REGISTRATION NUMBER 333-87247
FILED UNDER RULE 424(B)(3)
534,242 Shares
Common Stock
NETEGRITY, INC.
The stockholders of Netegrity, Inc. listed below are offering and selling
534,242 shares of Common Stock, par value $.01 per share, of Netegrity, Inc. All
of the stockholders purchased their shares of Netegrity Common Stock on
September 9, 1999.
The selling stockholders may offer their Netegrity Common Stock through
public or private transactions, on or off the United States exchanges, at
prevailing market prices, or at privately negotiated prices.
Our common stock is listed on the Nasdaq National Market under the symbol
"NETE." The last reported sale price of our common stock on the Nasdaq National
Market on October 7, 1999 was $26.3125 per share.
------------------------------
Investing in our common stock involves risks.
See "Risk Factors" beginning on page 6.
------------------------------
The date of this prospectus is October 8, 1999
<PAGE>
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and current reports, proxy statements and other
information with the SEC. You may read and copy any document we file at the
SEC's public reference rooms in Washington, D.C., New York, New York and
Chicago, Illinois. Please call the SEC at 1-800-SEC-0330 for further information
on the public reference rooms. Our SEC filings are also available to the public
from commercial document retrieval services and the SEC's website at
http://www.sec.gov.
We have filed a registration statement to register with the SEC the shares
of our common stock that are being offered. This prospectus is a part of the
registration statement and, as the SEC rules permit, does not contain all the
information that stockholders can find in the registration statement or the
exhibits to the registration statement.
The SEC allows us to "incorporate by reference" the information we file
with them, which means that we can disclose important information to you by
referring you to those documents. The information incorporated by reference is
considered to be part of this prospectus, and information that we file later
with the SEC will automatically update and supersede this information. This
prospectus incorporates by reference the documents listed below:
o Annual Report on Form 10-K for the year ended December 31, 1998; as
amended by a Form 10-K/A filed on July 6, 1999, as further amended by a
Form 10-K/A filed on September 17, 1999;
o Proxy Statement filed on March 19, 1999 for the 1999 Annual Meeting of
Stockholders, and Proxy Statement filed on September 7, 1999 for the
Special Meeting of Stockholders to be held on October 7, 1999;
o Quarterly Reports on Form 10-Q for the quarters ended March 31, 1999
and June 30, 1999 as amended by a Form 10-Q/A filed on September 17,
1999; and
o Form 8-A, filed on December 6, 1988, as amended by Amendment No. 1 to
Form 8-A, filed on December 13, 1988, setting forth a discussion of our
capital stock.
We incorporate by reference in this prospectus additional documents that we
may file with the SEC between the date the registration statement was initially
filed and the date of termination of this offering. These include periodic
reports, such as Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and
Current Reports on Form 8-K, as well as proxy statements.
You may request a copy of these filings, at no cost, by writing or
telephoning our Chief Financial Officer as follows:
NETEGRITY, INC.
245 Winter Street
Waltham, Massachusetts 02451
(781) 890-1700
<PAGE>
NETEGRITY
We are a leading provider of software and services that manage and control
user access to web-based applications. Our SiteMinder product is part of the
software infrastructure that is used to build and manage an e-commerce web site.
SiteMinder manages the complex process of identifying users and assigning those
users privileges to multiple e-commerce applications on a company's web-site.
These assigned privileges determine what information a user can see and what
transactions a user can perform on the web site. SiteMinder enables our
customers to centrally control access to e-commerce web sites requiring secure
log-in, while distributing the administrative responsibility to the most
appropriate parties. SiteMinder is designed to be scalable and reliable, to
integrate with our customers' existing systems and to accommodate emerging
Internet technology. We offer a wide range of support services that enable our
customers to successfully implement SiteMinder into their organizatios. As of
June 30, 1999 we had 87 customers. We sell our products through a direct sales
force and through our distribution partners. To date, most of our customers'
deployments of SiteMinder have supported business-to-business e-commerce
applications, but our customers are beginning to deploy SiteMinder for
business-to-customer applications.
<PAGE>
FORWARD-LOOKING STATMENTS AND INDUSTRY DATA
This prospectus and the documents incorporated in it by reference
contain forward-looking statements about our plans, objectives, expectations and
intentions. You can identify these statements by words such as "expect",
"anticipate," "intend," "plan," "believe," "seek," "estimate," "may," "will" and
"continue" or similar words. You should read statements that contain these words
carefully. They discuss our future expectations, contain projections of our
future results of operations or our financial condition or state other
forward-looking information, and may involve known and unknown risks over which
we have no control. You should not place undue reliance on forward-looking
statements. We cannot guarantee any future results, levels of activity,
performance or achievements. Moreover, we assume no obligation to update
forward-looking statements or update the reasons actual results could differ
materially from those anticipated in forward-looking statements. The factors
discussed in the sections captioned "Risk Factors," "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and "Business" in
this prospectus and the documents incorporated in it by reference identify
important factors that may cause our actual results to differ materially from
the expectations we describe in our forward-looking statements.
This prospectus and the documents incorporated in it by reference
contain data related to the e-commerce market. These market data have been
included in studies published by the market research firms of Forrester Research
and International Data Corporation. These data include projections that are
based on a number of assumptions, including increasing worldwide business use of
the Internet, the growth in the number of web access devices per user, the
absence of any failure of the Internet, and the continued improvement of
security on the Internet. If any of these assumptions is incorrect, actual
results may differ from the projections based on those assumptions.
RISK FACTORS
This offering involves a high degree of risk. You should carefully
consider the risks and uncertainties described below and the other information
in this prospectus before deciding whether to invest in shares of our common
stock. If any of the following risks actually occur, our business, financial
condition or operating results could be materially adversely affected. This
could cause the market price of our common stock to decline, and could cause you
to lose part or all 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 in every
fiscal period. We cannot predict when we will become profitable, if at all, and
if we do, that we will remain profitable for any substantial period of time.
Failure to achieve profitability within the time frame expected by investors may
adversely affect the market price of our common stock. In the six months ended
June 30, 1999, we had a net loss of $2.8 million. As a result of ongoing
operating losses, at June 30, 1999, we had an accumulated deficit of $17.4
million. We have generated relatively small amounts of SiteMinder revenues until
recent fiscal quarters, while increasing expenditures in all areas, particularly
in research and development and sales and marketing, in order to execute our
business plan. Although we have experienced revenue growth in connection with
SiteMinder in recent periods, the growth has been off of a small base, and it is
unlikely that the recent growth rates are sustainable.
Disappointing quarterly results could cause the market price of our common stock
to fall substantially.
Our quarterly revenues and operating results are difficult to predict and
may fluctuate significantly from quarter to quarter. If our quarterly revenues
or operating results fall below the expectations of investors, the price of our
common stock could fall substantially.
Our quarterly revenues may fluctuate for several reasons, including the
following:
o market acceptance of our SiteMinder products;
o our success in obtaining follow-on sales to existing customers;
o the long sales and deployment cycle for sales of SiteMinder licenses;
o our ability to hire and retain personnel, particularly in services and
sales and marketing;
o the release of new versions of SiteMinder or other products; and
o the development of our direct and indirect sales channels.
In addition, because our revenues from services are largely correlated with
our SiteMinder software revenues, a decline in SiteMinder software revenues
could also cause a decline in our SiteMinder 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. Moreover, our expense levels are based, in part, on our expectations
regarding future revenue increases. 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 increased quarterly losses.
Our future success will depend on our ability to market SiteMinder and related
services successfully.
The sale of SiteMinder licenses and related services provides a substantial
majority of our total revenues. These sales accounted for 70% of our total
revenues in the six months ended June 30, 1999. We expect that our future
financial performance will depend on SiteMinder sales. Prior to the release of
SiteMinder 3.0 in June 1998, there had been very few commercial installations of
SiteMinder. Since June 1998, all commercial deployments of SiteMinder have
supported business-to-business web applications. Broad market acceptance of
SiteMinder will depend on the development of the market for secure user
management, including usage of SiteMinder for business-to-consumer applications,
and customer demand for the specific functionality of SiteMinder. We cannot be
sure that either will occur. Like most technology products at an early stage of
development, SiteMinder may require extensive reengineering or upgrading if it
fails to meet the performance needs or expectations of our customers when
shipped or contains significant software defects or bugs. If we fail in
marketing SiteMinder products and services, for whatever reason, our business
would be harmed.
Our success is dependent on our ability to enhance our SiteMinder product line
and develop new products.
We believe our success is dependent, in large part, on our ability to
enhance and broaden our SiteMinder product line to meet the evolving needs of
both the business-to-business and business-to-consumer market. We cannot be sure
that we will be able to respond effectively to technological changes or new
industry standards or developments. In the past, we have been forced to delay
introduction of several new product versions. In the future, we could be
adversely affected if we incur significant delays or are unsuccessful in
enhancing our SiteMinder product line or developing new products, or if any of
our enhancements or new products do not gain market acceptance.
Our performance depends on our ability to obtain follow-on sales.
Customers typically place small initial orders for SiteMinder installations
to allow them to evaluate its performance. Our strategy is to pursue more
significant follow-on sales after these initial installations. Our financial
performance depends on successful initial deployments of SiteMinder that, in
turn, lead to follow-on sales. We cannot be sure that initial deployments of
SiteMinder by our customers will be successful, or that we will be able to
obtain follow-on sales.
We face significant competition from the internal efforts of potential customers
and from other technology companies and we may not be able to compete
effectively.
The market for secure user management products and services is relatively
immature and highly competitive. We expect the level of competition to increase
as a result of the anticipated growth of e-commerce. Until recently, our primary
source of competition was from secure user management software developed
in-house. Many of our potential customers have the resources to establish
in-house software development capabilities, and some of them, from time to time,
may choose to develop their own secure user management technology that is
competitive with ours. In addition, we have faced competition from web
development professional services organizations. Today our primary competitors
include enCommerce and the partnership between IBM and DASCOM. In addition, a
number of other security and software companies have indicated that they offer
products which may compete with ours. We expect that additional competitors will
emerge in the future. Current and potential competitors have established, or may
in the future establish, cooperative relationships with third parties to
increase the availability of their products to the marketplace. It is possible
that new competitors or alliances may emerge and rapidly acquire significant
market share. Potential competitors may have significantly greater financial,
marketing, technical and other competitive resources than we have. If, in the
future, a competitor chooses to bundle a competing secure user management
product with other e-commerce applications, the demand for our products might be
substantially reduced. Many of these factors are out of our control, and there
can be no assurance that we can maintain or enhance our competitive position
against current and future competitors.
The development of a market for SiteMinder is uncertain.
We provide secure user management solutions for web-based e-commerce
applications. Our market is new and rapidly evolving. If the market for secure
user management solutions does not grow at a significant rate, this will have a
material adverse effect on our business, operating results and financial
condition. As is typical for new and rapidly evolving industries, customer
demand for recently introduced secure user management products is highly
uncertain.
Our business will be adversely affected if the Internet does not become a viable
and substantial commercial medium.
Our future success depends heavily on the acceptance and wide use of the
Internet for e-commerce. If e-commerce does not continue to grow or grows more
slowly than expected, significant demand for SiteMinder and related services may
fail to develop. Consumers and businesses may reject the Internet as a viable
commercial medium for a number of reasons, including potentially inadequate
network infrastructure, slow development of enabling technologies, insufficient
commercial support or privacy concerns. In addition, delays in the development
or adoption of new standards and protocols required to handle increased levels
of e-commerce, or increased government regulation or taxation, could cause the
Internet to lose its viability as a commercial medium.
Regulations or consumer concerns regarding the use of "cookies" on the Internet
could reduce the functionality of SiteMinder.
SiteMinder uses cookies to support its 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 be stored on the user's hard drive. A number of
governmental bodies and commentators in the United 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
single sign-on and could reduce market demand for SiteMinder.
We must hire and retain skilled personnel in a tight labor market.
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 may limit the rate at which we can generate sales and
develop new products or product enhancements. This could have a material adverse
effect on our business, operating results and financial condition.
Our success depends on our ability to develop our direct sales and indirect
distribution channels.
To increase our revenues, we must develop our direct sales channel and
increase the number of our indirect channel partners. A failure to do so could
have a material adverse effect on our business, operating results and financial
condition. 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 increase the
number of strategic partnerships and other third-party relationships with
vendors of Internet-related systems and application software, resellers and
systems integrators. Our existing or future channel partners may choose to
devote greater resources to marketing and supporting the products of other
companies. In addition, we will need to resolve potential conflicts among our
sales force and channel partners.
Our failure to expand our professional services resources could limit the
success of SiteMinder.
Our professional services organization provides critical support to our
customers' installation and deployment of SiteMinder. If we fail to expand our
professional services resources, our ability to increase sales of SiteMinder may
be limited. In addition, if we cannot adequately support SiteMinder
installations, our customers' use of our products may fail, which could harm our
reputation and hurt our business.
Our lengthy sales cycle makes it difficult to predict our quarterly operating
results.
We have a long sales cycle because we generally need to educate potential
customers regarding the use and benefits of SiteMinder. Our sales cycle varies
depending on the size and type of customer contemplating a purchase and whether
we have conducted business with a potential customer in the past. These
potential customers frequently need to obtain approvals from multiple decision
makers prior to making purchase decisions. 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 period.
Our failure to manage our rapid growth effectively could hurt our business.
Our failure to manage our rapid growth effectively 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. We have
been experiencing a period of rapid growth that has been placing a significant
strain on all of our resources. From December 31, 1997 to August 31, 1999, the
number of our employees increased from 40 to 105. To manage future growth
effectively we must maintain and enhance our financial and accounting systems
and controls, integrate new personnel and manage expanded 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. The loss of any member of our management team could
have a material adverse effect on our business, operating results and financial
condition. We also depend on the ability of our officers and key employees to
work effectively as a team.
As we expand our international operations, we will face new risks to our
success.
Historically, we have not derived a significant portion of our total
revenues from sales to customers outside the United States. However, we intend
to expand our international operations in the future. This expansion will
require additional resources and management attention, and will subject us to
new regulatory, economic and political risks. We have very little experience in
international markets. As a result, we cannot be sure that our expansion into
global markets will be successful. In addition, we will face new risks in doing
business internationally. 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 we
believe are most likely to affect us are:
o longer payment cycles and problems in collecting accounts receivable;
o 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;
o the absence or significant lack of legal protection for intellectual
property rights;
o difficulties in managing an organization spread over several countries,
including complications arising from cultural, language and time
differences that may lengthen sales and implementation cycles;
o currency risks, including fluctuations in exchange rates; and
o political and economic instability.
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 could 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 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. 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 violated third party proprietary
rights, there can be no assurance that we would be able to reengineer our
product or to obtain a license 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, many of which are
confidential when filed, with regard to similar technologies. Any claim of
infringement could cause us to incur substantial costs defending against the
claim, even if the claim is invalid, 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.
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.
We could incur substantial costs resulting from product liability claims
relating to our customers' use of our products.
Many of the e-commerce 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, there can be no assurance 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.
If we acquire other companies or businesses, we will be subject to risks that
could hurt our company.
In the future, we may pursue acquisitions to obtain complementary products,
services and technologies. An acquisition may not produce the revenues, earnings
or business synergies that we anticipated, and an acquired product, service or
technology might not perform as we expected. If we pursue any acquisition, our
management could spend a significant amount of time and effort in identifying
and completing the acquisition. If we complete an acquisition, we would probably
have to devote a significant amount of management resources to integrate the
acquired business with our existing business.
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.
The market price of our common stock has been and may continue to be volatile
and you may not be able to sell your shares at or above the public offering
price.
Our stock price, like that of other technology companies, has been extremely
volatile. The announcement of new products, services, technological innovations
or distribution partners by us or our competitors, quarterly variations in our
operating results, changes in revenues or earnings estimates by securities
analysts and speculation in the press or investment community are among the
factors affecting our stock price. In addition, our common stock is listed on
the Nasdaq National Market, which may increase investors' difficulty in buying
and selling our common stock, which could have the effect of increasing the
volatility of our stock price.
In addition to this registration statement, we have filed a shelf
registration statement on Form S-3 with the SEC in connection with a recent
private financing. This registration statement covers 795,651 shares of our
common stock, which may be sold into the public market at any time. We also
filed on September 15, 1999 a registration statement on Form S-3 with the SEC in
connection with a proposed public offering of 3,450,000 shares of our common
stock. Sales of these shares could increase the volatility of our stock price.
The stock market in general, and the market prices for Internet-related
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.
We may lose money on fixed-price consulting contracts.
In the future, an increased portion of our SiteMinder services revenues may
be derived from fixed-price contracts. 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, our operating results could
be materially harmed.
Loss of our FireWall-1 reseller business would adversely affect our operating
results.
While we recently have focused our resources on developing and marketing our
SiteMinder software and services, we continue to generate a significant portion
of our revenues from our sales of Check Point Software Technologies' FireWall-1
product. Our FireWall-1 reseller business experiences competition from companies
that compete with FireWall-1, including Axent Technologies, Cisco Systems and
Trusted Information Systems, as well as from other resellers of FireWall-1. As a
result, we may not be able to maintain the current revenue levels generated by
our FireWall-1 reseller business.
Our directors and management will exercise significant control over our company.
We filed a registration statement on Form S-3 with the SEC on September 15,
1999 in connection with a proposed public offering of 3,450,000 shares of our
common stock. After that offering, our directors and executive officers and
their affiliates will collectively control approximately 31.8% of our
outstanding common stock. As a result, these stockholders, if they act together,
will be able to influence our management and affairs and all matters requiring
stockholder approval, including the election of directors and approval of
significant corporate transactions. This concentration of ownership may have the
effect of delaying or preventing a change in control of our company and might
affect the market price of our common stock.
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 our management to resist a takeover of our company. These provisions
might discourage, delay or prevent 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.
We may be adversely impacted by unexpected Year 2000 issues.
Computer systems and software must accept four digit entries to distinguish
twenty-first century dates from twentieth century dates. As a result, many
software and computer systems may need to be upgraded in order to be Year 2000
compliant. Significant uncertainties exist in the software industry concerning
the potential effects associated with such compliance. We have assessed the
impact of Year 2000 compliance on our products and systems. We cannot, however,
be certain that we have identified all of the potential risks to our business
that could result from matters related to the Year 2000. We have identified the
following risks that you should be aware of:
o Undetected Year 2000 problems that could affect our products. We believe
that all of our versions of our SiteMinder software products were Year
2000 compliant at the time of installation. Although we have tested
these products for Year 2000 compliance, we cannot be certain that these
tests have detected all potential Year 2000 problems. The failure of our
currently supported products to be fully Year 2000 compliant could
result in claims by or liability to our customers, which could have a
material adverse effect on our business and operating results. In
addition, we have relied on representations of Check Point Software
Technologies as to the Year 2000 readiness of FireWall-1. Any failure
of FireWall-1 to be Year 2000 compliant may have a material adverse
affect on our FireWall-1 reseller business, our customer relationships
and our operating results.
o Year 2000 problems that affect our internal systems. We believe that our
internal software systems are Year 2000 compliant. Although we have
tested these systems for Year 2000 compliance, we cannot be certain that
these tests have detected all potential Year 2000 problems. It is
possible that these systems could contain undetected problems that could
cause serious and costly disruptions which would have a material adverse
effect on our business and operating results.
o Year 2000 problems that affect products and services provided to us by
third parties. We have relied on certifications from our software
vendors and suppliers regarding the Year 2000 readiness of products and
services they provide to us. We have not conducted independent tests of
these products and services. It is possible that these systems could
contain undetected problems that could cause serious and costly delivery
delays which would have a material adverse effect on our business and
operating results.
The Year 2000 issue may cause our current and potential customers to delay
implementing our software.
Some of our customers and potential customers have implemented policies that
prohibit or discourage changing their internal computer systems until after
January 1, 2000. Our revenues may suffer if potential customers delay the
purchase of our products until after January 1, 2000. Purchasing decisions may
be delayed as potential customers halt development of their internal computer
systems or use their information technology budgets to address Year 2000 issues.
If our potential customers delay purchasing or implementing our products in
preparation for the Year 2000 problem, our business could be seriously harmed.
<PAGE>
USE OF PROCEEDS
All net proceeds from the sale of the Netegrity shares will go to the
stockholders who offer and sell their shares. Accordingly, we will not receive
any proceeds from sales of the Netegrity shares.
DIVIDEND POLICY
We have never declared or paid any cash dividends on our capital stock, and
we do not anticipate paying cash dividends in the foreseeable future. We
currently intend to retain future earnings, if any, to fund the expansion and
growth of our business. Payment of future dividends, if any, will be at the
discretion of the board of directors, after taking into account various factors,
including our financial condition, operating results, current and anticipated
cash needs, and plans for expansion.
<PAGE>
SELLING STOCKHOLDERS
The following table sets forth information about the beneficial ownership
of our outstanding common stock on September 14, 1999.
<TABLE>
<CAPTION>
Shares Shares
Beneficially Owned Number of Beneficially Owned
Before Offering (1)(2) Shares After Offering(1)(2)(3)
Name Number Percentage to be Offered Number Percentage
<S> <C> <C> <C> <C> <C>
Pogue Capital International Fund 24,284 * 24,284 0 *
Kingdon Associates L.P. 37,154 * 37,154 0 *
Kingdon Partners L.P. 30,354 * 30,354 0 *
M. Kingdon Offshore N.V. 175,328 1.3 175,328 0 *
Chilton Q.P. Investment Partners L.P. 11,636 * 11,636 0 *
Chilton Investment Partners L.P. 28,043 * 28,043 0 *
Chilton Opportunity International L.P. 6,174 * 6,174 0 *
Chilton International L.P. 51,282 * 51,282 0 *
Permal Media & Communication Fund, L.P. 46,139 * 46,139 0 *
Essex High Technology (Bermuda) Fund, L.P. 16,999 * 16,999 0 *
Essex High Technology (USA) Fund, L.P. 25,498 * 25,498 0 *
Essex High Technology Offshore II Fund, L.P. 8,499 * 8,499 0 *
Dimensional Partners, L.P. 14,571 * 14,571 0 *
Dimensional Partners Ltd. 58,281 * 58,281 0 *
Total 534,242 534,242 0
</TABLE>
*Less than 1%
(1) Except as otherwise noted below, the Company believes each beneficial owner
has the sole voting and investment power with respect to all shares of
capital stock.
(2) Percentage of beneficial ownership is based on 13,769,911 shares of
common stock outstanding as of August 31, 1999, including shares of
series D preferred stock which converted into 3,333,333 shares of
common stock in September 1999.
(3) Assumes that each selling stockholder will sell all of the Netegrity shares
set forth above under "Shares Which May Be Sold Pursuant to This
Prospectus". There can be no assurance that the selling stockholders will
sell all or any of the Netegrity shares offered under this prospectus
<PAGE>
PLAN OF DISTRIBUTION
The sale or distribution of the shares may be effected directly to purchasers by
the selling stockholders or by any donee or pledgee of any such selling
stockholders as principals or through one or more underwriters, brokers, dealers
or agents from time to time in one or more transactions (which may involve
crosses or block transactions) (i) or on any exchange or in the over-the-counter
market, (ii) in transactions otherwise than in the over-the-counter market,
(iii) through the writing of put or call options (whether such options are
listed on an options exchange or otherwise) on, or settlement of short sale of
the shares, (iv) through the distribution of the shares by any selling
stockholder to its partners, members or shareholders or (v) through a
combination of any of the above. Any of such transactions may be effected at
market prices prevailing at the time of sale, at prices related to such
prevailing market prices, at varying prices determined at the time of sale or at
negotiated or fixed prices, in each case as determined by the selling
stockholder or by agreement between the selling stockholder and underwriters,
brokers, dealers or agents, or purchasers. If the selling stockholders effect
such transactions by selling shares to or through underwriters, brokers, dealers
or agents, such underwriters, brokers, dealers or agents may receive
compensation in the form of discounts, concessions or commissions from the
selling stockholders or commissions from purchasers of shares for whom they may
act as agent (which discounts, concessions or commissions as to particular
underwriters, brokers, dealers or agents may be in excess of those customary in
the types of transactions involved). The selling stockholders and any brokers,
dealers or agents that participate in the distribution of shares may be deemed
to be underwriters, and any profit on the sale of shares by them and any
discounts, concessions or commission received by any such underwriters, brokers,
dealers or agents may be deemed to be underwriting discounts and commissions
under the Securities Act.
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
Netegrity's Common Stock in the course of hedging the positions they assume with
selling stockholders. The selling stockholders may also enter into options 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 hereby, which Shares such broker-dealer or other financial
institution may resell pursuant to this Prospectus (as supplemented or amended
to reflect such transaction).
Under the securities laws of certain states, the shares may be sold in such
states only through registered or licensed brokers or dealers. In addition, in
certain states the shares may not be sold unless the shares have been registered
or qualified for sale in such state or an exemption from registration or
qualification is available and is complied with.
Selling stockholders may also resell all or a portion of the shares in open
market transactions in reliance upon Rule 144 under the Securities Act, provided
they meet the criteria and conform to the requirements of such rule.
We will pay all of the expenses incident to the registration, offering and sale
of the shares to the public hereunder other than commissions, fees and discounts
of underwriters, brokers, dealers and agents. We have agreed to indemnify the
selling stockholders and any underwriters against certain liabilities, including
liabilities under the Securities Act. We will not receive any of the proceeds
from the sale of any of the shares by the selling stockholders.
We have agreed to keep the Registration Statement of which this prospectus
constitutes a part effective until the earlier of the date upon which all of the
Netegrity shares are sold or September 9, 2000.
LEGAL MATTERS
The validity of the shares of common stock offered hereby will be passed
upon for us by Hutchins, Wheeler & Dittmar, A Professional Corporation, Boston,
Massachusetts. Anthony J. Medaglia, Jr., a stockholder of the firm, beneficially
owns 15,195 shares of common stock.
EXPERTS
Our consolidated financial statements and schedule as of December 31, 1997
and 1998, and for each of the years in the three-year period ended December 31,
1998, have been included and incorporated by reference in this prospectus and in
the registration statement of which this prospectus is a part in reliance upon
the reports of PricewaterhouseCoopers LLP, independent certified public
accountants, appearing elsewhere and incorporated by reference in this
prospectus, and upon authority of said firm as experts in accounting and
auditing.
NO ONE (INCLUDING ANY SALESMAN OR BROKER) IS AUTHORIZED TO PROVIDE ORAL OR
WRITTEN INFORMATION ABOUT THIS OFFERING THAT IS NOT INCLUDED IN THIS PROSPECTUS.
<PAGE>
TABLE OF CONTENTS
PAGE
Where You Can Find More Information............................ 5
Incorporation of Certain Documents By Reference................ 5
The Company.................................................... 6
Risk Factors................................................... 7
Use of Proceeds................................................ 14
Selling Stockholders........................................... 15
Plan of Distribution........................................... 16
Legal Matters.................................................. 16
Experts........................................................ 16
<PAGE>
NETEGRITY, INC.
534,242 SHARES
OF
COMMON STOCK
PROSPECTUS
October 8, 1999
<PAGE>
