As filed with the Securities and Exchange Commission on April 12, 1999
Registration No. 333-75581
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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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. |_|
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
- ----------------------------- ---------------------- ------------------- ------------------------ ------------------
Proposed Maximum
Title of each class of Amount to be Offering Price Proposed Maximum Amount of
Securities to be Registered Registered per Security(1) Aggregate Offering Registration Fee
Price(1)
- ----------------------------- ---------------------- ------------------- ------------------------ ------------------
<S> <C> <C> <C> <C>
Common Stock, no par value 720,000 shares $47.00 $33,840,000.00 $9,408.00
- ----------------------------- ---------------------- ------------------- ------------------------ ------------------
<FN>
(1) The price of $47.00 per share, which was the average of the high and low
prices of the Common Stock on the Nasdaq National Market on April 1, 1999
is set forth solely for the purpose of calculating the registration fee in
accordance with Rule 457(c) of the Securities Act of 1933, as amended.
</FN>
</TABLE>
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 April _, 1999
720,000 Shares
LEGATO SYSTEMS, INC.
Common Stock
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INVESTING IN OUR COMMON STOCK INVOLVES CERTAIN RISKS.
SEE "RISK FACTORS" STARTING ON PAGE 4.
-----------------
The selling stockholders listed on page 13 are offering and selling
720,000 shares of our common stock under this prospectus.
The selling stockholders may offer their Legato stock through public or
private transactions, on or off the Nasdaq National Market, at prevailing market
prices, or at privately negotiated prices.
Our common stock is traded on The Nasdaq National Market under the
symbol "LGTO." On April 1, 1999, the closing bid price of the common stock on
The Nasdaq National Market was $47.00 per share.
------------------------------
Neither the Securities and Exchange Commission Nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
------------------------------
<PAGE>
The date of this Prospectus is April __, 1999
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TABLE OF CONTENTS
Page
Business of Legato Systems, Inc. 3
Recent Developments 3
Risk Factors 4
Forward-Looking Statements 12
Use of Proceeds 12
Selling Stockholders 13
Plan of Distribution 14
Legal Matters 14
Experts 14
Where You Can Find More Information 14
<PAGE>
THE BUSINESS OF LEGATO
Legato develops, licenses, markets and supports a broad, integrated
suite of storage management software applications operating on multiple computer
systems. Our NetWorker family of software products, from which we derive a
substantial amount of our revenues, and Global Enterprise Management Systems,
support many storage management server platforms, such as UNIX and Windows NT,
and can accommodate a variety of servers, clients, applications, databases and
storage devices. We license our products through resellers and directly to end
users in North America, Europe and Asia Pacific. We also license our source code
in exchange for initial licensing fees to original equipment manufacturers and
receive ongoing royalties from the original equipment manufacturers' product
sales. Substantially all of the original equipment manufacturers are large
computer system and software suppliers located in the United States, Europe and
Asia Pacific.
Our principle executive offices are located at 3210 Porter Drive, Palo
Alto, California 94304 and our telephone number is (650) 812-6000.
RECENT DEVELOPMENTS AT LEGATO
On October 25, 1998, we entered into a definitive agreement to acquire
Qualix Group, Inc. (dba FullTime Software, Inc.), a 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 our common stock in
exchange for all the common stock and options of Qualix Group, Inc. The
transaction is expected to be completed by the end of April of 1999, and is
subject to the satisfaction of standard closing conditions, including the
approval of Qualix Group, Inc. stockholders. We expect to account for the
transaction as a pooling-of-interests.
On April 1, 1999, we completed the acquisition of Intelliguard
Software, Inc. and O.R.P., Inc., developers of standards-based storage
management solutions for storage area networks. In this document, we refer to
Intelliguard Software, Inc. and O.R.P., Inc. collectively as "Intelliguard". We
issued 720,000 shares of our common stock and provided cash consideration of
$9,112,500 for all of the outstanding stock and stock rights of Intelliguard. We
accounted for the transaction as a business purchase combination.
------------------------------
This Prospectus includes trademarks of Legato and
other corporations.
------------------------------
<PAGE>
RISK FACTORS
OUR QUARTERLY OPERATING RESULTS ARE VOLATILE AND UNCERTAIN. OUR FAILURE TO
MEET PUBLIC MARKET ANALYSTS' EXPECTATIONS WOULD HARM THE MARKET PRICE OF OUR
COMMON STOCK.
Our quarterly operating results have varied in the past and may vary in the
future. We believe that period-to-period comparisons of our results of
operations are not meaningful and should not be relied upon as indications of
future performance. We believe that our operating results may be below the
expectations of public market analysts and investors in some future quarter or
quarters. In the past, our common stock price has on occasion declined following
earnings announcements. Our failure to meet analyst or investor expectations
would likely seriously harm the market price of our common stock.
We cannot predict our future revenue with any significant degree of
certainty for several reasons including:
- Product revenue in any quarter is substantially dependent on orders
booked and shipped in that quarter, since we operate with virtually no
order backlog;
- We do not recognize revenue on sales to domestic distributors until
the products are sold through to end-users; o The storage management
market is rapidly evolving; o Our sales cycles vary substantially from
customer to customer, in large part because we are becoming
increasingly dependent upon larger enterprise license transactions to
corporate customers. Such transactions include product license,
service and support components and take a long time to complete;
- The timing of large orders can significantly affect revenue within a
quarter; and
- License and royalty revenue are difficult to forecast. Our royalty
revenue is dependent upon product license sales by OEMs of their
products that incorporate our software. Accordingly, these royalty
revenues are subject to OEMs' product cycles, which are also difficult
to predict. Fluctuations in licensing activity from quarter to quarter
further impact royalty revenues, because initial license fees
generally are non-recurring and recognized upon the signing of a
license agreement.
Our expense levels are relatively fixed and are based, in part, on our
expectations of our future revenue. Consequently, if revenue levels fall below
our expectations, our net income will decrease because only a small portion of
our expenses varies with our revenues.
OUR MARKET IS HIGHLY COMPETITIVE AND IF WE ARE UNABLE TO COMPETE
SUCCESSFULLY, OUR BUSINESS WILL BE HARMED.
We operate in the enterprise storage management market, which 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.
We expect to encounter new competitors as we enter new markets. In
addition, many of our existing competitors are broadening their platform
coverage. We also expect 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, since there are relatively low barriers to entry in the
software market, we expect additional competition from other established and
emerging companies. We also expect that competition will increase as a result of
future software industry consolidations. Increased competition could harm us by
causing, among other things:
- Price reductions;
- Reduced gross margins; and
- Loss of market share.
Many of our current and potential competitors have longer operating
histories and have substantially greater financial, technical, sales, marketing
and other resources, as well as greater name recognition and a larger customer
base, than we have. As a result, certain current and potential competitors can
respond more quickly to new or emerging technologies and changes in customer
requirements. They can also devote greater resources to the development,
promotion, sale and support of their products. In addition, current and
potential competitors may establish cooperative relationships among themselves
or with third parties. If so, 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 functionality offered by our products. If
so, our products could be rendered obsolete and unmarketable. For all the
foregoing reasons, we may not be able to compete successfully, which would
seriously harm our business, operating results and financial condition.
WE DEPEND ON OUR NETWORKER PRODUCT LINE. A DECLINE IN THE PRICE OF, DEMAND
FOR, OR MARKET ACCEPTANCE OF, NETWORKER WOULD SERIOUSLY HARM OUR BUSINESS.
We currently derive, and expect to continue to derive, a substantial amount
of our revenue from our NetWorker software products and related services. A
decline in the price of or demand for NetWorker, or failure to achieve broad
market acceptance of NetWorker, would seriously harm our business, operating
results and financial condition. We cannot reasonably predict NetWorker's
remaining life for several reasons, including:
- The recent emergence of our 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.
IF WE DO NOT RESPOND TO RAPID TECHNOLOGICAL CHANGES OUR EXISTING PRODUCTS
COULD BECOME OBSOLETE.
The markets for our products are 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 our
existing products obsolete and unmarketable. To be successful, we need 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 our customers.
We may:
- Fail to develop and market new products that respond to technological
changes or evolving industry standards; o Experience difficulties that
could delay or prevent the successful development, introduction and
marketing of these new products; or
- Fail to develop new products that adequately meet the requirements of
the marketplace or achieve market acceptance
If so, our business, operating results and financial condition would be
seriously harmed.
As of December 31, 1998, we had 193 employees engaged in research and
development, which represented 29% of our total workforce. If potential new
products are delayed or do not achieve market acceptance, our business,
operating results and financial condition would be seriously harmed. We plan to
introduce and market several potential new products in the next twelve months.
Some of our competitors currently offer certain of these potential new products.
Such potential new products are subject to significant technical risks. We may
fail to introduce such potential new products on a timely basis or at all. In
the past, we have experienced delays in the commencement of commercial shipments
of our new products. Such delays caused customer frustrations and delay or loss
of product revenue. If potential new products are delayed or do not achieve
market acceptance, our business, operating results and financial condition would
be seriously harmed. In the past, we have also experienced delays in purchases
of our products by customers anticipating our launch of new products. Our
business, operating results and financial condition would be seriously harmed if
customers defer material orders in anticipation of new product introductions.
WE RELY ON ENTERPRISE LICENSE TRANSACTIONS AND FAILURE TO SUCCESSFULLY
MARKET OUR PRODUCTS IN ENTERPRISE-LEVEL TRANSACTIONS WOULD HARM OUR BUSINESS.
In the past, we marketed our products at the department-level of corporate
customers. Within the last two years, we began to pursue larger enterprise
license transactions with corporate customers. We may fail to complete or
increase the number of such larger enterprise license transactions. Such failure
would seriously harm our business, operating results and financial condition.
Our operating results are sensitive to the timing of such orders. Such orders
are difficult to manage and predict, because:
- The sales cycle is typically lengthy, generally lasting three to six
months, and varies substantially from transaction to transaction;
- They often include product license, service and support components;
- They typically involve significant technical evaluation and commitment
of capital and other resources; and o Customers' internal procedures
frequently cause delays in orders. Such internal procedures include
approval of large capital expenditures, implementation of new
technologies within their networks, and testing new technologies that
affect key operations.
Due to the large size of enterprise transactions, if orders forecasted for a
specific transaction for a particular quarter are not realized in that quarter,
our operating results for that quarter may be seriously harmed.
Historically, we have not had a separate large enterprise or national
accounts sales force and only within the last eighteen months have we begun to
develop direct sales groups focused on these larger accounts. To succeed in the
national accounts market, we will be required to continue to transition our
existing sales forces into enterprise level sales groups, and attract and retain
qualified personnel. Such personnel will require training about and knowledge of
our products. We may not be successful in creating the necessary sales
organization or in attracting, retaining or training these individuals.
Historically, we have licensed our products at the departmental level. Success
in the enterprise and national accounts market will require, among other things,
establishing and continuing to develop relationships and contacts with senior
technology officers at these accounts. Our business, financial condition and
results of operations would be seriously harmed if our sales force is not
successful in these efforts.
WE RELY ON INDIRECT SALES CHANNELS AND IF THESE INDIRECT SALES CHANNELS DO
NOT PERFORM ADEQUATELY, OUR REVENUES WOULD DECLINE.
We rely significantly on our distributors, systems integrators and
resellers for the marketing and distribution of our products. Our agreements
with resellers are generally not exclusive and in many cases may be terminated
by either party without cause. Many of these resellers carry product lines that
are competitive with our products. These resellers may not give a high priority
to the marketing of our products. We may not be able to retain any of our
current resellers or successfully recruit new resellers. Any such changes in our
distribution channels could seriously harm our business, operating results and
financial condition.
Our strategy is also to increase the proportion of our customers licensed
through OEMs. We may fail to achieve this strategy. We are currently investing,
and intend to continue to invest resources to develop this channel. Such
investments could seriously harm our operating margins. We depend on our 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. Our OEMs
may not effectively meet these technological challenges. These OEMs:
- Are not within our control;
- May incorporate the technologies of other companies into their
products in addition to, or to the exclusion of, our technologies; and
- Are not obligated to purchase products from us. In addition, our OEMs
generally have exclusive rights to our technology on their platforms,
subject to certain minimum royalty obligations.
Our OEMs may not continue to carry our products. The inability to recruit, or
the loss of, important OEMs could seriously harm our business, operating results
and financial condition.
WE DEPEND ON INTERNATIONAL REVENUE AND THEREFORE OUR BUSINESS IS
SUSCEPTIBLE TO NUMEROUS RISKS ASSOCIATED WITH INTERNATIONAL OPERATIONS.
Our continued growth and profitability will require further expansion of
our international operations. To successfully expand international operations,
we must:
- Establish additional international operations;
- Hire addition personnel; and
- Recruit additional international resellers.
These efforts will require significant management attention and financial
resources and could seriously harm our operating margins. If we fail to further
expand our international operations in a timely manner, our business, operating
results and financial condition could be seriously harmed. In addition, we may
fail to maintain or increase international market demand for our products. Our
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 our
products more expensive and, therefore, potentially less competitive in those
markets. In some markets, localization of our products is essential to achieve
market penetration. We may incur substantial costs and experience delays in
localizing our products. We may fail to generate significant revenue from
localized products.
Additional risks inherent in our international business activities
generally include:
- Significant reliance on our distributors and other resellers who do
not offer our products exclusively;
- Unexpected changes in regulatory requirements;
- Tariffs and other trade barriers;
- Lack of acceptance of localized products, if any, in other countries;
- Longer accounts receivable payment cycles;
- Difficulties in managing international operations;
- Potentially adverse tax consequences, including restrictions on the
repatriation of earnings;
- The burdens of complying with a wide variety of international laws;
and
- The risks related to the recent global economic turbulence and adverse
economic circumstances in Asia.
The occurrence of such factors could seriously harm our international sales and,
consequently, our business, operating results and financial condition.
IN ORDER TO PROPERLY MANAGE OUR GROWTH AND EXPANSION, WE MAY NEED TO
IMPROVE AND IMPLEMENT NEW SYSTEMS, PROCEDURES AND CONTROLS.
We have recently experienced a period of significant expansion of our
operations. Our headcount increased from 303 at December 31, 1996 to
approximately 738 at February 28, 1999 and will increase further upon the
integration of employees from our recent acquisition of Intelliguard. Also, we
expect our headcount to increase upon the closing of the Full Time acquisition
expected to be completed by the end of April of 1999. This growth has placed and
will place a significant strain upon our management systems and resources. We
plan to expand the geographic scope of our customer base and operations. This
expansion has resulted and will continue to result in substantial demands on our
management resources.
From time to time, we receive customer complaints about the timeliness and
accuracy of customer support. We plan to add customer support personnel in order
to address current customer support needs. If we are not successful hiring such
personnel, our business, operating results and financial condition could be
seriously harmed. Our ability to compete effectively and to manage future
expansion of our operations, if any, will require us to:
- Continue to improve our financial and management controls, reporting
systems and procedures on a timely basis; and
- Expand, train and manage our employee work force.
Our failure to do so could seriously harm our business, operating results
and financial condition.
If We Do Not Successfully Integrate Recent and Pending Acquisitions, Our
Business Would Be Harmed.
We expect that we will face numerous challenges in integrating the
operations of recently completed and pending acquisitions. On August 6, 1998, we
acquired Software Moguls, Inc. ("SMI"), a developer of advanced backup-retrieval
products for the Windows NT and UNIX environments. On April 1, 1999, we acquired
Intelliguard Software, Inc., a developer of standards-based storage management
solutions for storage area networks.
On October 25, 1998, we entered into a definitive agreement to acquire
Qualix Group, Inc. (dba FullTime Software, Inc.), a developer of distributed,
enterprise-wide, cross-platform, adaptive computing solutions. The acquisition
is expected to be completed by the end of April of 1999, subject to the
satisfaction of standard closing conditions, including shareholder approval.
We may make additional 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;
- Substantial transaction costs; and
- Substantial additional costs charged to operations as a result of the
failure to consummate acquisitions.
Some of the products we acquired may require significant additional
development before they can be marketed and may not generate revenues at levels
we anticipate. Moreover, any future acquisitions may result in dilutive
issuances of our 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 factors could seriously harm our
business, financial condition and results of operations.
IF THE STORAGE MANAGEMENT MARKET DOES NOT CONTINUE TO GROW, OUR SALES
OPPORTUNITIES WOULD BE LIMITED.
All of our business is in the storage management market. The storage
management market is still an emerging market and may not continue to grow. Our
future financial performance will depend in large part on continued growth in
the number of organizations adopting company-wide storage and management
solutions for their client/server computing environments. If this market fails
to grow or grows more slowly than we currently anticipate, our business,
operating results and financial conditions would be seriously harmed.
WE RELY ON OUR KEY PERSONNEL.
Our future performance depends on the continued service of our key
technical and senior management personnel. None of our key technical or senior
management personnel is bound by an employment agreement. The loss of the
services of one or more of our officers or other key employees could seriously
harm our business, operating results and financial condition. Our future success
also depends on our continuing ability to attract and retain highly qualified
technical and managerial personnel. Competition for such personnel is intense,
and we may fail to retain our key technical and managerial employees or attract,
assimilate or retain other highly qualified technical and managerial personnel
in the future.
PROTECTION OF OUR INTELLECTUAL PROPERTY IS LIMITED.
Our success depends significantly upon protecting our intellectual property
which are our most important assets. Despite our efforts to protect our
proprietary rights, unauthorized parties may attempt to copy aspects of our
products or to obtain and use information that we regard as proprietary.
Policing unauthorized use of our products is difficult, and software piracy can
be expected to be a persistent problem. In licensing our products, other than in
enterprise license transactions, we rely on "shrink wrap" licenses that are not
signed by licensees. Such licenses may be unenforceable under the laws of
certain jurisdictions. In addition, the laws of some other countries do not
protect our proprietary rights to as great an extent as do the laws of the
United States. Our means of protecting our proprietary rights may not be
adequate. Our competitors may independently develop similar technology,
duplicate our products or design around patents issued to us or other
intellectual property rights of ours.
From time to time, we have received claims that we are infringing third
parties' intellectual property rights. In the future, we may be subject to
claims of infringement by third parties with respect to current or future
products, trademarks or other proprietary rights. We expect that software
product developers will increasingly be subject to infringement claims as the
number of products and competitors in our 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 us to enter into royalty or
licensing agreements with third parties. If such royalty or licensing
agreements, if required, are not available on terms acceptable to us, our
business, operating results and financial condition could be seriously harmed.
DEFECTS IN OUR PRODUCTS WOULD HARM OUR BUSINESS.
Our license agreements with our customers typically contain provisions
designed to limit exposure to potential product liability claims. In licensing
our products, other than in enterprise license transactions, we rely on "shrink
wrap" licenses that are not signed by licensees. Such licenses may be
unenforceable under the laws of certain jurisdictions. As a result of these and
other factors, limitation of liability provisions contained in our license
agreements may not be effective. Our products can be used to manage data
critical to organizations. As a result, the sale and support of products we
offer may entail the risk of product liability claims. A successful product
liability claim brought against us could seriously harm our business, operating
results and financial condition.
YEAR 2000 ISSUES COULD AFFECT OUR BUSINESS.
Many currently installed computer systems and software products include
coding 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. Our computer systems and/or software 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 exits the software industry concerning
the potential effects associated with such problems.
We have conducted Year 2000 compliance reviews for current versions of our
products. The reviews include:
- Assessment;
- Implementation;
- Validation testing; and
- Contingency planning.
We respond to customer concerns about our products on a case-by-case basis.
Although we believe our software products are Year 2000 compliant, our software
products may not contain all the necessary software routines and programs for
the accurate calculation, display, storage and manipulation of data involving
dates. Failure of our software products to contain all the necessary software
routines and programs for the accurate calculation, display, storage and
manipulation of data involving dates would seriously harm our business,
operating results and financial condition.
To the extent information is publicly available we have assessed the Year
2000 compliance status of our customers. If our current or future customers fail
to achieve Year 2000 compliance or we divert technology expenditures to address
Year 2000 compliance problems, our business, results of operations, or financial
condition would be seriously harmed.
We have tested software obtained from third parties that is incorporated
into our products, and seek assurances from vendors that licensed software is
Year 2000 compliant. Despite such testing and assurances, products incorporated
into our 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 our reputation; or
- Increased service and warranty costs.
The occurrence of any of the foregoing could seriously harm our business,
operating results, or the financial condition.
We believe the software and hardware we use internally comply with Year
2000 requirements. During 1998, we replaced or upgraded much of our internal use
hardware and software. In addition, we are not aware of any material operational
issues or costs associated with preparing our internal use software and hardware
for the Year 2000. However, serious, unanticipated negative consequences,
including material costs caused by undetected errors or defects in the
technology used in our internal systems may occur. The occurrence of any of the
foregoing could seriously harm our business, operating results or financial
condition.
We have funded our Year 2000 compliance review from operating cash flows
and have not separately accounted for these costs in the past. We will incur
additional amounts related to the Year 2000 compliance review including:
- Administrative personnel to manage the review; and
- Outside contractors to provide technical advice and technical support
for our products, product engineering, and customer satisfaction.
We are currently developing contingency plans to be implemented as part of
our efforts to identify and correct Year 2000 problems. Depending on the systems
affected, these plans include:
- Accelerated replacement of affected equipment or software;
- Short to medium-term use of backup equipment and software;
- Increased work hours for our personnel or use of contract personnel to
correct (on an accelerated schedule) any Year 2000 problems that arise
or to provide manual workarounds for information systems; and
- Other similar approaches
If we are required to implement any of these contingency plans, it could
seriously harm our business, financial condition and operating results. Our
ability to achieve Year 2000 compliance and the level of incremental costs
associated therewith, could be seriously impacted by, among other things:
- The availability and cost of programming and testing resources;
- Vendors' ability to modify proprietary software; and
- Unanticipated problems identified in the ongoing compliance review.
<PAGE>
FORWARD - LOOKING STATEMENTS
This prospectus, including the documents incorporated by reference
herein, contains forward-looking statements that involve risks and
uncertainties. 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 statements regarding the Legato's expectations, beliefs,
intentions or strategies regarding the future. All forward-looking statements
included in this document are based on information available to the Legato on
the date hereof, and Legato assumes no obligation to update any such
forward-looking statements. Legato'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." You should carefully consider the risks described in the "Risk
Factors" section, in addition to the other information set forth in this
prospectus and incorporated by reference herein, before making an investment
decision.
USE OF PROCEEDS
All net proceeds from the sale of Legato common stock will go to the
stockholders who offer and sell their shares. Accordingly, Legato 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 April 1,
1999, with respect to the number of shares of common stock owned by the selling
stockholders named below 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. Based upon 38,082,575 shares of common
stock outstanding on March 29, 1999, George B. Wilson is the only selling
stockholder that owns more than 1% of the outstanding stock of Legato. See "Plan
of Distribution."
The shares being offered by the selling stockholders were acquired from
Legato in our acquisition of Intelliguard Software, Inc. and O.R.P., Inc.,
pursuant to a stock purchase agreement signed on January 27, 1999. The shares of
common stock were issued pursuant to an exemption from the registration
requirements of the Securities Act. The selling stockholders represented to
Legato that they were acquiring the shares for investment and with no present
intention of distributing the shares.
Legato has filed with the SEC, 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 on The Nasdaq National Market or in
privately-negotiated transactions. Legato has agreed to use its best 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 Selling Number of Number of Shares Number of
Stockholders Shares Percent Being Offered Shares Percent
- ------------ ------ ------- ------------- ------ -------
<S> <C> <C> <C> <C> <C>
George B. Wilson 450,000 (1) 1.2 450,000 0 -
1261 Farm Road
Berwyn, PA 19312
Roger K. Stager 135,000 (2) * 135,000 0 -
683 Newbury Street
Livermore, CA 94550
Donald Trimmer 135,000 (2) * 135,000 0 -
------- - ------- - -
1687 Quail Court
Livermore, CA 94550
TOTAL 720,000 1.9 720,000 0 -
======= === ======= = =
<FN>
- -----------------
* Less than 1%
(1) Includes 56,250 shares of common stock that are subject to an escrow in
favor of Legato to satisfy any breaches of representations and warranties
made by Intelliguard or certain of its stockholders in connection with
Legato's acquisition of Intelliguard. Such escrow will expire April 1,
2000.
(2) Includes 16,875 shares of common stock that are subject to an escrow in
favor of Legato to satisfy any breaches of representations and warranties
made by Intelliguard or certain of its stockholders in connection with
Legato's acquisition of Intelliguard. Such escrow will expire April 1,
2000.
</FN>
</TABLE>
<PAGE>
PLAN OF DISTRIBUTION
The shares offered hereby may be sold by the selling stockholders at
various times in one or more of the following transactions:
- In the over-the-counter market;
- On The Nasdaq National Market;
- In privately negotiated transactions; or
- In a combination of any of the above transactions.
The selling stockholders may sell their shares at market prices
prevailing at the time of the sale, at prices related to such prevailing market
prices, at negotiated prices or at fixed prices.
The selling stockholders may use broker-dealers to sell their shares.
If this happens, broker-dealers will either receive discounts or commissions
from the selling stockholders, or they will receive commissions from purchasers
of shares for whom they acted as agents.
For the purposes of this Prospectus, the term "selling stockholders"
shall include donees, pledgees and other assignees selling shares received from
a selling stockholder named herein as well as any donees, pledgees and other
assignees selling shares received from such donees, pledgees or assignees.
LEGAL MATTERS
The legality of the securities offered hereby will be passed upon for
Legato by Gunderson Dettmer Stough Villeneuve Franklin & Hachigian, LLP, Menlo
Park, California.
EXPERTS
The consolidated balance sheets of Legato as of December 31, 1998, and
1997 and the consolidated statements of income and comprehensive income,
stockholders' equity, and cash flows for each of the years in the three year
period ended December 31, 1998 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 June 30, 1997 and for each of the three years in the period ended June
30, 1998 are incorporated by reference in this prospectus from Legato Systems,
Inc.'s registration statement No. 333-74433 on Form S-4. 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.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements and
other information with the SEC. You may read and copy any document we file at
the SEC's public reference rooms in Washington, D.C., New York, New York and
Chicago, Illinois. Please call the SEC at 1-800-SEC-0330 for further information
on the public reference rooms. Our SEC filings are also available to the public
from the SEC's website at "http://www.sec.gov."
The SEC allows us to "incorporate by reference" the information we file
with them, which means that we can disclose important information to you by
referring you to those documents. The information incorporated by reference is
considered to be part of this prospectus, and information that we file later
with the SEC will automatically update and supersede this information. We
incorporate by reference the documents listed below and any future filings we
will make with the SEC under Section 13(a), 13(c), 14 or 15(d) of the Securities
Exchange Act of 1934:
1. Annual Report on Form 10-K for the year ended December 31,
1998, filed on February 10, 1999, as amended by Legato's
amendment to the Annual Report on Form 10-K/A for the fiscal
year ended December 31, 1998, filed on March 4, 1999;
2. The information from the section entitled "Unaudited Pro Forma
Combined Condensed Consolidated Financial Statements",
appearing on pages 71-75, and the section entitled "Qualix
Group, Inc. Consolidated Financial Statements", appearing on
pages F-1 - F-23, of Legato's registration statement on Form
S-4 filed on March 16, 1999 (File No.
333-74433);
3. The description of Legato capital stock contained in Legato's
registration statement on Form 8-A, dated May 24, 1995,
including any amendment or report updating such description;
and
4. The description of Legato capital stock contained in Legato's
registration statement on Form 8-A, dated May 23, 1997,
including any amendment or report updating such description
You may request a copy of these filings, at no cost, by calling us at
(650) 812-6000 or by writing to us at the following address:
Legato Systems, Inc.
3210 Porter Drive
Palo Alto, CA 94304
Attn: Investor Relations
<PAGE>
This prospectus is part of a registration statement we filed with the SEC. You
should rely only on the information or representations provided in this
prospectus. We have authorized no one to provide you with different information.
We are not making an offer of these securities in any state where the offer is
not permitted. You should not assume that the information in this prospectus is
accurate as of any date other than the date on the front of the document.
720,000 Shares
LEGATO SYSTEMS, INC.
Common Stock
-------------
April __, 1999
--------------
<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.................................. $10,000
Legal Fees and Expenses.............................................................. 10,000
Accounting Fees and Expenses......................................................... 5,000
Transfer Agent and Registrar Fees.................................................... 14,500
Miscellaneous........................................................................ 4,500
---------
Total........................................................................... $44,000
=======
</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, Legato's Certificate of Incorporation
("Certificate") contains a provision to limit the personal liability of the
directors of Legato for violations of their fiduciary duty as a director. This
provision eliminates each director's liability to Legato or its stockholders for
monetary damages except (i) for any breach of the director's duty of loyalty to
the Legato 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 Legato's Certificate and Article VII, Section 6 of
Legato's Bylaws provide for indemnification of the officers and directors of
Legato to the fullest extent permitted by applicable law.
Legato 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* Stock Purchase Agreement, dated January 27, 1999, by and among Legato Systems, Inc., Intelliguard
Software, Inc. 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.
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 (reference is made to the signature page of this Registrant Statement).
- -------------------
<FN>
*As 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 Form8-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 2nd day of
April, 1999.
Legato systems, inc.
By: /s/ Louis C. Cole
Chairman of the Board,President
and Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints jointly and severally, Louis C. Cole and
Stephen C. Wise, and each of them, the lawful attorneys and agents, with power
and authority to do any and all acts and things and to execute any and all
instruments which said attorneys and agents determine may be necessary or
advisable or required to enable Legato Systems, Inc., a Delaware corporation, to
comply with the Securities Act, and any rules or regulations or requirements of
the Securities and Exchange Commission in connection with this Registration
Statement. Without limiting the generality of the foregoing power and authority,
the powers granted include the power and authority to sign the names of the
undersigned officers and directors in the capacities indicated below to this
Registration Statement, to any and all amendments, both pre-effective and
post-effective, and supplements to this Registration Statement, and to any and
all instruments or documents filed as part of or in conjunction with this
Registration Statement or amendments or supplements thereof, and each of the
undersigned hereby ratifies and confirms all that said attorneys and agents or
any of them shall do or cause to be done by virtue hereof. This Power of
Attorney may be signed in several counterparts.
IN WITNESS WHEREOF, each of the undersigned has executed this Power of
Attorney as of the date indicated.
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 April 12, 1999
- ----------------------------------------
Louis C. Cole Executive Officer (Principal Executive
Officer)
/s/ Stephen C. Wise* Senior Vice President, Finance and April 12, 1999
- ----------------------------------------
Stephen C. Wise Administration and Chief Financial Officer
(Principal Financial and Accounting Officer)
/s/ Eric A. Benhamou* Director April 12, 1999
- ----------------------------------------
Eric A. Benhamou
/s/ H. Raymond Bingham* Director April 12, 1999
- ----------------------------------------
H. Raymond Bingham
/s/ Kevin A. Fong* Director April 12, 1999
- ----------------------------------------
Kevin A. Fong
/s/ David N. Strohm* Director April 12, 1999
- ----------------------------------------
David N. Strohm
/s/ Phillip E. White* Director April 12, 1999
- ----------------------------------------
*By: /s/ Louis C. Cole
- ----------------------------------------
Louis C. Cole, Attorney-in-Fact
</TABLE>
<PAGE>
Exhibit Index
<TABLE>
Exhibit
Number Description
<S> <C>
2.1* Stock Purchase Agreement, dated January 27, 1999, by and among Legato Systems, Inc., Intelliguard
Software, Inc. 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.
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 (reference is made to the signature page of this Registrant Statement).
- -------------------
<FN>
*As 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 Form8-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
720,000 shares of its common shares, of our reports dated January 18, 1999, on
our audits of the consolidated financial statements and financial statement
schedule of the Company as of December 31, 1998 and 1997, and for the years
ended December 31, 1998, 1997 and 1996 which reports are included in the
Company's 1998 Annual Report on Form 10-K/A, 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
April 12, 1999
<PAGE>
EXHIBIT 23.3
CONSENT OF DELOITTE & TOUCHE LLP
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
registration statement No. 333-74433 on Form S-4 of Legato Systems, Inc. We also
consent to the reference to us under the heading "Experts" in the prospectus,
which is part of this Registration Statement.
/s/ DELOITTE & TOUCHE LLP
San Jose, California
April 12, 1999
