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As filed with the Securities and Exchange Commission on December 16, 1997
Registration Statement No. 333-34241
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------
POST-EFFECTIVE
AMENDMENT NO. 1
TO
FORM S-3
----------------------
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
----------------------
SECURITY DYNAMICS TECHNOLOGIES, INC.
(Exact Name of Registrant as Specified in Its Charter)
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DELAWARE 04-2916506
(State or Other Jurisdiction (I.R.S. Employer Identification Number)
of Incorporation or Organization)
20 CROSBY DRIVE
BEDFORD, MASSACHUSETTS 01730
(781) 687-7000
(Address, including zip code, and
telephone number, including area code,
of registrant's principal
executive offices)
----------------------
CHARLES R. STUCKEY, JR.
CHAIRMAN OF THE BOARD,
PRESIDENT AND CHIEF EXECUTIVE OFFICER
SECURITY DYNAMICS TECHNOLOGIES, INC.
20 CROSBY DRIVE
BEDFORD, MASSACHUSETTS 01730
(781) 687-7000
(Name, address, including zip code, and
telephone number, including area code,
of agent for service)
COPY TO:
HAL J. LEIBOWITZ, ESQ.
HALE AND DORR LLP
60 STATE STREET
BOSTON, MASSACHUSETTS 02109
(617) 526-6000
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO PUBLIC: AS SOON AS
PRACTICABLE AFTER THE EFFECTIVE DATE HEREOF.
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If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, other than securities offered only in connection with
dividend or interest reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ] ________.
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. [ ] ________.
If delivery of the Prospectus is expected to be made pursuant to Rule
434, please check the following box. [ ]
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),
SHALL DETERMINE.
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Subject to Completion
December 16, 1997
PROSPECTUS
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.
396,387 Shares
SECURITY DYNAMICS TECHNOLOGIES, INC.
Common Stock
The 396,387 shares of common stock, $.01 par value per share (the
"Common Stock"), of Security Dynamics Technologies, Inc. (the "Company") covered
by this Prospectus are issued and outstanding shares which may be offered and
sold, from time to time, by or on behalf of Peter C. Loux, Khris Loux and The
Peter C. Loux Charitable Remainder Unitrust, stockholders of the Company (the
"Selling Stockholders"). The shares of Common Stock covered by this Prospectus
(the "Shares") were issued to the Selling Stockholders on July 15, 1997 in
connection with the acquisition (the "DynaSoft Acquisition") by the Company of
DynaSoft AB ("DynaSoft"). Pursuant to the terms of a Registration Rights
Agreement between the Company and the Selling Stockholders, the Company agreed
to register the Shares under the Securities Act of 1933, as amended (the
"Securities Act"), and to use its best efforts to cause the Registration
Statement of which the Prospectus constitutes a part to be declared and remain
effective until the earlier of (i) such time as all of the Shares have been sold
by the Selling Stockholders, or (ii) July 15, 1998. The Selling Stockholders
have advised the Company that they propose to sell, from time to time, all or
part of the Shares covered by this Prospectus on the Nasdaq National Market, in
ordinary brokerage transactions, in negotiated transactions, or otherwise, at
market prices prevailing at the time of sale, at prices related to such market
prices or at negotiated prices. See "Plan of Distribution."
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The Company will not receive any of the proceeds from the sale of
Shares covered by this Prospectus. The Company will bear all expenses incurred
in effecting the registration of such Shares, including all registration and
filing fees, "blue sky" fees, printing expenses and all legal fees of one
counsel to the Selling Stockholders, but excluding underwriting discounts and
selling commissions, if any, applicable to the sale of the Shares. The Company
and the Selling Stockholders have agreed to certain indemnification arrangements
with respect to the Shares offered hereby. See "Plan of Distribution."
The Company's Common Stock is traded on the Nasdaq National Market
under the symbol "SDTI." On December 15, 1997, the closing sale price of the
Common Stock on the Nasdaq National Market was $33.8125 per share.
All financial information in this Prospectus has been restated to
include the results of DynaSoft for all periods presented.
THE SHARES OFFERED HEREBY INVOLVE A HIGH DEGREE
OF RISK. SEE "RISK FACTORS" BEGINNING ON PAGE 4.
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 December __, 1997
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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 filed by the Company with the Commission
pursuant to the informational requirements of the Exchange Act may be inspected
and copied at the public reference facilities maintained by the Commission at
450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549 and at the
Commission's regional offices located at Seven World Trade Center, Suite 1300,
New York, New York 10048, and at Citicorp Center, 500 West Madison Street, Suite
1400, Chicago, Illinois 60661. Copies of such materials also may be obtained
from the Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549 at prescribed rates. In addition, the Company is required
to file electronic versions of these documents through the Commission's
Electronic Data Gathering, Analysis and Retrieval system (EDGAR). The Commission
maintains a World Wide Web site at http://www.sec.gov that contains reports,
proxy and information statements and other information regarding registrants
that file electronically with the Commission. The Common Stock of the Company is
traded on the Nasdaq National Market. Reports and other information concerning
the Company may be inspected at the Nasdaq National Market, 1735 K Street, N.W.,
Washington, D.C. 20006.
The Company has filed with the Commission a Registration Statement on
Form S-3 (together with all amendments, supplements, exhibits and schedules
thereto, the "Registration Statement") under the Securities Act with respect to
the shares of Common Stock offered hereby. This Prospectus does not contain all
of the information set forth in the Registration Statement, as certain items are
omitted in accordance with the rules and regulations of the Commission. For
further information pertaining to the Company and the Shares, reference is made
to the Registration Statement. Statements contained in this Prospectus regarding
the contents of any agreement or other document are not necessarily complete,
and in each instance reference is made to the copy of such agreement or document
filed as an exhibit to the Registration Statement, each such statement being
qualified in all respects by such reference. The Registration Statement,
including all exhibits and schedules thereto, may be inspected without charge at
the office of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549,
and copies of all or any part thereof may be obtained from the Commission at
prescribed rates. As used in this Prospectus, the term "the Company" refers to
Security Dynamics Technologies, Inc. ("SDI") and its subsidiaries, including
without limitation RSA Data Security, Inc. ("RSA") and DynaSoft, unless the
context otherwise requires.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the Commission are
incorporated herein by reference:
(i) The Company's Annual Report on Form 10-K for the year
ended December 31, 1996;
(ii) The Company's Quarterly Report on Form 10-Q for the
quarter ended March 31, 1997;
(iii) The Company's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1997;
(iv) The Company's Current Report on Form 8-K, dated July
15, 1997, including the amendments thereto on Form
8-K/A filed with the Commission on July 31, 1997 and
August 4, 1997;
(v) The Company's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1997;
(vi) The Company's current Report on Form 8-K, dated
December 16, 1997; and
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(vii) The description of the Common Stock contained in the
Company's Registration Statement on Form 8-A, as
filed with the Commission on November 15, 1994.
All documents filed by the Company with the Commission pursuant to
Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date
hereof and prior to the termination of the offering of the Common Stock
registered hereby shall be deemed to be incorporated by reference into this
Prospectus and to be a part hereof from the date of filing such documents. Any
statement contained in a document incorporated or deemed to be incorporated by
reference herein 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 modifies or supersedes such statement. Any 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 to whom this
Prospectus is delivered, upon written or oral request of such person, a copy of
any or all of the foregoing documents incorporated by reference into this
Prospectus (without exhibits to such documents other than exhibits specifically
incorporated by reference into such documents). All such requests shall be
directed to: Security Dynamics Technologies, Inc., 20 Crosby Drive, Bedford,
Massachusetts 01730, Attention: Investor Relations, telephone: (781) 687-7000.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS IN CONNECTION WITH THIS OFFERING OTHER THAN THOSE CONTAINED IN
THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH OTHER INFORMATION AND
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
COMPANY. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER
SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO
CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE
INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN
OFFER TO BUY ANY SECURITIES OTHER THAN THE REGISTERED SECURITIES TO WHICH IT
RELATES. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION
OF AN OFFER TO BUY SUCH SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR
SOLICITATION IS UNLAWFUL.
SPECIAL NOTE REGARDING FORWARD-LOOKING INFORMATION
Certain statements in this Prospectus and in the documents incorporated
herein constitute "forward-looking statements" within the meaning of Section 27A
of the Securities Act and Section 21E of the Exchange Act. For this purpose, any
statements contained herein or incorporated herein that are not statements of
historical fact may be deemed to be forward-looking statements. Without limiting
the foregoing, the words "believes," "anticipates," "plans," "expects" and
similar expressions are intended to identify forward-looking statements. There
are a number of important factors that could cause the results of the Company to
differ materially from those indicated by such forward-looking statements. These
factors include those set forth in "Risk Factors" herein.
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RISK FACTORS
This Prospectus contains certain forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933 and Section 21E of the
Securities Exchange Act of 1934. For this purpose, any statements contained
herein that are not statements of historical fact may be deemed to be
forward-looking statements. Without limiting the foregoing, the words
"believes," "anticipates," "plans," "expects" and similar expressions are
intended to identify forward-looking statements. Actual results could differ
materially from those indicated by such forward-looking statements as a result
of certain of the risk factors set forth below and elsewhere in this Prospectus.
In addition to the other information contained in this Prospectus, the following
factors should be considered carefully in evaluating an investment in the Common
Stock offered by this Prospectus.
Dependence on Principal Products. The Company currently derives
substantially all of its revenue from sales of its enterprise network and data
security products, the licensing of encryption security software components
("encryption engines") and the provision of related services, and existing and
new versions of such products are expected to continue to represent a high
percentage of the Company's revenue for the foreseeable future. As a result, any
factor adversely affecting sales of these products and services, or any factor
impeding or delaying the Company's ability to diversify its product offerings to
lessen its dependency on those products, would have a material adverse effect on
the Company's financial condition and results of operations.
Risks Associated with Enterprise Network and Data Security Market. The
rapid development of enterprise-wide and remote computing as well as increased
use of the Internet, intranets and extranets has enhanced the ability of users
to access proprietary information and resources and has in recent years
increased demand for enterprise network and data security products. Declines in
demand for the Company's products, whether as a result of competition,
technological change, the public's perception of the need for security products,
developments in the hardware and software environments in which these products
operate, general economic conditions or other factors, could have a material
adverse effect on the Company's financial condition or results of operations.
A well-publicized actual or perceived breach of enterprise network or
data security could trigger a heightened awareness of computer abuse, resulting
in an increased demand for security products such as those offered by the
Company. Similarly, an actual or perceived breach of enterprise network or data
security at one of the Company's customers, regardless of whether such breach is
attributable to the Company's products, could adversely affect the market's
perception of the Company and the Company's financial condition or results of
operations. In addition, although the effectiveness of the Company's
identification and authentication products is not dependent upon the secrecy of
its proprietary algorithm, the public disclosure or "breaking" of this algorithm
could result in a perception of breached security which could have an adverse
effect on the Company's financial condition or results of operations.
In February 1997, the Company announced its Enterprise Security
Services ("ESS"), a framework designed to deliver enterprise-wide security
solutions to businesses. As part of the ESS framework, the Company intends to
introduce products and form partnerships that are expected to enable delivery of
security services such as certificate management, key management and privilege
management. There can be no assurance, however, that the certificate management,
key management and privilege management technologies under consideration by the
Company will be adopted by the marketplace, that the Company will find
appropriate partners for developing and marketing its products or that the
Company will successfully market any products developed as part of the ESS
framework.
Technological Change and New Products. The market for security
products, especially in the Internet, intranet and extranet markets, is
characterized by rapidly changing technology, emerging and evolving industry
standards, new product introductions, relatively short product life cycles and
rapid and constant
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changes in customer requirements and preferences. To the extent that specific
methods other than those employed by the Company are adopted as standards for
implementing enterprise network and data security, sales of the Company's
existing and planned products in those market segments may be adversely
impacted, which could have a material adverse effect on the Company's financial
condition or results of operations. The Company's future success will depend in
part upon its customers' and end users' demand for enterprise network and data
security products and upon the Company's ability, on a timely and
cost-effective basis, to enhance its existing products and to introduce new
products with features that meet changing customer requirements and with
competitive prices. There can be no assurance that the Company will be
successful in doing so. Delays in product enhancement and development or the
failure of the Company's new products or enhancements to gain market acceptance
would have a material adverse effect on the Company's financial condition and
results of operations. Despite testing, new products may be affected by
quality, reliability or security failure problems, which could result in
returns, delays in collecting accounts receivable, unexpected service or
warranty expenses, reduced orders and a decline in the Company's competitive
position.
Software products may also contain undetected errors or bugs when first
introduced or as new versions are released, and software products or media may
contain undetected viruses. Errors or bugs may also be present in software
licensed by the Company from third parties and incorporated into the Company's
products. Errors, bugs or viruses may result in loss of or delay in market
acceptance, recalls of hardware products incorporating the software or loss of
data. Delays or difficulties associated with new product introductions or
product enhancements could have a material adverse effect on the Company's
financial condition or results of operations.
Potential Fluctuations in Quarterly Performance; Seasonality. The
Company's quarterly operating results may vary significantly depending on a
number of factors, including the timing of the introduction or enhancement of
products by the Company or its competitors, the sizes, timing and shipment of
individual orders, market acceptance of new products, seasonality of revenue,
customer order deferrals in anticipation of new products, changes in the
Company's operating expenses, personnel changes, foreign currency exchange
rates, mix of products sold, changes in product pricing, development of the
Company's direct and indirect distribution channels and general economic
conditions. There can be no assurance that the Company will be able to grow or
sustain its profitability on a quarterly basis. Because the Company's operating
expenses are based on anticipated revenue levels and a high percentage of the
Company's expenses are fixed, a small variation in the time of recognition of
revenue can cause significant variations in operating results from quarter to
quarter.
The Company has experienced, and may experience in the future,
significant seasonality in its business, and the Company's financial condition
or results of operations may be affected by such trends in the future. Revenue
has historically increased at higher rates in the last quarter of the year and
at lower rates in the next succeeding quarter. The Company believes that
revenue tends to increase at higher rates in the last quarter due to the
Company's quota-based compensation plans, year-end budgetary pressures on the
Company's customers and the tendency of certain of the Company's customers to
implement changes in enterprise network or data security prior to the end of
the calendar year. In addition, revenue tends to increase at lower rates in the
summer months, particularly in Europe, when businesses defer purchase
decisions.
Risks Relating to Cryptographic Technology. Any significant advance in
techniques for attacking cryptographic systems could render some or all of RSA's
existing products obsolete or unmarketable. RSA's cryptographic systems depend
in part on the application of certain mathematical principles. The security
afforded by RSA's encryption products is predicated on the assumption that the
"factoring" of the composite of large prime numbers is difficult. Should an
"easy factoring method" be developed, then the security afforded by RSA's
encryption products would be reduced or eliminated. There can be no assurance
that such a development will not occur. Moreover, even if no breakthroughs in
factoring are discovered, factoring problems can theoretically be solved by a
computer system significantly faster and more powerful than those presently
available. If such improved techniques for attacking cryptographic systems are
ever developed, it could have a material adverse impact on the Company's
business or results of operations.
Management of Growth. The Company is currently experiencing a period of
rapid growth that could place a significant strain on its management and other
resources. A component of the Company's business strategy is to seek the
acquisition of businesses, products and technologies that complement or augment
the Company's existing businesses, products and technologies. Acquisitions are
difficult to identify and complete for a number of reasons, including
competition among prospective buyers and the need for regulatory approvals,
including antitrust approvals. There can be no assurance that the Company will
be able to complete future acquisitions or that the Company will be able to
successfully integrate any acquired business. In order to finance such
acquisitions, it may be necessary for the Company to raise additional funds
through public or private financings. Any equity or debt financings, if
available at all, may be on terms which are not favorable to the Company and,
in the case of equity financings, may result in dilution to the Company's
stockholders. There can be no assurance that the Company will be able to
operate acquired businesses profitably or otherwise implement its growth
strategy successfully. The successful combination of companies in a rapidly
changing high technology industry may be more difficult to accomplish than in
other industries. The Company's ability to manage its growth and integrate any
newly acquired entities will require it to continue to improve its operational,
financial and management information systems, and to motivate and effectively
manage its employees. If the Company's management is unable to manage growth
effectively, the quality of the Company's products, its ability to identify,
hire and retain key personnel and its results of operations could be materially
and adversely affected.
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Challenges of DynaSoft Integration. On July 15, 1997, the Company
acquired DynaSoft, a leading provider of security solutions for protecting
access to corporate information and applications. Achieving the anticipated
benefits of the DynaSoft Acquisition will depend in part upon whether the
integration of DynaSoft's business is accomplished in an efficient and
effective manner, and there can be no assurance that this will occur. The
combination of the two companies will require, among other things, integration
of the companies' respective product offerings and coordination of their sales
and marketing and research and development efforts. There can be no assurance
that such integration will be accomplished smoothly or successfully. The
difficulties of such integration may be increased by the necessity of
coordinating geographically separated organizations. The integration of certain
operations will require the dedication of management resources which may
temporarily distract attention from the day-to-day business of the combined
company. The inability of management to successfully integrate the operations
of the two companies could have a material adverse effect on the business and
results of operations of the Company.
The Company recognized approximately $7.0 million of expenses during
the third quarter of 1997, the quarter in which the DynaSoft Acquisition was
consummated, to reflect direct transaction costs, primarily for investment
banking, legal and accounting fees, and costs associated with combining the
operations of the two companies. Additional unanticipated expenses may be
incurred relating to the integration of the businesses of the Company and
DynaSoft, including the integration of certain product lines and distribution
and administrative functions.
Dependence on Proprietary Technology. The Company's success and ability
to compete is dependent in part upon its proprietary technology. The Company
relies on a combination of patent, trade secret, copyright and trademark laws,
software licenses, nondisclosure agreements and technical measures to establish
and protect its proprietary technology. The Company generally enters into
confidentiality and/or license agreements with its employees, distributors and
strategic partners as well as with its customers and potential customers
seeking
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proprietary information, and limits access to and distribution of its software,
documentation and other proprietary information. There can be no assurance that
the steps taken by the Company in this regard will be adequate to deter
misappropriation or independent third-party development of its technology.
The Company's 15 issued U.S. patents expire at various dates ranging
from 2005 to 2016. Upon expiration of the Company's patents, competitors may
develop and sell products based on technologies similar or equivalent to those
currently covered by the Company's patents. In addition, a patent developed at
the Massachusetts Institute of Technology ("MIT") (U.S. Patent No. 4,405,829)
and licensed to RSA (the "RSA/MIT Patent"), the claims of which cover
significant elements of RSA's products, will expire on September 20, 2000, which
may enable competitors to thereafter market competing products which previously
would have infringed the RSA/MIT Patent. In addition, two U.S. Patents (Nos.
4,200,770 and 4,218,582) covering encryption technology developed by Stanford
University (the "Stanford Patents"), which have been licensed to RSA, expired in
1997. As a result of the expiration of the Stanford Patents, competitors may
develop and sell products based on technologies covered by such patents,
including products that may be positioned as competitive with products covered
by the RSA/MIT Patent, thereby adversely impacting sales of RSA's products.
There can be no assurance that any patent owned or held by the Company or its
licensors will not be invalidated, circumvented, challenged or terminated, that
any of the Company's pending or future patent applications will be within the
scope of claims sought by the Company, if at all, or that the steps taken by the
Company to protect its rights will be adequate to prevent misappropriation of
the Company's technology or to preclude competitors from developing products
with features similar to the Company's products. Further, there can be no
assurance that others will not develop technologies that are similar or superior
to the Company's technologies or duplicate the Company's technologies. In
addition, the laws of certain countries in which the Company's products are or
may be developed or sold may not protect the Company's products and intellectual
property rights to the same extent as the laws of the United States. The
inability of the Company to protect its intellectual property adequately could
have a material adverse effect on its financial condition and results of
operations.
The Company has from time to time received correspondence alleging that
its products may infringe patents held by third parties. The Company is not
presently aware of any claims that its products infringe third-party rights,
and the Company believes that its products and other proprietary rights do not
infringe the proprietary rights of third parties. There can be no assurance,
however, that third parties will not assert infringement claims against the
Company in the future. The encryption industry is highly litigious, and RSA is
and has been involved in litigation relating to its intellectual property
rights and those of its competitors. Any litigation, whether or not resolved in
favor of the Company, could result in significant expense to the Company and
could divert management and other resources. In the event of an adverse ruling
in any litigation involving intellectual property, the Company might be
required to discontinue the use of certain processes, cease the manufacture,
use and sale of infringing products, expend significant resources to develop
non-infringing technology or obtain licenses to the infringing technology and
may suffer significant monetary damages, which could include treble damages.
There can be no assurance that under such circumstances a license would be
available to the Company on reasonable terms or at all. In the event of a
successful claim against the Company and the Company's failure to develop or
license a substitute technology on commercially reasonable terms, the Company's
financial condition and results of operations would be materially adversely
affected.
Dependence on Suppliers and Third-Party Manufacturers. Although the
Company generally uses standard parts and components for its products, certain
components are currently available only from a single source or from limited
sources. For example, the microprocessor chips contained in the Company's
SecurID tokens are currently purchased only from Sanyo Electric Co., Ltd., a
Japanese computer chip manufacturer, the lithium batteries contained in the
Company's SecurID tokens are purchased from one supplier located in the United
States, Gould Electronics, and the Company's SecurID Key Fob is manufactured
only by Pemstar, Inc., an assembly subcontractor located in the United States.
The inability to obtain sufficient manufactured goods or sole or limited source
components as required, or to obtain or develop alternative sources at
competitive prices and quality if and as required in the future, could result
in delays in product
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shipments or increase the Company's material costs, either of which would
adversely affect the Company's financial condition or results of operations.
The relational database management software contained in the Company's
ACE/Server software is licensed by the Company from Progress Software
Corporation ("Progress Software"). The Company relies on Progress Software for
ongoing maintenance and support for such licensed software.
Need to Establish and Maintain Strategic Relationships. A significant
business strategy of the Company is to enter into strategic marketing alliances
or other similar collaborative relationships. There can be no assurance that the
Company's existing strategic relationships will be commercially successful, that
the Company will be able to negotiate additional strategic relationships, that
such additional relationships will be available to the Company on acceptable
terms or that any such relationships, if established, will be commercially
successful. In addition, there can be no assurance that parties with whom the
Company has established strategic relationships will not pursue alternative
technologies or develop alternative products in addition to or in lieu of the
Company's products either on their own or in collaboration with others,
including the Company's competitors. The Company's financial condition or
results of operations may also be affected by the success of its collaborators
in marketing any successfully developed products.
Competition. The market for enterprise network and data security
products is highly competitive and subject to rapid change. The Company
believes that the principal competitive factors affecting the market for
enterprise network and data security products include technical features, ease
of use, quality/reliability, level of security, customer service and support,
distribution channels and price. The Company's competitors and potential
competitors include organizations that provide or may seek to provide
enterprise network and data security products based upon approaches similar to
and different from those employed by the Company, and could in the future
include operating system or network suppliers not currently offering competitive
enterprise-wide security products. There can be no assurance that the market
for enterprise network and data security products will not ultimately be
dominated by approaches other than the approach marketed by the Company.
Certain of the Company's potential competitors have significantly
greater financial, marketing, technical and other competitive resources than
the Company. As a result, they may be able to leverage an installed customer
base and/or other existing or future enterprise-wide products, adapt more
quickly to new or emerging technologies and changes in customer requirements,
or devote greater resources to the promotion and sale of their products than
can the Company. Competition could increase if new companies enter the market
or if existing competitors expand their product lines. Any reduction in gross
margins resulting from competitive factors could have a material adverse effect
on the Company's financial condition or results of operations. Although the
Company believes it has certain technological and other advantages over its
competitors, maintaining such advantages will require continued investment by
the Company in research and development and sales and marketing. There can be
no assurance that the Company will have sufficient resources to make such
investments or that the Company will be able to make the technological advances
necessary to maintain such competitive advantages. In addition, current and
potential competitors have established or may in the future establish
collaborative relationships among themselves or with third parties, including
third parties with whom the Company has strategic relationships, to increase
the ability of their products to address the security needs of the Company's
prospective customers. Accordingly, it is possible that new competitors or
alliances may emerge and rapidly acquire significant market share. If this were
to occur, the financial condition and results of operations of the Company
would be materially adversely affected.
Dependence on Key Personnel. The Company's success depends to a
significant extent upon a number of key employees, including members of senior
management. The loss of the services of one or more of these key employees could
have a material adverse effect on the Company. The Company believes that its
future success will depend in part on its ability to attract, motivate and
retain highly skilled technical, managerial and marketing personnel. Competition
for such personnel is intense and
-8-
<PAGE> 12
there can be no assurance that the Company will be successful in attracting,
motivating and retaining key personnel.
Risks Associated with International Sales. Sales outside the United
States accounted for approximately 27.3%, 24.2% and 28.9% of the Company's
revenue in the years ended December 31, 1994, 1995 and 1996, respectively. While
the Company believes its current products are designed to meet the regulatory
standards of foreign markets, any inability to obtain foreign regulatory
approvals on a timely basis could have an adverse effect on the Company's
financial condition or results of operations. In addition, the Company's
international business may be subject to a variety of risks, including delays in
establishing international distribution channels, difficulties in collecting
international accounts receivable, and increased costs associated with
maintaining international marketing efforts. The Company's direct sales in
Canada, the United Kingdom, France, Germany, Norway, Sweden and Japan are
denominated in the local currency, and the Company is subject to the risks
associated with fluctuations in currency exchange rates. A decrease in the value
of any of these foreign currencies relative to the U.S. dollar could affect the
profitability in U.S. dollars of the Company's products sold in these markets.
In addition, the Company is subject to the usual risks of doing business abroad,
including increases in duty rates, the introduction of non-tariff barriers and
difficulties in enforcement of intellectual property rights.
Industry Regulation. All of the Company's products are subject to
export controls under U.S. law and applicable foreign government restrictions.
The Company believes it has obtained necessary export approvals for the export
of the products it currently exports. There can be no assurance, however, that
the list of products and countries for which export approval is required, and
the regulatory policies with respect thereto, will not be revised from time to
time or that the Company will be able to obtain necessary regulatory approvals
for the export of future products. The inability of the Company to obtain
required approvals under these regulations could adversely affect the ability of
the Company to make international sales.
Exports of RSA's encryption products, or third-party products bundled
with the encryption technology of RSA, are expected to continue to be restricted
by the U.S. and various foreign governments. All cryptographic products require
export licenses from either the U.S. State Department, acting under the
authority of the International Traffic in Arms Regulation, or the U.S. Commerce
Department, acting under the authority of the Export Administration Regulations.
Regulations issued by these departments define cryptographic devices, including
software, as both defense articles and dual-use commodities. The U.S. government
generally limits the export of software with encryption capabilities to mass
marketed software with limited key sizes, which significantly constrains the
security effectiveness of RSA products available for export. As a result, RSA
may be at a disadvantage in competing for international sales compared to
companies located outside the United States that are not subject to such
restrictions.
The Director of the U.S. Federal Bureau of Investigation has asked
Congress to enact legislation that would require manufacturers of encryption
products to incorporate key escrow and recovery capabilities into their products
for both domestic and international use, thereby allowing law enforcement
officials to gain access to decryption keys for the purposes of decoding
messages relating to illegal activities, subject to constitutional due process
safeguards. There can be no assurance that this or other similar measures will
not in the future become law in the United States or other countries, and the
Company cannot predict what effect any such law would have on its domestic or
international competitive position or on its results of operations.
Third-Party Claims. Customers rely on the Company's information
security products for critical electronic security applications. Failure of the
Company's products to work as designed could result in tort or warranty claims.
Although the Company attempts to reduce the risk of losses resulting from such
claims through warranty disclaimers and liability limitation clauses in its
sales agreements, there can be no assurance that such measures will be effective
in limiting the Company's liability. Any liability for damages resulting from
any such failure could be substantial and could have a material adverse effect
on the Company's business and results of operations.
Possible Volatility of Share Price. The market price of the Company's
Common Stock, which is traded on the Nasdaq National Market, may be subject to
significant fluctuations in response to operating results, announcements of
technological innovations or new products by the Company or its competitors,
patent or proprietary rights developments and market conditions for computer
industry stocks in general. In addition, the stock market in recent years has
experienced extreme price and volume fluctuations that
-9-
<PAGE> 13
often have been unrelated or disproportionate to the operating performance of
individual companies. These market fluctuations, as well as general economic
conditions, may adversely affect the market price of the Common Stock. The
trading prices of many high technology companies' stocks are at or near their
historical highs and reflect price/earnings ratios substantially above
historical norms. There can be no assurance that the trading price of the
Common Stock will remain at or near its current level.
Dividends. No cash dividends have been paid on the Common Stock to
date and the Company does not anticipate paying cash dividends in the
foreseeable future.
Antitakeover Provisions. The Company's Third Restated Certificate of
Incorporation, as amended (the "Restated Certificate of Incorporation"),
requires that any action required or permitted to be taken by stockholders of
the Company must be effected at a duly called annual or special meeting of
stockholders and may not be effected by any consent in writing, and requires
reasonable advance notice by a stockholder of a proposal or director nomination
which such stockholder desires to present at any annual or special meeting of
stockholders. Special meetings of stockholders may be called only by the
Chairman of the Board, the Chief Executive Officer or, if none, the President of
the Company or by the Board of Directors. The Restated Certificate of
Incorporation provides for a classified Board of Directors, and members of the
Board of Directors may be removed only for cause upon the affirmative vote of
holders of at least two-thirds of the shares of capital stock of the Company
entitled to vote. These provisions, and other provisions of the Restated
Certificate of Incorporation, may have the effect of deterring hostile takeovers
or delaying or preventing changes in control or management of the Company,
including transactions in which stockholders might otherwise receive a premium
for their shares over then current market prices. In addition, these provisions
may limit the ability of stockholders to approve transactions that they may deem
to be in their best interests.
-10-
<PAGE> 14
THE COMPANY
The Company is the leading provider of enterprise network and data
security solutions. The Company's products help organizations conduct business
securely, protect corporate information assets and facilitate business-to-
business and business-to-consumer electronic commerce. Historically, the
Company has delivered security solutions that provide secure remote access to
corporate networks. Through its ESS framework, partnerships and acquisitions,
the Company intends to expand its addressable market by delivering solutions
that provide secure access to information wherever it resides in an enterprise.
The Company has built its business through the development and
delivery of security solutions, partnerships with leading industry vendors and
acquisitions of companies delivering complementary technologies and products.
In July 1996, the Company acquired RSA, a leading provider of cryptographic
technology, and in July 1997, the Company acquired DynaSoft, a leading security
company providing solutions for secure access to information. Through the
combination of SDI, RSA and DynaSoft, the Company believes that it is well
positioned to take advantage of the range of opportunities in the market for
enterprise network security products.
The Company's products include: (i) its remote access security
solution, including SecurID "tokens" and ACE/Server software, which
authenticates the identity of users accessing networked or stand-alone computer
resources, (ii) RSA encryption products used to implement cryptographic data
security applications for assuring the confidentially and integrity of user's
data and (iii) the BoKS product family, which provides a broad range of
security solutions for accessing applications and information.
SDI is a world leader in user identification and authentication,
having sold more than two million SecurID tokens to over 2,000 customers
worldwide. SDI's customers include Fortune 500 companies and financial
institutions as well as academic institutions, research laboratories, hospitals
and federal, state and foreign government organizations. SDI's products are
sold or licensed primarily through its direct sales force, which is supported
by a number of strategic marketing relationships, as well as through value
added resellers and dealers. A significant portion of the Company's revenue has
historically been attributable to follow-on sales to existing customers, either
to support additional users or platforms or to replace SecurID tokens at the
expiration of their programmed lives.
Through its wholly owned subsidiary, RSA, the Company also develops,
markets and supports cryptographic data security products and related consulting
services. RSA is the leading brand name for cryptography, with millions of
copies of RSA encryption and data authentication technologies installed and in
use worldwide. RSA's encryption engines and other software products are used to
implement cryptographic data security applications targeted at secure electronic
commerce, secure electronic mail, communications privacy, client/server data
security, smart cards and other key information technologies. RSA licenses its
encryption engine products to OEMs which incorporate RSA encryption technology
into their products, and also licenses its products directly to certain
customers that incorporate RSA products and technologies into their business,
financial and electronic commerce networks. RSA's encryption technology is
embedded in current versions of Microsoft Corporation Windows NT, Netscape
Communications Corporation Navigator, Quicken by Intuit, Inc., Lotus Development
Corporation Notes and numerous other products. RSA technologies are part of
existing and proposed standards for the Internet and World Wide Web, CCITT, ISO,
ANSI and IEEE.
DynaSoft is a leading provider of security solutions for protecting
access to corporate information and applications. Based in Stockholm, Sweden,
DynaSoft offers a broad range of security solutions through its flagship product
family, BoKS, and sells through direct and indirect distribution channels, as
well as through its licensing agreements with Sun Microsystems, Inc. and
Hewlett-Packard Company. The Company plans to integrate the technologies,
products and staff of SDI and DynaSoft, rather than operate DynaSoft as a
separate division.
The Company is a Delaware corporation. The Company's principal
executive offices are located at 20 Crosby Drive, Bedford, Massachusetts, 01730
and its telephone number is (781) 687-7000. As used herein, the term the
"Company" includes Security Dynamics Technologies, Inc. and its subsidiaries.
-11-
<PAGE> 15
RECENT EVENTS
DynaSoft Acquisition
On July 15, 1997 (the "Effective Date"), the Company acquired
DynaSoft pursuant to Stock Purchase Agreements, dated as of July 12 and 15, 1997
(the "Stock Purchase Agreements"), by and among the Company, DynaSoft and the
stockholders of DynaSoft.
Pursuant to the Stock Purchase Agreements, the Company issued or
reserved for issuance approximately 2.7 million shares of the Company's Common
Stock in exchange for approximately 95% of the outstanding shares and certain of
the outstanding options to acquire shares of DynaSoft. The Company also paid
approximately $6 million in cash to certain stockholders of DynaSoft in exchange
for the remaining outstanding shares and options. The transaction has been
accounted for as a pooling of interests in the Company's historical consolidated
financial statements. The Company used authorized, but previously unissued,
shares of Common Stock in the DynaSoft Acquisition. The number of shares of the
Company's Common Stock issued in exchange for DynaSoft's shares was determined
in an "arm's length" negotiation and the transaction was unanimously approved by
the Boards of Directors of the Company and DynaSoft.
In connection with the Stock Purchase Agreements, the Company and the
Selling Stockholders entered into a Registration Rights Agreement, dated as of
July 15, 1997, pursuant to which the Company agreed to file a Registration
Statement on Form S-3, on or prior to the 40th day following the Effective Date,
for the purpose of registering the Shares under the Securities Act.
In addition, the Company, certain stockholders of DynaSoft, the
representative of such DynaSoft stockholders and State Street Bank and Trust
Company, as escrow agent, entered into an Escrow Agreement, dated as of July 15,
1997, providing, among other things, that 10% of the shares of the Company's
Common Stock received by such DynaSoft stockholders pursuant to the Stock
Purchase Agreements will be held in escrow to reimburse the Company in
connection with breaches of representations, warranties or covenants made by
such DynaSoft stockholders in the Stock Purchase Agreements.
Security Dynamics Technologies, Inc. Public Offering
On October 21, 1997, the Company closed an underwritten public
offering (the "Underwritten Offering") of 3,000,000 shares of Common Stock
pursuant to a Registration Statement on Form S-3 (File No. 333-35035). Of these
shares, 1,176,000 shares were issued and sold by the Company and 1,824,000
shares were sold by certain stockholders of the Company, including 109,006
shares sold by Khris Loux, 102,000 shares sold by Peter C. Loux and 7,200 sold
by The Peter C. Loux Charitable Remainder Unitrust. On October 24, 1997, the
Company issued and sold an additional 450,000 shares of Common Stock in
connection with the closing of the over-allotment option granted by the Company
to the underwriters of the Underwritten Offering.
-12-
<PAGE> 16
USE OF PROCEEDS
The Company will not receive any proceeds from the sale of Common
Stock by the Selling Stockholders.
THE SELLING STOCKHOLDERS
The Selling Stockholders acquired the Shares from the Company on the
Effective Date in connection with the DynaSoft Acquisition.
Khris Loux has served as Vice President of Sales and Marketing
of Securix, Inc., a California corporation and wholly owned subsidiary of
DynaSoft ("Securix"), since July 1993. He served on the Board of Directors of
Securix from July 1993 until its acquisition by the Company in July 1997. Khris
Loux also served on the Board of Directors of DynaSoft from July 1996 until
its acquisition by the Company in July 1997. Since July 1997, Khris Loux has
served as Vice President, Corporate Development of the Company. Khris Loux is
the nephew of Peter C. Loux.
Peter C. Loux served as the Chairman of the Board and Chief
Executive Officer of Securix from July 1993 until its acquisition by the
Company in July 1997. From July 1993 to August 1996, Peter C. Loux also served
as President of Securix. He also served on the Board of Directors of DynaSoft
from July 1996 until its acquisition by the Company in July 1997. He currently
serves as a consultant to the Company. Peter C. Loux is the uncle of
Khris Loux.
The following table sets forth the name and the number of shares of
Common Stock beneficially owned by each of the Selling Stockholders as of (i)
the Effective Date and (ii) November 30, 1997, all of which shares are offered
hereby by each of the respective Selling Stockholders. If all of the Shares
offered hereby are sold as described herein, each of the Selling Stockholders
will beneficially own no shares of Common Stock after completion of the
offering. See "Recent Events--Security Dynamics Technologies, Inc. Public
Offering."
<TABLE>
<CAPTION>
Number of Shares of Common Stock Number of Shares of Common Stock
Name of Beneficially Owned Beneficially Owned
Selling Stockholder Prior to Offering(1) as of November 30, 1997(1)
--------------------------- -------------------------------- --------------------------------
<S> <C> <C>
Khris Loux 198,194 89,188
Peter C. Loux 137,150 30,850
The Peter C. Loux Charitable 61,043 51,543
Remainder Unitrust(2)
</TABLE>
- --------------------
(1) The number of shares beneficially owned is determined under rules
promulgated by the Commission, and the information is not necessarily
indicative of beneficial ownership for any other purpose. Under such
rules, beneficial ownership includes any shares as to which the
individual has sole or shared voting power or investment power and also
any shares which the individual has the right to acquire within 60 days
after the Effective Date or November 30, 1997, as the case may be,
through the exercise of any stock option or other right. The inclusion
herein of such shares, however, does not constitute an admission that
such Selling Stockholder is a direct or indirect beneficial owner of
such shares. Each Selling Stockholder has sole voting power and
investment power with respect to all shares of capital stock listed as
owned by such Selling Stockholder.
(2) Peter C. Loux is the sole trustee of The Peter C. Loux Charitable
Remainder Unitrust.
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<PAGE> 17
PLAN OF DISTRIBUTION
The Selling Stockholders have advised the Company that the Shares
covered hereby may be offered and sold by the Selling Stockholders, or by
pledgees, donees, transferees or other successors in interest, in private or
public transactions, in transactions involving principals, in transactions
involving brokers, or by any other lawful methods. Sales through brokers may be
made by any method of trading authorized by any stock exchange or market on
which the Shares may be listed, including block trading in negotiated
transactions. Without limiting the foregoing, such brokers may act as dealers by
purchasing any or all of the Shares covered by this Prospectus, either as agents
for others or as principals for their own accounts, and reselling such Shares
pursuant to this Prospectus. Sales of Shares are, in general, expected to be
made at the market price prevailing at the time of each such sale; however,
prices in negotiated transactions may differ considerably. The Selling
Stockholders may also offer to sell and sell the Shares in options transactions.
Each of the Selling Stockholders has advised the Company that he or it does not
anticipate paying any consideration other than usual and customary broker's
commissions in connection with sales of the Shares. Each of the Selling
Stockholders is acting independently of the Company in making decisions with
respect to the timing, manner and size of each sale. In addition, any Shares
covered by this Prospectus which qualify for sale pursuant to Rule 144 under the
Securities Act may be sold under Rule 144 rather than pursuant to this
Prospectus.
In offering the Shares covered by this Prospectus, each of the
Selling Stockholders and any broker-dealers who execute sales for such Selling
Stockholder may be considered to be "underwriters" within the meaning of the
Securities Act, and any profits realized by such Selling Stockholder and the
compensation of such broker-dealers may be deemed to be underwriting discounts
and commissions.
The Company has agreed to indemnify in certain circumstances each of
the Selling Stockholders and any underwriter and certain control and other
persons related to the foregoing persons against certain liabilities, including
liabilities under the Securities Act. Each of the Selling Stockholders has
agreed to indemnify in certain circumstances the Company and certain related
persons against certain liabilities, including liabilities under the Securities
Act.
The Company has agreed with each of the Selling Stockholders to keep
the Registration Statement of which this Prospectus constitutes a part effective
until the earlier of (i) such time as all of the Shares have been sold by the
Selling Stockholders, or (ii) July 15, 1998. The Company intends to deregister
any of the Shares not sold by the Selling Stockholders at the end of such
period.
In connection with the Underwritten Offering, each of the Selling
Stockholders has agreed, subject to certain exceptions, not to, directly or
indirectly, offer, sell, pledge, contract to sell, grant any option to purchase
or otherwise dispose of (i) any shares of Common Stock beneficially owned by
them prior to December 4, 1997, (ii) no more than 20% of the shares of Common
Stock beneficially owned by them on or after December 4, 1997, but prior to
December 24, 1997 and (iii) no more than 40% of the shares of Common Stock
beneficially owned by them on or after December 24, 1997, but prior to
January 13, 1998.
-14-
<PAGE> 18
LEGAL MATTERS
The validity of the shares offered hereby will be passed upon for the
Company by Hale and Dorr LLP, Boston, Massachusetts.
EXPERTS
The consolidated financial statements of the Company as of
December 31, 1995 and 1996 and for each of the three years in the period ended
December 31, 1996 incorporated in this prospectus by reference from the
Company's Current Report on Form 8-K dated December 16, 1997, except as they
relate to the consolidated financial statements of RSA as of December 31, 1995
and for each of the two years in the period ended December 31, 1995, have been
audited by Deloitte & Touche LLP, independent auditors, as stated in their
report dated November 14, 1997 (which expresses an unqualified opinion and
includes explanatory paragraphs relating to the restatement of the historical
consolidated financial statements for a pooling of interests and a change in the
Company's method of accounting for option grants requiring stockholder approval
in 1996) which is incorporated herein by reference, and has been so incorporated
in reliance upon the report of Deloitte & Touche LLP given upon their authority
as experts in accounting and auditing. The consolidated financial statements of
RSA as of December 31, 1995 and for each of the two years in the period ended
December 31, 1995, (not presented separately herein) have been audited by Ernst
& Young LLP, independent auditors, as set forth in their report thereon included
in the Company's Current Report (Form 8-K) dated December 16, 1997 and
incorporated herein by reference in reliance upon such report given upon the
authority of such firm as experts in accounting and auditing.
-15-
<PAGE> 19
================================================================================
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE
ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN
THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST
NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE COMPANY OR THE SELLING
STOCKHOLDERS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF ANY OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY TO ANY
PERSON IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION OF AN OFFER WOULD
BE UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY OFFER OR SALE
HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS
BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY OR THAT THE INFORMATION CONTAINED
HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF.
---------------
<TABLE>
<CAPTION>
TABLE OF CONTENTS
PAGE
<S> <C>
Available Information................................ 2
Incorporation of Certain Documents
By Reference..................................... 2
Special Note Regarding
Forward-Looking Information........................ 3
Risk Factors......................................... 4
The Company.......................................... 11
Recent Events........................................ 12
Use of Proceeds...................................... 12
The Selling Stockholders............................. 13
Plan of Distribution................................. 14
Legal Matters........................................ 15
Experts.............................................. 15
</TABLE>
================================================================================
SECURITY DYNAMICS
TECHNOLOGIES, INC.
396,387 SHARES
COMMON STOCK
--------------
PROSPECTUS
--------------
December ___, 1997
================================================================================
<PAGE> 20
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the various expenses to be incurred in
connection with the sale and distribution of the securities being registered
hereby, all of which will be borne by the Registrant. All amounts shown are
estimates except for the Securities and Exchange Commission registration fee.
SEC Registration Fee................................... $ 4,429.33
Blue Sky Fees and Expenses............................. --
Accounting Fees and Expenses........................... 150,000.00
Legal Fees and Expenses................................ 15,000.00
Miscellaneous.......................................... 5,570.67
-----------
Total............................................. $175,000.00
===========
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Article EIGHTH of the Registrant's Third Restated Certificate of
Incorporation, as amended (the "Restated Certificate of Incorporation"),
provides that no director of the Registrant shall be personally liable for any
monetary damages for any breach of fiduciary duty as a director, except to the
extent that the Delaware General Corporation Law prohibits the elimination or
limitation of liability of directors for breach of fiduciary duty.
Article NINTH of the Registrant's Restated Certificate of Incorporation
provides that a director or officer of the Registrant (a) shall be indemnified
by the Registrant against all expenses (including attorneys' fees), judgments,
fines and amounts paid in settlement incurred in connection with any litigation
or other legal proceeding (other than an action by or in the right of the
Registrant) brought against him by virtue of his position as a director or
officer of the Registrant if he acted in good faith and in a manner he
reasonably believed to be in, or not opposed to, the best interests of the
Registrant, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful and (b) shall be
indemnified by the Registrant against all expenses (including attorneys' fees)
and amounts paid in settlement incurred in connection with any action by or in
the right of the Registrant brought against him by virtue of his position as a
director or officer of the Registrant if he acted in good faith and in a manner
he reasonably believed to be in, or not opposed to, the best interests of the
Registrant, except that no indemnification shall be made with respect to any
matter as to which such person shall have been adjudged to be liable to the
Registrant, unless a court determines that, despite such adjudication but in
view of all of the circumstances, he is entitled to indemnification of such
expenses. Notwithstanding the foregoing, to the extent that a director or
officer has been successful, on the merits or otherwise, including, without
limitation, the dismissal of an action without prejudice, he is required to be
indemnified by the Registrant against all expenses (including attorneys' fees)
incurred in connection therewith. Expenses shall be advanced to a director or
officer at his request, provided that he undertakes to repay the amount advanced
if it is ultimately determined that he is not entitled to indemnification for
such expenses.
Indemnification is required to be made unless the Registrant determines
that the applicable standard of conduct required for indemnification has not
been met. In the event of a determination by the Registrant that the director or
officer did not meet the applicable standard of conduct required for
indemnification, or if the Registrant fails to make an indemnification payment
within 60 days after such payment is claimed by such person, such person is
permitted to petition the court to make an independent determination as to
whether such person is entitled to indemnification. As a condition precedent to
the right of indemnification, the director or officer must give the Registrant
notice of the
II-1
<PAGE> 21
action for which indemnity is sought and the Registrant has the right to
participate in such action or assume the defense thereof.
Article NINTH of the Registrant's Restated Certificate of Incorporation
further provides that the indemnification provided therein is not exclusive, and
provides that in the event that the Delaware General Corporation Law is amended
to expand the indemnification permitted to directors or officers the Registrant
must indemnify those persons to the fullest extent permitted by such law as so
amended.
Section 145 of the Delaware General Corporation Law provides that a
corporation has the power to indemnify a director, officer, employee or agent of
the corporation and certain other persons serving at the request of the
corporation in related capacities against amounts paid and expenses incurred in
connection with an action or proceeding to which he is or is threatened to be
made a party by reason of such position, if such person shall have acted in good
faith and in a manner he reasonably believed to be in or not opposed to the best
interests of the corporation, and, in any criminal proceeding, if such person
had no reasonable cause to believe his conduct was unlawful; provided that, in
the case of actions brought by or in the right of the corporation, no
indemnification shall be made with respect to any matter as to which such person
shall have been adjudged to be liable to the corporation unless and only to the
extent that the adjudicating court determines that such indemnification is
proper under the circumstances.
ITEM 16. EXHIBITS
EXHIBIT
NO. DESCRIPTION
*4.1 Specimen Certificate for shares of Common Stock, $.01 par
value per share, of the Registrant.
** 5 Opinion of Hale and Dorr LLP with respect to the validity
of the securities being offered.
**23.1 Consent of Hale and Dorr LLP (included in Exhibit 5).
23.2 Consent of Deloitte & Touche LLP, independent auditors.
23.3 Consent of Ernst & Young LLP, independent auditors.
**24 Powers of Attorney (included on page II-5).
- ---------------------
* Incorporated herein by reference to the Registrant's Registration
Statement on Form S-1 (File No. 33-85606).
** Previously filed.
II-2
<PAGE> 22
ITEM 17. UNDERTAKINGS.
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3) of
the Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of this Registration Statement (or the most
recent post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in this Registration Statement. Notwithstanding the foregoing, any
increase or decrease in the volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any derivation 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 Registration Statement;
and
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in this Registration
Statement or any material change to such information in this
Registration Statement;
provided, however, that paragraphs (1)(i) and (1)(ii) do not apply if
the information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed by the Company pursuant to
Section 13 or Section 15(d) of the Securities Exchange Act of 1934 that are
incorporated by reference in this Registration Statement.
(2) That, for the purposes 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 the time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination of
the offering.
The Registrant hereby undertakes that, for purposes of determining any
liability under the Securities Act of 1933, each filing of the Company's annual
report pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934
(and, where applicable, each filing of an employee benefit plan's annual report
pursuant to Section 15(d) of the Securities Exchange Act of 1934) that is
incorporated by reference in this Registration Statement shall be deemed to be a
new registration statement relating to the securities offered therein and the
offering of such securities at the time shall be deemed to be the initial bona
fide offering thereof.
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 indemnification provisions described herein, or
otherwise, the Registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Securities Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered,
II-3
<PAGE> 23
the Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as
expressed in the Securities Act and will be governed by the final adjudication
of such issue.
II-4
<PAGE> 24
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant has duly caused this Post-Effective Amendment No. 1 to Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the Town of Bedford, Commonwealth of Massachusetts, on this 16th
day of December, 1997.
SECURITY DYNAMICS TECHNOLOGIES, INC.
By: /s/ Charles R. Stuckey, Jr.
---------------------------------------
Charles R. Stuckey, Jr.
Chairman of the Board, President
and Chief Executive Officer
II-5
<PAGE> 25
Pursuant to the requirements of the Securities Act of 1933, as
amended, this Post-Effective Amendment No. 1 to Registration Statement has been
signed below by the following persons in the capacities indicated on
December 16, 1997.
<TABLE>
<CAPTION>
SIGNATURE TITLE
<S> <C>
/s/ Charles R. Stuckey, Jr. Chairman of the Board,
- --------------------------- President and Chief
Charles R. Stuckey, Jr. Executive Officer
(Principal Executive
Officer)
/s/ Marian G. O'Leary Senior Vice President,
- --------------------------- Finance, Chief Financial
Marian G. O'Leary Officer and Treasurer
(Principal Financial and
Accounting Officer)
* Director
- ---------------------------
D. James Bidzos
Director
- ---------------------------
Richard L. Earnest
* Director
- ---------------------------
Joseph B. Lassiter, III
* Director
- ---------------------------
George M. Middlemas
* Director
- ---------------------------
Sanford M. Sherizen
Director
- ---------------------------
James K. Sims
* By: /s/ Charles R. Stuckey, Jr.
-----------------------------
Charles R. Stuckey, Jr.
Attorney-in-Fact
</TABLE>
II-6
<PAGE> 26
EXHIBIT INDEX
EXHIBIT
NO. DESCRIPTION
*4.1 Specimen Certificate for shares of Common Stock, $.01 par
value per share, of the Registrant.
** 5 Opinion of Hale and Dorr LLP with respect to the validity
of the securities being offered.
**23.1 Consent of Hale and Dorr LLP (included in Exhibit 5).
23.2 Consent of Deloitte & Touche LLP, independent auditors.
23.3 Consent of Ernst & Young LLP, independent auditors.
**24 Powers of Attorney (included on page II-5).
- ---------------------
* Incorporated herein by reference to the Registrant's Registration
Statement on Form S-1 (File No. 33-85606).
** Previously filed.
<PAGE> 1
Exhibit 23.2
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Post-Effective
Amendment No. 1 to Registration Statement No. 333-34241 (the "Registration
Statement") of Security Dynamics Technologies, Inc. (the "Company") on Form S-3
of our report dated November 14, 1997 (which expresses an unqualified opinion
and includes explanatory paragraphs relating to the restatement of the
historical consolidated financial statements for a pooling of interests and a
change in accounting for option grants requiring stockholder approval in 1996)
appearing in the Company's Current Report on Form 8-K dated December 16, 1997
and to the reference to us under the heading "Experts" in the Prospectus, which
is part of such Registration Statement.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
December 16, 1997
<PAGE> 1
Exhibit 23.3
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" and to the
incorporation by reference of our report dated April 8, 1996 with respect to the
consolidated financial statements of RSA Data Security, Inc. (not presented
separately herein) in Post-Effective Amendment No. 1 to the Registration
Statement (Form S-3 No. 333-34241) of Security Dynamics Technologies, Inc. for
the registration of 396,387 shares of its common stock.
Ernst & Young LLP
Palo Alto, California
December 15, 1997
