shares offered by this Prospectus may be offered from time to time
by the Selling Stockholders named below:
<TABLE>
<CAPTION>
Shares Beneficially Owned Shares Beneficially Owned
Prior to Offering After the Offering
Name and Address of Number of Number of Shares Number of
Selling Stockholders Shares Percent(1) Being Offered Shares Percent(1)
- --------------------- ------ ------- ------------- ------ -------
<S> <C> <C> <C> <C> <C>
Estate of Vinod Gupta 90,036 * 90,036 0 -
(Pratibha Gupta, Personal
Representative)
14835 Cherry Lane
Minnetonka, MN 55345
Charu Gupta 30,012 * 30,012 0 -
14835 Cherry Lane
Minnetonka, MN 55345
Shalini Gupta 30,012 * 30,012 0 -
14835 Cherry Lane
Minnetonka, MN 55345
Sunil S. and Vashuda 69,927 * 69,927 0 -
Khadilkar JTWROS
17205 Vantage Court
Eden Prairie, MN 55347
Sunil Khadilkar as Custodian 15,006 * 15,006 0 -
for Harshad S. Khadilkar
under MN UTMA
17205 Vantage Court
Eden Prairie, MN 55347
Sunil Khadilkar, as Custodian 15,006 * 15,006 0 -
for Himanshu Khadilkar under
MN UTMA
17205 Vantage Court
Eden Prairie, MN 55347
TOTAL 249,999 * % 249,999 0 - %
======= == ======= ==== ==
<FN>
- -----------------
* Less than 1%
(1) Applicable percentage ownership is based upon 37,608,006 shares of Common
Stock outstanding on December 8, 1998 and option shares outstanding
immediately prior to and immediately following the completion of this
offering. Beneficial ownership is determined in accordance with the rules
of the Securities and Exchange Commission and generally includes voting or
investment power with respect to securities, subject to community property
laws, where applicable. Shares of Common Stock subject to options currently
exercisable or exercisable within 60 days of December 8, 1998 are deemed to
be beneficially owned by the person holding such options or warrants for
the purpose of computing the percentage ownership of such person but are
not treated as outstanding for the purpose of computing the percentage
ownership of any other person. This Registration Statement shall also cover
any additional shares of Common Stock which become issuable in connection
with the shares registered for sale hereby by reason of any stock dividend,
stock split, recapitalization or other similar transaction effected without
the receipt of consideration which results in an increase in the number of
the Company's outstanding shares of Common Stock.
</FN>
</TABLE>
PLAN OF DISTRIBUTION
The Company is registering the Shares offered by the Selling
Stockholders hereunder pursuant to contractual registration rights contained in
the Registration Rights Agreement, dated July 30, 1998, by and among the Company
and the Selling Stockholders (the "Registration Rights Agreement"). The Company
has filed with the Commission, under the Securities Act, a Registration
Statement on Form S-3, of which this Prospectus forms a part, with respect to
the resale of the Shares from time to time as described below. The Company has
agreed to use commercially reasonable efforts to keep such Registration
Statement effective until the earlier of such time as (i) all the Shares have
been sold or (ii) all the Shares may be sold under Rule 144 of the Securities
Act in any three-month period.
The Company will receive no proceeds from this offering. The Shares
offered hereby may be sold by the Selling Stockholders from time to time in
transactions in the over-the-counter market, on the Nasdaq National Market, in
privately negotiated transactions, or by a combination of such methods of sale,
at fixed prices which may be changed, at market prices prevailing at the time of
sale, at prices related to prevailing market prices or at negotiated prices. The
Selling Stockholders may effect such transactions by selling the Shares to or
through broker-dealers, and such broker-dealers may receive compensation in the
form of discounts, concessions or commissions from the Selling Stockholders
and/or the purchasers of the Shares for whom such broker-dealers may act as
agents or to whom they sell as principals, or both (which compensation as to a
particular broker-dealer might be in excess of customary commissions).
In order to comply with the securities laws of certain states, if
applicable, the Shares will be sold in such jurisdictions only through
registered or licensed brokers or dealers. In addition, in certain states the
Shares may not be sold unless they have been registered or qualified for sale in
the applicable state or an exemption from the registration or qualification
requirement is available and is complied with.
The Selling Stockholders and any broker-dealers or agents that
participate with the Selling Stockholders in the distribution of the Shares may
under certain circumstances be deemed to be "underwriters" within the meaning of
the Securities Act, and any commissions received by them and any profit realized
on the resale of the Shares purchased by them may be deemed to be underwriting
commissions or discounts under the Securities Act. The Selling Stockholders may
agree to indemnify such broker-dealers against certain liabilities, including
liabilities under Securities Act.
Any broker-dealer participating in such transactions as agent may
receive commissions from the Selling Stockholders (and, if it acts as agent for
the purchase of such Shares, from such purchaser). Broker-dealers may agree with
the Selling Stockholders to sell a specified number of Shares at a stipulated
price per share, and, to the extent such a broker-dealer is unable to do so
acting as agent for the Selling Stockholders, to purchase as principal any
unsold Shares. Brokers-dealers who acquire Shares as principal may thereafter
resell such Shares from time to time in transactions (which may involve crosses
and block transactions and which may involve sales to and through other
broker-dealers, including transactions of the nature described above) in the
over-the-counter market, on the Nasdaq National Market, in privately negotiated
transactions, or by a combination of such methods of sale, at fixed prices that
may be changed, at market prices prevailing at the time of sale, at prices
related to such prevailing market prices or at negotiated prices, and in
connection with such resales may pay to or receive from the purchasers of such
Shares commissions computed as described above.
In connection with distributions of the Shares or otherwise, the
Selling Stockholders may enter into option or other transactions with
broker-dealers which require the delivery to the broker-dealer of the Shares
covered hereby, which the broker-dealer may resell or otherwise transfer
pursuant to this Prospectus. A Selling Stockholder may also loan or pledge the
Shares covered hereby to a broker-dealer and the broker-dealer may sell the
Shares so loaned or, upon a default, the broker-dealer may effect sales of the
pledged Shares pursuant to this Prospectus.
Under applicable rules and regulations under the 1934 Act, any person
engaged in the distribution of the Shares may not simultaneously engage in
market making activities with respect to the Common Stock of the Company for a
period of two business days prior to the commencement of such distribution. In
addition and without limiting the foregoing, the Selling Stockholders will be
subject to applicable provisions of the 1934 Act and the rules and regulations
thereunder, including, without limitation, Rules 10b-6 and 10b-7, which
provisions may limit the timing of purchases and sales of shares of the
Company's Common Stock by the Selling Stockholders.
The Selling Stockholders will pay all commissions and other expenses
associated with the sale of Shares by them. The Shares offered hereby are being
registered pursuant to contractual obligations of the Company under the
Registration Rights Agreement, and the Company has agreed to bear certain
expenses in connection with the registration and sale of the Shares being
offered by the Selling Stockholders. The Company has not made any underwriting
arrangements with respect to the sale of Shares offered hereby.
LEGAL MATTERS
The legality of the securities offered hereby will be passed upon for
the Company by Gunderson Dettmer Stough Villeneuve Franklin & Hachigian, LLP,
Menlo Park, California.
EXPERTS
The consolidated balance sheets of the Company as of December 31, 1997,
and 1996 and the consolidated statements of income, stockholders' equity, and
cash flows for each of the years in the three year period ended December 31,
1997 incorporated by reference in this Prospectus, have been incorporated herein
in reliance on the report of PricewaterhouseCoopers LLP, independent
accountants, given on the authority of that firm as experts in accounting and
auditing.
The consolidated financial statements of Qualix Group, Inc. as of June
30, 1998 and 1997 and for each of the three years in the period ended June 30,
1998 are incorporated in this prospectus by reference from Legato Systems, Inc.
current report on Form 8-K/A filed on December 14, 1998. Such consolidated
financial statements have been audited by Deloitte & Touche LLP, independent
auditors, as stated in their report, which is incorporated herein by reference,
and have been so incorporated in reliance upon the report of such firm given
upon their authority as experts in accounting and auditing.
No dealer, salesperson, Selling Stockholders or any other person has been
authorized to give any information or make any representations in connection
with this offering other than those contained in this Prospectus and, if given
or made, such information or representations must not be relied upon as having
been authorized by the Company, the Selling Stockholders or any other person.
This Prospectus does not constitute an offer to sell or a solicitation of any
offer to buy any of the securities offered hereby by anyone in any jurisdiction
in which such offer or solicitation is not authorized or in which the person
making such offer or solicitation is not qualified to do so or to any person to
whom it is unlawful to make such offer or solicitation. Neither the delivery of
this Prospectus nor any sale made hereunder shall, under any circumstances,
create any implication that the information contained herein is correct as of
any time subsequent to the date of the Prospectus.
249,999 Shares
LEGATO SYSTEMS, INC.
Common Stock
-------------
December ___, 1998
--------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
The following table sets forth all expenses, other than the
underwriting discounts and commissions, payable by the Registrant in connection
with the sale of the Common Stock being registered. All the amounts shown are
estimates except for the registration fee.
<TABLE>
<S> <C>
Securities and Exchange Commission Registration Fee.................. $3,614
Legal Fees and Expenses.............................................. 4,000
Accounting Fees and Expenses......................................... 1,000
Transfer Agent and Registrar Fees.................................... 500
Miscellaneous........................................................ 500
----------
Total........................................................... $9,614
======
</TABLE>
Item 15. Indemnification of Officers and Directors.
Section 145 of the Delaware General Corporation law ("DGCL") empowers a
Delaware corporation to indemnify any persons who are, or are threatened to be
made, parties to any threatened, pending or completed legal action, suit or
proceedings, whether civil, criminal, administrative or investigative (other
than action by or in the right of such corporation), by reason of the fact that
such person was an officer or director of such corporation, or is or was serving
at the request of such corporation as a director, officer, employee or agent of
another corporation or enterprise. The indemnity may include expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement actually and
reasonably incurred by such person in connection with such action, suit or
proceeding, provided that such officer or director acted in good faith and in a
manner he reasonably believed to be in or not opposed to the corporation's best
interests, and, for criminal proceedings, had no reasonable cause to believe his
conduct was illegal. A Delaware corporation may indemnify officers and directors
in an action by or in the right of the corporation under the same conditions,
except that no indemnification is permitted without judicial approval if the
officer or director is adjudged to be liable to the corporation in the
performance of his duty. Where an officer or director is successful on the
merits or otherwise in the defense of any action referred to above, the
corporation must indemnify him against the expenses which such officer or
director actually and reasonably incurred.
In accordance with the DGCL, the Company's Certificate of Incorporation
("Certificate") contains a provision to limit the personal liability of the
directors of the Company for violations of their fiduciary duty as a director.
This provision eliminates each director's liability to the Company or its
stockholders for monetary damages except (i) for any breach of the director's
duty of loyalty to the Company or its stockholders, (ii) for acts or omissions
not in good faith or which involve intentional misconduct or a knowing violation
of law, (iii) under Section 174 of the DGCL providing for liability of directors
for unlawful payment of dividends or unlawful stock purchases or redemptions, or
(iv) for any transaction from which a director derived an improper personal
benefit. The effect of this provision is to eliminate the personal liability of
directors for monetary damages for actions involving a breach of their fiduciary
duty of care, including any such actions involving gross negligence.
Article XI of the Company's Certificate and Article VII, Section 6 of
the Company's Bylaws provide for indemnification of the officers and directors
of the Company to the fullest extent permitted by applicable law.
The Company has entered into indemnification agreements with each
director and executive officer which provide indemnification to such directors
and executive officers under certain circumstances for acts or omissions which
may not be covered by directors' and officers' liability insurance.
Item 16. Exhibits.
The exhibits listed in the Exhibit Index as filed as part of this
Registration Statement.
(a) Exhibits
<TABLE>
Exhibit
Number Description
<S> <C>
2.1* Agreement and Plan of Reorganization dated July 30, 1998, by and
among Legato Systems, Inc., Aspen Acquisition Corp., Software
Moguls, Inc., Sunil Khadilkar (as Shareholder Representative), Louis
C. Cole (as Escrow Agent) and the Selling Stockholders.
3.1 (1) Amended and Restated Certificate of Incorporation of the Registrant,
as amended to date.
3.2 (2) Amended and Restated Bylaws of the Registrant adopted on May23,1997.
3.3 (3) Form of Certificate of Designation filed in connection with Rights
Agreement, dated May 23, 1997.
4.1* Reference is made to Exhibits 3.1, 3.2 and 3.3.
4.2 (4) Specimen Common Stock Certificate.
4.6 (4) Restated Investor Rights Agreement, dated September 8, 1993,
among the Registrant and the investors and the founders named
therein, as amended January 28, 1994 and February 13, 1995.
4.7 (3) Rights Agreement, dated May 23, 1997 between the Company and Harris
Trust and Savings Bank, including the Certificate of Designation of
Series A Junior Participating Preferred Stock, Form of Right
Certificate and Summary of Rights to Purchase Preferred Shares
attached thereto as Exhibit A, B and C, respectively.
4.8* Registration Rights Agreement dated September 29, 1998.
4.9* Affiliates Agreement dated July 30, 1998.
5.1* Opinion of Gunderson Dettmer Stough Villeneuve Franklin &
Hachigian, LLP.
23.1 Consent of PricewaterhouseCoopers LLP.
23.2* Consent of Gunderson Dettmer Stough Villeneuve Franklin & Hachigian,
LLP (included in the opinion filed as Exhibit 5.1).
23.3 Consent of Deloitte & Touche LLP.
24.1* Power of Attorney.
27.1* Financial Data Schedule.
- -------------------
<FN>
* Previously filed.
(1) Incorporated by reference to the registrant's definitive Proxy Statement
for Special Meeting of Stockholders, dated May 31, 1996, and definitive
Proxy Statement for Annual Meeting of Stockholders, dated April 6, 1998.
(2) Incorporated by reference to the registrant's Current Report on Form 8-K,
dated June 6, 1997.
(3) Incorporated by reference to the registrant's Form 8-A, dated May 30, 1997.
(4) Incorporated by reference to the registrant's Registration Statement on
Form S-1, filed May 9, 1995 (File No. 33-92072).
</FN>
</TABLE>
Item 17. Undertakings.
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this Registration Statement: (i) to include any
prospectus required by section 10(a)(3) of the Securities Act; (ii) to reflect
in the prospectus any facts or events arising after the effective date of the
Registration Statement (or the most recent post-effective amendment thereof)
which, individually or in the aggregate, represent a fundamental change in the
information set forth in the Registration Statement; and (iii) to include any
material information with respect to the plan of distribution not previously
disclosed in the Registration Statement or any material change to such
information in the Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the provisions described in Item 15, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Securities
Act and will be governed by the final adjudication of such issue.
The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
1934 Act (and, where applicable, each filing of an employee benefit plan's
annual report pursuant to Section 15(d) of the 1934 Act) that is incorporated by
reference in the Registration Statement shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
For purposes of determining any liability under the Securities Act, the
information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of this Registration
Statement as of the time it was declared effective.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Palo Alto, State of California, on this 15th day of
December, 1998.
LEGATO SYSTEMS, INC.
By: /s/ Louis C. Cole
Louis C. Cole
Chairman of the Board, President
and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed by the following persons in the capacities and on the
dates indicated:
<TABLE>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Louis C. Cole Chairman of the Board, President and Chief December 15, 1998
- ---------------------------------------- Executive Officer (Principal Executive
Louis C. Cole Officer)
/s/ Stephen C. Wise* Senior Vice President, Finance and December 15, 1998
- ---------------------------------------- Administration and Chief Financial Officer
Stephen C. Wise (Principal Financial and Accounting Officer)
/s/ Eric A. Benhamou* Director December 15, 1998
- ----------------------------------------
Eric A. Benhamou
/s/ Kevin A. Fong* Director December 15, 1998
- ----------------------------------------
Kevin A. Fong
/s/ David N. Strohm* Director December 15, 1998
- ----------------------------------------
David N. Strohm
/s/ Phillip E. White* Director December 15, 1998
- ----------------------------------------
Phillip E. White
*By: /s/ Louis C. Cole
- ----------------------------------------
Louis C. Cole
Attorney-in-Fact
</TABLE>
<PAGE>
Exhibit Index
<TABLE>
Exhibit
Number Description
<S> <C>
2.1* Agreement and Plan of Reorganization dated July 30, 1998, by and
among Legato Systems, Inc., Aspen Acquisition Corp., Software
Moguls, Inc., Sunil Khadilkar (as Shareholder Representative), Louis
C. Cole (as Escrow Agent) and the Selling Stockholders.
3.1 (1) Amended and Restated Certificate of Incorporation of the Registrant,
as amended to date.
3.2 (2) Amended and Restated Bylaws of the Registrant adopted on May 23,1997
3.3 (3) Form of Certificate of Designation filed in connection with Rights
Agreement, dated May 23, 1997.
4.1* Reference is made to Exhibits 3.1, 3.2 and 3.3.
4.2 (4) Specimen Common Stock Certificate.
4.6 (4) Restated Investor Rights Agreement, dated September 8, 1993,
among the Registrant and the investors and the founders named
therein, as amended January 28, 1994 and February 13, 1995.
4.7 (3) Rights Agreement, dated May 23, 1997 between the Company and Harris
Trust and Savings Bank, including the Certificate of Designation of
Series A Junior Participating Preferred Stock, Form of Right
Certificate and Summary of Rights to Purchase Preferred Shares
attached thereto as Exhibit A, B and C, respectively.
4.8* Registration Rights Agreement dated September 29, 1998.
4.9* Affiliates Agreement dated July 30, 1998.
5.1* Opinion of Gunderson Dettmer Stough Villeneuve Franklin &
Hachigian, LLP.
23.1 Consent of PricewaterhouseCoopers LLP.
23.2* Consent of Gunderson Dettmer Stough Villeneuve Franklin & Hachigian,
LLP (included in the opinion filed as Exhibit 5.1).
23.3 Consent of Deloitte & Touche LLP.
24.1* Power of Attorney.
27.1* Financial Data Schedule.
- -------------------
<FN>
* Previously filed.
(1) Incorporated by reference to the registrant's definitive Proxy Statement
for Special Meeting of Stockholders, dated May 31, 1996, and definitive
Proxy Statement for Annual Meeting of Stockholders, dated April 6, 1998.
(2) Incorporated by reference to the registrant's Current Report on Form 8-K,
dated June 6, 1997.
(3) Incorporated by reference to the registrant's Form 8-A, dated May 30, 1997.
(4) Incorporated by reference to the registrant's Registration Statement on
Form S-1, filed May 9, 1995 (File No. 33-92072).
</FN>
</TABLE>
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the Registration Statement on
Form S-3/A of Legato Systems, Inc. (the "Company") for the registration of
249,999 shares of its common shares, of our reports dated January 19, 1998,
except for the first paragraph of Note 5 and Note 11, for which the date is
August 6, 1998, on our audits of the consolidated financial statements and
financial statement schedule of the Company as of December 31, 1997 and 1996,
and for the years ended December 31, 1997, 1996 and 1995 which reports are
included in the Company's 1997 Annual Report on Form 10-K/A, as amended, filed
with the Securities and Exchange Commission. We also consent to the reference to
our firm under the caption "Experts".
/s/ PRICEWATERHOUSECOOPERS LLP
San Jose, California
December 14, 1998
<PAGE>
EXHIBIT 23.3
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Registration Statement of
Legato Systems, Inc. on Form S-3/A of our report dated July 23, 1998 on the
consolidated financial statements of Qualix Group, Inc., appearing in the
Current Report on Form 8-K/A of Legato Systems, Inc. as filed on December 14,
1998. We also consent to the reference to us under the heading "Experts" in such
Prospectus.
/s/ DELOITTE & TOUCHE LLP
San Jose, California
December 14, 1998
