<PAGE>
Filed pursuant to Rule 424(b)(3)
Registration No. 333-85405
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
The information in this prospectus is not complete and may be changed. The
selling stockholders may not sell these securities until the registration
statement filed with the Securities and Exchange Commission is effective. This
prospectus is not an offer to sell these securities and it is not soliciting an
offer to buy these securities in any state where the offer or sale is not
permitted.
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
PROSPECTUS
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137,413 Shares
SEGUE SOFTWARE, INC.
Common Stock
The selling stockholders identified in this prospectus are offering to sell
up to an aggregate of 137,413 shares of common stock of Segue Software, Inc.
The common stock is quoted on the Nasdaq National Market under the trading
symbol "SEGU." The last reported sale price of the common stock on the Nasdaq
National Market on September 7, 1999 was $10.50 per share.
The selling stockholders may sell their shares of common stock in any manner
described in the "Plan of Distribution" section of this prospectus beginning on
page 7.
Investing in the common stock involves certain risks. See "Risk Factors"
beginning on page 2.
Neither the Securities Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
prospectus is truthful or complete. It is illegal for any person to tell you
otherwise.
The date of this prospectus is September 8, 1999
<PAGE>
RISK FACTORS
An investment in the common stock involves various risks. This prospectus
contains forward-looking statements within the meaning of the federal securities
laws. You are cautioned that any such forward-looking statements are not
guarantees of future performance and involve risks and uncertainties. Actual
events or results may differ materially from those discussed in the forward-
looking statements as a result of various factors, including the factors
referenced in Segue's documents which are filed with the SEC and which are
incorporated by reference herein. In deciding whether or not to invest in the
common stock, you should consider the following risk factors:
Segue's quarterly results may fluctuate. Segue's quarterly revenue and
operating results are difficult to predict and may fluctuate significantly from
quarter to quarter. If Segue's quarterly revenue or operating results fall below
the expectations of investors or public market analysts, the price of its common
stock could fall substantially. Segue's quarterly revenue may fluctuate
significantly for several reasons, including: the timing of introductions of new
products or product enhancements by Segue or its competitors; personnel changes;
the size and timing of individual orders; software bugs or other product quality
problems; competition and pricing; customer order deferrals in anticipation of
new products or product enhancements; demand for Segue's products is difficult
to predict for reasons discussed below; changes in operating expenses; product
mix; and general economic conditions. A substantial portion of Segue's operating
expenses are related to personnel, facilities and marketing programs. The level
of spending for such expenses cannot be adjusted quickly and is based, in
significant part, on our expectations of future revenues. If actual revenue
levels are below management's expectations, results of operations are likely to
be adversely affected. In addition, Segue does not typically experience order
backlog. Furthermore, Segue has often recognized a substantial portion of its
revenues in the last month of a quarter, with these revenues frequently
concentrated in the last weeks or days of a quarter. As a result, product
revenues in any quarter are substantially dependent on orders booked and shipped
in the latter part of that quarter, and revenues for any future quarter are not
predictable with any significant degree of accuracy. For these reasons, Segue
believes that period-to-period comparisons of its results of operations are not
necessarily meaningful and should not be relied upon as indications of future
performance.
Segue may not be profitable in the future. Since Segue began operations, it
has generally experienced losses. Losses have resulted in an accumulated deficit
of approximately $29.5 million as of June 30, 1999. Segue had net income of
$144,000 in 1996; a net loss of $11.5 million in 1997, which included a charge
of $9.1 million for purchased research and development in process and $718,000
for severance charges; a net loss of $2.9 million in 1998, which included a
charge of $1.5 million related to Seque's acquisitions of Eventus Software and
Black & White Software, and a charge of $667,000 related to the write-offs of an
NRE fee and guaranteed royalties; and a net loss of $11.5 million for the six
months ended June 30, 1999, which included non-recurring and other charges of
approximately $2.5 million related to employee severance costs. While Segue has
experienced revenue growth in recent periods, continued growth at the same rate
is not sustainable and is not necessarily indicative of future operating
results. Failure to sustain or increase profitability may adversely affect the
market price of Segue's common stock.
Segue has recently shifted its focus from general software testing to
e-business testing. In 1997, Segue began to develop and acquire technology to
provide automated software testing for Web-enabled software applications,
including its acquisition of SQLBench in December 1997. These developments
allowed Segue to extend its testing capabilities beyond distributed
client/server applications with GUI front ends. In the second quarter of 1998,
Segue introduced "LiveQuality," an e-business scenario testing product. In the
fourth quarter of 1998, Segue acquired Eventus Software and Black & White
Software to acquire certain other technologies which Segue believed would help
expand its then current line of e-business testing products. Segue's shift from
a general software testing company to an e-business testing company during the
past year has resulted in significant changes in Segue's (i) organizational
structure, (ii) management personnel, (iii) product mix, and (iv) sales
approach. In addition, because e-business scenario testing is more complicated
than general software testing, Segue may experience issues with its product
quality. If Segue fails to effectively manage these changes, or make other
changes which may be needed in connection with its shift to an e-business
testing company, Segue's business, operating results and financial condition may
be materially adversely affected.
The development of a market for Segue's products is uncertain. The market
for automated software testing products is relatively new and undeveloped.
Marketing and sales techniques in the automated software testing marketplace, as
well as the bases for competition, are not well established. There can be no
assurance as to the extent that a significant market for automated software
testing products will develop or the extent to which Segue's products will be
accepted in that market. Although Segue believes that the current trend
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<PAGE>
toward increased use of automated software testing will continue, a majority of
software testing is still carried out manually, and there can be no assurance
that the automated software testing market will enjoy continued growth.
The commercial market for products and services designed for use on the
Internet, Intranet and Extranet has only recently begun to develop. The success
of Segue's products focused on e-commerce and Internet applications will depend
on the growth of the market and on Segue's ability to continue to enhance its
products to work with all of the prevalent technologies driving Internet
applications. There can be no assurance that Segue will be able to effectively
adapt its products to the prevalent technologies being used on e-commerce
applications or to successfully compete in the market for Internet-related
products and services. As is typical for new and rapidly evolving industries,
demand for recently introduced products is highly uncertain.
Segue may have difficulty managing its growth. Segue has been experiencing a
period of rapid growth, including increases in the number of orders, customers
and employees. Segue's rapid growth has placed, and may continue to place,
strains on its management, operations and systems. To manage future growth
effectively, Segue must expand, improve and effectively utilize its operational,
management, marketing, sales and financial systems as necessitated by changes in
its business. Segue is currently implementing a new management information
system and anticipates that such system will be completed by December 1999.
There can be no assurance that such system will be successfully and timely
implemented. Segue also opened its global technical support center in North
Ireland in July 1999 which will support its LiveQuality E-Business Management
Solutions software. There can be no assurance that the Northern Ireland support
center will be able to effectively support Segue's software products or that
Segue will not have to increase training or incur other additional costs with
respect to the Northern Ireland support center. Furthermore, the management
information system and the Northern Ireland support center have required, and
will continue to require, significant management attention and/or financial
resources of Segue that Segue might otherwise allocate to other activities.
There can be no assurance that Segue will be able to effectively manage such
changes.
Segue has also significantly changed its executive management and sales
management teams, and has changed the structure of its internal organization by
adding product divisions which relate to its e-business testing products. Segue
consolidated the positions of Senior Vice President of Research and Development
and Senior Vice President and General Manager of the executive management team
and in the second quarter of 1999 filled the newly created position of Senior
Vice President and General Manager of Product Development. Also during the
second quarter of 1999, Segue appointed a new Chief Financial Officer. There can
be no assurance that Segue will be able to effectively manage such changes.
Segue may be subject to risks associated with its recent acquisitions and
future acquisitions. In the fourth quarter of 1998 Segue acquired Eventus
Software and Black & White Software in two separate transactions. Segue's
product range and customer base have increased in the recent past due in part to
these acquisitions. These acquisitions provided Segue with technologies which it
believed would help expand its then current line of e-business testing products.
There can be no assurance that the integration of any or all of the acquired
technologies will be successful or will not result in difficulties which may
absorb significant management attention.
In the future, Segue may acquire additional businesses or product lines. The
recently completed acquisitions, or any future acquisition, may not produce the
revenue, earnings or business synergies that Segue anticipated, and an acquired
product, service or technology might not perform as expected. Prior to
completing an acquisition, however, it is difficult to determine if such
benefits can actually be realized. There can be no assurance that the
integration of an acquired company will be successful. The process of
integrating acquired companies into Segue's business may also result in
unforeseen difficulties. Unforeseen operating difficulties may require
significant management attention, which Segue might otherwise devote to its
existing business. Also, the process may require significant financial resources
that Segue might otherwise allocate to other activities, including the ongoing
development or expansion of its existing operations.
If Segue pursues a future acquisition, its management could spend a
significant amount of time and effort in identifying and completing the
acquisition. To pay for a future acquisition, Segue might use capital stock or
cash. Alternatively, Segue might borrow money from a bank or other lender. If
Segue uses capital stock as it did with its recent acquisitions, Segue's
stockholders would experience dilution of their ownership interests. If Segue
uses cash or debt financing, its financial liquidity will be reduced.
Segue has recently changed its sales approach and restructured its sales
teams. As part of the shift in Segue's business to e-business testing, Segue
focuses its marketing and sales efforts with a solution sales approach. Segue's
direct sales force focuses on large enterprise-wide and strategic sales in an
effort to provide as many solutions as a particular client needs. To facilitate
the solution sales approach, Segue restructured its direct sales force into
teams of one strategic sales representative and one technical support engineer.
There can be no assurance that this sales approach will result in greater
revenues. Because its sales force focuses on making larger sales, its Segue's
sales cycle may increase.
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<PAGE>
Larger purchases will take longer than smaller sales because customers will
generally take more time to decide on whether to make larger purchases. A longer
sales cycle reduces Segue's ability to forecast revenue levels. Any delay or
loss in sales of Segue's products could have a material adverse effect on its
business, operating results and financial condition, and could cause its
operating results to vary significantly from quarter to quarter.
Segue's performance will depend in part on the growth and commercial
acceptance of the Internet. Segue's future success will depend substantially
upon the widespread adoption of the Internet as a primary medium for commerce
and business applications. If the Internet does not become a viable and
substantial commercial medium, Segue's business, operating results and financial
condition will be materially adversely affected. The Internet has experienced,
and is expected to continue to experience, significant user and traffic growth
which has, at times, caused user frustration with slow access and download
times. The Internet infrastructure may not be able to support the demands
placed on it by continued growth. Moreover, critical issues concerning the
commercial use of the Internet, such as security, reliability, cost,
accessibility and quality of service, remain unresolved and may negatively
affect the growth of Internet use or the attractiveness of commerce and business
communication on the Internet. In addition, the Internet could lose its
viability due to delays in the development or adoption of new standards and
protocols to handle increased activity or due to increased government regulation
and taxation of Internet commerce.
Segue faces significant competition from other software companies. The
market for software quality management tools is new, intensely competitive and
subject to rapid technological change. Segue expects competition to intensify in
the future. Segue currently encounters competition from a number of public and
private companies including Mercury Interactive Corporation, Rational Software
Corporation and Compuware Corporation. Many of Segue'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 Segue does. Therefore, these competitors may be able to
respond more quickly than Segue to new or changing opportunities, technologies,
standards and customer requirements or may be able to devote greater resources
to the promotion and sale of their products than Segue. Segue may also face
increased competition from the recent consolidation of several companies in the
automated software quality market. An increase in competition could result in
price reductions and loss of market share. Such competition and any resulting
reduction in profitability could have a material adverse effect on Segue's
business, operating results and financial condition.
Segue's business could be adversely affected if its products contain errors.
Software products as complex as Segue's products may contain undetected errors
or "bugs," which result in product failures. The occurrence of errors could
result in loss of or delay in revenue, loss of market share, failure to achieve
market acceptance, diversion of development resources, injury to Segue's
reputation, or damage to its efforts to build brand awareness, any of which
could have a material adverse effect on Segue's business, operating results and
financial condition.
Segue's future success will depend on its ability to enhance existing
products and develop new products. To be competitive, Segue must develop and
introduce product enhancements and new products that increase its customers'
ability to test their systems. If Segue fails to develop and introduce new
products and enhancements successfully and on a timely basis, it could have a
material adverse effect on Segue's business, operating results and financial
condition. The emerging nature of the automated software testing and e-commerce
testing markets requires that Segue continually improve the performance,
features and reliability of its products, particularly in response to
competitive offerings and evolving customer needs. Segue must also introduce
enhancements to existing products as quickly as possible and prior to the
introduction of competing products. Segue has acquired, and may in the future
acquire, technologies to provide it with the tools to introduce new products or
to enhance current products. The success of such acquisitions will depend in
part on Segue's ability to effectively integrate the technologies.
Segue must hire and retain skilled personnel in a tight labor market.
Qualified personnel are in great demand throughout the software industry.
Segue's success depends in large part upon its ability to attract, train,
motivate and retain highly skilled employees, particularly sales and marketing
personnel, software engineers and other senior personnel. There is intense
competition for sales personnel in Segue's business, and there can be no
assurance that Segue will be successful in attracting, integrating, motivating
4
<PAGE>
and retaining new sales personnel. The failure of Segue to attract and retain
the highly skilled personnel that are integral to its direct sales, product
development, service and support teams may limit the rate at which Segue can
generate sales and develop new products or product enhancements. This could
have a material adverse effect on Segue's business, operating results and
financial condition.
Class action lawsuits have been filed against Segue which, if determined or
settled in a manner adverse to Segue, could adversely affect Segue's financial
condition. On or about April 27, 1999, a putative class action complaint was
filed in the United States District Court for the District of Massachusetts
against Segue, its Chief Executive Officer and a former Chief Financial Officer
of Segue, captioned Nathan Rice v. Segue Software, Inc., et al. Civil No.
----------- ---------------------------
99-CV-10891RGS. The class action complaint alleges that Segue and a certain
officer and a former officer violated the federal securities laws by making
material misrepresentations and omissions in certain public disclosures during
the period beginning on October 13, 1998 through April 9, 1999, inclusive. The
public disclosures relate to, among other things, Segue's past and future
financial performance and results. On or about May 3, 1999, another similar
putative class action complaint was filed against Segue, its Chief Executive
Officer and a former Chief Financial Officer of Segue in the United States
District Court for the District of Massachusetts, captioned Anthony Moumouris v.
-----------------
Segue Software, Inc., et al., Civil No. 99-CV-10933RGS. These cases have been
- ---------------------------
consolidated under the caption In Re Segue Software, Inc. Securities Litigation,
------------------------------------------------
Civil No. 99-CV-10891-RGS. Segue is currently reviewing the allegations made in
these lawsuits. Segue intends to defend the claims vigorously. Segue believes
the defense of the claims could involve significant litigation-related expenses.
The outcome of these matters is uncertain and, as a result, at this time Segue
is not able to quantify any related financial exposure. In the event that any of
the claims set forth in the class action complaints are determined or settled in
a manner adverse to Segue, then such determination or settlements could
adversely affect Segue's financial position or results of operations in the
period in which the litigation is resolved.
Segue faces many risks associated with international business activities.
Segue derived approximately 16% of its total product sales from international
customers in 1998 and 13% for the first six months of 1999. The international
market for software products is highly competitive and Segue expects to face
substantial competition in this market from established and emerging companies.
Segue faces many risks associated with international business activities
including currency fluctuations, imposition of government controls, export
license requirements, restrictions on the export of critical technology,
political and economic instability, tailoring of products to local requirements,
trade restrictions, changes in tariffs and taxes, difficulties in staffing and
managing international operations, longer accounts receivable payment cycles and
the burdens of complying with a wide variety of foreign laws and regulations. To
the extent that Segue is unable to expand international sales in a timely and
cost-effective manner, Segue's business could be materially adversely affected.
Segue may be affected by unexpected Year 2000 problems. Many existing
computer systems and software products do not properly recognize dates after
December 31, 1999. This "Year 2000" problem could result in miscalculations,
data corruption, system failures or disruptions of operations. Segue is subject
to potential Year 2000 problems affecting its products, its internal systems and
the systems of its vendors and distributors, any of which could have a material
adverse effect on Segue's business, operating results and financial condition.
In addition, there can be no assurance that Year 2000 errors or defects will
not be discovered in Segue's internal software systems and, if such errors or
defects are discovered, there can be no assurance that the costs of making such
systems Year 2000 compliant will not be material.
Year 2000 errors or defects in the internal systems maintained by Segue's
vendors or distributors could require Segue to incur significant unanticipated
expenses to remedy any problems or replace affected vendors and could reduce
Segue's revenue from its indirect distribution channel.
Segue's new strategy of selling its products through a few large system
integrators may result in fewer sales and may adversely affect Segue's results
of operations. During the second quarter of 1999, Segue shifted its sales
strategy away from creating and managing a large network of resellers and
towards building deeper relationships with a few large system integrators. There
can be no assurance that this sales strategy will result in greater revenues. In
general, these system integrators may discontinue marketing and selling Segue's
products with little or no notice. In addition, because Segue will be dependent
on a smaller number of integrators, the affect that any single integrator may
have on Segue will be greater than any single reseller under Segue's former
strategy. Accordingly, Segue is highly dependent on the services of the system
integrators and the loss of, or a significant reduction in sales volume through,
any single system integrator could have a material adverse effect on Segue.
Segue could be subject to product liability claims. In selling its
products, Segue relies primarily on "shrink wrap" licenses that contain, among
other things, provisions protecting against the unauthorized use, copying and
transfer of the licensed program and limiting Segue's exposure to potential
product liability claims. However, these licenses are not signed by the
licensees and the provisions of these licenses, including the provisions
limiting Segue's exposure to product liability claims, may therefore be
unenforceable under the
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laws of certain jurisdictions. Segue's products may be used on applications
that are critical to the operations of its customers' businesses. Any failure
in a customer's applications could result in a claim for substantial damages
against Segue, regardless of Segue's responsibility for such failure. Although
Segue maintains general liability insurance, including coverage for errors and
omissions, there can be no assurance that such 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.
Segue's success depends on its ability to protect its proprietary
technology. Segue's success depends to a significant degree upon the protection
of its software and other proprietary technology. The unauthorized reproduction
or other misappropriation of Segue's proprietary technology could enable third
parties to benefit from Segue's technology without paying Segue for it. This
could have a material adverse effect on Segue's business, operating results and
financial condition. Although Segue has taken steps to protect its proprietary
technology, they may be inadequate. Segue currently relies on a combination of
trademark, copyright and trade secret laws and contractual provisions to protect
its proprietary rights in its products. Segue presently has no registered
copyrights. Segue has a patent but there can be no assurance that the patent
would be upheld if challenged. Moreover, the laws of other countries in which
Segue markets its products may afford little or no effective protection of
Segue's intellectual property. There can be no assurance that Segue's
competitors will not independently develop technologies that are substantially
equivalent or superior to Segue's technology. If Segue resorts to legal
proceedings to enforce its intellectual property rights, the proceedings could
be burdensome and expensive and could involve a high degree of risk. There can
be no assurance that third parties will not assert intellectual property
infringement claims against Segue. If Segue were to discover that any of its
products violated third party proprietary rights, there can be no assurance that
Segue would be able to obtain licenses on commercially reasonable terms to
continue offering the product without substantial reengineering or that any
effort to undertake such reengineering would be successful.
Any claim of infringement could cause Segue to incur substantial costs
defending against the claim, even if the claim is invalid, and could distract
management from Segue's business. Furthermore, a party making such a claim
could secure a judgment that requires Segue to pay substantial damages. A
judgment could also include an injunction or other court order that could
prevent Segue from selling its products. Any of these events could have a
material adverse effect on Segue's business, operating results and financial
condition.
THE COMPANY
Segue is a Delaware corporation with its principal executive offices at 201
Spring Street, Lexington, Massachusetts 02421. Its telephone number is (781)
402-1000.
USE OF PROCEEDS
Segue will not receive any proceeds from the sale of the common stock under
this prospectus.
MATERIAL TERMS OF THE EVENTUS TRANSACTION
On December 3, 1998, Segue and its wholly owned subsidiary, SSI Merger
Corp., entered into an Agreement and Plan of Merger dated December 3, 1998, with
Eventus Software and the stockholders of Eventus Software. Under the terms of
the merger agreement, SSI Merger Corp. was merged with and into Eventus
Software, with Eventus Software surviving the merger. As a result of the
merger, which was treated for accounting purposes as a pooling of interests
transaction, the stockholders of Eventus Software received an aggregate of
312,990 shares of Segue common stock, and the holders of outstanding Eventus
Software options and warrants received options and warrants to purchase up to an
aggregate of 31,951 shares of Segue common stock. Eventus Software is now a
wholly owned subsidiary of Segue based in San Francisco, California and engaged
in the business of developing and marketing web management software.
The stockholders of Eventus Software entered into a Registration Rights
Agreement with Segue pursuant to which Segue agreed to register 50% of the
shares of Segue common stock issued to such stockholders in connection with the
merger. Under the registration rights agreement, each selling stockholder is
entitled for a period of 30 days in which an initial registration statement
filed by Segue covering such shares (the "Initial Registration Statement") is
effective (the "Initial Sale Period") to sell shares of common stock issued by
Segue to such holder in connection with the merger. Near the end of the Initial
Sale Period, Segue will determine the total number of shares of common stock
registered pursuant to the Initial Registration Statement which remain unsold
and will within five business days of the end of such 30-day period notify the
selling stockholders of the number of unsold shares (the "Request Notice").
The selling stockholders will have the right to sell under a registration
statement any additional shares of common stock (up to the aggregate amount
unsold) during the Additional Sale Period (as defined below) by giving written
notice to Segue within five business days after delivery of the Request Notice
advising Segue of the number of shares that such selling stockholder desires to
sell (the "Additional Sale Notice"). If the number of shares requested to be
sold by the selling stockholders exceeds the amount unsold after the Initial
Sale Period, then the available shares will be allocated among the selling
stockholders who have timely sent an Additional Sale Notice to Segue on a pro
rata basis. Within five business days after the date upon which the Request
Notice is required to be delivered, Segue shall notify (the "Participation
Notice") each participating selling stockholder of the number of shares that
such stockholder will be entitled to sell during the Additional Sale Period.
The Additional Sale Period is the period from the date of the Participation
Notice to a date on which there has elapsed a total of 30 days for which the
Initial Registration Statement has been effective and the participating selling
stockholders could have sold their shares thereunder. The selling stockholders
agree that from the period after the end of the Initial Sale Period to the
beginning of the Additional Sale Period, they will not sell any shares
registered under such registration statement.
On April 15, 1999, Segue filed the Initial Registration Statement for the
sale of shares during the Initial Sale Period. The Initial Registration
Statement was declared effective by the Securities and Exchange Commission on
June 25, 1999 and the Initial Sale Period ended on July 26, 1999. Based on
responses to its notice to the selling stockholders under the Initial
Registration Statement, Segue determined that no shares were sold pursuant to
the Initial Registration Statement during the Initial Sale Period and that the
responding selling shareholders desire to sell an aggregate of 137,413 shares in
the Additional Sale Period. Segue is filing this registration statement on Form
S-3 to register the sale of 137,413 shares by those selling stockholders who
indicated their desire to sell shares in the Additional Sale Period.
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SELLING STOCKHOLDERS
<TABLE>
<CAPTION>
Number of Shares of Number of Shares Percentage
Common Stock Number of Shares of Common Stock Ownership
Name of Selling Beneficially Owned as of Common Stock Beneficially Owned After
Stockholder of August 1, 1999(1) Offered Hereby After Offering(2) Offering
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SQRIBE 42,755 21,378 21,377 *
TECHNOLOGIES CORP
- -----------------------------------------------------------------------------------------------------
Mike Burkland(3) 126,939 63,470 63,469 *
- -----------------------------------------------------------------------------------------------------
Chris Kocher 47 47 0 *
- -----------------------------------------------------------------------------------------------------
Kerry Smith 51 26 25 *
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Fenwick & West LLP 2,492 1,246 1,246 *
- -----------------------------------------------------------------------------------------------------
Mark C. Stevens 2,492 1,246 1,246 *
- -----------------------------------------------------------------------------------------------------
Sumitomo Corporation 30,000 30,000 0 *
- -----------------------------------------------------------------------------------------------------
Sumisho Datacom, Inc.(4) 15,000 15,000 0 *
- -----------------------------------------------------------------------------------------------------
Sumitronics Inc.(5) 5,000 5,000 0 *
- -----------------------------------------------------------------------------------------------------
</TABLE>
* Less than one percent.
- --------------------
(1) Beneficial ownership is determined in accordance with the rules of the SEC
and generally includes voting or investment power with respect to securities
and includes any securities which the person has the right to acquire within
60 days of August 1, 1999 through the conversion or exercise of any security
or other right.
(2) Gives effect to the sale of the shares of common stock.
(3) Mike Burkland is currently receiving termination benefits from Segue.
(4) Sumisho Datacom, Inc. is the exclusive distributor for the sale of
SilkControl, a Segue product, in Japan.
(5) Sumitronics Inc. is acting as a purchasing and shipping agent of Sumisho
Datacom, Inc. for SilkControl, a Segue product.
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PLAN OF DISTRIBUTION
The shares of common stock offered by this prospectus (the "Shares") are
being offered on behalf of the selling stockholders. Such Shares may be sold or
distributed from time to time by the selling stockholders, or by donees or
transferees of, or other successors in interest to, the selling stockholders,
directly to one or more purchasers or through brokers, dealers or underwriters
who may act solely as agents or may acquire such Shares as principals, at market
prices prevailing at the time of sale, at prices related to such prevailing
market prices, at negotiated prices, or at fixed prices, which may be changed.
The sale of the Shares offered hereby may be effected in one or more of the
following methods: (i) ordinary brokers' transactions; (ii) transactions
involving cross or block trades or otherwise on the Nasdaq National Market;
(iii) purchases by brokers, dealers or underwriters as principal and resale by
such purchasers for their own accounts pursuant to this prospectus; (iv) "at the
market" to or through market makers or into an existing market for Segue common
stock; (v) in other ways not involving market makers or established trading
markets, including direct sales to purchasers or sales effected through agents;
(vi) through transactions in options, swaps or other derivatives (whether
exchange-listed or otherwise); (vii) in privately negotiated transactions;
(viii) to cover short sales; or (ix) any combination of the foregoing.
From time to time, one or more of the selling stockholders may pledge,
hypothecate or grant a security interest in some or all of the Shares owned by
them, and the pledgees, secured parties or persons to whom such Shares have been
hypothecated shall, upon foreclosure in the event of default, be deemed to be
selling stockholders hereunder. The number of Shares beneficially owned by
those selling stockholders who so transfer, pledge, donate or assign such Shares
will decrease as and when they take such actions. The plan of distribution for
the Shares sold hereunder will otherwise remain unchanged, except that the
transferees, pledgees, donees or other successors will be selling stockholders
hereunder. In addition, a selling stockholder may, from time to time, sell
short the Shares, and in such instances, this prospectus may be delivered in
connection with such short sales and the shares of Segue common stock offered
hereby may be used to cover such short sales.
A selling stockholder may enter into hedging transactions with broker-
dealers and the broker-dealers may engage in short sales of Segue common stock
in the course of hedging the positions they assume with such selling
stockholder, including, without limitation, in connection with distributions of
Segue common stock by such broker-dealers. A selling stockholder may also enter
into option or other transactions with broker-dealers that involve the delivery
of the Shares to the broker-dealers, who may then resell or otherwise transfer
such shares of Segue common stock. A selling stockholder may also loan or
pledge its Shares to a broker-dealer and the broker-dealer may sell the Shares
so loaned or upon a default may sell or otherwise transfer the pledged Shares.
Brokers, dealers, underwriters or agents participating in the distribution
of the Shares as agents may receive compensation in the form of commissions,
discounts or concessions from the selling stockholders and/or purchasers of the
Shares for whom such broker-dealers may act as agent, or to whom they may sell
as principal, or both (which compensation as to a particular broker-dealer may
be less than or in excess of customary commissions). The selling stockholders
and any broker-dealers who act in connection with the
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sale of the Shares hereunder may be deemed to be "Underwriters" within the
meaning of the Securities Act, and any commissions they receive and proceeds of
any sale of the Shares may be deemed to be underwriting discounts and
commissions under the Securities Act. Neither Segue nor any selling stockholders
can presently estimate the amount of such compensation. Segue knows of no
existing arrangements between any selling stockholders, any other stockholder,
broker, dealer, underwriter or agent relating to the sale or distribution of the
Shares.
Segue will pay substantially all of the expenses incident to the
registration, offering and sale of the Shares to the public other than
commissions or discounts of underwriters, broker-dealers or agents. Segue has
also agreed to indemnify the selling stockholders and certain related persons
against certain liabilities, including liabilities under the Securities Act.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of Segue, Segue
has been advised that in the opinion of the SEC such indemnification is against
public policy as expressed in the Securities Act and is, therefore,
unenforceable.
Segue has advised the selling stockholders that during such time as they may
be engaged in a distribution of the Shares included herein they are required to
comply with Regulation M promulgated under the Securities Exchange Act of 1934.
With certain exceptions, Regulation M precludes any selling stockholder, any
affiliated purchasers, and any broker-dealer or other person who participates in
such distribution from bidding for or purchasing, or attempting to induce any
person to bid for or purchase any security which is the subject of the
distribution until the entire distribution is complete. Regulation M also
prohibits any bids or purchases made in order to stabilize the price of a
security in connection with the distribution of that security. All of the
foregoing may affect the marketability of the Shares.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
This prospectus is part of a registration statement Segue filed with the SEC
to register the Segue common stock offered in this offering. It does not repeat
important information that you can find in the registration statement or in the
reports and other documents that Segue files with the SEC. The SEC allows Segue
to "incorporate by reference" the information it files with them. This means
that Segue can disclose important information to you by referring to other
documents that are legally considered to be part of this prospectus, and later
information that it files with the SEC will automatically update and supersede
the information in this prospectus and the documents listed below. Segue
incorporates by reference the documents listed below, and any future filings
made with the SEC under Section 13(a), 13(c), 14, or 15(d) of the Securities
Exchange Act of 1934 until the selling stockholders sell all the shares of
common stock offered under this prospectus:
1. the Annual Report on Form 10-K for the fiscal year ended
December 31, 1998;
2. the Quarterly Report on Form 10-Q for the fiscal quarter ended
March 31, 1999;
3. the Quarterly Report on Form 10-Q for the fiscal quarter ended June 30,
1999;
4. the Current Report on Form 8-K filed with the SEC on December 17, 1998;
and
5. the description of common stock contained in Segue's Registration
Statement on Form 8-A, filed with the SEC on February 16, 1996, as
amended, under Section 12 of the Securities Exchange Act of 1934 and any
amendments or reports filed for the purpose of updating such description.
You may request a copy of these filings at no cost by writing or telephoning
Segue at the following address: Chief Financial Officer, Segue Software, Inc.,
201 Spring Street, Lexington, Massachusetts 02421 (Telephone: (781) 402-1000).
You should rely only on the information incorporated by reference or
contained in this prospectus or any supplement. Segue has not authorized anyone
else to provide you with different or additional
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information. The selling stockholders are not making an offer of these
securities in any state where the offer is not permitted. You should not assume
that the information in this prospectus or any supplement is accurate as of any
date other than the date on the front of those documents.
Segue files annual, quarterly and special reports, proxy statements and
other information electronically with the SEC. You may read a copy of any
reports, statements or other information that Segue files with the SEC at the
SEC's Public Reference Room at 450 Fifth Street, N.W., Washington, D.C. Please
call the SEC at 1-800-SEC-0330 for further information on the Public Reference
Room. Segue's SEC filings are also available from the Internet site maintained
by the SEC at http://www.sec.gov.
LEGAL MATTERS
The validity of the shares of common stock has been passed upon for Segue by
Goodwin, Procter & Hoar LLP, Boston, Massachusetts.
EXPERTS
The financial statements incorporated in this prospectus by reference to the
Annual Report on Form 10-K for the year ended December 31, 1998 have been so
incorporated in reliance on the report of PricewaterhouseCoopers LLP,
independent accountants, given on the authority of said firm as experts in
auditing and accounting.
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You should rely only on the information incorporated by reference or contained
in this prospectus or any supplement. Segue has not authorized anyone else to
provide you with different or additional information. The selling stockholders
are not making an offer of the Segue common stock in any state where the offer
is not permitted. You should not assume that the information in this prospectus
or any supplement is accurate as of any date other than the date on the front of
those documents.
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Risk Factors............................................................... 2
The Company................................................................ 6
Use of Proceeds............................................................ 6
Material Terms of the Eventus Transaction.................................. 6
Selling Stockholders....................................................... 7
Plan of Distribution....................................................... 8
Incorporation of Certain Documents by Reference............................ 9
Legal Matters.............................................................. 10
Experts.................................................................... 10
</TABLE>
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137,413 Shares
Segue Software, Inc.
Common Stock
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PROSPECTUS
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September 8, 1999
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