As filed with the Securities and Exchange Commission on April 8, 2004
Registration Statement No. 333-112431
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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Amendment No. 2 to
FORM S-3
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REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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NETEGRITY, INC.
(Exact name of registrant as specified in its charter)
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Delaware 04-2911320
(State or other jurisdiction of incorporation (I.R.S. Employer Identification
or organization) No.)
201 Jones Road
Waltham, MA 02451
(781) 890-1700
(Address, including zip code, and telephone number, including area code,
of registrant's principal executive offices)
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Regina O. Sommer
Chief Financial Officer and Treasurer
Netegrity, Inc.
201 Jones Road
Waltham, MA 02451
(781) 890-1700
(Name, address, including zip code, and telephone number, including area
code, of agent for service)
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Copies to:
Peter N. Handrinos, Esq.
Hale and Dorr LLP
60 State Street
Boston, Massachusetts 02109
Telephone: (617) 526-6000
Telecopy: (617) 526-5000
Approximate date of commencement of proposed sale to 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. [ ] 333-_______.
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. [ ] 333-__________.
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. [ ]
THE COMPANY HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE COMPANY 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),
SHALL DETERMINE.
================================================================================
THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. THE
SELLING STOCKHOLDERS NAMED IN THIS PROSPECTUS MAY NOT SELL THESE SECURITIES
UNTIL THE REGISTRATION STATEMENT FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER TO SELL THESE
SECURITIES AND THE SELLING STOCKHOLDERS NAMED IN THIS PROSPECTUS ARE NOT
SOLICITING OFFERS TO BUY THESE SECURITIES IN ANY JURISDICTION WHERE THE OFFER OR
SALE IS NOT PERMITTED.
SUBJECT TO COMPLETION, DATED APRIL 8, 2004
PROSPECTUS
NETEGRITY, INC.
2,556,940 SHARES OF COMMON STOCK
This prospectus relates to resales of shares of common stock that we previously
issued to the former stockholders of Business Layers, Inc. in connection with
our acquisition of that company.
We will not receive any proceeds from the sale of the shares.
The selling stockholders identified in this prospectus, or their pledgees,
donees, transferees or other successors-in-interest, may offer the shares from
time to time through public or private transactions at prevailing market prices,
at prices related to prevailing market prices or at privately negotiated prices.
Our common stock is traded on The NASDAQ National Market under the symbol
"NETE." On April 7, 2004, the closing sale price of the common stock on NASDAQ
was $9.62 per share. You are urged to obtain current market quotations for the
common stock.
INVESTING IN OUR COMMON STOCK INVOLVES A HIGH DEGREE OF RISK. SEE "RISK FACTORS"
BEGINNING ON PAGE 2.
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.
The date of this prospectus is _______ __, 2004.
TABLE OF CONTENTS
PAGE
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PROSPECTUS SUMMARY....................................... 1
THE OFFERING............................................. 1
RISK FACTORS............................................. 2
SPECIAL NOTE REGARDING FORWARD-LOOKING
INFORMATION.............................................. 9
USE OF PROCEEDS.......................................... 11
SELLING STOCKHOLDERS..................................... 11
PLAN OF DISTRIBUTION..................................... 13
LEGAL MATTERS............................................ 14
EXPERTS.................................................. 14
WHERE YOU CAN FIND MORE INFORMATION...................... 15
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE.......... 15
Netegrity's executive offices are located at 201 Jones Road, Waltham,
Massachusetts 02451, our telephone number is (781) 890-1700 and our Internet
address is www.netegrity.com. The information on our Internet website is not
incorporated by reference in this prospectus. Unless the context otherwise
requires references in this prospectus to "Netegrity," "we," "us," and "our"
refer to Netegrity, Inc. and its subsidiaries.
"Netegrity", "SiteMinder", "IdentityMinder" and "TransactionMinder" are
our trademarks or registered trademarks.
We have not authorized anyone to provide you with information different
from that contained or incorporated by reference in this prospectus. The selling
stockholders are offering to sell, and seeking offers to buy, shares of our
common stock only in jurisdictions where offers and sales are permitted. The
information contained in this prospectus is accurate only as of the date of this
prospectus, regardless of the time of delivery of this prospectus or of any sale
of common stock.
-ii-
PROSPECTUS SUMMARY
This summary highlights important features of this offering and the
information included or incorporated by reference in this prospectus. This
summary does not contain all of the information that you should consider before
investing in our common stock. You should read the entire prospectus carefully,
especially the risks of investing in our common stock discussed under "Risk
Factors."
NETEGRITY, INC.
We are a leading provider of security software solutions that securely
manage identities and their access to enterprise information assets, letting
business in while keeping risk out. We provide a comprehensive identity and
access management product line for continuously evolving computing environments,
including legacy, Web, and service-oriented architectures. Our flexible,
standards-based offerings increase security, reduce administrative costs, and
enable revenue enhancement.
Our suite of core products, SiteMinder, IdentityMinder,
TransactionMinder and the provisioning software recently purchased from Business
Layers, provides an identity and access management solution for Web access
control and management, user administration, provisioning and de-provisioning of
account access. We also offer various levels of consulting and support services
that enable our customers to successfully implement our products in their
organizations.
THE OFFERING
Common Stock offered by selling
stockholders......................................... 2,556,940 shares
Use of proceeds...................................... We will not receive any proceeds from the sale of
shares in this offering
NASDAQ National Market symbol........................ NETE
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RISK FACTORS
Investing in our common stock involves a high degree of risk. You
should carefully consider the risks and uncertainties described below before
purchasing our common stock. The risks and uncertainties described below are not
the only risks facing our company. Additional risks and uncertainties may also
impair our business operations. If any of the following risks actually occur,
our business, financial condition or results of operations would likely suffer.
In that case, the trading price of our common stock could fall, and you may lose
all or part of your investment.
WE HAVE INCURRED SUBSTANTIAL LOSSES AND MAY NOT BE PROFITABLE IN THE FUTURE.
In recent years, we have incurred substantial operating losses. While we
recently returned to profitability on a quarterly basis, we cannot predict if we
will maintain profitability for any substantial period of time. To sustain
operating profitability on a quarterly and annual basis, we will need to
continue to increase our revenues, particularly our license revenues. Failure to
maintain levels of profitability as expected by investors may adversely affect
the market price of our common stock. We had a net loss of $4.2 million for the
year ended December 31, 2003 and an accumulated deficit of $111.0 million as of
December 31, 2003.
OUR QUARTERLY RESULTS MAY FLUCTUATE WIDELY.
Our quarterly revenues and operating results are difficult to predict and
may continue to fluctuate significantly from quarter to quarter for several
reasons, including, but not limited to, the following:
- customers choosing to delay their purchase commitments or
purchase in smaller than expected quantities due to a general
slowdown in the economy or in anticipation of the introduction
of new products by us or our competitors;
- market acceptance of our SiteMinder, IdentityMinder Web
Edition, IdentityMinder eProvision and TransactionMinder
provisioning products;
- our success in obtaining follow-on sales to existing
customers;
- the long sales and deployment cycle of our products;
- our ability to hire and retain personnel, particularly in
development, services and sales and marketing;
- the loss of or changes in key management personnel;
- the timing of the release of new versions of our SiteMinder,
IdentityMinder Web Edition, IdentityMinder eProvision and
TransactionMinder or other products;
- pricing pressures that result in increased discounts or
changes in our or competitors' pricing policies;
- changes in our operating expenses;
- the development of our direct and indirect distribution
channels;
- integration issues with acquired technology; and
- general economic conditions.
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In addition, because our revenues from services, particularly maintenance
revenues, are largely correlated with our software revenues, a decline in
software revenues could also cause a decline in our services revenues in the
same quarter or in subsequent quarters. Other factors, many of which are outside
our control, could also cause variations in our quarterly revenues and operating
results.
Most of our expenses, such as employee compensation and rent, are relatively
fixed. As a result, any shortfall in revenues in relation to our expectations
could cause significant changes in our operating results from quarter to quarter
and could result in future losses.
OUR SUCCESS WILL DEPEND ON OUR ABILITY TO MARKET OUR PRODUCTS AND RELATED
SERVICES SUCCESSFULLY.
Our revenues are primarily generated from the sale of perpetual licenses for
our proprietary SiteMinder, IdentityMinder Web Edition, IdentityMinder
eProvision, TransactionMinder and related services. Broad market acceptance of
our products will depend on the continued development of a market for identity
and access management, the education of our customers on the use of business
software applications in general and the relevance of our products specifically.
Market acceptance for our products, and customer demand for the services they
provide, may not develop.
We have released several new product offerings in the past 12 months. If we
fail to gain market acceptance for these products, our business, operating
results and financial position could be materially adversely affected.
Additionally, with the reduction in information technology spending in all
industries we will need to be successful in conveying the value of our products
to customers who may be hesitant to replace a "homegrown" system due to the
costs involved with switching to a purchased solution.
Our ability to succeed in the market for our products depends in part on our
ability to provide support services on a 24 hour per day, seven day per week
basis. Any damage or disruptions to our service centers, including our service
centers in Malaysia and Israel, whether as a result of employee attrition, acts
of terrorism or some other cause, or language barriers, could seriously impact
our ability to provide the necessary service to our customers and fulfill our
service contracts.
OUR SUCCESS IS DEPENDENT ON OUR ABILITY TO ENHANCE OUR PRODUCT LINES AND DEVELOP
NEW PRODUCTS.
We believe our success is dependent, in large part, on our ability to
enhance and broaden our product lines to meet the evolving needs of the business
market. We may not be able efficiently to integrate recently acquired
technologies into our products. We may be unable to respond effectively to
technological changes or new industry standards or developments. Product
development cycles are unpredictable and, in the past, we have delayed the
introduction of several new product versions due to delays in development.
We have arrangements with a third party located in India to perform certain
testing of our products, as well as internationalization and porting of our
products to new platforms, and with third party software vendors who provide
software which is embedded in our products. Any adverse change in our
relationship with these third parties could result in delays in the release of
our products. In the future, we could be adversely affected and be at a
competitive disadvantage if we incur significant delays or are unsuccessful in
enhancing our product lines or developing new products, or if any of our
enhancements or new products do not gain market acceptance.
As we continue to release new versions of our existing software we may be
required to assist customers in migrating to the latest version once a product
is announced to be at the end of its life. Additionally, we may be required to
assist Business Layers customers in migrating to more standardized versions of
the provisioning product. We could be adversely affected if there are
significant migration issues and a decline in customer satisfaction related to
such transitions.
OUR ACQUISITION OF BUSINESS LAYERS AND OTHER COMPANIES MAY INCREASE THE RISKS WE
FACE.
We recently acquired Business Layers. In the future, we may pursue other
acquisitions to obtain complementary products, services and technologies. These
acquisitions may not produce the revenues, earnings or business synergies that
we anticipate, and an acquired product, service or technology might not perform
as we expect. In
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pursuing any acquisition, our management could spend a significant amount of
time and effort in identifying and completing the acquisition. We will have to
devote a significant amount of management resources to integrate with our
existing business the business we acquired from Business Layers and any other
business we might acquire. We might not be able to successfully transfer the
knowledge of the employees or integrate the operations of acquired businesses,
including Business Layers. As a result of acquisitions, we might assume
contracts and other agreements that subject us to burdensome liabilities,
including obligations to indemnify third parties, or impose unfavorable terms on
us, including significant royalty obligations and termination fees. We may not
be able to renegotiate these agreements. To pay for an acquisition, we might use
our stock or cash. Alternatively, we might borrow money from a bank or other
lender. If we use our stock, our stockholders would experience dilution of their
ownership interests. If we use cash or debt financing, our financial liquidity
will be reduced.
OUR PERFORMANCE DEPENDS ON OUR ABILITY TO WIN BUSINESS AND OBTAIN FOLLOW-ON
SALES IN PROFITABLE SEGMENTS.
Customers typically place small initial orders for our products to allow
them to evaluate our products' performance. A key element of our strategy is to
pursue more significant follow-on sales after these initial installations. Our
financial performance depends on successful initial deployments of our products
that, in turn, lead to follow-on sales. If the initial deployments of our
products are not successful or if our customers do not remain satisfied with our
products and services, we may be unable to obtain follow-on sales. In addition,
even if initial deployments are successful, we cannot assure you that customers
will choose to make follow-on purchases, which could have a material adverse
effect on our ability to generate revenues.
WE FACE SIGNIFICANT COMPETITION FROM OTHER TECHNOLOGY COMPANIES AND WE MAY NOT
BE ABLE TO COMPETE EFFECTIVELY.
The market for identity and access management is highly competitive. We
expect the level of competition to increase as a result of the anticipated
growth of the identity and access management market. Our primary competitor in
the identity and access management market is the Tivoli Division of IBM. We also
compete against traditional security and software companies, such as Oblix, RSA
and Novell, and stack vendors such as Sun MicroSystems. In addition, a number of
other security and software companies are beginning to offer products that may
compete with our identity and access management solution. Competition may also
develop as the market matures and other companies begin to offer similar
products, and as our product offerings expand to other segments of the
marketplace. We also face competition from Web development professional services
organizations. We expect that additional competitors will emerge in the future.
Current and potential competitors have established, or may in the future
establish, cooperative selling relationships with third parties to increase the
distribution of their products to the marketplace. Accordingly, it is possible
that new competitors may emerge and acquire significant market share. It is
possible that current and potential competitors may attempt to hire our
employees and although we have non-compete agreements in place with most of our
employees they may or may not be enforceable. It is possible that new
competitors or alliances may emerge and rapidly acquire significant market
share. Today, many of our competitors have shorter operating histories and fewer
financial and technical resources than we have. In addition, these smaller
competitors have smaller customer bases. Some of our other competitors, however,
are larger companies who have large financial resources, well-established
development and support teams, and large customer bases. These larger
competitors may initiate pricing policies that would make it more difficult for
us to maintain our competitive position against these companies. It is also
possible that current and potential competitors may be able to respond more
quickly to new or emerging technologies or customer requirements, resulting in
increased market share. If, in the future, a competitor chooses to bundle a
competing point product with other applications within a suite, the demand for
our products might be substantially reduced. Because of these factors, many of
which are out of our control, we may be unable to maintain or enhance our
competitive position against current and future competitors.
REGULATIONS OR CONSUMER CONCERNS REGARDING THE USE OF "COOKIES" ON THE INTERNET
COULD REDUCE THE EFFECTIVENESS OF OUR SOFTWARE PRODUCTS.
Certain of our products use cookies to support their single sign-on
functionality. A cookie is information keyed to a specific user that is stored
on the hard drive of the user's computer, typically without the user's
knowledge. Cookies are generally removable by the user, and can be refused by
the user at the point at which the information would not be stored on the user's
hard drive. A number of governmental bodies and commentators in the United
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States and abroad have urged passage of laws limiting or abolishing the use of
cookies. The passage of laws limiting or abolishing the use of cookies, or the
widespread deletion or refusal of cookies by Web site users, could reduce or
eliminate the effectiveness of our single sign-on functionality and could reduce
market demand for our products.
WE MAY BE UNABLE TO HIRE AND RETAIN SKILLED PERSONNEL.
Qualified personnel are in great demand throughout the software industry.
Our success depends, in large part, upon our ability to attract, train, motivate
and retain highly skilled employees, particularly software engineers,
professional services personnel, sales and marketing personnel and other senior
personnel. Our failure to attract and retain the highly trained technical
personnel that are integral to our product development, professional services
and direct sales teams, particularly software engineers, may limit the rate at
which we can generate sales, develop new products or product enhancements or
transfer technical knowledge across our employee base. A change in key
management could result in transition and attrition in the affected department.
In addition, we may experience attrition by employees we acquire as a result of
acquisitions of other companies if those employees experience difficulties in
integrating with our existing employees and management. This could have a
material adverse effect on our business, operating results and financial
condition.
OUR SUCCESS DEPENDS ON OUR ABILITY TO OPTIMIZE OUR DIRECT SALES AND INDIRECT
DISTRIBUTION CHANNELS.
To increase our revenues, we must optimize our direct sales force and
continue to enhance relationships with systems integrators, resellers and
technology partners to increase the leverage of our partners. There is intense
competition for sales personnel in our business, and we cannot be sure that we
will be successful in attracting, integrating, motivating and retaining sales
personnel. In addition, we must effectively leverage our relationships with our
strategic partners and other third-party system integrators, vendors of
Internet-related systems and application software and resellers in order to
reach a larger customer population than we could reach alone through our direct
sales and marketing efforts.
We may not be able to find appropriate strategic partners or may not be able
to enter into relationships on commercially favorable terms, particularly if
these partners decide to compete directly in the identity and access management
market. Furthermore, the relationships we do enter into may not be successful.
Our strategic relationships are generally non-exclusive, and therefore, our
strategic partners may decide to pursue alternative technologies or to develop
alternative products in addition to or instead of our products, either on their
own or in collaboration with our competitors.
WE RELY ON THIRD PARTY TECHNOLOGY TO ENHANCE OUR PRODUCTS.
We incorporate into our products software licensed from third party software
companies that enhances, enables or provides functionality for our products and,
therefore, we need to create relationships with third parties, including some of
our competitors, to ensure that our products will interoperate with the third
parties' products. Third party software may not continue to be available on
commercially reasonable terms or with acceptable levels of support or
functionality, or at all. Failure to maintain those license arrangements,
failure of the third party vendors to provide updates, modifications or future
versions of their software or defects and errors in or infringement claims
against those third party products could delay or impair our ability to develop
and sell our products and potentially cause us to incur additional cost. There
are also third party products incorporated into the provisioning products that
we recently acquired from Business Layers. We expect to renegotiate some of the
terms of those licensing arrangements. There can be no assurance that we will be
able to renegotiate those agreements on commercially favorable terms. In
addition, if we discover that third party products are no longer available as a
result of changes in the third party's operations or financial position, there
can be no assurance that we would be able to offer our product without
substantial reengineering, or at all.
Often these third party software companies require prepayment of royalties
on their products and, in the past, we have had to expense these prepaid
royalties to cost of sales when it was determined that they may not have future
realizable value.
OUR FAILURE TO EXPAND OUR RELATIONSHIP WITH GLOBAL SYSTEMS INTEGRATORS COULD
LIMIT OUR ABILITY TO SUPPORT OUR CUSTOMERS' DEPLOYMENT OF OUR PRODUCTS.
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Our professional services organization and our relationship with global
systems integrators provide critical support to our customers' installation and
deployment of our products. If we fail to adequately develop our relationship
with global systems integrators, our ability to increase products sales may be
limited. In addition, if we or our partners cannot adequately support product
installations, our customers may not be able to use our products, which could
harm our reputation and hurt our business.
OUR LENGTHY SALES CYCLE MAKES IT DIFFICULT TO PREDICT OUR QUARTERLY OPERATING
RESULTS.
The length of our sales cycle varies depending on the size, type and
complexity of the customer contemplating a purchase, whether we have conducted
business with a potential customer in the past and the size of the deal. In
addition, some of our customers may also need to invest substantial resources
and modify their computer network infrastructures to take advantage of our
products. As a result, these potential customers frequently need to obtain
approvals from multiple decision makers prior to making purchase decisions, a
process that has been, at times, further lengthened as a result of the current
market conditions surrounding technology spending. Our long sales cycle, which
can range from several weeks to several months or more, makes it difficult to
predict the quarter in which sales will occur. Delays in sales could cause
significant variability in our revenues and operating results for any particular
quarterly period. Our sales cycle is subject to a number of uncertainties such
as:
- the need to educate potential customers regarding the benefits
of our products;
- customers' budgetary constraints;
- the timing of customers' budget cycles;
- customers' willingness to make changes in their network
infrastructures; and
- delays caused by customers' internal review processes.
OUR FAILURE TO EFFECTIVELY MANAGE CHANGES IN THE BUSINESS ENVIRONMENT IN WHICH
WE OPERATE COULD HARM OUR BUSINESS.
Our failure to effectively manage changes in the business environment in
which we operate could have a material adverse effect on the quality of our
products, our ability to retain key personnel and our business, operating
results and financial condition. In the past, we have experienced both periods
of rapid growth as well as periods of economic slowdown which have resulted in
reductions in workforce Both of these situations have placed a significant
strain on all of our resources. We may experience similar changes in the future.
Additionally, we may experience disruptions as a result of attacks from
electronic viruses which could result in reduced productivity. To effectively
manage changes in the business environment in which we operate we must maintain
and enhance our financial and accounting systems and controls, maintain the
security of our infrastructure, maintain our ability to retain key personnel,
integrate new personnel and manage operations.
IF WE LOSE THE SERVICES OF BARRY BYCOFF OR ANY OTHER MEMBER OF OUR MANAGEMENT
TEAM, OUR BUSINESS COULD SUFFER.
Our future success depends, to a significant degree, on the skill,
experience and efforts of Barry Bycoff, our chief executive officer, and the
rest of our management team. A change in our management team or the inability of
our officers and key employees to work effectively as a team could have a
material adverse effect on our business, operating results and financial
condition.
AS WE CONTINUE TO OPERATE IN INTERNATIONAL MARKETS, WE WILL FACE CONTINUED RISKS
TO OUR SUCCESS.
We operate in several international markets, including Israel as a result of
our recent acquisition of Business Layers. Our international operations are
subject to increased regulatory, economic and political risks. We have
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limited experience in international markets and we cannot be sure that our
continued expansion into global markets will be successful. In addition, we will
face increased risks in conducting business internationally, including the
ability to develop, market and distribute localized versions of our products in
a timely manner or at all. These risks could reduce demand for our products and
services, increase the prices at which we can sell our products and services, or
otherwise have an adverse effect on our operating results. Among the risks
related to international operations we believe are most likely to affect us are:
- longer decision making cycles;
- longer payment cycles and problems in collecting accounts
receivable;
- adverse changes in trade and tax regulations, including
restrictions on the import and export of sensitive
technologies, such as encryption technologies, that we use or
may wish to use in our software products;
- the absence or significant lack of legal protection for
intellectual property rights;
- selling under contracts governed by local law;
- difficulties in managing an organization spread over multiple
countries, including complications arising from cultural,
language and time differences that may lengthen development,
sales and implementation cycles and delay the resolution of
customer support issues;
- currency risks, including fluctuations in exchange rates;
- political and economic instability;
- localization of technology, including delays in localizing the
most recent versions of our products;
- increased use of contractors on a global basis for both
professional services and development, that may result in
increased cost of services and less direct control; and
- disruption caused by terrorist activities in various regions
around the world.
OUR SUCCESS DEPENDS ON OUR ABILITY TO PROTECT OUR PROPRIETARY RIGHTS.
Our success depends to a significant degree upon the protection of our
software and other proprietary technology. The unauthorized reproduction or
other misappropriation of our proprietary technology would enable third parties
to benefit from our technology without paying us for it. This could have a
material adverse effect on our business, operating results and financial
condition. We depend upon a combination of patent, trademark, trade secret and
copyright laws, license agreements and non-disclosure and other contractual
provisions to protect proprietary and distribution rights in our products. In
addition, we attempt to protect our proprietary information and the proprietary
information of our vendors and partners through confidentiality and/or license
agreements with our employees and others. Although we have taken steps to
protect our proprietary technology, they may be inadequate and the unauthorized
use of our source code could have an adverse effect on our business. Existing
trade secret, copyright and trademark laws offer only limited protection.
Moreover, the laws of other countries in which we market our products may afford
little or no effective protection of our intellectual property. If we resort to
legal proceedings to enforce our intellectual property rights, the proceedings
could be burdensome and expensive, even if we were to prevail.
CLAIMS BY OTHER COMPANIES THAT WE INFRINGE THEIR PROPRIETARY TECHNOLOGY COULD
HURT OUR FINANCIAL CONDITION.
If we discover that any of our products or third party products embedded in
our products violates third party proprietary rights, there can be no assurance
that we would be able to reengineer our product or to obtain a license
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on commercially reasonable terms to continue offering the product without
substantial reengineering. We do not conduct comprehensive patent searches to
determine whether the technology used in our products infringes patents held by
third parties. In addition, product development is inherently uncertain in a
rapidly evolving technology environment in which there may be numerous patent
applications pending for similar technologies, many of which are confidential
when filed. Any claim of infringement, even if invalid, could cause us to incur
substantial costs defending against the claim and could distract our management
from our business. Furthermore, a party making such a claim could secure a
judgment that requires us to pay substantial damages. A judgment could also
include an injunction or other court order that could prevent us from selling
our products. Any of these events could have a material adverse effect on our
business, operating results and financial condition.
OUR BUSINESS COULD BE ADVERSELY AFFECTED IF OUR PRODUCTS CONTAIN ERRORS OR
FLAWS.
Software products as complex as ours may contain undetected errors or "bugs"
that result in product failures. The occurrence of errors could result in loss
of, or delay in, revenues, loss of market share, failure to achieve market
acceptance, diversion of development resources, injury to our reputation, or
damage to our efforts to build brand awareness, any of which could have a
material adverse effect on our business, operating results and financial
condition. Additionally, the security features included in our products to
prevent unauthorized access to the application may not meet all of our
customers' requirements.
WE COULD INCUR SUBSTANTIAL COSTS RESULTING FROM PRODUCT LIABILITY CLAIMS
RELATING TO OUR CUSTOMERS' USE OF OUR PRODUCTS.
Many of the business applications supported by our products are critical to
the operations of our customers' businesses. Any failure in a customer's Web
site or application caused or allegedly caused by our products could result in a
claim for substantial damages against us, regardless of our responsibility for
the failure. Although we maintain general liability insurance, including
coverage for errors and omissions, and contractually attempt to limit liability,
we cannot be sure that our existing coverage will continue to be available on
reasonable terms or will be available in amounts sufficient to cover one or more
large claims, or that the insurer will not disclaim coverage as to any future
claim.
OUR FORMER INDEPENDENT PUBLIC ACCOUNTANT, ARTHUR ANDERSEN LLP, HAS BEEN FOUND
GUILTY OF A FEDERAL OBSTRUCTION OF JUSTICE CHARGE, AND YOU MAY BE UNABLE TO
EXERCISE EFFECTIVE REMEDIES AGAINST ARTHUR ANDERSEN IN ANY LEGAL ACTION.
Our former independent public accountant, Arthur Andersen LLP, provided us
with auditing services during the year ended December 31, 2001, including
issuing an audit report with respect to our audited consolidated financial
statements as of and for the year ended December 31, 2001 included in our Annual
Report on Form 10-K for the year ended December 31, 2003 and incorporated by
reference in this prospectus. On June 15, 2002, a jury in Houston, Texas found
Arthur Andersen guilty of a federal obstruction of justice charge arising from
the federal government's investigation of Enron Corp. On August 31, 2002, Arthur
Andersen ceased practicing before the Securities and Exchange Commission, or the
SEC.
We were unable to obtain Arthur Andersen's consent to include its report
with respect to our audited consolidated financial statements as of and for the
year ended December 31, 2001 in our Annual Report on Form 10-K or to incorporate
by reference such report in this prospectus. Rule 437a under the Securities Act
of 1933, or the Securities Act, permits us to dispense with the requirement to
file Arthur Andersen's consent. As a result, you may not have an effective
remedy against Arthur Andersen in connection with a material misstatement or
omission with respect to our audited consolidated financial statements that are
incorporated by reference in this prospectus or any other filing we may make
with the SEC, including any claim under Section 11 of the Securities Act. In
addition, even if you were able to assert such a claim, as a result of its
conviction and other lawsuits, Arthur Andersen may fail or otherwise have
insufficient assets to satisfy claims made by investors or by us that might
arise under federal securities laws or otherwise relating to any alleged
material misstatement or omission with respect to our audited consolidated
financial statements.
INCREASED UTILIZATION AND COSTS OF OUR TECHNICAL SUPPORT SERVICES AND INCREASED
DEMANDS ON OUR OTHER TECHNICAL RESOURCES MAY ADVERSELY AFFECT OUR FINANCIAL
RESULTS.
Our products involve very complex technology and the failure or inability of
our technical support staff to meet customer expectations in a timely manner or
customer dissatisfaction with our product functionality or performance could
result in loss of revenues, loss of market share, failure to achieve market
acceptance, injury to our reputation, liability for service or warranty costs
and claims and other increased costs. We may be unable to respond to
fluctuations in customer demand for support services as well as resolve customer
issues in a manner that is timely and satisfactory to them. We also may be
unable to modify the format of our support services to compete with changes in
support services provided by competitors.
As we win business from larger, more complex customers there may be an
increased demand on our resources, particularly product management and support,
which may affect the allocation of our resources. Additionally, as we continue
to sell our new products to existing customers, our customers might expect us to
provide the same level of product support on the new products as we do on the
old products. This would increase demand on our product support resources beyond
levels we could provide.
THE MARKET PRICE OF OUR COMMON STOCK HAS BEEN AND MAY CONTINUE TO BE VOLATILE.
Our stock price, like that of other technology companies, has been extremely
volatile. The announcement of new products, services, technological innovations,
customers or distribution partners by us or our competitors, quarterly
variations in our operating results, changes in coverage by securities analysts,
changes in revenues or earnings estimates by securities analysts, speculation in
the press or investment community and overall economic conditions are among the
factors affecting our stock price.
8
In addition, the stock market in general and the market prices for
technology companies in particular have experienced extreme volatility that
often has been unrelated to the operating performance of these companies. These
broad market and industry fluctuations may adversely affect the market price of
our common stock, regardless of our operating performance. Recently, when the
market price of a stock has been volatile, holders of that stock have often
instituted securities class action litigation against the company that issued
the stock. If any of our stockholders brought a lawsuit against us, we could
incur substantial costs defending the lawsuit. The lawsuit could also divert the
time and attention of our management.
The general economic uncertainties in the United States and abroad continue
to cause significant volatility in the stock markets. The continued threat of
terrorism in the United States and abroad and the ongoing military action and
heightened security measures undertaken in response to that threat can be
expected to cause continued volatility in securities markets. In addition,
foreign political unrest may continue to adversely affect the economy.
WE MAY LOSE MONEY ON FIXED-PRICE CONSULTING CONTRACTS.
Although the majority of our services have historically been performed on a
time and material basis, we have in the past performed services under fixed
price contracts at the request of a customer. In the future, it is possible that
an increased portion of our services revenues could be derived from fixed-price
contracts, particularly since we assumed several fixed-price contract
obligations as a result of the Business Layers acquisition. We work with complex
technologies in compressed time frames and it can be difficult to judge the time
and resources necessary to complete a project. If we miscalculate the resources
or time we need to complete work under fixed-price contracts, we may suffer
losses, and our operating results could be materially adversely affected.
CONTINUED WEAKNESS IN THE GLOBAL ECONOMY MAY ADVERSELY AFFECT OUR BUSINESS.
The global economy is still weak and may continue to be weak in the
foreseeable future. In addition, the United States' continued involvement in
Iraq, as well as the political unrest in other parts of the world, have
contributed to global economic uncertainty. We believe the current economic
slowdown has caused some potential or current customers to defer purchases. In
response to the current economic conditions, many companies have reduced their
spending budgets for information technology products and services, which could
reduce or eliminate potential sales of our products and services.
CERTAIN PROVISIONS OF OUR CHARTER AND OF DELAWARE LAW MAKE A TAKEOVER OF OUR
COMPANY MORE DIFFICULT.
Our corporate documents and Delaware law contain provisions that might
enable us to resist a takeover of our company. These provisions might discourage
or delay a change in the control of Netegrity or a change in our management.
These provisions could also discourage proxy contests and make it more difficult
for you and other stockholders to elect directors and take other corporate
actions. The existence of these provisions could limit the price that investors
might be willing to pay in the future for shares of our common stock.
Additionally, we have entered into employment and executive retention agreements
with certain employees and executive officers which, among other things, include
certain severance and change of control provisions that may have similar
effects.
SPECIAL NOTE REGARDING FORWARD-LOOKING INFORMATION
This prospectus includes and incorporates forward-looking statements
within the meaning of Section 27A of the Securities Act of 1933 and Section 21E
of the Securities Exchange Act of 1934. All statements, other than statements of
historical facts, included or incorporated in this prospectus regarding our
strategy, future operations, financial position, future revenues, projected
costs, prospects, plans and objectives of management are forward-looking
statements. The words "anticipates," "believes," "estimates," "expects,"
"intends," "may," "plans," "projects," "will," "would" and similar expressions
are intended to identify forward-looking statements, although not all
forward-looking statements contain these identifying words. We cannot guarantee
that we actually will achieve the plans, intentions or expectations disclosed in
our forward-looking statements and you should not place undue reliance on our
forward-looking statements. Actual results or events could differ materially
from the plans, intentions and expectations disclosed in the forward-looking
statements we make. We have included important factors in the cautionary
statements included or incorporated in this prospectus, particularly under the
heading "Risk
9
Factors", that we believe could cause actual results or events to differ
materially from the forward-looking statements that we make. Our forward-looking
statements do not reflect the potential impact of any future acquisitions,
mergers, dispositions, joint ventures or investments we may make. We do not
assume any obligation to update any forward-looking statements except as
otherwise required by law.
10
USE OF PROCEEDS
We will not receive any proceeds from the sale of shares by the selling
stockholders.
The selling stockholders will pay any underwriting discounts and
commissions and expenses incurred by the selling stockholders for brokerage,
accounting, tax or legal services or any other expenses incurred by the selling
stockholders in disposing of the shares. We will bear all other costs, fees and
expenses incurred in effecting the registration of the shares covered by this
prospectus, including, without limitation, all registration and filing fees,
NASDAQ listing fees and fees and expenses of our counsel and our accountants.
SELLING STOCKHOLDERS
We issued the shares of common stock covered by this prospectus in a
private placement in connection with our acquisition of Business Layers in
December 2003. The following table sets forth, to our knowledge, certain
information about the selling stockholders as of January 26, 2004.
Beneficial ownership is determined in accordance with the rules of the
SEC, and includes voting or investment power with respect to shares. Unless
otherwise indicated below, to our knowledge, all persons named in the table have
sole voting and investment power with respect to their shares of common stock,
except to the extent authority is shared by spouses under applicable law. The
inclusion of any shares in this table does not constitute an admission of
beneficial ownership for the person named below.
Shares of Common Stock Number of Shares Shares of Common Stock to be
Beneficially Owned of Common Stock Beneficially Owned After
Name of Selling Stockholder Prior to Offering (1) Being Offered Offering (1)(2)
------------------------------------- ---------------------- ---------------- ----------------------------
Number Percentage Number Percentage
------ ---------- ------ ----------
Advent PGGM Gemini L.P. (3) - - 7,592 - -
Asaf Investment in High Tech Ltd. (4) - - 44,715 - -
Ascent Venture Partners III, L.P. (5) - - 363,261 - -
Canaan Equity II L.P. (6) - - 465,886 - -
Canaan Equity II Entrepreneurs L.L.C.
(5) - - 36,986 - -
Canaan Equity II L.P. (QP) (6) - - 208,404 - -
Formula Ventures II (Israel) L.P. (7) - - 20,614 - -
Formula Ventures II L.P. (7) - - 61,842 - -
Formula Ventures (Israel) L.P. (7) - - 26,271 - -
Formula Ventures L.P. (Delaware) (7) - - 102,660 - -
James Furnivall (6) - - 5,861 - -
FV-PEH L.P. (Delaware) (7) - - 26,123 - -
Garage Securities, Inc.(8) - - 6,966 - -
Gemini Israel II L.P. (3) - - 59,562 - -
Gemini Israel III L.P. (3) - - 204,763 - -
Gemini Israel III Overflow Fund L.P.
(3) - - 42,585 - -
Gemini Israel II Parallel Fund L.P.
(3) - - 102,876 - -
Gemini Israel III Parallel Fund L.P.
(3) - - 37,332 - -
Gemini Partner Investors L.P. (3) - - 3,270 - -
Israel Seed III, L.P. (9) - - 40,076 - -
Israel Seed IV, L.P. (9) - - 428,774 - -
Israel Seed III Annex Fund, L.P. (9) - - 123,684 - -
Israel Seed III (Israel), L.P. (9) - - 2,388 - -
Deepak Kamra - - 2,473 - -
Gregory Kopchinsky - - 2,886 - -
Novell, Inc.(10) - - 129,091 - -
11
(1) Of the total shares of common stock listed as owned by the selling
stockholders, a total of 357,577 shares are held in an escrow account
to secure indemnification obligations of the former stockholders of
Business Layers to us. It is expected that these shares (less any
shares that may be distributed from the escrow account to us in
satisfaction of indemnification claims) will be released from escrow
and distributed to the selling stockholders on December 30, 2004. The
number of shares indicated as owned by each selling stockholder
includes those shares (representing approximately 14% of the number of
shares listed as beneficially owned by each selling stockholder) which
such selling stockholder is entitled to receive upon distribution of
these shares from the escrow account.
(2) We do not know when or in what amounts a selling stockholder may offer
shares for sale. The selling stockholders might not sell any or all of
the shares offered by this prospectus. Because the selling stockholders
may offer all or some of the shares pursuant to this offering, and
because there are currently no agreements, arrangements or
understandings with respect to the sale of any of the shares, we cannot
estimate the number of the shares that will be held by the selling
stockholders after completion of the offering. However, for purposes of
this table, we have assumed that, after completion of the offering,
none of the shares covered by this prospectus will be held by the
selling stockholders.
(3) Gemini Israel Funds Ltd. is the general partner of, or the general
partner of the general partner of, each of Advent PGGM Gemini L.P.,
Gemini Israel II L.P., Gemini Israel III L.P., Gemini Israel III
Overflow Fund L.P., Gemini Israel II Parallel Fund L.P., Gemini Israel
III Parallel Fund L.P. and Gemini Partner Investors L.P. The board of
directors of Gemini Israel Funds Ltd., which controls the investment
decisions of these entities, consists of Yoseph Sela, Abraham Mlavsky,
Steve Kahm, Amram Rasiel and David Cohen. Each of these directors may
been deemed to beneficially own the shares of common stock being
registered hereby on behalf of such entities. Tali Aben, the general
partner of Gemini Israel Funds Ltd., is a former director of Business
Layers.
(4) Shlomo Kramer has voting or investment control over these shares.
(5) Geoffrey Oblak, a member of Ascent Venture Management III, LLC, the
general partner of Ascent Venture Partners III, L.P., and Leigh E.
Michl, a retired managing member of Ascent Venture Management III, LLC,
are former directors of Business Layers. Christopher W. Dick,
Christopher W. Lynch and Frank M. Polestra have voting or investment
control over these shares.
(6) Canaan Equity II L.L.C. is the general partner/manager of Canaan Equity
II L.P., Canaan Equity II Entrepreneurs L.L.C. and Canaan Equity II L.P.
(QP). James Furnivall, a general partner of Canaan Partners, is a former
director of Business Layers. John V. Balen, James C. Furnivall, Stephen
L. Green, Deepak Kamra, Gregory Kopchinsky, Guy M. Russo and Eric A.
Young have voting or investment control over these shares.
(7) Formula Ventures Ltd. is the general partner of Formula Ventures II
(Israel) L.P. and Formula Ventures (Israel) L.P. and Formula Ventures
Partners (Cayman Islands) Ltd. is the general partner of Formula
Ventures II L.P., Formula Ventures L.P. (Delaware) and FV-PEH L.P.
(Delaware). Formula Ventures Ltd. is the parent company of Formula
Ventures Partners (Cayman Islands) Ltd. Formula Ventures II (Israel)
L.P., Formula Ventures (Israel) L.P., Formula Ventures II L.P., Formula
Ventures L.P. (Delaware) and FV-PEH L.P. (Delaware) (the "Formula
Venture Funds") and Formula Ventures Ltd. and Formula Ventures Partners
(Cayman Islands) Ltd. may be deemed to beneficially own the shares of
common stock being registered hereby on behalf of the Formula Venture
Funds. Shai Beilis, Dan Goldstein, Nir Linchevski, Michael Geiger and
Yigal Erlich having voting or investment control over the shares of
common stock being registered hereby on be half of Formula Ventures
(Israel) L.P., Formula Ventures L.P. (Delaware) and FV-PEH L.P.
(Delaware). Shai Beilis, Dan Goldstein and Nir Linchevski have voting or
investment control over the shares of common stock being registered
hereby on behalf of Formula Ventures II (Israel) L.P. and Formula
Ventures II L.P.
(8) Guy Kawasaki and William Reichert have voting or investment control over
these shares.
(9) Each of these entities (the "IVP Funds") is organized a "blind pool"
partnership in which the limited partners have no discretion over
investment or sale decisions, are not able to withdraw from such entity
except under exceptional circumstances, and generally participate
ratably in each investment made by such entity. The sole general
partner of Israel Seed III, L.P. and Israel Seed III Annex Fund, L.P.
is Israel Venture Partners Ltd. ("IVP"), which has sole investment
control with respect to these entities. The sole general partner of
Israel Seed IV, L.P is Israel Venture Partners 2000 Ltd. ("IVP 2000"),
which has sole investment control with respect to Israel Seed IV, L.P.
The sole general partner of Israel Seed III (Israel), L.P is Seed
Management Associates Ltd. ("SMA"), which has sole investment control
with respect to Israel Seed III (Israel), L.P. The sole principals of
the investment advisors to IVP and IVP 2000, and the sole principals of
SMA, are Jonathan Medved, Neil Cohen and Michael Eisenberg (the
"Principals") and, as such, they may be deemed to share voting control
over shares held by the IVP Funds. No other persons have investment
control over IVP, IVP 2000, SMA or the IVP Funds. IVP, IVP 2000, SMA
and the Principals disclaim beneficial ownership of any shares held by
IVP Funds except to the extent of their respective pecuniary interests.
Jonathan Medved is a former director of Business Layers.
(10) Cliff Simpson and Betty DePaola have voting or investment control
over these shares.
None of the selling stockholders has held any position or office with,
or has otherwise had a material relationship with, us or any of our subsidiaries
within the past three years, except as indicated above.
12
PLAN OF DISTRIBUTION
The shares covered by this prospectus may be offered and sold from time
to time by the selling stockholders. The term "selling stockholders" includes
donees, pledgees, transferees or other successors-in-interest selling shares
received after the date of this prospectus from a selling stockholder as a gift,
pledge, partnership distribution or other non-sale related transfer. The selling
stockholders will act independently of us in making decisions with respect to
the timing, manner and size of each sale. Such sales may be made on one or more
exchanges or in the over-the-counter market or otherwise, at prices and under
terms then prevailing or at prices related to the then current market price or
in negotiated transactions. The selling stockholders may sell their shares by
one or more of, or a combination of, the following methods:
- purchases by a broker-dealer as principal and resale by such
broker-dealer for its own account pursuant to this prospectus;
- ordinary brokerage transactions and transactions in which the
broker solicits purchasers;
- block trades in which the broker-dealer so engaged will
attempt to sell the shares as agent but may position and
resell a portion of the block as principal to facilitate the
transaction;
- an over-the-counter distribution in accordance with the rules
of The NASDAQ National Market;
- in privately negotiated transactions; and
- in options transactions.
In addition, any shares that qualify for sale pursuant to Rule 144 may
be sold under Rule 144 rather than pursuant to this prospectus.
Each selling stockholder has agreed with us not to sell, assign,
dispose of, loan, pledge or otherwise transfer in any calendar week more than
such number of shares as equals approximately 12% of the total number of shares
registered hereunder on behalf of such selling stockholder.
To the extent required, this prospectus may be amended or supplemented
from time to time to describe a specific plan of distribution. In connection
with distributions of the shares or otherwise, the selling stockholders may
enter into hedging transactions with broker-dealers or other financial
institutions. In connection with such transactions, broker-dealers or other
financial institutions may engage in short sales of the common stock in the
course of hedging the positions they assume with selling stockholders. To the
extent permitted by law, the selling stockholders may also sell the common stock
short and redeliver the shares to close out such short positions. The selling
stockholders may also enter into option or other transactions with
broker-dealers or other financial institutions which require the delivery to
such broker-dealer or other financial institution of shares offered by this
prospectus, which shares such broker-dealer or other financial institution may
resell pursuant to this prospectus (as supplemented or amended to reflect such
transaction). The selling stockholders may also pledge shares to a broker-dealer
or other financial institution, and, upon a default, such broker-dealer or other
financial institution, may effect sales of the pledged shares pursuant to this
prospectus (as supplemented or amended to reflect such transaction).
In effecting sales, broker-dealers or agents engaged by the selling
stockholders may arrange for other broker-dealers to participate. Broker-dealers
or agents may receive commissions, discounts or concessions from the selling
stockholders in amounts to be negotiated immediately prior to the sale.
In offering the shares covered by this prospectus, the selling
stockholders and any broker-dealers who execute sales for the selling
stockholders may be deemed to be "underwriters" within the meaning of the
Securities Act in connection with such sales. Any profits realized by the
selling stockholders and the compensation of any broker-dealer may be deemed to
be underwriting discounts and commissions. Garage Securities, Inc. has informed
us that it is a registered broker-dealer. As a result, it is an underwriter in
connection with the sale of shares covered by this prospectus.
13
In order to comply with the securities laws of certain states, if
applicable, the shares must 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.
We have advised the selling stockholders that the anti-manipulation
rules of Regulation M under the Exchange Act may apply to sales of shares in the
market and to the activities of the selling stockholders and their affiliates.
In addition, we will make copies of this prospectus available to the selling
stockholders for the purpose of satisfying the prospectus delivery requirements
of the Securities Act. The selling stockholders may indemnify any broker-dealer
that participates in transactions involving the sale of the shares against
certain liabilities, including liabilities arising under the Securities Act.
At the time a particular offer of shares is made, if required, a
prospectus supplement will be distributed that will set forth the number of
shares being offered and the terms of the offering, including the name of any
underwriter, dealer or agent, the purchase price paid by any underwriter, any
discount, commission and other item constituting compensation, any discount,
commission or concession allowed or reallowed or paid to any dealer, and the
proposed selling price to the public.
We have agreed to indemnify the selling stockholders against certain
liabilities, including certain liabilities under the Securities Act.
We have agreed with the selling stockholders to keep the registration
statement of which this prospectus constitutes a part effective until the
earlier of (i) such time as all of the shares covered by this prospectus have
been disposed of pursuant to and in accordance with the Registration Statement
or (ii) December 30, 2004.
LEGAL MATTERS
The validity of the shares offered by this prospectus has been passed
upon by Hale and Dorr LLP.
EXPERTS
The consolidated balance sheet of Netegrity as of December 31, 2001 and
the consolidated statements of income, stockholders' equity and cash flows for
the year ended December 31, 2001, have been incorporated by reference herein and
in the Registration Statement in reliance upon the report of Arthur Andersen
LLP, independent auditors, incorporated by reference herein, and upon authority
of said firm as experts in accounting and auditing. Arthur Andersen LLP has not
consented to the incorporation by reference herein and the Registration
Statement of their report, and we have not obtained their consent to do so in
reliance upon Rule 437a of the Securities Act. Because Arthur Andersen LLP has
not consented to the incorporation by reference herein and the Registration
Statement of their report, you will not be able to recover against Arthur
Andersen LLP under Section 11(a) of the Securities Act for any untrue statements
of a material fact contained in the financial statements audited by Arthur
Andersen LLP or any omissions to state a material fact required to be stated
therein.
The consolidated balance sheets of Netegrity, Inc. as of December 31,
2003 and 2002 and the consolidated statements of operations, stockholders'
equity and cash flows for each of the years in the two-year period ended
December 31, 2003, have been incorporated by reference herein and in the
Registration Statement in reliance upon the report of KPMG LLP, independent
accountants, and upon the authority of said firm as experts in accounting and
auditing. Their report refers to their audit of the adjustments that were
applied and the disclosures added to revise the 2001 consolidated financial
statements, as more fully described in Note 1 to the consolidated financial
statements. However, they were not engaged to audit, review, or apply any
procedures to the 2001 consolidated financial statements other than with respect
to such adjustments and disclosures.
14
WHERE YOU CAN FIND MORE INFORMATION
We file reports, proxy statements and other documents with the SEC. You
may read and copy any document we file at the SEC's public reference room at
Judiciary Plaza Building, 450 Fifth Street, N.W., Room 1024, Washington, D.C.
20549. You should call 1-800-SEC-0330 for more information on the public
reference room. Our SEC filings are also available to you on the SEC's Internet
site at http://www.sec.gov.
This prospectus is part of a registration statement that we filed with
the SEC. The registration statement contains more information than this
prospectus regarding us and our common stock, including certain exhibits and
schedules. You can obtain a copy of the registration statement from the SEC at
the address listed above or from the SEC's Internet site.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The SEC requires us to "incorporate" into this prospectus information
that we file with the SEC in other documents. This means that we can disclose
important information to you by referring to other documents that contain that
information. The information incorporated by reference is considered to be part
of this prospectus. Information contained in this prospectus and information
that we file with the SEC in the future and incorporate by reference in this
prospectus automatically updates and supersedes previously filed information. We
incorporate by reference the documents listed below and any future filings we
make with the SEC under Sections 13(a), 13(c), 14 or 15(d) of the Securities
Exchange Act of 1934, prior to the sale of all the shares covered by this
prospectus.
(1) Our Annual Report on Form 10-K for the year ended
December 31, 2003;
(2) Our Current Report on Form 8-K dated December 30,
2003, as amended by a Current Report on 8-K/A filed
on February 6, 2004;
(3) Our Current Report on Form 8-K dated February 17,
2004;
(4) All of our filings pursuant to the Exchange Act after
the date of filing the initial registration statement
and prior to effectiveness of the registration
statement; and
(5) The description of our common stock contained in our
Registration Statement on Form 8-A filed on December
6, 1988, as amended by a Form 8-A/A filed on December
13, 1988, and as updated by a Current Report on Form
8-K filed on February 12, 2002.
You may request a copy of these documents, which will be provided to
you at no cost, by writing or telephoning us using the following contact
information:
Netegrity, Inc.
201 Jones Road
Waltham, MA 02451
15
Attention: M. Colette Cooke, Esq.
Telephone: (781) 890-1700
16
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the various expenses to be incurred in
connection with the sale and distribution of the securities being registered
hereby, all of which will be borne by Netegrity, Inc. (except any underwriting
discounts and commissions and expenses incurred by the selling stockholders for
brokerage, accounting, tax or legal services or any other expenses incurred by
the selling stockholders in disposing of the shares). All amounts shown are
estimates except the Securities and Exchange Commission registration fee.
Filing Fee - Securities and Exchange Commission..................... $ 3,181
Legal fees and expenses............................................. $ 10,000
Accounting fees and expenses........................................ $ 5,000
Miscellaneous expenses.............................................. $ 1,819
--------
Total Expenses............................................. $ 20,000
========
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 102 of the General Corporation Law of the State of Delaware
allows a corporation to eliminate the personal liability of directors of a
corporation to the corporation or its stockholders for monetary damages for a
breach of fiduciary duty as a director, except where the director breached his
duty of loyalty, failed to act in good faith, engaged in intentional misconduct
or knowingly violated a law, authorized the payment of a dividend or approved a
stock repurchase in violation of Delaware corporate law or obtained an improper
personal benefit. Netegrity, Inc. has included such a provision in its Restated
Certificate of Incorporation.
Section 145 of the General Corporation Law of the State of Delaware
provides that a corporation has the power to indemnify a director, officer,
employee or agent of the corporation and certain other persons serving at the
request of the corporation in related capacities against amounts paid and
expenses incurred in connection with an action or proceeding to which he or she
is or is threatened to be made a party by reason of such position, if such
person shall have acted in good faith and in a manner he or she reasonably
believed to be in or not opposed to the best interests of the corporation, and,
in any criminal proceeding, if such person had no reasonable cause to believe
his conduct was unlawful; provided that, in the case of actions brought by or in
the right of the corporation, no indemnification shall be made with respect to
any matter as to which such person shall have been adjudged to be liable to the
corporation unless and only to the extent that the adjudicating court determines
that such indemnification is proper under the circumstances.
Article Eighth of the Restated Certificate of Incorporation of
Netegrity, Inc. provides that a director or officer of Netegrity will be
indemnified by Netegrity to the fullest extent authorized by the General
Corporation Law of the State of Delaware against all expense, liability and loss
reasonably incurred or suffered by him or her, who we refer to as an indemnitee,
in connection with any action, suit or proceeding in which he or she is made a
party or is threatened to be made a party by reason of the fact that he or she
is or was a director, officer or employee of Netegrity, whether the basis of
such proceeding is alleged action in an official capacity or in any other
capacity while serving as a director, officer, employee or agent. With respect
to proceedings to enforce rights to indemnification, Netegrity will indemnify
indemnitees in connection with a proceeding initiated by him or her only if the
proceeding was authorized by the Board of Directors of Netegrity. The right to
indemnification conferred is a contract right and includes the right to be paid
by Netegrity the expenses incurred in defending any such proceeding in advance
of its final disposition.
II-1
Article Eighth of the Restated Certificate of Incorporation of
Netegrity further provides that if the General Corporation Law of the State of
Delaware is amended in the future to expand the indemnification permitted to
directors, Netegrity must indemnify those persons to the fullest extent
permitted by such law. Article Eighth also provides that any repeal or
modification of Article Eighth may not increase the personal liability of any
director of Netegrity for any act or occurrence taking place prior to that time.
Article V of the Amended and Restated By-Laws of Netegrity provides
with respect to a third party action that Netegrity will indemnify any person
who was or is a party or is threatened to be made a party to any threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative by reason of the fact that he or she is or was a
director or officer of Netegrity, or, while a director or officer of Netegrity,
is or was serving at the request of Netegrity as a director, officer, employee
or agent of another corporation, partnership, joint venture, trust or other
enterprise, against expenses, including attorney's fees, judgments, fines and
amounts paid in settlement actually and reasonably incurred by him or her in
connection with such action, suit or proceeding. Article V further provides with
respect to derivative actions that Netegrity will indemnify any person who was
or is a party or is threatened to be made a party to any threatened, pending or
completed action or suit by or in the right of Netegrity to procure a judgment
in its favor by reason of the fact that he or she is or was a director, officer,
employee or agent of Netegrity, or, while a director or officer of Netegrity,
is or was serving at the request of Netegrity as a director, officer, employee
or agent of another corporation, partnership, joint venture, trust or other
enterprise, against expenses, including attorney's fees, actually and reasonably
incurred by him or her in connection with the defense or settlement of such
action or suit.
Article V of the Amended and Restated By-Laws of Netegrity further
provides that Netegrity will advance all expenses incurred by the indemnitee in
defending any action, suit or proceeding in advance of its final disposition
within 20 days of a written request by the indemnitee. To the extent required by
law, such payments shall be made only upon receipt of a written undertaking by
the indemnitee that the indemnitee will repay such amounts if it is ultimately
determined that he or she is not entitled to be indemnified.
Article V of the Amended and Restated By-Laws of Netegrity is not
exclusive of any other rights to which those seeking indemnification may be
entitled under any by-law, agreement, vote of stockholders or disinterested
directors or otherwise. The indemnification continues after a person has ceased
to be a director, officer, employee or agent. Netegrity may also indemnify any
person who is or was a director, officer, employee or agent of a corporation
absorbed in a consolidation or merger with Netegrity in the same manner as it
may indemnify any person who is or was a director, officer, employee or agent of
Netegrity.
Netegrity has entered into indemnification agreements with each of its
current non-employee directors to give such directors additional contractual
assurances regarding the indemnification provisions set forth in our certificate
of incorporation and bylaws and to provide additional procedural protections.
Netegrity has purchased directors' and officers' liability insurance
which would indemnify its directors and officers against damages arising out of
certain kinds of claims which might be made against them based on their
negligent acts or omissions while acting in their capacity as such.
ITEM 16. EXHIBITS
EXHIBIT NUMBER DESCRIPTION
-------------- -----------
3.1 Restated Certificate of Incorporation, as amended, of the Registrant
(filed as Exhibit 3.1 to Registration Statement on Form S-3
(Registration No. 333-82640) filed February 12, 2002 and incorporated
by reference herein).
3.2 Amended and Restated By-laws of the Registrant (filed as Exhibit 3.02
to Annual Report on Form 10-K for the year ended December 31, 2003
(File No. 1-10139) and incorporated by reference herein).
5.1 Opinion of Hale and Dorr LLP (previously filed).
II-2
23.1 Notice Regarding Consent of Arthur Andersen LLP (previously filed).
23.2 Consent of KPMG LLP.
23.3 Consent of Hale and Dorr LLP (previously filed).
24.1 Power of Attorney (previously filed).
ITEM 17. UNDERTAKINGS.
Item 512(a) of Regulation S-K. 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 of 1933, as amended (the "Securities
Act");
(ii) To reflect in the prospectus any facts or events
arising after the effective date of this 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 this Registration Statement. Notwithstanding the foregoing,
any increase or decrease in the volume of securities offered (if the
total dollar value of securities offered would not exceed that which
was registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b) if, in the
aggregate, the changes in volume and price represent no more than 20
percent change in the maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective Registration
Statement; and
(iii) To include any material information with respect to
the plan of distribution not previously disclosed in this Registration
Statement or any material change to such information in this
Registration Statement;
provided, however, that paragraphs (1)(i) and (1)(ii) do not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed with or furnished to the
Commission by the Registrant pursuant to Section 13 or Section 15(d) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), that are
incorporated by reference in this Registration Statement.
(2) That, for the purposes of determining any liability under the
Securities Act, each 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 the 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.
Item 512(b) of Regulation S-K. 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
15(d) of the Exchange Act (and, where applicable, each filing of an employee
benefit plan's annual report pursuant to Section 15(d) of the Exchange Act) that
is incorporated by reference in this 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.
II-3
Item 512(h) of Regulation S-K. 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
indemnification provisions described herein, 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.
II-4
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
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
Amendment No. 2 to Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Waltham, Commonwealth of
Massachusetts, on April 8, 2004.
NETEGRITY, INC.
By: /s/ Barry N. Bycoff
-------------------------------------------
Barry N. Bycoff
President and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
Signature Title Date
--------- ----- ----
/s/ Barry N. Bycoff President, Chief Executive Officer and Director April 8, 2004
--------------------------------- (Principal Executive Officer)
Barry N. Bycoff
/s/ Regina O. Sommer Chief Financial Officer and Treasurer (Principal April 8, 2004
--------------------------------- Financial Officer and Principal Accounting
Regina O. Sommer Officer)
* Director April 8, 2004
---------------------------------
Sandra England Bergeron
* Director April 8, 2004
---------------------------------
Eric R. Giler
* Director April 8, 2004
---------------------------------
Lawrence D. Lenihan
II-5
* Director April 8, 2004
---------------------------------
Ronald T. Maheu
* Director April 8, 2004
---------------------------------
Michael L. Mark
* Director April 8, 2004
---------------------------------
Ralph B. Wagner
*By: /s/ Regina O. Sommer
----------------------------
Name: Regina O. Sommer
Title: Attorney-in-fact
II-6
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION
------ -----------
3.1 Restated Certificate of Incorporation, as amended, of the
Registrant (filed as Exhibit 3.1 to Registration Statement
on Form S-3 (Registration No. 333-82640) filed February 12,
2002 and incorporated by reference herein).
3.2 Amended and Restated By-laws of the Registrant (filed as Exhibit
3.02 to Annual Report on Form 10-K for the year ended December 31,
2003 (File No. 1-10139) and incorporated by reference herein).
5.1 Opinion of Hale and Dorr LLP (previously filed).
23.1 Notice Regarding Consent of Arthur Andersen LLP (previously filed).
23.2 Consent of KPMG LLP.
23.3 Consent of Hale and Dorr LLP (previously filed).
24.1 Power of Attorney (previously filed).