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As filed with the Securities and Exchange Commission on May 22, 1998
Registration Statement No. 333-49949
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO. 1 TO
FORM S-3
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REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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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)
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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
May 22, 1998
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 THE REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF SUCH STATE.
PROSPECTUS
784,342 Shares
SECURITY DYNAMICS TECHNOLOGIES, INC.
Common Stock
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The 784,342 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 Robert L. Kane and Lillian Kane,
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 March 26, 1998 in connection with the acquisition (the "IDI
Acquisition") by the Company of Intrusion Detection Inc. ("IDI"). 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) March 26, 1999. 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."
Each of the Selling Stockholders has agreed with the Company not to
sell, transfer or otherwise dispose of, or reduce his or her interest in or risk
relating to, any Shares until such time as the Company has published (within the
meaning of Accounting Series Release No. 130, as amended, of the Securities and
Exchange Commission (the "Commission")) financial results covering at least 30
days of combined operations of the Company and IDI. See "Plan of Distribution."
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 May 21, 1998, the closing sale price of the Common
Stock on the Nasdaq National Market was $24.63 per share.
All financial information in this Prospectus has been restated to
include the results of IDI for all periods presented.
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THE SHARES OFFERED HEREBY INVOLVE A HIGH DEGREE
OF RISK. SEE "RISK FACTORS" BEGINNING ON PAGE 4.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
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The date of this Prospectus is _______________, 1998
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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 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.
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"), DynaSoft AB ("DynaSoft") and IDI,
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, 1997, including the amendment thereto on Form
10-K/A filed with the Commission on April 1, 1998;
(ii) The Company's Current Report on Form 8-K, dated March 26,
1998;
(iii) The Company's Current Report on Form 8-K, dated April 2,
1998;
(iv) The Company's Current Report on Form 8-K, dated April 21,
1998;
(v) The Company's Quarterly Report on Form 10-Q for the
quarter ended March 31, 1998;
(vi) The Company's Current Report on Form 8-K, dated May 20,
1998; and
(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.
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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 and elsewhere in this
Prospectus.
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RISK FACTORS
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.
As part of its SecurSight framework (formerly known as Enterprise
Security Services), the Company intends to introduce products and form
partnerships that are expected to enable delivery of enterprise-wide 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
SecurSight 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 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
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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
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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.
Challenges of Integration. On March 26, 1998, the Company acquired IDI,
a leading publisher of network security software tools that help network
officials manage enterprise-wide security more effectively. 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 these acquisitions will depend in part upon whether the
integration of IDI's and DynaSoft's businesses is accomplished in an efficient
and effective manner, and there can be no assurance that this will occur. The
combination of 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
companies could have a material adverse effect on the business and results of
operations of the Company.
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
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") and licensed to RSA, expired in 1997. As a
result of the expiration of the Stanford
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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 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
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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 there can be no assurance that the Company
will be successful in attracting, motivating and retaining key personnel.
Risks Associated with International Sales. International sales
(excluding Canada) accounted for approximately 18.3%, 23.0% and 26.1% of the
Company's revenue in the years ended December 31, 1995, 1996 and 1997,
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
-8-
<PAGE> 12
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
certain countries 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.
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 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
-9-
<PAGE> 13
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 a 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 SecurSight family of enterprise security
solutions, 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; in July 1997, the Company acquired DynaSoft, a leading security
company providing solutions for secure access to information; and in March 1998,
the Company acquired IDI, a leading publisher of network security software
tools. Through the combination of SDI, RSA, DynaSoft and IDI, 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 confidentiality and integrity of users'
data, (iii) the BoKS product family, which provides a broad range of security
solutions for accessing applications and information, and (iv) the IDI products,
Kane Security Analyst and Kane Security Monitor, which address network security
assessment and monitoring.
SDI is a world leader in user identification and authentication, having
sold more than 2.5 million SecurID tokens to over 3,000 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
-11-
<PAGE> 15
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.
IDI, based in New York, is a leading publisher of network security
software tools that help network officials manage enterprise-wide security more
effectively. The IDI products, Kane Security Analyst and Kane Security Monitor,
are highly complementary to the Company's SecurSight family of plug-in
enterprise security solutions and address two critical solutions areas, network
security assessment and monitoring. The products are currently distributed both
directly and through distributors in the United States and through resellers in
20 countries and will also be available through the Company's direct sales
forces, as well as through SecurWorld channel partners.
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.
RECENT EVENTS
On March 26, 1998 (the "Effective Date"), the Company acquired all of
the outstanding capital stock of IDI, pursuant to an Agreement and Plan of
Merger (the "Merger Agreement"), dated as of March 26, 1998, by and among the
Company, IDI, Apple Acquisition Corp., a wholly owned subsidiary of the Company,
and Robert L. Kane and Lillian Kane (the "IDI Stockholders").
Pursuant to the Merger Agreement, the Company issued 784,342 shares of
the Company's Common Stock, in exchange for all of the outstanding capital stock
of IDI. The transaction has been accounted for as a pooling of interests. The
Company used authorized, but previously unissued, shares of Common Stock in the
acquisition. The number of shares of Common Stock issued in exchange for the
shares held by the IDI Stockholders was determined in an "arm's length"
negotiation and the transaction was unanimously approved by the Boards of
Directors of the Company and IDI.
In connection with the Merger Agreement, the Company and the IDI
Stockholders entered into a Registration Rights Agreement, dated as of March 26,
1998, pursuant to which the Company agreed to file a Registration Statement on
Form S-3, on or prior to the 15th business day following the Effective Date, for
the purpose of registering under the Securities Act the shares of Common Stock
issued to such stockholders pursuant to the Merger Agreement.
In addition, the Company, the IDI Stockholders, the representative of
such IDI Stockholders and State Street Bank and Trust Company, as escrow agent,
entered into an Escrow Agreement, dated as of March 26, 1998, providing, among
other things, that 10% of the shares of Common Stock received by the IDI
Stockholders pursuant to the Merger Agreement will be held in escrow until the
first anniversary of the Effective Date to reimburse the Company in the event
of any breaches of representations, warranties or covenants made by the IDI
Stockholders in the Merger Agreement.
USE OF PROCEEDS
The Company will not receive any proceeds from the sale of Common Stock
by the Selling Stockholders.
-12-
<PAGE> 16
THE SELLING STOCKHOLDERS
The Selling Stockholders acquired the Shares from the Company on the
Effective Date in connection with the IDI Acquisition.
Robert L. Kane served as Chief Executive Officer and principal
stockholder of IDI until its acquisition by the Company in March 1998. Since
March 1998, Mr. Kane has served as Vice President - Technical Marketing of the
Company. Lillian Kane is Robert L. Kane's mother.
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 the
Effective Date, 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.
Number of Shares of Common
Name of Stock Beneficially Owned
Selling Stockholder Prior To Offering
------------------- --------------------------
Robert L. Kane 705,908
Lillian Kane 78,434
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 she 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
-13-
<PAGE> 17
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) March 26, 1999. The Company intends to deregister
any of the Shares not sold by the Selling Stockholders at the end of such
period.
Each of the Selling Stockholders has agreed with the Company not to
sell, transfer or otherwise dispose of, or reduce his or her interest in or risk
relating to, any Shares until such time as the Company has published (within the
meaning of Accounting Series Release No. 130, as amended, of the Commission)
financial results covering at least 30 days of combined operations of the
Company and IDI.
LEGAL MATTERS
The validity of the shares offered hereby has been passed upon for the
Company by Hale and Dorr LLP, Boston, Massachusetts.
EXPERTS
The consolidated financial statements of the Company as of
December 31, 1996 and 1997 and for each of the three years in the period ended
December 31, 1997 incorporated in this prospectus by reference from the
Company's Current Report on Form 8-K, dated May 20, 1998, except as they relate
to the consolidated financial statements of RSA for the year ended December 31,
1995, have been audited by Deloitte & Touche LLP, independent auditors, as
stated in their report dated May 15, 1998 (which report expresses an unqualified
opinion and includes explanatory paragraphs referring to the restatement of the
consolidated financial statements for poolings of interests in 1997 and 1998 and
a change in the Company's method of accounting for option grants requiring
stockholder approval in 1996) which are incorporated herein by reference, and
have 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 for the year 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 May 20, 1998, and are incorporated
herein by reference in reliance upon such report given upon the authority of
such firm as experts in accounting and auditing.
-14-
<PAGE> 18
<TABLE>
<S> <C>
========================================== ==========================================
NO DEALER, SALESPERSON OR OTHER PERSON HAS SECURITY DYNAMICS
BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TECHNOLOGIES, INC.
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 784,342 SHARES
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 COMMON STOCK
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. --------------
PROSPECTUS
--------------- --------------
TABLE OF CONTENTS
PAGE
----
Available Information................ 2
Incorporation of Certain Documents _________________, 1998
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................. 13
Legal Matters........................ 14
Experts.............................. 14
---------------
========================================== ==========================================
</TABLE>
<PAGE> 19
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................ $6,356
Accounting Fees and Expenses........ 10,000
Legal Fees and Expenses............. 10,000
Miscellaneous....................... 3,644
-------
Total.......................... $30,000
=======
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
II-1
<PAGE> 20
precedent to the right of indemnification, the director or officer must give the
Registrant notice of the 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.
- ------------
* Incorporated herein by reference to the Registrant's Registration Statement
on Form S-1 (File No. 33-85606).
** Previously filed.
II-2
<PAGE> 21
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 end of the
estimated maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b) if, in the
aggregate, the changes in volume and price represent no more than 20
percent change in the maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the 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 Registrant 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 undersigned 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
II-3
<PAGE> 22
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
II-4
<PAGE> 23
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant has duly caused this 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 22nd
day of May, 1998.
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> 24
Pursuant to the requirements of the Securities Act of 1933, as
amended, this Amendment No. 1 to Registration Statement has been signed below by
the following persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Charles R. Stuckey, Jr. Chairman of the Board, President and May 22, 1998
- ---------------------------- Chief Executive Officer (Principal
Charles R. Stuckey, Jr. Executive Officer)
* Senior Vice President, Finance, Chief May 22, 1998
- ---------------------------- Financial Officer and Treasurer
Marian G. O'Leary (Principal Financial and Accounting
Officer)
- ---------------------------- Director
D. James Bidzos
- ---------------------------- Director
Richard L. Earnest
* Director May 22, 1998
- ----------------------------
Joseph B. Lassiter, III
*
Director May 22, 1998
- ----------------------------
George M. Middlemas
* Director May 22, 1998
- ----------------------------
Sanford M. Sherizen
- ---------------------------- Director
James K. Sims
</TABLE>
* By: /s/ Charles R. Stuckey, Jr.
----------------------------
Charles R. Stuckey, Jr.
Attorney-in-Fact
II-6
<PAGE> 1
EXHIBIT 23.2
INDEPENDENT AUDITORS' CONSENT
To the Board of Directors and Stockholders of
Security Dynamics Technologies, Inc. and Subsidiaries:
We consent to the incorporation by reference in this Amendment No. 1 to
Registration Statement No. 333-49949 of Security Dynamics Technologies, Inc.
(the "Company") on Form S-3 (the "Registration Statement") of our report dated
May 15, 1998 (which report expresses an unqualified opinion, refers to the
report of other auditors and includes explanatory paragraphs referring to the
restatement of the consolidated financial statements for poolings of interests
in 1997 and 1998 and a change in the Company's method of accounting for option
grants requiring stockholder approval in 1996), appearing in the Company's
Current Report on Form 8-K dated May 20, 1998 and to the reference to us under
the heading "Experts" in the Prospectus, which is part of this Registration
Statement.
/s/ DELOITTE & TOUCHE LLP
Boston, Massachusetts
May 20, 1998
<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 Amendment No. 1 to Registration Statement (Form S-3 No.
333-49949) of Security Dynamics Technologies, Inc. for the registration of
784,342 shares of its common stock.
/s/ Ernst & Young LLP
Palo Alto, California
May 20, 1998
