AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON NOVEMBER 6, 1996
REGISTRATION NO. 333-______
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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NETEGRITY, INC.
(Exact name of Registrant as specified in its charter)
DELAWARE 7371
(State or other jurisdiction (Primary Standard Industrial
of incorporation or organization) Classification Code Number)
04-2911320
(I.R.S. Employer
Identification Number)
NETEGRITY, INC.
245 WINTER STREET
WALTHAM, MASSACHUSETTS 02154
(617) 890-1700
(Address, including zip code, and telephone number,
including area code, of Registrant's principal executive offices)
BARRY N. BYCOFF, PRESIDENT AND CHIEF EXECUTIVE OFFICER
245 WINTER STREET
WALTHAM, MASSACHUSETTS 02154
(617) 890-1700
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
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Copies to:
JOHN HESSION, ESQ.
Testa, Hurwitz & Thibeault, LLP
125 High Street
Boston, Massachusetts 02101
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, 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. [ ]
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
- ------------------------------- ----------------- ------------------------- ------------------------ --------------------
Title of Shares Amount to be Proposed Maximum Proposed Maximum Amount of
to be Registered Registered Offering Price Aggregate Offering Registration Fee
Per Share (1) Price (1)
- ------------------------------- ----------------- ------------------------- ------------------------ --------------------
<S> <C> <C> <C> <C>
Common Stock, $.01 par 465,838 $2.4375 $1,135,480.125 $344.08
value per share
- ------------------------------- ----------------- ------------------------- ------------------------ --------------------
</TABLE>
(1) The price of $2.4375 per share, which was the last sale price of the Common
Stock reported on the Nasdaq SmallCap Market on November 1, 1996, is set
forth solely for the purpose of calculating the registration fee pursuant
to Rule 457(c) under the Securities Act of 1933.
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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.
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
PRELIMINARY PROSPECTUS
Subject to Completion
November 6, 1996
NETEGRITY, INC.
465, 838 SHARES
COMMON STOCK
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This Prospectus relates to the resale of up to an aggregate of 465,838
shares of Common Stock, $.01 par value per share (the "Shares"), of NeTegrity,
Inc. ("NeTegrity" or the "Company") which was issued to the stockholder of
Internet Security Corporation ("ISC") in connection with the Company's
acquisition of ISC and such stockholder's transferees (the "Selling
Stockholders"). The Shares may be sold from time to time by the Selling
Stockholders in brokers' transactions, to market makers or in block placements,
at market prices prevailing at the time of sale or at prices otherwise
negotiated. See "Selling Stockholders" and "Plan of Distribution".
The Company will not receive any of the proceeds from the sale of the
Shares being sold by the Selling Stockholders. The Company has agreed to bear
the expenses incurred in connection with the registration of the Shares. The
Selling Stockholders will pay or assume brokerage commissions or similar charges
incurred in the sale of the Shares. The Company has agreed to indemnify the
Selling Stockholders against certain liabilities, including liabilities under
the Securities Act.
The Company's Common Stock is traded on the Nasdaq SmallCap Market
under the symbol "NETE" and on the Boston Stock Exchange under the symbol "NTY".
On November 1, 1996, the last reported sale price of the Common Stock was
$2.4375 per share, as reported by the Nasdaq SmallCap Market.
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THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF RISK. SEE "RISK
FACTORS" COMMENCING ON PAGE 4.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
THE DATE OF THIS PROSPECTUS IS NOVEMBER __, 1996.
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AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files reports, proxy statements and other information with
the Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information are available for inspection and copying at the
public reference facilities maintained by the Commission at 450 5th Street,
N.W., Washington, D.C. 20549, and at the following regional offices of the
Commission: Seven World Trade Center, 13th Floor, New York, New York 10048 and
Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois
60661-2511. Copies of such material can also be obtained from the Public
Reference Section of the Commission at 450 5th Street, N.W., Washington, D.C.
20549 at prescribed rates. The Commission maintains a World Wide Web site that
contains reports, proxy and information statements and other information
regarding the Company. The address of such site on the World Wide Web is:
http://www.sec.gov. The Common Stock of the Company is quoted on The Nasdaq
SmallCap Market and such material may also be inspected and copied at the
offices of the National Association of Security Dealers, Inc., 1735 K Street,
N.W., Washington, D.C. 20006 and on the Boston Stock Exchange and such material
may also be inspected and copied at the offices of the Boston Stock Exchange,
Inc., One Boston Place, Boston, Massachusetts 02108.
The Company has filed with the Commission a Registration Statement on
Form S-3 (including all amendments thereto, the "Registration Statement") under
the Securities Act, with respect to the Common Stock offered hereby. This
Prospectus does not contain all information set forth in the Registration
Statement, certain parts of which are omitted in accordance with the rules and
regulations of the Commission. For further information regarding the Company and
the Common Stock offered hereby, reference is hereby made to the Registration
Statement and to the exhibits and schedules filed therewith. Statements
contained in this Prospectus regarding the contents of any agreement or other
document filed as an exhibit to the Registration Statement are not necessarily
complete, and in each instance reference is made to the copy of such agreement
filed as an exhibit to the Statement, including the exhibits and schedules
thereto, may be inspected at the public reference facilities maintained by the
Commission at 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549 and
copies of all or any part thereof may be obtained from such office upon payment
of the prescribed fees.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The following documents filed by the Company with the Commission
pursuant to the Exchange Act are incorporated in this Prospectus as of their
respective dates (File No. 1-10139):
1. The Company's Annual Report on Form 10-K for the fiscal year ended
March 31, 1996.
2. The Company's Quarterly Report on Form 10-Q for the fiscal quarter
ended June 30, 1996.
3. The Company's Current Report on Form 8-K dated as of November 16,
1995 regarding the Company's acquisition of ISC.
4. The Company's Current Report on Form 8-K/A (Amendment No. 1 to Form
8-K dated as of November 16, 1995) dated as of November 16, 1995,
including pro forma financial statements in connection with the
Company's acquisition of ISC.
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5. The Company's Consent Solicitation Statement (proxy statement) on
Schedule 14A dated June 4, 1996 regarding the Company's sale of
substantially all of its operating assets (those assets relating to
the catalog operation to Programmer's Paradise, Inc.).
6. The Company's Current Report on Form 8-K dated as of July 3, 1996
regarding the Company's sale of substantially all of its operating
assets (those assets relating to the catalog operation to
Programmer's Paradise, Inc.).
7. The Company's Current Report on Form 8-K as of August 14, 1996
regarding the Company's change in Fiscal Year end (from March 31 to
December 31).
All documents filed by the Company pursuant to Section 13(a), 13(c), 14
or 15(d) of the Exchange Act after the date of this Prospectus and prior to
termination of the offering of the Shares, shall be deemed to be incorporated by
reference in this Prospectus and made a part hereof from the date of filing of
such documents.
Any statement contained in a document incorporated or deemed to be
incorporated by reference in this Prospectus shall be deemed to be modified or
superseded for purposes of this Prospectus to the extent that a statement
contained herein or in any other subsequently filed document which also is or is
deemed to be incorporated by reference herein or in any Prospectus Supplement
modifies or supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Prospectus.
The Company will provide without charge to each person whom a
Prospectus is delivered, on the written or oral request of any such person, a
copy of any or all of the documents incorporated by reference herein (other than
exhibits to such documents unless such exhibits are specifically incorporated by
reference into such documents). Written requests for such copies should be
directed to NeTegrity, Inc., Attention: James O'Connor, Jr., Chief Financial
Officer. Telephone requests may be directed to Ann Georgopoulos, Investor
Relations at 617 890-1700 ext. 228. Unless the context requires otherwise,
references in this Prospectus to the "Company" or "NeTegrity" refer to
NeTegrity, Inc. and its subsidiaries.
TRADEMARKS
NeTegrity, the NeTegrity logo, SiteMinder and Internet Security
Corporation are unregistered trademarks of the Company. The Company has filed
United States trademark applications for NeTegrity and SiteMinder. This
Prospectus also includes trade names and trademarks of entities other than the
Company.
THE COMPANY
NeTegrity, through ISC, is a provider and reseller of network security
products and services to organizations using their networks and the Internet for
mission-critical applications. The Company serves customers seeking to protect
enterprise networks in a wide range of industries, from banking, insurance and
manufacturing to telecommunications, health care and government. The Company
also has a consulting service organization which provides assistance to
customers in developing enterprise-wide security policies, auditing existing
security schemes, performing threat assessment and evaluating network
topologies. The Company acquired ISC in November, 1995. ISC was founded in June
1994 as a non-exclusive distributor
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of Check Point Software Technologies, Ltd.'s ("Check Point") FireWall-1 access
control product for network security applications.
In June 1996, the Company, with the approval of its stockholders, sold
its core business in which the Company was a direct marketer and distributor of
PC-based software and hardware to technical and professional PC users to
Programmer's Paradise, Inc. The sale expedites the Company's transformation into
a provider of products and services for the rapidly developing network security
business.
The Company was incorporated in Delaware in 1986 under the name of The
Software Developer's Company, Inc. and in 1996, the Company changed its name to
NeTegrity, Inc. The Company's principal executive offices are located at 245
Winter Street, Waltham, Massachusetts 02154 and its telephone number is (617)
890-1700.
RISK FACTORS
In addition to the other information in this Prospectus, the following
factors should be considered carefully in evaluating an investment in the shares
of Common Stock offered hereby.
LIMITED OPERATING HISTORY; UNPREDICTABILITY OF OPERATING RESULTS
The Company was incorporated in 1986, however its current business
operations did not start until 1994. The Company is currently unprofitable.
Although the Company has experienced significant growth in recent periods, in
view of the Company's short operating history in its current business of
reselling Check Point's FireWall-1 products, the rapidly changing nature of the
network security market and the uncertainty of acceptance of the products the
Company resells, such growth may not be sustainable and should not be considered
indicative of future revenue. The Company's results of operations may become
increasingly unpredictable from quarter to quarter as a result of numerous
factors, including market acceptance of the products the Company resells, as
well as new products the Company may introduce in the future, fluctuations in
the development and growth of the network security industry in general, the mix
of distribution channels through which the products are relicensed, any future
acquisitions which could result in additional expenses and losses to the
Company, the timing of orders and shipments of products, the introduction of new
products by the Company, or the introduction or the announcement of competitive
products. In addition, a portion of the Company's revenue may occur during the
last few weeks of each quarter; therefore, any delays in orders or shipments are
more likely to result in revenue not being recognized until the following
quarter. The Company's current expense levels are based in part on its
expectations of future revenue and, as a result, net income for a given period
could be disproportionately affected by any reduction in revenue. There can be
no assurance that the Company will be able to achieve significant revenue from
sales of products in the future or that the level of revenue in the future will
not decrease from past levels. It is likely that in some future quarter the
Company's revenue or operating results will be below the expectations of stock
market securities analysts and investors. In such event, the price of the
Company's Common Stock could be materially and adversely affected.
RISKS ASSOCIATED WITH THE EMERGING NETWORK SECURITY MARKET
The market for the products the Company resells is in an early stage of
development. The rapid development of enterprise-wide and internetwork computing
has increased the ability of users to access proprietary information and
resources and has, in recent years, increased demand for network security
products. Because the market for network security products is only beginning to
develop, it is difficult to assess the size of this market and the product
features and prices, the optimal distribution strategy and the
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competitive environment that will develop in this market. In addition, a
well-publicized actual or perceived breach of network security at a customer of
the Company or at an entity that uses a product the Company distributes could
adversely affect the market's perception of the Company.
DEPENDENCE ON THE INTERNET AND INTRANET MARKETS
The market for network security products is in an early stage of development.
There can be no assurance that the Internet or common public protocols will
continue to be used to facilitate communications or that the market for network
security systems in general will continue to expand. The continued growth of
this market will depend, in large part, upon the continued expansion of the
Internet usage and the number of organizations adopting or expanding intranets,
upon the ability of their respective infrastructures to support an increasing
number of users and services, and upon the continued development of new and
improved services for implementation across the Internet, and between the
Internet and intranets. If the necessary infrastructure or complementary
products and services are not developed in a timely manner and, consequently,
the network security, Internet and intranet markets fail to grow or grow more
slowly than the Company currently anticipates, the Company's business, operating
results and financial condition would be materially adversely affected.
DEPENDENCE ON PRINCIPAL PRODUCT, UNCERTAINTY OF PRODUCT ACCEPTANCE
The Company derives substantially all of its revenue as a non-exclusive
reseller of Check Point's FireWall-1 products. As a result, any factor adversely
affecting sales of this product could have a material adverse effect on the
Company. The Company's future financial performance will depend in significant
part on the successful development, introduction, marketing and customer
acceptance of Check Point's FireWall-1 products, and enhancements and new
features to Check Point's FireWall-1 product line. If Check Point's FireWall-1
fails to receive widespread market acceptance, the Company's business, operating
results and financial condition would be materially adversely affected. The
future success of the Company also depends on the timely adoption of other
network security products by users. The market acceptance of these products is
difficult to estimate due in large measure to the recent emergence of the market
for network security products, the effect of new products, applications or
product enhancements, technological changes in the network security market and
future competition. Moreover, the Company anticipates that its existing and new
competitors (including possibly Check Point) will introduce additional
competitive products, particularly if demand for enterprise-wide security
products increases, which may reduce future market acceptance of these products.
There can be no assurance that the products will achieve acceptance in the
network security market, and the failure of the products to achieve such market
acceptance, or maintain such acceptance, if achieved, as a result of
competition, technological change or other factors, could have a material
adverse effect on the Company's business, financial condition and results of
operations.
COMPETITION
The market for network security products and services is new, intensely
competitive, rapidly, evolving and subject to rapid technological change. The
Company expects competition to intensify in the future. The Company's principal
current competitors include America Online, Inc.'s Advanced Network and Services
subsidiary, Borderware Network Technologies, Raptor Systems, Inc., Cisco
Systems, Inc., Digital Equipment Corporation, International Business Machines
Corporation., Milkyway Networks Corporation, Morningstar Technologies, Inc.,
Network Systems Corporation, Secure Computing Corporation, Trusted Information
Systems Inc. and V-One, Inc., as well as other resellers of Check Point's
FireWall-1 product such as Sun Microsystems, Inc., Hewlett Packard Company and
BBN Bolt Bernek &
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Newman. Due to the rapid expansion of the network security market, the Company
may face competition from new entrants in the network security industry,
possibly including the Company's resellers as well as Check Point. In addition,
Microsoft and AT&T Corp. have announced that they intend to enter the network
security market. There can be no assurance that the Company's current and
potential competitors will not develop network security products that may be
more effective than Check Point's current or future products or that Check
Point's technologies and products would not be rendered obsolete by such
developments. Many of the Company's current and potential competitors have
longer operating histories, greater name recognition, larger installed customer
bases and significantly greater financial, technical and marketing resources
than the Company. As a result, they may be able to adapt more quickly to new or
emerging technologies and changes in customer requirements, or to devote greater
resources to the promotion and sale of their products than the Company. In
addition, certain of the Company's competitors may determine, for strategic
reasons, to consolidate, to substantially lower the price of their network
security products or to bundle their products with other products, such as
hardware products or other enterprise software products. In addition, current
and potential competitors have established or may establish financial or
strategic relationships among themselves, with existing or potential customers,
resellers or other third parties. Accordingly, it is possible that new
competitors or alliances among competitors may emerge and rapidly acquire
significant market share. An increase in competition could result in price
reductions and loss of market share. Such competition and any resulting
reduction in gross margins could have a material adverse effect on the Company's
business, financial condition and results of operations.
In the future, vendors of operating system software or networking
hardware may enhance their products to include functionality that is currently
provided by Check Point's FireWall-1 products. The widespread inclusion of the
functionality of Check Point's software as standard features of operating system
software or networking hardware could render Check Point's FireWall-1 products
obsolete and unmarketable, particularly if the quality of such functionality
were comparable to that of Check Point's products. Furthermore, even if the
network security functionality provided as standard features by operating
systems software or networking hardware is more limited than that of Check
Point's FireWall-1 software, there can be no assurance that a significant number
of customers would not elect to accept more limited functionality in lieu of
purchasing additional software. In the event of any of the foregoing, the
Company's business, operating results and financial condition would be
materially adversely affected.
RISK OF NEW PRODUCT INTRODUCTIONS; RISK OF ERRORS OR FAILURES
As the network security industry continues to evolve, the Company plans
to develop and introduce new products to address the changing needs of the
evolving network security market. There can be no assurance that the Company
will be able to develop new products or that such products will achieve market
acceptance or, if market acceptance is achieved, that the Company will be able
to maintain such acceptance for a significant period of time. Any inability of
the Company to develop products on a timely basis that address changing customer
requirements may require the Company to substantially increase development
expenditures or may result in a loss of market share to a competitor. Moreover,
products as complex as those offered by the Company may contain undetected
errors when first introduced or when new versions are released. In particular,
the personal computer hardware environment is characterized by a wide variety of
non-standard configurations that makes pre-release testing for programming or
compatibility errors very difficult and time consuming. There can be no
assurance that, despite testing by the Company, errors will not occur in new
products or releases after commencement of commercial shipments, resulting in
adverse publicity, in loss of or delay in market acceptance, or in claims by the
customer against the Company, which could have a material adverse effect on the
Company's business, financial condition and results of operations.
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CHANGES IN TECHNOLOGY AND INDUSTRY STANDARDS
The network security industry is characterized by rapid changes,
including evolving industry standards, frequent new product introductions,
continuing advances in technology and changes in customer requirements and
preferences. The introduction of new technologies and the emergence of new
industry standards could render Check Point's products obsolete or unmarketable,
and, as a reseller of Check Point's products, the Company's business, operating
results and financial condition would be materially adversely affected. The
development cycle for the Company's new products may be longer than projected,
resulting in higher development costs or a loss in market share. Advances in
techniques by individuals and entities seeking to gain unauthorized access to
networks could expose existing products to new and unexpected attacks and
require accelerated development of new products. There can be no assurance that
Check Point's FireWall-1 products or the Company's future product offerings will
keep pace with technological changes implemented by competitors or persons
seeking to breach network security, that these products will satisfy evolving
consumer preferences or that the Company will be successful in developing and
marketing products for any future technology. Failure to develop and introduce
new products and product enhancements in a timely fashion could have a material
adverse effect on the Company's business, financial condition and results of
operations.
MANAGEMENT OF GROWTH
The Company's ability to hire and assimilate new personnel will be
critical to the Company's performance, and there can be no assurance that the
management and systems currently in place will be adequate if the Company
continues to grow or that the Company will be able to implement additional
systems successfully and in a timely manner as required. If the Company
continues to grow, it will be required to recruit additional key management
personnel, expand its direct sales force and development capabilities, improve
its operational and financial systems, expand its customer support functions and
train, motivate and manage additional employees. There can be no assurance that
the Company will be able to manage these changes successfully. Although the
Company is not currently involved in negotiations for any acquisitions, the
Company may undertake acquisitions in the future. Any such transaction would
place additional strains upon the Company's management resources.
DEPENDENCE ON KEY PERSONNEL; MANAGEMENT OF A RAPIDLY CHANGING BUSINESS
The Company's future success depends to a significant extent on its
senior management and other key employees. The Company also believes that its
future success will depend in large part on its ability to attract and retain
additional key employees. Competition for such personnel in the computer
software industry is intense, and there can be no assurance that the Company
will be successful in attracting and retaining such personnel. The Company's
inability to attract and retain additional key employees or the loss of one or
more of its current key employees could have a material adverse effect on the
Company's business, financial condition and results of operation. The Company
does not have personal life insurance policies on any of its employees. The
expansion of the Company's business has placed, and any future expansion is
expected to continue to place, a strain on the Company's management and
operations, including its sales, customer support, finance and administrative
operations. The Company's ability to manage its future growth, if any, will
require the Company to continually improve its financial and management
controls, reporting systems and procedures on a timely basis, implement new
systems as necessary and expand, train and manage its employee workforce. There
can be no assurance that the Company's controls, systems or procedures will be
adequate to support the Company's growing operations. The failure of the
Company's management to respond effectively to changing business
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conditions would have a material adverse effect upon the Company's business,
operating results and financial condition.
DEPENDENCE ON RESELLERS
The Company distributes Check Point's FireWall-1 products directly and
through other VARS. The success of the Company is therefore dependent in part
upon the performance of its resellers, which is outside the Company's control.
In particular, the Company is dependent upon a number of strategic VARs for a
significant amount of its revenue. In the fiscal year that ended March 31, 1996,
sales to approximately twelve resellers accounted for approximately 20% of the
Company's revenue. The Company's relationships with most of its resellers have
been established within the past two years, and the Company is unable to predict
with accuracy the extent to which its resellers will be successful in marketing
and selling the products. The loss of any of the Company's major resellers,
either to competitive products offered by other companies or to products
developed internally by the resellers, could have a material adverse effect on
the Company. Moreover, the Company's future success will depend in part on its
ability to attract new resellers.
DEPENDENCE ON EXTERNAL DEVELOPMENT RESOURCES AND SUPPLIERS
The Company has relied and will continue to rely on external
development resources for the development of certain of its products and
components thereof. The Company's success will depend in part on its continued
ability to obtain product development agreements with independent software
developers. There can be no assurance that the Company will be able to obtain or
renew product development agreements on favorable terms or at all. Due primarily
to the increased demand for software programs, the payment of advance and
guaranteed royalties to independent developers has increased and may continue to
increase. As independent developers are in high demand, there can be no
assurance that independent developers will be available to develop products for
the Company in the future. Many independent developers have limited financial
resources, which could expose the Company to the risk that such developers may
go out of business prior to completing a project. In addition, due to the fact
that the Company has less control over the scheduling and quality of the work of
independent developers than it does over its own employees, there can be no
assurance that such developers will complete products for the Company on a
timely basis, within acceptable guidelines or at all.
EFFECT OF GOVERNMENT REGULATION OF TECHNOLOGY EXPORTS
The Company's international sales and operations may be subject to
risks such as the imposition of governmental controls, export license
requirements, restrictions on the export of critical technology, trade
restrictions and changes in tariffs. In particular, because of governmental
controls on the exportation of encryption technology, the Company is unable to
export its most robust network security products. As a result, foreign
competitors that face less stringent controls on their products may be able to
compete more effectively than the Company in the global network security market.
There can be no assurance that these factors will not have a material adverse
effect on the Company's business, financial condition and results of operations.
LIMITED PROTECTION OF INTELLECTUAL PROPERTY AND PROPRIETARY RIGHTS
The Company relies on copyright and trade secret laws, employee and
third-party non-disclosure agreements and other methods to protect its
proprietary rights. There can also be no assurance that the Company's trade
secrets or nondisclosure agreements will provide meaningful protection of the
Company's
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proprietary information. Furthermore, there can be no assurance that others will
not independently develop similar technologies or duplicate any technology
developed by the Company. The Company's inability to protect its proprietary
rights would have a material adverse effect on the Company's business, financial
condition and results of operations. Further, the Company may be subject to
additional risk as it enters into transactions in countries where intellectual
property laws are not well developed or are poorly enforced. Legal protections
of the Company's rights may be ineffective in such countries.
As the number of network security products in the industry increases
and the functionality of these products further overlaps, software developers
and publishers may increasingly become subject to infringement claims. There can
be no assurance that third parties will not assert infringement claims against
the Company in the future with respect to current or future products. Although
the Company is not currently the subject of any intellectual property
litigation, there has been substantial litigation regarding patent, copyright,
trademark and other intellectual property rights involving computer software
companies. Any claims or litigation, with or without merit, could be costly and
could result in a diversion of management's attention, which could have a
material adverse effect on the Company's business, financial condition and
results of operations. Adverse determinations in such claims or litigation could
also have a material adverse effect on the Company's business, financial
condition and results of operations.
DEPENDENCE OF LICENSED TECHNOLOGY. The Company, through ISC, signed a
three-year extension to its non-exclusive distribution agreement with Check
Point whereby it has the right to sell, on a non-exclusive basis, all of the
current and future products by Check Point within the United States and Germany.
The Company maintains the right to distribute these products through its direct
sales organization or through resellers. The Company must achieve certain
revenue targets to maintain a most favorable discount level from Check Point.
The distribution agreement can not be terminated unless revenue targets are not
achieved. There can be no assurance that the Company will achieve such revenue
targets, and the Company's inability to achieve such revenue targets could have
a material adverse effect on the Company's business, financial condition and
results of operations.
RISKS ASSOCIATED WITH ACQUISITIONS. Management may from time to time
consider other acquisitions of assets or businesses that will enable the Company
to acquire complementary skills and capabilities, offer new products, expand its
customer base or obtain other competitive advantages. There can be no assurance
that the Company will be able to successfully identify suitable acquisition
candidates, obtain financing on satisfactory terms, complete acquisitions,
integrate acquired operations into its existing operations or expand into new
markets. Acquisitions may result in potentially dilutive issuances of equity
securities, the incurrence of debt and contingent liabilities, and amortization
expense related to intangible assets acquired, any of which could materially
adversely affect the Company's business and results of operations. Acquisitions
involve a number of potential risks, including difficulties in the assimilation
of the acquired Company's operations and products, diversion of management's
resources, uncertainties associated with operating in new markets and working
with new employees and customers, and the potential loss of the acquired
company's key employees. There can also be no assurance that future
acquisitions, if any, will not have a material adverse effect upon the Company's
business and results of operations. Once integrated, acquired operations may not
achieve levels of revenues, profitability or productivity comparable to those
achieved by the Company's existing operations, or otherwise perform as expected.
The Company is not currently engaged in negotiations with respect to any
acquisition and does not currently have any agreements, arrangements or
understandings with respect to any particular acquisition.
POSSIBLE VOLATILITY OF STOCK PRICE. The market price of the Common
Stock could be subject to significant fluctuations in response to, and may be
adversely affected by, variations in quarterly operating
-9-
results, changes in earnings estimates by analysts, developments in the software
industry, adverse earnings or other financial announcements of the Company's
customers and general stock market conditions as well as other factors. In
addition, the stock market has experienced extreme price and volume fluctuations
from time to time which have, in certain circumstances, borne no meaningful
relationship to performance.
SHARES ELIGIBLE FOR FUTURE SALE. Sales of substantial numbers of shares
of the Company's Common Stock in the public market or the perception that such
sales could occur could adversely affect the market price of the Common Stock.
AVAILABILITY OF PREFERRED STOCK FOR ISSUANCE. The Board of Directors is
authorized to issue, without stockholder approval, up to 3,850,000 shares of
Preferred Stock of the Company (the "Preferred Stock") with voting, conversion
and other rights and preferences that may be superior to the Common Stock and
that could adversely affect the voting power or other rights of the holders of
Common Stock. The issuance of Preferred Stock or of rights to purchase Preferred
Stock could be used to discourage an unsolicited acquisition proposal.
ABSENCE OF DIVIDENDS. The Company does not anticipate paying any
dividends on its Common Stock in the foreseeable future.
THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995. This act contains
certain safe harbors regarding forward-looking statements. Any description of
the Company's business and operating strategy for 1996 and subsequent years are
considered to be forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995. In that context, the discussion in
these Risk Factors in this Prospectus contains forward-looking statements which
involve certain degrees of risk and uncertainties, including statements relating
to business strategy, markets and product offerings. Except for the historical
information contained herein, which is limited, the matters discussed in this
section are such forward-looking statements that involve certain risks and
uncertainties, including, among others: the need for additional personnel,
including additional members of the management team, the dependence on
third-party technology of Check Point, the lack of Company-proprietary
technology, the presence of potential competitors with greater resources,
certain product and market commercialization risks and significant competitive
risks. Investors are cautioned to refer to this section which sets forth at
length a number of meaningful cautionary statements relating to the Company's
business, strategy, product offerings and markets which could cause the actual
results of the Company's operations in 1996 and in the future to differ
materially from those stated in the Company's forward-looking statements in this
Prospectus.
USE OF PROCEEDS
The Company will not receive any of the proceeds from the sale of the
Shares by the Selling Stockholders.
SELLING STOCKHOLDERS
The following table sets forth certain information regarding beneficial
ownership of the Shares as of November 1, 1996 and the number of Shares which
may be offered for the account of the Selling Stockholders or their transferees
or distributees from time to time. The shares may be offered from time to time
by the Selling Stockholders. Because the Selling Stockholders may sell all or
any part of their Shares pursuant to this Prospectus, no estimate can be given
as to the number of Shares that will be held by the Selling Stockholders upon
termination of this offering. See "Plan of Distribution."
-10-
<TABLE>
<CAPTION>
NUMBER OF SHARES BENEFICIALLY OWNED NUMBER OF SHARES WHICH MAY BE SOLD
SELLING STOCKHOLDERS PRIOR TO OFFERING IN THIS OFFERING
-------------------- ----------------- ----------------
<S> <C> <C>
Richard J. Kosinski 423,914 423,914
Ralph B. Wagner 20,962 20,962
Eyal Shavit 20,962 20,962
</TABLE>
Rich J. Kosinski is an officer of the Company. Ralph B. Wagner is a
director of the Company.
In November 1995, the Company acquired ISC (the "ISC Acquisition"), a
provider of network security products and related services, through the issuance
of 465,838 shares of its Common Stock. In connection with ISC Acquisition, the
Selling Stockholders were granted certain registration rights ("Registration
Rights Agreement") with respect to the 465,838 shares of Common Stock issued to
the Selling Stockholders. Pursuant to the Registration Statement of which this
Prospectus is a part, the Company is fulfilling its obligations under the terms
of the Registration Rights Agreement by registering for resale all of the Shares
that may be resold by the Selling Stockholders.
PLAN OF DISTRIBUTION
The Shares offered hereby are being sold by the Selling Stockholders
for their own account. The Company will not receive any of the proceeds from
this offering.
The Shares covered by this Prospectus may be sold by the Selling
Stockholders or by pledgees, donees, transferees or other successors in
interest. Such sales may be made at fixed prices that may be changed, at market
prices prevailing at the time of sale, at prices related to such prevailing
market prices, or at negotiated prices. The Shares may be sold by one or more of
the following: (a) one or more block trades in which a broker or dealer so
engaged will attempt to sell all or a portion of the Shares held by the Selling
Stockholders as agent but may position and resell a portion of the block as
principal to facilitate the transaction; (b) purchases by a broker or dealer as
principal and resale by such broker or dealer for its account pursuant to this
Prospectus; and (c) ordinary brokerage transactions and transactions in which
the broker solicits purchasers. The Selling Stockholders may effect such
transactions by selling shares to or through broker-dealers, and such
broker-dealers will receive compensation in negotiated amounts in the form of
discounts, concessions, commissions or fees from the Selling Stockholders and/or
the purchasers of the shares for whom such broker-dealers may act as agent or to
whom they sell as principal, or both (which compensation to a particular
broker-dealer might be in excess of customary commissions). Such brokers or
dealers or other participating brokers or dealers and the Selling Stockholders
may be deemed to be "underwriters" within the meaning of the Securities Act of
1933, in connection with such sales.
Any securities covered by this Prospectus that qualify for sale
pursuant to Rule 144 under the Securities Act of 1933, as amended, may be sold
under Rule 144 rather than pursuant to this Prospectus.
The Company intends to maintain the effectiveness of this Prospectus
for approximately twelve months or such longer period as is required to satisfy
the Company's obligations under the Registration Rights Agreement with the
Selling Stockholders; provided, however, that, under certain circumstances set
forth in the Registration Rights Agreement, including, without limitation, the
Company's determination that it is in possession of material nonpublic
information that it determines in good faith that it is not advisable to
disclose in a registration statement but which information would otherwise be
required by the Securities
-11-
Act to be disclosed in a registration statement, then the Company may by written
notice suspend the right of the Selling Stockholders to sell shares pursuant to
this registration statement for up to 90 days.
The Registration Rights Agreement provides that the Company will
indemnify such Selling Stockholders for any losses incurred by them in
connection with actions arising from any untrue statement of a material fact in
the Registration Statement or any omission of a material fact required therein,
unless such statement or omission was made in reliance on written information
furnished to the Company by the Selling Stockholders. Similarly, the
Registration Rights Agreement provides that the Selling Stockholders will
indemnify the Company and its officers and directors for any losses incurred by
them in connection with any actions arising from any untrue statement of
material fact in the Registration Statement or any omission of a material fact
required therein, if such statement or omission was made in reliance on written
information furnished to the Company by the Selling Stockholders. Insofar as
indemnification for liabilities arising under the Securities Act of 1933 may be
permitted to directors, officers or persons controlling the registrant pursuant
to the foregoing provisions, the registrant has been informed that in the
opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Act and is therefore unenforceable.
The Company will inform the Selling Stockholders that the
antimanipulative rules under the Securities and Exchange Act of 1934 (Rules
10b-5 and 10b-6) may apply to sales in the market and will furnish upon request
the Selling Stockholders with a copy of these Rules. The Company will also
inform the Selling Stockholders of the need for delivery of copies of this
Prospectus.
LEGAL MATTERS
The issuance of the Shares will be passed upon for the Company by
Testa, Hurwitz & Thibeault, LLP Boston, Massachusetts. Certain attorneys at
Testa, Hurwitz & Thibeault, LLP own an aggregate of 1,000 shares of Common
Stock.
EXPERTS
The financial statements and schedules included in this Prospectus and
elsewhere in this Registration Statement, to the extent and for the periods
indicated in their reports, have been audited by Coopers & Lybrand L.L.P.,
independent public accountants, and are included herein in reliance upon the
authority of said firm as an expert in giving said reports.
-12-
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS IN
CONNECTION WITH THE OFFERING MADE HEREBY AND, IF GIVEN OR MADE, SUCH INFORMATION
OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
COMPANY, ANY SELLING STOCKHOLDER OR ANY UNDERWRITER. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF ANY OFFER TO BUY ANY OF THE
SECURITIES OFFERED HEREBY TO ANY PERSON OR BY ANYONE IN ANY JURISDICTION IN
WHICH IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF
THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES,
CREATE ANY IMPLICATION THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF
ANY DATE SUBSEQUENT TO THE DATE AS OF WHICH INFORMATION IS SET FORTH HEREIN.
------------------------
TABLE OF CONTENTS
PAGE
----
Available Information ...................... 2
Incorporation of Certain
Information by Reference.................. 2
Trademarks.................................. 3
The Company................................. 3
Risk Factors ............................... 4
Use of Proceeds ............................ 10
Selling Stockholders........................ 10
Plan of Distribution........................ 11
Legal Matters .............................. 12
Experts .................................... 12
------------------------
465, 838
NETEGRITY, INC.
COMMON STOCK
--------------
PROSPECTUS
--------------
November __, 1996
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
Estimated expenses (other than underwriting discounts and commissions)
payable in connection with the sale of the Common Stock offered hereby are as
follows:
<TABLE>
<CAPTION>
<S> <C>
SEC Registration fee ...................................................................$ 344
Printing expenses....................................................................... 2,000
Legal fees and expenses ................................................................ 10,000
Accounting fees and expenses ........................................................... 10,000
Miscellaneous .......................................................................... 500
--------
Total ......................................................................................$ 22,844
========
</TABLE>
The Company will bear all expenses shown above. All amounts other than
the SEC Registration fee are estimated solely for the purposes of the Offering.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
As permitted by the Delaware Law, the Company's Certificate of
Incorporation provides that directors of the Company shall not be personally
liable to the Company or its stockholders for monetary damages for breach of
fiduciary duty as a director, except for liability (a) for any breach of the
director's duty of loyalty to the Company or its stockholders, (b) for acts of
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, (c) under Section 174 of the Delaware General Corporation Law,
relating to prohibited dividends or distributions or the repurchase or
redemption of stock or (d) for any transaction from which the director derives
an improper personal benefit. In addition, the Company's By-laws provide for
indemnification of the Company's officer and directors to the fullest extent
permitted under Delaware law. Section 145 of the Delaware Law provides that a
corporation may indemnify any persons, including officers and directors who were
or are, or are threatened to be made, parties to any threatened, pending or
completed legal action, suit or proceeding, whether civil, criminal,
administrative or investigative (other than an action by or in the right of such
corporation), by reason of the fact that such person was an officer, director,
employee or agent of such corporation or is or was serving at the request of
such corporation as an officer, director, employee or agent of another
corporation, partnership, joint venture, trust or other settlement actually and
reasonably incurred by such person in connection with such action, suit or
proceeding, provided such person 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 that his
conduct was unlawful. 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.
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 that such officer or director actually and reasonably
incurred. Insofar as indemnification for liabilities arising under the
Securities Act of 1933, as amended (the "Securities Act") may be permitted to
directors, officer or persons controlling the Company pursuant to the foregoing
provisions, the Company has been informed that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in Securities Act and is therefore unenforceable.
The Company maintains directors and officers liability insurance for
the benefit of its directors and officers.
ITEM 16. EXHIBITS
(a) Exhibits:
EXHIBIT NO. DESCRIPTION
- ----------- -----------
2.1 Agreement and Plan of Merger among the Company, ISC
Acquisition Corp., Internet Security Corporation and Rich
Kosinski dated as of October 17, 1995 and Amendment No. 1
to the Agreement and Plan of Merger among the Company, ISC
Acquisition Corp., Internet Security Corporation and
Richard Kosinski dated as of November 16, 1995, (filed as
Exhibits 7.01 and 7.02 to the Company's Report on Form 8-K,
dated November 16, 1995 (the "Report on Form 8-K") and
incorporated herein by reference).
4.1 Specimen certificate representing the Common Stock (filed
as Exhibit 4.01 to the Company's Registration Statement on
Form S-18 (File No. 33-24446-B) and incorporated herein by
reference).
5.1* Opinion of Testa, Hurwitz & Thibeault, LLP
23.1* Consent of Coopers & Lybrand L.L.P.
23.2* Consent of Testa, Hurwitz & Thibeault, LLP (included in
Exhibit 5.1).
24.1* Power of Attorney (see page II-5).
- ------
*Filed herewith.
-2-
ITEM 17. UNDERTAKINGS.
(a) 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;
(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; notwithstanding the foregoing, any increase or
decrease in 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 and 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;
(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;
provided, however, that paragraphs (a) (1) (i) and (a) (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 by the registrant pursuant to
Section 13 or Section 15(d) of the Securities Exchange Act of 1934 that are
incorporated by reference in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, 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 post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 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.
(c) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, 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 of 1933 and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than
-3-
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 of 1933 and will be governed by the final adjudication of such
issue.
-4-
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 Waltham, Massachusetts, on November 6, 1996.
NETEGRITY, INC.
By: /s/ Barry N. Bycoff
----------------------------------------
Barry N. Bycoff
President and Chief Executive Officer
POWER OF ATTORNEY AND SIGNATURES
We, the undersigned officers and directors of NeTegrity, Inc., hereby
severally constitute and appoint Barry N. Bycoff and James O'Connor, Jr. and
each of them singly, our true and lawful attorneys, with full power to them and
each of them singly, to sign for us in our names in the capacities indicated
below, all pre-effective and post-effective amendments to this registration
statement, and generally to do all things in our names and on our behalf in such
capacities to enable NeTegrity, Inc. to comply with the provisions of the
Securities Act of 1933, as amended, and all requirements of the Securities and
Exchange Commission.
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>
<CAPTION>
SIGNATURE TITLE(S) DATE
--------- -------- ----
<S> <C> <C>
/s/ Barry N. Bycoff PRESIDENT, CHIEF EXECUTIVE November 6, 1996
- ------------------------------------
Barry N. Bycoff OFFICER AND DIRECTOR
(PRINCIPAL EXECUTIVE
OFFICER)
/s/ James O'Connor, Jr. VICE PRESIDENT, CHIEF FINANCIAL OFFICER November 6, 1996
- ------------------------------------
James O'Connor, Jr. PRINCIPAL FINANCIAL
(AND ACCOUNTING OFFICER)
DIRECTOR
Aaron Kleiner
/s/ Michael L. Mark DIRECTOR November 6, 1996
- ------------------------------------
Michael L. Mark
-5-
/s/ Milton J. Pappas DIRECTOR November 6, 1996
- ------------------------------------
Milton J. Pappas
/s/ Ralph B. Wagner DIRECTOR November 6, 1996
- ------------------------------------
Ralph B. Wagner
/s/Stephen L. Watson DIRECTOR November 6, 1996
Stephen L. Watson
</TABLE>
-6-
Exhibit 5.1
November 6, 1996
Netegrity, Inc.
245 Winter Street
Waltham, MA 02154
Re: Netegrity, Inc.
Registration Statement on Form S-3
Ladies and Gentlemen:
We are acting as counsel for Netegrity, Inc., a Delaware corporation
(the "Company"), in connection with the registration on a Registration Statement
on Form S-3 (the "Registration Statement") under the Securities Act of 1933, as
amended, for the offer and sale of up to 465,838 shares of Common Stock, par
value $.01 per share, of the Company (the "Shares") to be sold by the former
stockholder of Internet Security Corporation ("ISC") and such stockholder's
transferees ("the "Selling Stockholders"). The Shares were issued to the former
stockholder of ISC in connection with the Company's acquisition of ISC on
November 16, 1995.
We have reviewed the corporate proceedings taken by the Board of
Directors of the Company with respect to the authorization and issuance of the
Shares. We have also examined and relied upon originals or copies, certified or
otherwise authenticated to our satisfaction, of all corporate records,
documents, agreements or other instruments of the Company and have made all
investigations of law and have discussed with the Company's officers all
questions of fact that we have deemed necessary or appropriate.
Based upon and subject to the foregoing, we are of the opinion that the
Shares are duly authorized, validly issued, fully paid and nonassessable.
We hereby consent to the filing of this opinion as Exhibit 5.1 to the
Registration Statement and to the reference to our firm in the Prospectus
contained in the Registration Statement under the caption "Legal Matters."
Very truly yours,
/s/ TESTA, HURWITZ & THIBEAULT, LLP
TESTA, HURWITZ & THIBEAULT, LLP
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion by reference in this registration statement on Form
S-3, of our report dated May 15, 1996, on our audits of the consolidated
financial statements of The Software Developer's Company, Inc. (now known as
NeTegrity, Inc.) as of March 31, 1996 and 1995, and for the years ended March
31, 1996, 1995, and 1994. We also consent to the reference to our Firm under the
caption "Experts".
/s/ COOPERS & LYBRAND L.L.P.
COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
November 6, 1996
